Department of Human Settlements performance 2011/12: Public Service Commission & Financial & Fiscal Commission comment

Meeting report

Chairperson’s introductory remarks
The Chairperson welcomed the Public Service Commission (PSC) and Financial and Fiscal Commission (FFC), both of which were institutions created by the Constitution to assist and advice on the governance, performance and financial management of government departments and entities. The Department of Human Settlements (DHS) had been assessed by both these institutions, and the Committee would now be briefed on the findings of the assessment.

Ms G Borman (ANC) noted her disappointment that many of the ANC members had to attend to other very important meetings, but agreed that the matter must be taken forward.

Public Service Commission Report on 2011/12 performance of Department of Human Settlements
Mr Ben Mthemba, Chairperson, Public Service Commission, led the delegation. He noted his appreciation that the PSC could share its experience and observations on performance with the Committee. The PSC had a Constitutional mandate to promote performance and other public service values. The observations from the PSC were meant to assist the Committee in its oversight role.

He noted that the PSC had developed a monitoring and evaluation framework with indicators that assessed the performance of government departments. This framework was used to assess the DHS in terms of governance and performance, and he noted that the last assessment had taken place some time previously. The PSC, in compiling its report, had also considered reports from the Auditor-General (AG) and the Department of Public Service and Administration (DPSA).

Mr Richard Levin, Director General, Public Service Commission, noted that the PSC did not have information on the public entities reporting to the Minister of Human Settlements, so an opinion on these entities was not provided.

In relation to financial management, the PSC outlined the audit opinions by the Auditor General for the DHS and its entities. The DHS had an unqualified audit, with findings. There was the need for restatement of corresponding figures. The Rural Household Infrastructure Grant (RHIG) showed material underspending, and there were unaudited supplementary schedules. The state of financial management of the National Home Builders Registration Council, Social Housing Foundation, Housing Development Agency and other entities were presented to the Committee (see attached presentation).

With regard to expenditure versus performance, there was an increase in the percentage of budget spent, which had now reached 99% spending. However, the achievement of targets had increased to only 77%. The reasons for the under spending were delays in implementing projects and securing office space, and moratorium on filling non-critical positions pending the completion of the turnaround process. The PSC noted that although almost the entire budget was spent, the achievement of predetermined outputs was fairly low.

There was no unauthorised, irregular, fruitless and wasteful expenditure. It was found that contractual obligations and money owed by the Department were not settled within 30 days or an agreed period.

In relation to development orientation, PSC found that the DHS had contributed directly to sustainable human settlements and the improved quality of household life. The DHS had upgraded 400 000 housing units in informal settlements. The DHS was also facilitating the provision of 80 000 affordable social and rental housing units in well located areas. The revision of the White Paper on Basic Household Sanitation had been initiated.

PSC commented that if accountability was to be practiced in the public service, Executive Authorities and Heads of Departments should visibly support performance management processes, and ensure that these cascaded down to other levels within management.

In terms of professional ethics, the DHS had a Special Investigations Directorate and a whistle-blowing policy was in place. DHS had implemented an extensive Anti-Corruption Awareness Campaign. There was a Financial Disclosure Framework to manage potential conflicts that the senior managers may have between their private business interests and their official responsibilities. The PSC had found that 32% of the senior managers in the DHS may have potential conflicts between their private interests and their official responsibilities. The DHS had to manage precautionary suspensions in cases of serious misconduct. In the 2011/12 financial year, the DHS reported two cases of financial mismanagement, one involving an amount of R100 million. However, there was no loss to the State in this case.

With regard to transparency, the DHS website was user friendly and most documents were accessible although no document could be downloaded. There was no link on the DHS website for the DHS Annual Report for 2010/11, as at 1 October 2012, contrary to what the Department should have done.

The DHS did not have a human resource plan, as required by the Public Service Regulations. As at 31 March 2012, the overall vacancy rate within the Department was 21.1%, but this had increased to 24.4% as at June 2012. The vacancy rate in respect of professionals and SMS members was very high, and it was noted that it took the DHS, on average, over two years to fill posts. In relation to employment equity, the DHS had 93.5% of black employees, 36.4% women and 0.3% people with disabilities.

