Department of Public Works (DPW) Annual Report 2011/12: Minister's briefing

Meeting report

Department of Public Works (DPW) Annual Report 2011/12: Minister's briefing
The Hon. Mr Thembelani Nxesi, Minister for Public Works  gave a background to the presentation. In view of current public interest the Minister began with a statement on the security upgrade of the President's residence at Nkandla. Firstly, the Minister stated that he would not play politics with the security of the President. ‘On matters of security I prefer to err on the side of caution’, he said. The Minister stated that he remained concerned about the leaking of information concerning classified projects. Where public funds are involved, there must be accountability and value for money. That was why the Minister requested the Auditor-General to provide staff with top security clearance specifically to audit all classified prestige projects. The Portfolio Committee was referred to the joint media statement issued on 5 October 2012 by the DPW in consultation with the Departments of State Security, Defence and Military Veterans and South African Police Service – which detailed the reasons for and nature of the security upgrade on the President's residence. This was the first time that such an audit had been carried out in DPW. Given the history of malpractice in the DPW, the Minister was also conducting his own investigations. The Mister stated that he welcomed involvement of the Public Protector and pledged his full cooperation, and that of the DPW. The Minister stated that in the presentation he would try to address the major shortcomings of the DPW revealed in the Annual Report, as well as notable achievements, in particular, the DPW's contribution to job creation in line with government priorities for 2011-2012 which was dubbed by the President ‘The Year of Job Creation".

There was significant under-spending during the financial year 2011-2012 in relation to Expanded Public Works Programme (EPWP) incentives to provinces and municipalities and capital projects.  In relation to capital projects, under-spending was largely due to poor management and planning. The DPW had taken the following remedial actions going forward. The DPW had started creating joint teams with client departments to improve planning, coordination and service. The DPW was introducing the use of the Infrastructure Development Improvement Programme (IDIP) - a planning and project management tool supported by National Treasury and one of the entities, the Construction Industry Development Board (CIDB). In general, in relation to projects, the DPW was greatly hampered by the lack of technical professionals in the construction field. The DPW had identified the need for 220 such professionals which were required to manage the DPW's obligations in regard to capital projects. DPW had approached the National Treasury to fund these posts as part of the turnaround strategy. In relation to EPWP incentives, under-spending was largely due to the low take up rate by municipalities and the failure to report adequately – a condition for accessing the incentive grants. To ensure improved draw-down of the incentives in future, the incentive grant model had been revised to include a 40% upfront payment. The revised model aimed to ensure that rural municipalities had easier access to incentive grants in order to increase labour intensive work opportunities through the EPWP projects. Increased technical support had also been provided to assist with accurate reporting of programmes.

DPW was mandated to regulate and promote growth and transformation in the construction and property sectors. The Annual Report pointed to non-delivery on a number of crucial policy and legislative fronts. The Portfolio Committee in its engagements with DPW had rightly expressed its frustration with the DPW and the DPW took these criticisms very seriously. The DPW had undertaken to rectify the situation. The DPW had agreed with Deputy Minister of Public Works, Mr Jeremy Cronin, that one of his priorities would now be to drive the policy and legislative agenda. The CIDB had been charged to coordinate with the Council for the Built Environment (CBE), Agrément SA and the DPW, for the purpose of facilitating a Summit on the transformation of the built environment at the end of November 2012; with the express purpose of developing concrete measures to enhance and expedite empowerment, and to update and refresh the vision for transformation of the built environment. Specific commitments by the DPW in this area in the current financial year included the finalisation of the Immovable Asset Life Cycle Management Guideline, the finalisation of the review of the Built Environment Professions legislation, the finalisation of the draft bill for submission to Cabinet of the review of the Expropriation Act of 1975, and the finalisation of the Business case for Agrément South Africa.

The Department failed to meet its target of land to be transferred for housing. Reasons for the delays included the need to provide developmental plans and to comply with existing land use management laws and municipal by-laws. DPW was also required to exercise caution to ensure that national land which was sold or donated was actually used for the intended purpose as per request, if not, such land must now revert to the State.

