DID ANNUAL REPORT 2022 23

Annual Report 2022-2023

Status of previously reported material irregularity Refurbishment of a private hospital without compensation for refurbishments done 44. R esources of the department were not utilised economically, as required by section 38(1) (b) of the PFMA. The department refurbished a privately owned hospital between April 2020 and March 2021 as per the lease agreement signed in March 2020 and April 2020. The lease agreement stated that any refurbishments done to the private hospital will be to the benefit of the lessor and no compensation would be paid to the department. By 31 March 2022, R492.9 million was spent on the refurbishments.

45. G auteng Department of Infrastructure was managing the project on behalf of the Gauteng Department of Health.

46. T he Gauteng Department of Health is likely to suffer a material financial loss if an amount of R492 855 808 spent on refurbishments is not recovered. The amount is disclosed in note 22 to the 2020-21 annual financial statements of Gauteng Department of Infrastructure Development.

47. T he accounting officer was notified of the material irregularity on 22 July 2022 and invited to make a written submission on the actions taken and to be taken to address the matter.

48. A n investigation that was conducted by the Special Investigating Unit (SIU) dated 10 December 2021 found that a lease agreement was concluded between the Departments of Infrastructure Development, Health and owners of the hospital. 49. T he SIU applied to the Special Tribunal of South Africa for the draft settlement agreement between the SIU and owners of the hospital to be made an order of the tribunal. The matter was heard in November 2022. The options included in the draft settlement agreement are as follows: o Gauteng provincial government to become registered title owner of the hospital and the residence, including parts of the land upon which these buildings are built on. o Concluding of a long-term written lease agreement for a period of not less than 99 years between the owners of the hospital and Gauteng provincial government at no rental cost, and where the Gauteng provincial government will only be required to pay its pro rata or other fair contribution to the municipal services and other related services required for the operation of the hospital. 50. The accounting officer has taken the following actions to address the material irregularity: o Initiated the process of updating the property lease policy to only allow refurbishments to be done on buildings owned by the Gauteng provincial government. The process is expected to be finalised by October 2023. o An official from the Department of Infrastructure Development who signed the lease agreement was placed on suspension in 2021-22 financial year while the disciplinary process is on-going and it is expected to be finalised by 31 March 2024. In addition, an official from the Department of Health who also signed the lease agreement resigned from the employment of the department in October 2020.

51. I will follow up on the outcome of the application made to the Special Tribunal of South Africa and progress made on the updating of the policy during my next audit.

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DEPARTMENT OF INFRASTRUCTURE DEVELOPMENT