Council for the Built Environment on its 2014/15 Annual Report

Meeting report

Council for the Built Environment (CBE) on its 2014/15 Annual Report
Chairperson’s opening remarks
The Chairperson expressed concern that Council for the Built Environment (CBE) had had an acting Chief Executive Officer (CEO) for a very long time, and wanted to know whether there was a timeline in which this position would be filled permanently.

Mr Isaac Nkosi, Chairperson of CBE, responded that the current Acting CEO had been in the acting position for more than a year. In March 2015, the Board took a decision to suspend the previous CEO pending an investigation into directives that were not adhered to

The Chairperson requested that the Committee should be provided with detailed information around the suspension of the CEO, including the charges, and Members needed to know the position.

Mr Nkosi responded that the CEO was put on a suspension in line with a resolution of the Board, following the findings from the Auditor-General of South Africa (AGSA) on the breakdown of the organisation, mainly in the Supply Chain Management (SCM) and risk management, and the recommendations that were not implemented to address these issues.

Ms E Masehela (ANC) wanted to know how far the disciplinary process that was instituted against the suspended CEO had moved, noting that it must be about a year that it had taken so far.

Mr K Sithole (IFP) asked the Chairperson of the Board to explain in detail as to why the previous CEO was put on a suspension. He felt the explanation that had been provided was inadequate.

Ms P Adams (ANC) commented that CBE was an important entity in the built environment and therefore it was completely unacceptable for it to have an acting CEO for more than a year. The response that had been provided by the Chairperson of the Board around the suspension of the previous CEO was not very convincing. She too urged that more details were needed.

The Chairperson reiterated that Members of Parliament are entitled to full disclosure of information around the charges that had been instituted against the previous CEO and the gravity of those charges. There are also legal ramifications in having an individual in an acting position for more than a year. It was clear that the entity had contravened various labour laws. The Committee would not accept the “spinning of information” as the priority was to get facts without any vagueness.

Ms D Kohler-Barnard (DA) wanted to know if the Department of Public Works (DPW), together with the Director-General, managed to play any oversight role on this matter. She too reiterated that it made no sense for such an important entity as the CBE to have an acting CEO for more than a year. The process of appointing a permanent CEO should have been completed by now. She also asked whether several individuals had been acting in rotation, or if there was one individual acting for more than a year.

Dr C Madlopha (ANC) enquired if the CEO was suspended with or without a pay.

Mr Nkosi replied that the intention of the Board was to conclude the matter at the end of November 2015. The investigations on the matter were concluded in August 2015 and charges were put to the suspended CEO at the beginning of November. However, the suspended CEO fell ill and was hospitalised for about a month. The Board was forced to wait for the CEO to recuperate. The process was resumed at the beginning of February 2016 and the conclusion was now expected at the end of April 2016.

The Chairperson complained about the fact that the entity had waited for another four months after the recuperation of the suspended CEO, and asked why this particular aspect took so long to be resolved.

Ms S Kopane (DA) asked about the people that were involved in the investigation of the suspended CEO. She said it was also unclear as to why the matter had not been referred to the South African Police Service (SAPS), as this was where criminal cases were being dealt with.

Dr Madlopha enquired about the budget implications on the entity if the CEO was being suspended with payment.

Ms Kohler-Barnard asked about the annual salary package of the suspended CEO.

The Chairperson reiterated that his primary concern was the length of time involved. He added that it was quite likely that lawyers were delaying the matter and this could be expensive.

Mr Nkosi replied that the Board had hired Gildenhuys Malatji attorneys in Pretoria to draw up the charges against the suspended CEO.
 
Dr Madlopha asked whether the delays on the matter were caused by the involvement of the lawyers and how much had already been paid to the lawyers to date.

