IFMS BRIEFING

TO THE STANDING COMMITTEE ON PUBLIC ACCOUNTS

06 MARCH 2018

PROGRESS ON ACTION TAKEN ON MATTERS RAISED SINCE LAST

SCOPA BRIEFING

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MATTER PROGRESS

Report on services provided to NT by Bitz

Technologies Report submitted to Parliament as requested and provided as an

addendum

Finalisation of forensic investigation into

the IFMS

A Service Provider has been appointed and the investigation is

currently underway, after Audit Committee rejected the draft report

completed by the initial service provider

Investigating whether any employees of

NT were awarded contracts under IFMS No evidence has been found of any NT employee having received

remuneration outside of the public service in relation to the IFMS

Appointment of permanent staff in the

OAG IFMS unit Interviews have been conducted to appoint a permanent head of

IFMS unit.

Suspending IFMS related payments Payments processes reviewed and controls strengthened

Raising issues in respect of previous

forensic investigators On recommendation of Audit Committee, contract with service

provider terminated.

IFMS – THE BACKGROUND

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Cabinet approved decision to replace IFMS1 (2000-2013) with IFMS 2 in Nov 2013, as

recommended by Ministers of Finance and Public Service and Administration

Process for IFMS 2 managed jointly by NT, DPSA and SITA

IFMS1 was a hybrid solution with IFMS2 shifting to an off-the-shelf COTS solution

– Objective was to replace governments legacy IT systems with an integrated system (BAS,

PERSAL and LOGIS)

– Includes Procurement, HR management, Financial management, Catalogue management,

payroll integrated data exchange

Procurement of COTS solution commenced in 2014, final award to Oracle in April 2016

– Favourable discounts negotiated on back of government committing to purchase licenses

and tech support over the first 5 years

Audit opinion for 2013/14, 2014/15 and 2016/17 did not raise any material issues related to the

award of the contract or its management

IFMS – ISSUES RAISED

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Issues raised by AGSA audit opinion (2016/17) different from issues raised in May 2016 Internal

Audit Unit report

Audit opinion covers ICTworks settlement and payment of licenses, whilst IAU leaked report covers

weaknesses in controls, all of which management has responded to

In respect of the IA :

– NT acted promptly on request by audit committee for a forensic investigation.

– In the interest of good governance the audit committee was assigned to oversee the

investigation process

– Issues raised in the Internal audit Report has been addressed by management and is being

closely monitored by Internal Audit on a quarterly basis

– NT will act speedily and decisively if any corruption or wrongdoing identified by forensic

process

IFMS – ISSUES RAISED

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In respect of AGSA

On matters relating to Oracle the necessary corrective steps will be taken once the investigation is

concluded however the key question is how the audit process treats such practice

NT believed it was cost-effective to pay every year for technical support rather than pay more in

later years and with penalties

Such support includes system upgrades and coding support, and NT believes led to an upfront

saving of R149 million and R719 million over 20 years

On matters relating to CSD and LOGIS/BAS enhancements/developments, the key question is how the

audit process differentiate between interpretations of enhancements and new systems

NT believes that the enhancement of the existing supplier master of government was provided for

in the existing SLA through a variation/expansion of the existing contract

On the matter relating to ICT-Works

Shifting from IFMS1 to IFMS2 required exit of contracts to be negotiated

ICT-Works demanded damages of approximately R800 million

This was negotiated down to R383 million with the settlement in lieu of cash assigning a specific

role to ICT-Works in IFMS2

IFMS - FORENSIC INVESTIGATION

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As previously reported arising out of anomalies raised by the Audit Committee (AC) in respect of

actions taken and work performed by the then appointed service provider to conduct a forensic

investigation of IFMS, the DG in consultation with the AC and the then Minister approved on 31

August 2017 to invite an open bid to restart the process to conduct the IFMS Forensic Investigation

– Bid published on 22 September 2017 and closed on 13 October 2017

– New service provider was appointed on the 30 January 2018

– Contracted investigation period from 01 February 2018 – 30 April 2018

– Areas of investigation :

PMO, SCM process. Finance (payments), IFMS1 settlements and other (systems and

IT)

– Investigation is currently underway

– The draft report to the AC is expected by the first week of May 2018

– The Final report once completed will be made available to all stakeholders including Scopa,

the Public Protector and the Hawks as per their request

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THE ROLE OF INTERNAL AUDIT

• In terms of the Standards for the Professional Practice of Internal Audit, it is an Independent

objective, assurance and consulting activity designed to add value and improve an

organisations operations. It helps an organisation by bringing a systematic and disciplined

approach to evaluate the effectiveness and efficiency of an organisations Internal controls,

Risk management and Governance processes .

