Human Settlements Portfolio Audit outcomes & performance: AGSA & DPME input; DHS 2022/23 Annual Report; with Ministry

Meeting report

Opening Remarks

The Chairperson opened the meeting. The agenda was adopted by Mr B Herron (GOOD) and seconded by Ms S Buthelezi (IFP). Apologies were received from Adv T Masutha (ANC), who was unwell and had been homesick for the entire year and Ms M Makesini (EFF), who would join the meeting late as she was travelling. The Minister and Deputy Minister also sent apologies.

Dr N Khumalo (DA) raised concerns that delays in report submissions were disadvantageous to the Committee and asked that the Department explain what the issue was to avoid similar situations in the future.

The Chairperson indicated that the agreement was that presentations be sent within 24 hours. The Annual Report was tabled by the end of September. She asked when the Committee would receive the presentation.

Dr Khumalo spoke about the numerous reports that had been received that had changed, and asked if there could be communication about the reports sent, what changes were made and why those changes mattered.

The Chairperson indicated that the report was tabled in Parliament in the ATC. Because it was a booklet, the Department and invitees had a summary which was the presentation, and changes to the report were done through Parliament. The report had been sent beforehand.

AGSA Briefing

Mr Tshepo Shabangu, Senior Audit Manager: Human Settlements Portfolio, AGSA, and Ms Corné Myburgh, Business Unit Leader, AGSA, took Members through the presentation. The presentation looked at the non-financial performance of the portfolio, noting that:

• Overall, the portfolio has achieved an average of 58%of its targets (refer to slide 8). The non-achievement of key indicators affects lived experiences of citizens due to e.g. four housing programme agreements for mining communities not being developed, quarterly reports on title deeds not including information from all provinces by NHDS, etc. NHBRC, CSOS and HDA reported significant achievements of their targets. This raises concerns about whether the entities in the portfolio are fulfilling their different mandates.

• The Department evaluates quarterly performance reports of the entities and provides recommendations and action plans on how to improve. However, there is no evidence that the monitoring process has led to improvements in performance.

The persistently high housing backlog will result in an increase in service delivery protests and riots

• The surge in informal settlements and land invasions resulting from inadequate housing provision by the sector.

• Achieving the MTSF targets may be challenging as this marks the fourth year of the current administration's term.

• The “missing middle” population will continue to remain unserved in their numbers due to lack of financial assistance through programmes such as FLISP etc.

• The HAD contributes as an implementing agent towards to the MTSF target relating to number of houses delivered and has not achieved the target in the current year.

• The portfolio is currently behind schedule in achieving its medium-term targets, considering it is in the fourth year of the current administration. Addressing the title deeds and housing backlogs in the country remains a priority, with one more year remaining to meet these objectives.

• The impact on the citizens is lack of basic housing and lack of security of tenure which further impact the dignity of citizens and exacerbate the challenges of spatial planning plaguing the country, such as social unrest and inequality.

• Additional entities, such as NRBRC, SHRA, and NHFC, did not achieve some key targets. While they may not directly contribute to the key targets mentioned above, it is important to note that their failure to meet their own targets can indirectly affect the overall attainment of MTSF targets within the portfolio.

The presentation went on to look at the quality of financial reporting, financial health, compliance with key legislation, procurement and payments and irregular expenditure.

The presentation concluded by looking at root causes, recommendations, and reflections on the provincial audit outcomes.

(See presentation for more information)

The Chairperson indicated that questions had to be directed only to the current presentation, and questions directly for the Department had to be tabled for the afternoon.

Discussion

Ms N Sihlwayi (ANC) appreciated the Chairperson’s input on how to address the report going forward. She asked for clarity on the financial performance of the entities - the expenditure had to be able to create an impactful value, yet the financial expenditure did not give an impact or create value, which was problematic. For example, the challenge of the NHBRC was picked from the title deeds, the houses that were built which were not of good quality had title deeds, and money had been spent on the NHBRC but there was no good performance or achievement that made an impact.

When did the Department want to see the response of the consequence management of the past financial years? The Department seemed comfortable when it said that the consequence management issue was not for the current financial year but for the other year. Was that something that had to be prolonged? Was there progress to date? On the irregular expenditure in the disciplinary process that was apparently halted, what did that mean? Why was the process halted?

