Audit Outcomes: AGSA briefing; DPWI & PMTE on implementation of 2017/17 recommendations; DPWI & PMTE 2018/19 Annual Report; with the Minister and Deputy Minister

Public Works and Infrastructure

08 October 2019
Chairperson: Ms N Ntobongwana (ANC)
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Meeting Summary

Annual Reports 2018/2019

In the morning session, the Auditor-General’s office presented audit outcomes of the Department of Public Works and its entities. The Minister and Deputy Minister were present.

The Auditor-General’s Office was questioned for its reactive approach to investigation and lacking of actions on consequence management. Members asked whether the AG’s office had utilised its expanded mandates to perform those duties. For instance, the Department of Public Works’ wasteful expenditure of was indicated in AG’s report. In light of that, members asked if AG’s office had taken actions against those involved and further asked AG’s office to explain their working relationship with the Special Investigation Unit (SIU).

A Member commented that there was a deliberate attempt in South Africa currently to flounder public fund and to undermine South African Constitution and thus encouraged AG’s office to adopt a proactive, participatory approach in referring those matters to law enforcement. The Committee expressed its wish to see increasing accountability and asked the AG’s office to develop monitoring mechanism to track progress of the DPW. There was a sentiment expressed among some old members of the Committee that AG’s presentation was merely a repetition in content. The question of EPWP project was also touched upon when a member asked how the AG’s office calculated the figure.

In the afternoon session, the Department of Public Works presented its progress report in the 2017/18 financial year, PMTE’s progress report in the 2018/19, as well as the financial performance reports of the DPW and PMTE.

Question raised were discrepancy of employee figures contained in the report and presentation, the whereabout of underspent fund at municipal level, the incompatible ratio of allocated fund and achieved objectives on the EPWP project, the sudden stop of Public Works Academy, the activities of the 1202 beneficiaries of DPW’s skills development programme, IDT entities, non-submitted CBE and BCPCs Amendment Bills, vacancy rate and consequence management. Members expressed disappointment over the lacking of first-level executive accountability for the bad audit regression outcome.

A Member said that the recklessness which resulted in R36 million penalty from SARS was a signal that the Department needed to put in place a clear consequence management system. On the illegality issue surrounding IDT entities, members could not comprehend how an illegal entity could still operate. On underspending fund and EPWP project’s poor performance, the Committee urged the Department to take actions. Asset register needs to be improved and vacant buildings owned by the Department could be considered to give to small municipalities to support local economic growth. On local economic growth, a member also suggested Department to equally consider the investment in small harbours as they were often overlooked by the Department in favour of big harbours in Port cities. On the issue of high turnover rate and staff vacancy, mMmbers expressed their concern.

Meeting report

AGSA on audit outcomes

Tintswalo Masia, Senior Manager at Auditor-General South Africa, presented the 2018/19 audit outcomes.

The mandate and the role of the AG’s office was explained to the Committee.

The Department of Public Works (DPW) consisted of five different entities: Property Management Trading Entities (PMTE), Independent Development Trust (IDT), Agrèment South Africa (ASA), the Construction Industry Development Board (CIDB) and Council for Built Environment (CBE). Audit outcomes of those five portfolios for the past five years have been provided. It was pointed out that leadership stability and competent assurance providers who perform timely and effective checks and balances are the reasons behind sustained desired outcomes at CBE. Vacancies in key positions have led to submitted financial statements containing material misstatements that were subsequently corrected (ASA; CIDB).

The key concerns on the audit outcomes over the past five years for PMTE, IDT and DPW were outlined.

The status of internal controls for DPW, PMTE, CIDB and IDT were illustrated in terms of leadership, financial performance management as well governance. The key drivers of the internal controls for PMTE, DPW, IDT, CIDB were indicated.

The AG’s office explained to the Committee of the Assurance structure that existed in those entities and assessed their performance. On management and delivery of key programmes, the spending, performance and reporting of EPWP and Facilities management were evaluated and presented. For EPWP programme, they key message was 1) misalignment in spending (97%) and achievements (71%) deprives the marginalized, unskilled and unemployed opportunities to benefit from the programme; 2) Lack formal training and certification led to the programme not yielding a desired impact on employment rate i.e. the programme is used as a mere grant instead of upskilling beneficiaries for sustainable employment opportunities). The AG recommended that MTSF to customize the EPWP indicator for all spheres of government receiving the grant Enhance Dora conditions to enable credible reporting and compliance with DoRA. Prioritise the provision of formal training and certification on the work opportunities created. Three projects from the audit were mentioned and examined in details: Construction of braai facilities for ministerial houses, Pretoria Central Police Station as well as Department of Agriculture.

