Rural Household Infrastructure Grant Performance Audit: hearing

Public Accounts (SCOPA)

01 September 2015
Chairperson: Mr T Godi (APC)
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Meeting Summary

The Department of Human Settlements was called upon to account for poor planning and project implementation when it engaged with the Standing Committee on Public Accounts regarding the performance audit on the Rural Household Infrastructure Grant programme.

The audit covered the period 1 April 2010 to 31 March 2013.  254 sites had been visited where ventilated improved pit (VIP) toilets had been built. The toilets were located in 26 municipalities in seven provinces. The report of the Auditor-General (AG) had identified poor workmanship as a result of non-compliance with the South African National Standards (SANS). It had been found that soil around the toilets had not been properly compacted, doors were damaged, ventilation pipes were broken, most toilets had been built under trees, the roofs of the toilets were not waterproofed, and panels, hinges and locks were broken. At some municipalities, the implementing agents had not fitted the toilets with hand wash attachments, and instead were fitted with empty fizzy drink bottles as hand wash facilities.

The Committee also heard that health and hygiene training had not been carried out among the beneficiaries. Posters had been put up mainly in the VIP toilets, with no explanation as to how the toilets should be used. Some beneficiaries had continued to use water and newspaper and this had caused the toilets to fill up faster than expected.

At the end of the 2011/12 financial-year, the construction of 17% of the targeted VIP toilets had not begun. At the end 2012/13 financial-year, the construction of 46% of the targeted toilets had not begun. The Department of Human Settlements (DHS) indicated that challenges had arisen owing to the inability to excavate due to hard rock surfaces. The situation had been worse in the Free State -- the area looks flat but there are rocks underneath the surface – and that was why it took longer to build there and had pushed the price of one unit to R36 000.

The Committee was further informed there had been no clear reporting lines between the implementing agents and the management consultants. The service level agreement between the DHS and management consultant had not been based on performance, as it had not indicated actual deliverables. Consequently, the management consultant had been paid in full even when there had been inadequate progress on site. The management consultant had not always attended site meetings. This had resulted in instances where the construction of the VIP toilets had not been according to the required standards.

The DHS had paid regional sanitation coordinators and the management consultant to perform the same function. The management consultant had received 95% of its total budget between July 2010 and March 2013, while only 4% of the budget allocated to building the VIP toilets had been spent during this period.

In the appointment of additional service providers to construct VIP toilets, there were vast discrepancies in the scores awarded by the members of the Bid Evaluation Committee. One of the members of the bid committee consistently awarded lower scores per criterion when compared with the other three members. Three bidders had been disqualified as a result. The DHS had not taken the results of the background and the security screenings into consideration before appointing the additional service providers.

Meeting report

The Chairperson welcomed everyone and explained the agenda for the day.

Rural Household Infrastructure Grant Performance Audit: hearing
Ms T Chiloane (ANC) asked why the Department had under-spent by R504.1 million.

Mr Mbulelo Tshangana, Acting Director-General (ADG): DHS, explained that in the built environment more time was spent on planning. The Department was never geared up for infrastructure projects. There was a shortage of engineers. The gearing up for capacity took longer than had been expected. The Department had to make use of two implementing agents -- Imvula Trust and the Independent Development Trust (IDT). The grant had been given to Imvula Trust, but its performance had not been satisfactory. Most municipalities had not received the grant because they did not have capacity and clean audits. The provinces were also not geared up for these infrastructure projects.

Ms Chiloane wanted to know why there was a lack of thorough planning before the implementation of the programme of the Department. She said planning came before implementation.

The Acting DG said the Auditor General (AG) report had pointed out concerns around procurement, service level agreements (SLAs), and terms of reference regarding the implementation of these projects. The grant had been disbursed to the implementing agents, who had not met the targets. The implementing agents had not performed to the satisfaction of the Department.

Ms Chiloane, on tenders, pointed out that all bidders had been scored low, except for one bidder. This meant the bids had never been scrutinised thoroughly. She wanted to know if there was any member of the Bid Evaluation Committee who had disclosed a relationship with the bidders.

Mr Tshangana said that discrepancies had been picked up. The Adjudication Committee had referred the matter back to the Bid Evaluation Committee. No conflict of interest had been picked up. The only concern had been on scoring. The fluctuations had been a result of the absence of a Bid Specifications Committee. The members of the Bid Evaluation Committee had not been clued up on procurement issues. They were just programme managers. On why one bidder had been scored higher, he said the Department still had to come to a conclusion whether there had been a conflict of interest. He said the Department had evaluation criteria based on the nature of work to be done. That was why the Department needed to have a Bid Specification Committee to look at the terms of reference, functionality and other issues. The terms of reference, it appeared, were not tight and that was why there were fluctuations. When the Department had procured these projects, it did not have a technical expert.

Ms Chiloane wanted to know why the service provider had not been screened.

Mr Tshangana said that screening had happened, but the results had taken a long time to come. There had been pressure to start the work. In hindsight, the Department should not have started the work without the results.

