The Department of Public Works presented its Annual Report 2009/10 to the Committee. It highlighted that in this year attention was paid to up scaling of the Expanded Public Works Programme (EPWP), the Public Entities programme that aimed to help development in rural schools, and assisting the Council for the Built Environment to help generate professionals and create better representation in the building and construction professions, including new learning programmes and innovative participation in the public sector. The major challenges were around tender fraud and there was a need to strengthen internal controls to address and counter corruption, to effect risk management and ensure effective control. The project-driven reporting on the EPWP at local government levels remained problematic. The Department also experienced historic and current problems in getting payments from tenants, but had introduced a programme to try to address this. Monitoring and evaluation was in place to address the functionality of units, which had improved targets. The Department was trying to introduce web-based reporting systems. Lack of critical skills in the built environment and engineering professions remained problematic, but the Department was paying attention to this, and the Cuban embassy mentorship programme was described, as well as ongoing research into tracking students and graduates at all universities. Asset management also remained a problem, but the Department was busy reaching its target for construction of 200 new buildings, and 75% of buildings were compliant with minimum requirements. Tender opportunities were being given to Black Economic Empowerment (BEE) firms, and there was increased compliance with BEE leases. Although the EPWP had not reached its targets, it was trying to encourage more municipalities to participate, particularly in improving roads and bridges. The financial statements were presenting, noting that capital expenditure was regarded as work in progress. The Department had a large bank overdraft and had requested a rollover. There had been fruitless expenditure of R392 00 when tenants left a building before expiry of the lease. There was irregular expenditure of R264 million, which was broken down. The progress in addressing the problems was outlined.
Members were generally critical of the Department’s presentation, commenting that there were many gaps and that concerns highlighted by Members in previous meetings were not addressed, and there was insufficient provincial information, as well as insufficient information on gender matters. More clarity was sought on the asset investment management and agreements. Members highlighted several instances in which State owned buildings were neglected and unsafe. Members were concerned that corruption might be masking the true situation, and they asked how the Department was handling this. They were also concerned about lack of skill generally in the sector, as well as lack of special skills, including financial skills, in the Department itself, and asked much was being paid to the consultants. They stressed the high figures for irregular and unauthorised expenditure, and believed that these should be sternly addressed, with penalties being imposed against those responsible, in view of the large amounts involved. Members stressed that time frames needed to be set for addressing problems, and that more concerted efforts must be made for collection of rental. They asked about incentives to municipalities in respect of the EPWP programmes and thought that there should be closer collaboration between the national and provincial departments, and enquired how much was being given to the municipalities. They were concerned whether sufficient policies were in place and whether they were being handled correctly, and enquired also what was being done to address internal control weaknesses and risk management, as well as to address incorrect information and update the systems. They called for a report on police headquarters. Some of the questions were addressed in the meeting, but the Department was told to deal with others in writing, and was warned that in future it should note the concerns and formulate its presentations around these points, to ensure that progress was reported.
Department of Public Works (DPW) Annual Report 2009/10 Briefing
Mr Siviwe Dongwana, Director General, Department of Public Works, began the presentation with a brief overview of the priorities that guided the policy for 2009/10. He mentioned that critical attention was paid to up scaling of the Expanded Public Works Programme (EPWP). He added that the Public Entities programmes aimed to help development for rural schools. Another programme was aimed as assisting the Council for the Built Environment (CBE) to help generate professionals and create better representation in the building and construction professions in the country. The Department of Public Works (DPW or the Department) had also been involved in taking risks in introducing learning programmes that no one else had been using, to try to induce more innovative ways of assisting participation within the public sector. He noted that there were challenges around fraudulent tenders, and it was mainly the internal controls that needed to be strengthened within the Department to address and counter corruption, to effect risk management and ensure effective control over the Department’s activities. He said that EPWP web-based reporting at local government level, which was driven by projects, remained problematic to administrate.
Ms Cathy Motsisi, Chief Financial Officer, Department of Public Works, spoke about the programmes that the Department had in place to try to ensure that assets were secure and paid up. The main problem experienced by the Department internally was the issue of payments that had been outstanding and not paid from several years ago, by tenants. The Department of Public Works introduced an operation called “Re Ya Patala” that had assisted in following up with outstanding payments. She also highlighted the running of the internal audit investigation system, which the Department used to prevent fraud. Communication was done through posters on doors and elevators to promote awareness to help address the problem. Monitoring and Evaluation had been put into operation, to try to understand units’ functionality, and this had improved the reaching of targets. The development of web-based systems was one of the main technical systems that the Department aimed to have in place. Currently it was operating under a manual Excel programme, but this did not generate sufficient credible information that was needed to solve the main issues that were experienced nationally.
