Initiatives to Address SCOPA Concerns; Immovable Assets Management & Pending Legislation: briefings

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Meeting report

PUBLIC WORKS PORTFOLIO COMMITTEE

PUBLIC WORKS PORTFOLIO COMMITTEE
31 August 2005
INITIATIVES TO ADDRESS SCOPA CONCERNS; IMMOVABLE ASSETS MANAGEMENT AND PENDING LEGISLATION: DEPARTMENT BRIEFINGS

Chairperson:
Mr F Bhengu (ANC)

Documents handed out:
Department briefing: Action Plan to Address Issues Raised by SCOPA
Department briefing: Immovable Asset Management PowerPoint Presentation
Department PowerPoint presentation: Current Status of Pending Legislation

SUMMARY
The Department delegation outlined the issues that the Standing Committee on Public Accounts (SCOPA) had raised regarding the Public Works Department’s 2003/04 Annual Report and its performance. These included the need to:
- improve the Property Assets Register;
- to strengthen its debtors system;
- to address certain revenue issues;
- to improve its asset management;
- to improve its Information and Technology (IT) disaster recovery plan;
- to strengthen the controls of the Property Management Information System (PMIS);
- to address vacancies and staff development issues;
- to address unauthorised expenditure and other related budgetary issues;
- to improve certain aspects of governance;
- to finalise the devolution of rates to provinces; and
- to obtain the Minister’s approval for the properties disposal plan.

The Department had undertaken various initiatives to address these issues, which included:
- formulating an Assets Register Action Plan;
- improving debtor management;
- implementing Disaster Recovery Plans (DRP);
- altering the controls of the PMIS;
- improving the quality of the budgets submitted to Treasury;
- ensuring that regional managers recovered the debts owed by client departments;
- developing a plan to implement user charges;
- producing a plan for the devolution of rates to provinces; and
- submitting a disposal plan to the Minister.

In the ensuing discussion, Members enquired about:
- the measures the Department had taken to address local government’s concealing immovable state assets;
- whether it had a timeframe to fill its vacancies;
- how it was combating government officials that illegally rented out state properties;
- whether it should consider an alternative to the tendering process;
- whether it recovered its debts;
- how it dealt with the problems surrounding vesting; and
- whether government should dispose of prime properties.

The Department delegation discussed its initiatives to improve management of immovable assets. These included:
- developing the Government-wide Immovable Asset Management Bill (GIAMA),
- introducing user charges for client departments,
- improving the Assets Register,
- undertaking the Proactive Disposal Programme,
- developing an options analysis, and
- implementing Service Level Agreements (SLAs).

Members were concerned that there was still confusion around the ownership of certain government properties. In such cases it was unclear which sphere of government was the owner. Members also enquired whether the Department would make underused government properties available to local governments for municipal purposes.

The delegation provided an update on the legislation that the Department was currently involved in developing. The Government-wide Immovable Asset Management Bill would be submitted to Parliament for approval in September 2005. The Department was also finalising the Expropriation Bill of 2005, which would take into account the government’s land reform polices, and the aspects of the Constitution that related to expropriation. The Parliamentary Villages Management Board Bill would be submitted to Parliament in 2006. This Bill outlined the specific composition of the Board, and extended the categories of people that could be accommodated in the Parliamentary villages. Members noted that they could not undertake in-depth work around the Bills, as the Bills had not yet been formally submitted to Parliament.

MINUTES

Action Plan to Address Issues Raised by SCOPA: Departmental briefing

Dr S Phillips (Department Chief Operational Officer) began by discussing some of the general observations that SCOPA had made about the Department’s 2003/04 Annual Report and its general performance. He noted that progress had been made in addressing the problems that SCOPA had identified, but there were still a few outstanding issues. These would, however, be dealt with in the near future. Dr Phillips then discussed the details of the issues that SCOPA had raised, and how the Department was addressing them.

He pointed out that SCOPA had been concerned that the Properties Asset Register was incomplete and inaccurate. In order to address this concern, the Department had employed 60 young graduates as built environment specialists, on a contract basis, to collect data about underused/unused state-owned properties. This information would be used to improve the Asset Register.

