Department of Human Settlements on its Turnaround Strategy, progress with Rural Household Infrastructure Programme, and Audit Report

Meeting report

The Chairperson noted the apology from the Minister of Human Settlements who was unable to attend.

Members were annoyed that the Department had sent updated versions of the presentations only the night before the meeting. This was unacceptable as the Members had studied and made notes on the prior versions sent through. The Department apologised saying that most of the changes had been editorial and did not affect the substantive content of the presentations.

Department of Human Settlements (NDHS) on its Turnaround Strategy
Ms Yvonne Mbane, NDHS Chief Director: Human Resources, said the need had arisen for the Department to reconsider its Business Model and Value Chain and for it be reconfigured to cater for its expanded scope, focus and depth of work in relation to the three spheres of government. The turnaround was aimed at giving effect to seamless administrative processes; improvement of internal departmental performance; improvement in coordination and effective layers of management and specialisation.

The current structure had five Deputy Directors-General and 25 Chief Directors. The proposed structure planned for six DDGs and 21 Chief Directors. A new Project Management Unit (PMU) unit would be added to the structure. The proposed structure aimed to enhance capacity and capability to implement the Department’s strategy and improve levels of service delivery. The impact of the new structure would be improved integration between national and provincial departments, state-owned enterprises and related organisations.

The new structure had a number of resource implications. The number of senior level posts would increase. However, additional funding would not be received from the National Treasury and the realignment would be funded within the Department’s current budget allocation. Taking into consideration the growth of the Department, as a result of the mandate to deliver sanitation services, additional office space and other operational tools would be required.

The turnaround strategy had been signed off and approved by the Minister of NDHS but still needed to be signed off by the Minister of Public Service and Administration. Outstanding matters included the migration of staff, an adequate human resource plan, recruitment for the new posts, ongoing training and development initiatives and the implementation of a Change Management programme which involved culture change, performance management and a monitoring and evaluation system.

Discussion
Ms D Dlakude (ANC) asked how far the Department was in implementing its turnaround strategy considering that it had been approved.

Ms Dladuke asked if the process of moving staff from one organisational structure to another had impacted on service delivery on the ground. If the strategy had not yet been implemented, then it would seem to her that nothing was happening in the meantime.

Ms Mbane replied that the Department was fixing a moving train, the train was not stationary and business was continuing.

Ms A Mashishi (ANC) asked what the Department meant about it contributing to “combating crime” on slide 10.

Mr Neville NDHS Chainee, Chief Operations Officer, replied that NDHS had an integral role to play in combating crime. Better area-lighting for example had been linked to a reduction in crime.

Ms N Mnisi (ANC) asked what the rationale was for the “refined macro structure” mentioned on slide 15 and what the implications of this would be for the Department?

Ms Mnisi said that most of the NDHS targets listed in its Annual Report were not measurable neither were there any service delivery “achievements” as such. How would the Department change this?

Mr R Bhoola (MF) said that the NDHS Annual Report had listed certain strategies and achievables which did not seem to be appropriate since the presentation stated that the Department wanted to restructure and it needed to allow the process to run for one to two years before it could be evaluated. Would the time frame of one to two years be allowed for the Department to analyse problems before it implemented precautionary measures?

Ms Mbane replied that time was needed to sort out which problems were as a result of the structure and which could be attributed to the “human element”. Identifying the source of weaknesses required time.

Mr Bhoola said that the Committee was concerned about the translation of the Department’s restructuring and alignment to enhanced service delivery on the ground. The Committee did not want to hear six months down the line that the wrong skills and competencies had been deployed to certain areas of the Department. Was NDHS sure that the necessary competencies and skills were directed to the correct functions within the Department so that the realignment would translate into better service delivery?

Mr Chainee replied that, given the kind of situation it was dealing with, there might be staff that were misplaced but that this was not the Department’s fault and happened in all organisations.

Ms Mbane added that there were processes contained within the Public Services Regulations. Certain processes, such as competency assessments and a skills audit, needed to be followed when a person’s job function was changed to ensure whether a person was a 50% fit for the job or not.

