ATC201118: The Budgetary Review and Recommendation Report (2019/20) of the Portfolio Committee on Public Works and Infrastructure on the Performance of the National Department of Public Works and its Entities, Dated 18november 2020

Public Works and Infrastructure

THE BUDGETARY REVIEW AND RECOMMENDATION REPORT (2019/20) OF THE PORTFOLIO COMMITTEE ON PUBLIC WORKS AND INFRASTRUCTURE ON THE PERFORMANCE OF THE NATIONAL DEPARTMENT OF PUBLIC WORKS AND ITS ENTITIES, DATED 18NOVEMBER 2020

 

On 17 November 2020 the Portfolio Committee on Public Works and Infrastructure (the committee, or PC on PWI) met to assess the performance of the Department of Public Works and Infrastructure (DPWI), the Property Management Trading Entity (PMTE), and public works entities for the financial year under review (2019/20).

 

The assessment was based on an analysis of the annual performance plan (APP for 2019/20), strategic plan (SP 2020-2025), quarterly performance reports, and audited annual financial statements contained in the annual reports. The committee now reports as follows.

 

 

1.       INTRODUCTION

Section 5 of the Money Bills Amendment Procedure and Related Matters Act (Act 9 of 2009) states that in the year preceding the budget, portfolio committees of parliament must conduct reviews of the audited financial statements of their respective departments and entities and, if required, issue recommendations on the forward use of resources. The Act further requires that committees submit the budgetary and recommendation reports “after the adoption of the Appropriation Bill and prior to the adoption of the reports on the Medium Term Budget PolicyStatement.”[1]

 

The analysis contained in this report usually forms part of the oversight process prior to the examination, consultation, and comments that the finance and appropriation committees of each House of parliament makes on the overall Medium-Term Budget Policy Statement (MTBPS). Due to the Covid-19 pandemic, and the subsequent lockdown implemented through the Disaster Management Act (No. 57 of 2002), the Minister of Finance gave departments and entities permission to table their annual reports by 18 November 2020. This year, the analysis contained in this report, is following rather than preceding the work of the finance committees on the MTBPS.

 

The Budgetary Review and Recommendation Report (BRRR) must provide an assessment of the department’s service delivery performance given available resources; an assessment on the effectiveness and efficiency of the department’s use and forward allocation of available resources; and may include recommendations on the forward use of resources.

According to the Money Bills Amendment Procedure and Related Matters Act, Parliament may exercise its amendment powers so that there is an appropriate balance between revenue, expenditure and borrowing.

The Act necessitates that the portfolio committees assess the performance of the department and its entities annually through an analysis of the:

“(a) medium term estimates of expenditure 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 relating to such department published by the National

Treasury in terms of section 32 of the Public Finance Management Act (PFMA);

(d) the financial statements and annual report of such department;

(e) the reports of the Committee on Public Accounts relating to a department; and

 (f) any other information requested by or presented to a House or Parliament.”[2]

In order to hold the Minister as executive authority, and the Director-General (DG) as accounting officer accountable, the committee used the quarterly performance reports presented to the committee during the 2019/20 financial yearas the basis of its assessment.

 

 

The mandate of the DPWI and the PMTE

Schedule 4, Part A of the Constitution of the Republic of South Africa containing the “Functional Areas of Concurrent National and Provincial Legislative Competence” sets out the legal mandate of the DPWI.

The Government Immovable Assets Management Act (GIAMA) (2007) describes the department’s mandate as custodian of government’s immovable propertiesin further detail.

The department is responsible for the official accommodation of all national departments. It provides construction, maintenance, and property management services to all client departments at national level. This includes the rendering of expert built environment services relating to the planning, acquisition, management and disposal of immovable assets.

The department also provides strategic leadership of employment creation through the implementation of phase three of the Expanded Public Works Programme (EPWP). The department plays a coordinating and capacity-enhancement role with provincial and local government counterparts to ensure the implementation of the EPWP.

 

The following Acts form the legislative mandate of the DPWI and PMTE:

• Government Immovable Asset Management Act, 2007 (Act No. 19 of 2007);
• The Infrastructure Development Act (Act No. 23 of 2014)[3];
• Construction Industry Development Board Act, 2000 (Act No. 38 of 2000);
• Council for the Built Environment Act, 2000 (Act No. 43 of 2000);
• The six Acts that regulate the Built Environment Profession Councils (BEPCs);
• The Agrément South Africa Act, 2015 (Act No. 11 of 2015);
• Public Finance Management Act, 1999 (Act No. 1 of 1999). 

 

The following policy texts contain the policy mandates of the DPWI, PMTE and public works entities:

• DPW White Paper: Public Works, Towards the 21st Century, 1997;
• DPW White Paper: Creating an Enabling Environment for Reconstruction, Growth and Development in the Construction Industry, 1999;
• Construction Sector Transformation Charter, 2006;
• Property Sector Transformation Charter, 2007;
• DPW Broad-based Black Economic Empowerment (BBBEE) Strategy, 2006;
• Property Management Strategy on BBBEE, Job Creation and Poverty Alleviation, 2007;
• Green Building Framework, 2011.

 

It is important to note that the departmentis not directly involved in service delivery. It provides accommodation and maintenance services to service delivery departments. It further provides professional built environment, construction, project management, and facilities management services to client departments. Client departments that directly provide services to the public need the DPWI and its entities to use its allocated budgetary resources effectively so that all government buildings and facilities are places of safety and security where people are welcome.

 

The oversight function

The committee does oversight over the executive authority (the Minister)[4]. The PFMA makes a distinction between the functions of the executive authority or political head of a department (Cabinet Minister) and the head official or accounting officer[5]. The executive authority “is responsible for policy matters and outcomes; this includes seeking Parliamentary… approval and adoption of the department’s budget vote. The head official (Director-General (DG)… is responsible for outputs and implementation, and is accountable to Parliament … for the management of the implementation of the budget.”[6] The accounting officer must report to parliament on how the department uses the budgetary allocation to translate policy into implementable programmes. The DG reports to different levels of oversight to whom he or she is accountable.

