Budgetary Review
and Recommendation Report of the Portfolio Committee on Public Works on the
Department of Public Works for the 2010/11 financial year, dated 20 October
2011.
The Portfolio Committee on Public Works, having considered the relevant
reports and the Annual Report of the Department of Public Worksfor 2010/11,
reports as follows:
1.
Introduction
The Budgetary Review and Recommendation Report of the Portfolio
Committee on Public Works arises from the fulfillment of the requirements of
the 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 to
provide for related matters.
Following from the above, the report will outline progress made by the
Department of Public Works as reported in the different reports, including the
Strategic Plan, section 32 reports and the 2010/11 Annual Report of the
department as well as the Auditor-General’s opinion in the Department’s 2010/11
Annual Report.
1.1 The mandate and role of the Committee
The Portfolio Committee on Public Works is guided by
the Rules of Parliament and the
Constitution to play an oversight role over the Ministry, the Department of
Public Works and its entities. In doing so, 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;
·
scrutinises 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;
·
learns to understand other
international best practices relevant to its field of jurisdiction to serve all
South Africans to its best.
1.2
The mandate
of 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 the custodian of national
government’s 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).
The
Department is also responsible for four entities that report to the Minister of
Public Works as the executive authority. These entities comprise:
·
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
2.1.1 The Department has identified the following six
strategic goals:
a)
Providing strategic leadership for effective and efficient
immovable asset management and in regard to the delivery of infrastructure
programmes.
b)
Promoting an enabling environment for the creation of both short
and sustainable work opportunities to contribute to the national goals of job
creation and poverty alleviation.
c)
Contributing to the building of a developmental state and a
comprehensive rural development framework through State assets.
d)
Ensuring transformation and regulation of the construction
and property industries to ensure economic growth and development.
e)
Ensuring effective corporate governance and sound resource
management.
f)
Ensuring improved service delivery in all departmental
programmes to meet clients’ expectations and leverage stakeholder relations.
2.2 Measurable Objectives
Five critical programmes determine the work of the Department. Within
each of the programmes, the Department identified a number of measurable
objectives which are shown below per departmental programme:
Programme 1: Administration
2.2.1 Provide strategic leadership and support services, including the
accommodation and overall management of the Department.
This
programme reports on a number of sub-programmes related to support services,
accommodation and management of the Department. This section will highlight the
performance of the Department in meeting its targets, as well as its
challenges.
2.2.2 Finance and Supply Chain Management
The
following targets were reached or exceeded:
a)
Due to the improved revenue and debtor management the
Property Management Trading Entity (PMTE) achieved (62 per cent of planned 50
per cent reduction in the debtors book) by R1.3 billion of an estimated R2
billion.
b)
Collected (97 per cent of a targeted 80 per cent in revenue)
on invoices issued during the period under review.
c)
Achieved (set target of 90 per cent compliant by 31 March
2011) for the improve management of moveable assets by a credible Asset
Register.
d)
Improved Supply Chain Management with (82.7 per cent of a
targeted 80 per cent compliance) with Service Level Agreements (SLA).
The
following targets were not met:
a)
Delays in the acquisition of financial systems meant 7 of 16
action plan outputs were achieved (44 per cent of targeted 70 per cent). Action
Plans implemented to ensure Generally Accepted Accounting Principles (GAAP)
compliance by the PMTE.
b)
Improved internal controls with 7 policies and procedures
(80 per cent of targeted 90 per cent) developed and/or reviewed for
implementation.
c)
Accredited 16.2 per cent of a targeted 80 per cent of the
Department’s suppliers.
2.2.3 Corporate Services
The
following targets were reached or exceeded:
a)
Implemented the EPWP Web-Based System.
b)
Completed Virtual Private Network and is operational.
The
following targets were not met:
a)
A total of 78 out of an annual target of 180 employees were
vetted due to delays by the National Intelligence Agency (NIA) in terms of its
internal processes in concluding the vetting process.
b)
A total of 413 out of an annual target of 1 000 companies
were vetted, cleared and incorporated into the database. The process is
dependent on a request from clients for clearance of service providers.