Mr Mandla Mazibuko Deputy Director General: Special Projects, Department of Public Works, highlighted that there were serious challenges in regard to job creation, because of the lack of critical skills in the Built Environment and Engineering disciplines. The Department had however achieved most of its targets in regard to education and skills creation that were aimed at putting more skilled people into the marketplace. The Department had found that when people were trained in the public sector it was easy for the private sector to take them on, and in order to address the scarce skills and skills shortages the Department had an arrangement with the Cuban Embassy to facilitate a mentorship programme over a period of three years. Under this, South Africa young professionals could have the opportunity to attain the necessary skills needed for engineering, and this programme had so far been a success, so it might be extended.
Ms Sasa Subban, Deputy Director General: Asset Investment Management, Department of Public Works, advised that Asset Investment Management was common to most departments when it came to service delivery expectation levels. Some reviews were not submitted by departments on time, and the DPW tried to help in the conduct of investments. The Department had also saved on 10% of consumption on government buildings by 31 March 2010. The Department of Public Works had a target of 200 buildings to construct nationally, and to date, 114 were in construction, 38 were completed and 22 were at the stage of design procurement. The valuation of State property cost the national government about R250 million per building, so the Department was conscious of the need to ensure that everything was done correctly to ensure that the financial ramifications were handled appropriately. 75% of the 108 562 properties complied with the minimum accounting requirement, as compared to the 80% target.
She noted that to achieve a transformed construction industry, tender opportunities must be given to companies that were Black Economic Empowerment (BEE) compliant. 30% of tenders on projects above R100 million must be subcontracted to BEE contractors, by 31 March 2010. The DPW had identified two projects in Johannesburg and at Head Office, which were both BEE projects. The Department also identified an increase in lease agreements of BEE compliant entities of 31, 74%, compared to the figure of about 5% two years ago. She said that research had shown that Integrated Development Plans (IDP) existed in Mthata, Matatiele and Cape Town and Tshwane, while three other towns also experienced development growth.
Mr Stanley Henderson, Deputy Director General: Expanded Public Works Programmes, Department of Public Works, outlined the role of the EPWP among learners and set out how the Department had made improvements. The Department had a target of 6 000 youth members participating in national youth programmes and had achieved 2 500 participants. The number of learners participating in the Vuk’uphile learnerships were 511, compared to the target of 1 000. The only two sectors where the Department succeeded in meeting its targets was the number of municipalities reporting EPWP and number of work opportunities created, which was 625 859. Mr Henderson mentioned that the EPWP tried to embark on road shows in which all municipalities would participate, to try to facilitate better roads and bridges in poorly developed areas, so people could access schools, clinics and water.
Ms Lydia Bici, Deputy Director General: Policy, Department of Public Works, said that the there was improved performance, growth and development of construction and property sectors because of the increase in numbers of students registering for the courses at university level. The Department had collected data from all universities in South Africa to find out which students had registered for Engineering and Built Environment programmes, but had not analysed the data yet, including the numbers of dropouts and number of students registered at any one time.
Ms Motsisi then presented the financial performance of the Department of Public Works. She highlighted 86% capital expenditure, noting that this was still a work in progress. The Department experienced a R112 million roll over and had a R1.67 billion bank overdraft at the end of the 2008/9 financial year, because of the revenue that it had been unable to collect from clients in the previous year. The Auditor-General had commented on fruitless expenditure of R392 000, and she explained that this arose in Johannesburg, when clients had vacated the buildings before the end of the lease contract. The Department believed that this matter could be resolved if it was able to form closer relationships with the clients to ensure that money was paid. The Auditor-General also highlighted irregular expenditure of R264 million. This comprised an amount of R4.2 million for which no proper authorisation was obtained, a failure to obtain tax clearance on R82 million, lack of supporting documents in respect of R109 million and R69 million transactions where procurement processes were not followed. The Audit report showed that in some cases the lack of title deeds meant that costs were not recoverable. She did, however, stress, that the Department had been making progress with some of the problems of immovable assets and irregular expenditure.
Ms M Themba (Mpumalanga, ANC) thanked the Department for the presentation, but noted that she did not feel the Department had made sufficient progress on the gender focal point that it had highlighted in a previous meeting. There was no indication of how many males and females were employed and trained by the Department, and this information was needed. For instance, page 15 of the presentation should have given a gender breakdown. It was imperative to show the Select Committee Members how service delivery was taking place in each province.
