Independent Development Trust responds to Manenberg Development Coordinating Structures on alleged misuse of funds allocated by IDT to local organisations; IDT on Eradication of Mud School structures, long-term sustainability of IDT

Meeting report

Manenberg – mismanagement of funds
Ms Faldiela de Vries, Chairperson, Manenberg Development Coordinating Structures, reported on the alleged misuse of funds allocated by the Independent Development Trust (IDT) to the Proudly Manenberg and Zion Pulse organisations. 

Concerns were raised in March 2010 with the Manenberg executive regarding the mismanagement of funds and the existence of “ghost workers” at Proudly Manenberg.  Engagement with the IDT started in April, and in May the IDT informed the community of a R97 000 discrepancy and that a forensic audit would be carried out, as requested by the community.  They were told that PriceWaterhouseCoopers would carry out the forensic audit.  The IDT had refused to make the report of the audit available to the community, who then employed the services of an attorney to get the information released.  To date, it had still not been received.

Ms De Vries tabled a detailed list of alleged irregularities, such as self-enrichment, nepotism, financial mismanagement, and late or under-payment of beneficiaries.  She said the questions the IDT needed to answer were why the forensic report had been withheld, whether fraud had been detected, why no criminal charges had been laid, and why it had not reported back, as promised, to the community.

A similar situation existed at Lion Pulse, which she believed had arisen directly as a result of no action being taken over the Proudly Manenberg issues.  When the latter’s funding had stopped, the IDT had provided funds to the Lion Pulse Community Project, registered as an non-governmental organisation (NGO) only in April last year.  Members of the Project claimed links to the Zion Life Ministries, but this was untrue.  Concerns regarding financial mismanagement and internal enrichment were presented, with documentary evidence, to the IDT in Cape Town.  The IDT staff had not taken these complaints seriously.  After investigation, Zion Life Ministries had laid criminal charges with the Manenberg police, and a docket had been opened.  The police were now investigating the matter.

Ms De Vries said concerns included beneficiaries not being paid or short paid, relatives and friends being listed as beneficiaries, a R45 000 withdrawal of Lion Pulse funds from an automated teller machine (ATM) by a relative, and the summary firing of any beneficiary who dared to question the Project’s actions.  She wanted to know what was done by the IDT when concerns were raised, and whether criminal charges would be laid if discrepancies were found.

Ms Thembi Nwedamutswu, Chief Executive Officer (CEO), IDT, said the IDT had not funded Manenberg since the 2009-10 year.  An audit had been instituted after a number of concerns had been raised and, on completion, were ordered to submit the report to the Department of Public Works (DPW) as the funds involved had been allocated as part of the DPW’s Expanded Public Works Programme (EPWP).  It was not able to implement the recommendations in the report until the Department gave the go-ahead.  For the same reason, it could not release the report to the community.  She said a report back meeting had been held with the community to discuss the issues raised, but this did not include the forensic report.

A member of the IDT delegation said that from a technical point of view, PriceWaterhouseCoopers had not carried out a forensic audit, but had merely extended its internal audit process – as the IDT’s auditors – to the Manenberg issues.  Their investigation had identified irregularities, and the IDT had recommended to the DPW that a forensic audit be considered.  This was not done.

Discussion
The Chairperson then asked the DPW to indicate what it had done to handle the matter.

Ms Cathy Motsisi, Chief Financial Officer (CFO), DPW, said the report could have been given by the IDT’s internal audit to the DPW’s internal audit department.  However, she was not in a position to say whether a forensic audit had started or not, or if the report had reached the Minister’s desk.  She undertook to follow up.

The Chairperson said the DPW had been informed of the purpose of the meeting, and she had expected a full report on the matter. 

Ms C Madlopha (ANC) said she also did not understand why the Department could not react, and wanted to know what processes were involved within the Department.

Mr P Mnguni (COPE) suggested the Manenberg representatives should leave the meeting so that the Committee could deal with it as an internal matter, but the Chairperson said it would not be fair to the community representatives, who had come to have their questions answered.

Mr L Gaehler (UDM) said the problem lay with the DPW, as the Department should have briefed the IDT to conduct a forensic audit.  The DPW had known about the issues, but had come to the meeting either unprepared or unconcerned.

Ms Motsisi said she had attended the meeting as a board member and trustee of the IDT, and not as a representative of the DPW.  She acknowledged that the Department’s internal audit and legal departments should have been brought in to make a clear presentation addressing the issues.

Ms N Ngcengwane (ANC) said the matter had dragged on for two years, and she wondered how the Manenberg community felt about this response.

