Audit of state land & property: progress report by Department of Public Works

NCOP Public Services

20 August 2012
Chairperson: Mr M Sibande (ANC Mpumalanga)
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Meeting Summary

The Chairperson warned that officials needed to take the Committee’s work seriously. The Committee was aware that Ministers were sometimes held up at Cabinet meetings, but a situation where junior officials were sent to account to Parliament should be avoided.

The Committee heard that reconstructing the Immovable Assets Register (IAR) had been an extensive exercise. Maintenance of the immovable assets register was important, as that would ensure there was no repetition of what had already been done by either municipalities or provinces.

The IAR programme would ensure that a baseline compliant IAR was produced, covering all required assertions like completeness, accuracy and ownership. This would ensure that the register complied with all accounting requirements. The Chief Surveyor General was currently surveying all state property and the projected date for completion was 31 March 2014.

Servcon and Intersite Solutions were appointed in 2007 to verify the essential information fields, and conduct condition assessments on state-owned properties. The Department of Public Works resolved to stop the project in 2009, while it verified the quality of data that had already been received. The Department and Intersite were involved in a court process where the company was disputing the money it received for the job it did.

Members voiced frustration on raising the same issues repeatedly and the use of consultants to carry out the verification work. That the deadline coincided with the end of the term for the current administration was also worrying.

Meeting report

Opening remarks
The Chairperson commented that officials needed to take the Committee work seriously. Today's topic dealt with an important aspect of government and the principal officials from the Department of Public Works (DPW) needed to be present and give the briefing. The Committee was aware that ministers were sometimes held up at Cabinet meetings, but a situation where junior officials were sent to account to Parliament should be avoided. Some faces at the Department had never appeared before the Committee. He handed over to DPW for a briefing on Immovable Asset Register programme.

Department of Public Works (DPW) presentation
Ms Florence Rabada, Chief Director: Asset Register Manager, DPW, said reconstructing the Immovable Assets Register (IAR) had been an extensive exercise. It had been embarked on to meet three objectives: analyse the deeds database and other registers; define a fair value model; and define a new operating model to better manage the IAR and DPW's concurrent mandate.

Maintenance of the immovable assets register was important, as that would ensure there was no repetition of what had already been done by either municipalities or provinces. The operating model was critical in keeping the system alive, and DPW would ensure that it existed at National Department and regional head offices.

The reconstruction exercise identified a significant amount of work required to resolve legacy issues. That necessitated interaction with provinces, National Treasury, Department of Rural Development and Land Redistribution (DRDLR), and other stakeholders.

The IAR programme would ensure that a baseline compliant IAR was produced, covering all required assertions like completeness, accuracy and ownership. This would ensure that the register complied with all the accounting requirements. There had been constant engagement with the Accountant General and National Treasury on this matter. The view from the two institutions had been not to worry about anything but correctness and completeness of information on government's immovable assets when the 2014 completion date came.

The objective would be to get custodians to understand the role they ought to play in managing and accounting for assets as per Treasury guidelines. A significant amount of work, including physical inspection, was required. The Treasury Sector Specific Guide would be regularised by March 2013, and this would determine who was responsible for what assets. Ideally this would lead to a substantially complete and compliant IAR by the end of 2013.

She said DPW had a clear plan on how to produce a baseline compliant IAR. Four provinces and DRDLR had reconciled against the deeds register. Gaps analysis was done, to clarify the kind of information that needed to be on the register. The plan was in place and information would be collected through physical verification.

A custodian framework that would inform disclosure requirements had been developed. But also a fair value model and a compliant capitalisation policy had been developed, to ensure the IAR remained properly valued. The capitalisation policy would assist the Department on how it incurred expenditure on capital assets, and would then be disclosed in the annual financial statements.

Ms Rabada said there were hiccups in interacting with the Deeds Office and the Chief Surveyor General but those were referred to the Minister and the Director General. Hiccups occurred when the assets register was reconciled against the deeds register. Reconciling with the deeds register was a continuing exercise and would not end with the verification project.

The Chief Surveyor General was currently surveying all state land and the projected date for completion was 31 March 2014. Also challenging was mobilising sufficient resources in time, especially since more work was required than initially anticipated. There was still a material risk attached to the data available to inform fieldwork.

Prior 1994 SA did not have a comprehensive computer based register of state-owned immovable assets. DPW commenced with the compilation of a comprehensive computer-based inventory of immovable assets. The project was completed in 1999. Information gathered during the process included physical addresses of properties; cadastral description; land parcels; utilisation of properties; zoning and potential use of properties; photos; sites and improvements.

