Lottery was warned in 2014 about fraud – and yet it continued

Had all the recommendations been taken seriously hundreds of millions of rands would not have been wasted in subsequent years

Photo of NLC sign

A 2014 report, that as far as we can tell has not been published, described numerous dodgy Lottery-funded projects. Photo: Raymond Joseph

By Raymond Joseph

3 April 2020

Several measures recommended in 2014 to stop dodgy, often fraudulent, applications for Lottery funding appear not to have been implemented, a GroundUp investigation has found.

So serious had the problem become at the time that former Chief Risk Officer Bathabile Kapumha submitted a report warning the (then) National Lotteries Board. She recommended steps to prevent it happening in the future.

Kapumha’s report also flagged a number of questionable applications. She recommended that projects where “falsified information” had been included in grant applications be cancelled and referred to the police for investigation.

Over R289 million in dodgy applications is covered in the report, of which nearly R94 million had already been allocated. But thanks to the vigilance of the risks team, only R3 million of this was paid out, highlighting the value of the stringent due diligence procedures in place at the time.

Yet, six years later, many of the issues flagged in the 20 August 2014 report appear to be continuing.

The current NLC Commissioner Thabang Mampane and J Du Preez, the Senior Executive for Grant Funding, were also involved in compiling the report, which has been leaked to GroundUp.

With the number of “confirmed cases of fraudulent financial statements”, falsified NPO certificates and non-existent organisations applying for funding, it became “imperative” to verify the authenticity of information submitted with applications, the report warned.

The report also explained the “lessons learned” and the steps and resources that needed to be put in place to detect fraudulent applications for Lottery funding in the future.

“… one of the key lessons learned from recent irregularities detected is the need to check/verify people involved with the applicant and/project given,” the report’s compilers wrote. Checks had also revealed “the recurrence of the same individuals in projects without being listed as part of the management committee or directors”. They had found “individuals who register a number of NPOs/NPCs applying for funding for these organisations” the board was told.

The report’s compilers recommended that the board cancel a variety of projects and also act against organisations that had submitted “falsified information” in support of grant applications. This should include reporting these organisations “to the SAPS for further investigation and possible criminal prosecution”.

Letters describing the issues that had been uncovered and asking for explanations were then sent to all the identified organisations by Mampane, at the time the NLB’s CEO.

What the 2014 report found

The 2014 report listed various “transgressions” that had been discovered in applications:

The report also highlighted several examples of dodgy applications that had been uncovered and made recommendations of what should be done. They included:

Had all the recommendations from the 2014 report been taken seriously hundreds of millions of rands in Lottery money would not have been wasted on fraudulent or highly questionable projects in subsequent years.

In response to detailed questions sent via email and WhatsApp, NLC head of communications Ndivhuho Mafela replied with a “Lockdown notice”.

It reads: “Reminder! The NLC has suspended all operations during the national lockdown. This includes the call centre. All enquiries (funding, status of applications and media) will be attended to once operations resume. #StayHomeSafe”