ATC120124: Report onOversight Visit to the Province of the Northern Cape on 24 January 2012, dated 05 June 2012

NCOP Appropriations

FIRST DRAFT REPORT

REPORT OF THE SELECT COMMITTEE ON APPROPRIATIONS ON THE OVERSIGHT VISIT TO THE PROVINCE OF THE NORTHERN CAPE ON 24 JANUARY 2012, DATED 05 JUNE 2012

 

1. Introduction

 

The Select Committee on Appropriations (the Committee) was established in terms of section 4(3) of the Money Bills Amendment Procedure and Related Matter s Act, No. 09 of 2009. In terms of section 4(4) of this Act, the Committee has the powers and functions conferred to it by the Constitution, legislation, the standing rules or a resolution of a House, including considering and reporting on:

  • spending issues;
  • amendments to the Division of Revenue Bill, the Appropriation Bill, Supplementary Appropriations Bill and Adjustment Appropriations Bill;
  • recommendations of the Financial and Fiscal Commission, including those referred to in the Intergovernmental Fiscal Relations Act, No. 97 of 1997;
  • reports on actual expenditure published by the National Treasury; and
  • Any other related matter set out in this Act.

 

Furthermore, the mandate of the Committee encompasses its functions to legislate, conduct oversight over the Executive’s actions; promote public participation; facilitate international agreements and review matters of public interest in relation to spending issues.

 

1.1 Purpose of Visit

 

The visit formed part of the Committee’s ongoing interaction with provinces on their expenditure on conditional grants.

 

The purpose of this visit was to -

  • Interact with the Northern Cape Department of Education on their conditional grant spending;
  • Assess the performance of these grants as at the end of the third quarter of the 2011/12 financial year;
  • Interact with the Northern Cape Department of Health on Hospital Revitalisation Grant projects;
  • View and verify the progress made thus far on these projects;
  • Ascertain how much has been spent on these projects to date and the projected overall cost of each project;
  • Find out if project management principles are adhered to; and
  • Ascertain the completion dates of the projects.

 

 

1.2 Delegation

 

The delegation consisted of the following Members:

 

Hon JMG Bekker, (Western Cape – DA);

Hon TE Chaane, ( North West - ANC) Chairperson of the Select Committee on Appropriations;

Hon CJ de Beer, ( Northern Cape - ANC) Chairperson of the Select Committee on Finance;

Hon RA Lees (KwaZulu-Natal - DA);

Hon BL Mashile ( Mpumalanga - ANC); and

Hon TM Memela ( KwaZulu-Natal - ANC).

 

The parliamentary officials who accompanied the delegation were: Mr Z Rento (Committee Secretary: Select Committee on Finance); Mr L Nodada (Committee Secretary: Select Committee on Appropriations), Ms E Grunewald (Committee Secretary: Select Committee on Appropriations); Mr S Mncwango (Committee Researcher: Select Committee on Finance), Ms Y Joseph (Committee Researcher: Select Committee on Appropriations), and Mr M Vumazonke (Committee Assistant).

 

1.3 Terms of reference

 

The Committee invited the Northern Cape Department of Education to brief the Committee on the following grants:

· Dinaledi Schools Conditional Grant;

· National School Nutrition Grant;

· Technical Secondary School Recapitalisation Grant;

· Education Infrastructure Grant;

· HIV and AIDS (Life Skills Education) Grant; and

· Social Sector Expanded Public Works Programme Grant.

 

National Treasury was invited to make an input on the grant performance reported by the provincial departments.

 

The Committee also invited the Northern Cape Department of Health to brief the Committee on the Hospital Revitalisation Grant. The national and provincial departments of Public Works, as well as Chairpersons of the relevant provincial portfolio committees were also invited to attend.

 

After the presentation on the performance of the Hospital Revitalisation Grant, the Committee undertook a site visit to the Northern Cape Mental Health Hospital , which is located in Kimberley .

 

2. Briefing by Northern Cape Education Department

 

The Northern Cape Department of Education (NCDE) submitted an expenditure report, as at the end of the third quarter of the 2011/12 financial year, with respect to the following six conditional grants that fall under their jurisdiction.

