The Budgetary Review and
Recommendation Report of the Portfolio Committee on Public Works on the
performance of the Department of Public Works for the 2009/10 financial year,
dated 21 October 2010.
The Portfolio Committee on Public Works, having assessed the service
delivery performance of the Department of Public Works, reports as follows:
The Budget Review Recommendation Report of the Portfolio Committee on
Public Works arises from the fulfillment of the requirements of the recently
enacted Money Bills Amendment Procedure and Related Matters Act, (No. 9 of
2009), which was signed into law on 16 April 2009. The aim of the Act is to
provide for a procedure to amend money Bills before Parliament and for norms
and standards for amending money Bills before provincial legislatures and
related matters.[1]
Following from the above, the report will outline progress made by the
Department of Public Works as reported in the different existing reports
including, the Strategic Plan, Section 32 Reports, Annual Report as well as
recommendations made by the different Committees concerned with financial
matters.
1.1
The Committee
The Portfolio Committee on Public Works is
guided by the Rules of Parliament promulgated in terms of the Constitution to
play an oversight role on the Ministry, the Department of Public Works and its
Entities. The Committee:
·
Exercises its
monitoring role in such a way that it contributes towards the improvement of
the quality of life of all South Africans.
·
Scrutinise
legislation and other policies that impact on the spheres of Public Works.
·
Facilitates
interdepartmental and intergovernmental relationships at all spheres of
government.
·
Transforms the
conduct of the Committee’s business to be sensitive to provincial interests at
the National Level.
·
Learn to understand
other international best practises relevant to its field of jurisdiction so as
to serve all South Africans to its best.
Section 5 of the Money Bills
Amendment Procedures and Related Matters Act, (No. 9 of 2009), sets out the
procedures to be followed prior to the introduction of the national budget.
Section 5(1) indicates that the performance of each national Department must be
assessed annually by the National Assembly through its Committees. The
following instruments can be utilized:
(a) The medium term estimates 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 related 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.
(f) Any other information requested by or presented to the House or
Parliament.
(2) Committees must annually submit budgetary review and recommendation
reports for tabling in the National Assembly for each department.
(3) A budgetary review and recommendation report –
(a) must provide an assessment of the department’s service delivery
performance given available resources.
(b) must provide an assessment on the effectiveness and efficiency of
the department’s use and forward allocation of available resources.
(c) may include recommendations on the forward use of resources.
(4) A committee reporting to the National assembly in terms of this
section must submit its budgetary and recommendation report after the adoption
of the Appropriation Bill and prior to the adoption of the reports on the
Medium Term Budget Policy Statement.
(5) Any budgetary review recommendation report must be submitted to the
Minister and the member of Cabinet responsible for the vote which the report
applied after its adoption by the National Assembly and prior to the reports on
the Medium Term Budget Policy Statement.
(6) Additional budgetary recommendation reports may be submitted at the
discretion of a committee.[2]
The Portfolio Committee has reviewed the Department’s Strategic Plan,
Annual Report, Reports of the Auditor-General and other related financial
documents, as well as its own Oversight reports and recommendations in the
compilation of this Report.
1.2
The Department
The Department of Public Works was allocated a functional
mandate in terms of the Constitution of the
·
Provide land
and accommodation to national Government departments and institutions.
·
Manage such
land and accommodation.
·
Act as
custodian of national Government immovable assets.
·
Provide
strategic leadership to the Construction and Property industries.
·
Co-ordinate the
implementation of the Expanded Public Works Programme.
·
Have the
Minister of Public Works carry out functions related to land and accommodation
through the State Land Disposal Act (No. 48 of 1961).[3]
The Department of Public Works is also responsible for four
entities, who report to the Minister of Public Works as the executive
authority. These entities include:
·
Agrèment South
·
Construction
Industry Development Board (CIDB).
·
Council for the
Built Environment (CBE).
·
Independent
Development Trust (IDT).
2. Strategic Priorities and
Measurable Objectives of the Department
2.1 Strategic Priorities of the Department[4]
2.1.1 The
Department of Public Works 2009/10 – 2011/12 Strategic Plan is informed
by the following Government strategic
documents:
-
Medium Term Strategic Framework that gets
revised annually.
-
Fifteen year review that outlines the
performance of government.
-
2009 Development Indicators that are
published annually by the Presidency.
-
Medium Term Budget Policy Statement and the
Budget Vote.
-
Millennium Development Goals.
-
May 2009 Cabinet Lekgotla decisions.
2.1.2
The Department of Public Works Strategic Goals are to:
-
Provide strategic leadership for effective
and efficient asset management.
-
Establish an enabling environment for the
creation of both short and sustainable work opportunities for the unemployed.
-
Contribute to the National goal of Job
Creation and Poverty Alleviation.
-
Transform and regulate the construction and
property industries to ensure economic growth and development.
-
Ensure effective and efficient
implementation of project management in the construction and property
management environments.
-
Ensure effective stakeholder management for
enhanced implementation of the Department’s mandate.
-
Ensure effective corporate governance
processes and sound resources management.
-
Improved service delivery to meet clients’
expectations.[5]
Government
has identified 10 key priorities for the Medium Term Expenditure Framework. The
Department of Public Works has highlighted 8 of these Government priorities in
its Strategic Plan for 2009/10 which are:
1.
Speeding up growth and transforming the
economy to create decent work and sustainable livelihoods.
2. Massive
programme to build social and economic infrastructure.
3.
Comprehensive development strategy linked to
land and agrarian reform and food security.
4.
Strengthen skills and human resource base
(major renewal of skills and education system.
5. Intensifying
the fight against crime and corruption.
6. Pursuing
African advancement and enhanced international cooperation.
7.
Sustainable resource management and use.
8.
Building a developmental state including
improvement of public services and strengthening democratic institutions.
The
above key Government Strategic Goals present an overarching list of priorities
to ensure effective and efficient service delivery. The key priorities are set
out to provide Government and Departments with guidelines to ensure that its concerns
with poverty alleviation, provision of basic services as well as sustainable
resource management are attained over the 2009/10 to 2013/14 MTEF period.
The
Office of the Director-General in the Department will among other things
capacitate the Department with a Monitoring and Evaluation Unit, create
awareness of the Unit and monitor performance of the business units within the
department for improved service delivery.
