4th quarter 2010/11 performance follow up: Department of Human Settlements

Standing Committee on Appropriations

09 August 2011
Chairperson: Ms B Dambuza (ANC) and Mr E Sogoni (ANC)
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Meeting Summary

The meeting was attended by Members of both the Standing Committee on Appropriation and the Portfolio Committee on Human Settlements. It was held as a follow up to an earlier meeting that had enquired into the 4th quarter performance of the Department of Human Settlements (DHS), at which a number of questions could not be answered to the satisfaction of Members, due to time constraints, and where additional details were requested. The DHS had been asked to detail the spending in the Free State, the transfer of funds from one province to another, who had then under-spent, and whether spikes in spending had resulted in actual delivery of housing on the ground. Members also asked for further details of serviced sites, the sanitation programme, spending on research, the costs of consultants, and instances of underspending. The Department tabled a full presentation, in which the details of the transfers were outlined, and confirmed that it had requested rollovers of R7.1 million in total, which were explained in respect of each of the programmes. Virements were requested, of R27 million for the Special Investigation Unit investigations, R14.4 million for appointment of service providers for the turnaround strategy, and R34 million to assist Servcon with tax liability. A total of 121 879 houses were completed across the country. It was explained that there had been delays in sanitation, arising both from different procedures adopted by the former and new departments handling this, and appointment of service providers. It was explained that the money that would assist Servcon was now to be paid by the Department instead of Servcon selling its land, as the land could be used to develop more human settlements. The spending of the public entities was set out. It was noted that although there were vacancies, the DHS was in the process of restructuring and had made a conscious decision to delay appointments. The DHS also confirmed that all transfers were in accordance with the Division of Revenue Act requirements, and the spikes in spending were not only reported to the Auditor-General but were also investigated, whilst spikes in the Department’s own spending were due to approval of recovery and business plans for the provinces. The DHS understood that more needed to be done in monitoring and oversight, and would be introducing IT programmes to assist in this. The reasons for the turnaround strategy were linked to the Department’s expanded mandate.

Members were concerned as to why targets were not reached, and suggested that they were not properly aligned with the budget, with set deadlines being attached. They expressed their concern that Servcon had still not closed, five years after this was mooted. They were concerned that rollovers essentially implied that work had not been done and delivery backlogs would result, and with the fact that the spheres of government did not seem to be communicating as well as they could. Members also questioned the delays in updating of licences and the need to import servers. The Chairperson of the Portfolio Committee on Human Settlements indicated her concern about the time taken for various matters, the hiring of consultants and the delays in sanitation delivery. A detailed report on the situation in the Free State would be requested by that Committee, whilst the Standing Committee on Appropriations requested a report explaining why provinces had not complied with the rules and regulations around reports, and a report on Servcon, with timelines, within one week. 


Meeting report

4th quarter 2010/11 performance of Department of Human Settlements: continuation
Co-Chairperson Mr E Sogoni noted that this meeting was a follow-up to one held in the previous week. He summarised the questions that had arisen at the previous meeting, noting that issues of concern to Members included the situation in the Free State, the discrepancy regarding the budget adjustment and the spike in the spending in the fourth quarter, with questions around whether this spike had actually translated into delivery of houses on the ground. Members had also wanted to hear about the serviced sites, and the efforts in the sanitation programme. Questions had also been asked about spending on research, the cost of construction, and the circumstances surrounding transfer of funds from one province to another, particularly where there had been underspending.

Department of Human Settlements (DHS) follow up briefing on 4th quarter 2010/11 performance
Mr
Thabang Zulu, Director General, Department of Human Settlements, answered the initial set of questions. He referred the Committee to the information that he had prepared in the form of a slide presentation (see attached presentation). Slides 4 and 5 outlined the transfers. An amount of R82.678 million was approved as a rollover. This amount comprised of the following amounts in each of the programmes: Administration - R7.1 million, Housing policy, research and monitoring  - R1.2 million, Housing Development Finance - R34.9 million and Strategic Relations and Governance -R7.7 million. The virements approved included an amount of R27 million for the Special Investigation Unit, R14.4 million for the appointment of service providers for the turnaround strategy, and R34 million to assist Servcon with tax liability. He also drew attention to slide 17, which showed the numbers of houses completed. A total of 121 879 houses were completed across the country.

Mr Nyameko Mbengo, Acting Chief Financial Officer, Department of Human Settlements, continued with the remainder of the presentation. He began by highlighting the legislation with which the Department of Human Settlements (DHS or the Department) must comply. He elaborated on the points made by Mr Zulu. He mentioned that the reason why the Administration programme had to request that R7.1 million be rolled over was a due to a delay in updating Microsoft licenses and the purchasing of a server, which was delayed when importing it. The amount of R1.2 million in the Housing Policy, Research and Monitoring programme represented the outstanding amount that had to be paid on a research tender on the upgrading of the informal settlements. The amount requested for rollover for Housing Development and Finance was earmarked as a transfer to the Social Housing Regulatory Authority (SHRA), and the creation of the bank account was delayed through long approval processes. The next amount for Strategic Relations and Governance, of R7.7 million, was the amount due to be paid for outstanding tenders.

With respect to the roll over for sanitation, he mentioned that sanitation was previously the responsibility of the Department of Water Affairs.

The money needed to close down Servcon was to ensure that all liabilities were settled so that it could be closed down. He reminded Members that initially Servcon was going to sell land to settle debt. However, because the land could be used to for human settlements, the DHS had approached National Treasury to approve a virement so that the debt can be settled in other ways, and DHS can acquire land for development.

