Public Works Annual Report 2010/11: hearings with Minister

Meeting report

Opening remarks
The Chairperson noted that it was SCOPA's responsibility to review expenditure within government departments. The DPW was called to account based on the findings of the Auditor-General (A-G) on their financial statements in their Annual Report in the context of the Department's accountability to Parliament. The Department's maxim was "South Africa Works because of Public Works" and if DPW was not working as it should, then it impacted directly on how the country functioned. It was a very important and strategic department of government which under no circumstances should have been allowed to deteriorate to the state it was in. It was imperative that the interaction with all stakeholders should assist them to understand what led to the current status of the Department and to address the issues rationally and not emotionally. Focus areas had been allocated to SCOPA members to give direction to the proceedings. Dr D George wanted clarity on who the Accounting Officer was for the purposes of the Public Finance Management Act (PFMA). The Chairperson responded that it was the Acting Director General. The Minister would be joining the meeting shortly and thus the administrative and political leadership would be present. It was confirmed that a member of the SIU was present.

Immovable Tangible Capital Assets
Mr R Ainslie (ANC) said he would refer to the A-G's report and the Department's Annual Report, specifically the statements of the previous Minister, Ms Gwen Mahlangu-Nkabinde's and the Accounting Officer's overview. He noted that the Department had received the worst possible audit outcome which in essence was that the A-G did not know what was going on in the Department and that it bordered on being dysfunctional.

Mr Ainslie referred to the Accounting Officer overview in the annual Report which stated that the DPW had 'prioritised' the management of its Immovable Assets portfolio and went on to list the assets countrywide i.e. buildings and land parcels. She stated further that 80 % of the information fields relating to the properties had been captured and 35% for land parcels. If it was a priority of the DPW, why was it taking over 18 years to have a complete, up to date Asset Register. What were the obstacles? Why after 18 years, did the Government still not know what property was owned, who was using it and for what purpose and when would they have a complete, updated asset register?

The Acting Director General, Ms Mandisa Fatyela-Lindie, said that the Department had deteriorated to a state of dysfunctionality as had been pointed out by the A-G. The Asset Register had been attended to for the past few years but the challenge had always been that most of the projects undertaken by the former Accounting Officers of the Department had not built on the initiatives of their predecessors. They had not made Parliament understand what they were undertaking and where they were in the process. This was complicated by the fact that officials in the Department responsible for the Asset Register had left and by the fact that they had 11 regional offices in addition to their Head Office. Capability in management of the asset register, such as updating, populating all the fields correctly, verification and coordination had been lacking. The core business of the department which was the Asset Register, had not been well resourced. She noted that they would address this and were going to get assistance to get the Asset Register right once and for all.

Mr Ainslie asked why they were sourcing outside consultants such as Ernst & Young and not using people employed within the DPW. The vacancy rate was 20% and he noted that to be effective, the staffing should be quite stable. A change in top leadership should not affect the job of capturing information and if there was a shortage of personnel, why were more people not employed instead of using outside consultants?

The Acting DG said that parallel to engaging Ernst & Young, they had employed 15 young persons on contract at the Head office and 12 in the regional offices as part of addressing the high unemployment rate amongst young people.

Mr Ainslie was not satisfied with this response and said they were paying huge costs to outside consultants to perform work that was fundamental to the DPW.

Mr Ainslie noted that the Accounting Officer's statement referred to countrywide assets, which he assumed were those within the boundaries of the country. Surely, there were also assets around the world, both movable and immovable that should be reflected in the relevant asset registers. Why were 'countrywide' immovable assets only mentioned?

The Acting DG responded that they had an agreement with the Department of International Relations and Cooperation (DIRCO) to manage the foreign assets.

Mr Ainslie noted that according to the Constitution the DPW was responsible. Why were they abdicating this responsibility?

The Acting DG said they were not abdicating their responsibility but it was delegation of authority to another Department according to accepted guidelines.

Mr Ainslie and the Chairperson queried whether there was one inclusive Asset Register for the Department.

The Acting DG responded that the Department was the custodian of all immovable State assets and the assets in foreign countries were part of the asset register but they had delegated the authority to manage those assets to DIRCO.

Mr Ainslie voiced his suspicion that there were hundreds of millions of rands of assets abroad and in the country of which the State was unaware. He drew attention to the statement by the Accounting Officer in the overview of the Annual Report which said that "a concerted effort to trace government property that was presumed unaccounted for or illegally occupied" was being made. He questioned the use of the word 'presumed' as it intimated that they were unsure. He reiterated his contention that there were hundreds of millions of rands worth of assets around the world that the Department was unaware of. Was he right or was he wrong?

Ms Sasa Subban, Deputy Director General: Asset Investment Management, DPW, said that in respect of the foreign assets, they shared a database and had a close relationship with DIRCO.

Mr Ainslie interjected that he was not only referring to international assets but to assets inside the country as well.

The Chairperson asked her not to direct her answer to the DIRCO issue but to the question on the assets whose whereabouts the Department was unsure of.

Ms Subban, said that the former Minister had launched 'Operation Bring Back' in October 2011, basically to appeal to the public to report any assets they were aware of that belonged to the State which were not accounted for. It had not been extended for foreign assets. A help line had been established and two cases had been reported subsequently and were under investigation. The campaign needed to be intensified and more media awareness had to be created.

Mr Ainslie questioned whether illegal occupants of state property would respond. The DPW needed to refer to the deeds office and old parliamentary records and it should be an active campaign and investigations should be conducted.

Ms Subban said they were doing desktop verification with their service providers.

The Chairperson asked who they were.

Ms Subban replied that it was Ernst & Young and they had an asset register team comprised of all custodians such as the Department of Rural Development and Land Reform, The Department of Water Affairs and the provinces. They were working on the verification process and she supplied the current figure for State land.

Mr Ainslie responded that those were the ones they knew about. His contention was that they were sitting on assets that they were unaware of and DPW was not embarking on a proper investigation to identify government assets around the world. He referred to the table provided in their Annual Report (page 26) and pointed out that there had been no additions such as land parcels, dwellings and non-dwellings in the reporting period, despite their assertion that they had prioritised immovable assets. Whatever they were doing including engaging Ernst and Young, had been futile.

The Chairperson asked if they had been able to identify any additional assets.

Ms Subban said that they had not been able to identify any additional assets.

Mr Ainslie declared that it was further evidence that the Departments was dysfunctional. He asked in frustration what one did with dysfunctional departments. They knew what happened with dysfunctional provinces and dysfunctional provincial departments, but what did one do with a national department that stayed dysfunctional?

He noted that the portfolio committee had requested that the Accountant-General be at the meeting as they were dealing with dysfunctionality and asked if any officials from National Treasury were present.
 
The Chairperson noted that they had invited them but received no response.