Mr C Malematja (ANC) agreed that the AG team was composed of a group of messengers delivering a report, hence the questions had to be directed to the Department and its entities. What enforcement was put in place to deal with the repetitive findings? At what stage had the AG intervened and ensured that its findings had been reported to the Committee for assistance and to avoid repetitions? That was work in progress, and the entities tried their best to avoid repeating findings, which was commendable.

Dr Khumalo added that those questions had to be directed to the Department and its entities. She pointed out that the PPRA seemingly had the same audit outcomes as it had done in the previous year so there were repeated findings in the various entities and in the Department - what was the reasoning for that? Was it due to a lack of adherence to the yearly recommendations? Where was the gap? At which point or when in the year did the AG review the recommendations of the performance of those entities or the Department in terms of the implementation and the progress made to ensure that those findings would not happen again? There was a great need for much more concentrated attention to the Department and its entities.

The Chairperson highlighted that the report had a lot of evident issues and asked if the internal auditing committees, of both the Department and its entities, operated effectively if some of the findings were repetitive and continued into other years. What was the effectiveness of the internal audit committees? When engaging with those audit plans, was the AG able to assess if the entities were dealing with the root causes? When interacting with the Departments and the audit committee, was there evidence of work being done to fix the issues raised?

Besides the recommendation that had been provided to follow up, to talk to the relevant structures that were supposed to help in making sure that the audit findings and reporting systems could get to the relevant authorities in the Department and the entities to respond to those issues, to check the effectiveness of those structures that needed to make sure that the audit findings and action plans dealt with the root causes. The report was informative and would help the Committee strengthen its oversight recommendations.

Responses

Ms Myburgh said the repeat findings and the enforcement to prevent those repeat findings had been in two categories: the AG would audit, make findings, make recommendations, engage the Department or the entity and it was up to the accounting authority to assess those recommendations and see to what extent they would be implemented.   The AG’s office would follow up with recommendations, share them with the Department, and track whether the recommendations were being implemented and whether they were effective or not. Enforcements came in with the enhancements of the Public Audit Act, where the AG talked about material irregularities where there had to be specific criteria that would be adhered to, it had to be material, there had to be financial loss and non-compliance. If the criteria was met, the AG notified and allowed the accounting officer to respond to that material irregularity and its response would be assessed.

If there was a financial loss, the aim was to regain the loss, which was the enforcement role. The notification would be issued, responses assessed and if deemed appropriate, the AG would follow up and report back with details about who was held accountable through disciplinary steps, the amount of money would be recovered in internal control and re-occurrence would be prevented. If the actions were not sufficiently implemented, there would be further action where there would be recommendations in the audit report which were enforceable or to rather refer to public parties. That depended on the circumstances which made it compulsory for entities to implement those recommendations. If the recommendations were implemented, the AG expected that the re-occurrence of that transaction would be stopped.

The feedback and insights shared highlighted specific reasons, key vacancies had been reported in critical positions that took time to be filled, there was work done by the Minister and there was some progress, but for the year under review, the outcome seen had been impacted. The other reason that was reflected was the action plan; there were action plans but effective implementation needed follow-through monitoring to ensure that the actions were deliberately implemented to achieve the required results. That was not always necessarily the case and that was where oversight came in. The financial performance versus the expenditure versus impact was a concern because money spent was unrelated to the impact on the ground.

Mr Shabangu responded to the questions about internal audits and their effectiveness. He said the internal audit committees did what they were required to do in terms of the treasury regulations and they were measured against that. The internal auditors could only recommend to management as the auditors were not part of implementers. They only identified challenges and advised management on how to resolve those internal controls, and when they were assessed, they were doing what they had to be doing. The assessment of action plans followed up on the implementation of action plans as the AG also did, the AG followed up on the prior findings it had made.

For example, even next year, when starting with the audit, all the findings raised would be followed up, to understand how management dealt with those findings. For example, for PPRA’s current acting CEO and new CFO had already extended an invite to a workshop on 18 October 2023 where the entity would discuss audit action plans for the current year, with the issues presented to get views and review adequacy. The AG still maintained independence as auditors but it was better to view the action plans now, instead of next year.

On Dr Khumalo’s question, it was a mixture of things and every scenario was different. For example, PPRA’s licensing and compliance programme had issues and ICT challenges with the system to register property practitioners. The entity ended up doing it manually to compensate for the challenges faced, which was the root cause for some of its challenges. The entity was working on it and guaranteed that everything would be automatic by the end of the current financial year. An assessment would still be done to check whether that had been done.

