Lifestyle audits: Bringing legal and ethical considerations under scrutiny

April 1st, 2021
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Picture source: Gallo Images/Getty

The reported request by the Gauteng Provincial Premier, David Makhura, for the State Security Agency (SSA) to conduct lifestyle audits on Members of the Executive Council (MECs) warrants some probing as to its alignment with institutional legal mandates within the context of public administration governance (Pearl Magubane ‘State Security Agency to conduct lifestyle audits on Makhura, MECs’ (www.sabc.com, accessed 12-8-2020)). Directing the request to the particular institution, infers that it has a legal obligation that assigns it either a direct or shared accountability role in the matter. Additionally, the request brings both legal and ethical considerations under scrutiny.

The issue

The importance and placement of the mandate in the governance context is deliberated in that it is theoretically being conjoined to the understanding of jurisdictional integrity. The latter term is formulated as: ‘[T]he political and legal competence of a unit of government to operate within a spatial and functional realm’ (Chris Skelcher ‘Jurisdictional integrity, polycentrism, and the design of democratic governance’ (2005) 18(1) Governance – an International Journal of Policy Administration and Institutions 89). Based on the description of the word, it can thus be assumed that the Premier’s request presupposes that the SSA has the legal mandate to provide assistance. If by deductive reasoning it can be concluded that directing the request to the appropriate entity suffices, it would also imply that the request falls within the confines of good governance or corporate governance practices. The governance foreseen outcomes (as derived from the concept description by the Institute of Directors South Africa’s King IV Report on Corporate Governance for Southern Africa: 2016) would, therefore, be aligned to the exercise of ethical and effective leadership directed towards the sustainment of –

  • an ethical culture;
  • good performance;
  • effective control; and
  • legitimacy (www.iodsa.co.za, accessed 12-8-2020).

The relevance in referencing corporate governance in particular is juxtaposed against the background of how the request came about. Briefly, the much-publicised allegations of tender corruption in the securing of health-related goods and services involving senior public officials was accompanied by calls for action to address the seemingly growing number of cases thereof. Notwithstanding the foregoing, the request also illuminates the ethics element insofar as it pertains to balancing the legal standards with the aspect of personal judgment on the matter (Nomfundo Jele ‘Can ethics be taught?’ 2014 (April) DR 8). In this instance, the assertion is made that the request from the Premier could be considered as part of the possible acceptance of non-binding forms of cooperation in government entities when dealing with governance issues. However, such a development would seek ‘to supplement traditional forms of regulation in areas in which command and control processes have not been effective’ (David M Trubek and Louise G Trubek ‘New Governance & Legal Regulation: Complementarity, Rivalry, and Transformation’ (2007) 13 Columbian Journal of European Law 539). Hence also, the applicability of the International Federation of Accountants’ (IFAC) fundamental principles on public administration governance directing, among others, for the –

‘controls established by the top management of the [respective organs of state] to support it in achieving the entity’s objectives, the effectiveness and efficiency of operations, the reliability of internal and external reporting, and compliance with applicable laws and regulations and internal policies’ (IFAC ‘Governance in the Public Sector: A Governing Body Perspective’ Study 13, August (2001) (www.ifac.org, accessed 7-8-2020)).

In considering the above, the question still remains whether the premier’s request was appropriately directed?

The legal context

The generally acceptable view holds that the conducting of lifestyle audits is not only part of a proactive anti-corruption strategy, it also forms part of governance best practice. A read of the National Strategic Intelligence Amendment Act 67 of 2002 informs that the SSA’s mandate includes, among others, a counter-intelligence responsibility. Derived from this responsibility is the SSA’s explicit task to conduct security vetting in all organs of state on individuals that are new appointees, or those considered to be employed (or retained) in sensitive or high-risk job functions. This is to provide the necessary assurance that any such individual does not pose a security risk to the state. The concept of security vetting is formulated as ‘the prescribed investigation followed in determining a person’s security competence’ (Carmen Charmaine Lucas Vetting investigations for organs of state in a constitutional democracy – the South African context (LLM thesis, University of Pretoria, 2018) (https://repository.up.ac.za, accessed 16-8-2020)).

A lifestyle audit, in turn, is described as:

‘[A]n audit carried out with specific attention on income received by individuals, and these reports are an amalgamation of reports from a variety of databases that aim to give a snapshot of certain related aspects of the life of an employee’ (E Munjeyi and S Mujuru ‘Is it worth investing in “Lifestyle Audit” in Zimbabwe?’ (2018) 7(8) International Journal of Innovative Research in Science, Engineering and Technology (www.ijirset.com, accessed 15-8-2020)).