 

Levels of oversight

The office of the Minister (advisors, support staff, in combination with the Deputy Minister and support staff,is the office of the Minister) functions as the first level of oversight over the administrative responsibility of the DG. Thiscommittee (PC on PWI) functions as the second level of oversight, while the Auditor-General of South Africa (AGSA) functions as the third level of oversight. The committee utilises the expertise of the AGSA to deliberate on further matters that may need attention as part of its oversight function. 

Components of the oversight focus

The committee’s oversight focus is firstly on how the executive authority functions as policy leader. That is, whether, and how the Ministerdirected the DG and the administration to research, review, and draft policy and regulation that may be required to give effect to the public works mandate.

The second oversight focus is on how policy needs were translated into programmes. This is often as described in the Annual Performance Plan (APP) and five year Strategic Plan (SP) of the department and the entities. The APP includes predetermined objectives described as performance targets with key performance indicators (KPIs) to be reached within stipulated time frames that assists to keep a check on whether targets were reached.

The third focus is on whether and how the Minister guided the DG and the administration to develop uniform standards for implementation, and regulated the implementation of these standards across the public works sector. It is further important to keep a check on how (as first level of oversight) the Minister, through in-year reports, monitored compliance to the Public Finance Management Act (PFMA) and the legislative framework. This aspect is important to ensure that the department uses the allocated budget for the financial year efficiently with as little fruitless and wasteful expenditure as possible, in order toachieve a clean audit of the implementation of public works programmes through which policy is implemented.

In short, the committee keeps the Minister as the leader of the sector responsible for the use of budgetary and human resources to ensure optimalperformance of the DG and the administrative team.

 

2.         EVIDENCE THAT THE COMMITTEE USED

 

In performing its oversight duty, and following the procedure as set out in the Money Bills Amendment Procedure and Related Matters Act (2009) to assess the department’s performance, the committee used the following evidence:

1.    The Department’s five-year Strategic Plan (2020-2025), and the Annual Performance Plan.

2.    The quarterly performance reports[7] on the 1st, 2nd(considered on 21 November 2019) and third quarter (considered on 4 March 2020) for the 2019-2020 financial year as per Section 32 of the Public Finance Management Act (PFMA);

3.    The oversight events of the committeeduring the period under review. This includes the deliberations that took place duringOctober 2020 on the presentations on the quarterly performance reports.During November2020 further meetings took place on low expenditure rates on compensation of employees and the growing debt of the Property Management and Trading Entity (PMTE), and on the audited Annual Financial Statements (AFS) in the Annual Report.

This report records the analysis of this committee as described in section 5 (1) (a) to (f) of the Money Bills Amendment Procedure and Related Matters Act (Act 9 of 2009) as set out in the introduction.

 

To give effect to its mandated responsibility to analyse and assess the performance of the department, the committee first assessed the planningdocumentsof the department and the PMTE.

 

 

 

3.    ALIGNMENT OF THE LEGAL MANDATE, AND PLANNED INITIATIVES AS STATED IN THE DEPARTMENT’S PLANNING DOCUMENTS

 

3.1.Alignment of the Strategic Plan, Annual Performance Plan (APP) and the Annual Reports (AR)

 

This sub-section provides an analysis of the effects of the planning documents that includes the infrastructure component into the mandate of the department and renaming it from the Department of Public Works to Department of Public Works and Infrastructure (thus from DPW to DPWI).

On 20 June 2019, the President announced, “infrastructure was a critical area of investment that supported structural transformation, growth and job creation”. He reminded the country thatin 2012 the National Development Plan (NDP) was adopted as “the guide to our national effort to defeat poverty, unemployment and inequality.”[8] He stated that with 10 years to go before the year 2030 when most of the NDP targets[9] were to be reached, progress have been too slow and that we had to take “extraordinary measures, (to) realise Vision 2030”[10].

Some of the key challenges that slowed infrastructure development down, had been identified as fragmentation in the management of infrastructure projects between the national, provincial and municipal levels of government. Already in 2011, the Presidential Infrastructure Coordinating Commission (PICC) was established to address the problem of fragmentation between the different levels of government. Another measure to address the identified problems, was to reconfigure the Department of Public Works to include an infrastructure component. The importance of the infrastructure component was signalled in the renaming of the department to the Department of Public Works andInfrastructure (DPWI)[11].

 

3.2. The DPWI is the lead coordinating department in the infrastructure sector

Infrastructure development as a componentwastransferred to the DPWI because it was the lead department for the construction, maintenance, accommodation, and social infrastructure facilitation and project management function across the three levels of government. This status as lead department is stated in the mandated function[12] of the department to:

• Provide policy formulation for, as well as coordination, regulation and oversight of the public works, professional built environment, and construction sector; this makes the national DPWI the coordinator and regulator of the accommodation of government departments that simultaneously plays a leading role in the land and infrastructure needs of nationaldepartments.
• Enhance intergovernmental relations by coordinating concurrent public worksfunctions as set out in schedule 4 of the Constitution.
• Lead and direct the implementation of the national Expanded Public WorksProgramme (EPWP) by national and provincial departments and municipalities.
• Promote growth, job creation and transformation in the construction, property, and professional built environment related industries.

 

This announcement signalled that the role of the Minister as executive authority[13] (EA) would henceforth include functions described in the Infrastructure Development Act (IDA) (23 of 2014).

At a first reading, this might mean that the infrastructure component would have the public works EA serve on the Presidential Infrastructure Coordinating Commission (PICC) to assist with the coordination and oversight of the fragmented systems of public infrastructure development across the national, provincial and municipal government levels. If so, it would mean that the following three additional functions were added to the public works mandate:

• The coordinating responsibility for all public infrastructuredevelopment in the country.
• The Secretariat function of the PICC.
• The Infrastructure Delivery Management System (IDMS) (a system of processes with gateways to manage portfolio, programme, operations, maintenance, and project management to plan and implement infrastructure assets for public service delivery across the three levels of government).

 

The Strategic Plan (SP) 2020-2025, and the Annual Performance Plan (APP) for the financial year 2020/2021 indicated that the DPWI would play a more impactful role “alongside the Infrastructure Investment Office in the Presidency (“IIO”), (sic) to structure the country’s Infrastructure-led Economic Growth under a single point of entry where the overall National Infrastructure Plan for South Africa is defined and the pipeline of bankable projects are focused within a new methodology.”[14]

The planning documents revealed that the President’s announcement in June 2020 “proclaimed that the department had to assume the infrastructure coordination responsibility to integrate and accelerate all public infrastructure development, as well as setting the long-term vision for infrastructure delivery across the sector.”[15]

Prior to summarising the analysis of the usefulnessof planning documentsfor this first year of the sixth administration, it is important to list matters of concern on this department’s performance that remained problematic throughout the past five years (2014-2019); duringthe current year, the committee’sassessment will keep checking on these matters.