The Minister stated that in his Budget Vote Speech in May this year, the Portfolio Committee had been informed that ‘too little, too late’ had been done to make any meaningful impact on the audit for 2011-2012. The first members of the ‘turnaround team’ only came on board in March 2012, right at the end of the financial year. With the work done in the last few months, the turnaround team was confident that the DPW would lose the disclaimers for the current financial year, 2012-2013. Whilst the Department would be striving for a clean audit, the turnaround team cautioned that there are certain deep systemic flaws which would persist for some time. Principally there was need to mention that the completion of the vesting process to finalise the Immovable Assets Register required massive and complex coordination across all the levels of government (particularly with the provinces) as well as with other Departments; principally the Department of Rural Development and Land Reform (DRD&LR) and with the Deeds Register. In relation to irregular expenditure, individuals would take personal ownership of their mistakes. At financial statement level a number of technical enhancements had been done. Related party disclosure and quantification framework had been developed; Contingent liability and contingent assets had been identified; an Audit Action Plan had been developed to resolve all audit findings and had been submitted to National Treasury. At the most basic level this includes ensuring that proper documentation was maintained to allow auditing to take place. An Action Plan committee had been established to monitor implementation, which met bi-weekly. The AG's team had been invited to attend as they deem fit. Internal Audit had also been tasked to follow up on progress reported against the action plans. Meanwhile, the DPW turnaround team was working closely with the Auditor General's office to address the audit issues. The Auditor General's staff had already conducted a two day workshop with directors and chief directors of the DPW to unpack the audit findings and spell out the remedial measures necessary, so that individuals took responsibility and ownership of the audit findings.

On the achievements of the DPW, the Minister stated that despite negative reporting of mismanagement and corruption, that sight should not be lost of the fact that within DPW there remained pockets of excellence and most officials were committed to service delivery. During 2011-2012, DPW completed 237 capital projects. This included a number of key projects: the Forensic Laboratory in Parow for the South African Police Services (SAPS), the correctional facilities in Kimberly and Brandvlei, the extensive renovations to the Supreme Court of Appeal in Bloemfontein, the Magistrates Building and Department of Justice in Pietermaritzburg and
the upgrading of the Marion Island Research Station - which complied with high standards of environmental sustainability.

The turnaround strategy for DPW was developed in the last quarter of financial year 2011-2012. This rested on two pillars: fighting corruption and improving the business model and performance of the Department. The Special Investigating Unit (SIU) had carried out a forensic audit of selected leases leading to disciplinary action against senior officials. Two officials had already been dismissed. The DPW was awaiting the outcomes of other disciplinary hearings. The DPW anticipated criminal charges in some cases. If these processes appeared to take a long time it was because the Department extended due process to everyone in this country. Court action was also being taken to nullify irregular leases and to recoup monies which were wrongly paid. A sample audit of leases had been conducted by the Auditor General. These findings and the experience of the SIU assisted the DPW to develop terms of reference for the tender for a comprehensive audit of all leases. Where possible the DPW had tried to use expertise from within the public service and its entities rather than outside consultants. Where it lacked skills, it would in-source these skills but would carefully manage the relationship with the clear intention of ultimately building capacity in-house.

EPWP, the flagship programme of DPW and government, achieved 97% of the work opportunities target for 2011-2012 by creating 843 459 work opportunities. This placed the country well on track to achieve the target of 4.5 million work opportunities to be created in the five years of this administration. 60% of EPWP participants were women, and 50% were youth. Since the EPWP Municipal Summit held in November last year, EPWP District Steering Committees had been increased and strengthened and protocol agreements had been signed with 99% of municipalities to commit them to specific targets. Alerted by findings arising out of site visits carried out by these committees, EPWP had now upgraded its reporting systems to combat false reporting. Of course EPWP was more than simply targets and statistics. It was about mitigating poverty and the effects of unemployment. It sought to give hope to those who, through no fault of their own, had been marginalised by unfeeling economic processes. It was also about promoting sustainable rural economic development.

Department of Public Works (DPW) Annual Report 2011/12: Department's briefing
Ms Mandisa Fatyela-Lindie, DPW Acting Director General, stated that the purpose of the presentation was to reflect on the achievements and challenges of the Department of Public Works during the financial year 2011/12 based on the 2011 State of the Nation Address theme of job creation. DPW’s efforts in the 20111/2012 financial were geared towards Outcome 4 2011/2012 SONA which was geared towards providing decent employment through inclusive economic growth. The DPW’s Expanded Public Works Programme aimed to create 4, 5 million work opportunities, and more than a million opportunities had been created already since the beginning of Phase 2. Part of the programme focused on repairing South Africa’s roads networks. In achieving the Outcome 4 the DPW launched Operation Re Ya Patala to support government stated intention of decent job creation by ensuring service providers were paid on time.

Ms Fatyyela-Lindie then took time to explain the achievements and challenges of the different Programmes of the DPW.

