Lifting the lid

With the conclusion of the State IT Agency`s (SITA) fourth annual conference, it has become abundantly clear that government can no longer delay an overhaul of the agency, if the organisation is to retain any credibility.this month`s GovTech Conference crucially illustrated that SITA stakeholders are trying to keep under wraps what has essentially become the worst kept secret within the industry: corruption is rife within the state IT services provider.

Speaking at the start of the conference, public service and administration minister Richard Baloyi assured his audience that corruption within the agency would be harshly dealt with, but, at the same time, emphasised that the entire agency was not corrupt and mismanaged.

It is not the first time that Baloyi, who took over the public service and administration portfolio a year ago, acknowledged that SITA faces major challenges. At the beginning of this year, Baloyi came out swinging, saying if SITA is to regain its status as the state`s IT services provider of choice, the organisation could be in for a major purge and shake-up.

Yet, his stance at GovTech seems to have softened somewhat, perhaps with the realisation that to admit the enormity of the problem would be tantamount to admitting that SITA is a lost cause. Indeed, as if to pre-empt this notion, Baloyi stressed that government would not disband the agency and solutions would be found.

So the much-awaited potential turnaround strategy  which is said to be unveiled "shortly" - seemingly promises to lack the fire and brimstone that Baloyi initially preached. Instead, last week, the minister appeared to be taking the positive reinforcement route, saying SITA would continue to receive all the "necessary support" it needs to fulfil its mandate, while corruption was being dealt with.

Similarly, SITA`s joint acting CEO, Moses Mthimunye, also noted at GovTech that allegations of corruption and mismanagement levelled against the agency and its employees, over the years, had to be investigated.

And, like Baloyi, Mthimunye also tried to cushion the blow, emphasising that the agency had spent R10 billion on ICT procurement since 2003, and "corruption was to be expected".

"Obviously, this is lucrative and shenanigans are bound to play themselves out here in the tussle for the piece of the cake of the R10 billion," he stated.

If justification was the name of the game, Mthimunye did not stop there, but added that the ICT industry should also shoulder the blame for corruption at the agency.

"The ICT industry has been playing victim for too long. When somebody knows there have been shenanigans around a bit, and they know who is the benefactor of the shenanigan, they simply point fingers at SITA. That is disingenuous," he stated during his address.

HIGHWAY ROBBERY

To prove that SITA had not been sitting on its hands while being robbed blind over the years, Mthimunye pointed out that the agency had recently commissioned a survey to understand the reality, degree and patterns of corruption in the organisation and in government ICT acquisitions.

The research conducted by SITA was carried out in two phases, he explained. Phase one involved desktop research and analysis of newspaper articles and media reports. The second phase involved an analysis of SITA`s internal corruption through fraud cases and statistical data.

The findings indicated that, for the 2008/9 financial year, a total of 32 disciplinary actions were initiated against various employees. Seventy-three complaints were received for the year in question, with suspected procurement irregularities and other irregularities. Over 230 cases were reported since 2004. The audit revealed the agency was dealing with incorrect perceptions and high cases of allegations, Mthimunye concluded.

But, unfortunately, neither key stakeholder did enough to save GovTech from the bogeyman forcing its way out of SITA`s closet. And that bogeyman was an internal risk assessment report into SITA`s procurement processes, compiled by enterprise risk assessment firm Henderson Solutions, which exposed a far more seedy reality.

Interestingly, neither Baloyi nor Mthimunye addressed the existence of this damning piece of evidence, despite having forewarning that its publication by ITWeb would coincide with the annual conference.

But, there it was - big, scary and towering over GovTech, exposing far bigger "shenanigans" than Mthimunye alluded to.

Ironically, the investigation and subsequent report were the result of a process started by Mthimunye himself, who requested SITA chief of procurement strategy Peter Pedlar to appoint Henderson Solutions to look into allegations of irregularities plaguing SITA`s procurement processes.

The report, concluded in April this year, was then handed to the minister, as well as circulated among the SITA executive. Seemingly, this should have given key stakeholders enough time to develop a communication strategy around the findings, as well as a good opportunity to save face.