Mr Nkosi replied that the process had been held back by a number of things, particularly the lawyers that were involved on the matter, plus the illness of the suspended CEO; he reiterated that the Board had felt it must wait for her recovery. The attorneys had been asked to ensure a conclusion by the financial year end. The case so far had cost around R1.4 million. He expanded that the suspended CEO was charged after non-compliance with Council resolutions. The CEO had, in particular, changed the Mathematics and Science Supporting Programme without consulting with the Council or seeking its concurrence, and without explanations. The second reason for the suspension was the complete disregard of the recommendations that were made in the AGSA report, around the need to put controls in place in SCM and risk management. SCM was important for the operation of any entity and could not be compromised. Thirdly she had failed to declare business interests as required by the policy of the organisation.
  
He added that the Chief Operating Officer had been asked whether she would accept the acting position, but she had rejected the offer as she had been in the organisation for just a few weeks, and she was given 60 days to settle into her position, then an extra month, at her request, then she accepted the position as Acting CEO. The suspended CEO was salaried R1.2 million per annum and she had been suspended with pay, in line with the organisation's policy. This obviously had implications on the budget. The COO was being paid an acting allowance.

Dr Madlopha wanted to know if the acting allowance was budgeted for, or was part of the R1.4 million cost that was indicated earlier.

Mr Nkosi clarified that the R1.4 million represented the costs of the case, excluding the acting allowance, which was currently at  R172  000.

Dr Madlopha requested that the Committee should be provided with information on the number of months where the organisation had paid the R172   000.
 
Ms Kopane asked the Committee to be provided with information on how much was spent on the firm leading the investigation, and whether this was also included in the R1.4 million. She requested written details around the suspended CEO.

Ms Kohler-Barnard expressed dismay that it took almost five months for the organisation to actually conduct an investigation and reach any conclusion on the matter. She wanted to know if it was not a criminal offence for an individual not to declare business interest; this was something specifically put in place to prevent fraud and corruption. The Committee should also be provided with the name of the suspended CEO, in order for the individual to be publicly known.

Ms Kopane wanted to know if the organisation had managed to remove the list of those service providers with whom that the suspended CEO apparently had an interest that she had failed to declare.

The Chairperson asked if there was any link between the suspended CEO and the service providers that were being used by the organisation.
 
Mr Nkosi admitted that indeed the suspended CEO did not disclose having a business interest with some of the service providers, but there were no findings on whether those service providers were also doing business with CBE. CBE had prioritised dealing stringently with non-performing service providers.
 
Mr Clifton Changfoot, Chief Financial Officer, CBE, expanded that the legal proceedings have affected the budget of CBE, although he said that this was fairly minimal. Measures that are put in place to cut some of the unnecessary costs, especially on Programme 4, where budget is based on the appeals instituted. CBE was also able to reprioritise on the budget from unfilled vacant posts to deal with the legal expenditure. Only after the Medium-term Budget Review could it be decided where funds could be made available or where increased budgets would be required.

Ms Kohler-Barnard asked if CBE had provided any legal assistance to the suspended CEO, and it was not clear whether she was self-representing.

Mr Nkosi responded that the initial plan was for the Council to provide her with legal counsel but the suspended CEO was adamant that she would represent herself in the hearing. Her name is Ms Gugu Mazibuko.

Ms Kopane asked about the implications of having an acting CEO for over a year, and expressed her concern that some of the money that was budgeted for the unfilled vacant posts was used for the legal expenditure.

Dr Madlopha was also worried on this point, and said that the organisation should be able to allocate a budget for the legal unit instead of taking money from other important programmes.

Mr Nkosi responded that the Board had provided full support to the Acting CEO, in order to ensure that the organisation was still able to operate efficiently. The inability to fill the position of the CEO on a permanent basis had had an impact on the performance of CBE. Detailed information on that would be presented in the quarterly report and the Annual Report. There was a legal and compliance unit within the entity, but the budget that was allocated to the unit was small in relation to the legal matters that it had needed to deal with.

Mr Changfoot said that CBE was able to fill all the budgeted posts, albeit later than original expected.