Ms Themba also said that more clarity was needed on the asset investment management and on the agreements.
Ms L Mabija (Limpopo, ANC) added that the Department needed to check the immovable assets very carefully, as there were houses in many areas that were occupied by officials, relatives and friends of the Department of Public Works. She noted the comments about the assets on which attention was being focused, but also pointed out that there were numerous State owned buildings that were neglected and which the Department did not appear to be able to repossess. She cited that some State buildings in some towns were dilapidated and neglected and were particularly unsafe for women and children, and were the site of major criminal activity that was causing major safety issues in the town.
Ms Mabija also pointed out that there seemed to be a problem with overtime work. This was not in compliance with the Batho Pele principles, nor with proving value for money. She wondered if what had been outlined in the presentation was actually happening on the ground, indicating that there was much corruption that might be masking the true nature of events. She further pointed out that the presentation did not hold true for all provinces, and felt the Department needed to put more work into addressing the problems.
Mr Z Mlenzane (Eastern Cape, COPE) said that when he had gone through the presentation himself, he had identified many gaps, and the presenters had not addressed these this morning. He agreed with Ms Themba that there were gender representivity issues that needed to be cleared as promised. He also agreed with Ms Mabija’s comments about public buildings not being accounted for. He asked whether the Department could not put a time frame to problems, so that it could evaluate the projects required to solve the issues over time.
Mr Mlenzane thought that there was a rather “messy” approach to the immovable properties and that this had to be addressed by officials who were qualified to administrate and ensure that lasting solutions were found. He asked about the incentives to municipalities for upscaling the EPWP programmes. This had apparently started in Eastern Cape, but there needed to be more knowledge and closer connection with provincial support, instead of the more national approach outlined in the presentation.
Mr Mlenzane also noted that the presentation had only addressed job creation at professional levels but not unskilled levels.
Mr Mlenzane noted that the former Minister of Public Works had highlighted risk management and corruption, and noted a Special Investigation Unit (SIU) investigation on page 5 of the presentation.
Mr Mlenzane asked what role consultants were playing and how much they were receiving.
The Chairperson felt that there was a major problem with the EPWP. He questioned whether it was proving effective in job creation. He noted that there were apparently 113 vacancies for engineers. He wondered what effect that had on service delivery and how the EPWP could be made effective and efficient.
Mr P Zulu (Kwazulu-Natal, IFP) said that he too had identified several loopholes and gaps in the presentation. He mentioned that in the past the government houses were largely occupied by the white population. With the growth in government and administration, he thought that the Department should be delegating some of its duties to municipalities and should be trying to recover the lost finances, to address the problem of the Department’s overdraft and unnecessary expenditure. The Department was surely allowed to intervene and take possession of these houses, as they were State owned, and if they were leased then the rental should be paid.
Mr Zulu wanted to know how much money the Department was giving to the 283 municipalities in South Africa.
Mr H Groenewald (North West, DA) was very concerned about how corruption was going to be halted in the municipalities. There were huge problems with tender issues, because of the involvement of politicians. This resulted in a half completed contract that would inevitably go wrong. He asked how the DPW was handling this problem.
Mr Groenewald focused on page 2 of the presentation, which looked at the problem of poverty and unemployment. He noted that it would be possible to address these issues with sustainable income, that would in turn help to get people off the streets and to educate them to acquire work, thus ensuring that they could provide for their families. Though many policies were in place, they were not being handled correctly and in line with the mandates. People needed to work on and be compliant with the necessary measures, and these should be enforced.
Mr Groenewald questioned the high amounts of fruitless expenditure and irregular expenditure in the Department, and expressed his concern about them.
Mr M Jacobs (Free State, ANC) said that all acronyms should be spelt out for Members’ convenience. He also commented that some of the issues highlighted in the previous year did not appear to have been carried forward and reported on. There was no response to the questions about the asset register and there was a weak presentation of provincial demographic numbers.
Mr Jacobs pointed out that in the Free State there were many State farms where people lived without making any form of payment for rental, and the challenge was to ensure that the Department of Public Works attended to this matter, and updated all land also in its asset systems. There needed to be internal control and risk management, and systems should be in place to help deal with problems. Issues that did not appear in the report, but were widely reported on currently in the media, included the Police Headquarters issues, and this had to be explained.