2.2.4 Internal Audit and Investigation Services
The
following targets were reached or exceeded:
a)
Improved compliance with all prescripts (92 per cent of
targeted 80 per cent) audit reports.
b)
Risk assessment and meetings with functional Audit Committee
of which 76 per cent of Audit Plan was implemented.
2.2.5 Strategic Management Unit
The
following targets were reached or exceeded:
a) Enterprise
Risk Strategy was approved and presented to the Audit Risk Management
Committee.
b) All
Risk Registers (at head office and in the regions) had been prepared and
reviewed to only reflect critical risk issues for 2011/12 and appointments had
been scheduled with all business units for risk assessment revision.
The
following targets were not met:
a) Completed
monitoring of high Risk Registers by reviewing and updating head office branches
(Finance and Supply Chain Management; Policy and EPWP) and visited
2.2.6 Intergovernmental Relations and Parliamentary Services
The
following targets were reached or exceeded:
a)
Co-ordinated 32 of a targeted 8 intergovernmental relations
and other relate meetings.
b)
Effective management and facilitation of meetings between the
Minister of Public Works and the entities, including the conclusion of the appointment
of board members of Agrèment South
2.2.7 Monitoring and Evaluation
The
following targets were met:
a)
Finalised and approved the Monitoring and Evaluation
Policy/Framework. In process of internal consultations.
b)
Compliance with reporting requirements (80 per cent of
targeted 80 per cent) of Monitoring and Evaluation policy with the conclusion
of consultative workshops with branches and business units.
c)
Reported that performance reports were being submitted
quarterly to the Department which, in turn, submitted them to National
Treasury, Auditor-General and presents to Parliament.
Programme 2: Immovable Asset
Management
2.2.8 Provide and manage Government’s immovable property portfolio in
support of Government’s social, economic, functional and political objectives.
The
successes and challenges under the different sup-programmes are listed below,
highlighting targets that were achieved or exceeded and those that were not
met. The Department reported on the Asset Register as follows:
Table 1: Immovable Asset Register as
at 1 April 2010 to 31 March 2011
|
Asset |
Opening Balance 1 April 2010 |
Disposal/(Archived)/Recon |
Closing Balance 31 March 2011 |
|
Land
Parcels |
36
257 |
(362) |
35
895 |
|
Dwellings |
33
233 |
(177) |
33
056 |
|
Non-Dwellings |
42
014 |
(1 672) |
40
342 |
|
Total |
111 504 |
(2211) |
109 293 |
The
Asset Register consists of 35 895 land parcels and 73 398 buildings
and structures vested in the national Government and falling under the
custodianship of the Department of Public Works. The Asset Register also
includes Defence Endowment Properties.
The
following targets were reached or exceeded:
a)
Completed approval and implementation of National Vesting Plan.
b)
Completed approved Amnesty Call Strategy and Campaign.
c)
A 10 per cent of a targeted 2 per cent reduction in
kilolitre water consumption in state-owned buildings.
d)
A total of 121 of targeted 64 buildings were identified and
made accessible.
e)
A total of 1 031 of a targeted 1 000 hectares of land
parcels were released for human settlement purposes.
f)
Compiled a total of 86 per cent of a targeted 50 per cent
requests for new market valuations.
The
following targets were not met:
a)
Populated Asset Register fields with (82 per cent of
targeted 90 per cent) with essential information. Target not reached due to
improvements for essential information being concentrated on properties that
were confirmed as belonging to national Government.
b)
Project to include 10 per cent supplementary information in
Asset Register fields was placed on hold due to priority given to the minimum
requirements of the Auditor-General’s findings.
c)
A total of 35 per cent of a targeted 55 per cent of land
parcels wasvested and the Department was in the process of aligning its
statistics with those of the Department of Rural Development and Land Affairs.