Mr Bhoola referred to the Millennium Development Goals (MDGs) which related to the eradication of poverty and the issue of informal settlements. One of the challenges with this had been that strategic plans and various pieces of legislation and policies were not in place which was precisely why some of the provinces would lose money or return money back to National Treasury. Was the Department assuring the Committee that now that the sanitation officers and all of the Department’s competencies to deliver on what it should, were in place, and that provinces would not be sending money back to National Treasury?

Mr Bhoola asked if the NDHS was sure that its restructuring was compliant with the Labour Relations Act (LRA), especially regarding people who had to be let go by the Department.

Ms Mbane replied that the NDHS did not need to let people go as part of its turnaround process. The DPSA did offer guidelines on strategies for how NDHS should work to retain its scarce skills in the realignment process.

Mr Chainee added that the Department had to be able to refine its micro structure but the one issue that everyone needed to understand was that, as a government department, they needed to comply with all of the laws, including the Labour Relations Act (LRA). The Department had to respect DPSA prescripts around labour, employment, conditions of service and restructuring.

Ms M Njobe (Cope) asked for more examples of its stated plans to “merge certain functions” to render it more efficient.

Ms Mbane replied that “Housing Equity” had been incorporated into the Chief Financial Officer Unit. Duplications had existed in the old structure that the Department was trying to eliminate.

Ms Njobe asked how the entities that reported to the Department would be affected by the realignment of the Department. Would it be possible for some entities to merge so that funds did not need to be divided up among them?

Mr Chainee replied that the entities had formed part of the consultation and assessment process that had resulted in the turnaround strategy. Some entities had sat around the periphery of the Department. The focus and mandates of the entities would have to be aligned to that of the NDHS. Behavioural, operational and strategic changes had already begun to take place in the entities. In the previous structure, the Entities and Governance Unit had been the main unit interacting with the entities and had focused on compliance. Other units had operated at an arms length from the entities. However, the entities needed to form part of any strategy that the Department implemented and NDHS needed to interact more with all of the units.

Ms Njobe asked if government had considered trying to reverse the trend of accelerated urbanisation. Building more houses in the urban areas encouraged people to move to the cities but was urbanisation really helping the people?

Mr Chainee replied that the Department was not focusing only on urbanisation but also the extension of infrastructure and services to rural households.

Ms Njobe referred to the Department’s mandate to promote the achievement of a non-racial integrated society and asked if the Department really was moving towards this. Had it really seen white people moving to live with black people in the villages?

Mr Chainee replied that the country was still battling to achieve non-racial integration seventeen years after the end of apartheid. The imperative might have been achieved within certain classes but this had not been achieved within the lower income and poorer communities. The Department needed to be able to plan and implement this strategy more aggressively. The Department did not represent only the low-income and poor part of the population but all sectors, rich and poor.

Ms J Sosiba (ANC) asked if the Department was satisfied that it had capacitated the two spheres of provincial and local government.

Mr Chainee replied that capacity development and professional support had been provided for in the new structure. The Department was aware that there were capacity gaps in provinces and municipalities.

Mr Bhoola said that time and again the Department had emphasised that there were certain pieces of legislation, relating to the three spheres of government, that needed to be synchronised in order for it to deliver on certain functions, such as the sanitation function. Was the Department assuring the Committee that these kinds of obstacles were no more?

Mr A Steyn (DA) said that changes in the Department surely needed to be cascaded to the provincial level of government in order to be effective. The Provincial Human Settlements Departments needed to follow a similar pattern to that of the NDHS if changes were going to be successful. The NDHS often complained that one it transferred money to the provincial departments, it had no control. Would the Department be hearing these excuses again in six or nine months?

Ms Mbane replied that the DPSA had realised that the structure of all national departments needed to be mimicked by that of the provincial departments to ensure better synergy between them. The DPSA was considering these issues, especially in the education and health sectors. The Monitoring and Evaluation function of the government would also assist in this matter.

Ms Sosiba asked how many posts needed to be filled in the Department by the end of the financial year.

Ms Mbane replied that the Department had a 20% vacancy rate as a moratorium had been placed  on particular positions as part of standard practice in the realignment. Only those vacancies that were critical and that would not be impacted on by the NDHS realignment could be advertised in the meantime.