Mr Jacobs thought that there must be a shortage of the correct skills capacity in the Department, as illustrated by the reporting on expenditure, with lack of authorisation for spending of R4.2 million, to name but one example. The Department would have to explain the qualifications in the audit report to the Committee, and ensure that all the necessary breakdowns on how funds were allocated to each section were given.
Mr Jacobs was also concerned about the underperformance highlighted in slide 17. The failure to take up EPWP with the municipalities was robbing provinces of work opportunities.
Mr Jacobs also thought that the R1,6 billion overdraft was a major concern, because effectively the Department was borrowing money that it did not have, and he wanted to know how it was going to deal with the problem.
Mr O De Beer (Western Cape, COPE) queried if the organisational model for the Asset Management was different for all provinces, or was uniform for the whole country. In the Western Cape there were many buildings that had no defined provincial or national ownership, and that must be addressed because they were effectively being wasted. He also noted that some years ago it had been highlighted that five of the buildings were “owned” by people who were either residing overseas or were already dead, yet still the lease agreements were in their names. The whole system was in need of being updated.
Mr De Beer highlighted the gap in compliance with Generally Accepted Accounting Practices (GAAP) on page 9 of the presentation, and asked for clarity on this. He also wanted to know about the high number of claims that had to be reconciled.
Mr De Beer felt that the high figure for irregular expenditure surely was deserving of some sort of penalty against those responsible, or even of suspension.
The Chairperson highlighted the instances of non-compliance with the Public Finance Management Finance Act (PFMA). If any person was breaching the provisions and incurring wasteful expenditure, that must be reported immediately. He agreed with Mr De Beer that the Department could not afford to ignore that an amount of R264 million was involved, and must address the issues.
The Chairperson also agreed with Mr Jacobs’s comments about poor skills capacity that had resulted in irregular expenditure of R264 million, which he noted was effectively a loss to the Department and government.
The Chairperson said that the EPWP needed to distribute skills amongst metropolitan and urban areas. He reiterated that this Committee comprised representatives from all provinces, who were concerned to ensure that better service delivery was provided to their people. Almost all Members brought up case studies illustrating problems in their provinces and communities, and the Department must be able to answer to these question.
The Chairperson requested a figure of how many assets the Department had. He also wanted details as to its stance on risk management. The manual systems problem must be addressed because this could be the one problem that has resulted in the workload on which the Department still needed to account.
Ms Mabija also pointed out that the handout was dated in October, which indicated that this presentation was not prepared specifically for this Committee.
The Chairperson asked the Department to answer some of the most pressing questions.
Mr Dongwane thanked the Members for their questions and indications where they thought that the Department needed to improve. He apologised for the lack of provincial analysis, but said that this was available, and would be forwarded to Members. He added that schools, hospitals and clinics were the responsibility of the province, and the mandate of the DPW prevented it from reclaiming buildings for which others were responsible.
Mr Dongwana conceded that some of the issues around immovable assets were, to some extent, not very clear. Some buildings had not been surveyed. The main challenges faced by the Department were in relation to the dilapidated and unoccupied buildings, and the Department was trying to formulate ways to deal with this problem. Some properties belonged to provincial departments and remained in their care. The danger for the Department was largely that there was no time frame to fix these problems, and the asset register remained a major concern currently facing the Department. Corruption was also a big issue. External employees posed their own burden from an infrastructural point of view, and in relation to fraud awareness. The problems needed to be addressed continuously. The skills shortage had been recognised by the Department and it was well underway in measures to try to repair the problem.
Ms Motsisi answered some of the concerns about the irregular expenditure. She highlighted that the R4,2 million was related to delegation powers for signing documentation. Sometimes it was necessary for the Director-General to sign, but sometimes this person would be unavailable, and another person had signed, which was not strictly in accordance with the delegation authority. In respect of the R82 million on tax clearance certificates, she reported that previously there was no requirement that tax clearance copies be kept. There was “chaos of documentation” when these could not be found. It was now mandatory for certificated copies to be in possession of the Department. She then explained that in respect of the R109 million where no supporting documents could be produced, there was no compliance with the rules that required supporting documents.
She further explained that the Department operated by billing the national departments for services. Because of the manual systems, the billing was not itemised and there could be under or over dispensations. Sometimes, payments were not received within the threshold of 30 or 60 days. There were 3 000 private leases, apart from those being offered to State entities, and there would be quarterly building in respect of these. There was no budget for municipalities, as this was provided for by provincial government.
Mr Dongwana noted that there was no proper accounting package to deal with the basis of qualification systems, and the valuation was difficult to reach by the manual audit, as set out in the presentation.
