PCPWorks

THE 2017/18 BUDGETARY REVIEW AND RECOMMENDATION REPORT OF THE PORTFOLIO COMMITTEE ON PUBLIC WORKS ON THE PERFORMANCE OF THE NATIONAL DEPARTMENT OF PUBLIC WORKS AND ITS ENTITIES, DATED 17 OCTOBER 2018

The Portfolio Committee on Public Works, having considered the performance (financial and non-financial) of the Department of Public Works, the Property Management Trading Entity (PMTE), and entities (Construction Industry Development Board (CIDB), Council for the Built Environment (CBE), Independent Development Trust (IDT), and Agrément South Africa (ASA), for the 2017/18 financial year, reports as follows:

1.       INTRODUCTION

The committee received presentations on the annual reports of the DPW, PMTE, CIDB, CBE, IDT, and ASA, from 9 to 16 October 2018. In this period, the committee robustly engaged with the department and the entities on its performance. This period included deliberations with the Office of the Auditor-General (AG) whose technical assistance deepened its insight into the challenges that the portfolio faced during the financial year under review.

Section 5 of the Money Bills Amendment Procedure and Related Matters Act (Act 9 of 2009) states that in the year preceding the budget, portfolio committees of parliament must conduct reviews of the finances of their respective departments and entities and, if required, issue recommendations on the forward use of resources.

The analysis contained in this report forms part of the process prior to the examination, consultation, and comments that the finance and appropriation committees of each House of parliament makes on the overall Medium-Term Budget Policy Statement (MTBPS). Parliament exercises its amendment powers through these committee processes so that there is an appropriate balance between revenue, expenditure and borrowing.

The Act necessitates that the portfolio committee annually assesses the performance of the department and its entities through an analysis of the:

“(a) medium term estimates of expenditure of each national department, its strategic priorities and measurable objectives, as tabled in the National Assembly with the national budget;

(b) prevailing strategic plans;

(c) the expenditure report relating to such department published by the National

Treasury in terms of section 32 of the Public Finance Management Act;

(d) the financial statements and annual report of such department;

(e) the reports of the Committee on Public Accounts relating to a department; and

 (f) any other information requested by or presented to a House or Parliament.”[1]

This report contains the analysis of the National Assembly’s Portfolio Committee on Public Works, on the annual performance as described in section 5(1)(a) to (f) of the Money Bills Amendment Procedure and Related Matters Act (Act 9 of 2009).

To give effect to this responsibility, the committee consulted the reports and documents as tabled to parliament, as stated above, of the Department of Public Works (DPW), Property Management and Trading Entity (PMTE), Construction Industry Development Board (CIDB), the Council for the Built Environment (CBE), Independent Development Trust (IDT), and Agrément South Africa (ASA).

The mandate of the DPW and the PMTE

Schedule 4, Part A of the Constitution of the Republic of South Africa containing the “Functional Areas of Concurrent National and Provincial Legislative Competence” sets out the legal mandate of the DPW.

The Government Immovable Assets Management Act (GIAMA) (2007) describes in further detail the department’s mandate as custodian of government’s immovable properties.

The department is responsible for the official accommodation of all national departments. It provides construction, maintenance, and property management services to all client departments at national level. This includes the rendering of expert built environment services relating to the planning, acquisition, management and disposal of immovable assets.

The Department also provides strategic leadership of employment creation through the implementation of phase three of the Expanded Public Works Programme (EPWP). The department plays a coordinating and capacity-enhancement role with provincial and local government counterparts to ensure the implementation of the third phase of the EPWP.

As mentioned earlier, the Department is further responsible for the following built environment and construction entities

• Agrément South Africa (ASA).
• Construction Industry Development Board (CIDB).[2]
• Council for the Built Environment (CBE).[3]
• Independent Development Trust (IDT).

The oversight role of the Portfolio Committee on Public Works

The committee does oversight over the national executive authority (the Minister), and how the department that it leads, uses the budgetary allocation to translate policy into implementable programmes.  Annually, it scrutinizes the Annual Performance Plan and the predetermined targets along which policy imperatives should be achieved. As set out in the Money Bills Amendment Procedure and Related Matters Act (Act 9 of 2009), all committees of the National Assembly of the South African parliament submit annual budgetary review and recommendation reports (BRRRs) after the adoption of the Appropriation Bill, and prior to the adoption of the reports on the Medium Term Budget Policy Statement (MTBPS)[4].

The committee’s oversight focus is on how the national executive authority developed, regulated and tracked the implementation of public works programmes that implement policy. The manner in which it does this is to monitor how the department and entities as implementing arm used the allocated funds to perform its mandated functions to ensure socio economic improvement.

2.       EVIDENCE THAT THE COMMITTEE USED

In performing its oversight duty, and following the procedure as set out in the Money Bills Amendment Procedure and Related Matters Act (2009) to assess the Department’s performance, the Committee used the following evidence

1.    The Department’s five-year Strategic Plan, Annual Performance Plan, and the Annual Report;

2.    The Strategic Plans and the Annual Reports of the entities that report to the Minister of Public Works;

3.    Quarterly Expenditure reports[5] as per Section 32 of the Public Finance Management Act (PFMA);

4.    Financial performance statements in the 2017/18 Annual Report;

5.    The oversight events of the Portfolio Committee on Public Works in the period under review including the deliberations on the presentations on the Annual reports and annual financial statements;

6.    The performance audit of the Auditor-General on the DPW’s financial statements for the 2017/18 financial year;

7.    The performance audit of the Auditor-General on the financial statements of the entities reporting to the Minister of Public Works for the 2017/18 financial year.

3.    THE COMMITTEE’S OVERSIGHT OVER THE ALIGNMENT OF THE LEGAL MANDATE, POLICY, AND PLANNED INITIATIVES AS STATED IN THE DEPARTMENT’S STRATEGIC PLAN, ANNUAL PERFORMANCE PLAN, THE MEDIUM TERM EXPENDITURE FRAMEWORK (MTEF), AND THE ANNUAL REPORT

3.1. A comparison between the Strategic Plan, Annual Performance Plan (APP) and the Annual Reports (AR)

The comparison showed that the department and the PMTE consistently reported that it made reasonable efforts to achieve its predetermined targets. The targets were also reasonably aligned with the broad objectives of the National Development Plan, the State of the Nation Addresses, and the Medium Term Expenditure Frameworks.

The stated policy objectives contained in these were expressed in the programmes, and human and budgetary resources were allocated in the DPW and PMTE’s annual performance plans.

In spite of the presence of these alignments in its planning documents and several presentations the DPW and PMTE failed to achieve key targets since 2014 at the start of the administrative term. This is despite the department’s political and administrative leadership having repeatedly giving undertakings to concretise the objectives in these plans.

3.2. Matters arising from 2015/16 to 2017/18 in the committee’s Budgetary Review and Recommendation Reports

In the Budgetary Review and Recommendation Reports on the 2015/16 and 2016/17 financial years, this committee referred to its disappointment that the allocated resources were not effectively used to achieve the stated target to review the White Papers on Public Works. This target appears in the five-year Strategic Plan and continued to be stated in the Annual Performance Plans from 2014 to 2017. Due to the committee’s insistence that the allocated resources needed to be used in the year under review the DPW stated that it would not be able to achieve this. It was going to be processed in the new administrative term that would start in 2019.

In addition to this matter, there is evidence that the PMTE has not yet transferred the Immovable Asset Register successfully onto a viable, sustainable electronic system that ensures full knowledge of the immovable assets under its legal control. Presentations that were made to the committee it continued to state that the Immovable Asset Register (IAR) had been moved from the Excel spreadsheet format to the ARCHIBUS software format. However, the material evidence of the IAR that was presented to the Auditor-General was not in ARCHIBUS but rather in Excel spreadsheet format. This means that the material evidence available is that the PMTE has not yet fully given effect to the prescripts of the Government Immovable Asset Management Act.

3.3. Strategic policy priorities in the Performance Agreement of the Minister of Public Works in the current MTEF, 2014 - 2019

In his meeting with the committee on 3 October 2017[6], the Minister of Public Works re-stated the following Government priorities as forming the basis of the Department’s Strategic Plan informed by the Performance Agreement of the Minister of Public Works and the 2014-2019 Medium Term Strategic Framework (MTSF). The following outcomes as described in the National Development Plan (NDP) guides what the Minister emphasised:

(a)   Outcome 4 - Decent employment through inclusive economic growth. The Department designed phase three of the Expanded Public Works Programme and reported to the committee on a focus on funding training in projects. It also highlighted how this phase would, with the collaborative work across national and provincial spheres as well as with other Departments, address the attempt to provide job opportunities to ensure inclusive economic growth.

(b)   Outcome 5 - Skilled and capable workforce to support an inclusive growth path. The Department uses its allocated budget to roll out a combination of development programmes such as the young professionals programme, its internship programme, learnership programme, and artisan programme. Through these attempts to achieve the stated policy objective of providing valuable on the job experience to young people who are in the preparation phase of entering the formal employment sector of the South African economy.

The effort to promote sustainable growth of the Built Environment Professions (BEPs) and transform the sector is the mandate of the Council for the Built Environment. It initiated a Skills Development Programme with schools to support learners undertaking Mathematics and Science to assist them to pursue a career in the built environment.

