Appropriation Bill: Department of Public Works budget and programmes

Meeting report

Public hearings on Appropriation Bill:  Department of Public Works performance and expenditure
Mr Sam Vukela, Acting Director General, Department of Public Works, said that the Medium Term Strategic Framework (MTSF) guided the policy priorities of the Department of Public Works (DPW or the Department) whilst its strategic goals were aligned to it. It aimed to provide strategic leadership in effective and efficient immovable asset management and in the delivery of infrastructure programmes. It aimed also to promote an enabling environment for the creation of both short and sustainable work opportunities, contribute to the building of a developmental state, ensure transformation and regulation of the construction and property industries and ensure improved service delivery in all departmental programmes. There had also been a strong focus on the Minister’s performance agreements. These answered to Government Outcome 4, namely to reduce youth employment and extend the Expanded Public Works Programme (EPWP) and to Outcome 8, because DPW was required to contribute land for low-income housing. Outcome 12 would be answered by the DPW providing quality and accessible office accommodation that facilitated service delivery. The Department’s strategy over the next three years would concentrate on poverty alleviation, labour intensive methodology, as well as improved monitoring and evaluation. There would be adequate skills and capacity building programmes, as well as an emphasis on the management of the Asset Register. The maintenance of state infrastructure and the EPWP were important.  

 Ms Cathy Motsisi, Chief Financial Officer, Department of Public Works, said that DPW had been allocated a total of R7.8 billion for the 2011/2012 financial year. Programme 1 (Administration) was allocated R751 033 million; Programme 2 (Immovable Asset Management) was allocated R5.4 billion; Programme 3 (EPWP) was allocated R1.5 billion; Programme 4 (Property & Construction Industry Policy Regulation) was allocated R34 900 and Programme 5 (Auxiliary and Associated Service was allocated R33 180. Some of the programmes had huge budgets because they included amounts for transfers and subsidies.

 Mr Habutsha Matutle, Chief Operations Officer, Department of Public Works, outlined the main purposes of the programmes. In terms of Programme 1, the office of the Director-General must provide strategic leadership and guidance and oversee programmes in the Department. The key priorities for this programme, over the MTSF period, were effective revenue management, internal controls, risk management and budget mobilisation. The Department was aiming to improve turnaround times of payments for service providers. 641 posts were vacant, but all were advertised, and the Department had started to fill 500 of these posts.

Programme 2’s main purpose was to manage the national government’s moveable asset portfolio. The sub-programmes under Programme 2 were Infrastructure, Strategic Asset Investment Analysis, Projects and Professional Services, Operations Management, Prestige Management, Property Management, Construction Industry Development Board, Council for the Built Environment, Agrément SA, Parliamentary Villages Management Board and Independent Development Trust. Some key projects, and their allocations, were outlined (see attached presentation for full details). Key priorities included the keeping of the asset register, achieving energy efficiency, and upgrading all buildings to achieve compliance for people with disabilities. Rehabilitation and maintenance programmes, and rural development and release of land were other priorities.

Discussion
Mr M Swart (DA) interrupted at this point, and asked if it was the intention only to address the Committee on the programmes and budget. He felt that the Committee should be informed about issues such as how the budget was spent, and achievement, for example, of the EPWP.

The Chairperson noted that since the Committee was dealing with appropriations; the Committee should be informed of what the Department intended doing within certain Programmes. However, he noted that since the Committee’s mandate was to recommend to the House the approval of the budget, it had to understand what was happening in those programmes in order to pass the budget. This was distinct from the presentation of expenditure reports.

Continuation of presentation
Mr Vukela said that Ms Motsisi would take the Committee through the budget allocations.

Ms Motsisi noted that in the previous financial year, there had been under-expenditure in the areas of employee compensation, goods and services, as well as capital payments. Expenditure for EPWP was 59% of target. The under-spending on compensation of employees was due to normal staff attrition and difficulty in attracting scarce skills. Goods and services showed underspend of R16.4 million, as against the R75 million allocation. The Department had requested a rollover of R40.9 million for this. She noted that the services of the DPW’s public entity were enlisted in order to assist in capital expenditure, and the result was that R120 million was transferred to the Independent Development Trust (IDT). By the end of March 2011, R18.9 million had been spent. The outstanding R111 million had been requested as a rollover.

In order to address under-spending and accelerate spending for the next financial year the Department had now appointed a manager who would be responsible for projects only. Weekly expenditure reports were now more closely scrutinised, and there was closer monitoring of budget allocations for projects. A lot of the under-spend was also due to furniture and Information Technology (IT) equipment intended for use in the in the new premises that DPW would occupy.

She reported that EPWP was a standing item on the agenda, for reporting to the executive committee. The Department was starting to use its own resources as part of its job creation programme.

Mr Stanley Henderson, Deputy Director-General: EPWP, Department of Public Works, said that the purpose of Programme 3 was to draw the unemployed and unskilled into the working environment through government intervention. The Department would look at the expansion of the incentive scheme in order to achieve its targets. This Department would support the Community work programme that was currently under the Department of Co-operative Governance and Traditional Affairs (COGTA). Slide 35 provided for the outputs and targets that the Department ought to be achieving. The number of work opportunities for full time employment was an important output for this department.