Mr Ainslie asked for an explanation of the Amnesty Campaign referred to by the Accounting Officer and what success, if any, they had.

Ms Subban said that the information that was provided was for the reporting period under review and the amnesty campaign commenced in January of the current financial year.

Mr Ainslie asked how many calls they had received.

Ms Subban said they had received two calls which they were investigating.

Mr Ainslie said that if they took their responsibility seriously, they should engage in an active campaign.

The Chairperson requested that in their future Annual Report, DPW should account for all their assets and they should get the relevant information from DIRCO.

Mr Ainslie referred to Immovable Tangible Capital Assets in the Annual Report (page 74) which dealt with unregistered State land that had to be registered. Had that been done?

Ms Subban replied that this had not been completed.

Mr Ainslie asked " Why not? "

Ms Subban responded that this involved a dual process with the Department of Rural Development and Land Reform. All the unregistered land had to be surveyed before it could be registered. There was a project that was being undertaken by the Department of Rural Development and Land reform with the Surveyor-General's Office to survey all the parcels of land that have not been registered.

Mr Ainslie asked why after 18 years they had not completed this.

Ms Subban deflected responding to this and referred to the Department of Rural Development and Land Reform.

The Chairperson commented that the Department in question had only been established in 2009. Whose responsibility had it been before then? The Department of Agriculture and Land Affairs?

Mr Ainslie enquired if the former homelands, Ciskei, Transkei, Bophuthatswana, Venda and the others had been properly incorporated into the Republic.

Ms Subban replied that this process was under the jurisdiction of the Department of Rural Development and Land Reform.

Mr Ainslie said he thought DPW had overall responsibility for all State land.

Ms Subban said that the Department of Rural Development and Land Reform was also a custodian of State land.

Mr Ainslie asked if the A-G had got his facts wrong and quoted from their report that the National Department of Public Works was responsible and that according to the Constitution they had overall responsibility for all government property.

The Chairperson said that within this particular instance there was multiplicity of custodianship.

Mr Ainslie said that the respective departments should account for what was going on.

The Chairperson said that it was a challenge and he interpreted what the A-G was making a general statement on their accountability.

Mr Ainslie referred to the A-G's finding that sufficient and appropriate audit evidence was not obtained to satisfy the requirements of completeness, existence, rights, valuation and allocation of properties recorded in the immovable asset register of the Department stated at R3.4 billion ( note 34 to the financial statements). He noted that the Department had been unable to provide documentary evidence for over R3 billion of immovable assets and called their entire accounting process into question.

Ms Cathy Motsisi, Chief Financial Officer confirmed that they could not provide the supporting documentation and conclusive evidence of the amount of R3.4 billion. She explained that the Department used to disclose the figures exactly according to the amounts allocated in the Capital budget previously. In 2010 they had begun on an exercise to try and align what they were spending on properties in terms of the exact costs. The R3.4 billion was a theoretical calculation of the cost incurred but they did not have was the documentation as that was sitting at the regional level. The process had been started late in the 2010/11 financial year and they did not have sufficient time to collate all the information from the regions to support the calculations.

Mr Ainslie asked what there was to theorise about in financial statements. Would it not have been more honest to leave a blank space and admit that they did not know and that they could not verify their information. It amounted to guess work. If the A-G came tomorrow would they be able to provide documentary proof of the R3.4 billion? Were the documents available now?

Ms Motsisi responded that it was not guess work as the information came from the system. They had taken the information that was recorded under capital expenditure. If the A-G came, they would be able to retrieve the documents.

Mr Ainslie asked why this was not possible the first time around.

Ms Motsisi replied that it was because it had been too late to coordinate the information from the regions.

Mr Ainslie responded that she should have been aware that every year there were annual audits. Would they be ready the next time around?

Ms Motsisi said it was the first time they had undertaken the exercise to analyse the capital budget more intensely. Previously they had just taken the amount that had been allocated in the budget.

Mr Ainslie said they should not have committed themselves to something that could not be accomplished and they should have prioritised what the A-G required. He was not satisfied by the response and maintained it amounted to guess work.

Lease Commitments
Mr Ainslie referred to the former Minister's statements in the Annual Report (page 10) in which she committed the Department to reduce the government's dependence on leased accommodation and to reduce leasing costs. Was that still an objective of the Department and if so what measures were in place to do so.

The Acting DG said it was still the policy of the current administration. However, the challenge that the Department faced, was the continual maintenance of public buildings. They had to balance the reduction of leasing agreements with the increasing costs of maintaining public buildings. There was a backlog of buildings that had to be maintained, rehabilitated or refurbished. Their budget was not sufficient for a massive reduction in lease agreements.

Mr Ainslie said they were not asking for a massive reduction but if a comparison was made over the past years, were they making some progress in reducing lease agreements?

The Acting DG replied in the negative.

Mr Ainslie concluded that the objective of the previous Minister to reduce government's dependency on leasing was not being met.

Mr Ainslie referred to the previous Minister's statements when she came into office, that criminal charges (mostly relating to tender fraud and corruption) against officials in the Department and other persons would be made. How many officials had been suspended and disciplined? Had any officials been charged for corrupt activities? Were investigations being undertaken by the Department or possibly the Hawks? He wanted some indication that these matters were taken seriously, given the fact that the former Minister had made some startling claims of wide-spread corruption within the Department. The Minister had also admitted that her investigations were being hamstrung by officials in the Department.

Mr Mandla Mabuza, Deputy Director General: Projects, DPW, confirmed that, on the basis of the call made by the former Minister, there were investigations being conducted by the SIU and four officials were on suspension. These included two senior officials.

Mr Ainslie asked if he was allowed to ask who these senior officials were and whether they were still receiving their salaries.

Mr Mabuza said they were a Deputy Director General and also a former Acting Director General.

The Chairperson commented that surely he could provide the names.

Mr Mabuza reiterated their designations.

Mr Ainslie suggested that it was Mr Sam Vukela.

Mr Mabuza repeated that it was the former Acting Director General.

Mr Ainslie said he could not understand why he was under suspension. Why? Was their insufficient proof to move against him immediately?

Mr Mabuza replied that the matter was sub judice and he was unable to comment on its content.

Mr Ainslie stated that he was uneasy as the gentleman in question had made an affidavit declaring that he had acted illegally. If he had admitted to his guilt, why was he on suspension and not in jail?

Mr Mabuza responded that he was unable to comment on the details.

Mr Ainslie commented that the matter was clear cut. Why was the person not in jail.

The Chairperson said they were trying to challenge the notion that officials could come to Parliament and not provide information because there was some sub judice rule by which they could not provide information to Parliament.

Mr Ainslie asked if he was correct in his assertion that the gentlemen in question had made the affidavit saying
that tender regulations had not been followed, in contravention of the PFMA. He reiterated the question, ' Why was he not in jail?' Was he right or wrong that the person in question had made an admission of guilt?

