13-year-old 'schoolboy mistake' comes back to haunt minerals department

An outstanding unauthorised expenditure described as a “schoolboy mistake” which has been hanging over the department of minerals and energy’s head for more than 13 years resurfaced in parliament on Wednesday. 

The R14.8m conditional grant which was made to the Mthonjaneni Municipality left members of the standing committee on public accounts “perplexed” after they were told that the payment was rejected twice due to a misspelling of the name of the municipality and verification of the banking details by the National Treasury. 

This led to the process resulting in unauthorised expenditure, MPs were told. 

The department of mineral resources & energy pleaded its case, asking Scopa to condone the unauthorised expenditure with funding to balance the books. 

The department’s CFO, Yvonne Chetty, told Scopa: “Today, chair, my humble request is that we have been carrying this unauthorised expenditure from 2010/2011 in the then new department of energy, and we last disclosed it on 31 March 2023 so it’s almost 13 years we have been carrying this unauthorised expenditure. 

“In my view the correct amount was paid to the correct person, it was used for the intended purposes, and it was not wasteful and we kindly request that this be condoned with funding, and it be done with the direct charge to the National Revenue Fund.”

She told MPs that the matter was first presented to the committee in September 2014 and the department was granted condonation of the unauthorised expenditure by the Treasury. 

However, the approval did not specify if the condonation was with or without funding. 

“Since the investigation has been concluded, the department has engaged National Treasury to deregister the transaction from its financial records. Our request today is for the condonation to be approved, with funding if possible.”

The incident occurred at a time when the department was on the cusp of being split. 

“It was processed in March, however that transaction did not go through, the amount was R14.8m.” 

She said the unauthorised transaction occurred in the next financial year, being rejected in March 2010, it only went through in the 2010/11 financial year.

“That is why it gave rise to the classification of unauthorised expenditure.”

The department made a payment to the Mthonjaneni Municipality and the transfer was initially processed on March 24 2010 but was rejected that same month. 

“The rejection happened at a very critical time as it was the last month before the department split. The reason the rejection happened was because the banking details were not verified by National Treasury.”

On April 15 the payment was resubmitted and again it was rejected, again because of the banking details. “The bank details were only verified on 21 May 2010 and the funds were successfully transferred on 27 May 2010.” 

The root cause for the transaction not being authorised and being rejected was because of the failure to verify the banking details timeously by the Treasury. 

The conditional grant of R14.8m to the municipality was included in the 2009/2010 Division of Revenue Act. She further explained that the amount was not included in that year's rollover request to the Treasury by the department as the financial system and documentation for the DME audit remained with the DMR.

The grant funds were subsequently transferred in the next financial year, resulting in the unauthorised expenditure. Therefore the correct amount was paid to the correct account during the incorrect financial year against the incorrect vote, because of the rejection, said Chetty.

“The department did investigate this transaction, going through and interviewing all the officials involved in the chain of events. The banking details were verified and did not change and the reason the verification took long is still unknown to date.”

There were no disciplinary actions taken against any officials as no wrongdoing was found, the correct recipients received the money, the correct bank details were used and the correct amount was dispersed. “All the evidence from the investigation pointed out to the technical problem in the banking verification process at the Treasury.”

She conceded that there was an element of negligence because somebody should have applied for the rollover, which was not done.

The DA’s Alf Lees said he was “somewhat perplexed” because the department was trying to make a “not so veiled attempt to blame the Treasury, and that concerns me”.

His colleague from the ANC Bheki Radebe agreed, saying it was surprising that in the department’s investigation it did not find anyone accountable.   

Scopa chair Mkhuleko Hlengwa jumped in to remind MPs that the Treasury had told the committee in 2014 that, in addition, the payment was made to a municipality whose name had changed.

Hlengwa said the municipality has always been known as the Mthonjaneni Municipality. 

“I think let’s go to Treasury to provide clarity because the 2014 narrative is not saying the banking details were incorrect, it’s saying the municipality's name had changed.” 

 A Treasury official told MPs that Safety Web is the name of the system used to verify the name of the beneficiary against the name of the banking app. 

“With this payment, initially on Safety Web, it was rejected because there was some kind of discrepancy in the system when the payment was made. 

“The payment was then again made in April and it was rejected again. Our record shows that there was a spelling error in the name of the municipality. I cannot remember whether there was a letter missing but there was an error in the name of the municipality versus the banking details.”

By the time the department made the payment again, the rollover process had passed and the payment was made outside what was then proposed regulations with the DORA. 

Hlengwa explained that the Treasury wrote to the committee submitting a schedule of unprocessed unauthorised expenditure and that’s why the department was hauled before the committee.

“There just has to be clarity over this banking details story ... because I consider this a schoolboy mistake with far-reaching consequences in that we are saddled with unauthorised expenditure because your transaction was rejected twice to the extent that National Treasury had concluded on its rollover processes.” said Hlengwa, adding that the error was “so elementary”. 

Demystifying the blame game, Mantashe said “we are not blaming the Treasury, we are stating the facts to the best of our ability and, fortunately or unfortunately, in working in this area it does involve the Treasury.

“What concerns us is that a condonation was issued but that condonation was without funding. That’s why we are here today because that issue continues to reflect in our books today because it was a condonation without funding.”

Hlengwa said the committee will apply its mind to the matter.