Public Works on its 2015/16 Annual Report, with Auditor General input; Council for the Built Environment on its 2015/16 Annual Report

Meeting report

Auditor-General of South Africa (AGSA): Briefing
Ms Corne Myburgh, Business Executive: AGSA, reminded the Committee that in 2014 there was a transfer of functions from the Department of Public Works (DPW) to the Property Management Trading Entity (PMTE), and the biggest transfer was the immovable assets. There was a delay in getting clear guidance from the office of the Accountant General and the Accounting Standards Board (ASB). AGSA had managed to get a meeting with all the role players only on 26 September 2016 and the audit of the PMTE was concluded on what was applicable, and what was not applicable.

Ms Myburgh said that the AGSA had a constitutional mandate and, as the supreme audit institution (SAI) of South Africa, it exists to strengthen our country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence. AGSA had noted that there had been a regression in the audit outcomes of the portfolio over the period of three years. In relation to financial statements’ processes, the AGSA noted the Independent Development Trust’s (IDT’s) inability to accurately and completely account for programme-related balances and transactions had resulted in a regression from a qualification in 2013-14 to a disclaimer of opinion in 2014-15. Action plans had been approved but were not fully implemented, resulting in a repeat disclaimer in 2015-16. Though the PMTE had remained unchanged, with a qualification between 2013-14 and 2015-16, the number of qualifications was reduced in 2015-16. This could be attributed to the efforts made by management to enhance the control environment.
           
Only the Construction Industry Development Board (CIDB) were able to submit quality financial statements that did not require material adjustments as a result of the audit process. Although there was a significant reduction in the amount of irregular expenditure incurred in the portfolio, none of the entities was fully successful in the prevention thereof. AGSA had raised concerns on the annual performance reports submitted by all entities in the portfolio, with the exception of the CIDB, where no material adjustments to the performance information submitted were required. The internal audit unit at CIDB had conducted a review of the performance report, and management were able to correct the errors identified before submitting the performance report for auditing. The PMTE had for the first time submitted its own annual performance plan (APP) in 2015-16 and was still enhancing its systems and controls.
           
The control environment within the Public Works portfolio was showing some movement in the right direction; however, this was not occurring at the required pace across the board. The Department should enhance its monitoring and review over annual financial statements, as well as over the record management of agencies collecting information regarding the Expanded Public Works Programme (EPWP) on its behalf.

The improvement in the overall control environment at PMTE could largely be attributed to the robust implementation of the turnaround strategy, including the filling of key positions within the finance unit. The IDT should timeously implement and monitor the implementation of actions plans that would be effective in addressing the reasons for the repeat disclaimer. The assurance provided by the audit committee had improved over the three years, and they had provided a level of assurance linked to their legislative mandate. Management was slow in implementing the recommendations from internal and external auditors as well as the audit committee, to ensure positive audit outcomes. The Portfolio Committee provided assurance through robust engagements with management, follow up on recommendations, action plans and quarterly reports.

Ms Myburgh said that the quality of the APP had regressed slightly. AGSA noted that the reported performance information on Programme 3 of the Department was not reliable when compared to the source information or evidence provided. The reported achievements against planned targets of important indicators for Programme 4 of PMTE were not reliable when compared to the information. AGSA also observed that the adequate and reliable audit evidence for Programme 1 could not be provided for the reported achievements against the planned targets of 44% of indicators. These targets were informed by the value of programme expenditure. Auditees who avoided qualifications due to the correction of material misstatements during the audit showed that the outcome, if not corrected, was 80% for those with material misstatements and 20% for those without material misstatements. The outcome after corrections showed 60% with no material misstatements, and 40% with financial misstatements. AGSA pointed out that there had been a slight improvement in compliance with legislation and the quality of financial statements.