The Chairperson asked for details on the suspension of the official.

The Acting DG said the disciplinary process was being conducted.

Mr Ainslie asked why the official was on special leave if he had admitted to his guilt. He concluded that this was further proof of dysfunctionality in the Department.

The Chairperson asked at what stage the disciplinary process was and how long they expected it to take.

The Acting Chairperson responded that they were at the beginning of the process but they hoped to pick it up very soon.

 Mr Ainslie referred to businessman, Mr Roux Shabangu, who had said that he had received between R200 to R300 billion of leases in South Africa which were concluded without going through the competitive bidding process. Mr Shabangu also said that in the Pretoria region alone, 194 leases flouted the PFMA. Did they concur with what Mr Shabangu said? Had they conducted their own investigations into these amounts and leases and what did their own investigations show? In his affidavit, Mr Sam Vukela had stated that 2 415 leases were concluded without proper tender procedures, in contravention of the PFMA. Was the department aware of the amounts involved and the number of leases?
 
Mr Mabuza responded that they could confirm that the statement was part of the affidavit submitted by Mr Shabangu and they were unable to comment on its content.

The Chairperson commented that when they called officials to Parliament, it was expected that they should provide information as requested. He would be conferring with the Advocate-General on the Rules of Parliament. To his understanding sub judice only applied if it would influence the outcome of the case and if not, there was not any reason why information should be withheld. He cautioned them that the principle of sub judice should be used sparingly. Parliament needed to be informed as that was the only way they could do their work properly.

Mr Ainslie asked if the Department had themselves undertaken an investigation to determine the value of leases where the proper tender procedures had not been followed. In Pretoria there were 2415, but how many were there throughout the country? How many leases were in contravention of the law and what was the value thereof as determined by the Department?

Mr Mabuza said they respected the Chairperson's interpretation of the Rules of Parliament in respect of the principle of sub judice. It was, however, their considered opinion that responding to that specific question had implications on the affidavit submitted by the person in question and it had the potential of influencing the outcome of that particular case. This was their humble submission to Parliament.

Mr Ainslie said that matter was in the hands of the Chair, he was asking what the Department had done. Had they investigated the number and value of the leases in contravention of the PFMA and what was the result of the investigations? That was not sub judice.

The Chairperson said the question was whether there were internal processes being instituted on the lease agreements and what had they found in terms of their own internal review and monitoring management processes.

 Mr Mabuza confirmed that they had, and said that at any time when there were allegations about any particular transaction, they did investigate it. He continued by saying that, as a matter of fact, the Minister of DPW had announced that in lieu of the many allegations that had been made about leases, a decision had been taken to withdraw the delegation of leases from the regions. It had now been centralised at their Head Office.

Mr Ainslie said he wanted to know the value and number of the leases that contravened the PFMA throughout the country. In the absence of a response, he concluded that the department did not know and this was further evidence of dysfunctionality.

The Chairperson commented that there was no internal review mechanisms to check on the compliance of lease agreements and there had been an announcement by the Minister to start this process.

Mr Ainslie asked if there had been any attempt to identify officials with interests in companies doing business with the Department such as leasing, contracting, and maintenance. Had there been such an investigation?

Ms Motsisi responded that senior officials had to declare their interests, as was mandatory, and only two officials had disclosed such interests.

Mr Ainslie referred to Mr Roux Shabangu and the case of the lease of the Independent Complaints Directorate (ICD). He noted that the lease for the ICD building increased fourfold from R4.2 million to R15. 6 million and it " killed and utterly destroyed" the ICD budget. The ICD complained that they had been forced into the lease and that the Department had refused to tell them what the rental would be in order for them to determine if it was within their budget and had refused to give them a copy of the lease. Was this the way the Department dealt with their client departments? How did they deal with their client departments on the matter of leases to ensure they were in budget? Did they supply them with a copy of those leases?

The Acting DG responded that the ICD lease was one of the matters being investigated by the SIU and she found it very difficult to respond. The SIU was wrapping up their investigations and the Minister would be speaking to the issues. She noted that the SIU investigation would reveal a lot of what was happening around collusion by Department officials and private companies.

Discussion
Ms M Mangena (ANC) said she was concerned about the use of consultants in terms of the costs. In the 2009/10 financial year they had spent R189 million and in the 2010/11 financial year they had spent R226 million. She noted that they would be using Ernst & Young in the current financial year. How much were they going to pay this time? Why could they not use their own personnel as had been asked previously?

Ms Mangena was concerned that the Department did not know how many assets they had, especially immovable assets. She also questioned why tractors of the Department had been appropriated by people in Kwa-Zulu Natal.

Ms M Mabuza, (ANC), Chairperson of the Portfolio Committee on Public Works, expanded on the challenges that they had experienced with the Department and said that every time they met with the Department, they spoke about integrity. She referred to information supplied to the Portfolio Committee in December 2010, which supplied figures on additions to the data base of immovable assets that had not been listed and assets that still had to be verified. On the question of documentation which could not be obtained by the A-G, Ms Mabuza said that the Portfolio Committee had been told by the Department that they could not supply the documentation because it was with the SIU. She questioned why they did not have backup copies.

Ms Mabuza expressed her concern about the fact that the Department did not have a lease policy and that they did not have Service Level Agreements with their clients, so there were no contracts in the Department and it was just a 'free for all'. They were at SCOPA to assist the Minister and the Government and she asked the officials of the Department if they could be honourable enough to be open and honest for the good of the country and respond with the correct information. In 1994 when Mr Jeff Radebe had been the Minister, there had been many cardboard boxes of asset registers and 150 disks with asset register information. What happened to that? Now they were employing Ernst & Young to start from fresh when the information was there.
 
Ms Motsisi responded to the questions on the Assets Register and placed the information that had been provided to the Portfolio Committee in context. They had an Asset Register and that was why they could supply the figures and they used the information to reconcile the property with the Title Deeds. The property they were saying could be lost property was not lost if it was registered to the National Department or other State entities. It could only be lost, if subsequent to that, the property changed hands through the Deeds Office. If the Title Deeds were still in the hands of the State, it would be reflected in the Asset Register. However, they would still not be able to know if the asset was legitimately occupied. The initiative the Department was undertaking with Ernst & Young was put into place in previous years for data integrity purposes. They were collating data to populate mandatory fields in the asset register and checking Erf numbers and Title Deeds so that there would be an asset register that could be properly disclosed in the Annual Report.
 
 The Acting DG said they used consultants for professional services mostly, where the Department did not have the expertise. The Department lacked the capabilities to cope with the Asset Register and they were trying to put the building blocks into place.

The Chairperson said that the point being made was why was it not possible for the Department to do the professional work required.

