The Department of Employment and Labour has responded to allegations of irregular procurement and consultant mismanagement at the Compensation Fund, defending its decisions as lawful and maintaining that value for money was achieved.
The Compensation Fund allegedly spent more than R142 million on consultants over several years, with a whistle-blower claiming there is little to show for the expenditure.
On Wednesday, the department responded to questions about the procurement decisions underpinning that spending.
Was the FTMG arrangement lawful?
The engagement of FTMG Africa Advisory Services in 2022, authorised by then-minister Thulas Nxesi under Section 15 of the Public Service Act, drew scrutiny after allegations emerged that using the provision to contract a private company may have been unlawful.
Sources alleged that the arrangement should have been subjected to normal supply chain management requirements under the PFMA.
The department rejected the suggestion that anything was amiss.
“The then minister’s authorisation of the FTMG arrangement under Section 15 of the Public Service Act was effected in accordance with the approved Human Resources delegations and the prevailing interpretation of Section 15 at the time,” it said.
It added that its internal governance framework was applied throughout.
On whether the engagement constituted a service contract requiring PFMA compliance, the department was firm. “The arrangement was treated as a secondment of personnel in terms of Section 15 of the Public Service Act and implemented, where applicable, under the Executive Authority’s delegated powers,” it said.
A R96-million contract and questions of value for money
After FTMG had allegedly completed between 75% and 85% of its assigned scope, the Fund issued a new tender and awarded it to EMS Solutions for R96 million.
This raised questions about whether the full scope needed to be retendered at more than double the cost of the original engagement.
However, the department rejected the framing that the new tender duplicated prior work.
“The department does not regard Bid TCF 03:2024/25 as a retender of previous work, but rather as a distinct procurement process aligned to the current operational needs of the department and the Compensation Fund,” it said.
It added that the process was subjected to a live probity audit, “which confirmed alignment with the assessments of the Bid Evaluation and Bid Adjudication Committees.”
The department expressed satisfaction with what the R96-million contract had delivered.
“The appointed service provider has supported measurable progress, including the timely submission of annual financial statements and advancements in addressing audit disclaimers. On this basis, the department is satisfied that value for money has been achieved,” it said.
Nearly 15 years of adverse audit findings
Despite the significant consultant expenditure, the Fund has continued to receive adverse audit findings for close to 15 years.
The department said plans were in place to address this.
“The Compensation Fund has implemented a comprehensive audit action plan to address longstanding audit findings,” it said, pointing to interventions including strengthened internal controls, improved data integrity and enhanced financial reporting processes.
“Additional controls, such as account verification systems and biometric measures, have also been introduced,” it added.
No referrals to law enforcement
Asked whether any procurement irregularities had been referred to law enforcement or an investigative body, the department said no such step had been taken.
“At this stage, no confirmed procurement irregularities have been identified. Accordingly, no matters have been referred to law enforcement or investigative authorities.”