2.1.3
The following programmes were reported to be insufficiently funded within
the Department:
-
Roll-out of the Government Immovable Asset
Management Act (GIAMA) to provinces and municipalities.
-
Energy efficiency.
-
Valuation of State properties.
-
Implementation of Property and Construction
Charters.
-
National Infrastructure Maintenance
Strategy (NIMS).
-
Asset Register.
-
Condition surveys.
-
Maintenance backlog.
-
Roll out of the Inner City Programme to all
nine provinces.
-
Water efficiency.
2.2 Measurable Objectives of
the Department
Programme 1: Administration
Finance and Supply Chain: The
need to accelerate tendering processes raises issues of compliance with the
PFMA[6]
and other regulations. Further accelerated service delivery poses the potential
risks of fraud, irregular and fruitless expenditure, especially if internal
controls are not strengthened and monitored. To address the above issue, the
Department indicated that for the 2009/10 financial year it would
institutionalise fraud prevention plans, as well as supply chain management
training and financial accounting. Further the Financial Management Branch is
expected to contribute actively to the implementation of integrated planning in
the Department, with the aim of aligning the budgetary process to the Strategic
Plan of the Department.[7]
The
report by the Auditor-General highlighted some of the risks experienced within
the Department. The 2009/10 Audit findings noted investigations were carried
out within the Department related to matters of fronting, the misuse of State
vehicles, conducting business while employed by the public service, the
unauthorised sale of government houses, allegations of overpayments, delay of
payments and irregular awarding of tenders. The investigations were still
ongoing at the reporting date.[8]
The Committee requested the Department to make available the reports on these
investigations as soon as they were concluded.
Corporate Services: The
services provided under this sub-programme include the integration of gender in
the property and construction programmes, sound relations with spheres of
government through relevant intergovernmental structures, standardising
physical security measures at Head and Regional Offices, and promoting the
unique role of the Department of Public Works in the socio-economic agenda of
Programme 2: Provision of Land
and Accommodation
Custodian Asset Management Plans (CAMPS): The
Department reports that guidelines for the Custodian Asset Management Plans
were completed by 30 September 2008. It is expected that these CAMPS will be
compiled on an annual basis, with the first being completed in the 2009/10
financial year.
Monitored and Assessed Asset Register: It is
reported that the Asset Register Enhancement Programme successfully completed
the targeted 33 555 properties on 31 March 2008. The enhancement programme
included collection, research and verification of property information as well
as the capturing of new and missing verified information in the Department’s
immovable Asset Register. Further, the Department intends to finalise an
Amnesty Call strategy in 2009/10 and to establish an Amnesty Call Centre to
trace State properties that are unaccounted for. The Department during a
presentation to the Committee on its 2009/10 Annual Report, reported that the
Department of Rural Development and Land Reform was tasked with the vesting of
all immovable assets that formed part of the former TBVC states. The Department
will continue with the vesting process of all other properties.
Energy Efficiency: The
Department of Public Works has implemented Shared Energy Contracts since 1997,
comprising of energy audits and retrofits, (in the four Department of Public
Works Regional Offices),[10]
which have realised an annual saving of approximately R56 million in around 4
000 buildings. The Department indicated that the Shared Energy Contracts will
be extended to the seven other Department of Public Works Regional Offices. By
31 March 2010 the Department reported on contributions made to energy savings
when Government buildings reduced their energy consumption by 10 per cent
(kw/h).[11]
The Department’s presentation on its 2009/10 Annual Report indicated that 17
buildings were retrofitted, which resulted in a saving of 3.473 kw/h.
Water Efficiency: The
Department indicates that it will develop a strategy, (to be finalised in the
2009/10 financial year), to identify sustainable water efficiency measures,
including reducing water leaks and retrofitting of existing plumbing fittings.
Further, the Department monitors water consumption in State-owned buildings to
ensure water efficiency and identify best practices.
Compliance of buildings for people with
disabilities: The Department receives a budget of R15 million
annually over the MTEF cycle, for its programme that addresses basic
requirements of access in terms of ramps, parking facilities and ablution facilities, appropriate doorways, lifts and
signage. The Department has an annual target of 200 buildings that it must
prioritise to be made accessible to people with disabilities. Of this number
only 38 buildings were completed, while 114 and 22 are reported to be in
construction and procurement phases respectively. The overall total was reduced
by 26 buildings which the Department reported was due to some buildings being
devolved to the South African Police Services (SAPS) and others being leased.[12]
Capital and Planned Maintenance
Implementation Programme: The Department noted that the State’s
property portfolio consists of 136 089 properties. It suggested that
Government’s allocation of a capital budget of R3.93 billion and R1.56 billion
for planned maintenance is inadequate to ensure the complete servicing of
accommodation needs of this portfolio.[13]
According to the Department’s 2009/10 Strategic Plan the Department’s
maintenance backlog stood at R16.57 billion. It reported that this backlog
continues to grow as there were no maintenance plans in place.[14]
Rehabilitation Programme: The
Department intends to enhance the value of State immovable assets and offering
improved service delivery to clients by means of a rehabilitation programme of
State buildings primarily for use by Government departments. For the 2008/09
financial year a total of 25 projects were under construction, with an
allocation of R362 million and will be completed over the medium term
expenditure framework period. In 2009/10 an additional R563 million is
allocated for the project with a further R649 million required for the 2010/11
financial year. It is expected that upon completion client departments will pay
accommodation charges reflecting full cost for new and rehabilitated buildings.
The
Department’s rehabilitation programme consists of a total of 1 053 state-owned
buildings that were earmarked for rehabilitation annually. The 2009/10 Annual
Report of the Department indicated that a 5 per cent target (namely, 526
buildings), was earmarked for rehabilitation during the 2009/10 financial year.
The Department deviated from this target due to the fact that the planning was
aligned to availability of funding.[15]
The
initial intention behind the introduction of the National Youth Service was to
assist government in the maintenance of its immovable assets, especially the
maintenance of various government buildings. Progress on the implementation of
this programme has been slow, with set targets usually not being met.