On ‘Programme 2’ dealing with Immovable Asset Investment Management, the DPW, in relation to asset register management, appointed 21 graduates through Human Capital Investment (HCI) Programme to verify IAR information against deeds records and conduct investigation on identified discrepancies. The challenge facing the Programme was that a strategy had to be fashioned to enhance IAR. There was also lack of interface between Property Maintenance Information System (PMIS) and Works Control System (WCS). The DPW also confirmed the ownership of land parcels under the correct sphere of government to address political and social government objectives. The challenge was that there were un-surveyed lands. However, the Chief Surveyor General had informed the DPW that all the lands had now been surveyed. There was also lack of documentation to validate ownership as at 27 April 1994. On the overall assessment of the asset register management, the DPW initiated the change of strategy to enhance the IAR, as a result the Service Provider was appointed in October 2011 to manage the Immovable Asset Register Enhancement Programme to ensure completeness and accuracy of IAR by 31 March 2014. There was an analysis of the IAR was conducted to determine the Term of Reference for the appointment of Service Provider(s) to conduct physical verification. The DPW was continuously engaging the Department of Rural Development and Land Reform (DRDLR) and provinces to fast track the process of issuing Item 28 (1) Certificates.

In relation to Strategic Asset Investment Analysis as a sub-programme (under ‘Programme 2’), the Custodian Asset Management Plan (C-AMP) was completed to contribute towards improved service delivery by enhancing planning and budgeting for efficient management of State immovable assets. The challenge was that C-AMP was completed without User Asset Management Plans (U-AMPs), condition assessments and performance assessments standards as required by Government Immovable Asset Management Act (GIAMA). This resulted in non alignment of User Department’s requirements and Custodians plans. The rehabilitated buildings ensured that User Departments were accommodated in functional buildings which contributed to improved service delivery and reduction of leased accommodation. State buildings were being made accessible and this contributed to improved service delivery for easy access to all people to government services. The challenge here was that there were delays in procurement processes due to non responsive tenders. In an effort to address the problem of non responsive tenders, the tenders would be extended to contractors with a higher Construction Industry Development Board (CIDB) grading. The overall assessment of the sub-programme was that GIAMA required that Custodians on an annual basis compile a Custodian Asset Management Plan (C-AMP) that addresses ‘User Departments’ needs as indicated in their respective User Asset Management Plans (U-AMPs). The Chief Directorate had completed 2013/14 C-AMP and would submit it to the National Treasury. However, this was achieved in the absence of key elements; viz, U-AMPs, condition assessments and performance assessments standards required for a comprehensive and compliant C-AMP. The outcomes of the C-AMP would be shared with relevant User Departments so that it informs planning going forward. Planning for projects; both planned maintenance and DPW capital; to be implemented in 2012/13 was concluded with all relevant stakeholders. Going forward, planning would be aligned to IDIP.  Delays with procurement processes contributed to accessibility projects not being implemented on time. As part of national priorities to reduce energy and water consumption 8 025 752 kilowatts and 4 324 210 kilolitres was saved during the financial year.  Improvements with monitoring and verification of savings for energy consumption would be done in conjunction with the Department of Energy. Progress with regard to release of land to address socio economic development was hampered by requests that are not supported by detailed developmental plans aligned to municipal IDIPs, hence the target was not achieved.

In relation to Key Account Management, Capital Works Implementation Programmes (CWIP) were approved by each of nine User Departments for execution in 2012/13 in order to enhance service delivery. The challenge was that the annual deadline of end of February for submission of approved Implementation Programs by User Departments did not allow adequate time for planning process ahead of the commencement of the next financial year. Also in line with its custodial responsibility, the Department signed off its Planned Maintenance Implementation Programme (PMIP) for execution in 2012/13. The challenge was that as a turnaround initiative, the Key Account Management (KAM) Branch would ensure affected User Departments submit approved Implementation Programmes by the end of September each year commencing in 2013 and would ensure the inter-departmental Service Level Agreements (SLAs) are amended accordingly. As a result of general non-compliance with GIAMA, DPW continued to work in an unplanned, reactive mode. DPW continued to be lambasted for its inability to render appropriate accommodation services. User Departments remained frustrated at the time it took for accommodation to be provided. There was under-expenditure and belated delivery of required accommodation as a result of poor forward planning, which further frustrated Users in their ability to deliver essential line function services. There was continuous allocation of funding without U-AMPs - this subverted the need for User compliance with GIAMA. The challenges were inadequate capacity and resources within User Departments and DPW to implement the requirements of GIAMA leading to non-compliance. The allocation of funds to User Department accommodation infrastructure programmes in the absence of UAMP’s and without the necessary forward planning. Remedial measures included appropriate capacitation to implement GIAMA and strategic agreement with National Treasury in enforcing GIAMA compliance.