SCOPA had raised concerns about the Department’s debtor information system. In order to address these issues, the Department had adjusted its debtors module. An internal audit had been undertaken to examine whether these adjustments were sufficient, and it was found that further changes were required. The Department had also developed a system to improve its debtor management; for example, regional heads would have to report on debt management to the Regions Branch Executive Committee. Added to this, the Department had decided to appoint debt collectors in certain regions.

Dr Phillips noted that SCOPA had been worried that a number of essential service officials were not paying marker-related rentals for state-owned houses. SCOPA had suggested that Public Works contact the Department of Public Services and Administration (DPSA) about this problem. Public Works had contacted the DPSA about this issue. However, the DPSA had said that it could not at this point increase the rentals of state houses to market-related levels. This was because negotiations around rentals had taken place in 2004, and it was not advisable to reopen these negotiations.

SCOPA had stipulated that the Department needed to finalise a valuation model for its immovable assets. The Department had contacted the Treasury about implementing a valuation model. Treasury indicated that they were concerned about the potential costs of producing commercial valuations for all the Department’s immovable assets. They wanted to examine a range of methodologies that could be used to value immovable assets. Until a methodology had been decided upon, valuations would not be undertaken.

Dr Phillips stated that SCOPA was concerned that the Department lacked certain controls around its computer system; for example, the Department had not finalised a proper disaster recovery plan. In order to address this, the Department had implemented DRP. SCOPA also felt that the control measures around the PMIS were inadequate. The Department’s IT section had addressed some of the problems around the control measures. There were, however, some remaining weaknesses that would be dealt with by the end of September 2005.

SCOPA had indicated that it was troubled about the Department’s high vacancy levels and about certain aspects of its skills development programme. The Department had addressed this by producing an updated recruitment plan. The Department had also compiled reports about the training that it offered to its staff in the finance section. These reports had been submitted to SCOPA.

SCOPA was worried about the Department’s unauthorised expenditure. In order to address this concern, the Department had improved the quality of the budgets that it submitted to Treasury. It was also carrying out quarterly reviews of its expenditure, and had contacted Treasury in order to regularise its unauthorised expenditure. SCOPA was also troubled about the fruitless costs that were being incurred by the Department, due to client departments vacating properties before their leases had expired. In order to address this, the Department’s regional managers had been instructed to recover monies spent on behalf of client departments. SCOPA had also noted that the Department had various problems around account balances. Dr Phillips noted that the Department was in the process of addressing this.

According to SCOPA, the Department had certain problems around governance. For example, there was a lack of independent checks and management reviews, which resulted in certain procedures not being adhered to. The Department had addressed this issue by strengthening the capacity of its Internal Audit, and appointing external auditors to undertake certain functions.

Dr Phillips commented that SCOPA had identified other weaknesses in the Department. These included problems around its compliance with the Expanded Public Works Programme’s (EPWP) conditions in the Division of Revenue Act (DORA); weaknesses in finalising a plan for the devolution of rates to the provinces; and a failure to obtain the Minister’s approval for its properties disposal plan. The Department had taken a number of steps to address these weaknesses; which included striving for greater compliance with EPWP conditions in DORA; submitting a property disposal plan to the Minister; and implementing a plan to devolve rates to the provinces by 1 April 2006.

Discussion
Mr L Maduma (ANC), Ms T Nwamitwa-Shilubana (ANC), Mr S Opperman (DA) and Ms C Ramotsamai (ANC) complemented the Department on the progress that it had made in addressing the issues that SCOPA had raised. They hoped that the outstanding issues would be tackled in the near future.

Mr Maduma noted that some of the local governments were concealing the fact that the national government owned certain properties in their districts. He stated that this would hamper the Department’s immovable assets audit. He asked whether the Department was cooperating with the South African Local Government Association (SALGA) to address this problem. Dr Phillips responded that the Department’s Asset Management Unit had drafted a plan, which would involve asking the public for support in identifying assets that were being hidden. He stated that this plan could be expanded to include a partnership with SALGA in combating the concealment problem.