In 2005, the Department embarked on the Asset Register Enhancement Programme and that was completed in 2008. The project focussed on 33 555 immovable assets. Servcon and Intersite Solutions were appointed in 2007 to verify the essential information fields, and conduct condition assessments on state-owned properties.

DPW resolved to stop the project in 2009, while it verified the quality of data that had already been received. The initial amount for the project was R100 million, but a total of only R10 million had been paid to the service providers. Intersite claimed it had done the job and wanted to be paid the R100 million. DPW disputed the claim, and the case was currently in court. The Department could not be made to pay for sub-standard information.

The Department's IAR was incomplete and inaccurate. The Auditor General underscored just as much in the past three years. Had the project served its purpose, DPW would not have received a qualification in 2009/10 on immovable assets. This situation formed the basis of the current programme.

She said according to the Accountant General, the assets register needed to cover the assertions of completeness, accuracy, reliability, ownership, rights and obligations, existence, valuation, presentation and disclosure. The completeness of the register could not be achieved unless all the other data sources were done. And one could not claim completeness of the assets register if the survey had not been done. There would still be gaps in the assets register if the land parcels were not surveyed.

State land audit information should be incorporated into the project by March 2013, and the focus would be on completeness and accuracy of deeds data. Much of the work would focus on Gauteng, Western Cape, KwaZulu Natal and Eastern Cape. With these provinces attended to, much of the work would have been completed.
Ms Rabada said if the three spheres of government did not work together then taxpayers' money would go to waste. If a municipality had conducted verification, it was logical for National Department to use that information and reflect it in the annual financial statements. The model on cooperation of spheres of government had been presented to the Auditor General. The next step would be to present this to the National Treasury and see if it welcomed the idea.

There had been confusion on the assets register as to whom disclosed what. This was why national and provincial departments of Public Works had been getting qualified audit opinions. Duplication and omissions were common in annual financial statements. As a result, extensive engagement and confirmation with other custodians was required prior to finality. Initially there were quarterly meetings with the provinces but now there was a proposal to meet monthly for screening all the information and eliminating duplication.

She said DPW had previously disclosed around 35 000 properties in Annual Reports; around 27 000 of which were confirmed. The remainder was currently being analysed and would be subjected to fieldwork. Around 50 000 properties identified in the IAR could potentially be provincial.

Progress on vesting was significantly behind target at all levels of government. DPW had completed the design of required interventions to address the vesting backlog. The process would address bottlenecks in the vesting process and would ensure that DPW intervened in addressing vesting backlogs. The Department wanted to introduce a uniform approach.

Discussion
The Chairperson expressed appreciation that an official from Ernest & Young, the firm that compiled the presentation, was present at the meeting. In the meeting in June 2012, the Committee expressed concern about the incomplete state of the IAR. This amounted to disregarding the Government Immovable Asset Management Act (GIAMA), and had thus led to the negative opinion from the Auditor General. This was the reason the junior officials were sent.

The Chairperson said the Committee acknowledged the steps taken by the Minister to reconcile the IAR, but still would have preferred to have senior officials amongst the delegation. The senior delegation would give the Committee an indication whether there was capacity or not. Junior officials forgot that oversight visits were conducted; they just presented information to Parliament and left. This was the reason why principal officials were preferred, and the call for senior officials was not to glorify the work of the Committee but provide clarity on the responsibility.

The Chairperson said in the 15 June meeting the Committee had asked for clarity on the refurbishment project DPW was undertaking. The Committee also needed a specific progress with the custodian framework that was being developed. This would enable the Committee to understand the lines of reporting.

The Chairperson sought clarity on the kind of relationship with sister departments. How often did the departments meet apart from the MinMEC meetings. He asked if there were other task teams and other ways to interact with provinces. Most of the land was there in the provinces.

The Chairperson sought clarity on what DPW had done with provincial submissions pertaining to issues of capacity and training to comply with asset management, the electronic vesting process, cooperation among departments, and the implementation of GIAMA. Bringing Ernst & Young on board was to prop up operations, but the Department was still responsible to account.

Ms Rabada replied that these were issues that were on the table when DPW met with provinces. The vesting factory that had been put in place was something that everyone had to implement starting in September 2012. There were challenges with the vesting system from DRDLR and it was not as functional as it was meant. This issue was being attended to. At the meetings with the provinces, DPW always asked provinces to state the areas they needed support and assistance with. The vesting position paper had been put together, and it highlighted the challenges and it had to be implemented after September. This was critical because one could not vest until surveys had been done.