(c)   Outcome 6 - An Efficient Competitive and Responsive Economic Infrastructure Network As the DPW is the custodian of all immovable assets, the policy leader stated a commitment to ensuring that the maintenance of these assets are effectively done. The Minister affirmed the leading policy role over the public works sector and that he would ensure that the DPW, PMTE and entities play the coordinating role with relevant infrastructure-related departments to ensure that there is no degradation of assets and infrastructure. The Minister would ensure that relevant implementable policy exist for the enforcement of maintenance instruments. As leader of the Department, he or she must ensure that the DG and top management use the allocated budget in manners that is effectively used for maintenance programmes. In addition, the Minister would work with the top management and Boards of entities to monitoring compliance with public works policy. The Government Immovable Asset Management Act (GIAMA) and the National Infrastructure Maintenance Strategy (NIMS) are government’s tools to ensure that this outcome is reached. The DPW, PMTE and entities are the Minister’s tools with which to reach outcome 6 in coordinating public works functions with other infrastructure delivery departments.

(d)       Outcome 12 – An efficient, effective and development-oriented public service. This outcome is in line with the Constitution of the Republic of South Africa (1996) that envisages a public service that is professional, accountable and development-oriented. The NDP shows awareness that “there is unevenness in capacity that leads to uneven performance in the public service. This is caused by a complex set of factors, including tensions in the political-administrative interface, instability of administrative leadership, skills deficits, insufficient attention to the role of the state in reproducing the skills it needs, the erosion of accountability and authority, poor organizational design and low staff morale.” Importantly, it states clearly that there have been “challenges in achieving constructive relations between departments and between the spheres of government, and a reluctance to manage the system on a day-to-day basis has created tension and instability. Steps are needed to strengthen skills, enhance morale, clarify lines of accountability and build an ethos of public service.”[7] 

(e)   Outcome 13 - “The provision of work opportunities is one of the best forms of social protection”, is aligned with the EPWP’s current primary objective of providing the unemployed with an opportunity to work, thus empowering vulnerable families in South African communities.

3.4. The DPW and PMTE Annual Performance Plan

Six Strategic Outcome-oriented goals to achieve over the period 2014 to 2019:

1. Transform the construction and property sectors through the development of policy and legislative prescripts;
2. Provide oversight of the public works sector;
3. To provide an oversight role in the implementation of Public Employment Programmes (PEPs) through Expanded Public Works Programme (EPWP) standardised frameworks;
4. Oversee the efficient delivery of identified services to Prestige clients
5. Support service delivery in a smart, proactive and business centric manner that is aligned to statutory requirements; and
6. To build State capacity in the Built Environment Professions.

Since the previous financial year (2016/17), the Annual Performance Plan included the separation of the functions of the PMTE from that of the Department. This means that the regulatory and policy, quality norms and standard setting, and monitoring functions remain with the Department while the service delivery functions fall under the PMTE.

This separation of function is an outcome of the Turnaround Strategy (TAS) that is unfolding over the medium term expenditure framework period (MTEF). This Turnaround Strategy was necessary to address the historically poor performance and the lack of adequate management and financial controls that the Department of Public Works had suffered from. The TAS moved the DPW into a phase of stabilisation and resulted in the repositioning of the organisation to better discharge its responsibilities.

The committee noted one of the progressive developments of the TAS as being the creation of the Governance Risk and Compliance Branch and its on-going work with the Special Investigations Unit to actively deal with allegations of corruption, maladministration, and malfeasance.

In its 2015-2020 Revised Strategic Plan, the Minister reported that the TAS has delivered results and that it entered a phase of ensuring “effective implementation through a focused plan with measurable deliverables against budgets and timeframes.”

The Turnaround Strategy importantly, includes the re-alignment of the Department to secure a better focus on its mandate as custodian and portfolio manager of government's immovable assets. Since the operationalisation of the PMTE, as in the 2015/16 and 2016/17, in the 2017/18 financial year, the Department remains focused on improved oversight over policy formulation, coordination, regulation and oversight related to the provision of accommodation and expert built environment services to client Departments.

For this reason, the committee noted a substantial decrease in the financial and staff allocations of the programmes falling under the DPW, with a concomitant increase in that of the PMTE.

3.5. Observations on the alignment of the alignment of the Strategic Plan 2014-2019, the Annual Performance Plan, the Medium Term Expenditure Framework (MTEF), and the Annual Report

In its interaction with these documents since 2014, the committee observed:

1. The urgent need for the review of White Papers 1997 and 1999 to be completed so that legislation that strengthens the DPW’s mandate is prepared and processed through parliament. This was a target set in the DPW’s Strategic Plan 2014 to 2019. In meetings deliberating the Annual Report of the previous financial year (2017/18) the committee heard that this target will not be met. It expressed its disappointment at this unmet target in the Committee’s Budgetary Review and Recommendation Report of 2015/16 and 2016/17.
2. The draft legislation emerging from the review of the White Papers would have ensured that the Minister’s leadership and regulatory power of the professional built environment and construction industry in both the private and public sphere was properly legislated.
3. The legislation would further have provided specificity concerning the coordinating role of the DPW (with the PMTE as the implementing entity) on the one hand, and on the other, the specific responsibilities of client departments, provincial departments of public works, and municipalities over immovable asset maintenance, contracting, leasing, and employment creation. It would also have strengthened the coordinating and regulatory function of the EPWP over data that needs to be more timeously collected and verified from municipalities and provincial departments.
4. The lack of this legislation of the Department of Public Works weakens binding and enforceable agreements that the DPW and PMTE can make with other departments and municipalities. This makes it difficult for the DPW to hold those stakeholders accountable. This non-delivery continues to leave the PMTE in a difficult space to collect management fees, advertorial and rental income, and in some cases, project management fees.
5. The DPW had not implemented a number of the recommendations from the Auditor-General in the previous financial year. The lack of consequence management processes to hold the responsible stakeholders accountable further weakens the effort to move towards a clean audit for the department, the PMTE and the entities.
6. Due to the lack of relevant legislation and regualtion, the Expanded Public Works Programme (EPWP) as coordinating branch of employment creation projects remains a misunderstood programme. EPWP employment creation projects are implemented by national and provincial departments, and municipalities in several sectors of government. A number of incentive grants exist to assist these national and provincial departments and municipalities to create employment through infrastructure maintenance, inner city and town cleaning, and spatial improvement projects. If treated in its correct form, as a coordinating programme in the DPW, the EPWP branch have actually been performing exceptionally well since its inception. Yet, it is incorrectly accused as holding the responsibility of not yielding the expected employment results. Much of such false allegations regarding the EPWP stems from the challenge to timeously collect and verify data from national and provincial departments and municipalities. Because of such delays, incentive grants can often not be paid out within stipulated timeframes. This continues to result in the EPWP getting unfavourable opinions from the Office of the Auditor-General due to the fact that there has been no effort from the DPW to remedy the apparent anomalies as reported by the Auditor-General.

4. OVERALL EXPENDITURE OF THE DPW FOR THE 2016/17 FINANCIAL YEAR

Programme 1 received a final appropriation of R447.7 million and spent R447.6 million. This equates to under expenditure of R134 000 (or 0.03 per cent), by the end of the financial year.[8] This programme reported on 12 planned targets for the year under review, of which seven were achieved and five were not achieved.[9]

Programme 2 received R48.2 million of the total Department allocation and spent R45.4 million, an under expenditure of R2.8 million (or 5.8 per cent). The variance is due to underspending on the following:[10]

• R1.3 million – Compensation of Employees, due to delays in the matching and placing process that therefore affected the advertising and filling of vacant positions.
• R 907 000 – Goods and Services due to delays in planned expenditure on the newly established Professional Services Branch.
• R171 000 – Transfers and Subsidies due to low spending on household for exit packages.
• R390 000 – Machinery and Equipment due to delays in planned procurement of assets resulting from unfilled vacant positions.

Programme 2 reported on five planned targets for the year under review. The Department achieved four of these targets were achieved and one was not achieved.[11] In addition, it also reported on one less than the six targets reported in the 2017/18 Annual Performance Plan. The target relates to the acquisition for approval of two Asset Management Services Tools (1 on Construction and 1 on Property Management) that were not reported on.[12]

Programme 3, the EPWP received the second largest allocation after Programme 4, with a total of R2.40 billion of which 99.2 per cent or R2.37 billion was spent. It underspent by R35.2 million or 1 per cent. The variance was mainly due to:

• R7 million – Compensation of Employees, due to delays in the matching and placing process that therefore affected the advertising and filling of vacant positions
• R28 million – for Goods and Services, due to delays in the implementation of the Infrastructure, Social, Environment and Culture projects.

Programme 3 reported on six targets for the year under review, of which three were achieved and three were not achieved.[13]

Programme 4 received R4.00 billion and spent R3.99 billion or 99.8 per cent of its allocation. The programme underspent by R14.6 million on the following:[14]

• R5 million – Compensation of Employees, due to unfilled vacant positions.
• R10 million – Goods and Services due to delays in entering into new agreements with the Property and Construction Charter institution where the planned payments were not paid in the current financial year.

Programme 4 reported on 3 targets for the year under review, of which two were achieved and one was not achieved.[15]

Programme 5 had received an allocation of R84.8 million of which R79.6 million was spent. It underspent by R5.2 million due to the following:[16]

• R5 million – Goods and Services due to planned expenditure that could not be incurred when the appointment of service providers was placed on hold for contractual reasons.