Mr Steyn said that the Committee had previously been led to be believe that there would be an overall restructuring of the Department but that it had heard this morning from the Department was it was more a realignment on the macro level. When had this process started, where did it stand at the moment, and when would it be finished? Mr Steyn could clearly remember the previous Director-General telling the Committee in 2004 that the Department was being restructured in line with the “Breaking New Ground” Policy and that it was busy “cascading” the idea down into the Department. Almost seven years later, it appeared that that “cascading” had not happened and a fresh process was being started. The only changes to the Department’s mandate since 1999 that needed to be taken into account was the delivery of sanitation and the imperative to accommodate the three spheres of government. All these years later, government was still harping on about creating a new structure to ensure delivery.

Mr Chainee said that the Department had specifically termed the strategy a “turnaround” strategy. The mandate given to the Department in 1994 had been narrower than the current mandate. It was important to recognise that South Africa had been at the cutting edge of dealing with specific issues relating to human settlements development. None of the experience and knowledge gained over the years was being thrown away. In terms of the Department’s continual review it was saying that the Department was not doing enough and not having enough of an impact. The change from the Department of Housing to the Department of Human Settlements in 2009 was not just a name change but changed the entire function of the Department. The collective rationale for the turnaround strategy had been the annual and quarterly reports, the policy documents and the legislation. All of this knowledge had been taken into account and hopefully the strategy addressed all of the deficiencies that existed in housing/human settlements. There would be periodical reviews of the strategy once it had been implemented as the Department would not get everything right from the beginning.

Mr Steyn said that there had been a lot of mention of regional offices which he understood the Department believed were necessary purely for the sanitation programme and not for the Department as a whole. However, none of the Department’s issues were new other than the delivery of sanitation and coordination of planning in the three spheres of government. Macro level changes were being made to the Department but few changes were being made to other areas of the Department. It seemed to him that more people were needed at the micro level of the Department to actually implement its work. Mr Steyn was confused because, in the most recent Annual Report, one of the targets for office accommodation at the national level was 7000m² yet the Department had actually secured 9600m². He could not imagine all of the extra accommodation being used just for sanitation-related employees. Clearly there was something wrong with the restructuring of the Department. Actions taken by the Department, such as securing office accommodation, did not gel with what it was telling the Committee. There was no synergy in all of this. Mr Steyn would have thought that, considering all the extra office space secured, a lot more people would have been employed at the micro-level. It therefore worried him that at some point in the planning and implementation, people in the Department were talking past each other.

Ms Mbane replied that the additional office space had been acquired because the Department had taken people from Servcon Housing Solutions and Thubelisha Homes

Mr Steyn said it also worried him that the Department seemed to have consulted largely with staff at the macro-level on the realignment but that it had not consulted with the “people who did the work”. Surely these were the people who should have been consulted as they were often the ones who knew what needed to be changed at ground-level in order to effect implementation.

Mr Chainee replied that a consultation process had been undertaken but the Department had had to strike a balance between consultation and its ability to take decisions.

Ms Mbane added that there would be a migration framework which would be discussed and agreed on at the “bargaining chamber” level. The Department could not consult on the micro structure until it had a macro structure.

Ms M Borman (ANC) asked about the research that had been done since 2004 and whether or not the Department was just “reinventing the wheel”. She said this in light the Committee’s visit to the Council of Scientific and Industrial Research (CSIR) a week before where it had discovered that an enormous amount of research was being done. How much of this research had been incorporated in the Department’s turnaround strategy? It was hugely important that, against the growing unrest in the country, the NDHS moved past the planning stages. The document presented today was very nice but the Committee needed more and would have preferred to see something that was more capable of being measured. It wanted to get to a stage where it could properly monitor and measure the progress being made. The Committee had asked the Department for this again and again.

Mr Chainee replied that the Department did leverage the work done by the CSIR, as well as work done by the Human Sciences Research Council and the National Research Foundation and other research bodies.

Ms Borman asked if the NDHS had been restructured purely because of the new mandate to provide sanitation.