There had been a slight decline in unauthorised expenditure within the portfolio, from R6.2 million in 2013/14 and R5.5 million in the 2014/15 financial year, to nothing in 2015/16 financial year. There had been an increase in fruitless and wasteful expenditure from R3 million in 2014/15, to R7 million in 2015/16. There had also been a significant decrease in irregular expenditure, from R1 314 million in 2014/15 to R522 million in 2015/16 financial year. There was significant under-expenditure of R1.301 billion, where implementation was severely impacted by the erratic nature of the payments received from the Department, amongst other factors. AGSA was concerned that the threshold for local content on designated sectors procurement was not always properly applied. It was clear that certain awards were not always made to suppliers based on criteria that were consistent with the original invitations for bids. Evidence for four performance targets relating to the value of programme expenditure for the year could not be obtained due to the entity’s inability to accurately record programme expenditure incurred on behalf of client departments in the financial period to which they related. 

The IDT and relevant client departments did not always ensure that payments were made to suppliers within the required 30-day period. These delays in payments significantly impacted on the contractors’ ability to complete the projects. These delays eventually necessitated the processing of advance payments to suppliers, which were incorrectly accounted for by IDT management as programme expenditure. The IDT placed significant reliance on the use of consultants to verify the work performed by contractors. Management must strengthen its own verification processes and hold transgressing consultants accountable in instances where progress certificates did not coincide with the work on site. Vacancies at senior management level at the DPW, IDT and CBE had resulted in misstatements in the performance reports that were not detected and corrected by management during the review process. The overall stagnation in compliance was as a result of auditees not effectively implementing all the recommendations relating to supply chain management (SCM) preventative controls, such as approval of deviations, and identifying conflicts before awards were issued.

Ms Myburgh highlighted that in AGSA’s interaction with the Minister, commitments were solicited and certain of the prior year’s commitments were reinforced. A lot of the commitments made are currently in progress, and thus no improvement in overall audit outcomes had been noted at this stage. AGSA had a number of recommendations, and these included:

• Monitoring the implementation of action plans to address qualifications at the IDT and PMTE;
• The accounting officer/authority of the DPW and CBE should provide quarterly feedback to the Minister and Portfolio Committee (PC) on the progress made in filling of key vacancies;
• The PC should monitor the progress made in the portfolio to investigate irregular expenditure and the implementation of consequence management;
• Management of PMTE should provide feedback to the PC with regard to the finalisation of the provisional amounts with respect to immovable assets in preparation for full generally recognised accounting practice (GRAP) compliance for the financial year ending 31 March 2017.

Discussion

Ms D Kohler Barnard (DA) said that what had been presented by the AGSA seemed like a complete opposite to what the Department’s entities had presented to the Committee. There appeared to be quite a bleak picture in the general performance of the portfolio. The IDT had indicated to the Committee that it had received a “better” disclaimer audit opinion in the current financial year, but  getting a disclaimer always implied that the situation was very bad. It was extraordinarily shocking to hear the IDT board saying the Committee should be happy with the current disclaimer audit opinion, just because it was not as bad as the previous one. It would be important for the Committee to hear from the AGSA if there was such a thing as a “better” disclaimer audit opinion.

She asked about the total number of forensic investigations that are under way, as each of these investigations seemed to involve an amount more than R100 million. It was also concerning to see that there had been a lot of people resigning, or being dismissed, before any investigation was undertaken without any attempt to recover all the funds that had been “stolen”. What steps had been taken to ensure that all those funds that had been lost through fruitless and wasteful expenditure were recovered?

Ms E Masehela (ANC) said the AGSA presentation had shed a lot of light on a number of important issues. It would be important for the Committee to be briefed on the percentage that was being charged by the IDT on the client departments, as some of them had been complaining about the lack of communication from the IDT on the fees that were being charged. The Committee should also know about the person who was giving IDT the “go-ahead” to increase the fees that are being charged to client departments. The assumption was that it should be the AGSA who was supposed to be giving the IDT guidance in terms of the amount charged. The lack of payment from client departments could potentially put the IDT at risk of being unable to generate revenue.