 

2.1 Dinaledi Schools Grant

 

The total budget for the Dinaledi Schools conditional grant in the 2011/12 financial year was R2.380 million. At the end of the third quarter of the 2011/12 financial year, R2.260 million had been spent. In addition, the NCDE reported that R139 377 had been committed, bringing the expenditure to 100.83 per cent at the end of the 2011/12 financial year. Overall, the grant will be overspent by R19 767.

 

The over-expenditure was attributed to an approved deviation to allow a service provider to deliver workstations directly to schools instead of departmental employees delivering them. The NCDE argued that workstations required storage space of 300 square metres which was not available at the head or district offices. There were also risks associated with the uploading and distribution of this sensitive equipment.

 

With respect to challenges, the NCDE reported that there was no dedicated project manager and clerical staff for data capturing. In addition, monitoring and evaluation could not take place regularly because of the vastness (i.e. distances to be covered) of the Northern Cape Province .

 

2.2 National School Nutrition Programme Grant

 

The total budget allocated for the National School Nutrition Programme Grant in the 2011/12 financial year amounted to R105.166 million. Expenditure, as at the end of the third quarter of the 2011/12 financial year, amounted to R88.346 million (that is 84 per cent) and the balance was R16.770 million. The NCDE reported on the number of beneficiaries as follows:

· 124 623 quintile 1-3 primary learners in all public schools were provided with one meal a day for 190 days (138 days at the end of the third quarter);

· 57 774 quintile 1-3 secondary learners in all public schools are provided with one meal a day for 190 days (138 days at the end of the third quarter);

· 40 843 quintile 4-5 primary learners in all public schools are provided with one meal a day for 190 days (138 days at the end of the third quarter);

· 24 843 quintile 4-5 secondary learners in all public schools are provided with one meal a day for 190 days (138 days at the end of the third quarter); and

· 1 300 special school learners are provided with one meal a day for 190 days (138 days at the end of the third quarter).

 

The National School Nutrition Programme Grant makes provision for quintiles 1 to 3 schools only, however the NCDE has extended the grant programme to quintiles 4 and 5 schools. The additional funding is sourced from the NCDE’s provincial equitable share allocation.

 

With respect to challenges, the NCDE reported that the vast distances in the province made it difficult to monitor all schools regularly and some schools were not reporting on time whether learners had been provided with a meal for the day. In addition, vacant posts and food price hikes posed problems. The fact that the quintile system had not been updated for some time, has resulted in some schools being classified as quintile 4, when they are actually quintile 3 schools, which is of concern to the NCDE as it currently has to fill a service gap with equitable share funds that could be used for other priorities.

 

2.3 Technical Secondary School Recapitalisation Grant

 

A total of R7.667 million was allocated to the province for the Technical Secondary School Recapitalisation Grant in the 2011/12 financial year. At the end of the third quarter of the 2011/12 financial year, R7.826 million (102 per cent) had been spent.

 

In terms of performance targets, the NCDE indicated that they had planned to supply and install equipment and tools in 56 workshops at nine schools. At the time of reporting, equipment and tools had been procured and delivered to four schools. The procurement process had been completed for another four schools, and some equipment has been partially delivered to these four schools. On the other hand, the procurement process for the remaining school has not been completed.

 

The NCDE further reported that they had managed to equip and network eyeglass display (EGD) computer labs at six schools; refurbish one school with stone guards, burglar bars and security doors; and had an alarm system installed at one school. The training of 68 educators on how to use the information communication technology equipment was scheduled to be completed by the end of February 2012.

 

In terms of challenges, the NCDE indicated that there were no dedicated project manager and administrative staff working on the implementation of the Technical Secondary School Recapitalisation Grant. Another challenge was that the vast distances in the province, inadequate service providers and the unavailability of equipment and tools impeded timely delivery.

