Provincial Departments of Education: Auditor-General's infrastructure performance audit

Public Accounts (SCOPA)

21 November 2011
Chairperson: Mr T Godi (APC)
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Meeting Summary

The Committee held public hearings, attended by representatives from all nine provinces, to discuss the findings set out in the Auditor General’s (AG) report on infrastructure delivery in the provincial departments of Education. The Chairperson noted that there were large backlogs in infrastructure delivery and that the Minister of Finance had indicated that more funds would be provided to the provinces for infrastructure development.

Members noted that the report covered
133 projects, totaling R1.8 billion, which was 11.25% of the infrastructure spending, and it seemed that the findings could represent merely a small portion of what was happening. There were concerns that the provincial Departments of Education were not co-operating in supplying the requisite documents to the Auditor-General, and Members asked why the documents were not supplied, whether anyone had been held accountable, and whether provinces were able to show that their document systems had improved and that they were able to give all documents that were called for. Although the departments tried to outline what was being done, a Member thought that the written and verbal responses could be called into question, and said that it did not seem that the recommendations in the Auditor-General’s report had been seriously taken into account. Further concerns were raised on the appointment of contractors for the projects, in particular the fact that there was not, as required by law, consultation on who was registered with the Construction Industry Development Board before appointments of contractors were made. Members also asked whether, having become aware of the problems, the provincial departments had then gone back and done investigations into the circumstances of all other appointments, and asked also how many of the currently-employed contractors were registered, and whether there was any consideration of the consequences of using non-registered contractors on service delivery. They were also concerned that it appeared that no action had been taken against those who had breached the law. Members were also concerned that there appeared to have been a number of violations of the Public Finance Management Act (PFMA). They asked whether the officials were aware of the provisions of that Act, and specifically that Accounting Officers could be held criminally liable for failure to comply.  

Members questioned whether there was suspicion of collusion around the prices quoted for building a school. They questioned the specific circumstances surrounding the infrastructure in a number of instances in Free State, Bisho, and Mpumalanga. They also asked about the monitoring of projects currently, asked if there were time frames attached when projects were awarded, and questioned the relationship with the Department of Public Works, with one department going so far as to suggest that there was “low scale war” between the Departments of Education and Public Works. Members were, however, critical of responses that attempted to shift the responsibility on to other departments or implementing agents. They questioned the wasteful expenditure and over-supply of classrooms in Gauteng and asked to what extent town planners were involved in construction of schools. They also questioned the payment of contractors, and the fact that several had left sites because they were apparently not paid, or multiple contracts were awarded that were then terminated. The National Department of Education noted that a team had been appointed at national level to deal with monitoring. The Deputy Auditor-General suspected that many of the cost issues would recur, and noted that Portfolio Committees should be monitoring these matters more closely. The MECs noted the need for provincial treasuries to be involved but said that they were trying to keep a closer watch on expenditure.

Meeting report

Provincial Departments of Education: Auditor-General’s infrastructure performance audit
The Chairperson welcomed delegates from the Auditor General South Africa (AGSA), National Treasury and provincial Departments of Education and Health. He noted that there were huge backlogs in infrastructure delivery in South Africa. He said the Minister of Finance had recently indicated that more money would be provided to the provinces for infrastructure development. The hearings today would focus on the findings of the Auditor General set out in the report on infrastructure delivery at the provincial Departments of Education.

Mr P Pretorius (DA) said that the Auditor General’s report covered 133 projects totaling R1.8 billion, which was the equivalent of 11.25% of the infrastructure spend over a three year period from 2008 to 2010. This suggested that the findings set out in that report represented merely the tip of the ice berg. One of the most worrying facts was that the provincial departments did not co-operate in supplying the requisite documents to AGSA. He therefore asked for an explanation why they had failed to supply those documents. Noting that the AGSA report said that disciplinary action had to be taken, he also followed up with a question as to whether anyone had been held accountable for this.

Ms Mahlasedi Mhlabane, Head of Department of Education, Mpumalanga, replied that her Department concurred with the findings of the Auditor-General. She said that the control of records and documents did present a challenge. She said that disciplinary action had not been taken yet, as the province had used implementing agents.

Advocate Modidi Mamonya, Superintendent General for Education, Eastern Cape, replied that this Department similarly concurred with the findings of the Auditor-General and that disciplinary action had been taken. A number of instances in this regard required action, and there was a backlog of reports. He said service delivery agreements had been revised to tighten controls, and the situation, though yet not good enough yet, showed an improvement from the previous year.