Theoretically, it can be deduced that the two concepts, security vetting and lifestyle audit, do not carry the same meaning and purpose. Based on these differences, it can also be surmised that from a practical stance, the vetting process includes the acquiring of lifestyle-related information as part of the formal action steps. Additionally, both practitioners and scholars consent to the fact that lifestyle audits can be conducted by any employer where there is suspicion of fraud. This can further be contrasted with the mandate of the South African Revenue Service (Sars), which conducts lifestyle audits to ensure compliance with liabilities under applicable tax Acts. Case law, with reference to Commissioner for the South African Revenue Services v Brown (ECP) (unreported case no 561/2016, 5-5-2016) (Smith J), underscores this view. Flowing from its defined mandate, the opinion holds that Sars is thus able to detect possible incidents of under-reporting of income or where there is not full disclosure of assets that can constitute potential tax evasion. Whether it has a clearly defined mandate to conduct lifestyle audits on the Executive in the manner intended by the request from Premier Makhura is not expressed. Also, the judgment from Commissioner, South African Revenue Service v Public Protector and Others 2020 (4) SA 133 (GP), adds to the reasoning. In this instance, a ruling was made on matters of taxpayer confidentiality and, to a degree, proposing other means of acquiring lifestyle information than being reliant on Sars. This case has been taken under review. Although there can be no dispute that from a practical point, both Sars and the SSA are suitable to the task (ie, they have institutional expertise), their legal mandates do not assign any direct obligation. Still, at present, the most appropriate entity considered, is the Office of the Public Protector. This can be derived from the mandatory tasks assigned to the Public Protector under s 3 of the Executive Members’ Ethics Act 82 of 1998. More so, s 4 of this legislation permits the incumbent to investigate any complaint, for example, against any MEC of a provincial government, lodged by either the president or any premier. Furthermore, ss 110 to 114 of the Constitution assigns the Public Protector the responsibility of investigating cases such as the alleged procurement corruption. Case law pertaining to Minister of Home Affairs and Another v Public Protector of the Republic of South Africa [2018] 2 All SA 311 (SCA) applies in this instance.

Findings

Based on the legal texts consulted, the presence of suitability for the task being vested in different state entities, as well as the role of the Office of the Public Protector more clearly defined, infers that there is an absence of a coordinated and standardised process to conduct lifestyle audits on the Executive. To elucidate:

  • Scholarly research on lifestyle audits, coupled with the 2019 State of the Nation Address by President Cyril Ramaphosa on the subject, supports this analysis (Cyril Ramaphosa ‘President Cyril Ramaphosa: State of the Nation Address 2019’ (www.gov.za, accessed 17-8-2020)).
  • The Western Cape Provincial government concluded its own lifestyle audit in 2020 with focus covering the period of 1 June 2017 to 31 May 2019 (Western Cape Provincial government ‘Premier Alan Winde on lifestyle audits of Western Cape cabinet members’ (www.gov.za, accessed 31-8-2020)). The relevance of this matter to the request by Premier Makhura can also be extrapolated to a 2018 complaint by the opposition Democratic Alliance in the Gauteng provincial government (Penwell Dlamini ‘Gauteng will do lifestyle audits on the executive … sometime’ (www.timeslive.co.za, accessed 27-2-2021)). The premise of the complaint was the delay in conducting lifestyle audits on the provincial MECs. The response at the time was that the Premier sought to secure the assistance of the relevant institutions to give effect to the task. This also raises the question as to how a comparable entity of the state concluded a related exercise.
  • At a practical level, the realisation of the request could also be aligned to perceived resource challenges. Of particular importance is the SSA’s presentation to the Standing Committee on Public Accounts in 2019. As part of its submission, the SSA highlighted that it had a huge vetting backlog with insufficient personnel and funding to carry out the background checks. This briefing related to a 2012 government decision to have all public officials involved in supply chain management vetted. This vetting commenced in 2014. With a reliance on other government agencies for information, the total applications for vetting in the supply chain management sector saw only 48% of the vetting applications completed. The SSA also raised the concern that some government departments and state entities refused to have their employees vetted (Standing Committee on Public Accounts ‘State Security Agency on vetting of officials: Research Unit on Audit outcomes, with Minister’ 15 October 2019). It is my opinion that any such refusal is contrary to the SSA’s legal obligation under s 2A of the National Strategic Intelligence Act 39 of 1994. The latter directs that the SSA ‘shall be responsible’ for vetting in those cases it is applicable. The Public Service Regulations, 2001 under s B.1(f) asserts the same obligation under ‘Conditions for appointment’. It similarly instructs that an executive authority ‘shall require an employee to be subjected to security clearance only where the duties attached to the post are such as to make security clearance necessary’. Both tasks denote a mandatory must be done. Following on from the Standing Committee briefing, the SSA cautioned that the situation left the state vulnerable to crime, corruption, fraud and mismanagement of state funds.
  • While annual financial disclosures are already a mandatory requirement for all public officials such declaration can be defined as an event rather than a process. However, it is the view that this compliance exercise can form the premise on which lifestyle audits can be constructed and managed.
  • Based purely on the appraisal of applicable legislation, the placement of the SSA as directly involved with the task seems to potentially pose both an ethical and legal concern. This reasoning can be framed in relation to the request being contrary to conformance as a good governance principle. In this instance it denotes how ‘the organisation uses its governance arrangements to ensure it meets the requirements of the law, regulations, published standards and community expectations of probity, accountability and openness’ (National Institute for Governance, Canberra ‘Better Practice Public Sector Governance’ (anao.gov.au, accessed 26-2-2021)).
Conclusion

The articulation of, and adherence to, defined mandates should not only continue to promote good governance practices but should also emphasise compliance with the associated ethical standards. Furthermore, the unfolding COVID-19 related events of alleged corruption are regarded as further motivation to address identified legal constraints in order to promote constitutionally enshrined good governance practices in public administration.

Dr Lincoln Cave DTech in Public Management (TUT) Master’s in Security Studies (UP) Dip Corporate Forensic Investigator (Damelin) is a diplomat and writes as a Certified Ethics Officer. Dr Cave is also an
Associate Member of the Institute of Commercial Forensic Practitioners and a Supporter of the Ethics Institute of South Africa.

This article was first published in De Rebus in 2021 (April) DR 22.

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