On adherence to recommendations, that was not always the case as repetitive findings showed that the entity had not implemented some of the recommendations. When recommendations were given, management was consulted so that the management could agree to the internal control deficiency which was the root cause. Once management and the auditors agreed on a root cause, it was easier to agree on the recommendation. Otherwise, it became difficult to implement a recommendation. There currently was no situation where there was disagreement on a recommendation for internal control deficiency. The issue was more on the implementation of those recommendations. Recommendations were always revisited where necessary, as they could evolve over time. How could the NHBRRC indicators be crafted such that that loophole could be closed.

Ms Sihlwayi asked about the irregularity that was identified and the process of consequence management that was put in place. In the process plan, there was a report that said the process of consequence management had been halted. Was that because there had been a recovery? Was there a disciplinary process? What stopped, where and why? Because that suggested that everything was put on hold.

Mr Shabangu explained that that was not an easy question as there was a similar scenario at the NHBRC. As the investigations were started against the irregularity, some of those investigations were stopped based on what was observed. Some of the reasons being that the person in question left the NHBRC employment.

Ms Stefani Wademan, Manager: AGSA, confirmed what Mr Shabangu had said and was also unaware of instances where investigations were halted.

The Chairperson thanked the AG team and indicated that the recommendations were adopted as tabled by the AGSA.

Presentation by the Department of Planning, Monitoring and Evaluation (DPME) on the Department of Human Settlements (DHS) and Entities’ Annual Performance (2022/23)

The DPME appraised the Portfolio Committee of Human Settlements on the annual performance of Department of Human Settlements (DHS) and its entities as per approved Annual Performance Plan 2022/23 and performance against 2019-2024 MTSF targets for the 2022/23 financial year. The presentation provided an overview of monitoring and evaluation of the work of the DHS and its entities and focusses on key highlights and areas that required improved performance.

DPME reported that the Department achieved 69.2% of targets in the financial year under review – this was an improvement from the past three years.

• For 2022/23, the Department received an unqualified audit with findings on performance information. However, the financial statements were clean and findings on performance information were adjusted accordingly.

• The Department engaged provinces and entities to influence integrated sector planning, budgeting, implementation and reporting. Investments made in key programmatic interventions were analysed.

• Responded to housing emergencies; fast-tracking repairs through a voucher system, allowing provinces and metros to utilise available funds from HSDG and ISUP to intervene in dealing with the damages; national Emergency Housing Response Fund

• Provided support to finalise a majority of PHSHDA implementation plans

• In February 2023, the DHS launched the First Home Finance programme as a revamped version of the erstwhile Finance Linked Individual Subsidy Programme (FLISP) – total of 5 811 households received financial assistance

• 8 262 of targeted 9 769 uninhabitable mud houses were eradicated in rural Provinces of Limpopo, North West and the Free State

• Developed a National Unblocking Programme - diagnostic evaluation of all blocked projects (3 445 projects identified) 925 of 1 873 targeted units delivered in 2022/23.

The presentation looked at the performance of the entities – see attached

Areas requiring attention for improved performance included the functioning of property markets for poor households, housing affordability, Intergovernmental planning and intersectoral collaboration and coordination, data dissonance, finding sustainable solutions to informal settlement realities, land invasion requiring provision of emergency services to unplanned informal settlements, Implementation shortcomings and enable delivery systems to function at a greater scale, capacitation of human settlement institutions, spatial inequality and spatial justice and climate resilience and disaster preparedness.

It was recommended the Portfolio Committee allow Operation Vulindlela to come and present progress to date on title deeds and DHS to resolve the identified blockages hindering progress on the upgrading of informal settlements.

(See presentation for more information)

Discussion

The Chairperson asked for clarity on the presentation of past reports instead of the current year, the report being from 2021/22 instead of 2022/23.

Ms Kefiwe Sethoabane, Acting Head: Local Government and Human Settlements Unit, DPME, indicated that the report presented was for the 2022/23 financial year and the 2021/22 report was for entities. The information on the MTSF was reported cumulatively for the performance of 2019 until 31 March 2023.

Mr M Tseki (ANC) was concerned about the cause of that because both entities and the DPME were reporting on 2022/23, and that information had to have been collated between March and now. In previous presentations from the DPME, he appreciated the work that the Department was doing but today’s approach on human settlements had been unclear. For instance, there was a sentence that said the DPME used a variety of data sources from government think tanks and research which was a vulnerable statement and there could be an improved presentation. We could agree on the problem statement, but the solutions could be broadened and made specific.

