Public Works on remedial actions to address 2011/12 audit opinion; Inner City Regeneration Programme progress report

Meeting report

Public Works on remedial actions to address 2011/12 audit opinion
Mr Cox Mokgoro, a member of the Department of Public Works (DPW) finance stabilisation team, traced the historical audit findings for the Department and the Property Management Trading Entity (PMTE) since the 2007/08 financial year, when both received unqualified audits. Since then, there had been a “downward spiral,” with both receiving disclaimers for the past two years. The situation was “totally out of hand,” calling for decisive action. This had resulted in the development of a turnaround strategy.

The Auditor General’s (AG’s) opinions had highlighted a wide range of negative issues. These included the instability of leadership in the DPW, a lack of competent staff at all levels, a high level of vacancies, widespread maladministration and fraudulent activities because of a lack of due diligence to controls and compliance, no enforcement of accountability and discipline, poor monitoring and evaluation, inadequate information technology (IT) controls, the PMTE business case still not being finalised, and a lack of proper strategic and operational planning.

The Department’s response to these issues had begun at a leadership level. The Minister had met with all staff at the head office, as well as the 11 regional offices, to instil a new ethos, ethics, practices and culture within the organisation. He had also met with all the unions in the bargaining council to solicit a buy-in for change. A new factor was that senior management would be held accountable for the implementation of all MinTop and EXCO decisions, which would be closely monitored.

Steps were being taken to fill vacancies and improve the capacity of the Department. The Director General (DG) post had been advertised and it was hoped it would be filled by the end of the year. A chief financial officer (CFO) was being head-hunted, as a previous interview had not yielded the desired outcome. The process to fill 40% of the 220 critical professional vacancies in the current year was under way with support from the Council for the Built Environment (CBE).

Other initiatives had included a two-day joint workshop attended by all chief directors and directors, with the AG, to analyse the audit report and agree on corrective measures. Action plans had been developed, driven by dedicated teams under the leadership of subject specialists, with clear timelines for execution and bi-weekly meetings to monitor progress. It was also planned to increase the capacity of the internal audit unit, so that investigations of alleged maladministration could be speeded up, and corrective action taken.

Mr Mokgoro said outside help had been sought to assist with three key stabilisation projects. The first of these involved the compilation of the immovable asset register (IAR). A service provider had been appointed, and the programme was expected to be substantially completed by 31 March, 2014, although a number of things that were supposed to have happened already, had not yet been done. The second dealt with the review and audit of leases, and the service provider was expected get started by the middle of next week. The third project covered finance, supply chain management (SCM) and a review of construction projects, and although a tender had not yet been awarded, it was expected that a service provider would be on board by the second week of January, 2013. One of the terms of reference of this project was that the service provider should engage interns from unemployed graduates, with a clear and formalised skills development plan. All of the projects arising from the key audit findings were backed by detailed action plans.

Discussion
The Chairperson initiated discussion by asking whether challenges surrounding the vesting of assets would result in the deadline for completing the IAR being missed. She also sought an assurance that the bi-weekly meetings, to monitor progress against the action plans, were actually taking place.

Ms C Madlopha (ANC) asked what the difference was between this remedial action plan, and previous plans presented to the Committee, so that the desired result would be achieved. What had been the reason for the PMTE slipping from an unqualified audit in 2007/08 to a disclaimer for the past two years? Who was responsible for the vesting of land parcels – was it the DPW or the Department of Land Affairs, or other departments? Could this be completed by the March 2014 deadline? She suggested the internal audit unit should be “beefed up” so that it could play a role in helping the DPW to avoid receiving an audit disclaimer.

Ms P Ngwenya-Mabila (ANC) said it was difficult for the Committee to fulfil its oversight role, as the presentation had not made it clear when the action plans would be completed. A limit needed to be placed on the amount of outsourcing involved in implementing the action plans, as there were people within the Department who were being paid to do the same job as the outside contractors. The objective should be to build internal capacity and create job opportunities. She also criticised the fact that a new policy had been drawn up to deal with irregular, fruitless and wasteful expenditure, as the requirements of the Public Finance Management Act (PFMA) and Treasury regulations were quite clear. The problem was that people were simply failing to implement existing policies, and the Department had not taken decisive action. A major challenge facing the DPW was its failure to carry out proper planning and budgeting, and these aspects appeared to be missing from the action plan.

Ms N November (ANC) echoed previous concerns that the action plan lacked timeframes, which made it difficult for the Committee to measure progress.

Ms N Ngcengwane (ANC) said the presentation had revived the Committee’s hopes that a turnaround could be achieved. She asked whether the fact that the Government Immovable Asset Management Act (GIAMA) had not been implemented at a local level, had influenced delays in completing the IAR. She felt GIAMA should be implemented at a local level. She was also sceptical about the level of monitoring taking place.

Mr N Magubane (ANC) expressed concern about the high level of vacancies. As far back as 2003/04, there had been 727 vacancies, and there were now over 1 400. The Department kept on promising to fill the vacancies, but the number just kept on growing. The Department was well aware that fraudulent activities were going on all around them, and there were people knew who the “crooks” were who were robbing the government – they even sat with them and shared the proceeds. Either the monitoring and evaluation unit was not there, or they were working hand in glove with the perpetrators, undermining the government and stealing the public’s money on a daily basis. He proposed the current unit should be disbanded and new people put in their place.

