Human Settlements Budgetary Review and Recommendations Report

Meeting report

Opening remarks
The Chairperson noted apologies from Members Mr S Mokgalapa (DA) who was out of the country; Ms P Duncan (DA) who was ill; and Ms G Borman (ANC) who was held up at a meeting with the Minister of Public Enterprises.

The Chairperson said the Committee had asked the Parliamentary Research Unit (PRU) to analyse and make a critique of the Department of Human Settlement's (DHS or Department) performance per programme. She pointed out inaccuracies that were there in the Department’s annual report and said as a result the Committee saw it necessary to add some slides and columns to the BRRR report, so as to prove how unreliable the information contained in the report was.

This confirmed the view by the Auditor General (AG) that the Department's information was not useful. She said page 7 of the report needed to be headlined "programme performance". This was where each programme was allocated and the pertinent virements. The slides were based on the Committee's analysis of the report. The Chairperson pointed one such inaccuracy as referring to under-expenditure as a saving. Minor changes were effected on the first pages.

Briefing by Parliamentary Research Unit
Mr Leepo Tsoai, Committee Researcher, said the amounts provided by the Department as total allocation, did not tally with those provided by National Treasury (NT). The Department claimed its total allocation was R222, 111 million for the Administration Programme; but NT had indicated R233 111 million. DHS indicated that it received R39 954 million for the Programme Two.

Mr K Sithole (IFP) sought clarity on which were the correct figures.

The Chairperson replied that the Committee did not know as the figures in the annual report were signed and agreed to by both the Director-General of the Department and the Minister. The report was the one that supported the oversight function of the Committee but at the same time it needed to source information from elsewhere for verification purposes. The Department sent monthly reports to NT on financial performance. It was important that both the NT and DHS were invited to explain the differing figures presented. It was good for the Committee to detect the discrepancies; on recommendations the Committee could summon both NT and DHS to Parliament for an explanation.

Mr Tsoai said it was concerning that the conflicting information was already out in the public. The Department in its annual report indicated that R2 282 541 million; this was a typing error, and needed to be in billions. This was so basic and ought not to have happened.

The Chairperson asked that the figure be expressed as received from NT.

Mr Tsoai said NT figure was R22 825 542 billion.

The Chairperson asked that the typo be ignored, and that the figure allocated for the housing policy be given.

Mr Tsoai replied that it was R39 442 million, but DHS indicated that it had received R39 954. DHS indicated that it received R193 011 million for Programme Three (Housing Planning and Delivery Support), whilst NT indicated R195 011 million.

Mr Tsoai said for Programme Four (Housing Development Finance), DHS indicated it got R22 201 49 million; but NT indicated R22 197 499 million. For Programme Five (Strategic Relations and Governance) NT indicated R160 478 million, whilst DHS indicated R169 478 million. There were huge discrepancies in terms of numbers and that was worrisome.

The directorate of Special Investigations Unit (SIU) was reported to have under-spent as a result of late invoicing. The directorate was indicated to only have spent R25.8 million of its original allocation of R56.1 million adjusted to R44.7 million. The chief directorate’s internal audit reported a saving of R18.9 million, but only R11.3 million of the saving could be achieved. It should be noted that the sub-programme managed only 45% of the total of 31 audits planned for 2011/12. About 17 audits could not be completed. The Department attributed this to the unavailability of clients to open meetings; client delays in commenting on the report; slow receipt of information required; as well as capacity constraints in the internal audit function.

DHS acknowledged under-pending in Programme One was as a result of the moratorium on filling non-critical posts. This state of affairs was critical and further engagements were required so that DHS could state what it considered non-critical posts.

Mr Tsoai said under-spending as a result of not acquiring office space had been a recurring issue for the past few years. The inability by government departments to acquire office space had a detrimental on outputs and ultimately on service delivery. The question had to be asked as to, to what extent could service providers and property owners be held accountable for not meeting their contractual obligations. This was an issue that required parliamentary scrutiny; it clearly impacted on the ability of departments to act on their mandates.