Ms P Adams (ANC) appreciated that the presentation was as detailed as possible and eloquently explained a number of key issues to be noted. It was unclear if the AGSA, together with the Treasury, could solve the challenges experienced in EPWP where it had been highlighted that the reported performance information was not reliable when compared to the source information or evidence provided. There should be a concerted effort to streamline the processes in the EPWP in order to solve all the challenges that were being experienced by the Department. It was confusing to observe that the AGSA had described the internal audit committee’s performance as generally “good,” despite the fact that the PMTE and IDT were still in the “concerning group”. The audit committee was supposed to have quarterly meetings and warn various government entities on potential threats that were likely to be encountered. 

Mr F Adams (ANC) asked if the commitments that had been made by the Minister in the previous financial year were also to be taken into consideration and merged with the new ones that had been made in the current financial year. What was the exact percentage of those commitments that had been met and implemented, and those that had not been met as yet? The AGSA should also enlighten the Committee on the reasons that had been provided as to why some of the commitments had not been implemented as yet.

Ms S Kopane (DA) said that the presentation that had been made to the Committee painted a bad picture of the performance of the Department and its entities. It was also clear that all the challenges that had been highlighted to the Committee had already been highlighted many years before. The Committee should be briefed on what was to be done to ensure that the commitments that had been made by the Minister were implemented.

The Chairperson commented that some of the issues that had been pointed out by the AGSA should not only be dealt with by the AGSA or the Department, but should also include the Standing Committee on Public Accounts (SCOPA). It would be important for the Committee to be present when the Department was called upon by SCOPA, as this was a platform that was looking at issues that had been raised in the past.

Mr M Filtane (UDM) enquired if the management consequence plan of the Department was able to bring about any results in effectively dealing with the problem of unauthorised, fruitless and irregular expenditure. It was clear that there was a low level at which the Department was able to tolerate the problem of recurring unauthorised and irregular expenditure. There was cognisance of the fact that the AGSA had legislative constraints in terms of instituting disciplinary measures, as its main mandate was to monitor the expenditure of public funds. There should be measures in place to recover all the funds that had been lost through unauthorised, fruitless and irregular expenditure. The matter of fruitless expenditure was the most painful of the three expenditures, as it meant that public funds had not been used for what they were intended. There was no doubt that fruitless expenditure should be regarded as a crime, if there was a serious intention to turn things around within the portfolio. What could be the most effective way of managing the consequence plan that would ultimately manage the problem of fruitless expenditure?

Mr Filtane asked if it was possible for AGSA to recommend that the number of government departments should be reduced, as it would not help for the current administration to keep on increasing the number of government departments and later complain about the lack of funds to fill vacant posts.  Members should support the suggestion that had been made by the Chairperson, for the Committee to be present when the Department was called upon by SCOPA. However, it would not help much if the Department’s entities were absent from that engagement.

The Chairperson said that the Committee could still set up a meeting with the Department to discuss matters that had been flagged by the AGSA further. It had been said many times that the weakness of SCOPA was the fact that it was like a “post-mortem,” as it was dealing with things of the past, and there should be a mechanism to effect remedial actions going forward. The responsibility of effecting remedial actions was not for SCOPA, but for the portfolio.

Ms Kohler Barnard wanted to know if there was a total figure for irregular expenditure in the current financial year. 

Ms Myburgh responded that the portfolio had regressed in terms of its overall performance over the three year period, but it was in essence the IDT that had regressed from a qualification to a disclaimer audit opinion. The Department, PMTE and CBE had all remained stagnant when one was comparing the previous outcomes. There was an element of complacency within the Department and its entities, as most of the entities continued to experience recurring findings. The one entity that was pulling the entire portfolio down was the IDT. There was no “better” disclaimer audit opinion, as the disclaimer was inherently linked to the limitations in the scope of the audit. Programme expenditure had been the reason for the disclaimer audit opinion for the IDT in 2014/15, and this was the same reason in the 2015/16 financial year.  The IDT had had a qualification on leave in 2014/15, and this was resolved in 2015/16, but the entity had experienced a new qualification on the management fees. The IDT would need to resolve all the matters that were contributing to the disclaimer audit opinion as this would result in the ultimate improvement in the performance of the portfolio.