d)
A total of 16 of 34 Service Level Agreements (
e)
Inadequate resources resulted in the developed (59 per cent
of targeted 70 per cent) property portfolio strategies.
f)
Developed (45 per cent of targeted 70 per cent) Client Asset
Management Plans due to inadequate resources.
g)
Approval and implementation of investment strategy to
increase revenue of State leased properties by 10 per cent has not been
completed.
h)
A total of 6 of the targeted 20 foreign properties were
disposed, which are subject to release of approval by the Department of
International Relations and Cooperation (DIRCO).
i)
Ministerial approval for disposal of 14 properties for
commercial purposes not completed with 25 properties still in approval process.
j)
A total of 34 of targeted 55 properties were disposed for
land reform purposes with an additional 21 in approval process.
k)
Completed (76 per cent of targeted 80 per cent) annual
project investment analysis due to inadequate resources.
l)
Negotiations and appraisals of 50 per cent annual municipal valuations
calendar not completed due to inadequate resources.
The
Department also highlighted the large maintenance backlog (which quantified the
costs of improving the physical work environment), based on a consultant’s
report dated June 2006. The Department estimated that for 2006 the backlog
stood at approximately R24.3 billion which increased to R35.6 billion allowing
for a 10 per cent escalation to date. The reported figures of the maintenance
backlog could not be verified as they were not supported by technical condition
assessments. In addition, not all the buildings were included in the assessment.
It should also be noted that the Department reported in its 2009 Annual Report
that by 2009 the maintenance backlog had risen to R16.6 billion from the 2007
estimate of R13.7 billion. If the backlog stood at 24.3 billion in 2006,
what is the reason for its reduction in 2007 and 2009?
Funding
had been requested from National Treasury to address the large maintenance
backlog, and the Department planned to prioritise condition assessments for
2011/12. The current practice is to undertake maintenance on a reactive basis
which resulted in over expenditure on planned and unplanned maintenance. In
addition, the Department planned to complete Condition Asset Management Plans
by March 2012.
For
the 2010/11 financial year, the Department spent a total of R2.01 billon on
planned maintenance (R1.71 billion) and rehabilitation (R303.7 million). The
Department indicated that maintenance was addressed through the following three
programmes; Planned Maintenance Implementation Programme, Capital Works
Implementation Programme and Day-to-Day maintenance). The programmes were not
linked and were therefore not integrated.
Programme 3: Expanded Public Works
Programme
2.2.9 Ensure the creation of work opportunities and the provision of
training for unskilled, marginalised and unemployed people in
The
department reported on progress made in terms of reaching the set target for
the creation of work opportunities and full-time equivalents (FTE), annual
designated groups, as well as disbursement of the wage incentive across all
sectors.
The
following targets were reached or exceeded:
a)
Reached 62 per cent women and 51 per cent youth of the
(designated targets of 55 and 40 per cent respectively.
The
following targets were not met:
a)
Created 607 612 work opportunities (set target of
600 000) exceeded by 7 612. However, it should be noted that the set
target for 2010/11 was 642 000 which means that the target was not reached
by 34 388 work opportunities.
b)
Created 203 690 FTE of a targeted 260 000, which
means 56 310 FTE were not created.
c)
0.45 per cent of the targeted 2 per cent of people with
disabilities participated in the EPWP.
d)
59 per cent of the targeted 65 per cent qualified for the wage
disbursement across all the sectors.
The
report by the Department on the EPWP raised concerns. The programme managed to
exceed the targets for the designated groups (women by 7 per cent and youth by
11 per cent). However, a number of targets were not reached, including the
percentage of people with disabilities, work opportunities, Full Time
Equivalents (FETs) and wage disbursement.
The
disbursement of the Incentive Grants to provinces and municipalities is of
concern as the Department reported a low uptake of these. Of the allocated R331 million
for the EPWP infrastructure incentive to provinces, (only 56 per cent) or
R182.4 million was disbursed. The EPWP infrastructure incentive to
municipalities had an even lower uptake with R279.6 million (or 44 per cent) of
the R622.9 million being disbursed for the year under review. The Department
indicated that the low uptake of these incentives at provincial and municipal
levels was due to underreporting and the low level of implementation of
projects utilising labour- intensive methods.