Mr Chainnee replied that the turnaround strategy was not purely based on the Department’s mandate to provide sanitation but was the result of the Department’s changed mandate from government, which obviously included the mandate to deliver sanitation. Within the sanitation function, the Department also had to revisit the different roles and responsibilities of the different spheres of government so that there was no overlapping of the work done.

Ms Borman asked how soon the Department of Public Service and Administration (DPSA) would sign off on the turnaround strategy.

The Chairperson said that the Committee should give its input on the structure before it was approved by the last person.

Ms Mbane replied the Public Service Regulations required for the DPSA to sign off on all changes. Every directorate in the structure was informed by a strategy, a delivery model and a value-chain as was required by the public services regulations. The structure had been made to the DPSA which could either accept or reject the structure. The DPSA would critique the proposed structure against its own methods.

Ms Borman asked how it was possible to increase the number of senior level posts in the new design but for the design of the structure to still be “effective yet lean to minimise unnecessary costs”, as stated by the presenter. This seemed to be a contradiction.

Ms Borman asked if new legislation needed to be put in place for the turnaround strategy to be implemented and if this had been considered. The Committee did not want for this to hold the turnaround process up down the line.

The Chairperson asked how the new structure accommodated the crucial imperatives of achieving the Millennium Development Goals and addressing Climate Change. The Committee would like to see these imperatives clearly articulated in the Department’s next strategic plan.

Mr Chainee replied that the Department did have a more detailed document on which today’s presentation had been based and which included some of the issues alluded to by the Chairperson.

The Chairperson said she did not see any provision for “policy research” in the proposed structure of the Department. Where did this crucial function come into the structure?

Mr Chainnee replied that the research function fell under the office of the Director-General which might not have been so clearly articulated in the presentation.

The Chairperson said that the Department did not seem to be serious about delivering sanitation which had been placed under the PMU unit in the new structure. If the Department was ready to deliver on this function it would be more proactive and show that it was serious about providing sanitation. When would the Department begin to administer the sanitation function?

Mr Chainee replied that the Department was trying to not treat sanitation as “an adopted child”. The new strategy provided for the mainstreaming of the sanitation function into the work of the Department. The provision of sanitation was an integral part of the Department’s functions – it was part of a basket of services provided by the Department that resulted in “human settlements. The proposed structure made provision for “Strategy and Planning” which should include sanitation. The Department could not create a unit headed “Strategy and Planning / Sanitation”. The new structure should be read in the context of all the functions that the Department had to achieve and undertake, which included sanitation.

The Chairperson replied that, according to the structure on the presentation, the sanitation function fell under the PMU Unit and not Strategy and Planning Unit. Could Mr Chainee unpack the three Chief Directorates – “Stakeholder and IGR; Human Settlement Planning; Human Settlement Strategy – that would be placed under the Strategy and Planning Unit?

Mr Chainee replied that the DDG for Strategy and Planning would be responsible for the planning for all the units in the Department including rentals, sanitation et cetera. The planning for sanitation would therefore not happen under the Chief Directorate of Sanitation Programmes but rather under the Chief Directorate for Human Settlement Planning under the Strategy and Planning DDG.

Mr Steyn said it was his opinion that the Chief Directorates for Human Settlement Planning and Human Settlement Strategy should come under one Chief Directorate. In the spirit of the Department’s espoused aim to be “lean and effective”, surely the Chief Directorates for “Capacity to Change” and “Capacity Development” should also be incorporated under one Chief Directorate? Furthermore, how much investing did the Department do that it needed a Chief Directorate for the Chief Investment Officer? Lastly, there were separate Chief Directorate for “Operational Framework and “Governance Framework” that could surely also be combined. Perhaps the more detailed document on which the presentation was based could answer these questions. If the Department really was aiming for a lean structure then Mr Steyn would like to see “less Chiefs and more Indians”.

Mr Chainee replied that the Department invested R22 billion annually. The comprehensive document on which the presentation was based explained the functions related to this. Strategy and planning had been a weakness in the Department in the past. The Department had for example not been able to respond to issues such as climate change using the current structure.

The Chairperson also commented that “Capacity to Change” and “Capacity Development” seemed to be the same thing and so how could there be a separate Chief Directorate for each one? She was not convinced at all by this.

Mr Chainee replied that the base document for the turnaround strategy made the difference between the two proposed directorates clear.