 

3.3. Challenges that remained consistent in the department and the PMTE during each financial year during the fifth administration from 2014-2019:

3.3.1.The Immovable Asset Register was incomplete.

The PMTE could not confirm a complete, accurate and valid recording of the following items on its accounts:

(a)Receivables for departmental revenue and lease commitments for operating lease revenue (properties being rented out by the department) and municipal rates and taxes expenditure. 

(b)Planned maintenance expenditure was being offset against revenue at PMTE. It did not have an effective system with which to capitalise qualifying expenditure to immovable assets at the department.

3.3.2.Leasing: There was a lack of reconciliations. Inaccuracies existed between what was recorded on the Property Management Information System (PMIS) and actual lease agreements with client departments.

3.3.3.Supply Chain Management (SCM): A lack of compliance with legislation and regulations guiding SCM that resulted in Irregular Expenditure.  Expenditure was incurred that could have been avoided resulting in Fruitless and Wasteful Expenditure.  No proper system existed to detect and disclose this in the Annual Financial System (AFS).  There was a lack of action against transgressions and no consequence management was possible. A climate existed within which corrupt activities could thrive. 

3.3.4.    A system of record keeping: A lack of a proper record retention and filing system resulted in internal and external auditing functions being severely limited. Oversight was severely curtailed.

3.3.5.    Commitments: There was an inability to supply evidence on how contract price adjustment provisions were calculated by consultants.

3.3.6. There was an inadequate compilation and review process of the AFS that resulted in material adjustments to AFS having to be submitted for audits in subsequent financial years.

3.3.7.The PMTE: A lack of a proper accrual accounting system. A lack of capacity of skills to perform accrual accounting resulted in audit qualifications at the PMTE in subsequent financial years.

3.3.8.The business case of the PMTE remained incomplete.

3.3.9.Material underspending: Immovable asset management impacted negatively on the department’s mandate to assist client departments to perform their service delivery mandates. Underspending of budget allocations to the EPWP continued to occur - albeit due to under-reporting by provincial departments and municipalities.

3.3.10.Predetermined objectives: A lack of understanding of the Framework for Managing Programme Performance Information (FMPPI) requirements resulting in strategic plans not conforming to the “SMART” principles.  A lack of policies and procedures for recording and evidence keeping of actual achievements (especially of concern for the EPWP). During the 2018/19 there was a slight improvement in this regard, but it had to be consistently improved for improved audit opinions in the future.

3.3.11.Compliance: Inadequate compliance with the PFMA meant that the SCM monitoring systems and processes were weak.  There has been a lack of action against transgressors as the systems for consequence management was weak.

3.3.12.Risk assessment: In spite of improvements in this regard due to the creation of a Governance Risk and Compliance Branch, inadequate risk assessment, mitigation and monitoring processes remained inconsistent across every programme and sub-programme of the department – the decentralisation of PMTE functions across eleven regional offices complicates operations, reconciliations and consequence management.

 

3.4. Positive Effects of the Turnaround Strategy 2011-2019

It is important to note the vast improvements brought about by the turnaround strategy that was initiated in 2011. The review of the financial and legislative compliance during the final years of the previous administrative term, as well as the reports of the AGSA, showed the effect of the turnaround strategy that addressed the challenges listed above.

Since the Turnaround Strategy, two features of the department and PMTE emerges:

3.4.1.The Operationalisation of the PMTE:Materially, the challenges that were characteristic of the internal operations of the departmentwere shifted to the PMTE. This brought immediate enhancements and improvements to the audit outcomes of the department itself.

3.4.2. Marked improvements across both the DPWI and PMTE. However, specific matters related to the Key Performance Indicator of Programme 3, EPWP, related to its functions of coordination and verification of data remained. At the PMTE, the information contained in the Immovable Assets Register (IAR) remained a difficult obstacle to overcome.

3.4.3. The creation of the Governance Risk and Compliance branch that assisted, through proactive work, to improve the fight against malpractice, and weak compliance with the PFMA and Treasury regulations. The GRC also collaborated with the Special Investigation Unit (SIU) to deal with several instances of corruption and malpractice, and preliminary work to get further investigations formalised.

In summary, the planning documents provided detail on efforts to support client departments across the three spheres of government. Yet, matters needed to be concretely addressed to sort out problems with how KPIs were stated, and how in-year reporting that assists with financial management control, is complied with as per the PFMA. Also note that the analysis of the effect of the infrastructure component on the DPWI and the PMTE will be dealt with in the reporting period of the following financial year 2020-2021.

 

The report now turns to matters that emerged in the quarterly performance reports that the committee considered for the first and second quarter (21 November 2019), and the third quarter (4 March 2020).

 

4. The performance of the DPWI during 2019-2020

4.1. Summary of Matters arising from the First, Second, and Third Quarter Performance Reports of the DPWI:

The DPWI and the PMTE reported that the following challenges were experienced during the first quarter:

 

1. There was insufficient response from the market for procurement spent for bids awarded to designated groups (Supply Chain Management (SCM): Programme 1);
2. There was a lack of available business representative for condition assessment module as per the Enterprise Resource Plan (ERP) implementation plan (Corporate Services (CS): Programme 1);
3. The conceptual framework to finalise the Sector Plan was presented to Technical MinMec and MINMEC pending implementation of therecommendations and delayed by external partners in signing agreements for joint service delivery (Intergovernmental Coordination (IGC[16]): Programme 2);
4. The department discontinued the plan to set up the Academy due to financial constraints (Professional Services (PS): Programme 2);
5. The target for work opportunities were not achieved and less achievement in participation by designated groups such as Youth and Women and delays in the finalisation of the legal verification processed led to delays in signing the Memorandum of Agreement for the implementing agent (Expanded Public Works Programme (EPWP): Programme 3);
6. The process on the development of the Public Works Bill was affected by the transition from 5th to 6th Administration on the (Property and Construction Industry Policy and Research[17]: Programme 4). This matter may require updating: The Minister and the department made it clear that Programme 4 would be impacted more by the infrastructure component. We foresee that this may further delay the review of the White Papers 1997 and 1999, and the draft Public Works Bill.