Programme 4: Property and
Construction Industry Policy Regulations
2.2.10 Promote the growth and transformation of the construction and
property industries, as well as uniformity and best practice in construction
and immovable asset management in the public sector.
The
department reported on progress made and challenges experienced in terms of
policies developed, plans of action implemented, as well as legislation tabled.
The
following targets were reached:
a)
Developed policies undergoing consultation: (Outdoor
Advertising; Letting for Commercial Purposes; Demolition).
b)
Completed and submitted submissions on the Department’s
review of the chapter dealing with Residences and other relevant sections of
the Ministerial Handbook.
The
following targets were not met:
a)
The approval framework and 50 per cent implementation of
Action Plan was not achieved. Currently under review with extensive
consultation with the Department of Cooperative Governance and Traditional
Affairs regarding the approach to extend the GIAMA to the local
government.
b)
The tabling of the Agrèment South Africa Bill before
Parliament not achieved due to longer than anticipated time taken in the
consultation with stakeholders. The business case for the establishment of
Agrèment South
c)
The tabling of the Expropriation Bill in Parliament not
achieved. The Department was in consultation with National Treasury on the
review Expropriation Act of 1975. It also undertook a regulatory impact assessment
to consider the possible impact of the socio-economic, good governance, costs
and risks impacts of the proposed legislative intervention.
d)
The review and development of the Department of Public Works
White Papers were put on hold due to resource constraints.
Programme 5: Auxiliary and
Associated Services
2.2.11 Provide various services, including compensation for losses on the
Government-assisted housing scheme, assistance to organisations for the
preservation of national memorials, managing grants for the
This
programme is mainly concerned with the transfer of payments:
a)
R15.06 million was transferred to the Commonwealth War
Graves, an annual contribution to mark and maintain the graves of members of
the forces of the Commonwealth who died in World Wars I and II.
3.
Analysis of
Section 32 Expenditure Reports
This report is based on the national budgets and expenditure report of
the fourth quarter for the 2010/11 financial year.
3.1 Summary
of Expenditure Outcome for the year
As at the end of the 2010/11 financial year, the
Department of Public Works (DPW) had spent R6.567 billion or 89.16 per cent of
its total adjusted appropriation amount of R7.365 billion, as reported in the Department’s
latest Appropriation Statement. Thus, savings amounting to R797.983 million or
10.84 per cent have been realised for the 2010/11 financial year. Below is a
graphical representation of the expenditure outcome for the 2010/11 financial
year:
Table 1: Deviations against approved budget for the
year ended 31 March 2011 (R’000):
Table 2: Deviations against approved budget per
economic classification
The main expenditure activity for the Department occurred
under programme 2, which also constituted 70.6 per cent of the total voted
appropriation for the 2010/11 financial year. However, while underspending was
recorded across most of the Department’s programmes, the largest underspending
for the financial year under review was recorded under programme 3, where a
total of R517.829 million or 64.9 per cent of the total savings for the year
was unspent at the end of the 4th quarter. This was mainly due to
the non-payment of Expanded Public Works Programme (EPWP) incentive allocations
to those public bodies who failed to meet the minimum quarterly performance
targets in order to receive payment. The
Department recorded 100 per cent expenditure against the voted appropriation
(after taking virements into account) for programme 1 while only 71.8 per cent
and 87 per cent of the voted appropriation for programmes 4 and 5 respectively was
spent.