Ms Sihlwayi mentioned that the presentation was interesting and touched on the nerve programmes of the DPME, for which the Committee would like to get real details on why there was such a lack of performance in a particular programme. To get clarity from DPME, for example, Programme 3 was a real nerve of the Department in terms of the housing development approach and making an impact to improve the quality of life of the people. Monitoring could have those details. There was an interest in knowing where the Department was losing Programme 3 and why it was unable to perform. Was the DPME able to clarify where exactly, was its programme planning where the programme had inefficiencies or was it the activities plan, the internal part to make things happen? The programme could be problematic, but it was interesting to know where the Department lost it.

Secondly, the other programme for priority development areas seemed to have no progress or performance according to how it was established when you listened to the DPME. That brought interest to understanding where the entity lost the programme as it was straightforward and aimed to advance the process of housing development to give dignity to the people in terms of them planning their housing development on their own and the types of houses they want but the programme was not performing - where was the issue? Those questions were linked to whether the DPME believed that it came from another angle in government and monitoring was a management function in each department. Did the DPME see a different approach that government could address to say maybe for each department to have its own monitoring processes and DPME came in, having that structure that had done the work periodically, and the entity worked together and not easily lost the process and would find it easier with an internal structure. Was there no need for internal monitoring units in the departments closer to where the programmes were?

The Chairperson stated that for the 2022/23 financial year, she agreed with the cumulative on targets of the MTSF. Even the AG’s report aligned with it, but the problem was with the entities. Why would the entities be de-linked from the Department when they were supposed to support the Department? The evaluation also said the Department was unable to build internal capacities and relied on entities like the HDA. That statement would be agreeable if it said the Department was unable to build its capacity to monitor even its entities, but the way it was being phrased was a bit problematic. As the DPME, for the office of the Presidency, you were supposed to assist the three spheres of government in assisting the District Development Model (DDM) for forward planning alignment and utilisation of available resources to the expected maximum impact.

Yet, there was the complaint that there was no forward planning. Who had to forge those forward planning processes if the Presidency could not do that? With the title deed programmes that had not performed very well, the Committee invited the steering committee on the title deed restoration programme - why was it not implemented? Notably, some municipalities did not have capacity, and some had lost mother earth, but on the allocation of housing in provinces and beneficiary management, the registrar had not talked to the SHH which meant people on the system were not registered which was a system that was supposed to inform the backlog of the country and for government to allocate resources.

If one looked at the identification of beneficiaries, the Committee found that the responsibility was given to municipalities that gave responsibility to ward councillors. Because of the alignment of the election process, the new councillor started new lists which negatively impacted the national registrar’s list. How did the DPME assist the three spheres of government in working together and planning together? For instance, KZN had started improving the system. The office of the premier had established a planning division where other spheres of government participated which might have positive results in the future. How had the DPME ensured that that happened throughout the country?

Mr Tseki said there was a checklist where the DPME used green and red, where 0 – 49 was red and 50 to 100 was green; could that be interpreted the same way? Those areas had no achievements and were seen as green, not even amber. The DPME had to look into that. Why had the DPME not gone back, consolidated the report to the relevant financial years and reporting years and organise a physical meeting with the departments?

Ms Mmakgomo Tshatsinde, DDG: Sectoral Monitoring, DPME, explained that the format of the presentation was indeed different as the DPME previously came in from the element of the MTSF, but today the DPME said that it wanted to touch on the annual report, issues of entities and on the future in terms of the NSDDFs which it had now inherited so that there could be clear reports in the future. It reduced the element of the MTSF which was previously concentrated on. She hoped that what was requested by the Committee was submitted and to submit a full report on the MTSF today so that Chapter 5 of Human Settlement could contribute. In an effort to bring everything together, that could have caused confusion. The issues of dates would be addressed with the sister departments that dealt with the entities who provided the information. It was about the available information and the differences in reporting cycles, but those were noted and would be updated in time, which would be taken back to the responsible unit. The biggest part of the messaging was the congruency of what was reported and what the AGSA reported. The DPME would go further to detail the problem in those entities as it had just developed the framework for monitoring SOEs and entites in the future. She apologised for that disjuncture in the presentation.