Mr Sithole asked about the kind of impact this would have on quantifiable performance information.

The Chairperson replied that as per the recommendation from the Research Unit, this was the issue that required further parliamentary scrutiny. The Committee’s comment needed to indicate that this clearly impacted on DHS to deliver its mandate.

Ms D Dlakude (ANC) sought clarity on the under expenditure by the SIU in the light of their scope of work increasing. She said also clarity had to be provided on the issue of the vacancies; there could not be a situation where posts were not required.

Ms J Sosibo (ANC) sought clarity on the R18.9 million saving, R11.3 million of which was used. What happened to the rest of the money? The report did not even mention it or even indicate that it would be rolled over. About R7.6 million rand was unaccounted for, and it was not reflected anywhere.

Ms M Njobe (COPE) commented that she was not at ease with the explanation given by the Department on the moratorium question the day before. The fact of the matter was that money sat somewhere in the Department. Why did DHS budget for posts it did not want to fill? The report needed to indicate that the Committee was not happy with the replies it was given yesterday.

Mr Tsoai said Programme Three was initially allocated R156.1 million; but according to DHS the figure was R200.7 million. The annual report had indicated 93% of the money was spent and the reason for the under expenditure was the failure to fill non-critical posts. The Department expenditure reporting for the programme appeared inconsistent, and that impacted negatively on Parliament’s constitutional mandate to perform efficient and effective oversight on the executive. Furthermore, annual reports were an important instrument to give an account as to how a department had spent money appropriated by Parliament. Such an account needed to be accurate and reliable.

Programme Four was allocated R21.9 billion, of which R14.9 billion was allocated to the Human Settlements Development Grant. The Rural Household Infrastructure Grant (RHIG), was allocated an amount of R257.5 million after adjustments of R26 million; R183 million of that amount was spent and that translated to 72% expenditure. An amount of R402 million was allocated to DHS’s entities; and an additional amount of R180 million was provided as the Disaster Relief Grant. In Programme Four the Department recorded an under-expenditure of R91.5 million for the year 2011/12.

Mr Tsoai said the Department indicated that the under expenditure on the RHIG (toilets provision) programme was as a result of communities resisting the implementation, as well as non-availability of building materials and difficult conditions. It should be noted that the Department reporting expenditure for the programmes appeared to be flawed.

It was indicated that the allocation had increased from R22.9 billion to R22.2 billion, in reality this was a decrease. However both the 2012 national expenditure and the 2011 adjusted estimates indicated that the programme was adjusted to R22.197 billion. Another inaccuracy according to DHS reporting pertained to RHIG that was allocated R100 million; whilst according to the NT, the programme was appropriated R231.5 million which increased to R257 million in the adjustment period.

The R100 million appearing in DHS’s annual report was actually the 2010 allocation not 2011. This was the start up amount for RHIG, as the grant started in 2010. There was a need for the Department to report accurately; thereby ensuring annual reports were not published while containing unreliable information.

Ms Dlakude commented that it was problematic that such an important report contained that many inaccuracies and yet no one was willing to account for it. The explanation that RHIG was not entirely spent as a result of communities protesting was not true. People out there needed these services and certainly the toilets. It was doubtful that anyone would resist a toilet; on the evidence of the oversight visits provinces people wanted toilets. It could be that the Department did not have capacity to spend the RHIG funding.

The Chairperson concurred- R57 million was allocated to North West and yet nothing was spent. The Committee needed to have a solid recommendation on excuses for under spending.

Mr J Matshoba (ANC) informed Members that the statement that unavailability of materials contributed to under spending was problematic. What material was DHS talking about?

Mr Tsoai said DHS's inaccurate reporting was again evident in Programme Five, where the Department reported a budget adjustment of R169 478 million whereas in reality it was adjusted to R160 478 million. This amount was not reflected in 2011 adjusted estimates of national expenditure. In fact Programme Three received a R3 million virement from Programme Five.