 

It must be noted that the challenges stated in Programme 1: Corporate Services, related to the implementation of the Enterprise Resource Plan (ERP) is a serious one. During the fifth administration, the ERP was reported as the solution to complexities that caused most of the audit challenges that the AG reported within the PMTE and the EPWP. The fact that this continues as a challenge during the first year financial year (2019/20) of the sixth administration is a serious concern.

Continued delays of the ERP impacts several aspects of the Shared Services between the DPWI and the PMTE. These are aspects within the SCM, general financial administration and management, the accounting, recording and reporting software that is required to manage the registry services (required to manage the Immovable Asset Register) in the PMTE, as well as the recording, verification, and reporting of employment opportunities that falls within programme 3, EPWP. Without a fully rolled out Archibus, Programme 5: Real Estate Information & Registry Services of the PMTE may continue to report a partially completed Immovable Asset Register (IAR). An incomplete IAR has knock-on effects on the capacity of Programme 2: Real Estate Investment Services of the PMTE to employ trading strategies to unlock the value of immovable assets.

Regarding the continued delay to complete the review of White Paper 1 and 2, the following needs to be noted:

The committee previously stated its concern with the lack of capacity to review the White Paper dated 1997 and produce a draft Public Works Bill inside the Policy branch. The review of the second White Paper dated 1999 had to result in amendments to the legislation that had to strengthen the functions of respectively the Construction Industry Development Board (CIDB) to transform the construction industry, and the Council for the Built Environment to, amongst others, ensure a proper professional registration pipeline of built environment graduates.

The committee noted that this delay in policy work resulted in the mandate of the DPWI being weakened, and in extreme cases, to be usurped by client departments with several starting their own construction and maintenance branches. The DPWI continuing to contract out work meant for its social infrastructure development entity (the IDT) to entities like Coega Development Corporation (CDC) and the Development Bank of South Africa (DBSA) further eroded this mandate and confidence in the department.

 

 

5. ANALYSIS OF THE BUDGET AND ANNUAL FINANCIAL STATEMENTS

 

Section 5 provides an analysis of amounts appropriated per programme for the main vote; the rate of predetermined targets achieved, and human resources assigned to the department and the PMTE.

The table below shows under-expenditure and reasons for it. It also shows longstanding underperformance in Programme 4 that has a knock-on effect on the performance of the department and the PMTE. The human resource allocation reveals a key challenge regarding instability in leadership positions in the department and the PMTE.

		2019/20				2018/19
	Final Appropriation	Actual Expenditure	Variance	Expenditure as %	Final Appropriation	Actual Expenditure	Expenditure as %
	R'000	R'000	R'000	%	R'000	R'000	%
1. Administration	511 013	460 670	50 343	90.1%	470 674	448 316	95.2%
2. Intergovernmental Coordination	56 386	52 448	3 939	93.0%	53 868	50 425	95.0%
3. Expanded Public Works Programme	2 680 814	2 638 163	42 651	98.4%	2 538 562	2 532 725	99.8%
4. Property And Construction IndustryPolicy andResearch	4 538 905	4 523 839	15 065	99.7%	4 232 691	4 232 318	100.0%
5. Prestige Policy	119 927	85 094	34 833	71.0%	188 531	184 765	98.0%
Totals	7 907 045	7 760 214	146 831	98.1%	7 483 326	7 448 549	99.5%

 

5.1. Amounts appropriated for Vote 11, the DPWI

The following table shows the amounts appropriated for each programme of the department for the period under review:

The DPWI reported to the committee that the adjusted appropriation for the year under review was R7.907 billion, whichisanincreaseof6%comparedtothe2018/19financialyear’sadjustedappropriation of R7.483 billion. The increase in the budget allocation was mainly for current payments and transfers and subsidies for the EPWP incentives and PMTE.

SpendingfortheperiodunderreviewwasR7.760billionwhichrepresents98.1% of the adjusted budget of R7.907 billion. Underspending of R147 million mainly related to compensationofemployees,goodsandservices,transfersandsubsidiesandmachineryand equipment.

Details of underspending per programme and economic classification follows:

 

Programme 1:Administration

The underspending of R50.4 million in this programme related to:

• Compensation of employees under spending of R31 million was mainly due to thedelay in advertising and filling of vacantpositions.
• Goods and services under spending of R17.3 million was mainly due to thefollowing:

• Communication due to participation in transversal contract by National Treasury and implemented cost containmentmeasures.
• Audit fees due to decrease number of activities in DPWI which require extensive attention ofAGSA.
• Operating leases due to lower than projected spending on leasing of Office Accommodation.
• Travel and subsistence due to implemented cost containmentmeasures.

Machinery and equipment under spending of R1.7 million was due to a delay in the planned acquisition of assets resulting from unfilled vacantpositions.

 

Programme 2: IntergovernmentalCoordination

The underspending of R3.9 million in this programme related to:

• Goods and services under spending of R3 million mainly due to reduced number of sector engagementsmeetings.
• Transfers and subsidies underspending of R239 000 was mainly due low spending on household for exit packages.
• MachineryandequipmentunderspendingofR402000wasduetoadelayintheplanned acquisition ofassets.

 

Programme 3: Expanded Public WorksProgramme

The underspending of R42.7 million related to:

• Compensation of employees under spending of R15 million was mainly due to thedelay in advertising and filling of vacant positions in line with the identified priority positions.

• Goods and services under spending of R26 million was mainly due to delays in public bodiesconfirmingprojectsformentorshipintermsofcontractdevelopmentandnon- responsive bidders forprocurement.
• Machinery and equipment under spending of R1 million was due to a delay in planned acquisition of assets resulting from unfilled vacantpositions.

 

Programme 4: Property and Construction Industry Policy and Research

Underspending of R15 million relatedto:

• CompensationofemployeesunderspendingofR5.5millionismainlyduetothedelay in advertising and filling of vacant positions in line with the identified priority positions.
• Goods and services under spending of R9 million is mainly due to a delay in entering into new agreements with the Property and Construction Charter institutions which resulted in the planned payment to both Property and Construction Charter Councils not being paid in the current financialyear.