 

2.4 Education Infrastructure Grant

 

For the 2011/12 financial year, the NCDE was allocated R290.426 million for the Education Infrastructure Grant, which was meant for capital projects and the refurbishment programme. At the end of the third quarter of the 2011/12 financial year, R161.642 million (56 per cent) was spent, and the balance was R128.784 million. Intervention strategies have been devised to address under-spending and to enhance spending ability. The implementing agents (IAs) were the provincial Department of Roads and Public Works (DRPW) and the Independent Development Trust (IDT). The NCDE indicated that meetings had been held with the above-mentioned IAs, where the urgency of the matter was stressed and understood. A total of R24 million could be fast-tracked with tight management and focused championing.

 

The NCDE reported that, of the 45 capital projects under the DRPW, 95 per cent were between 60 to 100 per cent complete. Two projects were below 50 per cent complete and interventions would be implemented to bring these projects up to par. A total of R24.2 million would be spent under this programme for the remainder of the 2011/12 financial year. The refurbishment programme was implemented by the districts and projected expenditure at the end of the 2011/12 financial year would be R8.8 million. A total of 54 capital projects were awarded to IDT for implementation, of which 41 are in the construction phase. The projected expenditure for the aforementioned capital projects would amount to R184 million at the end of the 2011/12 financial year. Together, the DRPW and IDT project were expected to spend R291 million (in total) by the end of the 2011/12 financial year.

 

With respect to challenges, the NCDE reported that delays in supply chain management processes and the late appointment of the IDT as an implementing agent contributed to under-spending. Projects in the tender stage were not viable for acceleration due to lengthy procurement procedures. Two problematic school sites, in the Nala and Emthanjeni local municipalities, would be moved to alternative sites.

 

The NCDE had advertised several vacancies in order to strengthen management and administration of infrastructure development.

 

 

2.5 HIV and AIDS (Life Skills Education) Grant

 

The NCDE reported that R4.357 million was allocated for the HIV and AIDS (Life Skills Education) Grant. At the end of the third quarter of the 2011/12 financial year, R3.962 million (91 per cent) had been spent, and the balance was R395 390. The NCDE indicated that spending on the HIV and AIDS (Life Skills Education) Grant was in line with operational plans and they did not foresee any deviations.

 

2.6 Social Sector Expanded Public Works Programme Grant for Provinces

 

The Social Sector Expanded Public Works Programme Grant had been allocated R6.159 million for the 2011/12 financial year. The expenditure as at the end of the third quarter was R3.546 million (58 per cent), and the balance was R2.613 million. The NCDE reported that the Social Sector Expanded Public Works Programme Grant was meant for job creation. A total of 361 assistants had been appointed at a monthly rate of R1 650.00 (R82.50 per day for an average of 20 days).

 

3. Briefing by Northern Cape Health Department

 

The Northern Cape Department of Health (NCDH) presented the expenditure report on the Hospital Revitalisation Grant per project. The NCDH listed the following Hospital Revitalisation Grant projects:

 

Table 1: List of Hospital Revitalisation Programme projects

 

Project Name

Status

Type of Project

Projected Costs

Commencement Date

Mental Health Hospital

Construction stage

Specialised Hospital

R1.07 billion

2004

Upington Hospital

Construction stage

Regional Hospital

R950 million

2006

De Aar Hospital

Construction stage

Regional Hospital

R850 million

2006

Postmasburg Hospital

Planning stage

District Hospital

R400 million

2014

Kuruman Hospital

Feasibility study

Regional Hospital

R1 billion

2018

Kimberley Hospital

Feasibility study

Tertiary Hospital

R1.6 billion

2021

Hartswater Hospital

Feasibility study in 2016

District Hospital

R400 million

2023

Kakamas Hospital

Feasibility study in 2020

District Hospital

R400 million

2027

Springbok Hospital

Feasibility study in 2014

District Hospital

R700 million

2025

 

 

3.1 Mental Health Hospital

 

The NCDH reported that, when the Mental Health Hospital project was started in 2004, the initial budget for the project had been R297 million for a 296 bed-capacity facility. Construction was suspended in 2009 when the contract was terminated as a result of slow progress and poor workmanship by the contractor. A legal dispute with the contractor ensued, which was settled after two years. A new contractor was appointed in November 2011 and the site was handed over on 21 December 2011. The NCDH indicated that, at the time when construction was halted, the project had been 70 per cent complete. At the time of the oversight visit, no construction was taking place as the NCDH was waiting for a professional report on how much of the existing structure had to be demolished due to the poor workmanship. The acting Head of the NCDH expressed the opinion that it could be as much as 50 per cent.