Programme 3: National Public
Works Programme
It is
noted that despite the gazetting of the Property Charter in 2007, by the
Department of Trade and Industry, transformation in the property sector remains
low. Therefore, the Department in 2007 approved the strategy that aims to
provide property empowerment opportunities to Black Economic Empowerment (BEE)
entities, with a greater emphasis on 100 percent BEE enterprises. Further,
Department intends in the 2009/10 financial year to implement the strategy that
provides for a Property Incubator Programme (PIP), which creates an enabling
environment for providing opportunities and support to BEE enterprises.[16]
At the time of the
presentation of the Department of Public Works Annual Report 2009/10 to the
Committee, the Department reported a total of 3 028 leases of which 686 were
awarded towards BEE companies which amounted to R 73 048 783 (31.47 per cent)
of value
The
Department was working closely with the Department of Land Affairs which is
currently called the Department of Rural Development and Land Reform to
facilitate the quick resolution of land claims on State land under its control,
as well as identifying surplus land under its control suitable for land reform
purposes. It is noted that the Minister of Public Works has in 2008/09 and
2009/10 approved the release of 10 500 hectares of State land, valued at more
than R50.4 million for land reform purposes.[17]
The
Department is still to report to the Committee on what happened to the land
released, to whom it has been given and for what purposes.
A wage
incentive scheme of R4.2 billion has been made available over the Medium Term
Expenditure Framework (MTEF) for 2009/10 to 2013/14. Two sectors will receive
the incentive grant initially (provinces and municipalities), while the
non-State sector will receive it for paying wages to EPWP workers in
infrastructure related projects. Further, the goal of the EPWP Phase II is to
create 2 million full time equivalents[18]
for poor and unemployed people in
Programme 4: Auxiliary and
Associated Services
The
Department indicates that the programme is under-funded, notably when it comes
to logistical arrangements of State events, which prove either unpredictable or
costly. Example noted include, State funerals, Presidential Inaugurations,
celebrations of children or women’s rights. To address the issue the Department
has sought a commitment from National Treasury to fund unpredictable State
events from their reserves.
The Department notes that transfer of payments to the Commonwealth War
Graves Commission presents a challenge in terms of the fluctuation of the
foreign exchange rate. This makes the budgeting for this section over the MTEF
unpredictable. It therefore plans to utilise the International Relations unit
to assist in fast tracking claims before the beginning of a new financial year.
3. Analysis of Strategic and
Operational Plans of the Department
The Strategic Plan of the Department outlines the broad framework for
the 2009/10 financial year. It highlights the Department’s planned commitments
as well as the outcomes of its previous commitments. It should be noted for
example that the Department did not meet its intended target of completing the
valuation of the Asset Register, which it hoped to do in the 2009/10 financial
year.
The Department also highlighted the conclusion of the Expanded Public
Works Programme Phase I and the commencement of Phase II of the programme. It
noted that the intended target was to create 4.5 million work opportunities
between 2009 and 2014. The second phase commenced in April 2009, and the
President in the
The Strategic Plan also takes account of the Department’s efforts to
address its vacancy rate and the filling of critical positions. It emphases a phased
approach to filling these vacancies, by means of appointments, promotions and
transfer of staff from other Departments to the Department of Public Works.
4. Analysis of Expenditure
Reports
4.1
Overall Budget Allocation for the 2009/10 Financial
Year[21]
The Department of Public Works was allocated R6
billion in the 2009/10 financial year. The departmental
budget consists of four programmes. A
substantial share of this budget amounting to R4.4 billion was allocated to the
Provision for Land and Accommodation programme, while R768.5 million was
allocated to the National Public Works programme. The budget allocation for the
National Public Works programme was further divided into R201.7 million for the
Expanded Public Works Programme (EPWP) Incentive Grant for Municipalities and
R151.4 million for the EPWP Incentive Grant to Provinces.
The
Administration and Auxiliary and Associated Services Programmes received a
budget allocation of R688 million and R49.2 million, respectively
4.2
First
Quarter of the 2009/10 Financial Year
The
Department was not selected by the Standing Committee on Appropriations during
the first quarter for further scrutiny of its budget, some concerns were raised
about its processes that impacts negatively on the spending of other departments.
The general consensus among departments is that processes within the Department
of Public Works for capital projects are too slow, resulting in delays in the
construction of key projects. In most cases, departments did not have service
level agreements with the DPW to formally define the level of service and
enforce accountability in the delivery of services.
There
were no reports available on the Second Quarter spending trends of the
Department for the 2009/10 financial year.
4.3
Spending
Trends at the end of the Third Quarter of the 2009/10 Financial Year[22]
The
Department of Public Works reported an expenditure of R4.4 billion or 73 per
cent at the end of the third quarter. While the Department had not
significantly under-spent by the end of the third quarter, its spending was of
concern in some critical areas of service delivery. The Department spent R3.31
billion or 74.9 per cent of the allocated budget in the Provision of Land and
Accommodation Programme. The under spending in this Programme was due to the
payment to the Property Management Trading Entity not being made. This was due
to the lack of submission of invoices by the Entity from its client
departments.
Furthermore,
the Department spent R518 million (58.6 per cent) in the National Public Works
programme. The under-spending in this programme was due to an additional
allocation of R91 million made during the adjustment period which was not spent
at the time. The Department had experienced some delays in transferring funds
to other receiving public bodies for Expanded Public Works Programmes. All
incentive Grants to Municipalities and Provinces are determined through the
performance threshold of the public body. In the third quarter of the financial
year, all the Municipalities and Provinces that had not met their performance
threshold and therefore had not received their grants. The main purpose of the Grant is to provide an incentive for provinces
and municipalities to increase labour intensive employment through programmes
that maximise job creation and skills development in line with the Expended
Public Works Programme (EPWP) guidelines.
The
Department recently held its first EPWP Summit, 13-15 October 2010. The
During
the State of the Nations address the President pronounced five priorities for
the next five years one of which is job creation.[23]
The Department of Public Works (DPW) is
instrumental in encouraging both municipalities and provinces to create jobs
through this Grant, thus ensuring the achievement of this priority. The slow
spending in this Grant was a serious concern to the Standing Committee on
Appropriations. The Committee noted in its third quarter expenditure report
that the Department together with the Department of Cooperative Governance and
Traditional Affairs, and National Treasury should draw up a clear plan
outlining interventions to assist struggling municipalities and provinces in
order to meet their performance threshold. This intervention was necessitated
by the non-transfer of Grant funds, which was regarded as hampering the job
creation efforts of government.
4.4
Spending Trends at the End of the Fourth Quarter of
the 2009/10
Financial Year[24]
The Department had spent R5.7 billion at the end of
the fourth quarter which was an under-spending of R361.9 million.