Programme 5 reported on five targets for the year under review, of which one was achieved four were not achieved.[17]

4.1. Sustained leadership, internal control, and financial performance management needed

The Department received an Unqualified Audit Opinion for the third year since the Turnaround Plan was initiated. The AG emphasised the following additional matters: [18]

• Internal Control Deficiencies[19]
  • The AG limited the findings to significant deficiencies found in the internal controls that resulted in the findings on the Annul Performance Report. 
• Leadership
  • Exercised inadequate monitoring of the Action Plan to address prior-year findings, which resulted in similar findings for the current year.
• Financial and Performance Management
  • Regular, accurate and complete performance reports were not always supported and proved by reliable information.
• Other reports Investigations[20]
  • Numerous allegations, (mainly relating to transgressions with regard to supply chain management, potential fraud and financial misconduct), were still being investigated on an ongoing basis by the Special Investigating Unit at the time of the publication of the Annual Report.

The Office of the Auditor-General further reported that it:

• Identified material impairments of R59.2 million as a result of irrecoverable receivables.[21]
• Did not audit the supplementary information on pp. 266 to 290 of the Annual Report and does not express an audit opinion on the supplementary schedules.
• Found that for Programme 3 EPWP, the supporting evidence provided for the achievement of stated performance indicators differed from what the EPWP claimed to have achieved in the EPWP-Reporting System (RS) by public bodies (Cumulative).[22] The supporting evidence showed that 1 117 272 work opportunities (WO) should have been reported instead of the claimed 900 234 WO.
• Was unable to obtain sufficient audit evidence for the variances and the reported achievements of the indicators under Programme 5 Prestige Policy. The AG was unable to determine if adjustments were required for the indicator on the reported achievement of 440 complaints out of 617 completed within 15 working days after logging complaint related to mechanical breakdowns (Cape Town).[23]
• Was unable to obtain sufficient audit evidence for the indicator on the reported number of working days taken to resolve emergency breakdowns after the logging of a complaint under Programme 5 Prestige Policy. The AG was unable to determine if adjustments were required on the reported emergency breakdowns achievement of 337 complaints out of 497 were completed within two days (Pretoria).
• Identified misstatements under Programme 3 EPWP which management corrected. The AG therefore raised material findings on the reliability of the reported performance information (and reported on the ones that were not corrected).

5. THE PROPERTY MANAGEMENT TRADING ENTITY (PMTE)

The PMTE was established as a trading entity that operates within the administration of the Department of Public Works. As part of the Turnaround Strategy, it has been operationalised to manage the majority of the functions that used to be done by the DPW. As such it deals with core functions of the public works portfolio that are, amongst others, property leasing, the compilation of user and custodian asset management plans with client departments, maintenance, and the Immovable Asset Register.

5.1. Programme Performance

The PMTE reported on 42 targets under its six programmes and sub-programmes, of which it met 22, while 20 were not achieved.[24] The table below outlines the performance of the PMTE under the six main programmes as reported for the 2017/18 financial year.

5.2. Financial Statement

The financial statement of the PMTE for the financial year is represented in the following table:

The total revenue of the PMTE declined by R977.6 million to R14.73 billion in 2017/18 from R15.70 billion in 2016/17. This is mainly due to the decline of R964.7 million under revenue from exchange transactions from R11.4 billion in 2016/17 to R10.4 billion in 2017/18.

Revenue from exchange transactions is mainly generated from accommodation charges on leasehold intergovernmental; freehold private; management fees on municipal services; sundry revenue and interest revenue, for example.[25]

The  interest expense decreased R85.1 million during the year under review. This is R5.1 million less than the R90.2 million in interest paid in in 2016/17. The decrease was mainly due to the following:[26]

• Interest on overdue accounts decreased by R31 000 in 2017/18 to R74 000 from R106 000 in 2014/15.
• Interest on municipal services and property rates decreased by R5.1 million from R88.3 million in 2016/17 to R83.2 million in 2017/18.
• Interest on finance leases increased slightly by R13 000 to R1.79 million in 2017/18 from R1.77 million in 2016/17. 

The R85.1 million is allocated towards interest due on backlog municipal services and property rates that has not been paid, but was provided for. This was mainly due to the Department embarking on the Phase II Verification Project, to verify claims across all regions made by local municipalities on arear municipal debt.[27]

Loss on disposal/transfer of assets declined by R137.2 million in 2017/18 to R18.5 million from R155.7 million in 2016/17.[28] This decline was mainly due to loss on the disposal of property, plant and equipment related to two land parcels with a carrying value of R16 million (2017 R146 million) which has changed ownership during the financial period. These are currently under investigation.

Operating lease increased by R421.3 million to R4.60 billion in 2017/18 from R4.18 billion in 2016/17. This is mainly due to increases of:

• R413.6 million (from R4,12 billion to R4.53 billion in 2017/18) on operating leases – building and improvements.
• R6.9 million (from R40.8 to R47.8 million in 2017/18) on operating leases – vehicles, furniture and office equipment. 
• R817 000 (from 24.7 million to R25.5 million in 2017/18) on rent on land.

Sundry operating expenses increased by R256 million to R1.44 billion in 2017/18 from R1.18 billion in 2016/17. A select number of expenses will be noted below to highlight some of the increases.[29]

• R7.3 million (to R35.7 million in 2017/18 from R28.4 million in 2016/17) on Auditor’s remuneration.
• R8.4 million (to R19.8 million in 2017/18 from R11.4 in 2016/17) on Computer software related expenses.
• R98.9 million (to R387 million in 2017/18 from R288.2 million in 2016/17) on Municipal service expenses.
• R133.1 million (to R197.9 million in in 2017/18 from R64.9 million in 2016/17) on Losses incurred, which consist mainly of additional payments made to defaulting contractors on projects.

The PMTE reported a deficit of R152.7 million, this is in contrast to the R1.1 billion surplus of 2016/17.[30]

5.3. Human Resources Required to perform optimally

The PMTE reported 7 592 posts of which 4 750 were filled at the end of 2017/18 with another 734 filled positions additional to the establishment.[31] During the year under review, the PMTE’s vacancy stood at 2 842. This translates into a vacancy rate of 37.4%. 

The largest portion of the 2 842 vacancies falls under Programme 6 Facilities Management followed by Programme 1 Administration, with 1 095 and 799 vacancies respectively. The two programmes also have the largest portion of Filled Posts Additional to the Establishment from the total of 734 position, Programmes 1 and 6 accounts for 239 and 209, respectively, for filled posts additional to the establishment.

Programme 3 Construction Project Management reported the third highest vacancy rate at 525 vacant positions followed by Programme 2 Real Estate Investment Services with 247 vacancies. While Programme 5 reported the lowest vacancy with 36 unfilled posts.

In terms of labour relations, the PMTE reported that:[32]

• 5 - Employees were dismissed.
• 11 - Employees suspended without payment.
• 32 - Issued with final written warnings.
• 42- Issued with written warnings.
• 11- Issued with verbal warnings.
• 2- Subjected to corrective counselling.

5.4. Matters that emerged

The Office of the Auditor-General expressed a Qualified Audit Opinion with emphasis of matters and additional matters on the financial performance of the PMTE for the 2017/18 financial year. This is an improvement from the Adverse Audit Opinion (including emphasis of matters and additional matters) that was expressed for the 2016/17 financial year.

The  basis for the qualified opinion for 2017/18 includes:

Property, Plant and Equipment[33]

The entity did not correctly measure deemed costs for property, plant and equipment, and the useful lives utilised in calculating depreciation did not reflect the actual conditions of the assets being depreciated. This affected the items in the financial statement as follows:

• Overstated property, plant and equipment by R11.8 billion (201712.7 billion).
• Impact on the surplus for the period and the accumulated surplus.

Payables from Exchange Transactions

The trading entity did not recognise all outstanding amounts meeting the definition of a liability in accordance with Generally Recognised Accounting Practice I (GRAP) payables were understated. This was found to be due to a lack of adequate systems to maintain records of accruals for goods and services that were received, but not paid for. The AG was unable to determine whether adjustments were necessary for the items in the financial statements. Accrued expenses for assets were understated by R295 million.

5.4.1. Emphasis of Matters and Other Matters

The AG emphasised the following matters:

• Questioned the PMTE’s ability to remain a going concern and indicated that the entity had a bank overdraft of R2.3 billion (2017 R1.9 billion) and current liabilities which exceeded current assets by R10.3 billion (2017 R9.3 billion).
• Identified material impairments of R1.1 billion as a result of irrecoverable receivables from exchange transactions.

• Programme 6 facilities Management

The AG could not determine the usefulness of reported performance information for the reported achievement of 10 per cent of unscheduled reported maintenance incidents resolved within the prescribed timeframes.

Expenditure Management

• Steps taken to prevent irregular expenditure amounting to R159 million were not effective in certain instances, as required by Section 38(1)(c)(ii) of the PFMA and Treasury Regulation 9.1.1.[34]
• The PMTE did not settle money owed within 30 days as required by Treasury Regulation 8.2.3.
• Payments were made in advance of the receipt of goods and services in certain instances in contravention of Treasury regulation 15.10.1.2(c).

Revenue Management[35]

Effective and appropriate steps were not taken to collect all money due as required by Section 38(1)(c)(i) of the PFMA.