Mr Phillip Chauke, NDHS Chief Director: Monitoring and Evaluation, apologised for the language and terms used which where perhaps making the Committee uncomfortable. “Capacity to Change” would deal with the transformation capacity of the entire human settlements sector and was not internally focused. In the current structure, the CD of Transformation dealt with the internal transformation of the Department. “Capacity Development” focused on developing the skills and training of people.

The Chairperson asked if the Strategy and Planning Unit planned for twelve months ahead.

Mr Chainee replied that the Department planned much further into the future than twelve months. The issue around Strategy and Planning was that there had to be a strategy that formed the basis of what the Department planned for. In many respects, being a national department, the NDHS had to lead on the strategic focus and outlook of the sector. The Department had identified that this area was lacking. Once a strategic plan had been drawn up, there were macro and micro planning issues that needed to be coordinated. Planning would therefore encompass business planning and coordination in the provinces, the urban settlements development grant. This presentation did not represent the sum total of the Department’s turnaround strategy. It was based on a document that gave a comprehensive overview of each of the units in the proposed structure including their functions. This could be provided to the Committee.

The Chairperson said the Committee would very much like to have this document so that it could more sincerely engage with the turnaround strategy and understand the proposed new structure.

Mr Chainee replied that the document would be circulated to the Committee

The Chairperson asked how the Department would monitor its regional offices considering that it had difficulties managing its headquarters. Did the Department really need regional offices? What about utilising the space in the provincial government offices?

Ms Mbane said she agreed that only a few staff members needed to be regionally based but that the issue was that office space was allocated to departments by the Department of Public Works based on the structure plans submitted by each department. If the NDHS was to use the office space of other governmental departments, the problem was that, once these departments filled all their vacancies, there would not longer be space for the employees of the NDHS. The Department would recommend that the office space for NDHS employees was located nearby other provincial government offices. It would especially recommend that the offices of its sanitation function employees be adjacent to the offices of the provincial water affairs departments.

The Chairperson asked when the turnaround strategy process had begun.

Ms Mbane replied that the turnaround strategy process had started in December 2010.

Ms Borman asked if the Department could give the Committee a time-frame for the implementation of the strategy once it had been approved by the DPSA.

Mr Mbane replied that the Department was aiming to implement the new strategy in the next financial year.

Rural Housing Infrastructure Programme: progress & implementation of Committee recommendations
Mr Phillip Chauke, NDHS Chief Director: Monitoring and Evaluation, presented the progress made by the Department, and its implementation of the recommendations of the Portfolio Committee, on the Rural Housing Infrastructure Programme (RHIP). The National Treasury had allocated a budget of R1.2 billion to the programme over the 2010/11 Medium-Term Expenditure Framework (MTEF) for provision of basic sanitation and some water projects in rural communities. The Department had appointed two service providers, Mvula Trust and Independent Development Trust (IDT), to support implementation as it currently lacked internal capacity.

In Phase 1 of the Programme, 11 920 households had been targeted and 9 911 toilets had been completed. Implementation had been especially slow in Limpopo province because some municipalities had taken a long time to sign service level agreements and some contractors’ contracts had had to be terminated and new ones appointed. Further, there were areas that had very hard rock underlying the ground and so the digging of pits in these areas had progressed slowly. Sixteen households were located in areas in Mpumalanga with a high water table – this matter would be addressed in the current year’s programme. In KwaZulu-Natal, the Emnambithi programme started very late due to the requirement to consult with stakeholders. In 2010/11, the Department spent only 57% of its budget.

The Department was currently in Phase 2 of the programme. Its total budget was R231.5 million for this phase, while only R23.5 million had been spent to date. Outstanding invoices would bring this expenditure to R36 million. The Department had targeted 27 978 households and 4171 toilets had been completed. A total of 2 848 jobs had been created to date, with a focus on sustainable jobs. The Phase 2 of the programme had been delayed as service providers had been instructed to first complete Phase 1.

The Department had demanded and received “recovery plans”, with set monthly targets from August 2011 to August 2012, from service providers to ensure that they were doing the work. Meetings had been held with service providers and their main contractors to identify problem areas and recommend action plans.