Mr M Swathe (DA) said the positions of DG and CFO were critical, and urged that they be filled as soon as possible. In the past, promises to fill vacancies had been broken.

Mr L Gaehler (UDM) said that without timeframes, the action plan document was worthless to the Committee, and requested that this information be provided within two weeks. He pointed out that most of the corrupt activities involving contracts and leases, took place in the regions, and this was where monitoring needed to be strengthened. The lack of a proper government IAR had resulted in the misuse of state property, and the loss of a great deal of money.

The Chairperson said it was her understanding that Ernst & Young had been appointed to compile an asset register, based on information provided by officials of the DPW – or would Ernst and Young be conducting its own research? She added that with other service providers still needed to be appointed to handle verification and data capturing, so there was “no way” the Department could meet the March 2014 deadline. She asked for the role of Ernst & Young to be clarified.

Mr Mfezeko Gwazube, Acting Chief Operating Officer (COO) of the DPW, said Ernst & Young had been appointed as a Project Management Office (PMO), their role being to manage the project to complete the asset register. This meant they would have to coordinate the work of other service providers, the internal staff of the DPW, as well as information from the provinces and other departments (e.g. Land Affairs) responsible for custodial duties. There was also the office of the Chief Surveyor General (CSG) which had been given a mandate to conduct an audit of ownership of land, and whether land had been surveyed. The CSG had indicated the audit was about 95% complete, and should be fully completed some time next year.

The Chairperson asked if the DPW was sure that the information it was providing to Ernst & Young was correct. There were officials in the Department who could give information about all the land in South Africa, but they did not want to make themselves available to do so. What had happened to the asset register which had been in place in the early 1990s? Had the register disappeared because people had grabbed something for themselves?

Mr Gaehler alleged there was a lot of state property being misused in rural areas. This was costing the government billions of rands, and it was essential for the Department to investigate the situation at a local level.

Ms Madlopha said boxes of information had disappeared, and Ernst and Young would be receiving information from the same officials who had been involved. Who would be verifying that the information given to Ernst and Young would be correct? Would the CSG be working with the deeds office to provide verification?

Mr Gwazube said the deeds registry was its base source of information, and if changes had been fraudulently made in the deeds registry, the Department would “be none the wiser,” because this was its last point of assurance regarding ownership. Those aware of any fraudulent activity had an obligation to report it to the relevant investigating authorities.

Responding to other matters raised, he said the candidate for the DG position would be interviewed the following day, and he hoped an appointment would be made by the end of the year. Taking into account the need for Cabinet approval and the appointee probably having to serve two months’ notice, the new DG would be in office by March next year. The appointment of a CFO was close to approval, and an announcement was expected by mid-December.

All spheres of government were responsible for vesting, and while the national DPW was behind in terms of vesting properties that had been apportioned to them (less than 50%), the situation was worse at provincial and local level. The Minister, together with Ernst and Young, had met with all the MEC’s to seek a resolution to this problem, because at the present rate the vesting process would never be completed – and until the process was completed, one would never have an accurate asset register. For as long as any property was not vested with any particular sphere of government, the responsibility for paying municipal rates and taxes rested with the DPW. Provinces did not want the burden of paying for their own property rates and taxes, and it was therefore not in their interests to fast-track the vesting process. A change in the Sector guidelines was needed.

Mr Gwazube defended the DPW’s decision to develop its own policy to deal with fraud and irregular expenditure. While acknowledging the role of legislation like the PFMA, he said the Department had to make it come alive and match the specific circumstances existing within the DPW. This was duplication, but a means of guiding the Department’s activities in line with the PFMA.

The turnaround strategy comprised three elements. These were identifying the challenges, stabilising the core areas in the Department, and transforming the business. The source of the “bleeding” had been identified, and the DPW was going in at full force to correct the situation.

The Chairperson referred to allegations of instances of corruption in areas such as Mthatha, and commented that the stabilisation process needed to be implemented in the regions, otherwise the turnaround would not be achieved.

Mr Gwazube said he would investigate the Mthatha situation. One could not take action against alleged crooks in the Department, based merely on hearsay evidence. The Special Investigation Unit (SIU) had conducted investigations, and had handed completed cases over to the police. The DPW, at a certain level, had been frustrated at the pace at which the police had been registering these cases, but progress was being made.

Mr Mokgoro answered criticism that the action plan did not provide timeframes for monitoring of progress. The presentation had given broad timeframes, but attached to the presentation had been detailed timelines for each planned activity. The deadline for the IAR was March 2014, and for the audit review of leases, February 2013. The deadline for the finance, SCM and construction projects review, remained March 2014, with the objective of receiving an unqualified audit for that financial year.

The strengthening of the internal audit unit was to enable it to increase its investigative work, as its current lack of capacity had prevented this from taking place. There were a number of allegations outstanding, which had not been proven, and beefing up the unit’s capacity would allow action to be taken.