Dr Nkosinathi Shishi, Head of Department of Education, KwaZulu-Natal (KZN) replied that this Department agreed with the Auditor-General’s findings but said that the issue sat with the implementing agents, although this provincial Department of Education had taken action against its staff who were supposed to monitor the programme. It had also engaged with the implementing agents, the Department of Public Works, and Ithala.

Mr Stanley Malope, Head of Department of Education, Free State, said that record keeping was a serious challenge and it had yet not improved to a satisfactory level No disciplinary action had been taken as the provincial Department of Education had found that the Department of Public Works was primarily responsible for not being able to provide documentation.

Mr Pretorius noted that no province had responded that its document system had improved, and had not said that they would be able to give any and all documents that were asked of them.

Mr Abe Seakamela, Acting Superintendent General of Education,
North West, also conceded that document management was still a challenge for this provincial Department.

Mr Tebogo Pharazi, Acting Head of Department of Education, Northern Cape, said there had been improvements in document management with regard to payments but that the problem lay with documents required from the Department of Public Works.

Mr Siphiwe Madondo, an official of Ithala, confirmed that Ithala had a document management system in place

Mr Pretorius said that Mpumalanga was the province which showed the most projects with problems, citing 30 projects valued at R250 million.

Ms Mhlabane said there had been improvements since 2010/11

Mr Legodi Boshielo, Head of Department, Department of Education, Limpopo, said that this provincial Department was following checklists with its implementing agents and checking up monthly, so the situation had improved significantly.

A member of the Committee asked if, when projects were awarded, there were time frames attached.

Ms Mhlabane replied that projects were awarded with time frames.

Ms Penny Vinjevold, Head of Department of Education, Western Cape, said that it appeared as if there was “a low scale war” between the provincial Departments of Education and the Department of Public Works. In order to overcome the problems, she had instituted monthly meetings between these two departments.

Mr R Ainslie (ANC) said he did not believe the written and verbal responses he had heard regarding the Auditor General’s recommendations. He said it appeared that provincial departments were destined to repeat the problems that had been noted. He quoted an example that the Auditor General referred to the Construction Industry Development Board (CIDB) register, which should be consulted before a contract was awarded. There was little evidence that that report had been taken to heart. He asked why the provincial departments had not consulted the CIDB register, and also asked if their heads were aware that the failure to consult the register was a contravention of the law. In Mpumalanga there had been fourteen instances where non-registered contractors were being used.

Ms Mhlabane said that the contractors had been appointed by the implementing agents.

Mr Ainslie said that this response was not acceptable, and was an attempt to pass the buck, although the Department itself remained responsible. He asked in how many cases, other than those already identified, this had happened, pointing out the report of AGSA was based on a sample only.  He asked if any retrospective investigations were being carried out to find out the extent of the problem.

Mr Malope replied that his Department was implementing changes to correct the challenges and that the matter had been raised at Executive Committee level. Action had also been taken at the Department of Public Works.

Mr Boy Ngobeni, Head of Department of Education, Gauteng, said the CIDB Act had been in operation since 2005, and therefore two out of the three cases mentioned did not fall within that Act’s requirements.  He said he thought the other instances had been joint ventures and therefore the CIDB registration requirement did not apply. When it was discovered that a CIDB rating was required, the matter was corrected, and a level nine grading had been attained. The other instances had concerned prefabricated structures, and he indicated that contractors need not have CIDB grading to erect prefabricated structures.

Mr Matthew Mohlasedi, Head of Provincial Department of Public Works, Roads and Transport, Mpumalanga, said that all these instances related to projects below R1 million in value. Compliance testing was always undertaken. His Department ran the Sakhabakhi Programme, to train upcoming contractors.

Ms A Dreyer (DA) said that the Auditor General’s report stated that the provincial departments did not comply with the necessary legislation and requirements. For instance, Free State showed 65% non-compliance, Limpopo showed 83% non-compliance and Mpumalanga showed 94% non-compliance. She stressed that all departments had to function within the confines of the law.

Mr Mohlasedi said his Department had drawn up an action plan to address the audit outcomes.

The Chairperson asked why there had not been a plan in place all along. He asked whether non-compliance could be detected.

Mr Ainslie asked whether the provincial departments were aware of what effect non-compliance would have on service delivery. He said page 30 of the Auditor General’s report reflected all the cases of substandard work.