The Chairperson sought clarity on what was meant by unregistered land parcels. He asked who was working on this, especially since the transition to a democratic system had already started in 1994. As long as properties remained unregistered, even if the Department could reconcile them that would be a futile exercise.

Ms Rabada replied that unregistered land meant the owner was not known. But by default such land was a state land. She agreed with the Chairperson that the process needed to be aligned with the vesting.

Mr Robbie Mettler, Ernst and Young consultant, said unregistered land was likely to have been surveyed but had not been registered at the Deeds Office. This was important in the context of what had been raised earlier. The key element of the project was to say who owned what. He said the role of the Chief Surveyor General was so important and he needed to work together with the Department. Until all land was surveyed, the books would always be incomplete.

The Chairperson said his suspicion was that the completion date was decided in such a way that people would want to shed responsibility. The reason 2014 was bandied around was because the term of the current administration would be ending. He failed to understand why the issue of accounting for assets was being prolonged. DPW could not keep extending deadlines; deadlines need not coincide with the term of office. Since last year, the Committee had been raising the same thing.

Mr Mfezeko Gwazube, Chief Operations Officer, DPW, said there was no malicious intent with the indicated deadline. It was not linked to the term of administration but to the programme of what was required to be done in terms of what the Auditor General said should be done. There was no alignment whatsoever with the term of office of the current administration.

The Chairperson voiced dissatisfaction that the presentation was prepared by Ernst & Young whilst the Committee had requested the Department to come and account.

Mr Z Mlenzana (Cope EC) sought clarity on whether multiple custodians in provinces were brought on board during meetings. He appreciated that if it happened - because the Department could not even identify the assets before.

Ms Rabada replied it was the intention and at national level, the meetings did incorporate the Chief Surveyor General. The Office of the Chief Surveyor General indicated that the programmes it ran had a huge dependency in ensuring that the assets register was complete. A lot more needed to be done. She cited an example of the Defence Endowment Property and Account Act which gave the Department of Defence (DOD) custodianship to 79 properties, and yet there was no engagement with DOD. This needed to be addressed. But also it needed to include the Department of Water Affairs (DWA) as it also was a custodian at provincial level.

Mr Mlenzana asked if the proposed monthly meetings would include the multiple stakeholders that were from provinces. And if the monthly meetings would also happen at provincial departments of Public Works as National was sometimes unable to intervene on provincial matters.

Mr Gwazube replied DPW working relationships with provinces was good. He reminded the Committee that a good working relationship was resolved by the MinMec in May between national and provinces. At that meeting there was an open-heart session where MECs shared with the Minister the challenges they faced. A task team was put together headed by the Head of Department in Mpumalanga to look at how issues of concurrent mandates were formalised. A report on this would be tabled in the next MinMec, scheduled for September. There was a process and a task team to solve this particular aspect, and actually define what was meant by the institutionalised concurrent mandate.

Ms Rabada replied at the operational level there were quarterly meetings to ensure continual engagements with provinces. Quarterly was not enough; meetings would happen on a monthly basis and timeframes were in place. A complete IAR could only accomplished if there were regular meetings.

Mr Mlenzana asked if the Department had contracted Ernest & Young as consultants to develop the IAR. If this was the case, for how long would that contract be in force? He said his question was informed by the reality that there could never be a complete assets register because assets were procured, sold and disposed of regularly. He sought clarity on the completeness of the IAR that was envisaged by the Department.

The Chairperson commented that questions be all responded to there and then. The Committee had raised these issues since 2011.

Ms Rabada replied that Ernst and Young were contracted to the Department as a programme management office. Their job was not physical verification where it conducted the actual fieldwork but set up the parameters for which work could be done effectively. DPW had suffered in the past in its conceptualisation of programmes, especially as that related to doing work on the ground.

There had to be parameters for the programme. The gaps analysis Ernst & Young had done was on the information acquired from the deeds register, as well as what was required from both assets management and accounting. The contract would end in March 2014. The initial completion date was 2017 given the amount of work, but through engagement the date was revised to March 2014. The revised date necessitated a lot of external capacity.

She said the presentation indicated that the assets register was a live document, and numbers changed with acquiring or disposing of property. There were issues of sub-dividing land parcels and consolidating. She agreed, there could never be an absolutely complete process.

Mr Gwazube said officials could try defining what completeness was but it was difficult. This was like a balance sheet; whether the numbers decreased or increased, they needed to reconcile. This was the issue that DPW was chasing for the deadline of 2014; but it should first determine baseline ownership; that process ought to be completed. The team had developed a new operating model; the task now had shifted to management to interrogate whether the model could be operationalised.