Mr G Anthony (ANC) pointed out that the constituency offices could assist the 60 specialists in identifying unused government properties. This would help with the compilation of an accurate Property Asset Register. Mr T Maseko (Department of Public Works Director-General) agreed that the constituency offices could be involved in assisting the 60 specialists to identify underused/unused government properties.

Ms Ramotsamai noted that a specialist unit, staffed by highly skilled managers, was needed in order to address the problems that exited around the Asset Register. She was concerned that government still did not have an accurate record of the assets that it owned. Dr Phillips responded that the Department had been building the capacity of its Asset Management Unit. Indeed, the Unit had been expanded, and an asset management plan was being formulated.

Mr Maduma enquired whether the Department had a timeframe for its plan to address high staff vacancy levels. Dr Phillips replied that the Department could not provide a timeframe for the total reduction of staff vacancies. Four percent of the Department’s staff left due to natural attrition. He added that the Department would be aiming to reduce its vacancy levels to five percent of its total staff complement. The Department, however, had not outlined this target in its current recruitment plan.

Ms Ramotsamai commented that SCOPA should have highlighted, and raised questions, about the problems that surrounded the Department’s moveable assets.

Ms Ramotsamai noted that some government officials were illegally renting out government properties to other people. She stated that perhaps there should be an amnesty for people renting these properties, as this would encourage them to report officials who were their illegal landlords. There could also be a reward system for people that provided information on government properties that were being illegally occupied. The only way to solve the problem was to get assistance from the public.

Ms Ramotsamai asked if Members could be provided with copies of the properties disposal plan. This would allow Members to gain an understanding of how the Proactive Disposal Programme was going to operate. Members would then be in a position to explain the plan to their constituencies. Dr Phillips replied that the Department would make copies of the disposal plan available to the Committee.

Mr Opperman noted that the delegation had stated that there would be an open public process around the disposal plan. He asked for more details on the open public process. Dr Phillips responded that the open public process would involve advertising the tenders for unused/underused properties in the media.

Mr J Blanche (DA) enquired whether the Department should continue advertising its property tenders in the nationwide newspapers. Estate agents tended to respond to these advertisements: they would purchase the properties and then resell them for higher profit rates. The Department perhaps needed to sell government properties through auctions. This would allow the Department to get the best prices for the properties.

Mr Maseko replied that there were certain problems around the Department’s current disposal procedures. It cost a lot of money to advertise in the national newspapers. Added to this, problems often arose with the organisations or companies that won the tenders. The Department was, therefore, currently reviewing its disposal procedures: it was considering whether it should auction properties rather than disposing of them through a tender process. Dr Phillips added that the Department also advertised properties in council offices and in the local media.

Mr P Gerber (ANC, SCOPA Member) commented that there were a number of rural properties being advertised in the State Tender Bulletin. He was concerned that the documents, which related to these properties, were not accessible to people in the rural areas. If one wanted the documents, one had to travel to Pretoria and pay R50 for them. He enquired whether the Department had any plans to make these documents more accessible. Mr Maseko replied that the Department would try to make these documents more accessible. It did, however, charge a fee for documents in order to encourage people to take care of them.

Mr Gerber enquired whether the properties advertised in the State Tender Bulletin were part of the unused properties that were being disposed of by the Department. Mr Maseko replied that he would check if the national Department was disposing of these properties. The provincial Public Works Departments, and other government entities, had also advertised properties in the State Tender Bulletin.

Ms M Ntuli (ANC) asked whether the Department had any plans to ensure that communities would benefit from the disposal of national government properties. For example, certain community projects desperately needed buildings to continue the work that they were doing. Could the Department transfer unused government properties to such community projects? Mr Maseko acknowledged that there was a need to provide opportunities for historically disadvantaged communities to benefit from the disposal of unused government properties. The Department had been considering a draft disposal policy that identified certain historically disadvantaged communities that would be the targeted purchasers of certain properties. The Department, however, needed to investigate whether the legislation allowed it to implement such an affirmative disposal policy.

Dr Phillips added that during the disposal process, information on the properties that were being sold was sent to the Provincial State Land Disposal Committees. This allowed other government departments to indicate whether they had a use for these properties. If a department had a use for a property, for service delivery or land reform, the property would be transferred to that department. Added to this, if a municipality identified a property that could be used by a community, that property would be transferred, free of charge, to the municipality.