Mr Rehaan Mohamed, Audit Manager, AGSA added that the IDT had been qualified on programme expenditure, as well on leave accruals in 2013/14, and there had not been any progress in terms of dealing with programme expenditure since then until now. There were three main accounts that the IDT had under programme expenditure, and these included the funds that were in the bank, money that was owed to suppliers for the work that had already been done for client departments, and the money that was needed to pay those suppliers from client departments. The IDT could not accurately capture the amount of money that was owed by client departments and the money that was to be paid to suppliers. There was an action plan that the AGSA had been able to look into back in September 2016, and this was supposed to be addressing the problem of qualification and the plans that were there to address this perennial problem. The IDT had promised to implement those action plans in order to turn around the entity and be able to be productive. The AGSA was particularly concerned about the fact that the people that had drawn up the action plans for the IDT were no longer there.

Ms Kohler Barnard asked if it was correct to assume that the IDT had implemented the second action plan without consulting the AGSA office.

Mr Mohamed responded that AGSA was not responsible for approving action plans, as its main responsibility was just to look at the plan and provide all the relevant comments. The IDT had promised to look at all the matters that had resulted in qualification. It had automated most of the reconciliations and also realised that it was spending money from one client department’s bank account for another project outside of that particular programme. Those issues had been identified through the reconciliation, but no corrective action had been taken by the IDT board. There was indeed no such thing as a “better” disclaimer audit opinion. The reason why the IDT had assumed that this was a “better” disclaimer audit opinion was because the entity had dealt with the “small issues,” but the significant issues that had resulted in the disclaimer were still there.

It had been in August 2014 when the Treasury had issued an instruction note to the IDT on the fees to be charged to client departments. IDT had gone ahead and implemented those fees without getting support from the Department. Moving forward, new contracts that are entered into with IDT are done on the basis of that instruction note from the Treasury. The IDT had made some strides in dealing with the problem of vacant positions, as it had managed to appoint a Chief Financial Officer (CFO).

Ms Myburgh said that there were a significant number of forensic investigations that were being undertaken at the Department and the PMTE, although the Committee could not be provided with the exact figure of these cases at the moment. The Special Investigating Unit (SIU) was taking its time in investigating and completing these cases. There was a Deputy Director General (DDG) within the Department who was responsible for all these cases, and he was reporting to the audit committee on a regular basis on the progress that had been made with each of those investigations. R522 million was the total amount of irregular expenditure within the portfolio. The CIDB and CBE had not incurred any fruitless expenditure in the current financial year. The presentation showed that there had been a general reduction in irregular expenditure and fruitless expenditure amongst the auditees.

There had been engagement between AGSA, the DPW and the Department of Planning, Monitoring and Evaluation (DPME) on the streamlining of information in order to deal with the challenge where it had been highlighted that the reported performance information was not reliable when compared to the source information or evidence provided. The DPME had indicated that it would look into delegating the responsibility of capturing accurate and reliable information on the work that had been created through the EPWP, to the provinces and municipalities. The audit committee was the governance structure that meets quarterly, and was not part of the Department and entities. There were a lot of capacity constraints within the internal audit committees and there was usually a heavy reliance on the outsourcing of skills or consultancy.