Leadership

• Effective oversight responsibility regarding the effective implementation of audit action plans and resulted in the negative audit outcome.
• Effective measures to ensure that incorrect payments to suppliers in respect of private leases were not instituted timeously or adequately resolved.

Financial and Performance Management

• Complete, relevant and accurate information was not readily accessible and available to support performance reporting due to proper record keeping not always being implemented in a timely manner.
• Regular, accurate and complete financial and performance reports supported by reliable information were not prepared throughout the financial year.
• In certain instances, reviewing and monitoring of compliance with applicable laws and regulations were ineffective.

Other Reports Investigations[36]

• Numerous allegations, (mainly relating to transgressions with regard to supply chain management, potential fraud and financial misconduct), were still being investigated on an ongoing basis by the Special Investigating Unit (SIU). At the time of reporting there were four active presidential proclamations covering various periods starting from 2003 to 2015.

5.4.2. Financial control and administration sections were under resourced

In the Budgetary Review and Recommendation Report for the 2016/17 financial year, the committee noted that DPW and PMTE officials made statements that committed themselves to ensuring that daily activities would be imbued with solid risk management practices. This assurance was given during the 2017/18 financial year as well.

Unfortunately, in spite of this, the evidence in the annual financial statement and the audit performance report of the AG showed that this was not part and parcel of the daily practice of the PMTE.

The PMTE reported that its risk management function was under-resourced and that this was the main reason for several misstatements and omissions in its reports.

With regards to human resources required to perform the core functions of the public works portfolio, the PMTE is facing serious problems. This Committee raised this in several reports since the 2014/15 financial year and the consequences of not giving the requisite attention to this, is manifested in the negative audit opinions expressed by the AG.

The rest of the report deals with the public works entities that report to the Minister of Public Works.

6. MATTERS THAT EMERGED RELATED TO THE ANNUAL REPORTS OF THE ENTITIES REPORTING TO THE MINISTER OF PUBLIC WORKS

6.1. The Independent Development Trust (IDT)

6.1.1. Background:

The Independent Development Trust (IDT) was established in 1990 as an independent civil society, temporary grant-making agency with an initial endowment of R2-billion.  The IDT is now an important part of the broader Public Works sector that reports to the Minister of Public Works. The IDT is currently a Schedule 2A Public Entity governed by a Deed of Trust.

The IDT has been in a process of transforming itself into a state social infrastructure implementing organisation that “manages and delivers integrated social infrastructure programmes on behalf of government, on time, cost effectively and through a people centred approach.”[37] The entity uses allocated money to pay project management fees for the construction of social infrastructure for client departments. These departments should pay management fees owed to the IDT from the Capital Expenditure portion of their respective budgets. The problem is that client departments seldom pay management fees at a high enough level and when they do, it is often much later than the actual financial year in which they budgetary allocation was made and has to be reported on. This leads to the IDT’s financial statements showing depleted accounts, high debt owed, a high risk in terms of legal costs (as debtors sue the entity for monies owed), and liabilities exceeding asset value. This means that the entity is, in terms of accounting and business principles, strictly speaking not a viable business to invest in. If this trend had to continue, as the Minister stated in his engagement with the committee, the entity may have to cease operations.

This has been the state of affairs during the last financial years since 2014/15. However, it must be kept in mind that the IDT has been on a path of recovery. It was undergoing an organisational development (OD) exercise in combination with an action plan to restructure itself into a new state social infrastructure implementing organisation. This organisation would have a stronger revenue creation and robust fee-collection focus and have the requisite technical human resource component.

6.1.2. The 2017/18 destabilisation of the IDT:

Unfortunately, before this could happen, the IDT was beset with a spate of removals from its administrative management, financial control, and governance structures. In the 2017/18 financial year, this caused a leadership and governance crisis that caused a severe setback as far as the implementation of the action plan and organisational restructuring efforts is concerned. In important offices such as the Chief Financial Officer, and the Chief Executive Officer, critical staff were removed, suspended or resigned.

This was happening while management fees had to be collected from client departments, service providers had to be paid, key projects had to continue, and the financial administration and management had to continue delivering social infrastructure projects to client departments. The staff losses in the vitally important areas of financial administration and management meant that the entity struggled to collect management fees. In the 2017/18 financial year, it was only able to collect 67.6% of the targeted 90% of the billed management fees for all the projects, which is a shortfall of 22.4%. The entity further experienced weaknesses in keeping records, managing contracts, and procuring services. These cumulating factors has led to the entity running at a financial loss.

6.1.3. The IDT must be reconfigured:

The Minister and Deputy Minister of Public Works expressed a strong view in the IDT as a reconfigured state social infrastructure implementation entity. The IDT must complete its organisational development exercise, and emerge as a state social infrastructure implementing agency that is relevant to the post-apartheid era.

6.2. Programme Performance

The entity reported on 24 predetermined performance indicators under two main programmes. The IDT reported that 50% of the targets were achieved or exceeded, and 50% were partially achieved or not achieved.[38]   

6.2.1. Programme 1 Integrated Service Delivery

Strategic Objective: Deliver quality social infrastructure on time, within budget and scope.

Programme 1 performance targets:[39]

The IDT reported the following targets that were achieved:[40]

• Spent R2.89 billion of the total programme spend of R4.31 billion on Broad-Based Black Economic Empowerment (BBBEE). A total of 67% of the projected target of 65% (i.e. exceeded the target by 2%).
• Spent R862.6 million or 20% of the percentage target on contracts awarded to women contractors as a percentage of the R4.31 billion. This is a new target focused on the value of programme spend on women (as the previous one referred to the value of contracts awarded to women).
• Created 57 112 of a targeted 50 000 work opportunities under the EPWP Non-State Sector. An additional 7 112 work opportunities were created.
• Supported 355 of a targeted 280 EPWP Co-operatives, Non-Profit Organisations (NPOs) and Community-Based Organisations (CBOs). An additional 75 NPOs were supported.

The following targets were not achieved or partially achieved:[41]

• Spent R4.31 billion of a targeted R5.0 billion.
• Spent 6% or R258.8 million of the targeted 15% value of the programme spend on youth contractors as a percentage of the R4.31 billion. The poor performance against this target is due to low participation of youth owned entities in construction projects.
• A total of 0% women contractors from a target of 65% participated in the Contract Development Programme (CDP).
• Awarded 0% of a total target of 4% in contract value of programme spend to Contractor Development Programme (CDP) participants.   
• Created 5 920 of a targeted 7 500 work opportunities - a shortfall of 1 580. 

6.2.1. Programme 2 An Effective and Efficient Administration[42]

Strategic Objective: A compliant, results-based, efficient and focused organisation.

Targets for Programme 2:

The IDT reported on Programme 2’s performance as follows:

• Received a Risk Maturity Level 5 of a targeted level 3 base.[43]
• Achieved 10.8% of a targeted minimum 5% of corporate budget savings.[44]
• 8.8% corporate efficiency ratio of a targeted 8.6% ratio.

The following targets were not achieved:

• Received Disclaimer instead of the targeted unqualified financial audit outcome.
• Received Disclaimer instead of the targeted unqualified performance information audit outcome.
• Paid 50% of invoices within 30 days from the date of receipt of invoices instead of 100% target.

• Communication Strategy reviewed and report to be presented to EXCO for approval, against the target of the Strategy being in place and implemented.
• Stakeholder Management Strategy presented to Management Committee (MANCO), but not approved by Executive Committee (EXCO) against a target of having the Strategy in place and 2017/18 plan implemented
• Billed a management fee of 4.7% against a target 5.5%. This decline was due to delays in transfers of programme funds from client departments.
• Collected 67.6% (of the targeted 90%) of the 2017/18 billed management fees, a shortfall of 22.4%.
• Achieved only 69% corporate occupancy for positions of targeted 92% due to Organisational Development project and moratorium on recruitment.
• Organisational Development placed a moratorium on implementation of the Employee Equity Plan.
• Due to the Organisational Development exercise a moratorium was placed on the implementation of the base target of each designated group, 90% of targeted 100% filling of vacancies of registered African professionals.

6.2.3. Human resources

The IDT staff establishment stood at 441 for the 2017/18 financial year. 326 positions were filled, leaving a vacancy of 115 positions.[45]

83 terminations were reported for the 2017/18 financial year.

Reasons for Termination were captured as follows:[46]

The IDT reported on eight disciplinary cases for the 2017/18 financial year. Of these cases, six people received Precautionary Warnings; one received a Written Warning (as a result of disciplinary proceedings), and one person received a Final Written Warning.

The instability of the IDT is shown in the large vacancy rate, but also the appointment of people to act in positions (such as Chief Executive Officer (CEO)[47]; Chief Operations Officer (COO) or Chief Financial Officer (CFO)) on an interim basis, while at the same time a number of people were also terminated in these Executive Management or Board level.

Instability at Executive Management and governance levels:

• Of the twelve Executive Managers at Executive Management level during 2017/18, between 31 January and 31 December 2017, seven were reported as being terminated.[48]
• The IDT experienced uncertainty at Board level, with 13 terminations reported between 31 July 2016 to 31 March 2018.[49]

6.2.4. Employment Expenses

The IDT’s total employment expenses equal R211.9 million, which is an increase of R45.6 million from the R166.3 million of 2016/17. Of this amount: [50]  

• R201.0 million on Remuneration, an increase of R17.1 million from the R183.9 million of the previous year.
• R10.9 million on Retrenchment Costs, an increase of 100% from the R0 million in the 2016/17 financial year.
• No Performance Bonuses were paid out, compared to R17.7 million from the previous year.