 

 

Programme 5: PrestigePolicy

Underspending of R34.8 million related to:

• CompensationofemployeesunderspendingofR1.2millionismainlyduetothedelay in advertising and filling of vacant positions in line with the identified priority positions.
• Goods and services under spending of R31 million is mainly due to lower than projected spending on Presidential Inauguration and decrease in number of State Functions during the current financialyear.
• Machinery and equipment under spending of R2.4 million is due to a delay in the planned acquisition ofassets.

The bulk of the appropriated financial resources (91%) for the year under review were allocated between Programme 3, Expanded Public Works Programme (34%); and Programme 4, Property and Construction Industry Policy and Research (57%). These two programmes represent the major proportion of the department’s mandate or deliverables.

The department reported that it shifted funds between sub-programmes and economic classification in line with the PFMA and that the set threshold of 8% was not exceeded. The following virement of funds were applied:

Programme 1 was decreased by R727 000 from compensation of employees to transfers and subsidies for households due to higher than projected expenditure for payment relating to exitpackages.

Programme4wasdecreasedbyR14000fromcompensationofemployees to transfers and subsidies for households due to higher than projected expenditure for payment relating to exitpackages.

 

Unauthorised Expenditure

The department further reported that no unauthorised expenditure was incurred. The report for the total cumulative unauthorised expenditure of R261.2 million was submitted to the National Treasury to be considered for the condonement by Parliament.

It must be noted that the opening balance of R261.2 million of unauthorised expenditure from the 2017/18 financial year was awaiting condonement. Note 9.4 of the Annual Financial Statement details this unauthorised expenditure as follows:

• R174.1 million - Unauthorised expenditure under capital expenditure incurred towards building of schools, which is a provincialcompetency.
• R3.9 million - Unauthorised expenditure on capital assets procured forschools.
• R67.1 million – Overspending on Compensation ofEmployees.
• R13.6 million – Overspending on Goods andServices.
• R2.3 million – Overspending on Transfers andSubsidies.

 

5.1.1. Non-financial Performance Information of the DPWI

The department has 36 performance targets that should be performed by the five main programmes. Note that in the APP for the year, 37 is mentioned[18]. Of the stated 36, 50% were achieved. The following table shows the targets per programme and the achievements and non-achievements:

Programme	Total targets in APP	TotalTargets inAR	Targets achieved	Targetsnot achieved	Performance target success rate %
1. Administration	16	15	9	6	56,3
2. Intergovernmental Coordination	8	8	5	3	62,5
3. EPWP	5	5	2	3	40
4. Property and Construction Industry Policy and Research	4	4	0	4	0,0
5. Prestige Programme	4	4	2	2	50
Total	37	36	18	18	48,6

 

The following subsection deals withprogrammatic targets that were not achieved.

Programme 1: reported on 15 of 16 planned targets as per the APP for the year under review, of which nine were achieved/or over achieved, and the other six were not achieved.Note, that the department reported on two targets as achieved, where both fell short of the 100% (to be discussed below).

The following six performance targets were not achieved:

• Only 7% (or R7.98 million) of a targeted (100% or R114 million) reduction in irregular expenditure, i.e. 93% of the target was not achieved due to a high vacancy rate, termination of contracts, limitation of scope of transaction and the new lengthy condonationprocess.
• Only 97% of a targeted 100% compliant invoices settled within 30 days, due to delays in certification of invoices by linemanagers.
• Only 88% (or 351 out of 397) of a targeted 90% of quotations were awarded within 30 working days from requisition date. This is a shortfall of (46 quotations) and 2% of the target.
• Only 52% (or 180 out of 344) of a targeted 100% of funded prioritised positions filled within 6 months from the date of advertising, i.e. 164 (or 48%) of positions not filled due delays in the nomination and approval of panels; and a moratorium being placed on the filling of positions.
• 0 of a targeted 1 module (Investment Analysis) was not fully implemented, with only20%of the Investment Analysis Module completed.
• One of a targeted five modules (Lease Out and Construction Management) as part of the Enterprise Resource Planning (ERP) implementation plan were not implemented. Due to changes in user requirements and unavailability of business process owners in some instances. Progress reported on (Construction Project Management Module where the work was completed; and 2 Vanilla User Manualsdeveloped).

 

The following target was also not reported on in the Annual Report:

Achieve 3.6 to 4.0 of the targeted index score for management practices.If it is counted, it means that 6 of the 16 targets under Programme 1, of the 2019/20 APP were not achieved.

 

 

Programme 2 reported on eight planned targets for the year under review. The department achieved/ or overachieved on five of these targets, and the other three were not achieved.

The following three performance targets were not achieved:

• Presented zero of a targetedtwo Performance Review Reports for 2019/20 to the Technical MinMec.
• Signed 12 of a targeted 15 agreements for joint service delivery between Provinces and Municipalities and the Intergovernmental Relations (IGR) partners. Target of three not reached due to the non-finalisation of Memorandums of Understanding (MOUs) between the Free State Province and the KwaZulu-Natal municipalities. The National Treasury agreement (NT) is pending the finalisation between the IGRpartners.
• Operationalisation of the Public Works Academy not implemented, due to the Department putting the plan for an Academy onhold.

 

Programme 3 reported on five targets for the year under review, of which two  were achieved and three were notachieved.

The following three performance targets were not achieved:

• Designated targets of 41.9% (of 55% for Youth) and 0.96% (of 2% for People with Disabilities) not reached by 13.1% and 1.04%,respectively.
• 339 of a targeted 350 contracted Non-Profit Organisations (NPOs) supported to implement the Non-State Sector (NSS): NPOProgramme.
• EPWP Policy Framework not approved, due to the comments that were received on the Draft Policy position must still be processed andconsidered.

 

Programme 4 reported on four targets for the year under review, of which none were achieved.

The following four performance targets were not achieved:

• Draft Public Works White Paper not submitted to the Minister for the legislative process to be followed by Parliament.
• Draft Expropriation Bill not submitted to the Minister for Parliamentaryprocess
• Draft Construction Industry Development Board (CIDB) Amendment Bill Policy developed; but was not submitted to theMinister.
• Final Draft of the Revised Built Environment Profession (BEP) Policy not submitted to the Minister due to the Task Team delaying the finalisation of the policydocument.