The overall assessment of the Programme was that the KAM program, as the Department’s front office servicing the accommodation needs of its significant client base remained a key priority.  In the year under review, there was a degree of improvement in that there was enhanced client relations resulting in an additional six SLA’s being signed. All nine User Departments for whom DPW procured Capital Works submitted their approved Capital Works Implementation Programmes (CWIP) in accordance with prescribed timeframes. There was increased Executive support for the key role of KAM as the Department's front office to User Departments and the need for heightened responsiveness by officials.

In relation to projects and professional services, the only project possible for implementation at Salvokop was the fencing project which was to be completed in 2012/13. The challenge was that the prolonged conclusion of the town planning guidelines for Salvokop had an impact on bulk infrastructure planning and development of the Site. The Department had completed 237 Project (Capital and Maintenance), while 660 Projects continued into 2012/13 performance year. The overall expenditure achieved was as follows: DPW Capital: 66%, DPW Maintenance: 89%, Clients Capital: 77%. The challenges were that during the 2011/12 fewer than planned projects where awarded which impacted negatively on expending funds allocated for construction phases of the projects. Efforts to utilise the funds to purchase lands and buildings or purchase capital equipment's for workshops were unsuccessful. The funds were not spent. The overall assessment was of this Project. Key projects were concluded and these projects enabled the security cluster Departments to provide the much needed services to the communities around these completed facilities.

On ‘Programme 3’ dealing with Expanded Public Works Programme, 97% of the work opportunity target was achieved. 69% of the full-time equivalent target was achieved. This contributed to Outcome 4 in terms of government priorities. The challenges were that 296 projects were excluded due to poor data quality based on data validation procedures. There was lack of capacity in public bodies to implement projects labour intensively. There was also poor and under-reporting by implementing public bodies. The DPW over-achieved on the target for women participating in the Programme. It also over-achieved on the target for youth participating in the Programme. However, the target for persons with disability target was not met. The challenges were that the nature of many EPWP projects limited the participation of people with disabilities. This included occupational health and safety issues.

63% of the integrated incentive for the Infrastructure and Environment and Culture Sectors had been disbursed. 100% of the Social Sector Expanded Public Works Programme (EPWP) Incentive Grant for Provinces had been disbursed by the Department of Public Works. This meant that 69% of the wage incentive was disbursed across the Infrastructure, Social and Environment and Culture Sectors. The challenge was that the disbursement of the incentive was dependent on eligible bodies to meet their annual threshold and report their data properly

Overall assessment of the Programme was that the EPWP achieved 97% of its 2011/12 work opportunity targets. To ensure that the Programme achieved its annual targets, intensive engagements were undertaken with public bodies to ensure their participation in the Programme. To ensure an improved draw-down of the incentive in subsequent financial years, the incentive grant model was revised. The model would ensure that especially rural municipalities had easier access in order to intensify employment-intensive programmes and projects. The revised model would be implemented as from the 2012/13 financial year.

On ‘Programme 4’ dealing with construction and property regulation policy, the purpose of this guideline was to provide national and provincial custodians with a user-friendly tool to assist them in better understanding the (a) custodian mandate in terms of GIAMA and related legislation; and (b) roles and responsibilities of users and custodians as it related to the management of immovable assets. The challenge was that Policy options and areas of particular concern (identified during interaction with national and provincial custodians and users) required further internal engagement before the guideline could be submitted for approval. The review of the Built Environment Professions would lead to a synergised sector focused on its growth and development whilst contributing to government’s development objectives. The challenge was that the submission of the review was delayed to allow for enhancement of the options analysis. The Agrément SA Act would serve as a national policy instrument to support innovation in the construction industry and accelerate delivery of social and economic infrastructure. The challenge was that the Business Case was withdrawn to remove proposed regulatory responsibility to allow for further consultation with relevant stakeholders. The process had started with the development of a revised Business Case and, upon approval; the prescribed legislative process would be followed.