6.2.5. Executive Management Remuneration

The IDT reported a total of R13.3 million in remuneration of the Executive Management for 2017/18. This is an increase of R2.1 million from the 11.2 million in the 2016/17 financial year.[51] The actual total expenditure on Executive Remuneration is unclear as it is reported as restated figures for 2016/17.

As stated above, no Performance Bonus pay-outs for the Executive Management are reported for 2017/18.  

The areas of weakness that lead to the continued disclaimer issued by the Office of the Auditor-General (OAG)

The areas of weakness that were stated in the BRRR of the committee for the 2016/17 financial year recurred in the 2017/18 financial year. The OAG remarked that while the IDT noted the advice given in 2016/17, and developed action plans, they were not implemented.

The relevant areas of weakness remain. They are listed below:

• The loss of key leadership and accounts and financial management staff - the vacancies in key positions meant that the organisation could not realistically be expected to do well with basic project, accounts and financial management. It had vacancies in critical finance positions such as general Manager, Finance; Senior Manager, Financial Technical Specialists; Senior Manager Financial Accounting; and Senior Manager Project Accounting.
• Inadequate document management systems - there was no readily available supporting documentation and back-up system for critical transactions in the organisation.
• Low capacity of the Internal Audit function - lack of Internal Audit support in the organization; the IDT was unable to deal with the auditing process with the Office of the Auditor-General; it means it was not in control of its records and systems at the time the AG’s auditing team arrived to audit its books for the financial year.
• Poor record-keeping of externally contracted services - this could lead to over and underpayments and an ad hoc management of projects (in the past the IDT struggled to collect management fees on projects and was running at a loss due to this).

6.3.      THE COUNCIL FOR THE BUILT ENVIRONMENT (CBE)

The Council for the Built Environment (CBE) is a schedule 3A entity established by the Council for the Built Environment Act (No. 43 of 2000). “The CBE and Professional Councils in the built environment value chain are to regulate those Built Environment Professions who conceptualise, design, build, maintain and transfer social and economic infrastructure”.[52] 

Mission and Legislative Mandate

 “Implementing projects and programmes that address built environment issues and add value to the built environment professions, government and the general public.”[53]

Legislative Mandate

The objectives of the CBE as per section 3 of the CBE Act, 2000 are to:[54]

• Promote and protect the interest of the public in the built environment.
• Promote and maintain a sustainable Built Environment and natural environment.
• Promote on-going human resources development in the Built Environment.
• Facilitate participation of the Built Environment Professions in integrated development in the context of national goals.
• Promote appropriate standards of health, safety and environmental protection in the Built Environment.
• Promote sound governance of the Built Environment Professions.
• Promote liaison in the field of training in the Republic and elsewhere and to promote the standards of such training in the Republic.
• Serve as a forum where the Built Environment Professions can discuss relevant issues.
• Ensure uniform application of norms and guidelines set by the Professional Councils throughout the Built Environment.

The DPW has published its draft BEP Policy as notice 370 of 2014 in the Government Gazette no 37653 on 23 May 2014. This enabled the DPW, to commence a process of amending the Council for the Built Environment Act 2000 and the professions acts of the six Councils for the Built Environment Professions. This also includes CBE’s engagement with its stakeholders for input, which resulted in the submission of the first draft of proposed revisions to DPW on 06 November 2017.[55]

Performance per Programme

The CBE implemented its 2017/18 APP through five programmes. The composition of the programmes has changed. The administration component from the former programme 1 now stands alone in a revised programme 1. The government policies and priorities component of the former programme 1 stands alone in a new programme 5. Programmes 2, 3 and 4 remain as they were.

Therefore, the revised programmes are:[56]

• Programme1 Administration
• Programme 2 Skills for Infrastructure Delivery
• Programme 3 Built Environment research, information and advisory
• Programme 4 Regulation and Oversight of Six (6) BEPCs
• Programme 5 Government policies and priorities

The CBE receives funding from the National Treasury through a transfer from the Department of Public Works.  For 2017/18, the entity received an allocation of R48.568 million that covers operational and core business projects.  In addition, it receives levy of R2 million from the various Councils for the Built Environment Professions (CBEPs) for professionals and candidates registered with them.

The entity’s expenditure for 2017/18 totalled R51 126 million (overall expenditure of 97.9%). Programme 3 overspent on its allocation of R601 million with 21.1%. The lowest expenditure rate was for Programme 5 (i.e. 65.5%).

The entity set itself 20 performance targets for 2017/18, of which it achieved a total of 18 targets. The overall performance rate is 90%.

6.3.1. Programme 1 Administration 

Strategic Objective Ensure that the CBE has the necessary capacity and capability to support Government’s development priorities within the Built Environment.

The Programme achieved all of its planned targets by the 31 March 2018.[57]

Amongst these, it achieved the stated target to implement ICT processes as per DPSA guidelines. It also received a clean audit report for the 2016/17 financial year.

6.3.2.   Programme 2 Skills for Infrastructure Delivery

Strategic Objective Drive and facilitate skills development and transformation within the Built Environment.

Programme 2 received a total allocation of R7.888 million, of which R7.2 million was spent.[58] The programme underspent by R645, 00 for the 2017/18 financial year:

The Programme achieved its six planned targets by 31 March 2018, which include the following:[59]

• The two categories of high demand professions’ implementation plans developed in support of the Landscape Architects and Property Valuers professionals for SIP.
• Additional 164 Grade 12 learners were enrolled in the Maths and Science support programme.
• Additional 50 new candidates/Built Environment graduates were placed in the workplace training by 31 March 2018.
• Further,152 Interns were placed for work-integrated planning
• The oversight report on the accredited academic programme by CBEP was submitted by the 31 March 2018.
• All the nine Provincial Public Works Departments had been engaged on the implementation of the CBE Structured candidacy Framework by the 31 March 2018.

6.3.3    Programme 3 Built Environment Research, Information and Advisory

Strategic Objective Provide research, knowledge and information on Built Environment issues pertinent to professionals, the Department of Public Works, service delivery and those influencing the economy.

The Programme achieved all three planned targets by 31 March 2018:[60]

• The report on initiatives to support infrastructure skills within government was developed.
• One research report on the state of readiness of municipalities to implement Standard for Infrastructure Procurement Development (SIPDM)[61] was developed.
• A research report on analysis of the impact of CBE’s Maths and Science support programmes focusing on built environment was developed.

6.3.4    Programme 4 Regulation and Oversight of six BEPCs[62]

Strategic Objectives To act as an appeal body on matters of law regulating the Built Environment Professions and to promote and ensure high standards of professional ethics and conduct within the Built Environment.

The Programme achieved most of the planned targets; however, the following targets were not completed[63]

• One of the appeals was decided within the prescribed period of 60 days due to the protracted Supply Chain Management process of appointing an appeal’s committee, although, it was eventually decided on the 10 October 2017.
• Two out of six CBEPs submitted their strategic plans and annual performance plans.[64]

6.3.5    Programme 5 Government Policies and Priorities

Strategic Objectives To ensure that Built Environment academic curricula and Continuous Professional Development (CPD) programmes embody issues of health and safety in construction; environmental sustainability; job creation through labour intensive construction and the IDMS.

The programme received a total allocation of R 521, 000 of which R341, 000 was spent.  The programme underspent by R180 000.

6.3.6. Human Resource

Personnel Cost by Programme/Activity/Objectivity[65]

In 2017/18, personnel expenditure totalled R24.4 million, which is 47.9% of the overall budget for the CBE.[66]

During the period under review, the following changes took place:

• The position of Chief Executive Officer was filled with an internal candidate who previously used to hold the position of the Chief Operating Officer.
• The following vacancies were also filled:
  • Manager Knowledge Management and Information Technology
  • Transformation Projects Co-ordinator
  • Transformations Projects Officer
  • Strategic Planning, Monitoring and Evaluation Officer
  • Chief Operations Officer
  • Paralegal
• The position of Skills Development Manager became vacant due to the previous manager’s resignation.

6.3.7. Report by the Auditor-General[67]

Audit Opinion

The CBE received a clean audit opinion for the second consecutive year from the Auditor-General (AG) with the following matters, without material findings.

The AG did not identify any material findings on the usefulness and reliability report performance information for Programmes 2, 3 and 5.

Investigations[68]

• There are two ongoing investigations with respect to the possible misappropriation of the public entity’s resources being performed by the South African Police Services. One case relates to the former supply chain practitioner, which occurred in the 2015-16 financial year and one case involving the former skills manager that occurred in the 2017-18.

6.3.8. Activities of the six Built Environment Professional Councils (BEPCs) with a focus on transformation:

The six BEPCs are:

• South African Council for Architectural Professions (SACAP).
• Engineering Council of South Africa (ECSA).
• South African Council for the Project and Construction Management Professions (SACPCMP).
• South African Council for the Landscape Architectural Profession (SACLAP).
• South African Council for the Quantity Surveying Profession (SACQSP).
• South African Council for the Property Valuers Profession (SACPVP).