Ms M Themba (ANC Mpumalanga) said there were government buildings that were being vandalised in all the cities. She sought clarity on when the issue of such buildings would be addressed by verification and maintenance thereafter.

Ms Themba asked why there had only been zero and six verification certificates issued to the Eastern Cape and the Western Cape respectively.

Mr Mettler replied that the statistics would indicate the level of activity per province. Some provinces had capacity to implement and some did not.

Ms Themba asked for the progress on migrating from the Properties Management Information System (PMIS) to Public Works, and if all the national departments concerned, provinces and municipalities were also migrating. Who was managing that process at the Department, and when last was an executive report submitted?

Mr Gwazube replied that he was aware of the work currently going on at DPW to migrate from the PMIS system to IE-Works. That would allow for a better management of the database. He was not aware of what the provinces were doing with regards to their own databases. The Minister of Public Works was the custodian of government assets. He was not sure if the report had been tabled with Cabinet.

Ms Rabada replied that provinces used different systems to capture their assets. There were still provinces like the Western Cape, Limpopo, Mpumalanga and Northern Cape, that used Excel spreadsheets to register assets. Through the engagements on GIAMA with provinces, the idea was that one could find provincial properties. DPW was not sure if such properties were there but this could only be known once the process had been finalised. Already, the provinces were paying rates to municipalities through IE-Works. This was the case with national Department. With separate systems the Department would not get anywhere. The development process of IE-Works was not finalised yet but provinces were using the common programme. It was critical that all other custodians were using the same programme.

Ms Themba asked if the Department was certain that it would complete registering all the immovable assets by its stated deadline.

Ms Themba sought clarity on those government properties that were occupied. Could the list be provided and could the Department indicate whether people occupying the houses were paying? She asked for the general status of such properties.

Mr Gwazube replied that the list of what government owned could be forwarded to the Committee with all the pertinent details on ownership and whether such assets were disposed off. He said it would be impossible for the Department to know the current users of such properties.

Mr Mettler replied that part of the register project would be to ascertain ownership and if a particular building was falling apart.

Mr H Groenewald (DA North West) said the IAR programme was such a difficult project especially looking at all government spheres. He asked how DPW gathered information, especially since in the North West a number of assets belonging to the state just vanished. When there was nothing to refer to, how did the Department start acquiring back these properties?

Ms Rabada replied DPW was aware of the issue and was tightening the screws. The challenge was at the Deeds Registry where ownership changed. From now on DPW had agreed with DRDLR that the custodian authority of state assets had to give consent before a property was transferred to another name. This was how it ought to happen with all other government departments; but DPW was aware of the disappearance of state property. Some properties would probably be found through Operation Bring Back.

Mr Groenewald asked for the number of jobs created through the project so far. He asked what would happen to the data after the completion of the project in 2014. Would such information be available to the public?

Mr Rabata replied DPW had 21 contract workers who were doing the desktop analysis. These were young graduates in various fields as town planning and architecture. At regional offices 52 posts were approved to assist with vesting. There had been high staff turnover at regional offices but the number of people employed was currently 33. It was made clear in the terms of reference for the secondary service provider who would do physical verification that job creation was critical. The bid for physical verification had closed and the clause on job creation would be looked at critically.

Ms Rabada replied that there should be value add to the information once completed and DPW would have to ensure that people got this information. She said there was a need to ensure that all the stakeholders in acquiring property were aware that state departments worked together.

Mr Groenewald wanted to know if DPW would be able to locate all land that was owned by the state after 2014. What about the land that fell under the jurisdiction of traditional authorities; did such land belonged to the state or the authority of a local chief? He commented that this was not clear.

Mr Groenewald sought clarity on what land parcels were and the sizes thereof. How big would be the smallest land parcel, if the Department could demonstrate that by way of an example? He also wanted to know how sectional title properties were handled where there was body corporate ownership.

Ms Rabada replied that a land parcel was a piece of land that could be defined through the survey. But one needed to know how many hectares or square units there were. It was needed to be identifiable through the surveyor diagram.

Closing remarks
The Chairperson said a lot of issues could still be discussed but Members had to attend a plenary meeting in the National Assembly. The Committee was serious about the asset register. The principal officials needed to be here; some had never appeared before this Committee since 2009. A worrying trend was the information that much coastal land had been sold to foreign owners in the Western Cape. There were vast game reserves in the former homelands; but DPW did not know who owned those pieces of land. He requested that the officials adequately prepare when appearing before the Committee.

The Committee adopted the minutes of 19 June, 07 and 14 August, with minor changes.

The meeting was adjourned.

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