Department of Public Works (DPW) Annual Report 2011/12: financial performance
Ms Sue Mosegomi, DPW Acting Chief Financial Officer, presented the financial performance report of the DPW for the final year  2011/12. Expenditure for compensation of employees amounted to 101% against the budgeted allocation. The Department's overspending on compensation of employees was in both ‘Programme 1 and 2. The overspending on compensation of employees was classified as unauthorised expenditure. The Expenditure for goods and services was was equivalent to 100% of the allocation. ‘Programme 2’ had overspending mainly due to the energy efficiency project where funding allocated was not sufficient to cover the commitment. Overspending was due to advance being made to the Independent Development Trust (IDT) during 2010/11 financial year with the roll over not being approved by National Treasury. With the project continuing in 2011/12 financial year this gave rise to over spending. This overspending was classified as unauthorised expenditure.

Expenditure under transfers and subsidies for the year ended was equivalent to 91% of the total allocation. Under-spending in transfers and subsidies related to the EPWP incentives to provinces and municipalities. ‘Programme 4’ resulted in overspending on transfers and subsidies and the overspending was classified under unauthorised expenditure. Expenditure for infrastructure was equivalent to 70% of the total allocation. Expenditure under machinery and equipment (including software) was equivalent to 96% of the total allocation. The reasons for under-expenditure were that the tender process was interrupted by the National Treasury Circular requesting projects procurement information for concurrence. Three months were lost while awaiting concurrence to be advertised. Planning and registering projects while having money on hand remain problematic. Ideally the building program must be completed prior to requesting funds from National Treasury. Approved progammes (Workshops, Water Operators Programme and Horticulture Programme at Port of Entries) were not allocated funds from DPW capital. There was late issuing of Procurement Instructions in particular for Accessibility Program. Funded PI where confirmed in September 2011 for implementation in same year.

Figures for virements were provided.

Department of Public Works (DPW) Annual Report 2011/12: audit report
Ms Mosegomi stated that the basis for disclaimer of the report were that Immovable asset reconstruction was still in progress.  The DPW could not verify completeness, validity and accuracy of the immovable asset register. The list of properties currently rented out could not be reconciled with the department’s immovable asset register. The DPW could not verify its completeness. In relation to operating lease revenue, the supporting schedule was compiled from PMIS and there was inability to supply the actual lease agreement in all instances.  Where lease agreements were provided, audit testing revealed an understatement of the commitments. There was absence of a complete and accurate immovable asset register thus the DPW was unable to confirm completeness. In relation to operating leases, the DPW could not supply sufficient appropriate audit evidence to substantiate operating lease expenditure paid to Property Management Trading Entity (PMTE). In relation to annual financial statements, performance and annual report, the financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework and supported by full and proper records. Material misstatements identified by the auditors in the submitted financial statements were subsequently corrected. In relation to asset management, proper control systems to safeguard and maintain assets were not implemented. This was also applicable to immovable assets. In relation to budgets, the budget for compensation of employees was exceeded. Transfers that were not originally budgeted for were made without the approval of the National Treasury. In relation to human resources management, appointments were made in posts which were not funded. Funded vacant posts were not in all instances filled within 12 months. Persons in charge at pay points did not always certify that the employees receiving payment were entitled thereto. The organisational structure was not in all instances aligned to the DPW’s strategic plan.

In relation to revenue management, the accounting officer did not take effective and appropriate steps to collect all money due. Immovable State property was sold at below market related values. Sufficient appropriate audit evidence could not be obtained that immovable State property was let at market-related tariffs. In relation to procurement and contract management, goods and services with a transaction value below R500 000 were procured without obtaining the required price quotations. Goods and services of a transaction value above R500 000 were procured without inviting competitive bids. Deviations were approved by the accounting officer even though it was not impractical to invite competitive bids. Contracts were awarded to bidders who did not submit a declaration of past supply chain practices. The accounting officer did not in all instances report within 10 working days to the Auditor-General all cases where goods and services above the value of R1 million (VAT included) had been procured in terms of Treasury Regulation 16A6.4. In relation to strategic planning, the accounting officer did not ensure that the DPW had and maintained an effective, efficient and transparent system of internal control regarding performance management, which described and represented how the DPW's processes of performance planning, monitoring, measurement, review and reporting were conducted, organised and managed. The accounting officer of the DPW did not finalise and approve the Business Case for running the trading entity and, consequently, did not formulate a policy and reporting framework for the head of the trading entity.