On financial health and management, tMs Masia first explained the meaning of financial health of an entity in terms of revenue management, asset and liability management as well as cash management. She presented the Committee with DPW’s unauthorised expenditure, fruitless and wasteful expenditure decrease, irregular expenditure decreases over the past two years. The issue of supply chain management was mentioned and its performance in terms of compliance is improving. Fraud and lack of consequences was included in the presentation. The AG’s office finished the presentation with its expanded mandates, as well as recommendations made to the Department and Portfolio Committee.

Discussion

Mr W Thring (ACDP) appreciate the work conducted by the AG. He remarked on the lack of consequence management for IDT as well as the serious challenges of wasteful expenditure which had been carried over the years. This particularly applied to the irregular and fruitless expenditure for IDT Thus, he asked with the expanded mandates, if the Auditor-General’s office had used its mandate to refer any of these entities for public investigation.

Ms L Shabalala (ANC) thanked the AG for their presentation and emphasised its importance in helping members to perform their oversight responsibility. She commented on the AG office’s reactive approach to investigation. She cited a “dying” municipality that she knew of as an example to demonstrate AG office’s reactive stance. This municipality planned to build a swimming pool that would cost taxpayers either R2 million or R4 million. She asked about the working relationship between the AG and the SIU. Has the office dealt with SIU on the issue of fraud? She asked how the AG calculated the figure for the EPWP project.

Mr E Mathebula (ANC) emphasised the importance of the meeting and thus expressed his wish to see the actual outcomes of the Committee’s work performance. Referring to the report, he expressed his concerns over the lazy people who are undermining the people of South Africa. On consequence management, he said it was worrisome. He believed that there were instances in the Department that people in positions of power were abusing their power. He used an example on the undervaluing of assets that was in the report. He believed undervaluing could only be caused by the people who intended to undermine this Committee and the people of South Africa. Also, he believed there was a deliberate attempt in the Department to steal public funds. He remarked that some people have been in the Department for so long that they hardly worked. Commenting on the key expansion of the AG’s mandate, he said that the Committee wanted to see the Office playing a proactive implementing role rather than passively explaining the definitions of these terms. Thus, he asked if the Office had implemented any of these expanded mandates. On IDT, he said that in his view it should have been closed. IDT was unconstitutional and thus any activity happened within it was illegal.

Ms S Van Schalkwyk (ANC) needed clarification on why CBE was excluded from the assurance level. Also, on assurance first-level, she asked what interventions had been done previously to remedy the situation. She asked if AG had compared the recommendations that had been made previously with the ones recommended now to see if any interventions had happened and if those recommendations had been taken seriously by both Committee and the Department.

Ms P Kopane (DA) asked the Chairperson if she had been in this Committee before. She felt like there was no change regarding the presentation content and the that the only change was a new Minister and a new Portfolio Committee. She asked the Minister to make a commitment on increasing accountability by her Department. Commenting on AG’s recommendations, she suggested a tracking mechanism to be developed in order to monitor implementation progress.

The Chairperson agreed with Mrs Kopane that the AG’s presentation was “singing the same song”. Since AG’s mandate has been expanded, she asked whether it has been utilised. As a new Member herself, she commented that the structure of the presentation was concise and asked the Committee to do follow ups. She promised that consequence management would be part of the Committee’s responsibilities in this term.

Ms Corne Myburgh, Office of the Auditor General South Africa, responded to the question on capacity building. The Public Audit Act, effective from 1 April 2019 gives the AG the prerogative to determine the nature of the audits. From its date of inception till now, there had only been 16 entities that were subjected to auditing - none of which belonged to this Portfolio Committee. The responsibility of the AG’s Office was to inform entities of their responsibilities according to the Public Management Finance Act (PMFA) which was to prevent irregular expenditure, investigate them and implementing AG’s recommendations. She reminded the Committee that they should not wait for AG to act. Entities should prevent irregular expenditure and implement recommendations. The first step in accountability lies with accounting officers. For the Department of Public Work, she said the AG had not referred anything and had not make any recommendations.

On their relationship with SIU, she said that her office had identified SIU’s mandates and had signed service agreement with SIU. Her office would decide what work fell within the SIU’s mandate and refer to them.

On a members’ comment around audits being reactive, she said that it was the nature of audits which was to look backwards. As an office, she acknowledged this gap and recognised the need for the AG’s office to be more proactive. The less push back from DPW was a direct result of the proactive approach that the AG Office was taking. There is also Visibility programme to inform and empower accounting officers to prevent activities that would result in unqualified audit outcomes. Having said that, Ms Myburgh said that her office could not be part of the decision-making process as AG’s office had to remain its independence thus the gap would always be there.

On the question around EPWP that 95% of the fund had been spent and only 71% had been achieved, she reminded the Committee that the office could not figure out if the 71% was credible in terms of the audit, so the percentage could be more or less.

Ms Masia responded to the exclusion of CBE. She explained that her office also had to look at the size of the entity which by its standard CBE was a small entity.

On recommendations of prior and current years, she said that there had been improvements in some areas and have been taken seriously which was included in the report.

