ATC100216: Report on Auditor General on the Special Audit of the N2 Gateway Project at the National Department of Housing

Public Accounts (SCOPA)

Third Report of the Committee on Public Accounts on the Report of the Auditor General on the Special Audit of the N2 Gateway Project at the National Department of Housing, dated 16 February 2010

 

 

Background

 

The Auditor–General (AG) was requested by the National Department of Housing (NDoH) to conduct a special audit of the N2 Gateway Project (N2GP). The audit focused on the N2GP from its inception, as well as the achievements of goals regarding sustainable human settlements and the collaboration of the three spheres of government to achieve successfully the common objective. The report highlighted challenges encountered during the audit and management comments received from the accounting officer on the 3rd of March 2008 and 5th of June 2008.

 

Report of the Committee

 

The Standing Committee on Public Accounts (SCOPA) heard and considered evidence from the Director General, Head of Department and Accounting Officers of the following Departments & Entities:

• National Department of Human Settlements
• Western Cape Department of Local Government and Housing

·               City of Cape Town

 

The Auditor-General made the following findings:

 

1.                    Enabling Legislation and Policies

 

a)            The specific roles and functions allocated to the different spheres of government in terms of the Housing Act (Act No. 107 of 1997) and the Social Housing Policy were not adhered to.

b)         The roles and responsibilities set out in the Memorandum of Understanding ( MoU) were not clearly defined and were inconsistent within the terms of the MoU resulting in uncertainties as to who needed to take responsibility for, and ownership of which specific functions.

c)         The Steering Committee established in terms of the memorandum of understanding (MoU) stopped functioning properly after 10 May 2006

 

The Committee recommends that:

 

i)             The completion of the project must conform to the prescripts of national legislation on housing and that the National Department of Human Settlements should monitor compliance by all stakeholders.

ii)             The current Memorandum of Understanding (MoU) should be reviewed to clarify the roles and responsibilities of all stakeholders

 

The Committee noting that the N2 Gateway Steering Committee is now meeting, recommendations that the Department of Human Settlements must monitor the proper functioning of the Steering Committee.

 

2.         Planning

 

The Auditor-General made the following findings:

a)         The business plan for the construction of the N2 Gateway Project had not been finalised and approved before the actual construction of the N2 Gateway Project and no final approved business plan was submitted to the audit team.

b)         The selection of beneficiaries was not finalised prior to the       commencement of construction, resulting in the non-compliance with the prescribed requirement of listing the beneficiaries in the final business plan and loading these details on the National Housing Subsidy database prior to the project implementation.

c)         The National Housing Code, The Breaking New Ground Plan and the     draft business plans were not consistent with regard to qualifying criteria for proposed beneficiaries, especially in respect of the monthly household income requirement. It was also noted that the criteria communicated to the different communities were not consistent.

d)       The identification and securing of sufficient land was not finalised prior to    the construction of the N2 Gateway Project and that the geotechnical surveys indicating the true seriousness of the soil problems were not compiled prior to the commencement of the project

 

The Committee recommends that the Accounting Officer ensures:

 

i)          The final business plan be aligned to applicable policies such as the  National Housing Code and the Breaking New Ground Plan.

ii)          The selection of beneficiaries should be in line with applicable policies and that National Department of Human Settlement should monitor compliance to applicable policies

iii)         Proper planning relating to the investigation of the availability and suitability of land must be undertaken within realistic timeframes

iv)         The professional advice from dully appointed housing official with regard to the risks associated with the project proposed timeframes must not be compromised.

v)          Funding should be secured prior to the project implementation and the three spheres of government should ensure that the funding required in terms of business plan is realistic.

 

The Committee notes that since the hearing with the Department of Human Settlements, the business plan of the project has been finalised and adopted by the Department.

 

3.       Appointment of previous Project Manager

 

The Auditor-General made the following findings:

 

That the previous project managers were appointed in spite of the following:

 

a)      The company failed to prepare its costing in compliance with the terms and conditions of the request for proposal (RFP), thereby rendering its bid non-responsive

b)      The supply chain management committee awarded the contract to the    company based on the Goods, Services and Property Advisory Board’s recommendation, notwithstanding the fact that the company was ranked number 6 in the evaluation Committee’s assessment.

c)      The National Department of Human Settlements was not represented in the evaluation committee even though the RFP stipulated it would comprise officials from all spheres of government.

d)      No formal contract was entered into with the company.

e)      The company lacked in-house and specialist expertise to perform various project management functions, with the result that the company obtained a third-party specialist and the company raised a 10% mark-up, on these services.

f)       The project management fees paid to the company exceeded the industry norm by 4% and were not performance based, as the company was paid 254% of the original tender amount (R12 080 653) although the N2 Gateway Project had not yet been completed.

 

The Committee recommends that:

 

i)       The Accounting Officers ensure that there is proper monitoring and compliance with applicable legislation and policies to avoid mismanagement and abuse of processes.

ii)       The Accounting Officers of National and Provincial Department of Human Settlements and the City of Cape Town should take disciplinary or legal action against implicated individuals and initiate processes to recover lost funds where appropriate

 

4.       Quality of Units at Joe Slovo Phase 1

Various physical shortcomings were identified by the Social Housing Foundation as well as the A-G which included, amongst others:

 

a)            The certificate of completion for the building contract issued by the principal agent was erroneously issued.

b)             Compliance with registration and inspection procedures ranging from the National Building Regulations to the National Home Builders Registration Council (NHBRC), construction regulations, inspection by local authorities and professionals and occupation certificate could not be verified.

c)             Site inspections revealed numerous cracks in the walls and floors, peeling paint, doors that were not fitted properly, loose fittings and uncovered drain pipes and blocked drains.

 

 

The Committee recommends that:

 

i)             The Accounting Officers ensure that all physical defects be rectified in line with building regulations.

ii)              Disciplinary actions or sanctions be instituted against officials or entities that did not comply with building regulations and inspection procedures  

 

5.       Conclusion

 

Subsequent to the hearing, the Committee undertook a site visit to the N2 Gateway and established that whilst the Department contends that the repairs were done to the units, there are serious deficiencies in the units and this matter requires urgent attention.

 

Report to be considered