3.2 Expenditure
Outcome for the 4th Quarter
For the quarter under review, the Department’s expenditure
amounted to R1.449 billion or 99.3 per cent of the projected expenditure
of R1.459 billion for this quarter. However, over the last 3 quarters, the Department’s
average spending against projected expenditure was 87.98 per cent, with
significant underspending notable in the 2nd quarter where actual
spending against projected expenditure amounted to 78.93 per cent. As such,
there seems to have been an accelerated increase in expenditure incurred during
the 4th quarter, specifically during the month of March 2011 when
comparing the overall expenditure for the quarter to the average spending for
the last three quarters. This is thus indicative of a “March spike”,
particularly as the bulk of the overspending during this quarter took place in
March as the Department accelerated its expenditure on infrastructure and the
incentive payments for the EPWP were also effected during this month. During
the 4th quarter, the Department experienced both faster and slower
than expected spending trends as follows:
3.3
Summary of
Expenditure per Programme
a) Programme 1: Administration
During the 4th quarter, the Department
incurred an overspending of 83.5 per cent under this programme. This was
largely due to accelerated payments for office accommodation, which was
initially slow during the beginning of the financial year, as well as
expenditure incurred for consultants due to projects for computer services and
immovable assets which were commissioned by the Department during this quarter.
b)
Programme 2: Immovable
Asset Management
Overspending of 13.6 per cent was
recorded for this programme during the quarter under review as a result of
accelerated payments for infrastructure, specifically during March 2011.
Departmental expenditure on infrastructure generally moved slowly during the
course of the financial year and was also the underlying reason for the
underspending recorded in previously quarters. There was also slow movement in
expenditure for the energy efficiency project which is accounted for under goods
and services.
In an attempt to fastrack
expenditure for both infrastructure and the energy efficiency project, the Department
appointed the Independent Development Trust (IDT), a public entity of the Department,
to implement a schools construction project in the Eastern Cape, as well as the
energy efficiency project and subsequently transferred R205 million during
February 2011 to the IDT to carry out these tasks. The movement of funds to the
IDT also contributed to the overspending of this budget during the quarter
under review.
c)
Programme 3:
Expanded Public Works Programme
Underspending of 56.3 per cent
was recorded for the Expanded Public Works Programme during the 4th quarter.
The bulk of the budget for programme 3, that is about 83 per cent, comprises
incentive allocations (including grants) to public bodies. However, while
allocations are made against specific public bodies as part of the budget
process, public bodies are required to meet certain quarterly performance
targets before they can access the allocated funds. As such, during the quarter
under review, the majority of public bodies failed to meet the expected
quarterly performance targets and consequently no payment was effected to these
public bodies, hence the significant underspending notable for the quarter. It
is important to note that for the month of March 2011, an overspending of this
budget was notable as the aforementioned payments to qualifying public bodies
were shifted from February 2011 to March 2011.
d)
Programme 4:
Property and Construction Industry Policy Regulations
During the quarter under review,
a minimal underspending of 2.2 per cent was recorded for this programme.
However, there was notable underspending of 32.2 per cent and 48.5 per cent
during the months of January and February 2011 respectively due to the
non-payment of border fence payments which were projected for January 2011 as
well as slow movement in expenditure for goods and services.
e)
Programme 5:
Auxiliary and Associated Services
A minimal overspending of 2.3 per
cent was recorded under programme 5 for the quarter under review. The
department exhausted the budget for this programme in May 2010 due to higher
than expected costs incurred for the funeral of the late Deputy Minister of
Health. However, in the Adjusted Estimates of National Expenditure, the
department shifted funds amounting to R5 million to this programme in order to
offset the shortfall in the budget.
3.4 Summary of spending trends
per economic classification
When analysing the expenditure for the 4th
quarter per economic classification and following from the analysis of
expenditure per programme in the previous section, significant overspending of
the budget is notable under current payments and payments for capital assets
largely due to the following:
a)
Current
Payments: accelerated payments for
the Department’s accommodation-related charges and an increase in expenditure
incurred for consultants due to the implementation of computer services and
immovable assets projects (programme 1) and the payment of R75 million to the
IDT during February 2011 for the energy efficiency project (programme 2).
b)
Payments for
Capital Assets: the overspending in
payments for capital assets is as a result of accelerated payments for
infrastructure, which also includes a transfer of R130 million to the IDT,
during the quarter under review, specifically under programme 2.