Most of the solutions provided were also recommendations and were included by the Cabinet. After every bi-annual reporting session, there was a POE week where cabinet clusters discussed the MTSF and provided inputs and recommendations. Most of those recommendations came from there and were being adopted by the committees themselves over that period. The details about where the programme was being lost, could be provided an in-depth analysis to identify the problem, deep dive reports were used to find out what the problem was and the responsible unit would be requested to do so and report back. If given a mandate and request, that deep dive would be done for Parliament. The DPME came from an angle where it tried to spread its wings rather than just focus on the MTSF; those difficult questions were addressed that way. 

Reporting on entities was all about the different reporting periods which would be sorted out and reported back on. On whether the departments were being de-linked, the DPME was not doing any de-linking, and the monitoring was being strengthened to ensure that the entities were supportive and that they played their part to see a change going forward because those entities currently did their own things that were not under scrutiny, as they would be going forward. The plan was to hold the entities accountable and monitor them closely. That message would be sent to the sister branch in public sector monitoring and capacity would be developed to deal with that matter. Planning forward, that was why the DPME brought the NSDF. It was a planning tool and a working tool to say there was a guide, and the national spatial framework which would help to plan more effectively for the developmental mandate. It was not about building houses just for the sake of it, but to correct the spatial development dilemma that had been caused by the apartheid system which was increasingly not being eradicated.

That framework encouraged better planning and the process for next year had been started. Both the MTSF and MTB had all of those elements that were missing in planning. The DPME planned forward and assisted the three spheres of government. The strong planning unit had forums encompassing all the provinces, including the municipalities. Using the DDM model, the DPME was trying to develop a joint plan which would be used to develop areas. The DPME wanted to see across all the spheres of government, such that what was implemented was within policy and was supported by the budget. That was the kind of result that monitoring and planning looked at, moving away from what used to be and synchronising those processes. When planning and trying to pass the audit, the developmental part was missed which delayed the process. There was a meeting that afternoon with the AG and solutions would be gotten right, through working together. With the alignment of all the plans, the alignment of performance ministers was aligned with the performance of MTSL. Now alignment was with regard to the APP and going forward which was a process that was underway.

Ms Sethoabane explained that the last slides proposed the solutions where the DPME had indicated its recommendations and had identified problems, which would lead to solutions from problems observed in those programmes being implemented by the Department. The programme mentioned was not performing well despite the specific grant identified for upgrading informal settlements. The problem started with the planning whereby municipalities and provinces prepared business plans for each financial year and submitted them to the National DHS to approve and secure funding based on the projects ready for implementation.

The challenge of those pipeline projects emerged when the municipalities and the provinces submitted projects that were not ready for implementation. As a result, at the beginning of each financial year, the provinces and municipalities intend to start the procurement at the beginning when they were supposed to be starting to implement and spend on those projects that had been approved. The planning protocol on the project pipelines was sitting with the National DHS. Other problems were with the project implementation; once the project had commenced, it did not meet all the timeframes in addressing the phases of upgrading the informal settlements.

The projects sometimes moved up to Phase 2 and did not reach Phase 3. The reason why the current MTSF 2019 – 2024,  included phase 3 was because, for the 2014 – 2019 MTSF, the DPME was only implementing the upgrading of informal settlements up to phase 2. Then, the DPME made a decision when preparing for the current MTSF 2019 – 2024 to say the DHS, provinces, and municipalities had to be upgraded to phase 3 to ensure that people had full services. If the DPME stopped at phase 2, the impact on the ground was not what it wanted to see. 

There were declared priority development areas, yet the programmes and plans for the implementation of development were moving slowly. Those issues were raised with the Department to determine the main challenges, but the response would say the implementation plan was being pushed so that those programmes could start being implemented. In terms of monitoring, the National DHS did have a monitoring branch. The DPME monitored the areas where the projects were being implemented and monitored the information to check if the progress that had been reported was correct.

On the issue of assisting the three spheres of government through the DDM, some plans were developed for each district which were submitted to the Department of Cooperative Governance (DCOG) and assessed by DCOG and the DPME planning branch. Not all human settlement projects would be incorporated into those District 1 plans.

With the work done in the three spheres, the provincial departments of human settlements developed the APPs which the DPME assessed before being tabled for approval. The National DHS also produced the APP for National, which the DPME assessed before being tabled to the Cabinet for approval. The DPME assessed the alignment of the targets between the APPs and the MTSF to ensure that the indicators in the MTSF were captured in the APPs to see them being implemented. The progress presented on the EUPRS was the quarterly report being submitted, which was based on the performance of the APPs, with the green and red slides. The 100% indicated indicators performed and achieved for the APPs through the EPRs, which was the legend.