The R6 million virement from Programme One for Govan Mbeki Human Settlement Awards was not reflected in the adjusted appropriation. This should have been adequately budgeted for since it was an annual award event. This was not an unforeseen event and ought to be budgeted for every year.

The Chairperson said there was a need to change the structure of the report in terms of the programmes. The Committee needed to put comments next to the programme; otherwise when listed at the end as recommendations it won't be easy to follow comments.

The Chairperson said NT had allocated the Disaster Relief Grant (DRG) R180 million during the Medium Term Budget Policy Statement (MTBPS). There should have been a revised plan by the Department where provinces had presented their business plans, before NT could adjust the budget. DHS could not request the money without business plans from provinces. The Committee needed to comment on the money allocated and the delays. The provinces - Gauteng and Limpopo - that indicated 100% expenditure for the DRG that was only released in February, they needed to specify the kind projects the money was spent on.

Ms Dlakude expressed concern that the DRG money was just transferred to provinces so the Department could not account for it. If provinces had business plans, DHS would have known how and where the funds were spent. She said for the figure transferred to Mpumalanga was nothing compared to the extent of damage caused by floods last year. The R360 000 for the province was pathetic, given that people lost property and stayed in abject conditions.

She said an impression was given last year that DHS would come and assist with funding to rebuild people's houses. The municipality said it still awaited funds from DHS; until today nothing had happened.

Mr Matshoba observed that the Eastern Cape (EC) had spent nothing at all in the grants.

The Chairperson said that the EC indicated that it had received the money in February. But the fundamental question to all provinces was how the money was transferred without business plans.

Ms Njobe asked if there was reserve funding for disasters. What then happened with the funds if there was no disaster?

The Chairperson said the Division of Revenue Act would give clarity on the question. There were still areas that were struck by disasters in 2009 and still had not benefited from the Disaster Relief Fund.

The Chairperson pointed to another suspect figure where the Department claimed to have prepared 82 000 sites last year, whilst NT quoted 19 275 mid-year. The 82 000 figure was unbelievable; there was no way it could happen.

The Chairperson said issues raised by the Public Service Commission (PSC) on DHS's financial performance were just formatted. The PSC raised the same concerns, as the AG, on RHIG where material under-spending was revealed. There were unaudited supplementary schedules in the grant; what did that mean, she asked? Where was the information during the audit process? The PSC only had access to the information in the first week of October, whilst the information had supposedly been scrutinised by the AG. It was confusing that the PSC would conclude that the information was unaudited by October, when it should have been to the AG long before that.

Ms Borman concurred that the statement about the unaudited supplementary schedule was problematic.

Ms Njobe said this sounded like the AG had received additional information that was not his responsibility to look into. She read on page 100 of the report where it was stated that supplementary information set out in pages 166-177 did not form part of the financial statements as it was presented as additional information. The AG had not audited these sections and accordingly the AG would not express an opinion. She wondered if the unaudited supplementary schedule did not form part of those pages.

The Chairperson said the AG was correct; this related to the funds on programme 4; that was done in the provinces. She clarified that the statement pertained the Urban Settlement Development Grant (USDG) that was transferred as it was. The only people who could help the Committee understand the kind of information that was not audited was the PSC.

The Chairperson said the PSC was worried by the under expenditure and the 30-day payment rule. According to the report, 113 cases were referred to the SIU, 7% of that was heard with only 2 concluded.

The PSC reported 32% (21) of senior managers had potential conflict of interest between their private interests and official responsibilities. 6 of the 21 had many companies, and two officials shared companies. The Department had failed to submit an input in 2010/11, and in 2011/12 it reported two cases of financial mismanagement; one involved an amount of R100 million and the other one was not disclosed. However there was no loss to the state in that case.