The underspending recorded under transfers and
subsidies is due to the non-payment of EPWP incentives to those public bodies
who failed to meet the quarterly performance targets.
3.5 Summary
of spending against earmarked funds as at the end of the 4th Quarter
|
Earmarked Item (R’000) |
Total
Appropriated |
Total Spent for the year |
%
Spent Against Total Appropriated |
|
Devolution of funds from Public Works |
351 027 |
313 133 |
89.2% |
|
Infrastructure (Public Works, including BCOCC) |
1 375 982 |
1 255 873 |
91.27% |
|
Construction Industry Development Board (cidb) |
63 665 |
63 665 |
100% |
|
Council for the Built Environment (CBE) |
25665 |
25 665 |
100% |
|
Energy efficiency
in government buildings |
75 000 |
75 000 |
100% |
|
Non-State sector (EPWP) |
179 811 |
179 811 |
100% |
|
Independent Development Trust (EPWP) |
10 515 |
10 515 |
100% |
|
EPWP incentive grant to local government for the
Infrastructure Sector |
622 996 |
279 642 |
44.9% |
|
EPWP incentive grant to provinces for the
Infrastructure Sector |
331 004 |
182 406 |
55.1% |
|
Devolution of Property Rate Funds Grant to
provinces |
1 865 227 |
1 865 227 |
100% |
|
Expanded Public Works Programme incentive grant to
provinces for the Social Sector |
56 637 |
56 637 |
100% |
4. Analysis
of the Department’s Annual Report and Financial Statements
The
Department received a disclaimer with emphasis of matter and additional matter
from the Auditor-General for the period under review.
4.1 Report
by the Auditor-General on the performance of the Department
The
basis for the disclaimer of opinion is as follows:
4.1.1 Immovable Tangible Capital Assets
a)
The Auditor-General was unable to obtain sufficient and
appropriate evidence of the completeness, existence, rights, valuation and
allocation of properties recorded in the Immovable Asset Register of the
Department stated at R3.49 billon.
b)
Corresponding figure for immovable assets has been reduced
by R6.09 billion to address a prior year misstatement, without any supporting
documentation. The Auditor-General was therefore unable to obtain sufficient
appropriate audit evidence of the existence, completeness, valuation and
allocation of, and rights pertaining to the restated immovable assets
corresponding figure of R2.23 billion.
4.1.2 Irregular Expenditure
a)
The Department did not have an adequate system in place to
identify and recognise all irregular expenditure. The Auditor-General could not
obtain reasonable assurances that all irregular expenditure had been properly
recorded and the completeness of irregular expenditure related to the current
year stated at R1.39 million (2010: R27.4 million).
b)
Payments made in contravention of Supply Chain Management
requirements amounted to R16.5 million. The amount was not included in the
irregular expenditure disclosed in Note 26 resulting in irregular expenditure
understatement of R16.5 million.
4.1.3 Other Expenditure
The
Auditor-General was unable to:
a)
obtain audit evidence for expenditure transactions with an
estimated value of R154.6 million.
b)
apply alternative auditing procedures to determine the
occurrence, accuracy and compliance of goods and services amounting to R819
million and expenditure for capital assets stated at R1.3 billion.
4.1.4 Lease Commitments
No
supporting evidence or documentation was available to the obligation, valuation
and classification for the restatement of R115 million in operating lease
commitments to address the prior years’ misstatement.
4.1.5 Contingent Liabilities
Claims
against the Department amounting to R5.09 million not included in the
contingent liabilities disclosed. The Department did not perform an assessment of
the likely settlement amounts and the Auditor-General could not perform
alternative audit procedures to determine reasonable assurance of the completeness
of claims against the Department stated as R29.3 million.
Emphasis of
Matter
4.1.6 Material underspending of the Vote and Conditional Grants
a)
The Department materially underspent the budget on the
Immovable Asset Management Programme by R235 million and the EPWP by R500.8
million.
b)
The bulk of the under-spending on the EPWP was due to the infrastructure
grant to provinces and municipalities not being transferred due to
underreporting and poor performance by reporting bodies eligible for the incentive
grant.
c)
The Department therefore did not achieve its objectives to
fast track the construction of selected schools and the energy efficient
interventions.