The Minister of Public Works, Ms Patricia De Lille was present. She said that it might be valuable for the Committee to know what had been transpired in the Department in the past four years had been the heightened executive authority. Ministers came and left which resulted in what she called “flip flop change around” situation. There was unstable leadership which reflected in the outcomes of its instability and bad audit outcomes. On the current status of the Department, she remarked that it was bloated and did not conform to the Public Service and Administration Act. There were massive additional employees which could not be prescribed to any job roles. She assured that the Department was remedying the issue. On the performance, the Department had missed 1st and 2nd quarters to implement consequence management so it had to backtrack all the key performance areas. But the Department had implemented key performance areas of all managers. The goal of the Department was now moving towards an unqualified clean audit.

On the EPWP programme, she understood thee reason why AG was not able to pick up discrepancy. She said that when the R9 billion was planned to deliver 6 million jobs, but only created 4 million jobs, her Department and the Committee needed to pick out the middleman such as IDT entity. For instance, she said that IDT would charge an implementing fee and they employ sub-contractors as well which IDT needed to pay. The discrepancy was spent administrative cost and this situation needed urgent attention and action.

The Chairperson thanked the Minister’s input and the AG office’s presentation. She said that some of the issues around IDP had been noticed for a while, the Committee needed to do follow up with the Department. She appreciated the AG’s office had picked up this point as well.

Parliament’s Researcher and Content Advisor

The Committee Secretary, Ms Nola Jobodwana made apologies on behalf of Ms Hicklin who had submitted an apology earlier stated that she was due to undergo a surgery. The Chairperson also mentioned that Mr Thring was to leave at 11:30 am due to a Committee meeting clash. Ms Van Schalkwyk had other duties to perform on Thursday and thus may not show up.

The Chairperson enquired why the delegation team of the Department of Public Work and Infrastructure (DPWI) was late.

Ms Jobodwana explained that the agenda was for the DPWI to present a progress report and its 2018/19 Annual Report at 13h00, but due to the AG’s concise report Members had free time.

The Chairperson suggested the Parliament research team to take the Committee through key points of the report.

Ms Kopane asked for the proposal from the Department and said that Members would need to reflect and deliberate. The Chairperson agreed to that point.

Mr Shuaib Denyssen, Content Advisor, informed the Committee that the BRRR report that was due to be presented was done during 5th term of Parliament. The timeframe to which this report referred stretched to the beginning of 2019. The Minister and the Department would be reporting the work of the previous financial year.

Mr Denyssen asked Members to bear in mind that details contained in this report was what the Department should’ve been doing to achieve a clean audit. This was closely related to what the Auditor General’s office had earlier on said about the lack of consequence management of the Department. If something is not done previously, you fix it and do it properly this time. The BRRR assists the Minister in compiling medium term budget and Members’ recommendations go into the BRRR as well.

Mr Dennyssen mentioned a few reminders about the Department. Since 2011/12 financial year, DPW had started fixing a lot of problems which the previous Minister called turnaround strategy. He said that the result had been evident from the 2014 till 2019 outcomes. What had been achieved was to concretise abstract ideas. The DPW became a policy maker and thus cannot be the implementor which left PMTE as the implementor. The consequence of which, he said was the shifting blame to PMTE which was picked up in AG presentation.

To explain the failure of PMTE to implement, Mr Dennyssen pointed out the lack certain skills in the entity. PMTE does not have enough qualified and experienced architects, quantitative surveyors and contract lawyers. He urged Members to engage with the Department to capacitate PMTE. The huge problem that underlined PMTE was that there are too many acting officers. For employees, if their appointments cannot be permanent within their 5-year contracts, employees are likely to leave.

On accountability and clean governance, Mr Dennyssen said that in 2014/15 financial year, a monitoring and tracking branch was developed and the head of that branch put forward an operational mentality of no corruption, clean work, absolute responsible actions. He asked the Committee to be aware of the lacking of evidence to include those in the report.

Mr Denyssen raised the issue around DPW’s programme 4 which linked very closely to the work of every single entity and PMTE. He advised members to steer clear of the question “what do you do with underspent expenditure”.

At last, he said that the leadership vacuum of PMTE stretched into governance and boards’ weakness especially within the IDT. There are leaders working at those entities but they do not correct nor provide guidelines.

Ms Inez Stephney, Researcher, explained to Members the expenditure and non-financial performance of the DPW. On the expenditure, there were clear indications of the targets achieved and those that had not been achieved. Her research team had focused around the ones not being achieved and tried to identify the causes. Overall, 44.7% of the 38 targets were achieved. Even though 4.2 billion were allocated to Programme 2 and followed by EPWP, the large portion of the fund was not spent within the Department and they were transferred to the provincial and municipal governments.

For DPW’s programme 5, she said that R38 million was taken from certain programmes to reallocate to a programme that had overspent on its money. The AG cited the cause of State funerals for justification. One of the state responsibilities is state funerals which is something the Department cannot plan on. She had highlighted these issues and suggested Members go through them.