PSC felt that the decline to a qualified audit by the National Home Builders Registration Council (NHBRC) was worrying.

The PSC’s overall impression was that the DHS had, over the years, made serious efforts to improve its management and administration practices. It had sustained a sound record of financial management and improved spending. However, it commented that the DHS was facing serious challenges in meeting South Africa’s daunting housing and sanitation needs, and was not performing well in this regard. Greater innovation and creativity were required.

Discussion
Mr S Mokgalapa (DA) asked why the PSC did not have the information on the entities.

Mr Mthemba replied that the reason why the PSC did not have information on the entities was because its mandate did not extend to the entities and local government, but was instead limited to national and provincial departments. The PSC was in the process of amending the PSC Act of 1997 to include local government. 

Mr Mokgalapa enquired how the entire budget could be spent yet the achievement of the predetermined targets be so low. He suggested that this suggested fiscal dumping or some other irregularity.

Mr Levin said that the problem of the budget and performance was not unique to the DHS. It was important for departments to be able to set the targets properly. Targets were generally not quantifiable and measurable, and there was no data which could allow for monitoring and evaluation. The entire public service had to work on these challenges. The PSC was working on signing a Memorandum of Understanding with the Financial and Fiscal Commission, which could assist in the resolution of such problems.

Ms G Borman (ANC) also felt that the discrepancy between the spending of the entire budget yet such low achievement of targets was a great concern. There was a need to quantify the performance so that monitoring and oversight could be made possible. Planning had to be properly done, where the budget was matched with the number of units provided.

Ms Borman further noted that although there was a 99% spending of the budget, a closer look at the details showed that there were major areas of non-expenditure across the various programmes. The figure for women and people with disabilities was very low. She wondered why DHS was not working on increasing this number. Overall, she felt that the DHS had to improve professional ethics and to guard against corruption. She commented that unless the vacancies were properly filled, the Department was not going to deliver efficiently. She further said that although the turnaround strategy was supposed to have been concluded by April 2012, the excuse of the “implementation of the turnaround strategy” was still being given.

Mr Levin agreed that the vacancies were a problem. He also noted that the turnaround strategy had been a hindrance to the filling of posts, and so it was important for the process to be fast-tracked and brought to finality. The number of vacancies at SMS level was very high, and he agreed that concerted efforts were needed to deal with the situation. There was some level of competition between government departments for employees with disabilities, although it was generally an area of poor compliance. This meant that efforts had to be made to improve, and to include this area in the HR planning function.

Mr K Sithole (IFP) asked why the DHS failed to submit an input to the PSC. He also questioned why the  HR plan was not in place, as required by the Public Service regulations, and what the PSC could do to  correct this situation.

Ms J Sosibo (ANC) asked if the entities were supposed to provide reports to the PSC, or whether they had to submit their reports via the Minister.

Ms Sosibo said it was an indictment that the bucket system was still being discussed, and she wondered if the PSC had anything to say to the DHS about the eradication of this system.

Mr Mthemba said that in terms of its mandate, the PSC could only advise and make recommendations, but did not have the powers to enforce the recommendations. The PSC could provide information to Parliament, and hoped that the Committee would then be able to effectively exercise oversight over the executive. There were simple issues of compliance which could be enforced. The PSC was in the process of amending the PSC Act so that it could have powers to enforce certain recommendations.

Ms Sosibo asked if suspended officials were being paid during the period of suspension.

Mr Levin said that the precautionary suspensions were with pay, and the whole issue of consequences for non-performance and misconduct was a matter of great concern. The PSC was going to make recommendations and directions on how these issues should be dealt with.

The Chairperson asked if the PSC had an opportunity to look at the whistle-blowing policy of the Department.

Mr Levin said that the PSC was going to look at the details of the whistle blowing policy to make sure that proper protections and security were in place.|

The Chairperson agreed with other Members that it was It was unacceptable that the DHS could be functioning without a human resource plan. She asked how the PSC reacted to that issue, and what its opinion was on ghost employees and unfunded posts. She urged that there was a need for regular interaction between the PSC and the Committee, so that many of the issues could be handled progressively. The issue of financial disclosures had to be taken very seriously.