Under-expenditure of R220.2 million (5 per cent) was reported on the Provision
of Land and Accommodation Programme due to delays in registration and payment
processes for properties that were being acquired or refurbished by the
Department. Delays in spending were related to the acquisition of prestige
accommodation as the suitability and availability of buildings remained a
challenge. The processes of negotiating prices further contributed to the
delayed spending.
The negotiations for the acquisition of a property
required for the construction of the Border Post precinct delayed the execution
of the Land Ports of Entry project. Furthermore, the One Stop Boarder Post
project initially planned for Lebombo was restructured into phases due to
financial and legal implications associated with operations and construction
required on foreign territory. Spending on the Re Kgabisa Tshwane programme was
delayed by late approval for additional work for the Government Garage project
and delays in the appointment of consultants. Other infrastructure projects
including Dolomite and Accessibility were also delayed by procurement
processes. The Department has indicated its intention to request a rollover in
this regard.
The Department employed 52 contract workers to assist
it with its Asset Register. These contract workers were employed to assist the
Department in the completion of administrative matters pertaining to the Asset
Register (including verification of deeds and stand numbers), for example,
issues that were highlighted by the Department’s Audit report.
Another area of slow spending in the departmental
budget was the EPWP Incentive Grant due to non-disbursement of grant funds to
provinces and municipalities. The Department has under-spent by R101.3 million
(50.19 percent) on EPWP Incentive Grant to municipalities as well as R35.2
million (23.25 per cent) on EPWP Incentive Grant to provinces. The following
were among the challenges faced by the Department in the implementation of this
Grant:
·
Lack of
communication between the Department of Public Works and provinces.
·
Lack of clear
understanding of the purpose of this Grant by provinces
·
Misalignment of
financial years between provinces and municipalities.
·
Uncertainty about
refunding as the Grant compensates for past performance.
·
Capturing of data
from provinces and municipalities.
The Department reported that it was developing a
number of initiatives to overcome the challenges experienced in the
implementation of this Grant. These included the appointment of 90 data
capturers to improve the credibility of the database, and technical support to
municipalities for improved data capturing and reporting. In addition,
provincial and municipal officials were trained on the EPWP Incentive Grant to
ensure a better understanding of the Grant.
During the consideration of the fourth quarter report,
the Standing Committee on Appropriations noted that, as in previous hearings,
concerns were raised by various departments about the lack of capacity within
the DPW to deliver on capital projects timeously. The design of the EPWP Incentive Grant and
the fact that departments had to spend prior to accessing the Grant was also a
matter of concern.
Table 1
below reflects under-spending by the Department of Public Works on conditional
grants.
Table 1: Under-spending
on conditional grants
|
Department |
Grant
Name |
Adjusted
Budget |
Actual
Expend. |
Under-spending |
|
|
R'000 |
R'000 |
R'000 |
|
|
Public
Works |
EPWP
Incentive Grant to Municipalities |
201
748 |
100
487 |
101
261 |
|
|
EPWP
Incentive Grant to Provinces |
151
419 |
116 219
|
35 200
|
The Department further requested a rollover of unspent
funds amounting to R220.2 million for the acquisition and refurbishment of
properties.
5. Analysis of the Annual
Report and Financial Statements of the Department
The
Department of Public Works accounts on the key projects and programmes it is
responsible for, which include the management of Government’s immovable assets,
the enhancement of the Asset Register, and responsibility for leading the
implementation of Expanded Public Works Programme (EPWP) amongst others. In
addition, the human capital capacity and challenges as well as the Department’s
overall governance and financial position for the year under review are
reported. The brief will take note of select issues highlighted in the Annual
Report.
5.1
The legislative mandate of the Department
The
Department’s mandate is derived from the Constitution of the Republic of South
Africa (No. 108 of 1996), and other relevant legislation. The stated mandate of
the Department is to:
5.2 Performance of the Department
The
overall aim of the Department is to provide and manage accommodation, housing,
land and infrastructure needs of national departments; lead and direct the
implementation of the national Expanded Public Works Programme; and promote
growth, job creation and transformation of the Construction and Property
sectors. The Department accomplishes this under its 4 main programmes (of
which, each also consists of sub-programmes), namely:
The
above programmes receive a budget with which to accomplish their set
objectives. For the 2009/10 financial year a total of R6.05 billion was
appropriated. With the following amounts being appropriated to the 4 main
programmes:
It is
noted from the above that Programme 2 received the bulk of the Department’s
budget, followed by Programme 3. Following below are the reports of the 4
programmes as outlined in the Annual Report.
5.3 Technical Aspects of the Report
It is
unclear from the manner in which the Annual Report is presented in the tables
if these targets have been met or not. The manner in which the information is
presented in the Strategic Plan and the Annual Report do not follow each other.
There is no clear flow in the presented information and one has to search as
the Strategic Plan presents its information in terms of the strategic
objectives, while the Annual Report is presented in terms of the achievements
under the 4 programmes.
It is
reported on page 66 that no donor funds were utilised during the year under
review. However, on page 214 (Table 14.3) indicates that Historically
Disadvantaged Individuals (HDI’s) were appointed utilising donor funds.
6. Consideration of Reports of
Committee on Public Accounts for the 2008/09
Financial Year[27]
The Report of the Committee on Public Accounts for 2008/09 is the most
current report on the evaluation of the performance of the Department. The
Report took note of some of the financial matters and governance issues that
were of concern to the Auditor-General in its report, and provided
recommendations to improve.
6.1 Movable tangible capital assets and
minor assets
The
Auditor-General noted various instances where the existence, completeness,
rights and obligations as well as accuracy of assets in the asset register
could not be verified.
The
following were reported:
a)
“Moveable tangible assets could not be supported
by a complete asset register and minor assets could not be confirmed due to the
incomplete asset register;
b)
Not all immovable assets were accounted for in
the asset register; title deeds and stand numbers for some of the assets were
not indicated on the asset register;
c)
The Departments of Public Works,
Rural Development, and Provincial Departments as custodians were tasked with
leading a government-wide initiative to complete the vesting of ownership of
state owned land; and
d)
The adjustment of intangible assets consisted of
software purchased during the 2005/06 financial year to an amount of R40,3 million. At the time of
reporting the software had not been utilised”.