There were slides that were skipped because they were talking to the performance of the entities for the 2022/23 financial year. The only slides that talked about 2021/22 were the ones about the financial performance and the 2022/23 data could not be used because the auditing process had not been completed.

The Chairperson adjourned the meeting and indicated that the meeting would reconvene at 14h00.

2022/23 Annual Report of the Department of Human Settlements

The Department reported that it achieved 69% of its targets for the year under review. The Department had an incremental performance across all quarters. However, there was a 3% decrease in the annual performance. This can be attributed to the performance adjustment on the 2023/24 National Human Settlements Development Plan and the number of job opportunities created. The mentioned targets were initially achieved but were later revised downwards by AGSA during their audit – see attached for detailed performance per programme.

2022/23 audit outcomes

• The overall audit outcomes of the Department remained unchanged from the previous audit cycle, as the Department received an unqualified audit opinion with findings on compliance.

• AGSA did not identify any material misstatement on the Annual Financial Statement.

• AGSA identified material misstatement on performance information that were subsequently corrected prior to the conclusion of the audit

• AG identified material non-compliance with legislation on financial management for reporting in the auditor’s report.

Areas for improvement

•Strengthen intersectoral collaboration for improved performance through the DDM.

•Improved integrated planning, budgeting, monitoring and reporting.

•Improved procurement processes, which should impact positively on the implementation of the planned targets.

See attached for full presentation

Discussion

Mr Herron congratulated the Department on the unqualified audit but was concerned that the inability to meet the target for BNG housing, which was almost 14 000 units short of the target, was disappointing given the housing crisis. With the delivery of social housing, the presentation indicated that there was 0 output but a summary of the AG’s report sent the previous night indicated 3 182 social housing units delivered in the PDAs. Was there a distinction between social housing issued in PDAs versus social housing in general? The fall in the number of housing units being delivered was concerning.

Ms Sihlwayi spoke on Mafia contractors. She said that attention had to be paid to what was happening in the country. Some groups undermined that democracy which was implemented on the basis of the Constitution and everyone had to be respected equally, meaning no one had to be undermined.

Those people had to be taken to court as their actions were unacceptable. How was the system bypassed? With the issue of reports of the Auditor-General and the DHS, two critical programmes were not performing well, which were critical for the transformed approach that the DHS had adopted on the housing programme. On programme three and the PDAs, the officials seem to get those areas where there had been weaknesses, and reports have gone out with those challenged gaps.

One of the requests made to the DHS was an in-depth analysis of where the challenges had arisen. For example, on Programme 3, was it on the programme planning or activities, technical or business process? Was it a lack of integrated planning between the three spheres of government for a specific programme, to avoid generalisations? The DHS had agreed that it had a sector portion that would provide details to address those issues - that was essential because the entire programme was now negated when there was a particular area. When “we lose the ball”, we had to get to know that and then tighten the loose area, like the PDEs. Were the DHS’s systems coordinated? When speaking about the PDAs, where housing developed in that particular area was being addressed, were the systems well coordinated? Were the provincial business plans coordinating with national plans? Those issues were concerning as they were the critical programmes of the DHS.

The NHFC had done a huge programme for the country; it had created a profile that many people did not know, that indigenous people, poor people and women were bankable, more especially in rural areas. Could the NFHC not make a research analysis about households with more than R10 000 in the collection of those benefiting from the SASSA grant and for the NFHC to make an assessment? On the issue of assets, what were they and how much were they? How was that process initiated as it had to deal with issues that had value for money? Who went and verified to make sure the assets were necessary to avoid spending money on assets that would not add value in the process. “Thank you for the unqualified audit” - it was going to be difficult because housing was an emotive issue, and those issues were being raised because the housing development had to be in good order.

Mr Malematja thanked the CFO for clarifying a lot of confusion caused by the earlier presentations. There had been improvement in the DHS which was commendable. The business plan for informal settlements had to be followed up and the DHS had to deal with it. The Department had to improve its internal auditing. The report could pass.