Ms A Dreyer (DA) noted that only two senior officials had declared their interests. What happened in the case of all the others who had not declared? This was not an option but obligatory and all senior management had to submit their Declaration of Interests forms by a certain date. What action had been taken against them?

The Chairperson welcomed the Minister of DPW and officials from the National Treasury.

Mr S Thobejane (ANC) emphasised that in terms of the Constitution, any official appearing before Parliament who deliberately misrepresented facts, was committing an offence. He noted that Parliament represented the people of South Africa. He commented on the misuse of the principle of sub judice to hide behind as they should get an Order of the Court. The affidavit was a declaration of what the person knew so it did not qualify under the sub judice principle.

Mr Thobejane referred to the failure of the Department to disclose its international assets in the Annual Report. He expressed his concern with the fact that they had delegated that authority to DIRCO. Had they received a report back on the status of those assets? Why were they delegating their responsibility? Delegation implied that DIRCO should report back and account for the properties outside South Africa.

Mr Thobejane asked if the Acting DG was aware of who was doing what in the Department as there should be an official responsible for liaising with DIRCO on the issue of Immovable Assets. What reports did they get from that particular official? Who were the responsible officials and what happened to them?

Mr Thobejane referred to DIRCO and the Department of Rural Development and Land Reform who worked with DPW in terms of land and property. Was there a Memorandum of Understanding (MOU) between the three departments?How was it managed and how did they coordinate their accountability?

M Motsisi said that twice a year all senior officials had to sign a Declaration of Interests on their or family members
business interests with the Department. They had to rely on the information coming from their disclosures and two officials had made such disclosures.

Ms Dreyer said the response did not answer her concerns. She wanted to know what happened to those who had not complied as it was not a choice and there should be consequences for those who did not.

The Chairperson ascertained that all the senior management had signed the Declaration forms.

Ms Subban responded to Mr Thobejane's questions and said that DIRCO had custodial delegation for the management of the country's international properties as articulated in the Government Immovable Asset Management Act (Act No.19 of 2007) (GIAMA). DIRCO had all management responsibilities except the disposal function. The Department did, however, have to reflect the DIRCO Assets on their Asset Register. Currently there were 213 foreign properties registered. An MOU to regulate the relationship was sent through to DIRCO to sign and it was still with them.

The Chairperson asserted that there was no MOU and asked when the MOU had been spent to DIRCO.

Ms Subban stated that it had been sent about a year and a half ago.

Mr Thobejane said they had not responded to the question on who the responsible officials were and what happened to them. He clarified that he was asking who was responsible for the management of Immovable Assets as they had failed at what they were supposed to do.

The Chairperson asked who was responsible for them receiving a qualification for Immovable Assets from the A-G.

The Acting DG responded that the focus of the Department currently, was to institute corrective measures in the management of Immovable Property.

Mr Thobejane persisted in establishing who the responsible official was.

The Chairperson asked who was in charge of Asset Management.

The Acting DG identified the official.

Ms C Madlopha (ANC) expressed her concerns about the use of consultants as it was a waste of resources

Ms Madlopha noted that GIAMA had been passed in 2007 and they had been informed that it would be implemented at local level within two years, but five years down the line, it had still not been implemented. Most of the assets of the country were at local level. When did the Department envisage implementing the Act at local level.

Ms Lydia Bici, Deputy Director General, Construction and Property Policy Regulation (DPW), said the Department had assisted local government to put all the steps into place to implement GIAMA but at the moment there was no legislation. They had three options, to change the existing legislation, to amend local government legislation to accommodate GIAMA or to come up with new legislation.

Mr N Singh (IFP) referred to the implementation of a project for asset management in the DPW that had been demonstrated at Parliament. Who had been the consultants and had the project been rolled out successfully?

Mr Singh noted that every municipality had a Valuation Roll on which every single property was itemised. he wondered how much Rates was outstanding to municipalities as a result of the DPW not taking responsibility for properties that were registered in their name. He asked if they could be informed how much Rates was outstanding to local authorities. The more Rates that were outstanding, the more ordinary citizens had to pay in Rates when the municipalities drew up their budgets.

Mr Singh stated that there was a lot of State property that was no longer required by the Government for the purposes it was intended for in the past and that was money sitting out there. How many properties had been sold in the last two financial years whether by private treaty or public tender and for how much?

The Chairperson referred to the Annual Report to the tables on the disposal of properties

Mr Masutu Ramatlotlo, Acting Chief Director: Information Services, DPW, said that the Asset Register System that had been developed had not been fully rolled out. Issues that they had were around the interfacing with the Accounting System. He estimated that over R6 million had been spent not including the consultants’ fees.

The Chairperson noted that more than R6 million had been spent on a system that was non-functional.

Ms Mabuza commented on the negative effects the lack of strategic leadership had on the Department and that this had led to the use of consultants. She enquired how long the process of the transfer of skills was going to take place. She said that the Department was different from others because it was very technical and she asked if the appointment of staff was in line with the mandate of the Department.

Ms Subban said they had not disposed of any property for commercial use but they had for social purposes. There was a programme for unutilised buildings and they had a list of all such properties throughout the country. They had a programme for rehabilitation and they had approached the NT for funding. They increased charges to client departments to reflect market related costs. When they did refurbishments they recouped their costs by raising the rental to client departments and they utilised that money for other buildings.

The Chairperson asked them to answer the question on whether the Department hired people who did not match the skills required.
 
A Department Official agreed that it was quite a technical department, they were very active in the build environment and they operated in a market characterised by scarce skills and that they had vacancies at a senior level that they had been battling to fill. They only made use of consultants when there was a dire need.

Irregular Expenditure
Mr Singh referred to the addendums to the DPW Annual Report and said it amounted to fruitless and wasteful expenditure. Many errors had been identified in the Annual Report and the people who were responsible for supplying basic information on the budget should be censured. There were a plethora of amendments to the figures and they should investigate the people who were responsible for the compilation of the document.

Mr Singh noted the rapid changeover in DGs and Acting DGs and its effect on the management of the Department. The one constant over the past three years had been the CFO. While he understood that the PFMA stated that the Accounting Officer was ultimately responsible, they relied heavily on information supplied by the CFO. The CFO had many responsibilities including that of condonement. He referred to the Annual Report for the list of Irregular expenditure that had been condoned by the CFO ( page 124). The list of Irregular expenditure that had been incurred included quotations that were not obtained, approval not obtained by delegation, and overspending for compensation and this had been condoned by the CFO.

Mr Singh noted that a number of the items under Irregular Expenditure related to poor internal control and the lack of proper Supply Chain Management (SCM) systems and his questions would be directed at establishing what kind of internal controls existed within the Department and if they have a credible SCM system as these were the two areas that gave rise to Irregular Expenditure.