Ms Nwamitwa-Shilubana stated that the Committee had heard from the Sekhukhuneland municipality that it was not being assisted by the Local Government SETA to train staff on the EPWP. She enquired whether the Department was able to monitor if the Local Government SETA was paying for the 432 municipal officials, countrywide, that had received training on the EPWP. Dr Phillips responded that he would investigate the situation around the Sekhukhuneland municipality.

Mr Opperman enquired whether the regional managers had successfully reclaimed the debt owed to Public Works, which had arisen due to client departments vacating properties before their leases expired. He also asked what action would be taken if client departments failed to pay their debts. Mr Z Ntsaluba (Department Chief Financial Officer) responded that Public Works had sent an internal memorandum requesting regional managers to recover money, which it had spent due to client departments vacating buildings prematurely. The Department’s Director-General had also written letters to his counterparts, in client departments, to inform them about the costs that had been occurred due to their department’s actions. He added, nonetheless, that Public Works was recovering the debts from client departments. Public Works would also report client departments that defaulted to the Treasury.

Dr Phillips added that the introduction of user charges and the devolution of budgets were aimed at addressing the problem of client departments vacating properties before the leases had expired. It would ensure that the client departments would bear the direct costs of such actions in the future. Nonetheless, Public Works would still be responsible for managing the leases.

Ms Ramotsamai asked what criteria the Department used to write off certain debts. Mr Ntsaluba replied that the Department was reluctant to write off debts. Nonetheless, there were instances where the three-year period, which was the time that the Department had to recover a debt, had lapsed. In such cases the debt had to be written off. The Department would also write off debts that were not economically viable to recover. Treasury also allowed the Department to write off the debts that were owed by destitute people.

The Chairperson noted that if the Department did not get a default judgement against an individual within the required time period, it would encounter problems with the law of prescription. Was this one of the reasons why the Department was employing debt collectors? Mr B Annandale (Department of Public Works Director: Legal Services) responded that the Department had to obtain a default judgement against a debtor to stop the implementation of the law of prescription. The Department would then be in a position to recover the debt, which it was owed. The quicker the Legal Services obtained information about a defaulting debtor, the quicker it could take action against them.

Ms Ramotsamai commented that the Department of Land Affairs appeared to be having difficulties with the government properties vesting process. Indeed, all of the provinces had experienced problems with the Land Affairs vesting process. As a result, governments departments, provincial governments, and local authorities still did not know which branch of government owned certain properties. This meant that it was difficult for an asset audit to be undertaken. She asked how Public Works was dealing with this problem.

Mr Maseko responded that the Department was concerned about the delays that surrounded the vesting process. These had arisen due to the limited capacity of the Provincial Disposal Committees. The various provincial departments, which had to compile reports on the ownership of properties, also had capacity problems. As a result, the documentation that reached the national Department often had information missing. In order to address this, the Departments of Public Works and Land Affairs had decided to provide training for provincial officials to ensure that they compiled complete property documents. Mr Maseko added that another problem in the disposal procedure was that the Ministers had to sign off the documentation on properties. This caused further delays in the process. The Department was investigating whether some of the functions, which surrounded the finalisation of the process, could be delegated to lower level officials. The Department had also established a fund, which would be used to hire consultants to fast-track some of the Department’s work around the vesting process. The Department would also be establishing a Joint Technical Committee with Land Affairs, which would focus on improving the process.

Mr Blanche commented that he was concerned that the state was selling prime properties. For example, there was an ex-military property in the George area, which could be developed by the state instead of selling it off. The state could get a sustainable income through developing a golf estate on this property.

Mr Maseko responded that, at this particular point in time, the Department was not involved in developing properties for commercial purposes. The Department only held properties that client departments were not using. It had decided to sell these unused properties to the private sector, which could then develop them. Nonetheless, the Department was considering leasing these prime properties out on a long-term basis instead of selling them outright.