4.1.7 Material losses
Material
losses of R54.8 million incurred as a result of the write-off of irrecoverable
debt.
Additional
Matter
4.1.8 Predetermined Objectives
a)
Reported objectives, indicators and targets are not
consistent with the approved Strategic Plan.
b)
The indicators are not well defined and verifiable, and
targets are not specific and measurable.
4.1.9 Transfer of Funds and Conditional Grants
Funds
were deposited by the transferring national officer into a bank account which
was not designated as the primary bank account of a province or municipality in
contravention of the Division of Revenue Act (DoRA) requirements section
10(1)(d).
4.1.10 Asset Management
The
accounting officer did not implement proper control systems for the
safeguarding and maintenance of assets to prevent theft, losses, wastage and
misuse as required by Treasury Regulation 10.1.
Other
Reports
4.1.11 Investigation
- Probe alleged abuse
of urgent and emergency procurement, as well as the utilisation of sole
suppliers.
- Investigation aimed
to establish possible collusion between officials and service providers
and to determine any reckless spending of funds.
4.2 Report by the Auditor-General on the
Performance of the Property Management Trading Entity (PMTE)
The
PMTE received a disclaimer of opinion
from the Auditor-General.
4.2.1 Irregular Expenditure
a)
The entity did not have an adequate system in place to
identify and recognise all irregular expenditure. The Auditor-General could not
obtain reasonable assurances that all irregular expenditure had been properly
recorded and that the completeness of irregular expenditure related to the
current year stated at R138.6 million (2010: R264.1 million).
b)
Payments made in contravention of supply chain management requirements
amounted to R291.6 million. The amount was not included in the irregular
expenditure disclosed in Note 12 resulting in irregular expenditure
understatement of R291.6 million.
4.2.2 Fruitless and Wasteful Expenditure
a)
The entity did not have an adequate system in place to
identify and recognise all fruitless and wasteful expenditure. The Auditor-General
could not obtain reasonable assurances that all fruitless and wasteful
expenditure had been properly recorded and the completeness of fruitless and
wasteful expenditure of R6.7 million.
4.2.3 Trade and Other Receivables
a)
The entity could not provide sufficient appropriate audit
evidence to support the trade and other receivables balance of R2.03 billion
(2010: 2.23 billion; 2009: 2.07 billion).
b)
The impairment of R220 million (2010: 296 million; 2009: 130
million) and the impairment reversal of R76.1 million were not supported by
appropriate sufficient audit evidence.
4.2.4 Revenue
Capital
expenditure of R2.0 billion (2010: R1.7 billion) incurred on planned
maintenance of state-owned buildings was off-set against revenue.
4.2.5 Predetermined Objectives
The
performance against predetermined objectives is not reported separately by the entity
and is included in the report of the Department of Public Works.
4.2.6 Strategic Planning
The
business case for running the Trading Entity was not finalised or approved by
the Accounting Officer of the Department of Public Works and no policy or
reporting framework was formulated for the head of the Trading Entity in
accordance with the requirement of Treasury Regulations (TR) 19.3.1.
4.2.7 Procurement and Contract Management
a)
All invitations for competitive bidding were not advertised
for a minimum period of 21 days, as per requirement of TR 16A6.3(c).
b)
All extensions or modifications to contracts were not
approved by a delegated official, as per Treasury Regulation requirements.
c)
Construction contracts were awarded to contractors who were
not registered and did not qualify for the contract in accordance with the
prescripts of the Construction Industry Development Board, contrary to TR
16A6.3(a).
4.2.8 Banking and Cash Management
The
main bank account of the entity was overdrawn throughout the reporting period
in contravention of TR 19.2.3.