Mr Singh referred the A-G's finding in the Annual Report that the Department did not have an adequate system in place for identifying and recognising all irregular expenditure and there were no satisfactory alternative procedures that the auditor could perform to obtain reasonable assurance that all irregular expenditure had been properly recorded (page 75). Why had this happened in the year under review?

Ms Motsisi noted the A-G's finding and said they operated in a decentralized environment with 11 regional offices and a Head Office. The measure they had put in place was for all the regional offices to report Irregular expenditure that had been approved by the regional offices to the CFO. There had been a confusion about compliance and this had resulted in under-reporting of R16 552 542 of Irregular expenditure which had been uncovered by the A-G. They had conducted an analysis and made decisions on all the cases and heightened the controls and had commenced with disciplinary processes. The systems were in place, they had checklists and recording frameworks and the regions were not complying. The controls, however were very manual and not system generated and depended on people copying the information and forwarding it to Head Office.

The Chairperson said it was the Department's responsibility to ensure that they had the proper systems in place and they could not use the weaknesses in the system as an excuse. Who should fix the system? Who put them in place? Not Parliament. The problem was not compliance, it was lack of monitoring and lack of management. The PFMA did not recognise decentralisation, it placed the responsibility to account with the senior management.

Mr Singh said that generally the Department were saying that the regions had not complied. Which regions were these and who were the regional heads who were not being compliant?

Ms Motsisi agreed that systems had to work whether manual or electronic. The regions were Durban, Cape Town and Mabatho and warning letters had been given to the regional managers and the regional Heads of Finance.

The Chairperson asked if disciplinary measures had been taken against officials for non-compliance.

Ms Motsisi replied that this had not yet taken place.

Mr Singh referred to the R16.5 million Irregular Expenditure that DPW had not disclosed and noted that they had done an analysis. What had it revealed? Had the A-G approved of their remedial action plans?

Ms Motsisi responded that the analysis revealed that R9 million had been for deviations from the competitive bid process. Instead of going out on an open bid, they had gone the nominated or negotiated route. R1.2 million (6% of the amount reported) was for deviations from the regulation on getting three quotations; 11% was for non-compliance and not Irregular expenditure; R2.5 million were for cases where service providers had not signed declaration of Interest forms; R347 thousand had been deviations from the supply register, where service providers were not sourced from the Service Provider Database; non-compliance with the A-G reporting; R6,6 million was for invoice payment not made within the 30 days period; and R1.6 million were for documents signed by a non-delegated official.

Mr Singh noted that the A-G did a sample audit and had identified the R16.5 million of undisclosed irregular expenditure. How many more Irregular Expenditure cases were there? What action had been taken against officials responsible for the non-compliance? He asked the A-G's representative to comment on whether they were satisfied with this type of reconciliation.

Ms Motsisi responded that they had uncovered more cases. Their internal audit did an audit on Irregular Expenditure and they uncovered more cases such as tax clearance certificates not being attached. This had led them to commencing with disciplinary measures and letters of warning had been issued.

The Chairperson established that no formal disciplinary measures had been undertaken.

Mr Singh emphasised that no disciplinary action had been taken for all the wrong things they had done. How could they condone expenditure when three quotations had not been obtained and when a person without delegated authority approved tenders and contracts?

The Chairperson referred to instances where three quotations had not been obtained for a contract of R2 million, an amount of R250 thousand not approved by delegated authority and cases of procurement through petty cash. What was happening to those officials?

Ms Motsisi stated that the only time they condoned Irregular expenditure was where there was a clear motivation and analysis showing that the official was not entirely responsible. Disciplinary action was not taken when this was the case.

The Chairperson queried how the person who had signed without delegated signing powers was able to justify his actions.

Ms Motsisi said she did not have the information at hand and it could be a number of cases. She would provide the details to SCOPA.

Mr Singh noted that over expenditure of R3.2 million on compensation for employees had been condoned. How did employees got overcompensated? They had a Human Resources Department and the Head had to be held accountable.

Ms Motsisi said that the total figure of R3,2 million reflected many individual cases and she could provide the details in each case.

The Chairperson emphasised that when SCOPA requested departments to appear before them on their Annual Report, they expected that they did revision on its content so that they could respond on the Report. The CFO was the gatekeeper and they expected that he/she would be able explain how and why things happened as this was the condition of being accountable. It handicapped the mandate of SCOPA if the information was not forthcoming

Mr Lourens Van Vuuren, Business Executive, AGSA, said the A-G would follow up on the analysis of the Department on the R16.5 Million Irregular Expenditure. He noted that an important concern was the completeness of the Irregular Expenditure reflected in the audit. This was a factor for them receiving a qualification as the A-G worked on a sample basis. If one was working on a sample basis, the Department was supposed to go back and audit the rest of the other transactions and identify where there was non-compliance and take appropriate action. They also had to ensure that the information in their Financial Statements were absolutely accurate and complete.

Mr Singh asked if the Acting DG could talk to the credibility of the internal control systems and the Internal Audit.
 
The Acting DG responded that they were very weak, it varied but was generally poor and needed to be tightened up and it was necessary to be honest about that.

Mr Singh commented that they had got to the root cause and if the situation remained they would be returning every year.

Mr Singh referred to figures under " Other Expenditure " in the Annual Report and noted that the A-G's finding was that they had been unable to obtain audit evidence for the expenditure. The DPW had informed them that documentation had been taken away by the SIU. Did the Department not have copies and backup documentation?
The SIU should also indicate when they would be completing their investigations as there were financial issues that had to be addressed.

The Chairperson shared these concerns.

Mr Singh referred to the Annual Report and asked for clarity on an amount from previous years that was awaiting condonation from National Treasury.

Ms Motsisi said that condonement was not awaited from Treasury but by the Department and was for cases that were unresolved from prior years and the matter was still under investigation by the internal process.

Mr Singh asked what was meant by 'prior years'

Ms Motsisi replied that it meant it was two to three years back.

Mr Singh queried why it was taking that long. He noted that responses to his questions had been unsatisfactory and concluded that the basics were not present and this had given rise to the Irregular Expenditure.

Contingent Liabilities
Mr Singh referred to the A-G's findings on Contingent Liabilities indicated in the Annual Report such as non-disclosure and poor reporting and recording (page 121). Why had this happened?

Ms Motsisi said the contingent Liabilities referred to the litigation against the Department and amounts were recorded as possible debt to the Department. They had to do an assessment of projected legal costs and they were working with their legal services to come up with a workable framework.

Mr Singh asked if it was that contingent liabilities had not being reported correctly, this would be reflected in the financial statements of the current financial year.

Ms Motsisi replied that it would be corrected and the Framework was in place.

