APPENDIX 4: LIST OF SCHEDULE 1 OFFENCES 270
4.2 FRAUD PREVENTION THEORY
4.2.1 Legislation
According to Burchell (2005:9), criminal law is used as a social mechanism that is used to instil fear into people not to commit crime, by threats of negative consequences against them in the form of punishment being imposed on them should they not abide by the law. The primary purpose of criminal law is to prevent crimes from taking place. Burchell (2005:10) avers that punishment entails depriving one of something, or inflicting suffering on a person found guilty of committing a crime. He (2005:18) postulates that penology deals with addressing criminal behaviour with the objective of rehabilitating the criminal so that s/he does not commit crimes again. The existence of criminal law also serves a preventative purpose by prohibiting certain conduct that is deemed to be unlawful. An act is unlawful and is also punishable by the state, through incarceration, paying a fine or community service.
The obvious implication for the perpetrator is that s/he would have a criminal record which would impact on future employment that is sought.
4.2.1.1 Constitution of South Africa Act 108 of 1996
According to Burchell (2005:116), the Bill of Rights embodied in the Constitution of the Republic of South Africa Act 108 of 1996 is the authoritative legislation in the country; the provisions of all statutes, common law and customary law should be aligned with the norms of the Bill of Rights. Section 29 (1) (b) of the Constitution of the Republic of South Africa Act 108 of 1996 stipulates that “everyone has the right to further education, which the state, through reasonable measures, must make progressively available and accessible”. Further education includes education provided by public universities, which are funded by the state.
The state has a duty to progressively make further education available to all its citizens. The
Merriam-Webster Dictionary (2014) defines “progressively”, which is used in the Bill of Rights, as “happening or developing gradually over a period of time”. The perpetration of fraud by employees of universities contributes towards undermining this right, as universities are unable to gradually increase the number of new students at universities due to constrained funding. The need to prevent employee fraud at universities is essential, according to Peltier- Rivest (2014:37), as it contributes towards ensuring the mitigation of reputational risk and the continued financial support from governments and donors, which is essential for the sustainability and growth of public universities.
Section 195 of the Constitution of the Republic of South Africa Act 108 of 1996 relates to the values and principles that govern public administration. The salient principles that relate to preventing employee fraud at universities in KwaZulu-Natal in particular and other public institutions in general are:
Professional ethical standards must be maintained;
Resources must be utilised efficiently and effectively, and
There must be accountability from those entrusted with public administration.
The White Paper on Transforming Public Service Delivery (Batho Pele White Paper) was implemented within the public sector in South Africa in 1997. The Batho Pele (People First) (2010:2) principles, were designed and implemented by the South African government in order to ensure effective and efficient service delivery to the public based on sound ethics. Section 8 of the Batho Pele principles (2010:77) relates to education, and to higher education in particular, which is the focus of this study.
Section 195 of the Constitution of the Republic of South Africa Act 108 of 1996 as well as the Batho Pele principles are explained in further detail in Chapter Six.
4.2.1.2 Higher Education Act 101 of 1997
The Higher Education Act 101 of 1997 stipulates under Section 27 (1) that the Council of a public higher education institution is tasked with the governance of that institution within the parameters of applicable laws and the statute of that institution. According to the Merriam- Webster Dictionary (2014), the word “govern” is defined as “to officially control and lead (a group of people)”. It is the role of the Council of a public higher education institution to ensure
that the institution is managed in an effective and efficient manner in line with good governance principles espoused in Section 195 of the Constitution of the Republic of South Africa Act 108 of 1996, Batho Pele principles (2010:77) and King III (2009:16).
4.2.1.3 Prevention of Organised Crime Act 121 of 1998
The Prevention of Organised Crime Act 121 of 1998 is intended to combat organised crime, money laundering and criminal gang activities. As fraud is one of the crimes that may be committed in an organised manner, it is listed under Schedule 1 of this Act. Of relevance to this study are the prohibitions and implications for persons who perpetrate fraud as an organised crime activity. There is a common law responsibility that people who are aware of organised criminal activities, to report such to the police so that these could be investigated so that those who are implicated could be successfully prosecuted.
4.2.1.4 Protected Disclosures Act 26 of 2000
The Protected Disclosures Act 26 of 2000 aims to encourage the eradication of criminal and irregular behaviour within the workplace. This Act encourages employees to make a protected disclosure against an employer or the employee of an employer who is suspected to be committing an offence. Section 1 of the Act stipulates, inter alia, that an employee may make a protected disclosure when s/he has reason to believe that a criminal offence was, or is being, or is going to be, committed. The Act prohibits the employee, who has made a protected disclosure, from being subjected to any occupational detriment by the employer. Section 1 defines occupational detriment as, inter alia, the employee being subjected to disciplinary action, harassment, intimidation and dismissal due to the protected disclosure s/he has made.
The provisions of this Act are essential when organisations consider implementing an anonymous whistle blowing service. Employees require assurance that their confidential disclosure would not be detrimental to their continued employment.
4.2.1.5 Prevention and Combating of Corrupt Activities Act 12 of 2004
The Prevention and Combating of Corrupt Activities Act 12 of 2004 is intended, inter alia, to enhance the measures to prevent corrupt activities, including fraud. This Act succeeded the previous Corruption Act 94 of 1992. In the preamble to this latest Act, it states that “the illicit acquisition of personal wealth can be particularly damaging to democratic institutions,
national economies, ethical values and the rule of law”. The impact of corrupt and fraudulent activities is widespread, necessitating the creation of this Act. A further measure aimed at preventing and combating fraud and corruption is contained in Section 34 (1) (b) of this Act, which makes it incumbent upon any person in authority, who is aware or should be aware, that any person has committed theft, fraud extortion, forgery or presenting a forged document, valued at R100 000 or more, has to report this to a police official. The Act aims to engender a culture of reporting violations to the police for the investigation and prosecution of offenders.
4.2.1.6 Companies Act 71 of 2008
The Companies Act 71 of 2008 was promulgated in order to, inter alia, define the relationships between companies, their directors and shareholders, as well as how companies are incorporated, managed, operated and governed. Section 159 of this Act also deals with the protection of whistle blowers. The Act reaffirms the provisions of the Protected Disclosures Act 26 of 2000 insofar as it relates to the Companies Act. Various forms of fraudulent conduct are prohibited in the Companies Act and punishable in law. In terms of this study, the Companies Act contributes towards the prevention of fraud by setting out the prohibitions and penalties for transgressions of the Act. The Act serves a deterrent value to potential fraudsters.
The Act is not directly applicable to higher education institutions as they are not regarded as companies in terms of the Act.
4.2.1.7 Pension Funds Act 24 of 1956
In terms of the Pension Funds Act 24 of 1956, employers who are defrauded by their employees are entitled to recover the value of the loss, including legal fees, from the pension fund benefits of the employee who is implicated. Section 37D deals with the pension fund making certain deductions from the pension fund benefits. Section 37D (1) (b) (ii) authorises a pension fund to deduct compensation that is due to the member’s employer for damage suffered by it due to fraud, theft or misconduct from the pension fund benefits of the employee.
This Section of the Act also serves as a deterrent to other employees. It reminds them that the employer is able to recover the value of loss from their pension fund benefits. In instances where, for example, an employee resigns before any disciplinary action could be instituted against him/her, the employer has recourse to recoup its loss from the pension fund benefits of the implicated employee. This Act contributes to the prevention of employee fraud. These Acts
should be taken into consideration when addressing employee fraud and prevention strategies at universities in KwaZulu-Natal.