The Standing Committee on
Public Accounts recommended that the Accounting Officer ensures that:
a) Management
understands and exercises oversight responsibility in relation to
financial reporting and internal
control;
b) Management
undertakes a needs’ assessment before any assets are purchased; and
c) Progress
with regard to the government-wide initiative in respect of the vesting of
ownership of state owned land is continually monitored and reported on
annually.
6.2 Non-compliance with applicable legislation
The Auditor-General reported the
following:
“The Department did not comply with
applicable legislation and regulations, inter alia:
a) PFMA - the management and
safeguarding of assets;
b) Treasury Regulations -
persons in charge at pay points did not verify on the date of payment that all
persons listed on the payroll report were entitled to payment;
c) Treasury Regulations -
immovable state property was not always
let at market-related tarriffs;
d) Treasury Regulations -
evidence was not provided that transfers and subsidies to entities were applied
for the intended purposes;
e) Public service regulations
- cases were noted where senior management positions were advertised and filled
before the job evaluation was approved; and
f)
Division of Revenue Act - the Department did not evaluate the performance of programmes
funded by conditional grants and report thereon to Treasury within four months
after the end of the financial year as prescribed by the Division of Revenue
Act (No. 12 of 2009)”.
The Committee recommends that the
Accounting Officer ensures that:
a)
Ongoing monitoring and supervision are undertaken
and that controls are present and functioning;
b)
Officials are held accountable and that
disciplinary steps are taken against those who contravene prescripts; and
c)
Management implements a
performance management system in terms of which staff performance is evaluated
against key performance indicators to
enable management to take appropriate steps based on agreed deliverables.
6.3 Investigations
The Auditor- General
reported on the following:
a) “The process followed with
the procuring of the SAS Business Intelligence Solution;
b) Allegations of irregular
appointments and management practices;
c) The process followed with
the appointment of service providers for the asset verification and condition
assesment project; and
d) Allegations of
unauthorised changes in service providers’ bank details”.
The Committee recommends
that the Accounting Officer ensures that:
a) The Department finalises all
pending investigations by ensuring that the necessary resources are made
available;
b) Management understands and exercises
oversight in respect of financial
reporting and internal controls; and
c)
Investigation reports are submitted to SCOPA when finalised.
6.4. Staff Establishment
The Auditor-General
reported that “The marginal decrease in the vacancy rate (from 22 percent to 16
percent) is insufficient and impedes service delivery”.
The
Committee recommends that the Accounting Officer ensures that vacancies are
filled urgently, so as to strengthen internal controls and improve service
delivery.
6.5 Governance Issues
The
Auditor-General reported that “the Audit Committee saw the resignation of some
members during the year, and new members were appointed on 31 May 2009”.
The
Committee recommends that the Accounting Officer ensures that the Audit
Committee becomes effective and oversees controls in order to eliminate
non-compliance.
6.6 Property Management Trading Entity
The
Committee heard evidence on and considered the contents of the Annual Report
and Report of the Auditor-General on the 2008/09 financial statements of the
Property Management Trading Entity. The Committee noted an adverse audit
opinion, highlighted areas which required the urgent attention of the
Accounting Officer and reports as follows:
6.6.1 Inter-departmental receivables
The Auditor-General
reported that “inter-departmental receivables owed by a number of national
departments and national public entities amounted to R419 million (31 March
2008: R48 million). This has been outstanding for more than two years.
Management did not implement appropriate steps to collect money owed and
further did not assess the recoverability of the long-outstanding debts. The
receivables amount disclosed is thus overstated by an unknown amount and the
provision is understated due to the assessment not being performed”.
The Committee recommends
that the Accounting Officer must ensure that:
a) Disciplinary
action is taken against staff who fail to perform their duties as required;
b) Reasonable
steps are taken to recover debts before they are written off; and
c) Management
understands and exercises oversight in respect of finances and related
internal controls.
6.7 Basis for qualified opinion
6.7.1 Moveable tangible capital assets and
minor assets
According
to the PFMA, the Accounting Officer must take full responsibility and ensure
that proper control systems exist and a proper record is kept for the
accounting of assets. The existence, completeness and accuracy of moveable
assets amounting to R221,9 million at year-end as disclosed in note 30 to the
financial statements and minor assets amounting to R26,8million as disclosed in
note 30.4 to the financial statements as a result of the following matters:-
-
The balances as disclosed in note 30 to the
Annual Financial Statements could not be supported by a complete asset
register.
-
The existence of minor assets as disclosed
in note 4.1, bought during the year 2008/09 financial year amounting to R13,4
million could not be confirmed due to the asset register being incomplete.
6.7.2 Immovable tangible assets
With
reference to note 32 to the financial statements, the completeness, rights and
obligation and valuations of the immovable tangible assets amounting to R5,3
billion due to the following shortcomings:-
-
Not all assets owned by the Department of
Public Works DPW were accounted for in the asset register that supports the
financial statements;
-
title deeds and stand numbers for some of
the assets were not indicated on the asset register; and
-
The DPW in conjunction with the Department
of Rural Development and Land Reform and all provincial departments’ custodians
were tasked with completing the vesting of ownership of state-owned land. The
initiative is still in progress.
6.7.3 Intangible Assets
Software
to the value of R40, 3 million purchased and paid for in advance during the
2005/6 financial year was disclosed in note 31 of the financial statements, but
the software was not fully utilised by the DPW at the time of reporting.
6.7.4
Non- compliance with legislation
The
accounting officer did not comply with the following legislative requirements:-
-
Section 38 (1)(d) of the PFMA, which
requires the management, safeguarding and maintenance of the assets;
-
Section 38(1)(i) of the PFMA, which
requires management to take effective and appropriate steps to collect all
money due to the DPW; and
-
Section 38(1)(g) of the PFMA, which
requires a report in writing to the relevant treasury of particulars of any
unauthorised, fruitless and wasteful expenditure
6.7.5 Treasury Regulations
-
The person in charge at the respective pay
point did not certify on the date of payment that all persons listed on the
payroll report are entitled to payment as required by treasury regulation
8.3.4;
-
Payments of invoices were not always made
within 30 days of receipt as required; and
-
The letting of immovable state property is
not always market related.
6.7.6 Public Service Regulation
-
Three cases were noted involving senior
management positions where relevant positions were advertised and filled before
the job evaluation was approved, which is contrary to the requirements of PSR
2001, Part III F.