Dr Khumalo mentioned that in the earlier presentation, the AG had mentioned a couple of concerning issues, such as key vacancies being filled, which had been reoccurring over the years, action plans not addressing identified findings concerning the entities, etc. What was the vision and the ideas around how the DHS planned to address those issues and the non-implementation of the AG’s recommendations, as discussed earlier today? From the DHS, a lot of the problematic programmes in human settlements were due to poor planning and due to the provinces submitting projects that were not ready for implementation. What were the ideas on informal settlements and the debt monitors that the provinces were being realistic around their plans and that those plans were implementable? How was the DHS not picking those things up at least midyear so that there was a level of intervention on its part? To sum up, on the non-implementation of the AG’s recommendations, the key vacancies, what were the reasons an employee would be reinstated after three written warnings and how had that related to labour law?

The Chairperson noted the increments on irregular expenditures and the audit action plans developed but there was no implementation in the DHS and entities appeared before the Committee just to report on what work had been done. As the DHS performed oversight, what had been the reason for entities developing action plans and not implementing them? There is an issue of monitoring from the sides of the Department to make sure that the entities implement those issues. Even with recurring issues like the NHPRC, which had not gotten a clean audit because of historical challenges, the Department had to follow up on those issues with the boards to make sure that those issues got finalised.

How did the DHS ensure that those irregular expenditures were reduced? How long would those irregular expenditures exist without being resolved? The audit findings had been welcomed but had reached stagnation, and the DHS had not received a clean audit. How could the issues be resolved and reduced in the entities? There had been no correlation between the DHS’s budget and the outcome of meeting targets, with the sector. Though provinces were given the funds, the targets were rarely met - that was worrisome.

The system usually had a person appointed and that person soon identified other opportunities, and left the Department which created vacancies. As people were appointed to act, how could their contracts be strengthened to maintain the status quo? The Department had not deteriorated and had prevented the system from collapsing. The alignment of the AG’s report with the provinces had been impressive - only 1 or 2 provinces were operating outside the system, one being the Free State, and it had been engaged and it had been seen as to how the province could be assisted better. The Committee welcomed the provincial unqualified audit. Nonetheless, there had to be clean audits, instead of unqualified.

Ms Zenkosi Mhlongo, Acting DDG: Research, Policy, Strategy and Planning, DHS, said that planning was key for the desired outcomes and part of the challenges around processes, and time frames of planning between the Local Government sphere and the provincial in different financial years had resulted in difficulty, those were the engagements being looked into. In terms of coherent integration for developments to align with other sector departments, that was being done to arrest the situation. While looking into new development of the MTSF, the DHS had started engagements up to the district level where there were metro as they were involved and provinces so that discussions around planning could include everyone for there to be a clearer picture on how the planning processes could be complementary and not fragmented. There would be challenges in the different functions and mandates, but engagements would lead to little milestones.

Mr Siyabonga Zama, DDG: Informal Settlement Upgrading (ISU) and Emergency Housing, DHS, indicated that a challenge was the growing number of informal settlements which continued to rise. What could be done to keep up with that number? While being directed by the Minister to look at the geospatial mapping of informal settlements, there was a need to re-block that informal settlement to do upgrades because relocations were also problematic. This would be the main focus in dealing with the growing number of informal settlements. 

Regarding the target that had not been achieved in quarter 1 - when the DHS was supposed to support the NSOs and approve its business plans, that was done, and all metro business plans were approved, allowing metros to start implementing their projects at the beginning of their financial years. The DHS was working very hard to keep up with the challenges being experienced in the programme. The entity was also improving support in provinces and metros so that it could improve the output in financial performance.

Ms Mulalo Muthige, DHS, addressed the monitoring of projects that were put in the business plans that were not ready for implementation. There were project-readiness metrics that were used to make sure that the projects that were there were ready for implementation. If it happened that some went through the approval phase without satisfying the readiness metrics, there was ongoing monitoring in place where support was provided for ongoing project implementation. With entities, there was an action plan in place that needed to be followed up on with the provision of oversight. The DHS had constituted the reviews of those action plans. In quarter 1, there were results as ongoing support was provided for the set targets.

Ms Mathope Thusi, Acting DDG: Corporate Service, DHS, confirmed that those were issues of procedures. As the matter was non-substantive, DHS had to reinstate the court order to reinstate the employee into the Department. With staff retention, there were bursary schemes and training and development for the Department and employees were encouraged to capacitate themselves, for the DHS to have employees that were capable. However, the performance seemed to drop when there were vacancies. The DHS was in the process of a skills audit to understand the gaps that needed to be filled and other priorities for the Department to have a capable and ‘capacitated’ workforce.