Ms Priscilla Mdlalose, Chief Operations Officer and Acting CEO, CBE, said that there was one other individual who was being investigated in the SCM unit, who had resigned before the finalisation of the investigations. She confirmed that there was a database in place, to check all the companies that were to do business with the organisation.

The Chairperson expressed concern that the organisation did not take any further steps after the resignation of the individual from the SCM.

Ms Mdlalose replied that the organisation had taken a conscious decision not to take any further steps after the individual decided to resign.

The Chairperson reiterated that this was of concern, particularly since that individual may well simply move to another entity. The fact that an individual who is suspected of any wrongdoing could just resign meant that everyone was complicit in the wrongdoing.

Mr Mziwonke Dlabantu, Director-General, Department of Public Works, said that this Department was  aware of the current situation in the organisation and there were discussions with the acting CEO and the Chairperson of the Council on the extent of the problem, and measures that could be put in place to remedy the situation. The Department had tried to mediate in an attempt to expedite the disciplinary process against the suspended CEO. This was a neutral intervention that aimed to deal with the underlying problem. The Minister had also given a direction to strengthen oversight over the shareholder compact of the entity and ensure that there was coherence in what the entity was doing. The Minister had also directed that such matters should not just end on the resignation of the individual in SCM but it should be pursued further.

Dr Madlopha suggested that perhaps there was a need to look at the legislation so as to make it possible that cases could be referred to SAPS even if the individual had resigned. The resignation could not be used a way in which unscrupulous individuals could gain exemption from criminal charges. She added that the entities had to ensure that the matter was speedily concluded since it was impossible to have good service delivery whilst there was no stable leadership. The Committee wanted to know also whether the Department would wait for the findings from the ongoing investigation before making a permanent appointment of the CEO.

Mr Dlabantu responded that there would be a meeting with CBE to discuss the way forward and how to deal with the instability in the executive position. He also clarified, in answer to the previous question, that the amount paid to the investigating firm, Ubuntu, was R350 000 and this was not included in the figure of R1.4 million given earlier.

Annual Report briefing
Ms Priscilla Mdlalose, Acting Chief Executive Officer, Council for the Built Environment, indicated that this entity operated under four programmes: Programme 1: Government Policies and Priorities, Programme 2: Skills Development in the Built Environment, Programme 3: Research and Information in the Built Environment, Programme 4: Public Interest. The entity managed to achieve 96% of the total Annual Performance Plan (APP) deliverables in the 2014/15 financial year, compared to 86% achievement in 2013/14 and 71% in 2012/13. CBE also managed to achieve an unqualified audit opinion in 2014/15 and ensure that corporate governance framework and risk management strategy and plan was developed and implemented. There was also an inauguration of the Mathematics and Science intervention that supported learners in four provinces. The CBE Workplace Training Programme was an ongoing CBE intervention in which 53 candidates and 101 interns were placed with host workplace training employers.

CBE had participated in 13 accreditation visits out of the scheduled 21 visits, together with four professional Councils. A report: A benchmark analysis of alternative approaches to attract, develop and retain BE professions in three government spheres was finalised. CBE had also adopted a reviewed Appeals policy by Council, introducing a simplified procedure aimed at cost and time saving. The entity was also able to ensure the completion of all appeal cases within the legislated 60 days period. It had also introduced a best practice model on appeals and disciplinary investigations, to all six Built Environment Professional Councils (BEPCs).
 
Ms Mdlalose said Programme 1 was focused on ensuring a capacitated and capable CBE that was responsive to government’s development priorities in the built environment. All six annual targets of Programme 1 were achieved. These included one report on skills needs relating to built environment graduates and professionals who were required to support government’s infrastructure delivery programme; and the implementation of one project to support health and safety in construction initiatives.

Programme 2 was premised around facilitation of skills and human resource development in the built environment, in line with the CBE mandate and in support of national goals and priorities, as well as transformation. All of the six annual targets of the programme were achieved. 150 students were reached through the rollout of the Mathematics and Science programme and there was one report on 100 interns placed in workplace training.