-
A number of employees did not declare their
interests to the Executive Authority as required by PSR 2001, Chapter 3.
The
Department in its presentation to the Committee on its Annual Report reported
that the above concern has not been resolved to date. The Department assured
the Committee that it was putting systems in place to address the issue.
6.7.7
Division of Revenue Act
-
The DPW did not evaluate the performance of
programmes that are fully or partially funded by schedule 4 conditional grants,
or submit such evaluation to the National Treasury within 4 months of the end
of financial year.
6.7.8 Internal control deficiency
Section
38 (1) (a) (i) of the PFMA states that the accounting officer must ensure that
the department has and maintains effective, efficient and transparent systems
of financial and risk management and internal control. The following gave rise
to the deficiency in the system of internal control:-
-
Moveable tangible capital assets and minor
assets;
-
Immovable tangible assets; and
-
Intangible assets.
6.8 SCOPA Recommendations in the 2008/09
Annual Report
The Committee is concerned with various government
Departments’ failure to honour their debts to the Department of Public Works
for services rendered on their behalf and has ordered the Property Management
Trading Entity to forward the list of such defaulters. The Committee has
already written to some of the defaulting Departments and entities seeking
clarity on their non-payments.
The Committee further recommended that the Executive Authority submits a
progress report on the implementation of all the above recommendations to the
National Assembly within 60 days of the adoption of this report by the House.
According
to the Auditor General’s report on National Audit Outcomes, the Department of
Public Works obtained a qualified audit in the 2008/9 financial year. In the
previous financial year (2007/8) the Department had financially unqualified
audits with other matters. The main qualification area is capital assets. The few emphasis areas that were cited by the
Auditor- General are as follows:-
7. Consideration of other
Sources of Information
7.1 Consideration of the
Auditor General’s Report:[28]
On the Auditor General’s report to Parliament on the Financial
Statements and Performance Information on Vote No. 5: Department of Public
Works for the year ended 31 March 2010 the following are highlighted as the
basis for a qualified audit opinion:
-
Immovable tangible capital assets:
The Department of Public Works did not have a complete asset register of all
immovable properties belonging to the national government which is under the
custodianship of the Department of Public Works. The Auditor General could not
perform alternative procedures to confirm the existence, valuation,
completeness and rights and obligations of immovable tangible capital assets
disclosed in the financial statements.
-
The Department did not follow the
proper procurement process for all procurement which resulted in irregular
expenditure.
-
The Department incurred fruitless
and wasteful expenditure to the amount of R 389 000
Some of the findings of the Auditor General were the:
-
Inadequate content of the department
strategic plan. The strategic plan of the department did not include the
indicators (measures) and targets for all the department’s programmes as
required by Treasury Regulation 5.2.3 (d).
-
Non-reporting of adequate
explanations for major variances between the planned and actual reported
targets for Programme 2: Provision of Land and Accommodation and Programme 3: National
Public Works Programme.
The report of the Auditor General has also highlighted investigations
that are in progress in the Department of Public Works. Investigations relating
to matters of fronting, the misuse of state vehicles, conducting business while
employed by the public service, the unauthorised sale of government houses,
allegations of overpayments, delay of payments and irregular awarding of
tenders.
The report of the Auditor General to Parliament on the Financial
Statements of the Property Management Trading Entity of the Department of
Public Works for the year ended 31 March 2010 also showed a qualified audit
opinion.
7.2 Information of Vote No 5:[29]
The
Department of Public Works received an allocation of R 5.29 billion for the
2009/10 MTEF from which the following allocations have been done per entity:
Agrément South Africa: R 8.55 million, Council for the Built Environment: R 24.15
million and Construction Industry Development Board:
R 59.26 million. The department reported that it expected a total
of R 7.37 billion
on conditional grants over the MTEF and assured the Committee that systems are
in place to ensure effective monitoring and management of the conditional
grants as captured in the Division of Revenue Act (DORA).
7.3 Report on oversight visits to
provinces
For the year under review the Committee undertook two provincial
oversight visits, to the Eastern Cape and Western Cape. The Committee noted the
following from these visits:
7.3.1 Eastern Cape
The
oversight visit of the Portfolio Committee on Public Works to the Eastern Cape
highlighted several challenges in the province. These included concerns that
the Department as well as the Alfred Nzo District Municipality appear to
struggle to spend their budgets as required. The Department at the beginning of
February 2010 was left with an amount of approximately R60.6 million of its
incentive budget of R83 million. The bulk of which is likely to be rolled-over.
The
Committee was concerned that there appeared to be no proper oversight over some
of the EPWP projects, which resulted in poor quality work, delays in meeting
deadlines and increases in project costs.
The
second Phase of the EPWP as in the first phase faces challenges of uneven
implementation of projects (for example projects undertaken by contractors). It
was also noted that consulting engineers were not designing appropriate
employment opportunities. To assist in implementing the EPWP properly,
officials required training in labour-intensive methods of construction.
Reporting
on EPWP projects, especially as it related to job creation and skills
development was not adequately monitored. Further, issues of adequate payment,
safety requirements and sustained work opportunities did not often form part of
peoples’ experiences.
In its findings, the Portfolio Committee on Public Works noted with
great concern the following:
7.3.2 Western Cape
The Western Cape Department of Transport and Public
Works made note of some of the challenges it faced to fulfil its mandate as
well as the EPWP targets. Mention was made of ineffective monitoring of
projects, which led to wasteful expenditure, for example
The Provincial Department was concerned with the manner in which the
EPWP has been implemented in the past. It also made reference to issues of
excessive use of consultants, the deterioration of the province’s road
infrastructure as well as its immovable assets.