 

Programme 5 reported on four targets for the year under review, of which two were achieved the other two were notachieved.

The following two performance targets were not achieved:

• zero of the two targeted Prestige Policies were not approved. Consultation and engagement with Stakeholders on the policy took longer thananticipated.
• 0% of the 80% target of movable assets provided within 60 days after approval by Prestige Clients. No requests received due to a Moratorium on the purchase offurniture.

 

Human Resource allocations for the period under review

The department has a total of 786 posts, of which 703 were filled at the end of 2019/20 with another 64 filled positions additional to the organisational structure.32 During the year under review, the Department’s vacancy stood at 83. This translates into a vacancy rate of 10.6 per cent.

 

 

 

Employment and Vacancies per Programme for 2019/20

 

Programme	Number of Posts	Filled Posts	Vacant Posts	Posts Filled Additional to Establishment
1. Administration	471	419	52	59
2. Intergovernmental Coordination
3. Expanded Public Works Programme (EPWP)	221	204	17	2
4. Property and Construction Industry Policy and Research	15	11	4	0
5. Prestige Policy	40	36	4	0
Total	747	670	77	61

Source: Department of Public Works and Infrastructure (2020).

 

Note: The information that the department provided in the narrative related to human resources per programme, differs from that provided in the above table. The total of 786 posts reported above falls short by 39 compared to the figure of 747 reported in the table above. The 703 filled positions fall short by 33 posts; and the vacancy of 83, falls short by 6 posts. Programme 2: Inter-Governmental Coordination indicate zero posts on the established; positions filled; posts filled additional to the establishment or any reportedvacancies.

The largest portion of the 77 vacancies falls under Programme 1: Administration followed by Programme 3: EPWP with a total of 52 and 17 vacancies, respectively. Programme 4: Property and Construction Industry Policy Research and Programme 5: Prestige Policy reported the lowest number of vacancies, at four each. If we look at possible reasons for the performance in reaching targets, the key question remains why Programme 4, in spite of reporting the lowest number of vacancies, performed the worst.

Programme 1 also have the largest portion, that is 59 additional posts of the total 61 Filled Posts Additional to the Establishment, followed by Programme 3 with the least number at 2 additional posts; while Programmes 2; 4 and 5 report 0 additional posts.

The department’s vacancy rate has declined from the 340 reported in 2017/18. It should also be noted, that with the PMTE becoming a Government Component within Public Works and Infrastructure, a large portion of the personnel and function shifted to the entity, which might have contributed to the decline in the vacancy rate within theDepartment.

 

Instability of leadership positions in DPWI and PMTE

The serious challenge of stability of leadership is evident at top management levelwhere, of the eight positions (including the Director-General), only three are filled. Five leadership positions of the department remain filled by personnel that are appointed in acting capacities. These positions include:

• Director-General.
• DDG: Supply ChainManagement.
• DDG: Inter-GovernmentalRelations
• DDG: Policy, Research and Regulations.
• DDG:EPWP.

Heads of key programmes in the PMTE, that is, Head of Real Estate Management Services (REMS) and Chief Director: Financial Reporting, also remain vacant.

Reasons for vacated positions

The department reported that a total of 218 persons left during the period under review. The highest total 190, falls under Expired Contracts, followed by 20 Resignations. A total of six people retired; while two officials were dismissed for misconduct.

The department also reported that the resignations comprise of permanent and contract employees who resigned during 2019/20 financial year.

 

 

 

 

5.2. THE PROPERTY MANAGEMENT TRADING ENTITY (PMTE)

5.2.1. Allocations to Programmes

Programme	R'000	Allocation as %
Administration	934 223	4%
Real Estate Investment Services	206 705	1%
Construction Project Management	4 977810	22%
Real Estate Management Services	12 038 772	54%
Real Estate Information & Registry Services	106 580	0%
Facilities Management Services	4 174 205	19%
Total	22 438 295	100%

 

5.2.2. Overall expenditure for the PMTE

	2019/20	2018/19
	R’000	R’000
Budget allocation	22,438,295	20,951,372
Actual expenditure	20,880,140	19,566,229
Actual: spent budget %	93%	93%
(Over)/ underspending	1,558,155	1,385,143
Actual: budget (over)/ underspend %	7%	7%

 

Details of underspending per programme and economic classification follows:

The total expenditure for the period ended March 2020 was R 20.9b. This represents 93% of the total budget. This was mainly due to under-expenditure against infrastructure projects and compensation of employees. The expenditure level was below the level of performance of the previous year.

 

Programme 1: Administration

Theunder-expenditureonthisprogrammewasattributabletothelowspendingoncompensation ofemployeesduetothedelayinthefillingofvacancies.Theotherreasonwasduetotheunspent fundswhichwerereservedfortherollingoutoftheadditionalVideoConferencingfacilitiesinthe regions to cut down on cost of travelling. Tenders were advertised but could not be adjudicated beforetheendofthefinancialyear.Fundingallocatedforprocurementoflaptopsthroughoutthis branch was not spent due to delays experienced by ICT with the SITAcontract.

 

Programme 2: Real Estate Investment Services

Theunder-expenditureonthisprogrammewasattributabletothelowspendingoncompensation of employees due to the delay in the filling of vacancies and due to funding that was allocated for the procurement of laptop which has not been utilized due to delays experienced by ICT with the SITA contract.

 

Programme 3: Construction Management Programme

Theunder-expenditureonthisprogrammewasattributabletothelowspendingoncompensation of employees due to the delay in the filling of vacancies and due to funding that was allocated for the procurement of laptop which has not been utilized due to delays experienced by ICT with the SITA contract. The other reason was due to the delay in the execution of projects which was caused by poor performance of some of the contractors, delays in appointing new contractors as well as the delays of the extension of time on some of theprojects.

As some of the projects are recoverable, the PMTE has to request approval from the client departments before tenders are advertised, when recommended bids are higher than the estimate and every time there is an increase in the cost of the project. Delays in client responses is a major cause of under-expenditure. Clients are expected to sign-off on their available allocations before the start of the financial year, but some Clients only make the allocations available during the first quarter of the financial year. This leads to further delays and under- expenditureasprojectscannotbeplacedontheProcurementPlanbeforeapprovalofthebudget.