The basis for disclaimer on PMTE, among other things, was that there no adequate system for identifying and recognising all irregular expenditure. There was no adequate system for identifying and recognising all fruitless and wasteful expenditure. In relation to trade and other receivables, there was inability to supply audit evidence in support of all recorded transactions. There was lack of audit evidence supporting statement that amortisation of debtors were immaterial. In relation to municipal rates and taxes, there was lack of evidence to support municipal rates and taxes payments. In relation to operating lease commitments, there was inability to obtain sufficient appropriate audit evidence supporting operating lease commitments. In relation to revenue management, the accounting officer did not develop and implement appropriate processes that provide for the identification, collection, recording, reconciliation and safeguarding of information about revenue to ensure that all money due to the trading entity was collected. The accounting officer did not take effective and appropriate steps to collect all money due.

An analysis of the 2011/12 audit report had been undertaken and the following areas of intervention had been identified to be addressed as a priority.

Immovable asset register
Irregular expenditure
Leases
Performance information
Budget management
PMTE structure and business case
Finance policies and business processes
Commercial accounting and billing software procure
Clearing of trade receivables
Enhance Internal Audit capacity

Department of Public Works (DPW) Annual Report 2011/12: turnaround initiative
14 important projects have been identified for the 2012/13 financial as part of the DPW ‘s turnaround initiative. The projects were:

Project 1: Anti fraud and corruption campaign
Project 2: Clean Audit Interventions
Project 3: Finance and SCM stabilisation Interventions
Project 4: Operationalisation of PMTE
Project 5: Compilation of Immovable Assets Register
Project 6: Audit and review of Leases
Project 7: Legislative Matters
Project 8: Re-opening of workshops and building of skills Project 9: KAM and Professional Services
Project 10: Inner City Regeneration (ICR)
Project 11: Prestige
Project 12:  IT Systems (iE-Works, PMIS)
Project 13: Governance and Performance Management     Review
Project 14:  Regional Support


Discussion
The Chairperson stated that she was happy that the DPW’s presentation tallied with that of the Auditor General. ‘There is no way we can shut down the DPW as there are still good people in the Department’, she said.

Ms A Dreyer (DA) stated that she agreed that the presentation acknowledged what was contained in the Auditor General’s presentation to the Portfolio Committee.  The 14 projects in the DPW’s turnaround strategy related to identified problems and projects to deal with them. ‘Project 11 states “Prestige”, can we have more information on it’, she asked.

Ms C Madlopha (ANC) stated that though the Committee was contributing to the DPW’s report, the Committee was alerted by the Minister not to expect much difference between the report and that of the previous year. From the report it would be appreciated that the turnaround strategy did not impact this report as it would have impact on the next financial year. ‘My concern is on the failure to achieve set targets’, she said. The contributing factors to this were Programmes 1 to 3. Programmes 2 and 3 relate to service delivery. On the issue of Public Works and PMTE, (though the Minister stated that there was a debate on whether the PMTE should be a stand-alone entity), these two portfolios had been the worst performing for four consecutive years. ‘We were told that there is a Unit that deals with policy, Is there still staff in the policy unit because they are not performing well for the Department?’ she asked. The unit must be reviewed to see if it still has any capacity. For the past four years, the outcome of the Auditor-General’s report had always been on policies and control. The property of the State was sold below market value. ‘There is legislation on the issue and I do not understand why’, she said. ‘We were told that there is a Bill that has to be executed for Agrément SA to fulfil its mandate’, she said. The issue of State funerals also caused unauthorised expenditure. The DPW must focus on the issue. There must be policy on the issue. The Auditor General had stated that the DPW had no alternative policy on the issue.

Mr K Sithole (IFP) stated that the report showed that there was dysfunction in the DPW. The DPW had failed to have a maintenance record of its property. Mr Sithole asked how much the DPW had transferred for the Nkandla development (though he did not see it as an Nkandla development). The wasteful expenditure showed that there were no records from the DPW. ‘The Minister gave us the turnaround strategy, which is very good. He is now a year in office, is there any fruits that have been got from the strategy?’ he asked.

Ms P Ngwenya-Mabila (ANC) stated that the DPW’s supply chain management was weak. Most of the issues are border on lack of compliance. ‘The 13 million spent on Cape Town, can it be clarified because for me it was wasteful expenditure?’  ‘How do you appoint personnel on posts that are not approved and funded?’ That was the reason the DPW had over-compensation figures. DPW’s expenditure must be on what it planned.