Ms Njobe commented that the performance of the SIU as the national anti-corruption unit was disappointing. Something had to be said to the effect that the unit should do its work, as failure to perform duties reflected bad on the Department. That it could finalise only two cases out of 113 defeated the aim of fighting corruption. The low volume of attending to cases would discourage those who reported corruption.

Mr Matshoba wanted to know if there was an obligation on the Department to continue relying on the SIU. Was there any reason why another investigating unit could not be employed? The only reason the SIU dragged its feet on cases was because it was making profit. The Minister should come and answer this specific matter.

Ms Borman said it was interesting to note that the unit had underspent its budget. The Committee needed to come across strongly on the issue to say this was noted; and the Committee would follow this with much bigger vigour. One could not have such a big outstanding number of cases. She agreed that the Minister should come down and explain why there was under-spending in light of cases outstanding.

The Chairperson said that the DHS website was not user friendly and there were no links to documents. The PSC reported that it accessed the annual report through the government website, as opposed to the departmental website in 2010. As at 01 October, the current annual report was not available on either website. This was crucial and needed to be recorded.

The PSC also noted that the Department did not have an HR plan.

Ms Njobe noted that the PSC had indicated that the Departmental vacancy rate at the senior managerial level was too high. This contradicted the statement about a moratorium on non-critical posts.

The Chairperson said the report by the Financial and Fiscal Commission cleared the Department but queried the 82 000 figure of prepared sites. She noted the recommendation that the issue of the USDG should be clarified in the Division of Revenue Framework.

On performance and monitoring, DHS had to facilitate the issue of transfer of the sanitation function. The Minister should ensure legislative prescripts were adhered.

The Chairperson said she had attached a document from independent researchers at the end of the report and according to it, Programme Two (Housing Policy Research) was crucial at DHS. The programme was responsible for providing capacity and conducting extensive research on use of alternative technologies. There should not be a logistical problem in serving funds. Capital allocated to research should relatively be easy to transfer to tangible outcome.

The Chairperson further noted that the researchers had noted a decrease on what was allocated for research whilst an increase was recorded for monitoring and evaluation. Researchers found it strange that an increase for monitoring research outputs was given whilst money to carry out the actual research had gone down.

Another dubious expenditure of money was in Programme Four where the Housing Development Finance had spent 99% of the allocation whilst there were tangible outcomes. This programme had become a fiscal dumping ground, where money was just handed over to provinces without any indication of where the money was spent.

The researchers noted that RHIG spent R187 million of its final appropriation of R257 million. In many areas, people saw open defaecation as necessary because there was no other option; the question was why was there a variance of R70 million when a serious issue as sanitation had not been addressed.

The Chairperson said the researchers also looked at the use of consultants by the Department. The utilisation of consultants on behalf of the Department should respect the core values in order to effectively serve the need of those the various projects ought to benefit. There was a total of 26 companies involved in doing work for the Department at a cost of just over R91 million. An amount of R41 million from the total sum was awarded to a company that managed the RHIG programme.

The Chairperson said this was concerning, especially given that the Department had its own Project Management Unit. Researchers indicated that lucrative contracts to consultants did not necessarily translate to effective work. DHS ought to find ways to limit the number of consultants it award contracts.

Ms Borman said the Committee should hold the Department accountable for the use of consultants. DHS should be summoned to account on the use of the 26 consultants and how that translated into work on the ground.

Mr Matshoba sought clarity on the relationship that the consultants had with officials at the Department.

Ms Njobe supported the call to summon officials to come and explain, what was done by consultants. The issue of consultants cut across departments; there was a need to reduce the use of consultants. A lot of money spent on consultants who do the work that officials ought to do.

She said research for human settlements was important. She asked who did the research for DHS; why was the Department not partnering with institutions of higher learning. The Committee should follow the issue of research. If research was done thoroughly these basic errors could be avoided.

The report was adopted with amendments.

The meeting was adjourned.