As at 31 October 2011, Mvula and IDT had delivered 5504 completed units and 3840 units were under construction. While Mvula was on target, IDT was slightly behind as contractors for 2011/12 had only been appointed after the work for 2010/11 had been completed. Members had recommended that IDT be put on terms to complete Phase 1 of the Programme but the Department sought legal opinion on terminating the contract due to non-performance. However, there had been a marked improvement in the IDT performance therefore a legal opinion to terminate its contract had been put on hold whilst its performance was being monitored. The NDHS had considered and acted on some of the recommendations made by the Portfolio Committee. This included the development of implementation programmes, the consideration of using cooperatives in the implementation of the programme and plans for the NDHS to report to the Committee on jobs created by NDHS.

The maintenance of sanitation in rural communities was still a major challenge for the NDHS

Discussion
The Chairperson asked if the Department had captured all of the recommendations made by the Committee.

Mr Matshoba said that the “Progress Phase 2” table reported that one toilet had been completed in the Free State, zero in Mpumalanga and zero in the Northern Cape.

Mr Matshoba noted that slide 16 reported that both “Mvula and IDT had delivered 5 504 units” as at 31 October 2011 and asked why the Department had not reported the number of units completed by each of these entities. The Department knew what the Committee had had to say about each of these entities and so it now coming up with a strategy of presenting the number of units produced by both entities so that the Committee could not see how many had units had been completed by each entity. The Department knew what the Committee’s recommendations were on IDT and now the Department had come to the Committee speaking of monthly meetings to be held with IDT et cetera. Why was the Department doing this to the Committee?

Ms Sosibo noted that the presenter had alluded to contracts that were terminated before the work had even begun. Did the Department not do adequate assessments of potential contractors before handing out contracts? What criteria had the Department used to sign on contractors?

Ms Sosibo asked about the “IDT Recovery Plan”, which said that IDT would be speeding up from this November, and if this meant that they would not be going on leave in December.

Ms Njobe asked how the Department could be sure that it would spend its allocated budget by March 2012, considering it had only spent approximately 10% of its allocated budget so far. Six months into the financial year, expenditure in the Limpopo Province was only R280 000 out of the R48 million allocated for the 2011/12 financial year.

Ms Njobe asked what use the Department had made of the research being done on sanitation by the CSIR. How could Mvula and IDT make use of the knowledge being generated by CSIR to improve service delivery, especially in the rural areas?

Ms Njobe said one of the problems with this programme was that the Department rushed too much. The Department should think seriously about how the community could be trained and capacitated to build their own sanitation so that in the coming years there would be no need for entities like Mvula and IDT as the locals would be trained and ready to do the work with the assistance of the government.

Ms Dladuke asked why the Department had under-spent on sanitation when the country, especially the rural areas, was in dire need of sanitation.

Ms Dladuke asked why only two service providers had been used by the Department and not many more which could speed up implementation of the programme.

Ms Dladuke asked if the Department could specify the names of the municipalities within Limpopo and Mpumalanga with which there had been problems.

Ms Dladuke asked how the Department would ensure that its service providers would speed up their delivery in Phase 2 of the Programme to ensure that the targets were met. It was not encouraging that in Phase 2, zero toilets had been completed in Mpumalanga.

Mr Steyn said that more than two service providers should be used. Why not use ten service providers across the country, especially since South Africa needed to create jobs. Mr Steyn was equally concerned about the progress to date.

Ms Mnisi asked what plans the Department had to assist municipalities that had not signed the service level delivery agreements on time.

Ms Mnisi commented that the Department had difficulties with compliance, according to the Auditor-General’s report – invoices had not been settled within 30 days for three consecutive years. What new plans did the Department have to improve its internal controls?

Ms Borman asked where the money allocated to the Department but unused, was sitting. The full R100 million allocated to Phase 1 had not been used and so where was the rest of the R43 million sitting?
 
Mr Borman asked if the NDHS had used all of its R12 million during the year.

Ms Borman sought clarity on the figures stated in the table on slide 9. While she understood that different costs were involved with different units, she imagined that the same types of units, more or less, were being built. The figures on the table were inconsistent and did not quite “add up”. Could the Department please ascertain that the figures were correct?