 Ms Sasa Subban, Deputy Director General: Asset Investment Management. Department of Public Works, said that the purpose of Programme 4 was to promote growth and transformation in the property and construction industries, in order to develop an effective and efficient state. The key priority was to accelerate the creation of decent job opportunities and sustainable livelihoods and there was a particular focus on rural development. She explained that for the purpose of costing, this was currently included as goods and services.

Ms Thembi Hlatshwayo, Acting Deputy Director General: Corporate Services, Department of Public Works, said that the purpose of Programme 5 was to provide various services, including compensation for losses on the government-assisted housing scheme, assistance to organisations for the preservation of national memorials, managing grants for the Parliamentary Village Management Board and meeting protocol responsibilities for State functions. This was more of an auxiliary services and there was no set budget.

Discussion
The Chairperson asked for more clarity on the involvement of DPW in the energy efficiency programme.

Ms Subban said that DPW’s involvement must be seen together with the efforts of the Department of Energy and National Treasury. DPW engaged with National Treasury for funding, within the general framework of government advancing energy efficiency. The carbon footprint would be reduced by having appropriate installations in the 75 000 buildings owned by DPW. There were two models adopted. The first, which had no funding requirements, was a shared savings model, which was running in some of DPW’s buildings. Although there had been an allocation of R75 million to try to upgrade buildings, it was not spent because of capacity constraints, although the Department did try to commission the Independent Development Trust (IDT) to assist in spending some of the money received. The project was at an advanced stage.

Mr G Snell (ANC) pointed out that the document being used as the basis of the presentation contained no figures. He hoped that the Department was not attempting to run just on the basis of what had been given in this presentation.

The Chairperson reiterated that the purpose of the meeting was not to discuss the expenditure of the fourth quarter. Members had created some confusion around this by requesting other information, so that some of the relevant information was not presented.

Mr Snell said that he agreed, but the Department could then cross-reference between the documents and slide presentation and inform the Committee how it intended to address the challenges. If this was not reflected in any of the documents then there was no point in carrying on with discussions.

The Chairperson said that there was some confusion created by the language. The Department had referred to the business plan as an “annual performance plan”. National Treasury had prepared guidelines for the construction of presentations and a consistent terminology should be used. This Committee was only interested in annual performance plans.

Mr L Ramatlakane (COPE) suggested that the Department should only present from one document where there were measurable objectives. The two documents may not cross-reference properly.

The Chairperson apologised for any confusion that had been created.

Mr Vukela said that the presentation, with the slides, was a summary of the document handed out, which was more detailed. The Department could go back and finish its more detailed presentation on the programmes.

Mr Snell pointed out that the Department would never accept a contract full of anomalies. However, it seemed to be asking the Committee to accept this presentation as akin to a contract.

The Chairperson said that the point made by Mr Snell was noted. There was a fundamental shift between Programme 4's expected outcome and purpose, and this was confusing. 

Ms Subban replied that the Deputy Director General responsible for this programme had left for another meeting.

Mr Swart asked what the management of the Parliamentary Village cost.

Mr Snell said that the figure for Programme 4 was given as R34.9 million for 2011/12, but in the more detailed presentation a figure of R22.8 million was shown. He wondered which figure was correct.

Ms R Mashigo (ANC) referred to Programme 3’s key priorities, and asked for more clarity on the Non-Governmental Organisation (NGO) pilot project.

Ms Mashigo also noted that hopefully the Asset Register would be completed soon, as she noted that the Department had said, for some time, that it was “about to be completed”.

Dr P Rabie (DA) said that one of the undertakings from the Department to curb under-expenditure was to drive some of the projects from national level. He asked for details of which projects these were these and their time frames.

The Chairperson requested input from National Treasury regarding the contents of Programme 1. He said that there should be guidelines on the topics to be covered by the programmes. This tended to differ from one department to the next. 

The Chairperson asked why there was underspending in Programme 1. He also questioned how this Committee would go about measuring the Department's performance on the management of public assets. He also asked why there seemed to be so many sub-programmes.

The Chairperson added that Programme 2 was frequently the cause of the Department receiving qualified audits.

The Chairperson was also concerned about the underspending on Programme 3, which was an important programme.

Mr Vukela said that the Department shared his concerns.

The Chairperson also asked whether the energy efficiency programme had been budgeted for at the beginning of the year.

The Chairperson was concerned that some government officials stayed in State property and then refused to pay, or paid less than the requisite amount, and he wondered why the DPW was allowing this to happen.

The Chairperson also asked whether the problems around the grading had been resolved. He asked if there were registers, under Programme 5, for the non-state sectors.

Ms Motsisi said that she was not sure about the figures that were queried by Mr Snell. R7.4 million was allocated towards the maintenance and running of the Parliamentary Villages.