Gender Representation of professionals in the BEPCs

The table shows that built environment is still a male dominated profession, males at 89% percent and female professionals at 11%.[69]

Voluntary Associations (VAs)[70]

• Voluntary Associations (VAs) are member-based groupings.
• The role of the VAs is to
  • Protect and enhance members’ interests.
  • A Repository of professional-specific technical knowledge and its dissemination through Continuing Professional Development (CPD) courses and activities. 
  • The Built Environment Professional Councils are encouraged to recognise as many of these VAs to ensure access to the scope and depth of the generated professional best-practice knowledge and its dissemination.
  • Serve as members of Evaluation Committees for programme accreditation at Higher Education Institutions (HEIs) that offer Built Environment qualifications.

During the year under review, 77 VAs were recognised, and 10 not recognised.[71]

Disciplinary Cases

Many of the cases took from 90 days to a year to complete. The challenges with this turn-a-round time were the following

• The high cost of investigations and conducting disciplinary cases.
•  The lack of legal resources within the CBEP, who are then forced to source this expertise externally.

Number of complaints received and completed [72]

During the year under review, the total number of the complaints received was 233, 14 of these cases were completed, 18 of them have been withdrawn and currently 201 complaints are in the process of being attendant to.

Recognition of Prior Learning (RPL)[73]

Recognition of Prior Learning (RPL) is an educational and skills based tool that has been appropriately designed to recognise skills and knowledge acquired at workplace level. Often individuals do highly technical design, engineering, planning, and construction tasks over long periods at workspaces. They become proficient enough to be tested using appropriately designed RPL procedures through which they can then undergo further training or receive professional qualifications. With such qualifications and training, such individuals may enter the professional technical job spheres from which they would otherwise have remained excluded. This enables the sector to improve access to individuals who were previously denied admission to the built environment professions and registration at BEPCs. At the time of reporting to the committee on the  2017/18 financial year, 130 RPL applications were received, 33 were declined and 22 are awaiting response from relevant BEPCs.

The table below shows the relevant information at all the BEPCs at the date of reporting:

The table indicates a poor uptake of potential RPL candidates in some Councils. Specifically the property valuers (SACPVP) and architectural (SACAP) BEPCs reported no candidates, which was the case in 2015/16 and 2016/17.

Continuous Professional Development (CPD)[74]

The purpose of the CPD is to ensure that Built Environment Professionals’ knowledge and competencies are continuously developed to keep up-to-date of new developments in their fields. The CPD is responsible for:

• Developing and expanding the expertise of members as markets and conditions change.
• Ensuring the relevance and enhancing the role and reputation of the professions, both within South Africa and within the international Built Environment community.
• Harnessing the expertise of members to inform public debate.

Some of the challenges in implementing the CPD include:[75]

• Dual registration of Built Environment Professionals with different CPD requirements.
• Funding issues such as course costs, influence out-of-office time.
• Resourcing and funding of smaller Built Environment Professional Councils, such as SACLAP.

6.4. THE CONSTRUCTION INDUSTRY DEVELOPMENT BOARD (CIDB)

6.4.1. Background and mandate

The CIDB is a Schedule 3A public entity established by the Construction Industry Development Board Act (No. 38 of 2000). The CIDB is expected to provide leadership to stakeholders and to stimulate sustainable growth, reform and improvement of the construction sector, for effective delivery and the industry’s enhanced role in the country’s economy.  In terms of the Public Finance Management Act, the Board of the CIDB is the accounting authority, responsible to the Minister of Public Works. The board submits its Annual Performance Plan and budget to the executive authority.

The aim of this brief is to provide a brief summary and analysis of the achievements and the challenges reported by the entity for the year under review.    

The Mandate of the CIDB is to:[76]   

• Provide strategic leadership to the construction industry stakeholders to stimulate sustainable growth, reform and improvement of the construction sector;
• Promote sustainable growth of the construction industry and the participation of the emerging sector in the industry;
• Determine, establish, promote improved performance and best practice of public and private sector clients, contractors and other participants in the construction delivery process;
• Promote uniform application of policy throughout all spheres of government and promote uniform and ethical standards, construction procurement reform, and improved procurement delivery management – including a code of conduct;
• Develop systematic methods for monitoring and regulating the performance of the industry and its stakeholders, including the registration of projects and contractors.

The CIDB Board established an Ad Hoc Committee that started a process of interrogating manners in which the entity could deliver more effectively on its stated mandate. The work of this Ad Hoc Committee, the CIDB Board could report that the following key areas required attention:

• Align the powers of the organisation with the intended outcomes of the legislation  that created  it;
• Align the powers and functions of the CIDB with industry needs  and expectations;
• Strengthen the entity’s powers and authority to regulate the industry;
• Remove areas of ambiguity and vagueness in the roles and responsibilities of the CIDB; and
• Reconcile the seemingly conflicting and contradictory dual role of the CIDB to regulate and develop the construction industry.

These areas were extensively interrogated by working together with the CIDB management during the period under review. The Committee was established to interrogate CIDB legislation and its attendant Construction Industry Development Regulations, with the aim to provide a comprehensive and informed CIDB input to a Public Works initiative to have the CIDB Act reviewed.

The following challenges were reported:[77]

• Internal inefficiencies and poor project management.
• Unrealistic (inappropriate) targets that are impractical to achieve, for example, during the year under review, there were 63 key performance indicators detailed in the Annual Performance Plan (APP). Of these, two targets were duplicated and 13 indicators did not specify targets to be measured for the year. Consequently, 50 targets were measurable, only 18 of which were achieved.[78]
• Incorrect alignment between the performance indicator, the planned target and the actual

Achievement.

• Misalignment between the Annual Performance Plan (APP) and the Technical Indicator.

Descriptor (TID), which resulted in inconsistency and errors between TIDs and quarterly targets, this resulting in the CIDB achieving less than 40 percent of its targets.

• The shedding of 115 000 jobs in the construction sector has resulted in the profit margins[79] of contractors and consulting professions curbed and operating under financially strenuous economic conditions.

Contractor Development and Transformation

According to the 2017 CIDB Construction Monitor, the pace of transformation shows little signs of improvement, as shown by the following key findings:[80]

• “The number of black executives in consulting engineering companies as a percentage of the total number of black executives, increased from 30 percent in the second quarter of 2014 to 37% in the second quarter of 2017.
• However, less than 40% of large contractors are black-owned and around 30% of contractors are female-owned. Despite this, there is a steady increase in the number of medium and large female-owned contractors. As a result, 36% of large contractors and 48% of medium sized contractors are at BBBEE level 1 or 2.
• Black-owned contractors access about 54% of public sector contract awards and women-owned contractors around 25%.”

Programme Performance

6.4.1. Programme 1 Administration

This programme plays a critical role in the CIDB’s service, through the provision of a range of support services, such as organisational development, HR and labour relations, and information and communication technology, property and facility management, legal, communications and all financial related functions.[81]

The programme consists of five sub-programmes namely:

• Financial Management
• Information Communications and Technology (ICT)
• Strategic and Corporate Governance
• Office of the CEO
• Partnership and Collaborations

Programme 1 Administration

The CIDB achieved 8 out of the 24 targets set for 2017/18, of which the target to spend 100% of its budget on contract was found to be “unrealistic” and deleted for the following financial year  (2018/19). This is because in reality, only 15% of the budget can realistically be spent on contracts.

The CIDB achieved the following planned targets:[82]

• It managed to resolve 88% of the Auditor General findings, this also dealing successfully with the 0.85% of the irregular expenditure.
•  It was able to deal with the 20% of the downtime multiple systems.
• All the ICT incidences or matters were attended within the specific required time.

Audit-related targets

• It failed to develop a strong audit risk rating on the final report an issue highlighted was inefficient and repeat findings of executive recruitment.
• Did not meet 60% of completed Internal Audit by March 2018 – outstanding audits deferred until May 2018 due to delay in the appointment of internal audits.

Implementing resolutions

• It did not manage to implement a minimum of 70% of Board resolutions and decisions.
• It could not implement at least 60% of IGR resolutions – due to stakeholder engagement model not finalised.

Conducting satisfaction surveys

• It did not conduct a customer satisfaction survey.
• It failed to conduct an employee satisfaction survey.

6.4.2. Programme 2 Regulation and Advocacy

Programme 2 The main functions of this programme, is to ensure that the CIDB play a regulatory role within the construction industry. The CIDB will provide an input and guidelines in terms of legislation governing the construction industry. A critical component with the regulation is embedded in the monitoring function that the CIDB needs to play in ensuring compliance against the legislation, regulations and standards.

Regulation and Advocacy

Targets not stated in 2017/18 APP:

• Percentage provincial performance index – baseline determined after March 2018, and index thus only submitted after end of financial year.
• Percentage provincial business advisory services to contractors at grades 2 to 6 index – 75% target.
• Percentage project assessment scheme compliance provincial index – 85% target.

Challenges :

The CIDB did not achieve the following targets:

• Failed to increase compliance with regulatory framework, of ensuring projects and client developmental procurement practices achieve higher levels.
• Failed to determine the baseline, in enhancing the provincial footprint to support its strategic objectives.
• There was a slower uptake of participants in workshops held in all the provinces (Only four construction management systems recognised in South Africa).
• Failed to finalise the assessment graduating from the CDP provincial index.

The Auditor-General noted the following with respect to Programme’s performance:

• The AG was unable to obtain sufficient appropriate audit evidence for reported achievement of target of 80% Register of Project information verified ad corrected within 8 weeks index – due to limitations placed on the scope of his work.