Ms Borman asked what “cumulative jobs” in the table on slide 10 meant. The Department had emphasised that it aimed to create permanent sustainable jobs, yet 18 jobs were created in the Free State in 2010/11 while zero “cumulative jobs” were created in 2011/12 in the Free State. If the 18 jobs created in 2010/11 were permanent jobs, then surely “cumulative jobs created” should be 18 for 2011/12, even if no jobs had been created in the 2011/12 year.

Mr Steyn similarly pointed out that the 18 jobs created in 2010/11 that were not listed as “cumulative jobs” created under 2011/12 had obviously not been sustainable and therefore contradicted Mr Chauke’s statement about how the Department measured the jobs it created.

Ms Borman commented that now that the Department was half way through the current financial year, approximately half of its budget should have already been spent. However, only 10% of the budget seemed to have been spent to date.

Ms Borman asked what communication the Department had with the provinces and how the provinces were notified as to when the Department was coming in, if at all. There had been some negative feedback about this communication between the provinces and the Department.

Mr Steyn was concerned about the budget being stretched over an additional year as 1) people would wait an extra year for delivery and 2) the same amount of money would buy the Department a lot less in the additional year.

Mr Steyn asked if the Department had contingency plans in place for when delays were experienced. For example, if problems were encountered in one municipality, then the service providers could be moved to work on another municipality while the problems were being sorted out in the other.

Mr Steyn was concerned that expenditure on the Programme for each of the four years on slide 4 added up to R1.38 billion whereas the Department had allocated a budget of R1.2 billion for the Programme. He was not aware of any extra money to be received by the Department and so again the red flags went up.

Mr Steyn asked if the 9 911 toilets reported as completed in the “Progress – Phase 1” table was the number of toilets completed up until the end of the last financial year, or if the Department was adding the toilets completed after the last financial year, but that were meant to have been completed during the year as part of Phase 1’s work.

Mr Steyn said that the problems encountered with contractors whose contracts had to be terminated were the same problems encountered in the past. The Department did not seem to be forward-thinking on this. It was not acceptable for contractors and the Department to arrive on site and only then realise there were problems. The Department needed to ensure that contractors using sub-contractors indicated who their sub-contractors would be and whether they had the necessary skills and capacity. This homework should be done before everyone arrived on site to do the work. The Committee had pointed this problem out to the Department yet no mention had been made about it in the presentation. If the Department could get its tender documents right then it could avoid a number of the problems it encountered.

Mr Steyn said that the CSIR had fantastic technologies that were not being applied by the Department.

Mr Steyn was concerned that in 2010/11, 47% delivery was achieved, but 85% management fee had been paid out. It was not acceptable for half of the work to be delivered in the year, but for almost all of the management fee to be have been paid out. There should be a correlation between the management fee and the deliverables.

Mr Steyn asked what the Department would actually do about a problem that was reported to it in one of its weekly meetings with the service providers. The Department needed to become more proactive - this seemed to be reactive and not proactive.

Mr Steyn commented on the Department’s testimony that it had been forced to dig a new pit next to an old pit that was full which did not make sense. Logic dictated that the Department should get a service provider in to empty the old pit.

Mr Steyn had seen on the Department’s website that a tender for R41 million for the project management of RHIP had been awarded to Maxima Global. Why had this not been mentioned in the presentation?

Mr Matshoba asked why the Department had reported in its presentation that “co-operatives should be considered in the implementation of the programme” when the Committee had already asked the Department to do just that.

The Chairperson asked what the first thing was that the Department had done with the R1.2 billion it received for the Programme from National Treasury. It had not planned exactly how many toilets it would deliver. Why had the Department been selective in its response to the Committee’s recommendations? Not all of them had been implemented. If the Programme was going to be pushed, the Department needed to get it right.

The Chairperson asked if the Department had been consistent in dealing with issues such as the service providers whose contracts it terminated. Her opinion was that it had not been. The Committee’s recommendation for the Department to seek a legal opinion on terminating the IDT’s contract due to non-performance was clear. The Committee had said that other service providers should be appointed but the Department had just come back to the Committee with “stories”. Why was the Department not appointing service providers? National Treasury had even warned the Department that the IDT was servicing eighteen government departments.