On non-financial performance, she highlighted all the issues of which targets had not been met. For instance, under Programme 2: Public Work Academy, money would have been spent on the initial contract which Ms Stephney said that the Department needed to explain. Also, under EPWP, her concern was the same with the AG’s report: The Department’s inability to report and explain underspend. Under programme 4, there is a list of the draft bills that has not been finalised within the 5-year period.

She highlighted the human resource issue. The Department was seriously lacking in staff. They did not have a CFO, DD: Policy Research and Regulation, Head of PMTE as well as head for the supplier chain management. The consequence is that it would be difficult to get work done if these positions were not filled. What remained unclear to her was if critical vacancies were separate of the general vacancies for PMTE. What also confused her was DPW’s additional positions which were reported to be 155 and PMTE was 779. Why are there additional positions in those entities while there were 156 positions reported as critical vacancies?

She commented on PMTE’s high expiry of contracts and resignations. 30 deaths and 81 retirements had been on record and she thus asked why there was such a high fatality and if there a succession plan to those retirees.

On the financial issue for PMTE, she said that the report said of a deficit in the previous financial year but now there was a surplus of R1.1 millionwhich she urged members to ask for explanations. She commented that PMTE needed to change their way of reporting to avoid discrepancies in figures.

Since time was running out, she suggested Members to look at investigations on PMTE and DPW. They were slightly similar issues but not the way that AG’s office had reported. For DPW, there was supplier chain management irregularities and the Department needed to explain the appointments that had been made both within the DPW and PMTE. She emphasised that it was not the number of vacancies that Members needed to look at but rather the quality of those vacancies that they should focus on.

The Chairperson said that the information provided was to assist Members to understand all the important aspects before the afternoon session. She did not think questions were necessary and thanked the researchers.

Presentation

Chairperson’s opening remark

In the afternoon session, the Chairperson remarked that this Committee would like to know if the recommendations made in the 5th Parliament had been implemented. She said that it would be the focus of the Committee. She thus asked the Department to send a report to the Committee before discussion could take place.

She said that the slides received were not the ones that were to be prepared. It was a challenge and she hoped that it would not happen again. Members needed time to peruse slides and make notes in order to perform their oversight function.

Briefing by the DPWI: 2017/18 Progress Report BRRR

Mr Imtiaz Fazel, Deputy Director-General, DPWI, briefed the Committee on the programme structures of the Department and PMTE.

Thematic areas and structures and overlapping areas of the DPW and EPWP were explained.

Under DPW Programme 1: administration. Regarding the 13% on the irregular expenditure reduction, he said that it was due to backlog in the Department. 30 working day payment was achieved. On quotations, he said the system needed to be improved. On procurement, the Department was dedicated to PPPFA regulations. On HR, the underperformance was due to the moratorium that was implemented in the Department. the Department was also dedicated to dealing with fraud and corruption cases subjected to disciplinary processes.

Under programme 2: inter-governmental coordination. He said that Public Academy was still under the conceptualisation process and was not approved. And the Minister would explain more on it since the Department had found an alternative route to achieve the same outcome.

Under Programme 3: Expanded Public Works Programme (EPWP), he noted that under-reporting and inability to capture accurate figures might result in the inaccurate figures of the designated groups’ percentages.  

Under programme 4: Property Construction Industry Policy and Research. He highlighted the CBE Amendment Bill and BEPCs Amendment bills would be submitted in due course.

Under programme 5: Prestige policy, he commented that it was norms and standards for service to prestige clients.

On DPW Audit outcomes, EPWP remained unchanged.

He highlighted that there was a huge under-performance in Programme 4

PMTE 2018/19 progress report

The vision of PMTE was to provide convenient access to dignified public service. The mission was to ensure effective management of the state’s immovable assets to contribute towards economic and social development and transformation of the built environment.

Under Programme 1: Administration, it was highlighted that

-87% (100% target) of compliant invoices settled within 30 days

-4 out of 15 Departments approved for itemised billing agreements signed by PMTE and not yet signed by the clients

-financial Model approved

  1. % (41 of 187) bids were awarded within 56 days 

-64 % quotations awarded within 30 days (4 942 out of 7 622)

-90% (target of 75%) procurement spend for bids awarded to designated groups in line with Preferential Procurement Regulations (PPR) 2017

-91% (target 75%) procurement spend for bids awarded to designated groups in line with Preferential Procurement Regulations (PPR) 2017

 Programme 2: Real Estate Investment Services. This programme informed the Department to do asset planning.