Ms Lucy Bele, CFO, indicated that the DHS accounted for each asset purchased, minor and major assets. When doing an asset verification and unable to locate the asset, the DHS put it there and closed it properly. The mistake made was not going back and locating all of those assets. The issues under minor assets were micro-ovens, dustbins, etc. Because they did not depreciate, those minor assets would be written off. National departments need an asset register. In past years, the Department would even buy small trolleys for serving tea, kettles, laptop bags etc. After the audit of major assets, the biggest chunk of assets were billboards. In prior years, a billboard would be procured. Once there was the one on the N2 highway, but there were a lot of those billboards that were procured but could not be verified. For example, an area was researched for a billboard in Soweto with poles but no middle, which were the issues.

Another major asset was a server which was a big thing. It was found that there was a storeroom, but the keys could not be located. Those were the assets being 100% accounted for, whether in the asset register, under investigation or sitting in a storeroom. Assets in the storeroom that were in working condition were being used to avoid frivolous spending. For the National DHS, there was an audit committee that was fully functional and tracked the action plan on a quarterly basis. When presenting on the issue of compliance on the issue of expenditure management, the DHS needed to have a MOA to avoid advance payments. The recommendations were taken into consideration and consultations had been made with the legal team to avoid repeat findings. The targets were changed yearly because of the AG’s recommendations. Irregular expenditure did not refer to DHS - the R1.4 million irregular expenditure had been disclosed, from the past year with irregular expenditure. It was being dealt with and disclosed in annual reports and consequence management was happening. The DHS was working on irregular expenditure, hence its value was going down. 

As a national department, the DHS had been transferring grants, hence there was 100% on its Programme 2 because it had transferred the grants. Quarterly, the provinces submitted the financial and non-financial reports. At the end of the year, the AG reports and the DHS got that information about no correlation. This was also when the DHS received the final reports of the provinces. The entity needed to evaluate the performance of the money it had transferred so that it could sit down with individuals to look at the financials versus non-financials to submit to treasury before the end of November. That report showed the DHS what had been transferred to the province, what was used, where it was used and what happened to the balance. When the DHS submitted the report, it would make it available to the Committee because it would clearly indicate the correlation between the financials and non-financials.

An official from the Department indicated that there were a number of social housing units tenanted and initially, those had showed a target of 3 529 and the achievement by SHRA was 2 595. What was presented was the sector standardised indicators as the provincial information that was audited. The DHS’s information talked to the number of rental social housing units delivered, and that was where the information differed. With the information indicating that the AG did not accept some of the reports because they were not verifiable or they did not support the provided evidence, the caution was such that the information had to be guarded. However, that information remained with the Department but it would be safeguarded as it was critical. What gave the DHS comfort was that annually, a plan would be presented to the audit committee that would be adopted or approved. The unfortunate part was that the AG did not rely on the work done or performed by internal audit of any institution.

Ms Pam Tshwete, Deputy Minister of Human Settlements, noted the comments, concerns, and recommendations. She saw the progress and was happy with it and appreciated the advice and comments received.

Ms Mmamoloko Kubayi, Minister of Human Settlements, emphasised that there was a need for a correlation between the targets and the money spent. One of the things that the DHS had started doing was to start tracking and reporting so that the provinces could see how much was spent. The DHS would be using the platform of MinMec for monitoring and evaluation. The DHS appreciated the meetings with the Committee and the provinces. Through those meetings, provinces and municipalities had been called into account and work together collaboratively, focussing on the targets. When the DHS looked at those business plans, it had to emphasise not how much was being spent but what needed to be achieved.

The DHS still had to pay attention to the quality of spending, which was important - was money being spent for the right purposes and the outcomes that the entity wanted? Paying attention to what money was being spent would allow the entity to correlate. The DHS saw improvements in performance in the MTSF. The only weak area was with the title deeds, and the entity was doing something about it. Other areas had improvement and alignment.

The DHS was committed to building the capacity of the state. Unfortunately, constraints around the restrictions of the compensation of employees have caused challenges. Going forward with what National Treasury said, there would be difficulties as the current aim was to fill critical vacancies, the entity had to put mechanisms in place that would serve as a retention strategy. There would be levels of development in the pipelines, but the skills audit was one of the mechanisms so that the Department could know the skills it had. The DHS was taking the issues around informal settlments seriously. There were regular meetings with the boards and they were held accountable.

The Chairperson adjourned the meeting.