It was reported that 65 per cent of the province’s buildings are in a
fair condition in terms of generally accepted construction standards. Further
it was noted that in 2009 almost 20 per cent of Government-owned buildings in
the province were in a poor condition. It was also noted that the maintenance
backlog of the immovable asset portfolio amounted to R2.8 billion as of
2009. It was suggested that the province
should consider new approaches to assets management to assist with its
maintenance backlog, with the aim of creating and maximising new cash flows.[30]
7.4 Assessment on progress
towards the attainment of the Millennium
Development Goals (MDG’s):
In 2000
at the United Nations Summit, 189 countries signed a commitment to the
attainment of the Millennium Development Goals (MDGs). Following is a summary of the third country
report on the Millennium Development Goals for South Africa for 2010. The
report is a comprehensive outline of the progress made to date by the country
in the attainment of the 8 MDGs which are:
The
concern of the effects of poverty and unemployment on a country’s population,
of which inequality, exclusion from accessing decent work, adequate education,
clean water and sanitation as well as housing has been highlighted. Poverty is
also viewed as an impediment to growth in a developmental economy. South Africa
is regarded as a middle income country, (due to its sophisticated
infrastructure, a well-developed private sector and a stable macro-economy),
but it also consists of inequalities (specifically access to quality education
and health care).[31]
In addition the high prevalence rates of HIV and AIDS are believed to have
hampered the country’s ability to achieve some of the MDGs. In addition the
2008 global economic crisis, which has plunged South Africa into its first
recession since 1992, will have a negative impact on the required economic
growth which is estimated at 7 per cent, (but had peaked in the past at 5 per
cent), if real progress is to be made in achieving employment and
redistribution targets.[32]
7.4.1 South Africa’s Progress to Date
It is noted that South
Africa has experienced a decline in poverty largely as a result of a
significant income transfer programme, massive reallocation of pro-poor
expenditure, for example on housing, water, electricity and sanitation. As a
result of these strategies the country has achieved or is close to achieving the
dollar-based purchasing power parity adjusted targets.
South
Africa as one of the signatories to the MDGs reports the following progress:
One of
the vehicles adopted in ensuring that unemployment and poverty are halved by
2014 is the Expanded Public Works Programme (EPWP). The programme is in its
second phase having achieved its goal in Phase I of creating a 1 million work
opportunities (for a targeted 40 per cent women, 30 per cent youth and 2 per
cent people with disabilities). It should be noted that the 2 per cent target
for people with disabilities was not reached. Phase II has been increased to
achieve 4.5 million work opportunities for 55 per cent women, 40 per cent youth
and 2 per cent people with disabilities. To date it is reported that Phase II
of the EPWP has created a total of 482 722 work opportunities.
Table 2: December 2009 EPWP II work
opportunities[33]
|
Sector |
Target |
Job Opportunities |
|
Infrastructure |
300
000 |
217
527 |
|
Environment
and Culture |
150
000 |
66 040 |
|
Social |
80 000 |
165
466 |
|
Non-State |
20 000 |
33 709 |
|
Total |
550 000 |
482 742 |
By
December 2009 the overall EPWP target of 500 000 had not been reached and a
total of 482 742 work opportunities had been created in the 4 sectors, with the
Social and Non-State sectors exceeding their set targets by 85 466 and 13 709
work opportunities respectively. Of the total work opportunities created
between April and December 2009, 204 376 (42 per cent) were women, 177 896 (37
per cent) youth (between 18-35 years) and 2.063 (0.427 per cent) were people
with disabilities.[34]
The Department reports that it managed to reach 88 per cent of the overall
total of 550 000 by February 2010. However, it still has to manage to add an
additional 67 258 by the end of the financial year to meet its target for
2009/10. [35] According
to the Department it exceeded the set target and created 625 859 work
opportunities for the period under review.
According to the country report the “proportion of people experiencing
absolute poverty has declined. This is based on two essential measures, namely
the proportion of the population who live below the thresholds of $1 up to
$2.50 per day, and the poverty gap ratio which has also reduced. Applying this
measure, South Africa has effectively more than halved the population living
below the poverty line of a $1 per day, thus achieving MDG1 of halving poverty.
The decline is from 11.3 per cent in 2000 to 5 per cent in 2006.”[36]
The
report however notes that “whilst poverty has been halved for both males and
females, the proportion of females living below $1 (PPP)[37]
per day remains high compared to that of males: 12.0 per cent (females) and
10.0 per cent (males) in 2000; and 5.3 per cent (females) and 4.8 per cent
(males) in 2006. The same pattern is found when other poverty lines such as
$1.25, $2, and $2.5 per day are used.”[38]
It is therefore noted that South Africa is unlikely to meet MDG 1 at $2.50 per
day even though the proportion of those below this threshold indicates a
declining trend across time, namely from 42.2 per cent in 2000 to 34.8 per cent
in 2006.
Poverty
and unemployment remain structurally inter-linked in the South African context.
The employment to population ratio in South Africa since 2001 is low, averaging
51 per cent for males and approximately 37 per cent for females. The national
average is reported at approximately 43 per cent. This ratio suggests a high
level of unemployment in South Africa which although declined from a high of 29
per cent in 2000 to a low of 24 per cent in 2009, still remains high by any
standard. The result of this phenomenon is a potential increase of poverty
especially amongst females.[39]
It is noted that the Government concentrated on a
number of poverty alleviation strategies, which included the provision of basic
services (such as subsidised water, sanitation, electricity). In addition a broad-based employment-creation and skills
development strategy known as the Expanded Public Works Programme (EPWP) which
is focused on Public Works as the lead department. There are also other
public-works programmes aimed at promoting environmental conservation and job
creation, for example, namely the Working for Water Programme and the Land Care
Programme.
While great strides have
been made in the attainment of the MDGs, further efforts will need to be
explored especially in strengthening employment and income generation
initiatives. It is believed that the MDG 1 is attainable, but at the same time
income disparities need to be monitored to ensure that they do not widen
further and create a barrier which might prove insurmountable.
It is also reported that a
contributing factor to the reduction in poverty in the country is due to the
significant expansion of the social wage. Cash transfers with social wage
packages including clinic-based free primary health care (PHC) for all,
compulsory education for all those aged seven to thirteen years, and to those
that qualify for subsidised housing, electricity, water, sanitation, refuse
removal, transportation, etc.[40]
7.5 The Report of the Financial and
Fiscal Commission
The Financial and Fiscal Commission (FFC) is a
statutory institution dealing with South African intergovernmental fiscal
relations. The FFC was established in 1997 through Section 220 of the
Constitution of the Republic of South Africa (Act 108 of 1996), and of the
Financial and Fiscal Commission Act (Act 99 of 1997). One of its roles has been the preparation of annual recommendations in
terms of intergovernmental revenue division for National Treasury and
Parliament’s consideration.[41]
In its 2009/10 report the FFC focused on the
monitoring of performance of service delivery in terms of the provincial
Departments of Education, Health, Public Works and Transport, and Housing. The FFC identified specific data needs for
the four provincial departments reviewed in its submission. The table below only lists the Departments of
Public Works and Transport, its relevant services or items and the question,
relevant legislation or policies that need to be adhered to, the data required
and reasons for this requirement, as well as their recommendations.