On the issue of monies owed by other Departments, it was because the DPW did not have proper control systems. For example The Department of Home Affairs informed the Portfolio Committee that it owed the DPW and then paid off the debt. After six months a letter arrived at the offices of the Department of Home Affairs from the offices of the DPW demanding the payment of the debt that had been paid off. ‘How can you underspend on capital projects and infrastructure, which was critical in creating jobs?’ she asked.  The DPW had a lot of outstanding policies. ‘For how long would these policies be outstanding’ she asked.  The Committee was yet to be told what was happening on the issue of officials of PMTE that had good relationships with PMTE’s suppliers. ‘What steps are the Department taking on the issue?’ she asked. ‘On the appointment of persons with disability, what was the challenge in complying with the Employment Equity Act?’ she asked. She asked what could be done on the issue of the failure to get documentation in relation to immovable property since 2006 to ensure that the documents were obtained for the DPW to move forward in the area of asset management. In the area of human resources, the Committee understood that there was an ongoing clean up process in the DPW. The DPW seemed to have a problem with capacity with many vacancy rates and officials functioning in acting capacities. ‘Is there no speed up process to fill up the vacancies especially the critical ones?’ she asked.

Mr L Gaehler (UDM) asked if the DPW was prepared to go ahead with the issue of the Cuban technical advisers. ‘What is the DPW doing to get the issue of construction project management sorted?’ What response had the DPW from its drive to employ technical professionals to assist the DPW considering that contract workers were being used in some areas? What was the DPW doing to address issues of reduction in collection of revenue, access of disabled person to government buildings, and training of young professionals?

Mr M Swathe (DA) stated that the DPW spent R1.3 billion, instead of R 1.5 billion on Programme 3. ‘Are we serious about creating job opportunities?’ The DPW in its turnaround strategy did not state if it would focus on EPWP. ‘The movement from private leased buildings to government old buildings, when is it going to happen, has it been started and when would it be implemented?’, he asked.

Ms Ngwenya-Mabila stated that the implementation of GIAMA at the local level should have been done three years after 2007. However, it had still not been implemented. ‘I think that is the reason we have not got the asset register yet’, she said. The DPW Risk Management Policy was approved in 2009. The audit and management units were supposed to be doing risks assessment and giving policy reports. The SETAs were not assisting that much. ‘Do we have a report from them (SETAs) as to how many people they have trained so far?’ she asked.

Ms N Madlala (ANC) asked for clarity on the money spent on consultants as stated in the DPW’s Annual Report 2011/2012. ‘For me the money is too much’, she said.

Mr N Magubane (ANC) stated that there were properties at the local, provincial and national levels. These properties were unused and were dilapidated. Nobody seemed to know the correct position of these properties as to who owned them. There were also farms that were not being used. ‘When will the DPW give these farms to the people that need them?’ he asked.

The Chairperson asked if the Mthatha criminal cases had been attended to and if they were included in the criminal cases mentioned in the DPW’s Annual report. The Chairperson asked why the DPW hired 21 consultants for furniture. ‘What do we hire them for?’ she asked. The Chairperson asked for clarity on why some entities were claimants and at the same time defendants in the claims list in the DPW’s annual report.

The Minister replied that ‘Prestige’ related to the Ministerial Handbook in terms of acquiring and maintaining property. It also went beyond that.  It related to accommodation for the Presidency, ministers, judges etc. Central to that was about how to maintain all these buildings. The Parliamentary Village had now become a big challenge to the DPW. The Committee must have heard of inflated costs of projects in which the DPW would end up paying more for a house that was being renovated (for example in Cape Town) and which had taken a year to two years more than the time it ought to have taken. The DPW had sometimes been told that the reason for the costs was that some of those houses were heritage sites and special materials had to be used to maintain the heritage. Most of the Ministerial houses were old houses. There was a need for detailed report of these houses. People hid behind the houses being heritage houses to inflate cost. ‘Prestige is talking about these houses and how we maintain them and also part of prestige is the cleaning staff at these houses’, he said. The Minister stated that he had delayed in engaging in the matter concerning to the Cuban consultants to the frustration of the former Cuban Ambassador. The reason was that the chaos in the DPW needed to be sorted out first before it could engage with the Cubans. When the DPW engaged with the Cubans there would be conditions that would be attached to the contracts, part of which would be that they would take young South African professionals and train them. The Mthatha cases were not included in the cases stated in the Annual Report. Eight criminal cases had been opened with the police and the cases were before the Director of the National Prosecuting Authority. The DPW would deal with some of the issues as soon as the SIU released information on them. The DPW was opening a big case against some contractors who were former employees of the DPW. The DPW would not be able to mention names  at the moment because of the seriousness of the matter until the processes had been completed. The system in the DPW would start to run smoothly once the leadership had been stabilised. At the moment the DPW had an acting Director General and Acting Chief Financial Officer. The positions had been advertised and the DPW was currently in the process of filling the positions. Once there was a substantive Director-General and Chief Financial Officer, the DPW would then be able to deal with the various issues raised by the Committee.