Ms Myburgh said that there were four key commitments that had been made by the Minister, and everything was in progress. There were still findings within the Department on procurement, and AGSA was expecting to see a clear reduction in terms of irregular expenditure on the procurement process. The turnaround strategy at the PMTE was specifically focused on introducing an immovable asset register, and it had managed to introduce an asset register. There was still a problem of irregular expenditure that had been incurred by the PMTE as a result of lease contracts. In relation to the stabilisation of leadership within the Department and PMTE, it must be pointed out that key positions had been filled within the Department and PMTE. It was difficult at this stage to determine the exact percentage of commitments that had been implemented and those that were still to be implemented. AGSA would give the PMTE adequate time to implement all the corrective actions and improve on matters that had been flagged.

The Public Finance Management Act (PFMA) was clear that all cases that are related to irregular or fruitless expenditure should be investigated by looking at the extent of the transgression and the person who was liable for that kind of transgression. It was for the accounting authority to decide on the most effective way to deal with irregular or fruitless expenditure in terms of instituting consequence management for that specific case. It was outside the mandate of AGSA to provide an opinion on whether there should be a reduction in the number of government departments. The AGSA made it clear to government departments and their entities that they needed to prioritise the filling of critical positions.

Mr Filtane asked if it was not possible for AGSA to make it harsher and more unpleasant for people who engaged in irregular and fruitless expenditure. There should be criminal charges instituted against people who had committed fruitless and wasteful expenditure, as there was no point in the Department wasting its time and investigating cases of irregular and fruitless expenditure. The moment there was prima facie evidence of irregular expenditure, this should be passed on to the relevant authorities. This could be passed to the National Prosecuting Authority (NPA), although there was currently lack of confidence in this institution with the presence of Mr Shaun Abrahams. Government departments were not established to be investigating cases, as this was not part of their mandates. The investigation of cases by government departments was a misplacement of responsibility. AGSA could be seen as further enhancing irregular expenditure if government departments were allowed to spend precious hours investigating cases.

Ms Kopane wanted to know if it was possible for the Committee to be given an action plan for the PMTE in terms of its overdraft. It had also been stated that the liabilities of PMTE were more than its assets and this loosely meant that the entity was bankrupt. What was the action plan that had been taken in regard to this matter?

Ms Myburgh replied that she was not aware of that specific action plan, and suggested that this question should be asked directly to the PMTE.

Mr Mohamed explained that in most instances it was usually apparent what went wrong or resulted in irregular expenditure. However, the investigation processes should be undertaken to determine the root causes of irregular and fruitless expenditure.

Council for the Built Environment (CBE): Briefing

Ms Priscilla Mdlalose, Acting Chief Executive Officer (CEO): CBE, said that the Council’s 2014-19 strategic plan was informed by the strategic review session held in October 2014. Its 2015/16 APP had 22 deliverables, and the entity had managed to achieve of 73% of the targets, 23% were partially achieved, and 4% was not achieved. The partial and non-achievement of targets was due to the dependency on external stakeholder endorsement. The entity also managed to achieve an unqualified audit opinion for 2015/16.

Programme 1 had five targets, of which four were partially achieved and one was achieved. The partial achievement of the targets was as a result of the Council on Higher Education (CHE) not endorsing the framework, citing that it was outside their mandate to do so. The highlight of Programme 1 was the development of the framework on modalities to incorporate health and safety in construction, environmental sustainability, job creation through labour intensive construction and the Infrastructure Delivery Management System (IDMS) in BE curricula. Engagements were held with the Office of the Chief Procurement Officer to formalise partnerships on IDMS training, as well as on the roll out of the new Standards for Infrastructure Procurement and Delivery Management (SIPDM).

Programme 2 had achieved all five of its planned targets, as 150 Grade 10-12 students were assisted with a maths and science support programme in Kimberley. A mobile science laboratory was donated for learners and teachers in the Northern Cape Department of Education. 60 candidates and 154 interns were placed in workplace integrated learning. The CBE had participated in 12 accreditation visits to ensure consistent application of accreditation policy by professional councils and to assess the gaps amongst the BE educational institutions. A transformation steering committee to drive transformation initiatives within the BE had been established.

