The National Treasury says it is hoping to renegotiate the controversial Integrated Financial Management System [IFMS] contract which is at the centre of its dispute with the auditor-general. The dispute has led to the delay in submitting its 2021/22 annual report to parliament as required by law.
The IFMS is an IT system approved by the cabinet in 2005 to integrate the government’s human resources and financial systems into a single platform but it has not been rolled out nationally having been designated fruitless and wasteful expenditure by the auditor-general.
The Treasury pays about R68m a year for technical support and the maintenance of the software licence system even though it is not in use. The state had entered into contractual agreements with software giant Oracle to supply software for the IT overhaul.
Acting director-general Ismail Momoniat told parliament's standing committee on public accounts [Scopa] the state has not implemented something that it was supposed to implement in 2017.
“The problem we face is that the implementation of the IFMS, which is an important project, has been seriously delayed and so the whole dispute relates around that there’s a contractual agreement that the government has entered into and what happens is every year when a payment is made, of say R68m for maintenance and support, the AG has said the IFMS not being used and therefore it’s fruitless expenditure,” said Momoniat.
He explained that while paying for the contract results in fruitless expenditure, not paying would have similar consequences.
“So it’s become an issue and what we’ve done now is to try to see what accounting standard should apply and what should be the basis on which it is deemed to be fruitless or irregular.
“If we were to abandon IFMS, the state would face legal consequences and those are all the areas we are going into to try to see what the issue is called, because even next year when our financials come out, if the current approach is maintained, it’s going to be fruitless,” he said.
It emerged in 2017 that the Treasury had spent R1bn on the system which, after more than a decade, it had failed to implement.
The process has been a subject of countless investigations. One forensic investigation identified conflicts of interest, tender irregularities and other failures in the contracting process and recommended that action be taken against officials involved.
President Cyril Ramaphosa issued a proclamation for the Special Investigating Unit to investigate the R4.3bn initiative in 2020.
The government’s initial plan was to develop its system internally, but this was changed by the cabinet in 2013/2014 in favour of an off-the-shelf software system, which was purchased in 2016/2017.
The process is managed by the National Treasury, the department of public service & administration and the State Information Technology Agency (Sita).
Momoniat said they were looking at a way forward.
“In government we don’t want to send a message that we don’t honour our contracts. We try to renegotiate it. It’s a discussion that we are having and as I’ve said we are trying to renegotiate, even with Oracle, so that hopefully we meet the concerns of the AG.
“But we do have differences both from an accounting standard and the way certain payments are being treated with the interpretation of the AG, which I think needs to be resolved,” he said.
The IFMS was not only dogging the Treasury but the entire government as the systems it uses were old, he said.
Finance minister Enoch Godongwana said he was told that there was an agreement by the cabinet that three departments should work together on the issue.
But his reading was that the three departments are not on the same page about the continuation of the IFMS.
“And that has got an implication on the implementation because to provide for the rollout, you need to have a service provider, and to get a service provider, it has to be done by one of our sister departments who are not committed on the project.
“So, Sita is going to provide us with a service provider to rollout but because we are not rolling out, AG says the costs you are incurring for maintaining these things without a rollout may be irregular. That’s simple my own reading.”
He undertook to make sure that the impasse is resolved before the end of the financial year, so that government can be able to continue with the rollout.
MPs continued to express concern over the non-tabling of the annual report.
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