Mr Blanche noted that the proposed sale of the Fernwood Estate would not be taking place. Before its aborted sale, Fernwood belonged to Parliament. He felt that as Fernwood was not being sold, it still belonged to Parliament. He was, therefore, concerned about the government’s plan to develop Fernwood as a ministerial housing complex. Parliament had the right to decide how the Estate should be used; not Public Works. Mr Maseko replied that Fernwood had reverted back to state ownership. The Department/government was considering various proposals around the future of the Fernwood Estate. One of these was to build a ministerial housing estate. Mr Maseko pointed out, however, that no firm decision had been taken.

Immovable Asset Management Update: Department briefing
Dr Phillips began by noting that the Department’s current management of immovable asset was inadequate. Various problems existed, which included a lack of a regulatory framework for immovable asset management; a lack of incentives for departments to use immovable assets efficiently; inadequate maintenance budgets; a need to improve the national and provincial asset management registers; and planning weaknesses. Dr Phillips noted that the Department was implementing six initiatives to improve its immovable asset management. These included:

- Developing the GIAMA. This Bill aimed to provide a regulatory framework for the management of immovable assets. Under the Bill, each state organ would be required to produce an immovable asset management plan, which should result in improved management of immovable assets. It appeared as if the Bill would initially only apply to the national and provincial spheres of government, and not local government. This was due to the complex legislation that surrounded local government. The Bill had been approved by Cabinet, and would be submitted to Parliament in September 2005.

- Introducing user chargers for client departments. As outlined in the White Paper on Public Works, the budgets for immovable assets would be devolved to client departments. These departments would then pay rent to Public Works for the state owned assets that they occupied. The Department would then use this rental money to maintain these properties. This would create incentives for the client departments to use their assets more efficiently.

- Improving the Asset Register. The Department had reached an agreement with the Accountant General on the contents, which should be part of an acceptable asset register. The Department was currently implementing a plan to verify the existing minimum information, and to collect missing minimum information, on the existing national Asset Register.

- Implementing the Proactive Disposal Programme. The Department had identified unused or underused government properties, which would form part of the Proactive Disposal Programme. The Department had divided such properties into three groups. The first group consisted of approximately 200 government owned houses. The Minister had already approved the disposal of most of these properties. The second group comprised of unused foreign properties, which the Department of Foreign Affairs had requested Public Works to dispose of. The third group comprised of 2000 properties, which needed to be researched in order to establish whether they should be disposed of; or whether they could be used for service delivery, or whether they should be used for land restitution purposes.

- Introducing an options analysis. Currently, there was no systematic methodology for determining an optimal acquisition solution. The Department, along with Treasury, had recently developed a generic options analysis methodology. In the future, all acquisitions would be subjected to an options analysis.

- Implementing SLA. The Department had developed a generic SLA in 2004; however, only one client department had agreed to sign it. The SLA was being revised to reflect the introduction of user charges and the implementation of GIAMA. The Department was in negotiation with Treasury to get it to ensure that client departments signed the revised SLA.

Discussion
Mr Blanche enquired whether a system could be implemented to inform the public about which properties belonged to provincial governments and which properties belonged to the national government.

Mr Maseko responded that the Constitution broadly defined which assets belonged to the different spheres of government. Nonetheless, there were certain issues surrounding the confirmation of which spheres of government owned particular properties. For example, there were cases where different lawyers interpreted the Constitution differently and, as a result, disputes over the ownership of certain properties had taken place between different spheres of government. Mr Maseko did, however, point out that such cases where rare.

Mr Opperman suggested that an ombudsman should be appointed to deal with such cases. Mr Maseko replied that disputes over the ownership of certain properties between the different spheres of government were unusual and, therefore, the establishment of an ombudsman would be unnecessary.

Mr Maduma stated that some local governments wished to use certain unused properties that were owned by the national government for municipal functions. He enquired whether the Department ensured that such properties were swiftly handed over to the local governments. For example, there was a local government in the Eastern Cape that wished to use a property, which was formerly a prison, as a tourist centre. The local government in question was unsure whether they should contact the Department of Correctional Services or the Department about this property. Mr Maseko responded that the Member could forward the information to the Department around this property. It could then assist in examining whether this former prison could be transferred to the local government for use as a tourist centre.