Programme 3 had five targets, of which four were achieved and one was partially achieved. The partial achievement of the one target was due to the delayed appointment of a technical expert. The highlights of this programme were the development of the following:

•A report on the existing maths and science support programmes within the Built Environment Professional Councils (BEPCs);

•The final research report on the profile of the BE  technical professionals employed at national and provincial departments, as well as at state-owned entities;

•The formulation of recommendations and an advisory report to the Department of Public Service and Administration (DPSA) on the Occupational Specific Dispensation (OSD); and

•A report on the first phase research on the viability of a government infrastructure agency.

Programme 4 had achieved six targets out of the seven that were planned for the year, and the reason for the non-achievement of one target was that the professional councils did not submit their strategic plans and APPs in time to allow for their evaluation by the CBE. The highlights of the programme included:

•Research on international benchmarking of the identification of work (IDoW);

•Monitoring and evaluation of the BEPCs’ compliance with the CBE’s corporate governance framework was done;

•A workshop with the BEPCs and the Department of Public Works (DPW’s) policy unit on the Ministerial approved policy frameworks was successful;

•Appeals were concluded within the statutory required time limit.

Ms Mdlalose said that the CBE had achieved an unqualified audit opinion, with an overall performance of 96% in the 2014/15 financial year, and an unqualified audit opinion once again in 2015/16, with an overall performance of 73%. Material misstatements of non-current assets, current liabilities and disclosure items identified by the auditors in the submitted financial statement were subsequently corrected, resulting in the financial statements receiving an unqualified audit opinion. In relation to expenditure management, the accounting authority had not taken effective steps to prevent irregular expenditure. For internal control, management did not have adequate review and monitoring processes in place in certain instances. A disciplinary process against the CEO was in progress. A disciplinary process had been instituted against the former supply chain management.  A criminal case had been opened and was still on-going at the time of the audit report. The entity had noted that all demographic areas in the entity’s staff composition had been fulfilled, with the exception of Coloured females, African males and disabled persons.

In conclusion, the CBE and the six BEPCs were strengthening their partnerships and their relations with the BE industry to benefit learners, students and candidates. Doors needed to be opened for students to do their practical training; candidates needed exposure to work that would be relevant to the learning outcomes expected by their professional councils. Government, as a key client for infrastructure development, needed to enforce skills training through construction projects undertaken by consultants. The CBE and the BEPCs, in partnership with DPW and other entities, had a commitment to increase the skills pipeline throughput from high school to tertiary, to candidacy until registration level.
              
Discussion

Ms Adams wanted to know if the Council for the Built Environment Act, 2000, and the Architectural Profession Act, 2000 were still relevant in regard to the goals that are set in National Development Plan (NDP), as this was South Africa’s blueprint for development. It would be important to know how it was possible to measure that the built environment was responsive to the developmental and economic priorities of the government. It had been indicated that the Council had received two resignations, from Ms A A Steyn, representing the South African Council for Landscape Architectural Profession (SACLAP) on the Council, and Ms N F Sithole on 2 February 2016 and 10 February 2016 respectively.  The Committee should be briefed on the specific reason for these resignations within the Council, as this had not been explained in the presentation. It had also been stated that the Council had received nominations from SACLAP, as required by the Act, which had been recommended to the Minister. When had this been recommended to the Minister?

Ms Adams asked if the Council had liaised with the Department of Public Service and Administration (DPSA) and Treasury in order to fill the two vacant positions in financial management, as this had contributed to some mismanagement of funds. It should be commended that SACLAP had the Women in Architecture South Africa (WiASA) programme, which was in response to the identified severe and dire need for transformation, and was structured just for women. What were the transformation targets for other professional councils? She wanted to know why the Council was not seeking assistance by outsourcing some of the scarce skills to deal with the problem of vacant positions.