The Chairperson said Ms Motsisi should have clarified her position as an IDT trustee initially, rather than purporting to represent the DPW.  The IDT had followed the proper procedures, but the DPW did not even know where the audit report was.  The Committee needed to engage with the Minister on the matter.

Mr Mnguni said the IDT should also be blamed for promising to deliver a report to the community, when this was possible only after it had been finalised by the DPW.  The Government could not be viewed as providing service delivery if it was unable to provide members of the community with the information they wanted.

Ms N November (ANC) said the discussion had become a waste of time and money.

Mr Gaehler said he felt the DPW was undermining the Committee by not even attending the meeting.

Ms Madlopha said the IDT should also share part of the blame, as it had been directed to report back to the Committee on the Manenberg situation, and it was wasting time by saying the matter had been referred to the DPW.  She was supported by Mr Mnguni, as both entities seemed to be “passing the buck.”

Mr K Sithole (IFP) said it was painful to be undermined by the DPW.  The Director-General should have been present to represent the Department.

Ms Pumla Radebe, Chairperson, IDT board, said it was only fair that the IDT should shoulder some of the blame for the breakdown in the flow of information, and for this she apologised.

Ms Motsisi said she had not anticipated the discussion would focus on the issue of a forensic audit, rather than the mismanagement of funds at Manenberg, and said there had been no intention to undermine the Committee.

The Chairperson said a misunderstanding had arisen because the IDT had not indicated that PriceWaterhouseCoopers was its internal auditors, while the Committee was under the impression PWC was conducting an external forensic investigation.

Mr Mnguni recommended that the discussion should be closed on the basis that the parties involved would get together to resolve the matter, as further discussion would only lead to more confusion.

The Chairperson closed the discussion.

Eradication of Mud School structures
Ms Nwedamutswu said the objective of the presentation was to clarify the differentiation between IDT-funded mud schools, and those funded by the Department of Basic Education (DBE), so that this background information could assist the Committee with its oversight responsibilities.

Mr Ayanda Wakaba, IDT Executive, said the eradication of mud schools was the responsibility of the provincial departments of education.  The National Treasury allocated an annual infrastructure grant to the provinces, which they then allocated to the departments to deal with the question – among other things – of mud schools.  The DPW and entities like the IDT, provided support to the departments.  The DPW was mandated to spearhead infrastructure management on behalf of the Government, so it would ordinarily assist the education departments in the implementation of mud schools eradication programmes.  The IDT fulfilled a similar role, in that it provided programme management support, but as an organisation, it did not have the mandate or the funding to eradicate mud schools.  Its role was to assist the Government in programme delivery.

He then described the extent of the mud schools problem – 1 860 were in existence in 2007, mostly in the Eastern Cape – and updated figures would be provided in 2012.  He also listed the IDT’s contracted value in school infrastructure over the past four years – nearly R3.7 billion – of which R1.05 billion was allocated to mud and inappropriate school structures. The IDT was also a participant in the DPW-funded programme for urgent school construction, using alternative construction technologies. IDT-funded projects aimed at mud school eradication had spread across eight provinces, involving classroom building at 19 schools and the provision of 20 ablution facilities, as well as furniture, information technology (IT) laboratories, waste water treatment and solar power.

Discussion
The Chairperson asked for more information on the IDT’s involvement in the search for alternative methods of constructing schools, as she understood the IDT’s expertise lay in the fields of brick and mortar, rather than fibre glass or other modern technologies.

Mr Wakaba said the IDT had the capacity to deliver infrastructure in many ways.  It had the capacity to receive resources, drive procurement, commission and monitor implementation, facilitate development and deliver the finished product to the client.  Much of the IDT’s work was related to infrastructure development, which meant that the IDT staff included a complement of engineers.  This gave it the technical capacity to manage projects, but it was not a construction entity – it engaged construction companies and monitored them.  At present, it was engaged in a pilot project investigating three different construction technologies, using three different companies.  The Council for Scientific and Industrial Research (CSIR) would produce a report on which methodology worked best, taking into account factors such as speed, costs, job creation, durability and community acceptance.  It seemed at this stage, as if the new technology could result in a 40% saving in building time and 15% in cost versus brick.  It also appeared to be better in dealing with heat or cold conditions.  There were shortfalls, however, as lower building times reduced the duration of employment, and new technologies would be detrimental to existing brick builders in rural areas.  Both the positive and negative factors would be researched thoroughly in the report.

Mr Gaehler said it was important that the new technology not only created new skills, but also created new jobs.  He also expressed concern at the problem of education departments not paying contractors, who then sought redress at the DPW.  This was detrimental to the Department’s image, and needed to be looked at.