Programme 3 focused on providing research, knowledge and information on the built environment to enable the CBE to advise government on matters within the scope of the built environment. A total of four out of five annual targets were achieved. These included two research reports on built environment issues pertinent to the BEPCs and two research reports on built environment issues that are a priority to the Department. The target that was not achieved was one pilot project on the Research and Information Hub on built environment issues. It was due for completion by 31 March 2015, but the reason for non-achievement was essentially lack of human capacity.

Programme 4 focused on the fulfilment of the statutory mandate of the CBE to act as an appeals body on matters referred to it in terms of the law regulating the BEPs, and the implementation of Identification of Work (IDoW) as set out in the CBE Act 43 of 2000. All four of the annual targets were achieved for Programme 4. These included one implementation report on the Best Practice Model for appeals and disciplinary proceedings within the built environment by the six BEPCs, and a report on the implementation of the decision of the Competition Commission by the five BEPCs.
 
Ms Mdlalose indicated that the audit report for 2014/15 showed that the entity was still struggling to deal with the issue of compliance with legislation, but material misstatements of non-current assets, current liabilities and disclosure items as identified by the auditors in the submitted financial statements were subsequently corrected, resulting in an unqualified audit opinion. There were some findings. In relation to procurement and contact management, competitive bids were not advertised for the required minimum period and the bid adjudication was not always done by committees. The preference point system was not applied in all procurement of goods and services above R30  000. The audit findings also identified that the accounting authority did not take effective steps to prevent irregular expenditure, and the proper control systems to safeguard and maintain assets were not implemented and monitored. The staff compositions of CBE showed that the top and senior management consisted of four females and three males, middle management/professionally qualified staff comprised one female and three male. 73.1% of the staff were African, 7.7% were coloured, 3.8% were Indian/Asian and 15.4% were white.
 
Ms Mdlalose concluded that the professional registration numbers reflected that BEPs were overwhelmingly white, with numbers of previously disadvantaged individuals (PDIs) barely reaching 20% in all six professions. In 2013/14, professional registrations (excluding candidates) showed that whites constituted 76% of total professional registrations, followed by Africans at 15%; Indians at 6% and lastly coloureds at 3%. Gender transformation, like racial transformation, remained insignificant, and the figures in 2013 indicated that the professions were made up of only 14% females. The transformation of BEPCs should address this issue and the Gender Strategy must accompany this as a non-negotiable. The percentage of registered professionals complying with continuing professional development (CPD) requirements was currently sitting at 60%-80%.

Discussion
Ms Kohler-Barnard asked for the reasons why there was over-expenditure in some of programmes in the entity. She expressed concern that CBE had had an irregular expenditure of R4.1 million related to procurement and SCM. She wondered whether this was not the outcome of the individual from the SCM who had resigned when she was being investigated. The Committee should be told if there were additional individuals who were being investigated in the SCM unit.

Mr Sithole wanted to know the explanation why the entity had under-spent on Programme 2, 3 and 4. The issue of transformation was still being disregarded in the built environment, with domination in the sector of white males, and it was shocking to hear that there were 39 878 whites in the six BEPCs compared to 19 746 Africans. He asked if there was any system in place to ensure that transformation was achieved in the sector.
 
Ms Adams also indicated that there should be measures in place to deal with the issues of not only racial transformation but also gender equality; given that there were 10 028 females in the six BEPCs compared to 56 687 males. It was equally important to work on inclusion of people with disability in the built environment, and she wondered if there was any engagement with disabled people. She asked why a report on the investigation that had requested by the Minister in accordance with section 19(3) of the Council for the Built Environment Act, regarding the functions of the Council, had not been made public. She wanted to know the name of the four provinces in which the Mathematics and Science programme was piloted. It was also unclear as to why CBE only participated in 13 accreditation visits out of the scheduled 21 visits together with four professional councils. She was concerned to hear that two thirds of engineers in South Africa are not registered, and she urged the CBE to rectify this situation.