Mr Mbengo drew attention to the public entities and their spending. He specifically set out details for the National Urban Reconstruction and Housing Agency, National Home Builders Registration Council, National Housing Finance Corporation, Rural Housing Loan Fund, Housing Development Agency and the Social Housing Regulatory Authority.

He further mentioned that restructuring in the DHS had an effect on the compensation of employees and that some appointments were being delayed until the final organogram was ready.

Mr Zulu then emphasised that all transfers were done in accordance with the requirements of the Division of Revenue Act (DORA). The spike in spending in the fourth quarter was based on the recovery plans and business plans submitted by the provinces. He further highlighted that research was an important function of the DHS and that it would be introducing IT systems to help monitor progress and improve its oversight functions.

Mr Zulu also expanded on the issue of sanitation. The function of sanitation was fairly recently transferred to the DHS and to some degree the process and procedures adopted by the Department of Water (who had previously handled this) and the DHS had differed. It was necessary to secure service providers in line with the Public Finance Management Act (PFMA). These two issues had led to under spending.

Ms Funani Matlatsi, Chief Director, DHS, added that the DHS had implemented cost saving measures, which saw a reduction in foreign visits and media campaigns. She also noted that the budget for the Social Housing Regulatory Authority was approved in 2010, and that additional money was needed for rental units.

Mr Neville Chainee, Chief Operations Officer, DHS, explained that the DHS needed a turnaround strategy because the scope of the department had changed from housing to a broader mandate of human settlements. He also stressed that the DHS was very earnest about trying to improve monitoring and evaluation.

Discussion
Mr J P Gelderblom (ANC- Appropriations) referred to slide 17 and asked why the set targets were not reached, and what plan or process was in place to reach the stated targets.

Mr A Steyn (DA- Human Settlements) asked if targets were not reached because these targets were not matched against the budget in a well-planned process.

Mr Steyn noted that the “closing down process” for Servcon had begun almost five years ago, and enquired why this was still ongoing. The same applied to Thubelisha Homes. He also asked about the turnaround strategy, and asked for a timeline for the implementation of the strategy.

Ms M Borman (ANC- Human Settlements) stated that whenever a roll over was requested, this implied that there was a backlog on delivery. She said that she was concerned by the vacancy rate in the DHS, and was also very concerned about the targets not being reached. She felt that the different spheres of government were not communicating adequately. She sought clarity on some of the figures presented, as she felt these sometimes conflicted. She repeated that her greatest concern was the delay of services

Ms R Mashigo (ANC, Appropriations) asked why there was a delay with the updating of Microsoft licenses. She also enquired why the DHS was importing a server, as it was surely possible to source one locally.

Co-Chairperson Ms Dambuza pointed out that the Urban Settlements Grant was a new grant and that this also had an effect on the budget. She was very concerned about the time taken. She was also unhappy with the costs associated with hiring consultants to plan the turnaround strategy. She was also concerned that there was a delay with sanitation delivery.

Co-Chairperson Mr Sogoni said that monitoring had to be improved and asked that DHS to list the conditions for transfer of money. He also felt that the finance capacity of the DHS had to be built.

Mr Zulu acknowledged that the progress of the turnaround strategy was slow. However, he pointed out that he had only assumed the position of Director General in May 2010, and this resulted in a delay. He said that the DHS was now concluding the strategy and that it should be implemented fairly shortly. He agreed that monitoring and evaluation needed to be improved.

Mr Zulu then outlined, in regard to the Free State transfers, that the DHS evaluated and monitored spending patterns of the province. The DHS informed the National Treasury of the spike in spending and had also brought it to the attention of the Auditor General. All information was shared and nothing was being covered up. He pointed out that implementation depended on the provincial structures. The Minister could intervene only where there was non-delivery, and there was no correlation between the plans and implementation. He reassured the Committee that he understood that monitoring and evaluation rested squarely on the shoulders of the DHS.

Mr Sogoni again stressed that oversight of the provinces must be taken seriously.

Ms Matlatsi said that the DHS was developing a plan to help provinces align their business plans with delivery. She clarified that R200 million was not taken away from Kwa-Zulu Natal, but that this province had been penalised for its non-delivery, as only the amount of R80 million was withheld and paid to other provinces.

Ms Dambuza said that the situation in the Free State was a disgrace, and that the Portfolio Committee on Human Settlements would be requesting a detailed report on the situation in the Free State.

Ms Borman added that this report should also include reasons for the spike in spending across all the provinces.

Mr Steyn asked if the reports that the DHS had submitted were indeed valid. Some provincial reports were not signed by the relevant Heads of Department (HOD) or senior personnel at the Provincial Treasury.

Ms Ulrike Rwida, Director Urban Development, National Treasury, said that according to the rules and regulations, the receiving officer had to submit reports on a monthly basis.  The HOD should sign the report. It was the responsibility of the national transferring officer to follow up and make sure that everything is in order. She added that if the reports were not signed by the relevant person, then money could be withheld.

Mr Sogoni requested a written report explaining why provinces had not complied with the rules and regulations. He added that there had to be clarity on what constituted compliance. He also requested a report on the closing down of Servcon. He said that Parliament wanted closure, and that the report should include a timeline for a final closing date of Servcon. He requested that reports should be submitted to Parliament within one week.

The meeting was adjourned.



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