-20 out of 42 User Asset Management Plans (UAMPs) received from client Departments

-10 of 10 signed-off infrastructure work lists

-CRM Strategy developed but not approved

-3 of 3 Government Precinct Development plans aligned with identified municipal (rural & urban) Integrated Development Plans

-4 out of 5 Government Precinct Development Plans aligned with identified (urban and rural) municipal IDPs  

-1 of 3 site established for development (Tshwane - HG De Wit)

-5 of 5 concepts have been completed for identified user Departments

-100% (255 of 255) of feasibility studies completed within scheduled timeframes (Target 90%)

-92% (231/252) of valuations completed within scheduled timeframes (Target 90%)

=70% (117/167) of disposal requests processed (Target 90%)

-1 CAMP submitted to National Treasury (1 of 1 CAMP)

-800 against a targeted 850 buildings’ performance assessed in identified performance areas.

Programme 3: Construction Project Management

-83 against 84 approved infrastructure project designs

-128 of 147 approved infrastructure projects ready for tender

-105 of 107 infrastructure sites handed over for construction

-105 of 109 infrastructure projects completed

-30 of 84 infrastructure projects completed within agreed construction period

-5 607 out of 7 511 EPWP work opportunities created through construction projects

-13% (against 20%) infrastructure project backlogs reduced in the constructions phase

-No contractors incubated through the Contractor Incubation Programme (CIP). The target set for the financial year was 297 contractors to be incubated

Programme 4: Real Estate Services. This programme was about the leasing in and out and state-owned buildings.

-600 of 636 lease agreements signed within scheduled timeframe  

-R332 million savings realized on identified private leases (Target R200 million)       

-42% (30% target) new leases awarded to to BBBEE companies  

-12 of 12 private leases reduced for the security cluster

21% (Target of 10%) increase in revenue generation through letting of State-owned properties

-65 against 95dentified vacant surplus State-owned properties let out

-400 of 505 state-owned properties verified to confirm occupation status     

-20 of 21 state-owned properties’ occupation status rectified

-NO Spatial and Economic Development Frameworks (SEDFs) completed for identified rural coastal towns  

-5.3% (10% Target) increase in revenue through rentals of state owned small Harbour and coastal properties            

-778 (target 1 000) work opportunities created through the letting out of state coastal properties and small Harbours

Programme 5: Real Estate information and Registry This is the programme which was about the Department’s asset register. On approved disposals, there was always price disputes. Key performance:

-60% (against 80%) of approved disposals (in respect of socio-economic objectives)

-100% of immovable assets updated on the IAR for completed infrastructure projects (67 of 67) completed projects capitalised and added to IAR)

-333 of 800 land parcels vested (42%)

-8 005 of 19 708 (41%) land and buildings physically verified to validate existence

-No buildings assessed to determine the condition of significant components as the project was cancelled due to funding constraints       

-9 of 9 provincial IARs assessed for compliance

Programme 6: Facility Management. The programme performance were:

-1 072 (Target of 500) facilities with maintenance contracts in place

-3.89% (target 15%) of unscheduled reported maintenance incidents resolved within prescribed timeframes

-80% term contracts awarded to blacked-owned companies (target 35%)

-187 780 293,7kWh (against a target of 150 000 000 kWh ) reduction in energy consumption for identified buildings  

-0Kwh of renewable energy generated (Target – 10 400 000kWh)

-12 780 865 kl (against a target of 8 000 000 kl) reduction in water consumption for identified buildings         

On human resource management, the personnel expenditure per programme was presented to the Committee. Mr Fazel also explained the challenges currently faced by the Department as well as the plans he had to address them.

DPW Financial Performance

Mr Aaron Mazibuko, Chief Financial Officer, of DPWI, explained that the underspent by R21.8 million or 2% due to vacant positions that remained unfilled during the financial year. The underspending in Transfers and subsidies was due to expenditure for leave gratuities payments being lower than projected. Spending for leave gratuities is linked to resignations and retirements. Machinery and equipment underspending of R12.2 million was mainly related to Programmes 1 and 5 and was a result of the delay in procurement processes. Under spending is linked to filling of vacant positions.

Explanatory notes to statements of financial performance and goods and services were given to the Committee.

Under goods and services items breakdown, the high increase were administrative fees and communication which was linked to ICT. The increase in contractors as a result of the state funerals in 2018/19 compared to previous financial year.

The statement of financial position or balance sheet was provided to the Committee. Contingent liabilities variance is due to an increase in Intergovernmental payables. Commitments variance compared to 2017/18 is attributable to events relating to Prestige, computer services as well as a decrease in prepayments made. Accruals variance compared to the previous year is mainly as a result of a decrease in accruals relating to EPWP (NSF). Employees benefits increased as a result of annual inflationary adjustments. The variance in financial lease commitments is attributable to the RT15 cellular phone contract that came into effect from April 2018. No unauthorised expenditure incurred in the current financial year. Unauthorised expenditure still being investigated by the GRC in line with recommendation from National Treasury. No new irregular expenditure reported in the current financial year. No new cases of fruitless and wasteful expenditure reported in the current financial year.

