Minister of Public Works on the Department's Annual Report & Auditor General's Findings


12 Oct 2009

Present: Minister, Mr Geoff Doidge; Deputy Minister, Mrs Hendrietta Bogopane-Zulu; Acting Director General Mr N S Malebye; Chief Financial Officer, Ms Cathy Motsitsi

The Minister of Public Works and the Director General briefed the media on the tabling of Departments Qualified Opinion by the Auditor General. He stated that this would be the start of a systematic cleanup of the Department which included the appointment of consultants to undertake internal systems and financial audits.
It was emphasized that the findings of the Auditor General could not be repeated in the future, and needed to be addressed promptly.


Q: Is there any evidence of criminality in the Department and if so, what is being done about this?

A: The Minister replied that he was unaware of any criminal activities. The Department was driven by the findings of the Auditor General and would direct its investigations based on thee findings. An in depth investigation was needed, because if all of the issues were not dealt with properly, then problems would emerge later on. The Department was of the view that interventions needed to be brought in at a very strategic time to ensure that a proper clean-up was done.

Q: What changes are being made to the Expropriations Bill?

A: The Minister responded that the Expropriation Bill had been substantially revised. The formal processes had not yet begun, and work would be done with Minister Nkwinti and his Department, with the first briefing taking place later in the week. This would be dealt with as a new Bill and there would be ample time for public engagement before it went through the formal processes of going to Parliament.

Q: How much are consultants, such as Simeka Consultants, going to cost?

A: Mr Malebye explained said that there were guidelines for the provision of services by professional service providers to government. One option was to go on a time cost basis and the other was to go on a fixed rate as approved by the Auditor General. Depending on the nature and extent of the work, either of those options would be applied. There was no direct answer, and the action plan would be worked on over a period of time and then costed. The service level agreements would then be signed, showing what the cost would be. There were no available figures currently, but there were guidelines in place that determined this.

Q: What does bringing in consultants say about the performance of personnel in the Department?

A: The Minister said that the Department did not have sufficient capacity, particularly in its finance division and therefore relied on the expertise of consultants.

Mr Malebye said that two things were important in terms of capacitating the Department. Firstly, to ensure the transfer of skills to personnel in the Department over a period of six months, with a specific action programme to determine who would be capacitated, and when would the process come to an end. This would enable the Department to say that their objects had been achieved in terms of capacity building. The types of skills required to fast-track the programme and address the findings of the Auditor General were critical, and the Department would ensure that these were gained.

Q: Have any staff members been ‘fingered’ as being responsible for the current state of affairs and what is going to happen to them?

A: The Minister said that there were many valuable employees in the Department. Staff would be given the opportunity to improve on their skills. This had been raised with senior management in the finance branch and it was agreed that that there was a need to enhance the skills of staff members. This was not being done in a hostile environment and there were no particular individuals that were being ‘fingered’. If the former DG taken the advice of the CFO, Ms Motsitsi in December 2008, then the audit report would have looked very different.

Q: Have any deadlines been set for when the recovery of funds owed to the Department needs to be done by?

A: Mr Malebye said that the amount owed to the Department was approximately R490 million. The target date for the collection of these funds was 31 March 2010.

Q: At some point, one professional body in the property industry estimated that the state owned property portfolio was valued at R120 billion. Outsourcing part of this management could create an economic opportunity for black owned property management firms. Has this idea been explored further in the Department, and is this something that you would be willing to look at as a way of creating economic opportunities?

A: Mr Malebye admitted that the Department had considered the business case in terms of the Property Management Trading Entity (PMTE). A variety of other options were being considered, and any suggestions were welcome in terms of unlocking value for money in this regard.

The Minister said that the Department continued to interact with all the major stakeholders in the property industry, but it was still early days. It would be a matter of looking at what policies and programmes existed, some of which had come to a complete standstill, and restarting these. Relations were good with organisations such as the South African Property Owners Association (SAPOA), and discussions about how the potential of the portfolio were under way. There was much excitement about what could be done if the PMTE was structured properly.

Q: Will the willing buyer/willing seller method be done away with in the Expropriations Bill? And the previous Bill prohibited courts to intervene, where there was a decision taken on the price offered for property to be expropriated. Will there be any changes to this?

A: The Minister said that the purpose of the briefing was to deal with the audit report, and not the Expropriations Bill. The Bill was in the process of being reviewed by Minister Nkwinti and once there was agreement on some of the amendments made and the re-drafts that had taken place there would be time for engagement on that issue. Some of the areas that have been questioned had been looked at extensively since the last draft.

Q: Going back to the question of the cost of consultants, you said that you could not put a figure on this, but you must have budgeted for consultants. Could you put a ballpark estimate on what these consultants are going to cost the tax-payer?

A: Mr Malebye said that the guidelines were very clear in terms of the utilisation of service providers, either on a fixed rate basis or on a time cost basis. He said that the service level agreement still needed to be finalised in terms of that particular transactions, with the view to ensure that the capacity and the level of experience was actually required and would be used in terms of personnel. The cost implications differed from one person to another, dependent on their skills, but the Department was mindful of the fact that in the past, consultants that were used tended to be unregulated in terms of the cost to government. The Department would be cautious in this regard, and ensure that there was a high value for money spent.