NO COMMENT

But, as it was, since taking delivery of the report, neither SITA nor the Department of Public Service and Administration would comment on the contents of the document, bar the latter, which confirmed the report`s existence in July. Their stance remained unchanged when they both were approached again in the week before GovTech and informed that ITWeb has a copy of the report and was preparing to publish it.

In short, the 613-page report reveals an apparent total breakdown of SITA`s internal control environment, and questions how such widespread illegal practices could have escaped SITA management and its internal audit committee.

During the investigation, Henderson Solutions received access to SITA`s human resources database, vendor/supplier database, tender database and e-mail database. Additionally, Henderson Solutions requested access to the payroll and payables database.

Ultimately, the findings reveal evidence of apparent large-scale corruption, conflicts of interest, duplicate payments, and invalid identities of suppliers and employees.

THE REPORT REVEALS:

* Multiple suppliers with different company names, using the same VAT number.

* Multiple suppliers with different company names, using the same company registration number.

* Multiple suppliers with different company names, using the same bank account number.

* Multiple suppliers with different company names, sharing the same physical address.

* Multiple suppliers with different company names, sharing the same telephone numbers.

            Multiple suppliers with different company names, sharing the same fax numbers.

* Multiple employee physical addresses that match supplier addresses.

In terms of duplicate payments, the report concluded that there appear to be a large volume of low-value duplicate payments made to suppliers. There also appear to be large payments split into smaller payments to bypass authority levels, and either duplicate payments or one large payment split into smaller multiple payments to bypass authority levels, or a combination of both. In total, the agency could have lost as much as R355 million through duplicate payments, over a four-year period.

The investigation uncovered, from information interrogated, that there were large numbers of suppliers that received multiple/irregular payments, while some reflected irregular invoice numbers and/or payment timeframes, as well as irregular payment numbers.

In some cases, employees` physical addresses matched supplier addresses, while several employee telephone numbers matched supplier telephone numbers. In another few instances, SITA employees` spouses are listed in the supplier database as suppliers or supplier points of contact. And in further instances, employees` children, or next of kin, have been found in the supplier database as suppliers or supplier points of contact.

The methods employed by the company in compiling the report relied on software technology to interrogate SITA`s data, says Henderson Solutions. "Consequently, the findings are based exclusively on raw data housed by SITA and are irrefutable," it adds.

SO MUCH DEEPER

And this is just the tip of the iceberg, as the report uncovers much more.

"I think, based on the nature of my findings, anecdotal evidence and media reports regarding confidential leaks that fraud and corruption appear to be endemic at certain levels," Bart Henderson, head of Henderson Solutions and author of the report, says during an interview.

"I believe the minister and CEO absolutely are committed to the turnaround of SITA, to an organisation that delivers on its mandate. The minister was appraised at all times regarding the risk assessment and supported the process completely from the outset.

"But, are they conveying the true picture and scope of the problem? This I can`t comment, because the jury is still out on the scope of the problem.

"There are aspects that still need to be investigated and, inasmuch as this is concerned, I have no knowledge of where these enquiries now stand and what findings, if any, have been concluded. Suffice it to say, I do believe action is being taken. I`m just not sure what."

Unfortunately, that is the question that neither SITA, nor the DPSA, want to answer at this stage. After the conclusion of GovTech, the DPSA finally did make a statement, but, again, nothing was said about the contents of the report, except to say the risk assessment was an internal study and emphasised previous statements that the minister would respond at the "appropriate time".

"It was an internal report, which looked at the issues which need to be addressed. It was not to check or expose maladministration within SITA, it was meant to take a look at the things which are currently making SITA not work," the DPSA stated. Meanwhile, SITA`s attempt to downplay the report did not go down well with delegates at the conference.

After the publication of the document, the delegates generally agreed that SITA should fully disclose the levels of corruption that are plaguing it.

"The SITA CEO admits to corruption. That was no surprise. What he should have done is address the conference on what was written [by ITWeb]. This report is clearly damning and shouldn`t be ignored the way it has been," said one delegate from government. Several others expressed similar views.

So, while the DPSA has made vague promises to announce a turnaround plan for the agency in the near future, Pandora`s Box has been opened and a restructure is needed sooner rather than later.