PMTE Financial Performance

Mr Herbie Abrahams, Director at the PMTE Finance, said that no changes had been made in accounting policies. Qualification was due to material misstatement of Immovable Assets with reference to the Valuation and Rights and Obligations assertions. The emphasis of matter draws attention to the impairment Provisions which amounted R756 million (2018: R1.1 billion). This results primarily on impairments on recoverable municipal services and recoverable operating lease payments. There was also an issue on bank overdraft of R2.6 billion. It was caused by a result of poor recovery in government debt – number of disputes as well as the current drive to resolve disputes and ensure revenue billed is recovered. The operating surplus for PMTE was of R1.1 billion (2018: loss of R218 million)

The overview for PMTE’s historical audit outcomes was provided and there has been an improvement in audit outcome for PMTE.

The going on concerns of the entity were increasing bank overdraft, deferred revenue and poor recoverability of debtors. Initiatives to address those concerns were grouped into immediate term and medium term.

The statement of Financial Position highlights non-current assets stood at R121.7 billion, current assets R6.1 billion, non-current liabilities R16 million, current liabilities R16.9 billion. Revenue recognised for deferred revenue increased by R680 million and impairment loss on receivables decreased by R327 million.

PMTE’s debtor’s information was provided. Key initiatives to address outstanding debt:

-Letter to ring fence accommodation related budgets has been submitted to National Treasury on 23 May 2019, Treasury has subsequently requested additional information on 27 September 2019;

-Interest is levied on all outstanding balances;

-Letters have been sent from our Minister to her counterparts requesting settlement of all outstanding debts (top 16 client Departments) within 30 days upon receipt of the letter;

-An Inter-governmental agreement on billing and recovery has been developed for the clients to sign.

Discussion

Ms S Graham (DA) commented that it was nice to see the Department was making progress on the audit outcome. She asked about the different numbers of employees. The report indicated 762 employees, it was not mentioned in the Annual Financial Statement and the last figure was given was 866 employees. She asked why there was a difference of 104 in those figures. On payables not recognised, she wanted an explanation of what it meant. On the grant paid to EPWP through DORA, she asked what would happen to the underspent fund at the municipal level. She asked how much DPW owes municipalities as this was a huge national issue. She asked why action plans were not given to address auditor-general’s findings.

Ms Van Schalkwyk welcomed the presentation. However, she registered the disappointment in the way in which the Committee was treated. She said that the Department should not take advantage of the new Committee and that documents needed to be sent to them in advance. Members needed time for deliberation. On audit outcome, the Committee was told that the Department had regressed and she would like to know the cause. There was no clear reference to the first-level of executive. On EPWP, she expressed her concern on the 99.8% budget that was being spent and achievement was only 50%. On MTSF target in terms of EPWP, 9.7 billion grant was budgeted but 9.3 billion was spent. She said that the figures provided did not correlate and asked for an explanation. She expressed disappointment in the penalty that was due to interest and late submissions to SARS to the amount of R 36 million. She said that this recklessness needed to stop and whoever was accountable should be brought to book. This was of particular concern as the AG had highlighted the importance of consequence management earlier. She expressed her concern on the non-compliance of the supplier chain management. On continuous recommendations made by the AG, it showed that there was almost no progress on the performance outcomes and asked if the Department was adhering to the recommendations made by AG’s office and the Committee. On the high turnover of staff and low dismissals, she wanted to find out what was going on and the impact on the loss of expertise. She further asked if the Department was building successive leadership to prepare for the retiring or leaving staff. She wanted to know what the current vacancy rate was. Considering the high unemployment rate in the country, she asked the Department to explain why it was reluctant to hire people despite of having sufficient fund to do so. She raised issues around poor compliance and poor workmanship. Some buildings such as a police station in North West having been build years ago but still were not occupied, she asked what was happening. She asked why Public Academy was not approved but finance statements stated that fund had been spent. She asked about the non-responsive status of contract incubation programme and said it was a concern.

Ms Siwisa (EFF) asked what the 1 202 beneficiaries who had participated in the DPW skills development programme were currently doing. Are there measures in place to ensure that they are employed? She commented that it would be wasteful if they were left destitute. On the non-submissions of CBE Amendment Bill and BEPCs Amendment Bill, she asked whose responsibility it was to get them done and the Committee needed a time frame. She said the outstanding documents for payments was a huge crisis and asked what plans the Department had to ensure 30-day payment. She asked how the Department compile its asset register if they were not even able to identify some of its assets. She asked why IDT continuously were being paid.

Ms Shabalala said that she might be repeating some points. Within her constituency, she had noted that some properties owned by DPW. Some of those properties were unoccupied. She suggested DPW to give some buildings it owned to the municipalities because it might make a contribution to economy in those municipalities. On litigating cases, she asked what the Department’s plan was to deal with service providers while the case was still in court because service providers were really the sufferers in these cases. She asked DPW to not only need to focus on big harbours such as those in Cape Town but also to inject some fund into small harbours to boost economy. The Department needed to make a turnaround strategy on procurement plan. On staff vacancy, she sought clarity to identify the areas in which the staff shortage lied and where the number of staff was bloated. On EPWP, she stated that there is lacking of synergy between the NPOs and Department. The Department seems unable to even identify if those people who are sweeping on the streets are beneficiaries of EPWP. She suggested improvements be made on the issue.