• The achievement for a target of 94% of Grade 1 contractors activated within 48 hours, reported in the Annual Performance Report, was 92%. However, the supporting evidence provided did not agree with the reported achievement and indicated an achievement of 77%.

6.4.3 Programme 3 Development and Capacitation

Within the name of the CIDB – the d provides a clear indication as to how important development are in terms of the functions and the mandate of the CIDB. Development is central in almost everything that is done within the CIDB.[83]

Development and Capacitation

6.4.4 Programme 4 Industry Performance and Transformation[84]

The purpose of this programme is to ensure the transformation of the construction industry and ensure that black women and youth owned contractors participate and play a key role in government projects.

Industry Performance and Transformation

6.4.5. Human Resources[86]

During the year under review, the redesign of the organisational structure is at an advanced level of the final consultation process. As a result, the recruitment of the new staff has been put on hold pending the approval of the new organisational structure. Candidates are being sought for crucial vacancies in the old structure and the microstructure.

Employment Numbers[87]

Employment numbers by occupational level

The entity reported four misconduct cases. The following disciplinary actions were taken against employees in this regard:[88]

• 1 - Final Warnings.
• 0 - Dismissals.
• 3 - CCMA referrals.
• 1 - Labour Court Case (resolved).
• 0- Written Warning

The employee benefit costs equal R75 million for the year under review (2017/18) and R81 million for 2016/17, this constitutes a decline of R2.6 million.[89]    

The total Remuneration for Executives (which includes Annual Remuneration, Acting Allowance and Performance Bonuses) equalled R12.7 million for 2017/18.[90] This is an increase of R1 million  from the R11.7 million for 2016/17.

6.4.5. Financial performance

Financial Statement

Financial Performance

By the end of 2017/18, the CIDB had an accumulated surplus of R148.9 million (Table 6). Its opening balance as at the beginning of the financial year was R113.7 million, of which a surplus of R35.1 million (Table 7) was added by the end of the financial year. 

The R35.1 surplus was the result of revenue generated by the CIDB totalling R177.4 million, minus expenditure of R142.2 million. Revenue included a grant of R75 million from the Department of Public Works.[91] Other income was significantly lower than the previous year due to sundry income (which is not specified in the financial notes) which decreased from R60 835 to R550 in 2017/18.

6.4.6. Report of the Auditor-General for the year ended 31 March 2018[92]

The CIDB received an unqualified audit opinion from the Auditor-General with the following findings:

Expenditure Management

Effective and appropriate steps were not taken to prevent irregular expenditure of R413 746 disclosed in note 28 to the Annual Financial Statements, as required by Section 51(1) (b) (ii) of the PFMA. The majority of the irregular expenditure was caused by a contract extended or modified without the approval of a properly delegated official and functionality criteria evaluation that was not consistent with the original bidding documents.

Internal Control[93]

Leadership

Vacancies in senior management positions were not filled due to the counsel received from the executive authority. This resulted in the oversight responsibility regarding performance monitoring and compliance with laws and regulations being inadequate.

Financial and Performance Management

Management did not adequately monitor adherence to the requirements of Treasury regulations regarding supply chain management processes, which resulted in irregular expenditure.

Management did not adequately review the Annual Performance Report for completeness and accuracy prior to their submission for audit purposes.

7. THE COMMITTEE OBSERVED THE FOLLOWOING TRENDS FROM 2015/16 TO 2017/18

An urgent need for Leadership Stability, and Consistency in Financial Management Systems

In the committee’s Budgetary Review and Recommendation Report for the 2015/16 financial year, it raised the following matters. These issues have re-emerged in deliberations with the DPW in the committee’s three-day meetings from 3 to 5 October 2017. Tensions in leadership positions of the DPW, PMTE, and the entities reporting to the Minister of Public Works, requires urgent attention to prevent the continued future regression in terms of performance of the DPW. The recurring trends were as follows:

7.1. The need for stable leadership

The DPW and PMTE had several vacancies in leadership positions namely, the Director-General of the DPW and the Head of the PMTE. This was a return to the unsound leadership situation prior to the Turnaround Plan. It caused the DPW to fall into disarray in the past. The Committee warned that the Minister must give urgent attention to this matter. The Deputy Minister aptly described the situation in his introductory statement to the DPW Annual Report for 2017/18, as the DPW not being “… unaffected by the political climate and instability associated with what has come to be called “state capture”. DPW, along with our partners in the Special Investigating Unit (SIU), experienced frustrations with the National Prosecuting Authority and its failure to prosecute a number of significant cases uncovered by DPW with the assistance of SIU. Likewise, after a period of relatively sustained stability in the political and administrative leadership of DPW, in the course of the reporting year, there were disruptive redeployments.”[94]

The committee notes this frustration and is fully aware of these disruptions as they reverberated in several of its meetings with the DPW family. The committee will continue to assist the uncovering of the “existence of corruption and poor management in the organisation (that) should never be allowed to obscure the pockets of excellence which continue to exist in Public Works.”[95] The committee will continue to support these existing pockets of excellence while simultaneously seeking to identify blockages to performance, and weaknesses and administrative vacuums that may allow corruption and state-theft to take place. 

The committee further raised the need for the DPW leadership to ensure that it had an adequate Information and Communications Telecommunications (ICT) strategy and system in place. The annual financial statements showed expenditure on a number of software packages, yet there was a lack of record keeping and data management. The DPW further reported that it stopped the purchase of at least one software package due to the underperformance of the IT consultant. This assertion was negated in the meeting of 4 September 2018 that the committee held to check on the roll out of ARCHIBUS and SAGE to strengthen financial and asset management in the DPW and the PMTE. In this meeting, it was clearly stated that the acquisition of the software package was not stopped at that time, but that it would only be stopped in February 2019. This type of contradictory information sharing by the DPW and PMTE was unfortunate. In addition, due to consistent changes being made in political and administrative leadership, the committee continue to receive contradictory and generalised statements about matters, as it is seldom the same leadership staff that report on such matters to the committee. This dilutes accountability of management for decisions that leadership take, using the allocated resources that the committee, parliament and National Treasury legislated for its use. The matter requires urgent attention in the near future.

7.2. The need for a succession plan

The first pillar of leadership (political leadership) over each five-year administrative term has to be as stable as possible. Sudden changes to the political leadership has destabilising effects on the policy direction of the administrative operations. The committee observed regressive effects on the administrative and operational leadership and systems in the DPW, PMTE, and the IDT since the last political leadership change in 29017/18.

The second pillar (administrative leadership) must equally remain stable. Too many changes over a five-year term to the administrative leadership, especially that of the accounting officer, chief financial officer, and programme leadership in Deputy Director-General positions, create lapses with the successful implementation of policy objectives being under threat.

Sudden changes in leadership further create a climate characterised by lapses of administration, financial control weaknesses, and oversight absences that create a climate that favour corruption and maladministration.

In spite of the progressive impact of the Turnaround Strategy since 2012, the DPW and PMTE’s senior management, and operations and financial management systems require more than one tier of leadership. In this way, the policy leader would be assured of a second tier of leaders who have in-depth knowledge of the DPW and the infrastructure and built environment sector. These two tiers of leadership should at all times consistently interact with oversight structures such as the Minister’s Office, the Portfolio Committee on Public Works, and the office of the Auditor-General.

This makes it possible that when matters of policy implementation are dealt with during oversight activities, a higher level of in-depth institutional knowledge is developed and shared. It further ensures that possible solutions are captured and recorded as strategic objectives for the next cycle of annual performance plans, and strategic plans. As stated in the previous reports (2016/17), the committee remains very concerned that there was no evidence of a strategic intervention in this regard.

7.3. Financial and Performance Management

The committee noted a need for senior management of the DPW and PMTE to have regular meetings to review compliance with legislation and financial regulation. This is particular concerning in the DPW as for consecutive financial years, the Office of the Auditor-General and this committee noted signs of inadequate attention to the key matters that is required to implement information technology controls.  Similarly, in both the 2016/17 and the 2017/18 financial years, the AG raised deficiencies in internal control, leadership having exercised inadequate monitoring of the Action Plan to address prior-year findings, which resulted in similar findings for the current year, and regular, accurate and complete performance reports not always being supported and proved by reliable information.

The consistency with which these matters appear during the stabilisation phase of the Turnaround Strategy, makes the committee refer to them as trends. This is deeply concerning as trends may turn into characteristics that are in fact in total opposition to the objective of the Turnaround Strategy of the DPW.

The committee is very concerned about the sustainability of the improvements in the department and the entities since 2012. It urges attention to these because it is clear that the department and the portfolio of entities can easily slip back into old undesirable patterns.

8. PORTFOLIO COMMITTEE ON PUBLIC WORKS - NOTE OF APPRECIATION FOR ENGAGEMENT AND RESPONSIVENESS

The Portfolio Committee on Public Works commends the Office of the Minister of Public Works, the Department of Public Works, and the PMTE, for the progress made in stabilising the Department and in operationalising the PMTE.

The consistent attendance of the Deputy Minister of Public Works is highly appreciated. This significantly enhanced the committee’s on-going efforts to deal with the challenging matters that the whole portfolio of public works faces.

The committee further notes the high level of engagement of the boards and administration of the IDT, CBE, CIDB, and ASA in its willingness to engage, and report to the Committee.