Ms Subban said that the Department was working closely with the Auditor-General (AG) on the continuous qualification of the asset register. The completion of the Asset Register was a massive task. In order for all State properties to be appropriately vested, the Department had appointed 52 new learners to assist. The Department was working closely with the Department of Rural Development and Land Reform (DRDLR), and the Surveyor General, in order to complete the Asset Register. 12 000 State properties had been identified and vested by the DRDLR.

Mr Snell asked if the Department knew what it owned, for the purpose of sales of property, as this was contained in the business plan.

Mr Vukela said that when property was sold by the State, a strict procedure was followed.

Ms Subban said that the Department of International Relations and Cooperative Governance (DIRCO) looked after State property abroad. DPW assisted DIRCO in doing a cost and investment analysis. The Department did not ordinarily sell property for profit purposes and there was a rigorous process to be followed should a property be sold. The Department had a complete listing of properties in an Asset Register but it was struggling with some of the accounting requirements.

The Chairperson said that he did not understand this response, as the AG had stated that the Department did not have a complete Asset Register.

Mr Vukela reiterated that the asset register was not fully complete, but the DPW and AG were working together to address these issues.

Ms Kelebogile Sethibelo, Chief Director: Expanded Public Works Programme, Department of Public Works, responded to the questions around programme 3. She noted that the NGO pilot was part of the new non-State sector. The pilot had begun in 2009/10, and one hundred NGOs were funded. Currently, the Department was making an evaluation on the impact of its funding.

Mr Henderson said that the community work programme started as a pilot project headed by the Presidency. It was relocated to COGTA, and was a fully-fledged EPWP programme.

Ms Hlatshwayo said that the under-expenditure on filling of vacancies was due to the fact that the Department had been unable to attract people with scarce skills, as well as the slow implementation, by the Department of Public Services and Administration, of Occupation Specific Dispensation (OSD).

Ms Subban said that the buildings with the highest consumption of energy had been identified and this was where retro-fitting was implemented. The shared savings model was then applied in properties located in Cape Town, Bloemfontein and Pretoria.

Mr Vukela added that the Department could not spend the entire R75 million for the energy efficient programme, and a 5% rollover was then requested.

Mr Swart said that he had discovered that sometimes companies would tender for work under the EPWP programmes, promising to pay their employees R150, but would actually pay them less. He asked what happened to the difference in funding once the contracts had been awarded.

Mr Vukela replied that EPWP was highly regulated insofar as payments were concerned.

Mr Henderson added that the EPWP wage range was from R60 to R150. There were, however, variations across the country. When tenders were advertised, the Code of Good Practice specified how prospective employers had to optimise creation of work opportunities. It was difficult to go back to suppliers and specify exactly what amounts had to be paid, but the DPW did make the EPWP requirements quite clear to o municipalities and provincial departments, to try to ensure that there was proper adherence.

Ms Gillian Wilson, Chief Director: Public Finance, National Treasury, said that National Treasury had identified the energy efficiency programme as low spending. She said that ideally DPW should identify exactly what its plans were for this programme. National Treasury had already issued guidelines to the Department on how it had to structure its programmes, and wanted Programme 1 coverage to be consistent across all departments. All the resources necessary for the strategic leadership of a department would reside under Programme 1. Support services were also located in Programme 1. It was difficult to measure Programme 1, because many of the costs and responsibility for performance resided there.

The Chairperson asked if National Treasury was happy with the composition of DPW’s Programme 1.

Ms Wilson replied that, for example, the costs for the building in which the DPW employees were housed should fall under Programme 1. Costs relating to financial services, auditing, advertising, and personnel functioning were under Programme 1. DPW’s programme 1 was therefore consistent.

The Chairperson asked that the Committee should also receive a copy of the guidelines from Treasury so that it could assist departments. He asked for clarity on the annual performance plan, in terms of the guidelines.

Ms Wilson said that this was the first year that National Treasury had started implementing the guidelines on the annual performance plans. The annual performance plan was a breakdown of the strategic plan. There had to be an alignment between the annual performance plan and the strategic plan.  It was difficult to measure the success of the implementation of the annual performance plan; there were still a lot of gaps.

Mr Snell asked for more clarity on the annual performance plan.

Ms Wilson said that the presentation of the annual performance plan was given this year, in terms of National Treasury guidelines. The annual performance plan was a breakdown of the strategic plan, because the latter was essentially a plan for the five years, broken down into separate financial years. However, at this stage it was difficult to measure how departments were implementing the guidelines. The annual performance plan was a way to link the departmental budget to outputs.

Mr Ramatlakane said that National Treasury was saying that it could not always track the success of annual performance plans, but he thought that there was perhaps a misunderstanding because preparation of annual performance plans was not a new concept.

Ms Wilson agreed that National Treasury was not coming up with any new concepts. The measuring indicators had been used in the past, but “annual performance plan” was another name for the old-styled “business plan”. The form and regulation of this was, however, different.

The Chairperson thanked the Department and apologised for any confusion surrounding the documents.

The meeting was adjourned