An unidentified member asked what steps the Department had taken to ensure that jobs were created under the EPWP.

Ms Kopane said that the Department often brought up skills shortage in their presentations. She asked what strategies were in place to get skills since Public Academy had not been approved. On the under-performance of EPWP in the past, the Department often said it was due to poor or non-reporting. Ms Kopane wanted to know Department’s plan of actions to address this and the actual time frame around the plan. Under Programme 4, she recalled the 5 July presentation where the Department said there was an absent piece of legislation that caused it unable to achieve the four targets. She asked if this legislation was indeed so important, why had it not been prioritised. During the presentation, the number of personnel under facilities management services was 3 008, however, this figure was 2 630 in the Annual Report. She asked the Department to explain the discrepancy. She commented that there were a lot of acting officers indicated in human resource section, and asked when these positions could be filled both in DPW and at PMTE. She asked why there were 123 employees at PMTE that had resigned. She expressed the worrisome issue around the expiry contracts which were 433 at PMTE and 153 at DPW. She wanted to know what would happen to those expired contractors and whether they would be absorbed and to which positions they would be absorbed.

Mr Mathebula commented that irregular expenditure was an issue that came from 2014 and still had not been resolved. He asked why the Department had not been able to follow up with the AG’s office during this five-year period. In his view, he remarked it reflected the bad implementation adhered by the Department on AG’s recommendations. He criticised the Department’s lack of actions. He asked the Department to expand details on any consequence management which resulted in any official involved in the irregular expenditure. He knew a case where a councillor had to report an official and encouraged officials to report corruption cases. On clients not being paid because not quality service was provided, he said he felt bad to read it. He asked why quality service was not being provided as the Department should set a role model for the public. On IDT, he commented that the board that managed IDT was improperly constituted. He thus asked about the consequences of this illegality and whether any legal duties would be declared unlawful. He suggested the Minister to pay attention to this issue. He urged that the board should be in place and timeframe should be attached to indicate when. On the submitted reports, Mr Mathebula said that these reports should be given at least quarterly if not monthly. He wanted to know if issues to fraud and corruption, if any actions have been taken and how far the Department was. Speaking about the recent visit to the Pretoria central police station, he remarked that it painted a bad picture. The bad conditions of that police station damage public’s confidence and stressed the importance of maintenance of public buildings. He described it as “basement flooded, electrical wire hanging from the roof, a damp crack which was a hazard”. He warned the Department and the Committee that cancellation of ICC assets would not be in the national interest if such important infrastructure was in such a bad condition. He criticised the Department for their nonchalant attitude towards their work. Furthermore, he said that some issues that should have been reported in the reports were often uncovered by media first.

The Chairperson said in relation to AG’s presentation, and the issue of EPWP, the information that was given to the Committee was untrue. AG’s report commented that the reported number were not credible and mis-stated. The Chairperson emphasised the uniform way in reporting. The grant was not utilised and asked the Department to expand. On the percentages of the diversity of staff, AG’s office said that it could not be proven while the Department put them to the Committee as a fact. She asked the Department to expand on the issue. The Department said that it had spent 99.5% of its allocated budget during the 2018/19 financial year but the targets achieved were only 44.7%. She commented that there was no value for money and that only 17 out of 38 targets had been accomplished. She wanted the Department to explain. On the Public Academy, the Chairperson said that the Department had even presented the case to the Committee and the impression was that everything was well under way. She was confused now that it was not approved all of a sudden and needed the Department to explain.

Department’s Response

Mr Sam Vukela, Director-General, DPWI, said he would respond to some of the questions and asked his colleagues to cover some others. He acknowledged the faults of the contractor incubator programme. The non-achievement was due to the lack of proper planning in place. Going forward, he said the Department would ensure that the equipment strategies of contractors were strengthened in various areas as this was the key area in which the Department could help build capacity of service providers

On capacity of PMTE and Academy, he commented that Academy was driving its functions through bringing on board young graduates and facilitate them to graduate into professionals. The programme will not suffer because it was driven by a branch that had already existed. The planning of the Academy was informed by funding. He assured the Committee that skills development programmes would not suffer because there was a branch in charge of that.

On high turnover and surplus employees, he commented that in terms of organisational structure of the Department, there was 433 contract employees at DPWI and 153 contract employees at PMTE. The rationale was that when these organisations were initially developed, there was capacity issue that constrained the performance of Department. A provisional agreement was made in areas where structure did not meet the needs, the Department was allowed to employ outside contract workers. He explained that vacancies do not talk to contract positions. Some employees left because they found other better positions as those contracts did not provide them much career growth space. To extend the period of those contract employees is a complicated matter. There was a limitation to extend these contract employees. However, he said the Department were doing all they could to ensure vacancies were filled.