Ms Masehela enquired if the CBE was really doing well in terms of achieving the transformation goals clearly stipulated in the strategic goal of the entity. The Committee should be provided with progress in regard to the challenge of gate-keeping within the built environment, as this was contributing negatively to the slow progress that had been made in transformation within the sector. It would be important for the Council to explain to the Committee what was meant by “partially achieved” with some of the targets, as this was a very vague phrase. The reality was that any target was either achieved or not achieved. It had been mentioned that there were delays that had been caused by the appointment of technical experts. Who was given the responsibility to do these appointments of technical experts? What was actually causing these delays?

Ms Masehela wanted to know about the number of people that had been uplifted because of the recognition of prior learning, and the steps that were supposed to be taken for people to be recognised for prior learning. The Committee should also be provided with progress that had been made on the disciplinary process against the Chief Executive Officer.
Ms Kohler Barnard asked about a R74 000 item that had been written-off, as this was not clearly explained during the presentation. What was causing the escalation of cost on the “other expenses,” as this had gone up by R1.5 million? What was causing an escalation in the expenditure on legal fees? She wanted to know why the management had not put in an adequate review and monitoring process to deal with the increased expenditure on legal fees. What progress had been made on the individual that was being investigated for developing a database system for R45 000, despite the fact that this database already existed within the Council? Was the individual who was involved in this case still working for the CBE? The Committee should be provided with detailed information on why work on the maths and science project, which was to cost R2.15 million, had not commenced.

Mr Filtane expressed concern that the Council had not been able to achieve its target on time management. What was the particular reason for this? How many landscapers were in the region of the Eastern Cape? It was concerning that the CBE had failed to provide quantifiable figures on the progress made on the programmes that were in place. To what extent was the Council impacting on government priorities, as it was the ultimate role of public representatives to determine the extent of the impact of a particular entity? Which entity was responsible for developing programmes intended to empower lower level individuals in the construction industry? The Minister had stated that those companies which had been fined for collusion in the building of stadiums for the 2010 FIFA World Cup had also been given a responsibility to ensure that they were able to respond to transformation goals.

Ms Kopane wanted to know about the outcome of the report that was based on the viability of government infrastructure agencies. It was mentioned that the professional councils had not provided their strategic plans and APPs on time so that the CBE could do closer monitoring. Was anyone held accountable for not providing the strategic plans and APPs on time? How many appeals were concluded before the statutory time? It was indicated that one of the reasons for over expenditure within the CBE was because of the legal expenses of the suspended CEO and the ongoing disciplinary cases in general. How much had been spent so far on legal expenses? How much had been spent for performance bonuses, as this had also contributed to the over-expenditure? What was the reason why the Council had received less from the levies than what was budgeted for?

Ms Mdlalose responded that the Council would need to get an input from the six professional councils and submit them in a written form to the Committee to respond to some of the questions that had been asked by Members. It must be highlighted that what informed some of the strategic goals of the CBE was part of the stakeholder engagement. The CBE had facilitated a Built Environment Indaba in 2011, and there were issues that had been flagged in terms of how the BE sector was responsive to the country’s national development issues. Some of the actions that had been taken would take time to have the desired impact. The responsiveness to the developmental and economic priorities of Government was measured against those issues that had been raised in the Built Environment Indaba. Prior to that, the CBE had commissioned research in 2008 that had highlighted key issues that were challenges in the BE sector, and this was also being used as a mechanism to accelerate transformation within the sector.

The CBE was currently facilitating a unified transformation steering committee, and this was to reach an agreement on the indicators which could be used to measure the impact of the interventions that were being carried out by a number of role players within the built environment. This year, the CBE would also be doing another baseline study which would assist in the measurement of the indicators of transformation. Transformation was usually measured based on the number of Africans that were participating in the sector and built environment professions. However, the general understanding was that it was not only about the numbers, but also about the ability to respond to issues facing our country. One of the challenges was unemployment, poverty and inequality, and this could be addressed through the transformation initiatives that were being undertaken within the built environment.