4.2.9 Other Reports: Investigations
The
following investigations were underway at the time of reporting:
a)
Probed alleged abuse of urgent and emergency procurement, as
well as the utilisation of sole suppliers.
b)
Alleged irregular expenditure in respect of leasing of
properties and an irregular awarding of a tender and the incapacity of a
contractor to fulfil its duties.
c)
Investigations into the leasing of buildings in Pretoria and
Durban by the Department on behalf of the South African Police Service. The
reports found that the procurement of the leases was not in accordance with a
cost-effective system as required by the Constitution. The Department failed to
record the reasons for deviating from a competitive tender process as required
by supply chain management prescripts.
5. Committee
Observations
a)
The Committee still notes with concern the delays in the
reintroduction of the Expropriation Bill and the Built Environment Professions
Bill which were withdrawn from Parliament in the 2008/09 financial year due to
the need for further consultation. These bills would have been reintroduced in Parliament
during the 2009/10 financial year. The Department has subsequently indicated
that the bills will only be reintroduced in the 2010/11 financial year, which did
not occur.
b)
During its oversight visits the Committee observed the
challenges in the implementation of the Government Immovable Asset Management
Act (No. 19 of 2007), especially as it did not extend to local government
level.
c)
The Committee has noted the management challenges that face
the Department of Public Works and noted with concern the lack of stable
leadership in the department. In the period under review, the department has
had three different Directors-General.
d)
The Committee notes with concern the progressively worsening
audit outcomes received by the department over the past three financial years,
leading to a disclaimer in the financial year under review. The matters of
emphasis raised in the previous financial year, i.e. 2009/10, were not
implemented by the department.
e)
The Committee has concerns about the inconsistency of the
figures reported by the department. It also raised concerns about the
contradictions between the Auditor-General’s report and that of the department on
the internal audit unit of the Department of Public Works and the risk
management issues.
f)
The Committee notes with concern the underspending in the
Expanded Public Works Programme and on infrastructure.
g)
The Committee notes with concern the shifting of funds from
one programme to the other that was made by the Council for the Built
Environment without informing the Portfolio Committee. The entity should also
inform the Committee when making changes to its measurable objectives.
6.
Conclusions
6.1
On the Expanded Public Works Programme:
The
Committee noted with concern the reporting method used on the EPWP II, and the
disbursement of the incentive grant to municipalities did not favour the rural
municipalities.
The
Committee observed that the National Youth Service was not being implemented by
all the provincial Departments of Public Works.
6.2 On the Financial Performance and Audit
Outcomes of the Department and the Property Management Trading Entity:
The Department of Public Works needs to attend to all the challenges
that were raised by the Auditor-General in the 2010/11 Annual Report.
7.
Recommendations
7.1
The Committee recommends to the Minister of Public
Works that a permanent Director-General be appointed before the end of the
2011/12 financial year after finalising the process of the suspended
Director-General.
7.2
The Committee recommends that the Department of Public
Works engage the National Treasury, SALGA and the Department of Cooperative
Governance and Traditional Affairs on a new EPWP model that would be designed
to assist all types of municipalities in accessing the incentive grants,
including the low-capacity municipalities and rural municipalities.
7.3
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. Such project should include the engagement of the national Department
of Public Works, Department of Rural Development and Land Reform and the nine provinces,
and progress reports should be presented to the Committee on a quarterly basis
until 2014.
7.4
The Committee recommends that the Internal Audit Unit of the
Department of Public Works should be properly resourced in order for it to
perform its functions, including the delivery of an updated risk assessment and
audit action plan. Minutes of the audit committee should be provided to the
Committee on a quarterly basis.
7.5
The Committee recommends that the Department of Public Works
reports back on findings of the Public Protector relating to the South African
Police Service lease investigations, including measures to address the
shortcomings identified as well as the disciplinary measurers taken against the
staff members concerned.
7.6
The Department of Public Works should compile a detailed action
plan to respond to all issues raised by the Auditor-General in his report and
that a copy of this action plan be provided to the Committee within the next
three months.
Report to be considered.