On small harbours, he agreed with Ms Van Schalkwyk’s point. The Department would make sure in future that all provinces were covered.

Mr Swanzie Matthews, DDG: Real Estate & Information & Registry, commented on asset register, the Department showed members the evolution of audit outcome from 2011/12 to the current financial year. Compared to the 2011/12 financial year, the key issue that was left behind in terms of the audit outcome was the immovable asset register and the evaluation of assets. For the past three years, the way the asset register was dealt with was not fully audited, but since 2017 there was an improvement. The main challenge of the Department was on the evaluation of assets.

On inter-governmental transactions that was related to bank overdraft, although the Department owed the bank and that amount was growing. But the money that was owed to municipality had grown even larger which amounted to R10 billion.

An official from the Department pointed out that the transactions between governments was ballooning and that was due to government’s priority to non-governmental sectors than governmental sectors.

Mr Vukela commented on the vacancy issue. He said that the instructions received was that positions above level 15 would need to be delayed to ensure that proper assessments needed to be done to ensure that these positions could be filled by current employees. For those positions under level 15, the Department was in the process of filling them.

On the amount that DPWI owes to municipalities, the annual report said that R675 million was owed and R1.1 million was on rates and taxes. Since municipalities were unable to provide accurate breakdown to the amount of money owed by the Department, it still would take the Department time to validate these figures.

On payments of service providers and outstanding documents, the Minister was very clear on expeditious payment and the issue had improved a lot. The Department does engage with service providers. The challenge is with small service providers who do not have the capacity to produce certain documentations.

On irregular expenditure, although it would take time to resolve the issue. However, considering when it had started with R34 billion but now it was only less than 2 billion, the Department said it was an improvement. There was also the challenge that some transactions were too old for documents to be retrieved.

On consequence management, the Department said the GRC working with them refer to labour relations for disciplinary processes. The Department was putting more resources to ensure prevention. The outcome has been positive as the trend shows that it was going down.

Mr Mazibuko explained that for advancement payments included in the financial statements, those were the payments made by other governmental Departments at the end of a financial year whilst service had not been due to be provided to them.

Mr Vukela said that the Department were implementing audit action plans.

Mr Stanley Henderson, DDG: EPWP, DPWI, commented on the unspent funds. He said that unspent funding would be returned to National Treasury under strict regulations. Internal audit also assists to audit in this regard. Mr Henderson said that the aim was to spent money but not to return.

On the ground funding and the under-perform the transfer of grant, he said the grant funding makes up less than 10% of EPWP budget per year. The important responsibility of the coordinating Department is to ensure EPWP approach is institutionalised across provincial and municipal levels. When there is under-spend on municipal grant, there was under performance of EPWP.

Since 2004 the Department had developed monitoring and evaluation system and there is a system in place regarding the EPWP. The system was a validation procedure to ensure data was correct and accurate. The Department was fully aware of the importance of the accuracy of data management. 

On synergy, he commented that the better the guideline takes root, the better programme would perform. EPWP should be institutionalised across all main streams.

Minister’s remarks

The Minister apologised for the late submission of the report to the Committee. She informed the Committee of the commitment of her Department in fighting gender-based violence. Her Department was undertaking to identify the unused buildings owned by the Department and use them for social development and women shelters. Her Department would brief the Committee on the matter in due course.

The Department would submit the unsubmitted bills in the 6th administration. The Department was currently busy with the Appropriation Bill which would be submitted in 2020. The Department was burdened with the 1997, 1999 White Paper and she said she planned on drafting a bill for public works. Regarding the Amendment Bills of CIDB and, CBE, her Department would give a time frame to the Committee.

She acknowledged that IDT was a big headache. In the process of reviewing the mandates of IDT, she planned to report the state of IDP to the Cabinet by end of the month and will keep the Committee informed.

On additional staff, her Department was currently auditing what positions they had. She asked Members to bear in mind of the recent merger between the DPW and Department of Infrastructure. Her concern was that there was an increase of additional contractual employees that were unnecessary to staff requirements. Many contracts ended in September and October. Her Department was working on getting extensions to ensure that people would not be out of a job in December.

On EPWP, she said that the Department must hold itself to the highest accountability standard as the AG recommends.

On Public Academy, she said that she had been misled. In the budget speech on 10 June 2019, she was briefed of the Public Academy case. However, after research, she came to realise that the Academy had only appointed the consultant to look at the feasibility of the Academy now.

On asset register as well as its remedial action, Ms De Lille said that the AG office had been working on this for past nine years and the response they got was the same. The failure lies in the lack of actions to implement and the failure of AG to make recommendations. She managed to get an independent service provider to get verification and she had to get help from National Treasury. Eventually it will be done.

The meeting was adjourned.  

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