Ms Chiloane, with regard to the capability of project managers, asked why a management consultant had been appointed and yet had failed to monitor the project involving the construction of toilets. She also asked if the Department could tell the Committee whether there was value for money in this project.

Mr Tshangana reported that the management consultant had been appointed to help the Department to manage the implementing agents who were not performing. The project had had regional sanitation coordinators. Some of them knew what needed to be done and had done work successfully, but there were areas where there had been fluctuations.

Ms Chiloane pointed out that the consultants had been paid R40m, yet regional coordinators were employees of the Department. She wanted to find out if it was really necessary for the Department to outsource, because it appeared that the regional sanitation coordinators were doing work for the management consultant.

Mr Tshangana explained that the regional sanitation coordinators were responsible for the sanitation programmes, but not all regions were capacitated in sanitary programmes. The management consultant and regional coordinators were supposed to work together but the whole thing had been undermined by contractual arrangements. He further indicated there was a need to outsource in order to beef up capacity in the Department and to address the financial challenges faced by the implementing agents. The management consultant had been meant to monitor the implementing agents and had been paid money. The whole issue could be blamed on the contractual arrangements. Contract management had never been done.

Mr E Kekana (ANC) asked if the implementing agents had provided hygiene education and training to the communities they were doing work in, and wanted to know the value of the contract.

Mr Tshangana said no training or education had been given to the communities. The training aspect had been included in the SLAs, but whether it was adhered to by the two agents was another story. The Department had run only a hygiene education programme with the two implementing agents. The implementing agents had been advised to educate the beneficiaries on maintenance and hygiene.

He said that the value of the contract in the first year was R100m, and one company received R41m. He was unsure of how much the second company received.

Mr Kekana asked if the Department had the capacity to execute projects or not, and enquired who the two agents were reporting to.

Mr Tshangana said that in some regions the capacity was not there, and no work had been done. The required capacity was in the fields of engineering and town planning, but this area of concern had been moved to the Department of Water Affairs and Sanitation. The two agents reported to the regional coordinators, who certified their work.

Mr Kekana, regarding screening, enquired if it was normal practice within the Department to publicise the specifications and not follow to them. Which procedure of law was allowing the Department to disburse funds to a company that was in financial difficulties?

Mr Tshangana replied that when it came to screening, standard procedure was always adhered to, but the problem lay with planning. He informed the Committee the Department was allowed to disburse funds to a financially ailing entity as long as there were contractual agreements in place. Funds could be disbursed from a department to another state entity like the IDT.

Mr M Hlengwa (IFP) remarked that the whole issue was the result of the lack of capacity to plan in order to manage these projects. It appeared as if one could do as one wished with public funds.

Mr Tshangana pointed out that when the project had started, internal capacity had been lacking. The core function of the Department was to build houses. Even the capacity that had been inherited from the Department of Water Affairs had not been enough. Professional service providers had been appointed and the implementing agents were being phased out. That was why, for monitoring and evaluation capacity, the Department had appointed Maxxima.

Mr D Ross (DA) commented that the Department was supposed to have standard contracts. He suggested it should seek legal opinion in terms of looking at contracts so as to avoid awarding them before screening was completed.

Mr Tshangana said contract management and enforcement were challenges facing the government departments, unlike in the private sector. This meant one needed to have good contract managers to do the enforcement.

Mr M Johnson (ANC) asked the Department to comment on the issue of norms and standards and poor workmanship that had been reported in Bloemfontein, where one toilet or unit was going to cost R36 000. He also asked about the impact of these projects on the beneficiaries.

Mr Tshangana, pertaining to norms and standards, said there were criteria that were used in the sizing of pit latrines. There were regulations to be followed. The challenge was on geotechnical variances. For instance, the Free State looked flat but underneath there were rocks. That was why it took time and more money to build toilets there. Concerning the impact on beneficiaries, he said there were good products in a number of areas, and the Department took full responsibility for where non-compliance had occurred.

Mr M Gana (DA) wanted to find out if the entire contract was open only to non-governmental organisations (NGOs). He asked if recommendation (f) of the AG’s report had been referred to the Competition Commission, and enquired if the R39m given to Maxxima could be recovered.

Mr Tshangana replied that the bid was limited to NGOs only. Recommendation (f) of the AG report had been actioned and forwarded to the Competition Commission. Maxxima had been paid because the work had been done and reports had been received and verified.

The Chairperson asked the National Treasury to explain the issue of advance payment.

An official from National Treasury explained there was a section within the Public Finance Management Act (PFMA) that talked about advance payment -- and discouraged it. However, if the service provider required it to do the work, the accounting officer had to approve it.

The Department said it had noted the concerns expressed in the AG’d report. As a result, it had started to investigate cases of irregularity, collusion and conflict of interest. It had reviewed procurement processes to avoid recurrences, and had identified professional service providers. The Housing Development Agency was going to take over work from the IDT and the Imvula Trust. The Department had also agreed to improve systems for monitoring and evaluation, payment would be done when work was completed, civil cases would be instituted, and contracts would be revised.

The meeting was adjourned.


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