Status of Legislation being dealt with by the Department: Briefing
Mr Annandale provided an update on the legislation, which the Department was involved in developing. This legislation included GIAMA, the Expropriation Bill of 2005, and the Parliamentary Villages Management Board Bill of 2005.

Mr Annandale noted that GIAMA had been submitted to the Chief Law Advisor for scrutiny on 11 August 2005. It had also been approved in principle by the Cabinet, and would be submitted to Parliament during the course of September 2005. Certain issues would have to be considered by the Committee, which included whether the Bill should be published for public comment, and whether it needed to be referred to the National Council of Provinces (NCOP).

Mr Annandale stated that the Expropriation Bill was necessary for several reasons, which included the need:
- to ensure that the Bill was consistent with the provisions in the Constitution that dealt with property rights, access to information, the right to privacy, language provisions, and just administrative action; and
- to take into account government’s land reform policies.

He added that the Bill had been drafted in consultation with the State Law Advisor, Office of the State Attorney, and the Department of Land Affairs. The fourth draft of the Bill was with the Department. However, it was unlikely that the Bill would be introduced into Parliament in 2005.

Mr Annandale noted that the Expropriation Bill aimed to provide for expropriation of land in the "public interest"; to include the considerations in the Constitution that dealt with the calculation of compensation; and to recognise the expropriation of, and compensation for, unregistered rights. The draft Bill also stipulated that the acquiring authority should pay the costs that an expropriatee would reasonably incur in submitting, and negotiating, a compensation claim. Added to this, it provided for the compensation of the negotiator’s costs. The Department was concerned about these provisions. Indeed, it would be consulting with the Treasury around the financial viability of some of the Bill’s provisions.

Mr Annandale noted that the Parliamentary Villages Management Board Bill aimed to extend the categories of people that could be accommodated in the parliamentary villages. The Bill also stipulated that the Board needed to include a member of the South African Police Services; the Chairperson of the Public Works Portfolio Committee; the Chairperson of the Public Works Select Committee; and an additional Member of Parliament. The Board would become responsible for formulating the parliamentary villages’ management rules. The Bill would be sent to the Board and Cabinet for approval. It was likely that the Bill would be formally submitted to Parliament in 2006.

Discussion
The Chairperson noted that the Committee could not undertake in-depth work on the Bills as they had not yet been formally submitted to Parliament. He added that at this point, the Committee could not decide whether there should be public hearing on GIAMA. He pointed out that the Minister had the right to decide whether to refer the Bill to the NCOP or the National Assembly. The Portfolio Committee would, nonetheless, meet with the Select Committee to discuss whether the Bill should be referred to the NCOP.

The Chairperson asked whether the Members could receive copies of the draft GIAMA Bill. Mr Maseko replied that copies of the draft Bill would be given to the Committee, although the final Bill would only be submitted to Parliament in September.

The Chairperson was worried that the Parliamentary Villages Management Board Bill stipulated that both the Chairperson of the Select Committee and him/herself had to be members of the Board. He felt that their positions on the Board could clash with their positions in the Committees. This was because the Committees were responsible for oversight over the Board.

Mr Maseko replied that the implications of having the Chairpersons of the Committees as Board members would be investigated. This issue could also be debated when the Bill was formally submitted to Parliament. Nonetheless, there needed to be a forum that brought all the key stakeholders in the parliamentary villages together. It was proposed that the Board would perform this function.

Mr Maduma asked whether the Parliamentary Villages Management Board Bill aimed to alter the existing composition of the Board.

Ms Nwamitwa-Shilubana commented that there needed to be an emergency generator to provide power to the parliamentary villages, because the villages sometimes experienced power failures. During the most recent power failure, Members were not even informed about what was taking place.

The Chairperson added that the issue of power failures had been brought to the attention of the Department in 2004. Members of Parliament had been told that the power cuts were due to cable thefts. As a result, Members had suggested that the cables should be relayed in another area to avoid cable theft. As far as he knew, this had been done.

Mr Maseko apologised for the power failures that the parliamentary villages had experienced. Power failures, however, could not be prevented: all areas in South Africa sometimes experienced power failures. Nonetheless, he added that the Department would investigate the possibility of providing an alternative emergency source of power for the villages.

The meeting was adjourned.

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