The Hon. Jeremy Cronin, Deputy Minister Public Works, stated that the Agrément  SA legislation had been pending. The proposal in the draft policy was to set it up as a separate entity. However, the DPW did not want to proliferate entities. The Deputy Minister thus instructed the policy unit to find out if the DPW could house the Agrément SA somewhere. The policy unit came up with the suggestion of housing it in the CIBD. The DPW however needed to come up with a revised Business Case and upon approval, the prescribed legislative process would be followed. It was true that there had been underspending on infrastructure largely with difficulties at the municipalities in relation to accounting. The DPW was now frontloading funds to municipalities to help remedy the situation there. ‘The DPW was not saying that anything that was not contained in the 14 projects are not of concern to it’, he said. The 14 projects were where the DPW had serious problems such as corruption, unaccountability, non-compliance with policies, etc. The DPW had to apply its mind to the PMTE. It could not allow the debate on it to be too long. There was a need to establish it as a trading entity with the necessary capacity.

Ms Fatyela-Lindie stated that the selling of State property beyond market value should not arise because before selling property it should first be valued. The DPW would look into the matter. This should not arise unless there was ‘under the table’ agreement. The issue of state funerals needed to be properly regulated.  The DPW normally wrote to the Treasury to re-imburse it for expenses that were categorised as unforeseeable and unavoidable. The DPW needed a system to look after its property. The DPW’S agreed that its Property Management Information System (PMIS) was archaic. The DPW was working with the Auditor General to find a new model. The DPW needed to acquire a system to deal with the issue. The DPW had written to Treasury on the issue and was not sure if Treasury would fund the project.  This had been a ‘roll-over’ issue. On the Nkandla issue, the DPW was not a security Department. It did not carry out security assessments. ‘We deliver infrastructure’, she said. The President’s house was a classified project as it was regulated by legislation. However, in this case the DPW opened up the project (though it was classified) for auditing by the Auditor-General. The directive to the Auditor-General was to find out if tax payers’ money was appropriately used in that project. ‘We want the Committee to trust us that we are doing the right thing and to speculate on a figure for the expenditure on the house will not help’, she said.

The Deputy Minister stated that the DPW requested the Auditor General’s office to check in that case whether there had been abuse of tax payers’ money. ‘We are awaiting the report; if there was any indication of abuse, we will take the appropriate action’, he said. The DPW was taking proactive steps on the matter and would inform the Portfolio Committee once it had clarity on the matter. The DPW also needed to check if it would violate any piece of legislation by giving out information on the issue in order to protect its officials.

Ms Fatyela-Lindie stated that lands had been surveyed by the Chief Surveyor General. There should not be a problem going forward. The Portfolio Committee could invite the Chief Surveyor General to verify the fact. There was a project plan in the Director General’s office which detailed what the DPW was doing to address the issue of weak supply chain. On the issue of the money spent in Cape Town, Durban and Pretoria, the SIU had completed its report and had recommended that some persons be criminally charged. The employment of persons in unfunded posts was a misconduct. The problem with that was that the DPW now had a huge salary bill. ‘It is a serious matter. It is not clear what informed the filling up of these posts. We will follow up on this now that we have the Auditor General’s report’, she said. The vacancy rate was affected because the DPW had a huge salary bill. The DPW did not have money to fill all the vacancies. When the DPW engaged with the Cubans, one of the key issues would be skill transfer. Skills transfer the last time was minimal. The training of learners was also affected by budgetary constraints. The training programme was being scaled down to focus on key strategic needs. The DPW was mindful of clients’ complaints and in accordance with the Ministerial guidelines had decided to establish joint teams to deal with the issue. The DPW did not want private leases because they  were a problem. The SIU report revealed that the DPW really needed to get out of them. The challenge was that state buildings were in bad shape and the DPW funds could not really handle this. ‘We are now doing this in phases’, she said.

Ms Mosegomi stated that the transfer of money to Agrément SA had been classified as unauthorised expenditure by the Auditor-General. The problem was that what the Auditor General classified as unauthorised expenditure continued to change every year. The amount of funding used in the compensation of employees had caused the DPW not to have enough funds to recruit the needed professionals. The DPW had made a request to the National Treasury for funds to enable it to capacitate itself.

The meeting was adjourned.