Table 3: FFC recommendations on
performance and service delivery
|
Department |
Service/ item |
Legislation/ policy |
Data required |
Reason |
Recommendation(s) |
|
Public Works and Transport |
Expanded Public Works Programme (EPWP) |
Guidelines for the EPWP |
Job creation as a conception of the programme, performance per target
group |
To measure progress towards achievements of the programme and assess
the impact made on the level of unemployment |
Job creation the target groups such as women, youth and people with
disabilities, should be included in the reporting requirements for all
infrastructure conditional grants to provinces and municipalities |
8. Committee’s Observations
The
Committee has noted with concern the delays in the reintroduction of the
Expropriation and the Built Environment Professions Bills which were withdrawn
from Parliament in the 2008/09 financial year due to the need for further
consultation. These Bills were to have been reintroduced to Parliament during
the 2009/10 financial year. The Department has subsequently indicated that they
will only be reintroduced in the 2010/11 financial year.
The
Committee has observed that the National Youth Service experienced a number of
challenges in its implementation, including the set targets for the number of
youth expected to participate in the programme was not met. The Committee
observed that the National Youth Service has deviated from its intended focus
of providing on the job training to unemployed youth with the aim of assisting
the Department in the maintenance of its immovable assets.
The
Committee further observed the non-alignment of the Strategic Plan to the
Annual Report of the Department. This observation was also made by the
Auditor-General in its audit findings.
The
Committee recommends that the challenges in the completion of a credible Asset
Register should be resolved by the Department, through the implementation of a dedicated special project, as previously
recommended by National Treasury, to ensure the completion of a viable Asset
Register.
The
Committee during its oversight visits observed the challenges in the
implementation of the Government Immovable Asset Management Act (No. 19 of
2007), especially as it does not extend to local government level.
9. Conclusion
The
Annual Report by the Department has highlighted a number of issues. The report
took note of the achievements in the Department, while at the same time
presenting a number of challenges. The report is sometimes inconsistent with
the targets set in the strategic plan, further some of the targets were
difficult to read as their intended outcomes were ambiguous.
The
report on the finances of the Department and the Property Management Trading
Entity indicated that both received qualified audit opinions.
The
challenges noted under the human resources section are of note and need to be
closely monitored. As in the past, the Department appears to have difficulty in
filling some of its critical positions in the Department. While it has made an
effort by employing foreign workers, (including the Cuban Technical
Professionals) for example, it still has a large backlog of skilled workers it
requires.
It is
not clear, but it is presumed that the lack of skilled personnel in these
critical areas might hamper the Department’s service delivery efforts. It has
already been noted that the Department is struggling with the completion of a
credible Asset Register, for example.
The
implementation of the Government Immovable Asset Management Act (No. 19 of
2007), which only extends to national and provincial levels of government has proven
to be a challenge. The exclusion of local government from the requirements of
the Act is believed to be a contributing factor as this is where most of governments’
assets reside.
10. Recommendations
·
The Minister and the Director
General in the Department of Public Works, and National Treasury needs to ensure
the recapitalisation of the Independent Development Trust (IDT). The funding of
the entity should be prioritised and the Department must report back to the
Committee by the end November 2010.
Report to be considered
References:
Department
of Public Works (2009) Strategic Plan of the Department of Public Works for
2009/10 to 2011/12.
Department
of Public Works (2009a) Expanded Public Works Report for 1 April to 31 December
2009, 3rd Quarter 2009.
Department
of Public Works Annual Report (2010a) Annual Report of the Department of Public
Works for 2009/10.
Department
of Public Works (2010b) Expanded Public Works Report for 1 April to 31 March
financial year 2009/10, 4th Quarter 2009/10 (Annexures A-E).
Republic
of South Africa (2010) Millennium Development Goals Country Report 2010.
[1] Money Bills
Amendment Procedure and Related Matters Act, 2009, p. 1.
[2] Money Bills
Amendment Procedures and Related Matters Act 2009, p.6.
[3] Department of
Public Works (2009).
[4] Department of
Public Works (2009).
[5] Department of
Public Works (2009).
[6] Public
Finance Management Act (No. 1 of 1999).
[7] Department of
Public Works (2009), p. 34.
[8] Department of Public
Works (2010), p. 76.
[9] Department of
Public Works (2009), p. 33.
[10] The Regional
Offices consist of
[11] Department of Public
Works (2010).
[12] Department of Public
Works (2010), p. 33.
[13] Department of Public
Works (2009), p. 44.
[14] Department of Public
Works (2009), p. 61.
[15] Department of Public
Works (2010), p. 34.
[16] Department of Public
Works (2009), p. 84.
[17] Department of Public
Works (2009), p. 86.
[18] Department of Public
Works (2009), p. 89. It is argued that the full time equivalent jobs equal 4.5
million (short and ongoing) work opportunities. Further that the average
duration of employment is assumed to translate into 100 days.
[19] According to the above
data, it would mean that it equals 500 000 work opportunities in 2009 to 1.5
million in 2014.
[20] Zuma, J. G. (2009) p. 6.
[21] National Treasury (2009).
[22] National Treasury (2010).
[23] Zuma, J.G.
(2010).
[24] Standing
Committee on Appropriations (2010).
[25] Department of
Public Works (2010), p. 12.
[26] Department of
Public Works (2010), p. 102.
[27] Tenth Report of the
Standing Committee on Public Accounts (2010)
[28] Department of
Public Works Annual Report 2209/10
[29] Portfolio Committee on
Public Works Strategic Plan (2009)
[30] MEC
Department of Transport and Public Works (2009).
[31] MDG Report
2010, p. 3.
[32] MDG Report
2010, p. 3.
[33] Department of Public
Works (2009).
[34] Department of
Public Works (2009a), p. 2.
[35] Department of
Public Works (2010b)
[36] MDG Report
2010, p. 28.
[37] PPP refers to
purchasing power parity.
[38] MDG Report 2010, p. 28.
[39] MDG Report
2010, p. 30.
[40] MDG Report
2010, p. 37.
[41] FFC (2008b).