Ms Motsisi highlighted the issue that the 86% capital budget expenditure was measured in a “S curve” because in most cases it was work in progress.
Mr Henderson said that many questions were raised about the EPWP. This was coordinated across national, provincial and local government and across four sectors. Work opportunities through the EPWP lasted about nine months, but sometimes up to two years, depending on the sector’s project. The data inputting had improved, as now the systems would scan the individual’s identification (ID) number, and this would help to identify those people who were able to enter further work opportunities after the initial programme had lapsed. The Department needed to work hand in hand with the stakeholders, to induce more job opportunities. He noted that there was a provincial disaggregation, which he would made available to Members, to show the gender dispensation across learners. There were 35% women, 47% youth and 0,5% disabled people employed.
Ms Subban said that the national and provincial departments were striving to reach a standardised asset register, across national and provincial departments, and that officials from both had a joint task team. There was huge complexity and an enormous magnitude of vesting issues, and a three year programme was in place to deal with this. The Department did not have a listing of buildings that were unoccupied.
Ms Bici said that the scarce skills in the engineering and built environment professions was being tackled by systems that would investigate how many students graduated from the four-year university programmes and would try to address what they needed to do to enter the industry, as also investigate how many of the graduates were leaving the built environment sector altogether.
Mr Mazibuko highlighted that there was a need to impose positive empowerment objectives and he indicated that already there had been attempts to improve the gender demographics.
Ms Themba said she still wanted a full explanation on what the Department was planning and doing in the provinces. The questions that were raised by Members during the Department’s strategic planning presentation were no different to the ones that were raised in this meeting. The Committee was due to visit different provinces next week, and it was therefore vital for the Department to bring the necessary information that would assist the Committee in carrying out its oversight mandate.
Ms Mabija stressed that the Department should work together with the Committee in order to realise the service delivery programmes that were envisaged by government.
Mr Jacobs (Free State) noted that there were two issues on which the Department did not respond. Firstly, he wanted to know the numbers and relative percentages of consultants that were used by the Department, because this might well not be addressing the real capacity needs. Secondly, he still was waiting for an explanation in regard to the leases. He added that there was no explanation of the lists of asset register in different provinces.
Mr Dongwana took note of the request around a comprehensive analysis for head office and regional offices of the Department. He also took note of issues raised in the strategic planning session and said that the Department would prepare a reconciliation on some of the issues that were raised in that meeting, to ensure that Members had received a comprehensive feedback.
Mr Dongwana said that he would ask Mr Henderson to give an indication of which EPWP projects were doing well, and the ones that were struggling, so that Members could visit them and get some sense of their challenges.
Mr Dongwana admitted that the Department was heavily reliant on the use of consultants. The Department felt that it would not be efficient, and would be too costly, to build its own internal capacity for construction and maintenance. It was also difficult to attract engineers and surveyors, especially in rural areas, and the amounts that they demanded for remuneration were also another challenge. This made it necessary for the Department to rely upon service providers or consultants to assist the Department with its construction and maintenance work.
Mr Dongwana said that there was an investigation, in partnership with the Special Investigating Unit, in relation to the leases of the South African Police Service buildings. The Office of the Public Protector would also start its own investigation, and was already interviewing a number of people. The Department was also conducting its own investigation and the Minister of Public Works has indicated that he had been advised to terminate the leases. The SIU had been requested to report on progress to the Minister of Public Works, and to report to the President on finalisation of the investigations.
The Chairperson concluded the meeting by listing the items on which the Department must report back to the Committee. He named them as immovable assets, irregular expenditure, fruitless and wasteful expenditure, lack of effective and transparent systems and internal control measures regarding performance management across the board, and the inadequate content of the strategic plan. The Department must also report on the reasons for variances between planned and actual targets that were not explained, the fact that planned and reported performance systems targets were not specific, measurable and time bound, that the planned and reported indicators were not well defined, and it must also address its non-adherence to PFMA requirements, Public Service Regulation 1. He noted that the Auditor-General had also made comments around leadership. The accounting officer of the Department apparently did not exercise oversight in terms of reporting and compliance with regulations. In terms of performance management and reporting, the Chairperson indicated that the Auditor-General noted that the Department did not have any documents approving internal policies and procedures, in relation to issues around planning, implementing, monitoring and reporting processes. He stressed that the points he highlighted should be used by the Department as a yardstick when reporting back to the Committee, as many of these points had been raised in previous meetings but were raised again by Members in this session.
The meeting was adjourned.
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