Q: Has a cap been put on this? Is there a figure that you would not go above? I still cannot understand why a ballpark estimate cannot be given on what is going to be spent on consultants.

A: Mr Malebye said the way in which the Department worked in terms of consultants, was that there was a wide range of consultants which needed to be appointed. Firstly, there were fees that were determined by the Auditor General, and there were fees which were gazetted in terms of the engineering field and the kind of professionals that were used. For example if there was a focus on construction cost, the definition of a consultant as opposed to a professional civil engineer or surveyor would differ because the latter would be paid through the gazetted fees. That is why it was important to have service level agreements, and determine the cost on the basis of quality and type of professional services that would be utilised. The amount of money that the Department spent on consultants varied from professional consultants, civil engineers, chartered accountants and so forth.

Mr Malebye said that the budget depended entirely on the project that was being undertaken. Certain projects, depending on the size, nature and complexity of the project would cost seven percent of the total cost of the project, it all depended on whether it was going up, or downscaling and so on.

The media briefing was adjourned.

Response to Auditor General's Qualified Opinion

Minister Geoff Doidge Address

13 October 2009

Members of the Media,

Members of the Portfolio Committee, Ladies and gentlemen,

Good Afternoon,

As some of you might be aware, this morning we appeared before the Portfolio Committee on Public Works where we considered the Annual Report of the Department of Public Works. Amongst other things, we discussed key issues such as the Auditor General's opinion of the financial status of the Department's Property Management Trading Entity.

I found it imperative that following our engagement with the Portfolio Committee, we invite the media to a briefing where we can unpack and respond to your questions about how the Department of Public Works intends to deal with areas highlighted in the qualified opinion expressed by the Auditor General.

I need to state upfront that as Minister and policy leader of Public Works, I am far from happy with the current accounting and financial situation in the department.

As custodian of this department, I have the responsibility to ensure that policy objectives are implemented. Systems of recording transactions, keeping appropriate records and a register of assets and accounting are crucial mechanisms that assist us to get our policy objectives implemented. Inside the department, such systems should be in place to ensure that we effectively deliver services to client departments as well as collect what they owe us on a monthly basis. The Annual Report and the audit carried out by the AG's Team confirm the monitoring work that was undertaken since I took Office. Our policy objectives are threatened by systems that are not properly aligned and that do not allow the Department's Trading Entity to function optimally.

The Auditor General's qualified opinion is both damning and disturbing to say the least. As policy leader I have therefore had a variety of engagements with the AG. I need to state that the issues in the Audit Report are not a surprise to me.

My custodianship makes it important that the Department identify specifically what is wrong, set up mechanisms with which to correct these wrongs, and ensure that in the long term, things work in such a way that policy objectives can be achieved. It is incumbent on the leadership and management of Public Works that concrete and appropriate steps are taken to address this situation.

Ladies and gentlemen, we are starting a systematic process of cleaning up with the view of operationalising a long term strategy that raises the bar on all levels for this department.

Please take note that we intend to do this in a responsible and systematic manner. We are not going to act rashly. There should be no misunderstanding: The fact that the AG's Opinion contained in the Annual Report expresses concern for things that are not in place, and that it confirms my monitoring work over the last year in Office, does not mean that this department is not working.

It simply means that there are weaknesses and systematic misalignments that must be corrected. It must be emphasised that we are not on a course to demolish in order to build. There is no need for that. We are on a course of identifying wrongs and weaknesses and re-aligning systems to strengthen and ensure sustainable delivery along which we can achieve policy objectives. We are on course to deliver on the mandate that the people gave us. And the Department of Public Works shall deliver on that mandate with the cooperation of all who show the willingness to work together: Together we shall do more.

To achieve this, I am appointing professional companies to do internal systems and financial audits. Their report and its findings will form the basis for properly aligned internal control systems to ensure that we do not have a recurrence of issues as contained in this year's report.

In my engagements with these companies I have made it clear that we want our monies worth. We will agree to strict deadlines as to when we want certain things to be done. I will also be engaging with them personally, to ensure that they brief me on regular bases, as to the progress they have made.

I have met all senior staff of the department to inform them of these steps. They have, along the spirit of working together, been the first to be informed of these steps. I can reveal here today, that in that meeting, Public Works senior management staff has shown a commitment to fully cooperate in identifying weaknesses and realigning systems.

They have done so because they are convinced that this is an attempt to assist rather than to break down, this is an attempt to strengthen rather than to destroy, this is an attempt to go long term rather than to fix for the short term. And they have agreed to work hard to raise the bar, they have shown a commitment to work together to do more, they want to reclaim the mandate of the Department of Public Works.

In conclusion, we state upfront, that this Department shall continue with our cooperation with Parliament, the Portfolio Committee, Select Committee and Standing Committee on Public Accounts (SCOPA) as well as the Auditor-General's Office to push the bar higher towards improved governance and a clean audit in years to come.

We shall not stop in our efforts to strengthen systems of accounting and managing state assets. This means turning the Department of Public Works towards excellence, and we shall do so. We owe this to our people.

Under my leadership and those who lead me, we shall do what is best for our citizens and our country.

I thank you.


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