• It is therefore an Internal Management tool that helps an organisations improve its internal

controls and governance. Internal Audit reports highlight findings in this regard with

recommendations for management consideration.

• Internal Audit reports are not meant for external distribution but for tabling in Audit Committee

where progress on the resolving of these internal control gaps is monitored

IFMS - IMPLEMENTATION PROGRESS

• Administration and payment has been streamlined for better control

• Revised IFMS Programme Base-line & Implementation Approach was

endorsed by IFMS Steering Committee

• Programme Risks are being monitored by project risk committee as well

as the National Treasury Risk Committee

• Interim IFMS PMO services have been sourced from SITA (value added

services) and processes are being strengthened continuously

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IFMS - IMPLEMENTATION PROGRESS

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REVISED IFMS PROGRAMME IMPLEMENTATION

APPROACH – NOVEMBER 2017

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The following detail describes the phases and sub-phases in more detail:

3.1 Phase 1: Software agreement

Completed with contractual agreement with Oracle (software only).

3.2 Phase 2: Focuses on the development of the Generic Template (GT) that will be used for

implementation and roll-out (Pilot Sites & Lead Sites). Three sub-phases agreed: ( Nov 2017 – Feb 2021 )

• 2A: Design and Template Development (18 Months, ending in Nov 2018)

Planning, scope, objectives & approach;

Securing architecture and design services

Procurement of implementation services and hosting infrastructure

Develop generic solution baseline - GT0;

Policy owners and assigned business representatives to participate in GT0 design phases to be as

inclusive as possible

• Phase 2B - Pilot Site Implementation, (12 Months , ending Nov 2019)

Implement and Refinement of GT0 at Pilot Sites (DPSA & NT) into GT1;

Establish the Centre of Excellence (CoE) at SITA including capacitation for support, maintenance,

training, etc.

• Phase 2C - Lead Site Implementation, (18 months , ending June 2021)

Refinement of GT1 into GT2 at Lead Sites (Eastern Cape and Western Cape).

REVISED IFMS PROGRAMME IMPLEMENTATION APPROACH –

NOVEMBER 2017

3.3 Phase 3: National Roll-out (To commence in April 2021)

Long-term planning for Phase 3 is still not quantified, dependent on

strategy and resourcing.

Standard departments will implement GT2, additional requirements to

be considered through a formal change process.

Differentiated departments (E.g. DOD, SAPS, Education and Health)

GT2 will be expanded for the differentiated departments’ legislative

requirements, culminating in GT3,

GT3 locked down and formal change management process in place,

The implementation and hosting approach for the differentiated

departments to be clarified.

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REVISED PROGRAMME IMPLEMENTATION APPROACH – NOVEMBER

2017

COST SUMMARY 2013/2014 – 2016/2017

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2013/2014 2014/2015 2015/2016 2016/2017 TOTAL

R'000 R'000 R'000 R'000 R'000

REVENUE

Annual Appropriation 194 626 167 366 178 516 556 985 1 097 493

EXPENDITURE

Current Expenditure 194 626 167 366 180 273 162 207 704 471

Compensation of Employees - - 1 927 3 786 5 713

Goods and services 194 626 167 366 178 346 158 421 698 758

Capital Expenditure

Payments for Capital Assets - - - 394 243 394 243

Surplus/(deficit) for the year 0 0 1 757- 535 1 221-

IFMS - FINANCIAL SUMMARY

2017/2018 Planned Costs vs. Actual.

Breakdown of total spent for Goods and Services

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FY2017/18 (YTD)

Total Budget allocation R 352 112 000.00

Total expenditure R 97 402 287.31

2 Compensation of employees R 2 600 783.47

3 Goods and Services R 94 801 143.84

4 Transfers and Subsidies R 0.00

5 Capital Assets R 360.00

Varience i.e. Actual vs Budget R 232 814 767.69

No. (Line Item 3 Goods & Services) Total Spend per item

1 Licence Fees R 1 455 472.52

2 Software and Maintenance costs R 79 280 020.24

3 SITA hosting and maintenance R 11 537 304.74

4 SITA website and consulting R 2 474 116.72

Total Good s & Services Costs R 94 746 914.22

Already committed expenditure for 2017/2018

• Note: The total committed expenditure above will be paid from the

variance of R233m which represents approximately 52% expenditure

Service Provider Committed Expenditure

Oracle R58 000 000

SAP (Annual licence fees) R11 000 000

SITA ( IFMS 1 Hosting & FAS) R17 699 566.80

TOTAL COMMITTED EXPENDITURE R 86 699 567

IFMS - COMMITTED EXPENDITURE FOR 2017/18

THANK YOU

TO THE STANDING COMMITTEE ON PUBLIC ACCOUNTS

06 MARCH 2018