 

The NCDH planned to complete construction on the project within 36 months (24 months for the main hospital building, internal road and guardhouse, and 12 months for staff accommodation). The NCDH reported that R420 million had been spent on this project to date (R350 million on construction and R70 million on professional consultant fees). A further R650 million would be needed to complete the project (R50 million for the 2011/12 financial year; R200 million for 2012/13; R200 million for 2013/14; and R200 million for 2014/15).

 

3.2 Upington Hospital Project

 

The NCDH reported that the Upington Hospital project was a 327 bed-capacity (267 for general hospital beds and 60 beds for tuberculosis [TB] patients) hospital that was started in 2006, with a projected cost of R950 million. As at the end of the third quarter of the 2011/12 financial year, a total of R128 million had been spent. The NCDH reported that this project had been divided into 6 phases, and it was at phase 2. This project was expected to be completed in July 2012. At the time of the oversight visit, it was reported that the construction of the hospital is 89 per cent complete.

 

3.3 De Aar Hospital Project

 

The De Aar Hospital project was reported as a 158 bed-capacity hospital project (95 general hospital beds and 63 beds for TB patients). This project was started in 2006 and was expected to be completed in 2014 with a projected total expenditure of R850 million. At the time of the oversight visit, only R38.7 million had been spent. The construction of the main hospital building has commenced and the site was handed over in November 2011 after a delay. The NCDH further reported that the construction of the TB unit has commenced, and the site was handed over to the contractor in September 2011, also after a delay.

 

3.4 Postmasburg, Kuruman, Kimberley , Hartswater, Kakamas, and Springbok

Hospital Projects

 

The NCDH reported that the Postmasburg Hospital project was at the planning stage and feasibility studies for the five other projects (namely Kuruman, Kimberley , Hartswater, Kakamas, and Springbok Hospital ) were yet to be started.

 

The NCDH indicated that the funds for the Postmasburg Hospital might be used to complete the Mental Health Hospital . Similarly, the diversion of funds to the Mental Health Hospital would result in delays on the construction of the other five projects.

 

4. Input by National Treasury on Departments of Education and Health

 

4.1 Northern Cape Department of Education

 

The National Treasury indicated that, with respect to most of the conditional grants, spending by the Northern Cape Department of Education (NCDE) has been higher than the national average. However, in terms of the Education Infrastructure Grant, where all provinces spent very poorly, the NCDE was lagging behind the national average. The National Treasury indicated that, in order to improve the planning ability in the NCDE, the following should be taken into account:

· The Head of Department should, when filling posts, focus on critical skills and competence in terms of the planning and design of infrastructure projects;

· Contracts should be drawn up with enough leverage for the NCDE. These contracts need to be monitored effectively so that appropriate action could be taken in terms of penalty clauses; and

· Better alignment was needed between the budget and the actual cash flow (or spending ability). The need for fast-tracking and roll-overs arose when budgets were too high for a department’s delivery capacity.

 

4.2 Northern Cape Department of Health

 

The National Treasury indicated that the Northern Cape Department of Health (NCDH) had spent only 38 per cent of its budget in the 2010/11 financial year, and had received a disclaimer of audit opinion during that time. The Auditor-General of South Africa had been requested to look at the Hospital Revitalisation Grant in particular and had reported that there were considerable delays in the completion of projects as a result of the following factors:

· Unavailability of funds due to improper cash management processes;

· Poor performance by contractors and changes to scope of work (in many instances, additional funds had to be paid for substandard work);

· Lack of proper planning and accurate needs determination before initiating projects;

· A robust procurement system was not consistently applied, compromising transparency, accountability and economy; and

· Ineffective project management, resulting in projects not being completed in time and at the required level of quality and cost.

 

The National Treasury stressed the fact that the NCDH needed competent staff to drive projects and that contracts needed to be tightly managed.