Discussion
Dr P Rabie (DA) noted that the DPW had been categorised as dysfunctional by previous speakers. He welcomed the presence of the Minister as the present state of affairs was highly untenable and unacceptable and a turnaround strategy was needed. The absence of a proper accounting system and a proper management revenue system was not acceptable. The fact that the CFO had been in her post for the past three years meant that these systems should have been implemented long ago. SCOPA had a very important oversight role and it was not acceptable for officials not to comply with the Division of Revenue Act (DoRA) or the PFMA. The sooner legal steps were taken against non-compliant officials, the better. Warning letters were unacceptable. What was needed was definite, pro-active steps and they needed a thorough turnaround strategy in the Department. He was grateful that the Minister was being open about the state of affairs in the Department as it was a reason for concern.

Ms Mangena asked when the Department was allowed to condone expenditure and when Treasury condoned expenditure.

Ms Motsisi replied that in terms of the PFMA, the Accounting Officer could condone Irregular expenditure. Amounts above R1 million were reported to the National Treasury and the A-G. The CFO had delegated powers with certain limitations.

Ms Mangena saw the possibilities for corruption such as personal favours and collusion in the practice of condonement.

Mr Thobejane asked why action was not taken against persons authorising transactions without delegated powers. Why were charges not made against people with the police?

Mr Thobejane referred to the cases where three quotations had not been obtained and suggested that the officials were corrupt and family and friends were benefiting. He noted that there was nothing indicated under criminal investigations in the Annual Report.

The Chairperson noted that they would be getting a detailed account from the CFO on those individual cases. He enquired how far the Department had got in the process of condonement.

Ms Motsisi said that it was in process and not all of it would be condoned.

Property Management and Trading Entity (PMTE)
Irregular Expenditure
Ms T Chiloane (ANC) referred to the SCOPA resolutions and said they had been tasked by Parliament to check if disciplinary action was taken against officials.

Ms Motsisi said they had not taken any disciplinary measures against officials as yet on the Irregular Expenditure they had reported.

Ms Chiloane asked what steps had been taken by the Department to recover the debts that had been written off?

Ms Motsisi replied that the debts that had been written off because they had exhausted all the available avenues for recovery.

Ms Chiloane noted that the PMTE had received a disclaimer from the A-G and that irregular Expenditure and Fruitless and Wasteful Expenditure had been part of this negative audit finding. The PFMA required an entity to
record all Irregular Expenditure during the financial year and include it in their financial statements in their Annual Report ( page 158). Why was this not done as required by the law?

Ms Motsisi responded that the Irregular expenditure they had disclosed as a Department had amounted to R138 637 000. The R291 668 886 that had been discovered by the A-G had not been included in the financial statements as, at the time of closing of the books, they had been busy analysing the cases to separate Non-compliance from Irregular Expenditure. They had completed the analysis and they would be adjusting the amount that they reported.

Ms Chiloane said it could then be presumed that there would still be Irregular Expenditure.

Ms Chiloane said that there had been payments made in contravention of the SCM regulations and the PFMA and it had resulted in Irregular Expenditure. Why had this happened?

Ms Motsisi reiterated that they had done the analysis and it showed that there had been deviations from the competitive bid process, there were cases of non-compliance with the use of the service provider database and more.

Ms Chiloane asked if action been taken against the officials involved.

Ms Motsisi responded that no action had been taken as yet.

Ms Chiloane asked the reason why no action had been taken.

Ms Motsisi say they had started the process with warning letters and they had realised that they had technical process issues. They were implementing the correct procedures for disciplinary action. They had given the responsible managers until the end of February to explain why they should not be disciplined based on the analysis they had done. After that they were going to follow the steps to finalise the disciplinary process.

Fruitless and Wasteful Expenditure
Ms Chiloane referred to the A-G's finding that the PMTE did not have adequate systems for identifying and recognising all fruitless and wasteful expenditure and thus appropriate audit evidence to satisfy the requirement of the completeness of the fruitless and wasteful expenditure stated at R6 772 000. Could they give an explanation for this?

Ms Motsisi responded that the expenditure had been discovered by the Department and disclosed as such, but what they did not have, was the supporting documentation. The fruitless expenditure related to municipal services where the invoices were paid late and interest that had to be paid on delayed payments.

The Chairperson asked why they had delayed payments.

Ms Motsisi said that in their analysis and investigation they discovered backlogs due to lack of capacity and they had addressed that.

Ms Chiloane understood that to mean that invoices were sent late. How they were going to recoup the money?

Ms Motsisi said the municipalities sent the invoices and a large amount of them were received late. What she could not concretely attest to, was whether they were sent late to the registry where they received all the invoices. An invoice that was dated March only arrived in the Department by April and interest would then have to be paid.

Ms Chiloane asked how much interest, approximately, had been paid in that had not been budgeted for.

M Motsisi said that about 80% was for interest on invoices that had been paid late.

Ms Chiloane asked if there was enough personnel and human capacity to deal with this issue as it seemed to be the issue affecting the entity?

Ms Motsisi confirmed that there were capacity constraints in the CFO's office and the PMTE.

Bank Overdraft
Ms Chiloane drew attention to the Audit finding that the financial statements were not compliant with Generally Accepted Accounting Practice (GAAP, IAS 39 AC 133) in respect of the bank overdraft. As a result, interest received stated at R123 657 000 was overstated by R84 510 107 and the bank overdraft stated at R1 254 763 000 was understated by R84 510 107.

Ms Motsisi submitted upfront that the Department had not complied with GAAP requirements. In 2009, they had service providers that had assisted them in setting the system up. 2010/11 had been the first time they started using it and they were not able to comply with all the standards as required. They had not had GAAP aligned policies for the PMTE.

Ms Chiloane found this very disturbing and said she was struggling to understand and asked the members to assist her. They were understating and overstating figures in the financial statements, were they not performing any corrupt activities? If they could not supply the correct figures, they were opening up the way for corruption and they would not be delivering according to their mandate, as expected.

Ms Motsisi said to a large extent it was not opening up a way for corrupt activities to take place but meant that they were not able to provide a fair presentation of the financial performance of the Department.

Ms Chiloane asked the CFO if she was acknowledging that she had not complied with the law when she was talking to members of Parliament. This huge Department could not comply in terms of their funds. They were guilty as charged in terms of money and now what? Anybody just came into the Department and did as they pleased and just left. There was no plan for on getting the money back. They had just not complied and there were no consequences.

Contingent Liabilities
Ms Chiloane enquired about the details leading to the contingent liabilities as stated in the Annual Report.

Ms Motsisi gave the amount that had been disclosed as R129 million.

Operating Lease Commitments
Ms Chiloane referred to the calculation of the operating lease commitment which the Department had based on straight-line lease payments instead of taking the minimum lease payments into account as was required by GAAP, IAS 17 (AC 105). The A-G found that the Department had not been in compliance with GAAP, resulting in an understatement of R2.6 billion. Why had there been an understatement?