The Chairperson said that the Department never came right with IDT but insisted on using them. She begged the Department to reconsider.

Mr Matshoba suggested that the Department came back to the Committee with another report as the current one was not helpful. The situation with IDT was a mess, the Department must go away and come back with a proper report.

The Chairperson said that the Committee was very serious about this issue. The current report given by the Department on RHIP, which was still using the IDT, would ruin the Department’s relationship with the Committee. Members had warned the Department about using the services of IDT for the sanitation programme from the very beginning.

Mr Chainee asked the Chairperson if the Department could carefully consider the questions posed by the Committee Members and present its answers on another day.

The Chairperson agreed that the Department should do this and come back the following week.

NDHS action plan to address audit findings by Auditor-General
Ms Funani Matlatsi, NDHS Chief Financial Officer, briefed the Committee on measures put in place by the Department to address the audit findings raised by the Office the Auditor-General (AGSA) for 2010/11. A number of the findings had been addressed immediately while others required more time. The Department had achieved an unqualified audit opinion with certain matters of emphasis.

▪ One matter of emphasis was for “irregular expenditure”. The Department had put a number of internal controls in place to address this matter, one of which was the development of a checklist for tenders to ensure that all aspects have been properly attended to before a request for advertising was issued.
▪ An omission on “lease commitments” discovered during the audit had resulted in the restatement of the figures for 31 March 2010 and for the year-end figure for 31 March 2011 and had been due to an error in the formula used to calculate amortisation. This formula had since been corrected.
▪ The Audit Report noted the Department had under-spent by R38.38 million on the RHIP as a result of the programme having started late and because the contractors were still finalising the first phase of the Programme. Recovery plans had been put in place to address the challenges experienced and contractors were forced to submit evidence of work done prior to payments being made to them.
▪ The Auditor-General had found that 29% of the Department’s Predetermined Objectives for Programme 3 and 4 had not been measurable. The Department had developed a “file of evidence” system that would indicate the outcomes achieved within the reporting period.
▪ The Auditor-General reported problems with the Department’s “Reliability of Information” as information reported as the Department’s achievements had not occurred and did not pertain to the entity.
▪ The Department had been unable to explain 40% of the variances between planned and reported targets. The Department planned to conduct a mid-term review to address this and come up with revised plans which met SMART (Specific, Measurable, Attainable, Relevant, Time-bound) requirements. As part of its way forward, the Department would also conduct quarterly reviews to improve on the measurable performance indicators in compliance with the SMART principle.

Mr Chainee said that one of the primary causes for the irregular expenditure was the Department had not included “evaluation criteria” in its Request for Quotations document. For the last five or six years the AG had not asked for this information and so the Department assumed that it had been compliant. Another factor was that its Audit Manager from the Office the Auditor-General had also changed which had resulted in different interpretations on some of the requirements. The same could be said about the SMART principles in relation to the predetermined objectives and which were open to interpretation. All the departments were battling with this.

Discussion
Ms Borman commented that the Department should aim to bring down the “significant uncertainties” and irregular expenditure reported in its Annual Report.

Mr Steyn said that by-and-large, with some exceptions, the Committee knew that the Department had the interests of the people at heart. It was of concern to him that an error made been made with the formula for calculating amortisation - anyone who was in finance knew that formulas were fixed. The problem had however been identified and hopefully would not happen again.

Mr Steyn said that much of the action plan rested on the implementation of the “file of evidence” system. A file of evidence could very well just consist of more reports to support what a project manager for example was submitting as a deliverable. It was the “reliability” problem in AGSA’s findings that concerned him and this was where the focus needed to be. In other words, how reliable would the file of evidence actually be?

Mr Steyn said that proof of the delivery of material was not evidence of work undertaken. It could not be assumed that a house had been built merely because the material had been delivered.

Mr Steyn said that, notwithstanding all the good things, many of the activities listed under the Department’s Way Forward were already in place, such as the quarterly reports. Implementation was the key.

Mr Chainnee replied that the comments were mainly suggestions which the Department would consider seriously.

The meeting was adjourned.