 

Programme 4: Real Estate Management Services

Theunder-expenditureonthisprogrammewasattributabletothelowspendingoncompensation of employees due to the delay in the filling ofvacancies.

 

The Audit Opinion on the Annual Financial Statements from the Office of the Auditor-General

The department received an Unqualified Audit Opinion (with emphasis of matters and additional matters) forthe 2015/16, 2016/17, 2017/18, and 2018/19 financial years.

In the current year under review, 2019/20, it received its fifth consecutive Unqualified Audit Opinion with emphasis of matter and additional matters.

 

We provide a select list of issues highlighted by the Auditor-General (AG):

• The AG commended the PMTE for resolving prior-year qualifications on properties recorded in its books, which it did not have title deeds as proof of ownership.
• However, a recurrence of a qualification on assets under constructions being expensed as oppose of capitalized and recorded in the asset register which was resolved in 2018-19 is concerning.
• The Immovable Asset Register remain incomplete. Efforts to determine how many properties owned by the PMTE are worth, remain unresolved as we still identified instances where source data was not correctly used in calculating the value of assets.
• The AG was pleased to note the trading entity moved from manual processes to computerized systems for record keeping of over 2457 leases.
• However, due to inadequate review processes of the information migrated, numerous errors were identified where information on the system did not agree to actual lease agreements. This resulted in a new qualification that affected both revenue and expenditure from leases.
• In addition, internal control systems of processing, reviewing and approving lease payments were not adequate to prevent overpayments made to landlords.
• Furthermore, the PMTE has 714 leases that are running on a month-to-month, which could lead to a missed opportunity of savings that could be realized on renegotiated contracts.

 

Regarding the audit of the department itself, the AG stated that:

• Laws and prescripts were compromised in procurement of goods and services which resulted in irregular and fruitless expenditure identified through audit process.
• Poor contract management specifically related to construction related projects in certain instances resulted in the trading entity making payments that were not in line with the terms of the contracts.
• Internal controls (including action plans) around performance information were not effective in ensuring that the set targets for Construction Project Management are achieved and reported correctly.

 

Other matters were:

• Alack of supporting evidence to confirm stated performance targets (EPWP):

As in the previous financial year, the AG found that for Programme 3: EPWP, the report did not agree to the supporting evidence provided for the performance indicators. The AG found that some supporting evidence provided, differed materially from the reported achievement, and in other instances was unable to obtain sufficient appropriate audit evidence. Due to the lack of accurate and complete records, the AG was unable to confirm the reported achievements via alternative means. The AG could not determine if the achievement of 994 699 work opportunities (WOs) as reported on the EPWP-Reporting System (EPWP-RS) by public bodies (Cumulative) required furtheradjustments.

• Percentage targets for vulnerable groups (EPWP):

The AG could not determine whether the percentage of EPWP participation of designated groups of 68.33% Women, 41.94% Youth and 0.96% People with Disabilities as reported on the EPWP-RS by public bodies required further adjustments.

• The achievement of planned targets as referred to in the Annual Performance Plan for the year under review should be considered in the context of the material findings on the usefulness and reliability of the reported performance information in paragraph 17 of the AG’sreport.
• Expenditure management:

A lack of effective and appropriate steps to prevent irregular expenditure, as required by Section 38(1)(c)(ii) of the PFMA and Treasury Regulation 9.1.1. The AG indicated that the value was not complete, as management was still in the process of quantifying the full extent of the irregular expenditure. The majority of the irregular expenditure disclosed in the Annual Financial Statements was caused by expenditure on state funerals (in the Programme 5, Prestige) where payments were made in excess of the contractedamounts.

• Ineffective Internal Controls:

In certain instances, effective internal controls were not in place for approving and processing payments, as required by Treasury Regulation8.1.1.

• Internal controldeficiencies:
  • The department was impacted by a number of investigations that implicated officials occupying Senior Management positions. In addition, there were vacancies at Senior Management level in a number of key programmes. This combination of instability in leadership and the lack of effective leadership culture contributed to irregular expenditure by thedepartment.
  • Inadequate monitoring of Action Plans to address the previous year’s findings resulted in similar findings on Programme 3: EPWP in the currentyear.
  • Inadequate review and monitoring of compliance when approving payments to suppliers resulted in irregularexpenditure.
• Material Irregularities: The AG notified the Accounting Officer of material irregularities identified during the audit, as required by Material Irregularity Regulation 3(2). The responses of the Accounting Officer were not yet due by the date of this Auditor’s Report. Therefore, these material irregularities will be included in the next year’s Auditor’sReport.

 

• Other reports:Ongoing Investigations
  • The Special Investigation Unit (SIU) has been authorised to investigate the affairs of the Department of Public Works asfollows:
    • Finalised a report in 2018/19 on Supply Chain Management irregularities within the Prestige Branch, covering the period 2003/04 to2010/11.
    • Investigation extended to cover the period 2010/11 to 2015/16, and further extended to cover the period 2015/16 to 2019/20. The investigations were still in progress at the time of the conclusion of the Auditor’s Report.

 

 

6. MATTERS THAT EMERGED RELATED TO THE ANNUAL REPORTS OF THE ENTITIES REPORTING TO THE MINISTER OF PUBLIC WORKS AND INFRASTRUCTURE

6.1. AGRÉMENT SOUTH AFRICA

6.1.1. Background

Agrément South Africa was established in terms of a delegation of Authority from the then Minister ofPublic Works in July 1969. The organisation is currently a schedule 3A public entity under the Public FinanceManagement Act No. 11 of 1999 and is established under the Agrément South Africa Act No 11 of 2015.

 

The organisation is an entity of the DPWI and its mandate is within the domain of the built environment and as such, the legislation and mandates that impact on the built environment and public works guide the functioning and operations of AgrémentSouth Africa. There are several sections of legislation which deal with, or have an impact upon, certificationof innovative and non-standard construction products for infrastructure development. In this regard the following legislative and other mandates must be noted.

 

Agrément South Africa is compiling internal policies and procedures aligned with the legislation mentioned below for approval by the Accounting Authority to ensure compliance.