Finally, the committee expresses its appreciation to the Office of the Auditor-General for the professional manner in which it provided analytic assistance on material evidence on which the opinions was based on the annual performance reports and financial statements of the department, the PMTE and the entities.

8. RECOMMENDATIONS

The Portfolio Committee recommends that the Minister of Public Works:

8.1.    Instructs the Office of the DG and the internal audit committee to report to the committee on a quarterly basis on its performance towards a clean audit. The focus should remain on the objective of the Turnaround Strategy to get clean reports across the public works portfolio. The DG to ensure regular quarterly performance reports submitted to the committee throughout each financial year.

8.2.    Ensures that the PMTE submits a quarterly report to the Committee on the efforts to enhance its financial controls and ICT systems to ensure proper management of government’s immovable assets.

8.3.    Instructs the DG, Head of the PMTE, and boards of the entities to ensure stable leadership in all key offices and bring an end to the proliferation of acting positions on its organograms and fill vacant positions where they exist.

8.4.    Engages with the National Treasury taking into account measures contained in the Intergovernmental Relations Framework Act (2005) so that the IDT can collect management fees and all debt owed to it from client departments. These engagements to be reported to the committee on interventions before the budget vote process in the 2018/19 financial year on regulatory measures and action steps to ensure that all heads of department (HoDs), Directors-General, and accounting officers of departments and heads of organs in future pay fees owed in the financial year that projects are planned and completed.

8.5.    Ensures that the review of White Paper 1997 and 1999 is completed and that draft legislation towards the Public Works Bill is completed. Similarly, that the review is completed so that the CIDB and CBE legislation is amended and the transformation of the construction and built environment can be addressed more vigorously. 

8.6.    Instructs the DG and the DDG of EPWP to ensure that the review of the White Papers also address the reporting on jobs created in municipalities, provinces and national departments so that the auditing anomalies are addressed, and the regulatory powers of the EPWP is further strengthened.    

8.7.    Ensures that the intergovernmental coordination and data control, verification, and submission processes of the EPWP has properly capacitated staff and ICT systems to prevent future adverse opinions from the AG.

8.8.    Ensures that the training component of the third phase of the EPWP is much more effective as the AG provided evidence that beneficiaries have not benefitted sufficiently from training that is provided by projects in the financial year under review.

8.9.    Takes urgent regulatory and control steps to ensure that the spirit of the turnaround strategy that was initiated in 2012 permeates every echelon of the DPW and the PMTE so that the stability that was gained and successes that were reached are sustained and become a permanent feature within which maladministration and corruption have no space to exist.

8.10.  Addresses the CIDB board on a too high focus on compliance than on the development of contractors. Ultimately more contractors from vulnerable sectors should graduate from lower levels of the contractors register towards level 9.

8.11. Ensures that the IDT is appropriately reconfigured into a state social infrastructure implementing agency. A report on this reconfiguration process to be submitted in the second term of the 2018/19 financial year. 

8.12   Instructs the IDT board to urgently appoint suitably qualified and experienced personnel in key positions where financial management, financial control, and management and reporting is required. In addition, that the process should enhance the entity’s ability to collect debt owed to it by client departments so that it can become self-sufficient.

8.13. Instructs the IDT board to also ensure that the Internal Audit support in the organization is set up with the ability to collaborate with the AG’s auditing team when they arrive to audit books for the following financial year.

8.14.  Instructs the DG and senior management of the department and the PMTE to urgently facilitate the transfer of the Immovable Asset Register from Excel format to the relevant ARCHIBUS software format.

Report to be considered.

[1] Section 5(1) (a) to (f) of the Money Bills Amendment Procedure and Related Matters Act (2009).

[2] Department of Public Works (2014), p. 43. The Department regulates the construction industry through the Construction Industry Development Board Act (No. 38 of 2000).

[3] The Department regulates and built environment through the Council for the Built Environment Act (No. 43 of 2000) and the six Professional Council Acts that regulate the six Built Environment Professions.

[4] The Money Bills Amendment Procedure and Related Matters Act (2009).

[5] The Committee used the Quarterly Performance Reports for the third and fourth quarters of the current financial year as presented to it on 5 June 2018.

[6] In his presentation to the Committee on 3 October 2017, the Minister stressed the policy imperatives of the NDP as stated in government’s medium term strategic framework (MTSF). Due to the continued relevance of the broad objectives for the 2014-2019 MTEF, this report repeats this section from the 2016/17 BRRR.

[7] Medium Term Strategic Framework (MTSF) Appendix 12.

[8] Department of Public Works (2018a), p. 71.

[9] Department of Public Works (2018a), p. 150.

[10] Department of Public Works (2018a), p. 27.

[11] Department of Public Works (2018a), pp. 64-5.

[12] Department of Public Works (2018a), p. 65.

[13] Department of Public Works (2018a), pp. 66-8.

[14] Department of Public Works (2018a), p. 27.

[15] Department of Public Works (2018a), p. 69.

[16] Department of Public Works (2018a), p. 27.

[17] Department of Public Works (2018a), p. 70.

[18] Department of Public Works (2018a), p. 187.

[19] Department of Public Works (2018a), p. 190.

[20] Department of Public Works (2018a), p. 190.

[21] Department of Public Works (2018a), p. 187 and 238. Note 12.5 Impairment of receivables totalling R59.2 million, an increase of R1.4 million from the R57.8 million identified in 2016/17.

[22] Department of Public Works (2018a), p. 188.

[23] Department of Public Works (2018a), p. 189.

[24] Department of Public Works (2018a), pp. 86 - 96.

[25] Department of Public Works (2018a), p. 339.

[26] Department of Public Works (2018a), p. 341. See note 23 of the financial statements.

[27] Department of Public Works (2018a), pp. 338-9. See note 16 of the Annual Financial Statements of the PMTE.

[28] Department of Public Works (2018a), p. 341. Also see note 7.

[29] Department of Public Works (2018a), p. 342.

[30] Department of Public Works (2018a), p. 271.

[31] Department of Public Works (2018a), p. 143.

[32] Department of Public Works (2018a), p. 162.

[33] Department of Public Works (2018a), p. 293.

[34] Department of Public Works (2018a), p. 296. As disclosed in note 32.

[35] Department of Public Works (2018a), p. 296.

[36] Department of Public Works (2018a), p. 297.

[37] IDT (2018), p. 18.

[38] IDT (2018), pp.  31-40.

[39] IDT (2018), pp. 31-33.

[40] IDT (2018), pp. 31-33.

[41] IDT (2018), pp. 31-32.

[42] IDT (2018), pp. 36-40.

[43] IDT (2018), p. 37.

[44] IDT (2018), p. 39.

[45] IDT (2018), p. 60.

[46] IDT (2018), p. 62.

[47] At the time of the Portfolio Committee assessing the Annual Report, the CEO was returned to the position.

[48] IDT (2018), p. 123.

[49] IDT (2018), p. 122.

[50] IDT (2018), p. 106.

[51] IDT (2018), p. 123.

[52] CBE (2015), pp.13 & 15. The CBE Act, tasks the CBE with regulating and governing the six Built Environment Professions Architects, Engineers, Landscape Architects, Quantity Surveyors, Project and Construction Managers and Property Valuers, through the six Professional Councils (also enacted through legislation).

[53] CBE (2018), p. 13.

[54] CBE (2018), p. 14

[55] CBE (2018b), p.16

[56] CBE (2018a), p.29

[57] CBE (2018),p.31

[58] CBE (2018), p. 55.

[59] CBE (2018), pp 34-36

[60] CBE (2016), p. 43.

[61] National Treasury, MFMA Circular 77, Annexure B, October 2015. SIPDM guidelines are aimed at built environment professionals who may participate in infrastructure procurement and delivery management as regulators, clients, consultants and contractors and are expected to facilitate the effective implementation of the National Treasury Standard for Infrastructure Procurement and Delivery Management (SIPDM).

[62] Built Environment Professional Councils (BEPCs), p. 47

[63] CBE (2018a), p 47-48.

[64] CBE(2018a) pp 47-48

[65] CBE (2018), pp. 84-85.

[66] CBE (2018), pp. 84-85.

[67] CBE (2018a), pp. 90-3.

[68] CBE (2018a), pp.90-3

[69] CBE (2018a), p. 148.

[70] CBE (2018a), p. 161.

[71] CBE (2018), p. 170.

[72] CBE (2018), p. 166.

[73] CBE (2018), p. 161.

[75] CBE (2018a), p. 161.

[76] CIDB, (2014), p. 8.

[77] CIDB (2018) p. 103.

[78] CIDB (2018) p. 13.

[79] CIDB (2018) p. 6.

[80] CIDB (2018) p. 24.

[81] CIDB (2018) p. 54.

[82] CIDB (2018) pp. 88 -91.

[83] Cidb (2017), p. 33.

[84] cidb (2018b) p64-68

[85] CIDB (2018) p. 100.

[86] CIDB (2018) p. 33

[87] CIDB (2018) p. 33.

[88] CIDB (2018) p.34.

[89] CIDB (2018) p. 51.

[90] CIDB (2018) p. 78.

[92]  CIDB (2018) pp.46 – 48.

[93] cidb (2018) pp.46 – 48

[94] Department of Public Works Annual Report, 2017/18, p9.

[95] Ibid, p7.