 

5. Site visit at Mental Health Hospital, Kimberley

 

The professional consultant contracted with the provincial Department of Roads and Public Works (DRPW) briefed the Committee on the history of the project and led the Committee on a tour through the buildings. The professional consultant, who was appointed in November 2007, pointed out defects in the building. The Committee was told that the professional consultant had reported to the DRPW that the previous contractor was delivering substandard work, and had recommended that the contractor be moved off site. These recommendations were not acted on by the DRPW. A major issue was the lack of supervision, with only five site supervisors having responsibility for a 35 000 square metre site, that is 7 000 square meters per supervisor. This lack of supervision compromised the quality of work delivered.

 

6. Findings

 

During interaction with the provincial departments of Education and Health and the

National Treasury, and a visit to the Mental Health Hospital project in the Province of the Northern Cape , the Select Committee on Appropriations made the following findings:

 

6.1 At the end of the third quarter of the 2011/12 financial year, the Dinaledi Schools

Conditional Grant was overspent due to a deviation that was approved for a service provider to deliver workstations directly to schools. This service was not included in the terms and conditions of the original contract - the Northern Cape Department of Education paid more than it had budgeted for. Moreover, there was no project manager or support staff to manage Dinaledi School Conditional Grant funds.

 

6.2 The Northern Cape Department of Education was not utilising the 5 per cent allocation within conditional grants to employ grants management staff. As a result, there were many vacant posts in almost all grants. The Northern Cape Department of Education had no capacity to manage conditional grant funds because there were no dedicated employees to monitor/supervise the expenditure of all grant funds.

 

6.3 The grouping of schools according to quintiles had compromised some schools because they were grouped in the wrong quintiles.

 

6.4 The oversupply of educators identified in the Province of the Northern Cape in the 2009/10 Expenditure Outcomes was still contributing to over-spending and making it difficult to employ administrative staff.

 

6.5 Neither the provincial Department of Education nor the provincial Department of Health in the Northern Cape Province had the capacity to manage capital infrastructure projects.

 

6.6 The Mental Health Hospital project was in a bad state and behind schedule. The building was dilapidated; window and door frames were in a poor condition; structural concerns may result in demolition; and the building material was being stored in an unsecured room.

 

6.7 There was generally a high rate of overspending in the Hospital Revitalisation Grant projects that were being implemented.

 

6.8 The Northern Cape Department of Health is diverting funds from other projects to the Mental Health Hospital project.

 

 

7. Recommendations

 

After deliberating on the above-mentioned findings, the Select Committee on Appropriations recommends as follows:

 

7.1 The provincial Department of Education and the provincial Department of Health in the Northern Cape Province should take necessary precautions to avoid overspending on conditional grant funds, as the conditions under which these grants should be spent are clearly stipulated in the Division of Revenue Act.

 

7.2 The Northern Cape Department of Education should consider utilising the 5 per cent allocation for staff within each conditional grant and employ project managers and support staff to manage grants.

 

7.3 The national Department of Basic Education should, during the 2012/13 financial year, consider revising the quintile system because many historically-disadvantaged schools have been compromised.

 

7.4 The Northern Cape Department of Education should fast-track the head count of educators in the Northern Cape Province within six months after the adoption of this Report by the National Council of Provinces and thereby expedite the transfer of misplaced personnel.

 

7.5 The national departments of Basic Education and Health should consider providing in-house building engineers to the Northern Cape ’s provincial departments of Education and Health,respectively.

 

7.6 The Northern Cape Department of Health should consider conducting an independent audit on how much remedial work needs to be done to the Northern Cape Mental Health Hospital project.

 

7.7 The Northern Cape Department of Health should take necessary precautions to avoid the continuous diversion of Hospital Revitalisation Grant funds from other projects to the Northern Cape Mental Health Hospital project and thereby delaying these projects.

 

7.8 The Member for Executive Council for Health in the Northern Cape Province should monitor and evaluate the implementation and completion of the Northern Cape Mental Health Hospital project and should submit quarterly reports thereon to the National Council of Provinces.

 

 

Report to be considered

 

 

 

 

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