Outsourcing had been necessary because the DPW’s internal staff lacked the competence to carry out the action plans within the required timeframes.

Mr Gwazube said the current structure of the Department was not adequate to support the business of the DPW. It was over-running its personnel budget expenditure, but at the same time, the filling of professional posts had been neglected. A moratorium had now been placed on the filling of non-core posts, and Treasury had provided funding to allow 40% of the 220 identified professional posts to be filled this year.

The Chairperson thanked the delegation for the presentation.

Progress report on Inner City Regeneration (ICR) Programme
Mr Gerard Damstra, Chief Director: ICR, said the brief to advise the Committee on the inner-city initiatives, with specific reference to the roll-out in urban areas, posed a problem, as the DPW’s current mandate from Cabinet was limited to the City of Tshwane. For this reason, the presentation would be divided into two sections, the first dealing with the Tshwane ICR programme, and the other with work being carried out by the DPW in other towns and areas.

The Chairperson explained that the brief had been based on what the Department had told the Committee at a previous meeting, where it had spoken about expanding to other small towns. This was why the Committee was seeking clarification.

Mr Gwazube said he had noted the observation which had been made by the Committee, that the Department did not have a mandate to expand, and he had therefore directed the DDG:ICR to refocus on what still needed to be done in Tshwane. However, this did not mean it had to stop work on its other programmes to accommodate government offices in other cities and towns.

Mr Damstra confirmed that the DPW was sticking to the Cabinet’s mandate, and suggested that the “boundaries may have become blurred” as a result of the number of changes in the Department’s management over the years, when officials had not taken the mandate fully into account. This situation had now been rectified.

The Chairperson asked what needed to be done to prevent a recurrence. If instructions were put down on paper, how could one go out and do things on one’s own initiative?

Mr Gwazube said that control documents had been lacking in the administration of projects, and this was being corrected in the transformation process. Projects would in future be signed off by a project owner, a project sponsor and the budget manager, so that there was tight control.

Resuming his presentation, Mr Damstra said the Tshwane ICR programme had now moved on to the master planning stage. The City itself was a major role player, and the DPW needed to take cognisance of what it was planning in order to work synergistically together. Its goal was to be known as a “capital city of excellence.” He provided details of the Department’s strategic alignment to government policy, and its collaboration initiatives in implementing the programme.

Outlining the development of the mandate from the Cabinet’s decision in 1997, affirming the importance of government departments remaining within the Tshwane inner city as part of an economic initiative to regenerate the area, he said the Re Kgabisa Tshwane (RKT) programme of 2007 was a macro-level planning project to investigate the best long-term accommodation solutions for national government within the inner city. The translation of “RKT” was “the beautification of Tshwane,” and was devised as a brand name. It was inappropriate, and had diverted attention away from the original mandate. It had been discontinued. The project was now referred to only as the Tshwane Inner City Regeneration programme.

The Chairperson said the Committee had wanted clarification on the matter, and this had now been provided. It had been assured by the COO that the Department was following what was in the Cabinet memorandum. The presentation could therefore be ended at this stage.

Mr Malusi Ganiso, Director: Town Planning Services, DPW, said the purpose of the rural towns development initiative was to ensure the DPW had a structured mechanism to deal with its dilapidated properties in regions, districts and local areas. However, the situation was looking bad, because there were no policies or framework in effect to provide for the rehabilitation of properties. The main reason for this was the lack of an asset register.
The result was that derelict buildings were being vandalised or destroyed.

The current situation was that about 500 rural towns were under-developed, with a general lack of bulk infrastructure services. Although these services had originally been built to support a population of only 15m, the small municipalities had such limited budgets that they could not afford to invest in infrastructure. Aggravating factors such as poverty, unemployment, drought and poor service delivery, were responsible for the massive influx of people to urban areas, seeking better environments. The only solution was to increase investment in the rural areas and create jobs.

Poor maintenance and negligence had led to structural and aesthetic decay of state-owned properties in towns, industrial and commercial properties formerly leased by the private sector lay abandoned, residential properties were unused and dilapidated, empty government properties were being illegally occupied by private companies and members of the public, and there was a lack of coordination between the different spheres of government over property utilisation. He had participated in a recent DPW feasibility study at Mthatha, and had discovered that most of the government properties had been converted into guest houses.

Turning to Town Planning Services rural and urban renewal initiatives, he said it was working on government precincts for Johannesburg, Mthatha, Kimberley, Durban, Mafikeng, Polokwane and Nelspruit. They were also looking at about 110 rural towns and small towns, focussing on providing facilities for the Departments of Justice, Police, Home Affairs, Social Security and Labour.

Mr Gaehler commented that proper town planners were required in rural towns, and the DPW should provide assistance.

Ms Ngcengwane said she was worried about who was occupying the large houses in the former TVBC (Transkei, Venda, Bophuthatswana and Ciskei) states, but got the impression that the Department did not really want to know. She suggested that the DPW should ensure it followed the “greening” policy when refurbishing old government buildings, such as replacing old bulbs with energy-efficient globes.

The meeting was adjourned.