Mr Boshielo
said some of the key officials in the Department had left. He conceded that there were errors around the Department of Public Works projects and his Department was now checking the CIDB register regularly.

Mr Ainslie said that it was apparent that no actions had been taken against people breaking the law.

Mr Pretorius asked if all contractors used at the moment were registered.

Mr Mohlasedi replied that all were checked for compliance, with the exception of the Sakhabakhi Programme contractors.

Ms Dreyer asked the name of the contractor involved in building the Khunjuliwe Secondary School, which was supposed to have been completed in 2005. 100% of the funds had been paid but the engineers found the building to be unsuitable. A new school was now under construction. She also asked who the current contractor was.

Ms Mhlabane named the consultants used, and noted that it had later been found that the soil had been unsuitable, and the building was falling apart. Action had been taken against the consultants and the matter was being taken to court, to reclaim the money paid.

Mr Ainslie said the Cyril Clarke Secondary School in Mpumalanga was another example of incompetence. After five months of construction, and after 89% of the contact fee had been paid, the site was discovered to have been earmarked for the Mbombela Stadium and the school was demolished. The school was then based on a railway site. He asked who was responsible for this and what action had been taken against officials responsible.

Ms Mhlabane noted that in the case of the Cyril Clarke Secondary School, the site for the stadium had been shifted closer to the school because the original site planned had been unsuitable. This in turn required the re-location of the school. Learners had to be temporarily relocated while the new school was being built. The second move was necessary because it was thought that a ring road on the railway site, where the temporary school had then been based, would be completed after the new school had been constructed. Because the school construction got delayed, the building of the ring road started and so the classrooms had to be demolished.

Mr Ainslie asked how the budget for the project jumped from R508 000 to R8.5 million.

Ms Mhlabane said the R508 000 related to the construction of the existing classes. There was an extra cost involved in moving to mobile structures for the temporary school, as well as for the primary school.

Ms Dreyer asked if all Mpumalanga officials declared their business interests.

Ms Mhlabane replied in the affirmative. She said that her Department would provide the name of the supplier of the mobile temporary accommodation, as well as the list of schools to which the mobile classrooms had been deployed since.

Mr Ainslie said the AGSA report indicated that in Gauteng, demand management through a needs analysis and the keeping of a database had resulted in wasteful expenditure, an oversupply of primary school classrooms and an undersupply of secondary schools.

Mr Ngobeni replied that this was a reflection of historical inequities. The Department had its shortcomings and had undertaken a study to correct them, including a demand model that included pupil transport as a factor.

A Member of the Committee asked whether the town planners had been involved in the construction of a school referred to on page 23 in the Auditor General’s report. A further question was asked as to why projects that should have been completed in nine months finally took 53 months to be completed.

Adv Mamonya replied that the infrastructure programme had a number of challenges. Money had been shifted in the middle of projects, for use in effecting repairs to disaster-struck schools. Cash flow was a problem when reprioritisation took place. Project funds were used to pay the salaries of teachers, and this led to the building work coming to a halt. A lack of planning and monitoring capacity in the Department resulted in poor workmanship.

Ms Mhlabane replied that a town planner had been involved with projects at her Department.

Mr S Thobejane (ANC) said that there were many violations of the Public Finance Management Act (PFMA). He asked if officials were aware of what PFMA set out, of what their duties were, and also that they were liable to be charged in respect of their failure to comply with the PFMA. He said gross negligence for punishable offences was being perpetrated.

Mr Thobejane also noted the instances set out on page 31 of the Auditor General’s report, saying that in the Free State, as indicated in clause 2.1.5(a), a different contractor to the one that was recommended had been appointed. In the Eastern Cape, as indicated in clause 2.1.4(b), a project cost had doubled from R1.18 million to R2.31 million, and here too the contractor was someone who had been removed from another project. In Limpopo, it had been found that a tender which should have lain open for advertisement for 21 days was only advertised for seven days.

Another Member of the Committee added that in certain instance in Free State, contracts had been awarded to contractors who had not attended site meetings, nor did they have CIDB registration.

Mr Malope replied that the project appointments had occurred in 2005 and so he could not give a full account of what happened. The person involved had been the Head of the Provincial Department of Public Works. The tenders had been reversed. The Department had pushed the Executive Committee to agree that the Department should now attend to all projects under R10 million.