Mr Wakaba said the IDT often got into trouble with its service providers, when the education departments did not release funds to the DPW for allocation to the IDT.  It would help if all departments would budget for transfer of payments ahead of time, but unfortunately payments were often late.

Mr N Magubane (ANC) said the Government had set a deadline of 2014 for the eradication of all mud schools, and he was worried that this could not be met.

Mr Wakaba said this was a question which the IDT could not answer, as it was not the agency mandate to drive the programme – its was the Department of Basic Education which had both the mandate and the resources.

The Chairperson closed the discussion.

Long-term sustainability of the IDT
Ms Radebe said the IDT did not wish to reschedule, but was putting forward a business case for its relevance as an organisation, and for its recapitalisation.

Ms Nwedamutswu said the IDT had been given a R2 billion grant in 1990.  Income was generated from investing this grant, and with a risk-aversion policy, this had generated R3,9 billion over the years.  However, with the drop in interest rates and an increase in the IDT’s portfolio – and its associated higher overhead costs – the capital base had been eroded to just R415 million by March this year.  However, the IDT dealt with a wide diversity of departments and managed a wide variety of programmes.

While there was a vast array of services provided by Government and other agencies, delivery remained uncoordinated and often misaligned, creating a “service gap”, in that there was no coordinated and integrated delivery at community level.  This resulted in the funds available not being effectively drawn into the community.  It was the IDT’s objective, as part of its mandate, to bridge that gap.  As the IDT operated across all three tiers of Government, it was ideally placed to take on this integrative role.  However, this meant the organisation would have to change, and this would require legislation.

The IDT needed to strengthen its involvement at community level through decentralisation, devolving its capacity which was currently concentrated at its head office.  This would enable communities to provide input into the IDT’s strategic plans, empowering them to influence policies in areas such as procurement. 

The IDT envisioned providing community support in three key areas.  These were community-based poverty eradication programmes to provide sustainable livelihoods, institutional delivery capacity building through policy support and technical expertise, and public mandated effort in programme and project planning, and delivery management.  In this “high road, quantum leap”, the organisation saw itself at the forefront of the redistribution of resources to the community.

At present, the IDT was a Schedule 2 Entity, and also a trust.  However, the Public Finance Management Act (PFMA) did not recognise trusts, so in order to secure funding from the Government, the necessary legislation needed to be enacted.  A Schedule 2 Entity cut across all three tiers of Government, but if it moved to a Schedule 3 Entity, it would be required to report to a specific Government department, according to the mandate of that department.  This was an issue that was currently under discussion, and included considering the different mandates of the institutions that were related to the IDT, as well as any other statutory provision which the Government might consider appropriate to accommodate the IDT mandate.  The IDT was looking for guidance from the Committee on its proposed future direction.

Discussion
The Chairperson said the IDT needed to be aware that as a Schedule 2 Entity, it enjoyed full managerial autonomy, whereas its autonomy would be limited as a Section 3 Entity.  Furthermore, to become a major public entity, it needed to terminate its current form as a trust, set up a new structure, and request the Minister of Finance to classify the IDT as a Schedule 3 Entity in terms of the PFMA.

Ms Madlopha said consideration should be given to the impact which the proposed changes might have upon the morale of the current staff of the organisation.

Ms Ngcengwane proposed that the Committee and the IDT should hold a workshop so that the Committee would be fully aware of the consequences of any decisions taken.

The Chairperson responded that before any workshop, the IDT needed to look into the issues which she had raised, involving both the requirements and responsibilities of public entities.  The Committee had already presented its legal opinion on the Section 3 Entity proposal to the DPW, which knew the Committee’s standpoint.

Ms Radebe said she was not aware that the IDT had, in fact, requested the change to a Schedule 3 Entity.  She also asked if the IDT could receive a copy of the legal opinion, so that it could understand the Committee’s standpoint.  The organisation could no longer exist as a trust, and needed guidance from the Committee.

The Chairperson said she would make the legal opinion available for the IDT to study, and they could agree on a date for a workshop.

Ms Radebe supported the comments of a member of her delegation, that becoming a Schedule 3 Entity might prove extremely constraining for the organisation, and that Schedule 2 might still be appropriate provided new legislation was enacted to enable it to operate effectively.  She said she was not aware that the IDT had ever promoted the Section 3 concept, although someone else might have spoken on behalf of the IDT.

The Chairperson insisted that the IDT had, in fact, mentioned seeking Schedule 3 status at a previous meeting.  In discussion, it was agreed that it had been put forward as an option, but not necessarily the favoured one.

The Chairperson said the Committee would still forward the legal opinion, but would also engage in further consultations on the matter.

The meeting was closed.