Mr Levin agreed that there was a need to abolish the unfunded posts, so that the wrong impression was not given to the public that the government was not filling posts, even with the high levels of unemployment.

Ms Borman asked why the unfunded posts were being created, and whether there was really a necessity for the positions.

Mr Levin replied that the answer to the question could be found from South Africa’s fiscal stance. There was a limited pot of resources and the Department had to plan properly, so as to efficiently utilise resources.

Mr Mokgalapa asked if the PSC had done its assessment before, during, or after the turnaround strategy.

Mr Levin said that the PSC made use of primary data and had not really gone physically into the Department, with the last visit to the DHS taking place in 2009/10. The Annual Report and other official government databases were used as points of reference. However, if there were any particular areas which the Committee wanted to highlight, the PSC could do some in depth work on the areas.

The Chairperson said that there was going to be increased interaction between the Committee and the PSC. This Committee would support the proposed amendment of the PSC Act.

Financial and Fiscal Commission presentation on DHS performance
Mr Bongani Khumalo, Acting Chairperson and Chief Executive Officer, Financial and Fiscal Commission, started by addressing the issues raised during the PSC presentation, that the DHS had spent 99% of its funds yet not achieved the targets. He explained that part of the reason for this lay in the fact that the DHS had to transfer funds to other entities and provinces. The funds were not spent on the core functions of the DHS itself, and that was one reason for the apparent discrepancy.

Ms Tanya Ajam, Commissioner, FFC, also highlighted and commented on the presence of unfunded posts in the structure of the DHS. This was caused by legislation that gave the Minister the power to delegate DHS was caused by the legislation which gave the Minister the powers to delegate HR functions.

Mr Sabelo Mtantato, Researcher, FFC, presented an overview of the DHS strategic plans in 2011/12, comparing  this to achievements or actual delivery in 2011/12, as well as a financial analysis, audit outcomes, measures to ensure continuous improvement, progress with the implementation of past FFC recommendations and issues for the Committee’s consideration.

Mr Mtantato outlined the measurable outputs, with targets, for the medium term, and compared them with the delivery. The DHS had a target to deliver 220 000 housing units, only 121 879 housing units were completed in 2010/11. The actual delivery had never reached 220 000 units since 2007. The FFC was of the view that annual performance targets needed to be reviewed.

In relation to the target for supporting, assessing and monitoring development of 20 000 public rental housing units in provinces, Mr Mtantato noted that less than half the target was achieved, and only 5813 units were delivered.

Other targets included the upgrading of informal settlements, proper services and land tenure to 400 000 households by 2014, assembling and acquiring 6 250 hectares of well-located State-owned land for low income and affordable housing, and supplying affordable housing finance to 600 000 households in the gap market.

Mr Mtantato turned to the financial analysis and expenditure outcomes. He reiterated that the total allocation for DHS was R22.8 billion and the percentage spent was 99%. The overall spending by the DHS seemed good, but on a closer look at expenditure per programme, it was apparent that there was actually underspending on four of the five programmes. On the Housing Disaster Relief Grant (HDRG), the spending had been very poor, as only 18% was spent by provinces (see attached presentation for further details). He also noted that only 44% of the Urban Settlement Development Grant (USDG)had been spent as at 31 March 2012.

Mr Mtantato then summarised the audit outcomes as reported by the Auditor-General (AG). These included material under-spending of the RHIG, performance indicators not well defined in some areas, performance targets not clearly specified in some instances, performance targets not measurable, and some planned targets not achieved during the year under review.

Mr Mtantato noted that the issues raised by the AG were largely the result of non-compliance with the National Treasury Framework for Managing Programme Performance Information and the lack of monitoring and evaluation. The DHS had to strengthen its monitoring and evaluation role within the sector. Targets needed to be broken down per annum, and not only shown for the entire Medium Term Expenditure Framework (MTEF).

In relation to progress with implementation of FFC’s past recommendations, the FFC noted that its previous assessment revealed that the current institutional arrangements, funding and some of the policy issues relating to the delivery of housing had to be reviewed. The Committee was also briefed on the progress on its accreditation recommendations. The FFC was involved in the process of housing function shifts, as required by various pieces of legislation, including the FFC Act of 1997. An initial meeting on the housing function assignment was held by the DHS and the FFC in April 2012.