Adv Mamonya stated that in respect of the Bisho Youth Care Centre, there had been a delay in the design and planning. The budget of R118 million related to the first year of operation only. The tender had been published in local newspapers, which had provincial coverage, and the contractor, Grinaker-LTA, had been a reputable company.

Mr Boshielo replied that the officials involved in the project under discussion had since left the Department. He said that he was not trying to “pass the buck” but was setting out where the responsibility in fact lay.

Ms Dreyer asked who the contractor for the Khotso Ixolo Secondary School in the Free State was, and whether that contractor had been blacklisted.

Ms Dreyer also noted that there was poor attendance at site meetings for new school projects in Mpumalanga, and asked if that Mpumalanga department was now doing things correctly.

A member of a provincial Public Accounts Committee asked whether the provinces had monitoring units to oversee public works, as the Auditor General had recommended that the Department of Basic Education had to monitor the work.

Mr N Singh, (IFP) said that he had found, during a site visit to the Eastern Cape, that contractors were leaving the site because they had not been paid. The Auditor General’s report backed this up, noting that multiple contracts had been awarded which had then been terminated. He asked what the terms were for payment, and whether the Departments suspected that there could be any collusion in the setting of prices for building schools.

Adv Mamonya replied that two companies had tendered for the Bisho Youth Care Centre. The tender required the highest grading level and the quotes had been for R230 million and R250 million. The cost escalation was due to certain items not having been included in the initial tender. He said that no contractor was owed money by his provincial Department.

Mr Malope replied that officials had declared their interests, and that the contractor, Thulo Construction, was no longer in the construction business. There had been monitoring capacity problems, but his Department was appointing people with a construction industry background to monitor projects. He said there were a few instances where there was suspicion of collusion, and conceded that the supply chain management procedures had to be overhauled.

Dr Shishi said that action had been taken in the case of Izwilesizwe School in Pietermaritzburg.

Mr Benny Padayachee, Acting Deputy Director of Planning, National Department of Basic Education, said there was a team in place at the National Department, specifically to monitor the infrastructure development programme.

Mr Ainslie asked if the provincial Department in Mpumalanga had investigated the wasteful, fruitless and fraudulent expenditure.

Mr Mohlasedi said this provincial Department had completed an action plan and the deadline for action to be taken was November 29.

Mr Ngobeni said that in his provincial Department, there were some problems with technical non-compliance in supply chain management, but that the Chief Financial Officer was now involved in correcting this.

Mr Boshielo said that this provincial Department had discussed the Auditor-General’s report with its implementing agents and was tightening procedures.

Adv Mamonya said that the Eastern Cape Department had done a report in 2007, noting systemic faults. There were issues that needed to be investigated, for instance the Bisho Youth Care Centre.

Mr E Sogoni (ANC), Chairperson, Standing Committee on Appropriations, said he appreciated the Auditor-General’s report. He was most concerned by the fact that many Accounting Officers seemed either to be in denial or were failing to comply with the PFMA regulations and rules. Some of the resources allocated had been conditional grants, but these necessary rules had not been applied. He said he was concerned to hear that the North West Province’s record keeping was limited to keeping boxes of documents, and urged it to start implementing other means of record keeping. He said Mr Singh’s comments on collusion on the cost of building a school needed to be followed up.

Mr Kimi Makwetu, Deputy Auditor-General, said that it was important to note that the total budget for the period under review was R32 billion, which was split equally between Education and Health departments. Based on what he had heard that day, he felt that most of the cost issues would recur. It was important from an oversight perspective, and Portfolio Committees should be keeping closer controls. Irregular expenditure occurred where control methods were not reliable and sustainable. He said he did not know when another such study would be undertaken.

Mr Raymond Elisha, MEC for Education and Training, North West, said there was a need for further engagement with the Standing Committee. He felt, however, that most of the emphasis had been on historic matters, what had happened in the past, rather than what was currently happening.

Mr John Blok, MEC for Finance, Northern Cape,  said the report reaffirmed the need for provincial treasuries to be involved.

Mr Dickson Masemola, MEC for Education, Limpopo, said that this Committee and the Auditor General should have confidence that matters would receive close attention from the MECs. MECs were meeting almost monthly to resolve issues. Treasury needed to provide guidelines on how to administer interdepartmental processes rather than the departments depending on gentleman’s agreements between themselves.

Ms Barbara Creecy, MEC for Education, Gauteng, noted that she had instituted a project management office to monitor provincial infrastructure development. Service level agreements had been revised so that the Department was more able to hold service providers to account.

The meeting was adjourned.


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