OUTA asks SAPS to investigate Services SETA’s payment of travel claims to contractor Grayson Reed

Four years after OUTA exposed irregularities in this contract on paying learnership stipends, the Services SETA has promised to investigate

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06/12/2022 10:32:29

.Image: OUTA

OUTA asks SAPS to investigate Services SETA’s R163m contract

The Organisation Undoing Tax Abuse (OUTA) has opened a criminal case with SAPS over the Services Sector Education and Training Authority’s (SSETA) payment of allegedly fraudulent claims as part of a contract worth R163 million.

The case was opened on 30 November 2022 at Parkview Police Station, by OUTA Legal Project Manager Asavela Kakaza. The charges which OUTA asked the police to investigate are fraud and charges under the Prevention and Combatting of Corrupt Activities Act, against two current employees of the SSETA and all the directors of the companies in the consortium which was awarded the contract. OUTA expects that the case will be referred to the SAPS Specialised Commercial Crime Unit.

In support of its complaint to the SAPS, OUTA handed over a 55-page report on this contract.

OUTA’s complaint specifically refers to the travel claims, but this does not limit the police investigation to this aspect of the contract only. OUTA also has concerns over other aspects of the tender and contract, which are raised in the report attached to our complaint.

The SSETA’s contract with Grayson Reed Consulting was awarded in October 2017 for R162.669 million and ran for about two years. The contract was to procure and manage a biometric learner attendance monitoring system and to make direct payments of stipends to learners. In 2018, OUTA started investigating allegations of corruption and mismanagement of funds in the contract after being alerted by a whistleblower.

OUTA found a series of irregularities pertaining to travel and accommodation claims worth R2.168 million. Most invoices were submitted without source documents, some had source documents which did not back up the claim or appeared to be fraudulent, while other costs were not incurred by Grayson Reed but by other entities. The SSETA travel and accommodation policy was ignored.

In February 2019 and March 2019, the ground travel claims were R194 800 and R259 309 respectively. “Taking into consideration the explanatory notes attached to the invoices, it looks like every employee at Grayson Reed was traveling daily by Uber and filling their vehicles every second day with fuel. They then claimed it back from SSETA… Not only was the fuel claim extremely high but there were also several instances where claims were clearly duplicated and thus charging SSETA double for the same expense,” says OUTA’s report.

Payments were authorised by the SSETA’s Senior Manager: Project Accounting and the Chief Financial Officer.

OUTA first exposed this contract in November 2018, saying the equipment had allegedly not been delivered or didn’t work (see here). In September 2019, the SSETA ended the contract six months early (see here). As far as we have been able to establish, no action was taken and nobody was held to account.

In January 2019, OUTA requested the contract documents from the SSETA in terms of the Promotion of Access to Information Act (PAIA) and received some documents but the rest were refused, due to opposition by Grayson Reed. OUTA filed legal action to challenge this refusal, which was opposed by the SSETA. The case was heard in June 2021 and, in November 2021, judgment was handed down in favour of OUTA. “Our Constitutional values require that public bodies be transparent, and that transparency in turn equates to public confidence on how the public funds are managed,” said the Johannesburg High Court judgment (see here). The missing documents were subsequently handed over.

OUTA found that the documents confirmed further irregularities in the tender and contract. We compiled a report on this and recently met with members of the SSETA executive management to discuss this.

The SSETA has since tabled our report at a meeting of its executive committee and undertaken to appoint independent lawyers to investigate the matter, using OUTA’s report as a basis for further investigations. The SSETA has also undertaken to keep OUTA informed on this. 

OUTA regards the undertakings of the SSETA to take action internally and to share with OUTA all other documents which OUTA previously requested through PAIA applications, but which were refused at the time, as a big victory in the battle against corruption. It is not just accountability that is important, but also encouraging change within an organisation to root out corruption, to respect the law and to do its work in accordance with legal prescripts like the Public Finance Management Act. It doesn’t help the country if implicated individuals are put in orange overalls, but the public entity carries on with its old habits. In this instance, OUTA not only unmasked some individuals implicated in wrongdoing, but the discussions we had with the SSETA enabled us to point out where good governance was neglected and where the SSETA did not follow its own supply chain management policies.

OUTA welcomes this as a positive move towards accountability in this matter. We believe that if action had been taken when we first raised this matter, money could have been saved.

Although SSETA officials undertook to take action, OUTA has decided to open a case with the SAPS and handed over our dossier on this matter.

The SETAs are funded by the skills development levy charged to employers and the SETAs’ role is to facilitate skills development. These funds are intended to fund learnerships for interns and apprentices, to help unemployed youth get a start.

OUTA’s report and findings

OUTA found that the bid for the tender was advertised for just four days before the closing date. The bid was published in the government Tender Bulletin on 25 August 2017 and closed on 29 August. The National Treasury Regulations require that a tender be published for at least 21 days before the closing date.

The bid description in the adverts for the tender in the daily newspapers differed from the description which was reflected on the SSETA website. The Constitution requires that procurement of services by organs of state be done in accordance with principles of fairness, equitability, transparency, competitiveness and cost effectiveness.

OUTA also found that the records of the SSETA’s Bid Evaluation Committee (BEC) reflect that the evaluation of the bid was conducted on 21 August 2017, eight days before the closing date. The SSETA has said that the bid evaluation date must have been a mistake, but our report is based on the documents before us. 

From OUTA’s investigations, it appears that the BEC and the Bid Award Committee (BAC) failed to conduct a due diligence investigation into the Grayson Reed consortium, which would have revealed that Grayson Reed did not have the required experience, had not previously declared any revenue to SARS and opened a business bank account shortly before submission of its bid documents. The Grayson Reed consortium partners showed a similar lack of experience.

Notwithstanding the irregularities in the procurement process, the SSETA accounting authority (the board) awarded the tender to the Grayson Reed consortium. The board has a fiduciary duty in terms of the Public Finance Management Act to act in the best interests of the public entity, but OUTA is of the view that the SSETA’s board failed to do that and ultimately cost the taxpayer more than R163 million.

More information

A soundclip with comment by OUTA Legal Project Manager Asavela Kakaza is here.

OUTA’s complaint to the SAPS is here and the attached report on our investigation into the Grayson Reed contract is here.

Image: OUTA

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