She said Ms Sithole had resigned as a deputy chairperson of Council, but would stay on as a Council member, while the resignation of Ms Steyn was because of her work commitments. The Minister had asked the Council to ensure that there was a replacement of these board members.

Mr Clifton Changfoot, Chief Financial Officer (CFO), CBE, referred to the two other positions that were vacant, and said the acting financial manager had resigned in May 2015 and the CBE had organised a temporary staff member to do the administrative work and ensure that there was no backlog on the processing of accreditation for professional councils. There had been discussions between the Department and Treasury on the financial management shortcomings and the way forward in keeping the operations flowing and financial management operating.

Ms Mdlalose said all six of the professional councils were committed to transformation and had initiatives that they were embarking on to accelerate transformation goals within the built environment. The Committee could be forwarded with all the presentations that had been delivered by the six professional councils in order to look at these transformation initiatives. There was a slow progress in transformation in the sector, but there was progress that was visible, especially in the increasing number of Africans that were participating in the professional councils. For the CBE to be able to change the registration of professional councils, it would need to push the candidates to be registered.

There were a number of challenges that were facing these candidates, and this included a lack of exposure to the work that was being done, and this was creating a barrier for them to be registered. Council was appealing to the industry to expose the candidates to the sector. CBE was working together with the Department in order to ensure that the industry was “buying” into this idea of opening opportunities for the candidates. There were certain learning outcomes that were required by the six professional councils, and the process was that it was impossible for students to graduate and then be immediately registered within the Council. There should be prior learning, or skills that would require students to be trained, for them to be registered. There was also a record of interviews of the candidates which was aimed at ensuring that there was transparency in the selection process.

Mr Changfoot said that the disciplinary hearing of the suspended CEO had been finalised on 29 August 2016. The CBE asset register was never reconciled in detail, and this exercise was finalised at the end of the current financial year. The assets that were written-off were either wrongly allocated between the categories or needed to be relocated, or some assets had been reported as missing and therefore needed to be taken out of the asset register. The reference to “other expenditure” was referring to expenditure related to disciplinary processes and the investigations that were carried out. The legal expense was related to legal advice that had been sought in regard to the appeals and dealings with the Competition Commission. The monitoring and review processes were under strain simply because of the way the internal controls were structured within CBE -- the supply  chain management practitioner and financial manager were  key staff members that would review everything that had been procured, and that which had been paid for. The two vacancies in those key areas had impacted on the monitoring and review processes.

With regard to the database system that was procured for R45 000, this was due to a supplier practitioner who had eventually been suspended and disciplined. The particular individual was not working with the CBE any more, as he had resigned. CBE had reported the case to the police in order for the matter to be taken further, and had instituted criminal charges.

Ms Mdlalose explained that the “partially achieved” were those that had been achieved, but not in accordance with how the target had been phrased in the APP. The CBE was currently trying to engage with stakeholders on the planning for the new financial year, and this was to ensure that the stakeholders were doing what they were mandated to do, as per their agreements. It would be impossible at the moment to know the exact amount of landscape professionals that were found in the Eastern Cape, but this information could be forwarded to the Committee. There were 150 beneficiaries of the maths and science project. The CIDB was responsible for building the capacity of contractors and the CBE was mainly concerned with making sure that there was a continuous development of professional councils. The Committee could be provided with the report on the outcome of the report that was based on the viability of government infrastructure agencies. The study was to determine whether there was a need for another infrastructure agency in the country, and the conclusion that was reached was that there was indeed no need for another infrastructure agency.  The CBE was still going to engage with numerous government departments, like the Office of the President, on the findings that were contained in the report so as to get their inputs.

Mr Changfoot said that the once-off payment of performance bonuses was based on 2% of the basic salary, but an additional 5% was offered and this amounted to R577 000 for the year. The budget was done with an estimation of the amount of levy that would be received, and the levies were based on the number of registrations with the professional councils. The decline in the number of registrations did impact on the levy that would be collected.

The meeting was adjourned.