Ms Motsisi said that the information they had used had come from the Property Information Management System (PMIS). She explained that, because of the intense manual process of doing straight lining they had not excluded expired leases and they also had leases running on a month-to-month basis. When they had corrected their information, it was too late to submit it to the A-G.

Ms Chiloane noted that the A-G's findings had been based on a lack of appropriate audit evidence, the weaknesses in the accounting systems and lack of control in record keeping.

Accountability
Dr George isolated accountability as a guiding principle for government departments and said it should not be forgotten that the government did not have any money of its own, it all belonged to the people. Government departments were trustees of the people's money and when it got wasted the people could not get uplifted from difficult circumstances. The A-G had given the Department a disclaimer and this meant that they could not figure out if the numbers were correct or not. That basically meant that there was no credibility in the numbers contained in the Annual Report. The Department had conceded that they did not even know if the figures they had submitted were credible and it was a shameful situation. There was no credibility, and the Department had a long way to go, to get it back in the eyes of the people.

Dr George noted that the PFMA set out the responsibilities of the Accounting Officer and the Accounting Officer had failed and the people in charge must take responsibility. In terms of the PFMA, there could be prosecutions and somebody needed to go to jail. They needed to set an example so that it was not ok for the people's money to be stolen or wasted or both. Why was the Acting DG not being criminally prosecuted?

The Chairperson noted that the Acting DG had been appointed as recently as the 16 January 2012. Mr Mabuza who had signed off the Annual Report only became Acting DG on 20 September 2011 to January 2012. Mr Vukela, who was on special leave, was Acting DG from 9 December 2010 to 19 September 2011.

Dr George thanked the Chairperson for clarifying that but maintained that somebody was responsible and that person had to be held to account.

Revenue and receivables
Dr George asked if they knew how much money was due to the Department and how did they know this in terms of the controls and processes in place.

Ms Motsisi replied in the affirmative and said the information was taken from the system they were using.

Dr George why the money had not been collected? Why was such a large amount outstanding?

Ms Motsisi said the reason was systemic as the PMTE had been established with no systems, no people and no structure. They generated invoices that took about a month to verify and send to the client departments. Departments had their own internal processes to verify the invoices before they paid up. Looking at the payment turnaround times over three years, it averaged three months. They also had old outstanding debt.

Dr George asked when would the outstanding money be collected. Could they give a schedule with deadlines and dates?

Ms Motsisi said that in terms of the R1.6 billion they had reported as outstanding at the end of the financial year, 49% had already been recovered.

Dr George noted that they had made provision for an impairment of R220 million. Did this mean that the people’s money was lost?

Ms Motsisi responded that the money was not lost. Their clients were national departments not individuals. Any money that the department did not spend went back to the Treasury.

Dr George referred to the provision for impairments given in the Annual Report and asked if they had something in place, to stop the amount for impairment provision from growing.

Ms Motsisi confirmed that they had and they had improved the way they dealt with their clients.

Dr George raised the issue of leases and asked if they knew how much was owed to the Department for leases.

Ms Motsisi explained that DPW was leasing from landlords and were also letting out State property, the bulk of which was to national departments She did not have a definite amount of what was owed to the Department for the letting of state property.

Dr George asked how they got the money from National Departments. Did they use a soft or hard line approach? Were there problems in the process?

Ms Motsisi said because of systemic issues they had taken a soft approach but after they had done the reconciliation, the former DG had written to the client departments that they would not renew leases if they were arrears and they were seeing a difference.

Expenditure and Payables
Dr George referred to the A-G's finding that the DPW had not been able to provide appropriate audit evidence to support the Trade and other Payables balance of over R1 billion. This was a very large amount of money and it was confusing how it was accounted for as it was unsure how much and on what it had been spent or if it had leaked out of the system.

Ms Motsisi could not confirm that the money was spent on things that were not supposed to derive value to the Department because, largely, it was amounts related to projects. Ms Motsisi explained how the DPW expense accounts worked and that there had been a tendency to pay corporate expenses out of the expense account in certain situations. They had taken control over this expense account so that they could check and validate all the transactions that went through this account. They had reconciled all their expense accounts, particularly the ones that had the biggest balances and they had reduced the amount by almost 60 %. They still had a balance of R300 million in one of the accounts. The challenge was the decentralised system in which they operated. Ms Motsisi stated that she " certainly could not say that monies were wasted or not ".

Dr George said that it seemed to be quite clear that when he went back to the community and was asked if the Department had spent a R1 Billion of their money properly on projects to uplift their situation, the answer would be that he did not know and neither did the Department.

Dr George appreciated the Department's candour and stated that it was extremely troubling to see the Department in such a state. He hoped that the financial report for the current year would be better but was not anticipating an improvement.

Discussion
Dr Rabie referred to the statement of the CFO, that they were under capacitated and noted that the Annual Report reflected huge amounts for Irregular Expenditure. It had also been stated that they did not have adequate system to monitor the amounts. Had they taken any steps to stop the Irregular expenditure in terms of personnel and the system? This situation could not continue in a developing country where millions of people were affected by poverty.

Mr Thobejane asked if the Department had a policy on debt collection? If they did, they had to forward it to the committee. The CFO had acknowledged that she did not have capacity. He suggested they should be doing job evaluation in the DPW which should include the CFO to determine their capacity.

Mr K Sithole (IFP) said what officials were saying was very disturbing. If there was no monitoring measures to control the revenue of the Department how did they control their finances.

Mr Ainslie asked what one did with a dysfunctional Department. He referred to the Extended Public Works Programme (EPWP) and the claim that it had achieved 98% of the job creation target. The former Minister had congratulated municipalities for the success of the EPWP, but how reliable were the claims that over 600 thousand jobs had been created. They relied on municipalities and local authorities for the facts and figures and they did not have a good track record. He was suspicious about the 98 % job creation claim and referred to the labour intensive infrastructure programmes where a total of R954 million was allocated but only R462 million was spent. This was 50 % of the budget, yet they claimed a 98% result (page 33 of the Annual Report).

Mr Ainslie noted that National Treasury officials were present and stated that there was clear evidence massive perjury and of a dysfunctional department. They knew what they had done in the case of a dysfunctional province, there was Limpopo, the Eastern Cape and others. The DPW could not produce an Asset Register after 18 years, the A-G had disclaimed their financials, there appeared to be rampant inflation in the running of the buildings and it was subject to a number of investigations and yet they continued to pour money into it. Was there any action the National Treasury could take to stop the rot? It was unfair to take actions against provinces and Departments were left off the hook. He recollected that the A-G had done an investigation on the unreliability of the success claims for the EPWP and they could comment.

Ms P Ngwenya-Mabile (ANC) commented that from the responses of the Department it was as if they had been established six months a go with no systems place. She was concerned that there were no contracts and agreements with leasers and yet they were paying. She appreciated the presence of the Minister as there was a lot of wrong doing and no steps were being taken against officials. He had to take the matters very seriously, make an assessment and take decisions that would make the Department run.