Ms Kopane asked whether there was any specific reason why the name of Programme 4 was changed. She asked why there was  over-expenditure of R3.2 million in Programme 1. She questioned why there was expenditure of R8.4 million for personnel, despite the fact that there was no reflected expenditure allocated for that. She asked that the Committee should also be briefed on the number and nature of pending disciplinary cases, and those that had been finalised.  She wanted to know the timeline in which the organisations would fill the four key positions in operations and cooperative services.

Mr M Filtane (UDM) asked if there were any measures in place to deal with the challenge of lack of capacity that ultimately led to non-achievement of the one pilot project on the Research and Information hub for the built environment. He wanted to hear the main challenges that made it so difficult to achieve transformation in the built environment, and what transformational targets had been set by the organisation. He also said that it was important for CBE to outline what achievements it had in strengthening the technical capacity of local, provincial and national government, as stipulated in CBE's Strategic Goals. He asked if any action had been taken against senior management for its failure to exercise oversight responsibility in relation to financial reporting, compliance and related internal controls.

Dr Madlopha requested that CBE should provide the names of the provinces where the main focus would be on the strengthening the technical capacity; she wanted to hear whether the focus would be mainly in rural areas where assistance was most needed. She asked in which provinces there would be a piloting of the Mathematics and Science intervention, to assist the Committee when it did oversight. CBE was asked to provide detailed information as to the challenges that are delaying the issue of transformation in the built environment, and what interventions would be implemented to expedite transformational goals in the sector. She also asked for the recruitment strategy to attract young people into the sector. She expressed her appreciation for the fact that the CBE had received a number of unqualified audit opinions, and there had been an improvement from the previous financial year also in terms of the interventions implemented, but she did want to hear whether officials that were responsible for irregular expenditure were being held accountable for their financial mismanagement.
 
Ms Masehela asked what plans were in place to ensure that the piloting of the Mathematics and Science intervention was also rolled out in other provinces. She wanted to know what was in place to deal with the challenge of lack of capacity.

Mr Changfoot responded that the over-expenditure was basically in the SCM and this was something that the Board was working on. AGSA could not find any evidence whether the irregular expenditure of R4.1 million was a misplacement of funding, or whether this was a deliberate misstatement. CBE was currently working on this, to ensure that the funding was accounting for. CBE was also implementing a database system that would keep the information on all service providers, and this was one of the measures aimed at putting controls in place for procurement and SCM. The under-expenditure in programmes 2, 3 and 4 was a result of the reprioritisation in the budget. The budget projection was not accurately done to ensure that all programmes were allocated adequate funding.

The Chairperson interjected and requested clarity on how was it possible for the budget projection for the programmes not to be accurately done. He added that the Committee also wanted more information on why CBE did not pursue the case of the individual in the SCM who resigned during the investigation of the suspected misconduct.

Mr Changfoot responded that he only joined CBE on 16 March 2015, and therefore his responsibility was limited to showing the figures that had already been represented in the accounting records before his arrival. The budget allocation was done prior to his arrival so he could not comment. He hastened to add that this was not an attempt on his part to abscond from his current responsibility as an accounting officer.
  
Mr Nkosi said that CBE was trying to deal with all the challenges of over and under expenditure in various programmes, particularly Programmes 2, 3 and 4. CBE had used people in rotation to act as CEOs; the first Acting CEO had worked in this post from March until November 2015, and the currently Acting CEO has been in that position from November to date. Most of these questions could be answered by the person who had been Acting CEO from March to November 2015.

The Chairperson complained about the fact that Mr Nkosi was not providing adequate responses to the questions that had been asked by Members.

Mr Nkosi replied that he had been the Chairperson of CBE since August 2014.

The Chairperson said that in this case Mr Nkosi should have institutional memory to respond to the questions that had been asked by Members. He suggested that the Committee should schedule another urgent meeting with CBE in order to address all the outstanding issues. It was clear that the Department of Public Works also needed to be involved in the discussions around the operation of the entity, and how to stabilise the current situation.

The meeting was adjourned.