Mr Mtantato summarised that the overall spending in 2011/12 had slightly improved, by 0.2%, compared to the 2010/11 financial year. The FFC had raised concerns on the overall performance of RHIG during this year, and it recommended a review of the grant design, introduction of termination clauses and improved monitoring and evaluation.

Discussion
Ms Borman asked if the FFC met with the DHS to point out some of the issues raised. The question of targets and budgets needed to be addressed, as there could be the possibility that a huge delivery backlog could be building up that was masked by the fact that the budget was being spent. She wondered if the FFC had managed to investigate the actual progress on delivery.

Ms Borman asked for more detail of the findings of the FFC around the fact that the USDG was not being well-spent by municipalities and metros.

Mr Mokgalapa asked what the FFC was doing to streamline the USDG nationally.

Mr Mokgalapa was interested to hear if the FFC had done a study on how alternative technologies could reduce the housing backlog.

Mr Sithole asked for the findings of the FFC on expenditure outcomes. He commented that this was not the first time the Committee was receiving this information.

Mr Mokgalapa asked what advice was given by FFC to the DHS and the local municipalities with regard to capacity.

Mr Mokgalapa thought it was important for a termination clause to be included in the RHIG.

Mr Mokgalapa questioned why there was a general complaint by departments and municipalities of lack of funding. In relation to accreditation and function shift, he commented that in fact the shift of function was just a synonym for accreditation, and the Committee was not sure that the municipalities were going to deliver, even with that shift in function shift.

Ms Sosibo said that when the national department transferred funds to provinces, they never did follow-ups to find out what was happening with the money.

The Chairperson said that the issue of function shift had to be unpacked. All services and government programmes were carried out at local government level, and she enquired what exactly the FFC meant by the shifting of the housing function.

Mr Khumalo commented that the FFC did interact with the DHS, as and when there were requests for work to be done. He agreed that the figures on performance and the risk of backlogs were of concern, but said that the FFC could not do anything about the figures, as they were in the audit reports. The FFC was preparing for a second round of public hearings around housing finance. However, one of the major problems it faced was the ability to obtain adequate and accurate data in respect of housing delivery. The FFC could not get the data from the national department and was referred to the provinces. The response time was very long and at times the data provided was not what was required.

Mr Khumalo commented that the issue of the USDG had to be understood in the context in which the grant was introduced. The grants were not the only source of financing for the municipalities. The Division of Revenue Act had to be complied with. The FFC had had engagements with the DHS on the issue of assignment of functions to the metros. The question was whether the municipalities were ready to exercise the powers and flexibility on key issues. If the municipalities did not take the right decisions, a system had to be put in place to pick up on such issues and alert the municipalities.

Mr Khumalo noted that it was the responsibility of the DHS to follow up on the use of the funds it transferred to provinces and the municipalities. When money allocated by the conditional grant was not spent, not only must the municipality take responsibility, but the transferring officers also had to do so. The national departments had to be sensitised to make them understand that they did have a responsibility to ensure that money transferred was properly spent.

The Chairperson asked why there was a challenge of concurrent functions and whether it was perceived or real.

Mr Khumalo replied that the issue of concurrent functions had to be dealt with by national government because it was the responsibility for national departments to set the standards. Very few departments had comprehensive standards on the issue of concurrent functions. The Department of Finance was an example, since it had produced the Public Finance Management Act and the Municipal Finance Management Act. It was the responsibility of national government to make and set clear standards.

Mr Khumalo answered questions on funding by saying that it was not quite correct for there to be complaints about lack of funding. The strategic plans and annual performance plans were based on the amount of money allocated. It was noted by the AG that some of the objectives did not comply with the S-M-A-R-T principles, and could not be measured. Looking at the annual report of the DHS, there were a number of variances where there were no explanations given. The budget was supposed to be linked to the performance plan. These issues should be dealt with when the strategic plan and the annual performance plan were being examined.

The Chairperson said that it was important that the various gaps be closed. The Committee would appreciate the assistance of the FFC in doing so.

The meeting was adjourned.