Mr Van Vuuren said that the Department had reported material under spending under the EPWP. He referred to the Annual Report (page 77) and the finding that the A-G could not obtain sufficient appropriate audit evidence with regard to the achievements of the EPWP and commented that Mr Ainslie's concerns were fair from an audit perspective.

Ms Mabuza said that the Department was owed R1.9 billion by client departments and they had an overdraft of R2. 1 billion because client departments were not paying them rent. Treasury itself was part of the problem and was not paying DPW yet they were coming year after year talking about Irregular Expenditure. Since 2007, there were recurring challenges in the DPW highlighted by the A-G, such as the systems for control and monitoring, the asset register for movable and immovable assets, control of invoices, reconciliation not done on time, procurement systems and unauthorised expenditure. She said that there were issues she did not want to raise and some of the information given by officials had not been correct. She had indicated that they had to be honest with SCOPA and they were not being honest and they would be judged for that. They were not being honest with the people of South Africa and the Political Head in terms of performing according to their mandate.

The Chairperson asked NT to respond on how they dealt with dysfunctional national departments. They nationalised provinces, so what about National Departments?

Ms Keitumetse Malebye, Director: Accounting Support, National Treasury, said that the office of the Accountant-General had embarked on a project whereby they identified and prioritised problematic national departments. They moved into them and communicated with the CFO and the Accounting Officer to identify the issues and they also involved the internal audit. They had entered into an Agreement called the Strategic Support Plan with the DPW, which detailed the real issues as indicated in the A-G's Report and other analytical data on the financial environment and strategised remedial action.

The Chairperson commented that the NT should be more pro-active. Where were they when the Department was going down the drain?

Ms Malebye said she could only answer for the reactive process and what they were doing currently.

The Chairperson commented that the NT had the responsibility to ensure the implementation of the PFMA.

Ms Malebye said that they were also looking at departments that had the potential to become dysfunctional.

The Chairperson speculated on whether there was any action that NT could take that was comparable to the action taken in Limpopo Province.

The Acting DG elaborated on the Actions Plans they had implemented in the Department. The Minister had been working with Treasury, there was a stabilisation team and the SCM, Financial Management, Human Resource Issues and the Leases were prioritised.

The Chairperson summarised the proceedings and noted the concerns expressed by members and acknowledged the processes being followed by the Minister, the National Treasury and the Department to address the issues. He was concerned that the Chairperson of the Portfolio Committee on Public Works said that officials were not being honest and that there were things she did not want to disclose as she did not want to embarrass the Department. It was a serious problem if SCOPA was given information that was false and he wanted the Minister to note this. It called into question the integrity of the process and this would be followed up with the Department and the Chairperson of the Portfolio Committee

On the issues around leadership, The Chairperson noted that the absence of a permanent Head did not assist in getting the organisation on the right footing. If internal controls were not attended to, whatever else was spoken about, would amount to zero. For reasons that they had not gone into, the CFO had not covered herself in glory as all the things around internal controls are vested in her office and the quality of information generated was poor. The Chairperson listed shortcomings in the Department's structures and processes such as the leadership instability, reporting lines, accountability, monitoring, SCM, tender processes, the use of consultants, lease management and the asset register. These matters needed to be addressed as a matter of urgency if they wanted to live up to their claim that ' South Africa works because of Public Works '.

Address by Minister of Public Works
The Minister commented that the S-G and Public Protector had done them a favour by alerting them to the fact that DPW had major problems in financial control and lease management. Good Governance required accountability and the SIU had provide the ammunition and the evidence to deal with the wrongdoers. It was only a small group of wrong doers who were tarnishing the Department's image but they were very powerful. He agreed with members that the present state of the Department was untenable. He had come to terms with the reality and he suspected that his predecessors had inherited chaos and not created it. The question was how they would be able to stabilise the leadership and the core functions of the Department and at the same time embark upon a fundamental review of all its operations with the objective of ensuring effective delivery of services.

A comprehensive turnaround strategy that started at the top was necessary. It was critical to start with the management and leadership and they had to eliminate the situation where 50% of the leadership were in acting positions. He alluded to the quick succession in the line of Acting DG's and he said he wanted to have a DG appointed as soon as possible but they had to sort out the issues there first. They had to sort out the problems of people being suspended indefinitely.

The turnaround strategy required active participation and a buy-in from the organisation as a whole. An Inter-ministerial Committee consisting of the Minister of Finance, Home Affairs, Public Services and Administration and Monitoring and Evaluation was put into place which would provide advice and political support. The turnaround process was going to be tough and painful for some in the Department. The trend in the past eight years had been negative and there had only been one year with a good audit outcome. The Acting DG was working strategically with a Technical Assistance Unit from Treasury and it would be expanded, mobilising expertise and best practices from other departments. They would advise and be a technical team in the office of the DG.

The Minister emphasised the importance of monitoring and evaluation and that the fundamental operations of the Department would have to be changed and they needed skilled administrators at a high level. If they needed additional personnel, they would source them through secondment or externally. He noted that for 'quick wins' they might have to go out and use some consultants but with a clear understanding that they would put systems in place and build capacity in terms of he core business of the Department such as lease management, the asset register and property management.

The Minister commented that DPW had been seen as a general social development department whereas it was a technical department as they were dealing with project management, construction and the build environment that needed highly skilled architects and engineers and other technical people. He noted that the stabilisation of the organisation would not happen with the people they had at present. He also noted that they would not get a clean audit for the current financial year but they would be able to monitor progress from the previous audit. They had to explore other areas where short term stabilisation could add value and relatively quick wins and they had to monitor and evaluate this. Personnel with the right skills set were needed and every functional area should be evaluated in terms of HR requirements. A Systematic diagnostic was needed which would point to priority areas for further action. The support team in the DG's office was not meant to replace the current management but they would account to the DG and provide the support he/she needed. They would be doing intensive performance assessment and evaluation of everybody. People would replace themselves, they would decide for themselves, that was his intention.

The Minister referred to the instability in the top leadership at the DPW over the past months and said he believed that the officials had tried to be honest in their responses but that was the best that they had and that was why the Department was functional. He commented on the action on some of the practices that were called corruption. Five officials of the Department had been suspended and charged with misconduct. More officials were implicated and the investigations would lead to a cleaning up of the situation. Disciplinary processes were being held from the 13 to 17 March 2012.

In respect of the Roux Shabangu leases, they were approaching the High Court to nullify the contracts that were entered into, in contravention of the law, and an attempt would be made to recover the money. It would be a protracted legal battle. They had also withdrawn financial delegation from the regions and centralised it to ensure scrutiny and accountability. They had adopted measures to prevent bottlenecks that could result from this centralisation.

The meeting was adjourned.