The R88m textbook bombshell

2013-10-06 14:00

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»?Forensicreport lifts lid on questionable discount benefits and management fees to EduSolutions, as well as three extra contracts awarded without tender

» Basic Education Minister Angie Motshekga fights back: Her department is countersuing EduSolutions for R88m

» SA Democratic Teachers’ Union appoints law firm to probe nagging allegations that it is being used by EduSolutions and publishers to fight proxy wars with Motshekga’s department

An explosive forensic report into EduSolutions, the company at the centre of Limpopo’s textbook scandal, reveals how it pocketed R88?million in discounts and management fees during the province’s education crisis.

City Press has in its possession the report by Gobodo Forensic and Investigative Accounting, which is not yet publicly released and which is still in draft form.

The report finds that the company massively overcharged the department of education in Limpopo for items they supplied, ranging from calculators and science kits to TVs and home-theatre systems.

But that was not all. After their first contract, signed with the department for R320?million, they were handed another three contracts worth more than R30?million without having to submit tenders for them.

The report recommends that the company pay at least some of the money back to the state.

Now Basic Education Minister Angie Motshekga is suing EduSolutions for the full R88?million in discounts and management fees the department of basic education says in court papers the company should never have received.

The papers have been filed in the North Gauteng High Court in Pretoria.

EduSolutions first sued the department in July for R150?million, which they claim they lost unfairly after the department cancelled their contract.

The Gobodo report and the department’s court papers also reveal that:

»?EduSolutions benefited from R68?million in discounts from textbook publishers and suppliers of school materials – even though the department had already negotiated a discount of its own;

Although EduSolutions received permission to share in these discounts, Gobodo found the department had previously negotiated discounts of its own accord and that EduSolutions should therefore not have been allowed to share in the benefit;

»?Gobodo’s investigators say full disclosure of all of the discounts was not made, which may amount to fraud; and

»?EduSolutions was paid R19?million, before delivering a single book, for “management and administration” fees.

Upfront payments, according to the report, are in breach of the Public Finance Management Act.

Ian Small-Smith, EduSolutions’ lawyer, questioned how City Press came by the “unlawful” possession of the Gobodo report, saying it was a “draft interim report”, which the company had neither seen nor responded to.

He said no EduSolutions employees had been approached by investigators to answer questions.

He slammed Gobodo’s report as “one-sided” and said it was conducted with the aim of reaching an “adverse conclusion” and “besmirching” the company’s name.

Small-Smith said his client would not comment and Gobodo’s “lack of objectivity and incompetence” would be exposed in court.

The facts and figures laid bare

‘Fraudulent’ discounts

But throughout the Gobodoreport, investigators claim they requested information from EduSolutions, some of which was never received.

One of the more startling revelations in the Gobodoreport is that EduSolutions bagged three contracts, without these going out to tender, even after serious questions were raised within the department about the initial textbook deal.

Investigators found that in October 2010 the ­provincial department’s former head, Benny Boshielo, cancelled a R2?million tender for the supply of 17?867 scientific calculators.

He allegedly instructed officials to give the contract to EduSolutions. Investigators could find no evidence that the calculators were delivered to EduSolutions’ warehouse in Seshego.

In January 2011, he cancelled a R1.3?million tender for the supply of physical science kits – and this was also awarded to EduSolutions.

The company allegedly charged the department R19?500 for each of the 25 kits they bought, whereas they paid R15?600 for each kit.

Read: EduSolutions responds

In another instance, investigators found that ­Boshielo cancelled a tender to buy toys for Grade R ­pupils across the province.

He then allegedly instructed officials to hand the R27?million contract to ­EduSolutions in January 2011.

Investigators said EduSolutions claimed to have ­negotiated discounts worth R8.8?million when buying the toys, allowing them to pocket R6.2?million.

They gave the department the rest.

The report also reveals that as part of the same R27?million contract, EduSolutions claimed to have bought TV sets and home-theatre systems from Game discount stores for R14.2?million and received a discount worth R4.2?million, R2.9?million of which it pocketed.

The company apparently failed to provide investigators with proper invoices from Game.

The report claims investigators were instead given informal invoices, meant for quotation purposes, which didn’t contain the discounts EduSolutions claimed.

Investigators concluded: “It appears EduSolutions fraudulently claimed a discount of R2.9?million from Game.”

The report also reveals that in August 2011,

EduSolutions received a R1.9?million contract to supply maths, science and technology equipment – without it being advertised or going out to tender.

While buying the equipment, EduSolutions allegedly claimed to have negotiated a discount of more than R762?000, from which it pocketed more than R533?000.

Investigators found that the company claimed more than R270?000 in discounts in circumstances where the company that supplied the goods told investigators they did not offer any discounts.

This means, the report said, that EduSolutions inflated the prices.

A chequered history

In 2012, National Treasury appointed Gobodo to probe EduSolutions’ appointment to buy and distribute books for Limpopo’s education department from 2011 to 2014.

The contract was cancelled in April 2012 after five provincial departments were placed under administration – and because allegations of corruption and ­financial mismanagement had already surfaced.

Before the contract with EduSolutions was signed, the department had a fully staffed and resourced book unit that handled the procurement and delivery of books to schools in Limpopo.

The Gobodoreport reveals that officials failed to give investigators convincing answers as to why the delivery of books should be outsourced.

Boshielo told investigators that the decision to ­outsource textbook delivery was based on the fact that “schools had no textbooks and that others were ­supplied with redundant and obsolete ones”.

The forensic report also reveals that the department failed to perform a cost and benefit analysis before ­deciding to outsource book distribution.

Investigators found that when EduSolutions was ­appointed in June 2010 to deliver textbooks in Limpopo, it received permission from the department to ­negotiate 30% discounts with publishers.

According to the agreement, EduSolutions would pocket 70% of these discounts and the rest would go to the department.

But Gobodo’s team found EduSolutions should never have benefited from these discounts, which amounted to R68 million: the department already had a standing agreement with the Publishing Association of SA to ­receive a 30% discount when purchasing books.

Inflated prices - what the Gobodo draft report says

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