 

Agrément SA requirements for innovative building material and systems are as follows:

• Make rules, determine the processes, procedures and forms forand relating to the issuing, amendment, suspension, reinstatement, withdrawal, or renewal of an ASACertificate;
• Issue a certificate in the prescribed form, if it is satisfied that a non- standardized Construction related product or system isfit-for-purpose, subject to the payment of the requiredfees;
• Monitor such certificates and manage the renewal of allcertificates; and
• Establishandmaintainapublicregisteroftheapplicationsrejectedand certificates issued, amended, suspended, reinstated,withdrawnand renewed.

 

6.1.2. Financial Statement for 2019/2020

Statement of financial performance	Approved budget	Audited Outcome	Medium-term estimate
R thousand	2019/20		2020/21	2021/22	2022/23
Revenue
Non-tax revenue	3,972	4,724	4,300	4,570	4,666
Sale of goods and services	2,634	2,435	2,966	3,154	3,349
Administrative fees	1,160	1,014	1,418	1,529	1,643
Sales by marketestablishment	1,474	1,421	1,548	1,625	1,706
Other non-taxrevenue	1,338	2,289	1,335	1,416	1,317
Transfers received	31,062	32,010	31,164	32,564	33,413
Total revenue	35,034	36,734	35,464	37,134	38,079
Expenses
Current expenses	35,034	34,991	35,464	37,134	38,079
Compensation ofemployees	20,810	19,060	21,175	22,510	23,455
Goods and services	13,974	14,083	9,916	14,178	14,178
Depreciation	250	1,848	0	446	446
Relief fund	–		3,578	–	–
COVID-19 Expenses	–		795	–	–
Total expenses	35,034	34,991	35,464	37,134	38,079
Surplus/(Deficit)		1,743	–	–	–

 

6.1.3. Performance for the year summarised

Performance Target	Planned Target 2019/2020	Achieved	Partially Achieved	Not Achieved
Sustainable business model developed for the Eco Label Scheme.	Sustainable business model developed for the Eco Label Scheme.	✔
Development of ISO 9001 QMS certification standard operating procedures.	Development of ISO 9001 QMS certification standard operating procedures.		✔
Organisational structure basedon organisational diagnosticfindings.	Organisational structure based on organisational diagnostic findings .		✔
To ensure effective implementation of corporate governance by addressing audit findings.	Unqualified external financial audit report, with possible compliance findings.		✔
To ensure a well-resourced organisation by providing finance support within budget.	Minimum 88% of approved expenditure spent of the approved budget, with 0% irregular expenditure.	✔
80% of projects assessed and completed as per the project timelines.	80% of projects assessed and completed as per the project timelines.			✔
Percentage quality inspections conducted for Agrément certificates postcertification.	82% quality inspections conducted for Agrément certificates postcertification.			✔

 

Corrective Actions on Performance Targets not achieved

In order to address the targets not achieved the organisation will adopt better planning and adequate time will be allowed between inspections and submission of reports to the relevant committees.

 

Performance highlights for the year under review

•Agrément South Africa fulfils its mandate throughthe assessment and certification of innovative and non- standardised products andsystems.

• During the 2019-2020 financial year 27 certificates were issued.
• Products and systems where certificates were issued include roofing insulation products, building systems, under-tile membranes, road products, sanitation systems and paints.
• The performance of the products and systems was assessed against respective performance criteria, while the manufacture and, where applicable, installation or erection processes were assessed in terms of documented and approved quality management systems.
• The Technical Committee of the Board satisfied itself that due diligence was exercised during the assessmentprocess.

 

 

 

 

6.2. THE CONSTRUCTION INDUSTRY DEVELOPMENT BOARD (CIDB)

6.2.1. Background and mandate

The CIDB is a Schedule 3A public entity established by the Construction Industry Development Board Act (No. 38 of 2000). The CIDB is responsible forproviding leadership to stakeholders and to stimulate sustainable growth, reform and improvement of the construction sector, for effective delivery and the industry’s enhanced role in the country’s economy.  In terms of the Public Finance Management Act, the Board of the CIDB is the accounting authority, responsible to the Minister of Public Works. The board submits its Annual Performance Plan and budget to the executive authority.

 

The Mandate of the CIDB is to:[19]

• Provide strategic leadership to the construction industry stakeholders to stimulate sustainable growth, reform and improvement of the construction sector;
• Promote sustainable growth of the construction industry and the participation of the emerging sector in the industry;
• Determine, establish, promote improved performance and best practice of public and private sector clients, contractors and other participants in the construction delivery process;
• Promote uniform application of policy throughout all spheres of government and promote uniform and ethical standards, construction procurement reform, and improved procurement delivery management – including a code of conduct;
• Develop systematic methods for monitoring and regulating the performance of the industry and its stakeholders, including the registration of projects and contractors.

 

 

 

6.2.2. Programme Performance

	Programme	Annual Targets	Achieved	Not Achieved
1	Administration	12	12	-
2	Regulation and Advocacy	6	2	4
3	Development and Capacitation	5	4	1
4	Industry Performance and Transformation	4	3	2
	Total	27	21	6

 

The CIDB achieved 77% of its programmatic targets for the year under review.

Regulation and Advocacy:

1. The target to get 96% of Grade 1to 9 contractors registered within 21 working days – 87% was achieved.

The reason was given as CIDB faced a challenge with the system challenge resulting in poor turnaround in processing applications.

It planned to improve online registration from May 2020 to improve performance.

2. The target to get a 70% of Grade 2 to 9 contractors satisfied/very satisfied with registration services resulted in 69% being satisfied.

Again the system did not enable progress.

3. The target to capture 90% of Grade 2to 9 applications captured by provincial offices within 7 working days was reached 96%.

 

Industry Performance and Transformation

The target was to have 25% of contractors in contractor development programmes (CDP) graduating. Unfortunately, the lockdown prevented progress.

 

Contractor Register:

Grading designation	Number of contractors
1	47 077
2	3 102
3	1 398
4	1 421
5	1 089
6	1 346
7	801
8	333
9	86

 

 

Performance Highlights reported:

Contractor Developments

• The CIDB partnered with Ingquza Hills Local Municipality to support contractor development on their Small-Town Revitalisation Project with the Office of the Premier EasternCape.
• The Ingquza Hills Local Municipality provided work packages for 10 youth and women owned contractors under theSmall-Town.
• The CIDB conducted entry assessments to determine the training needs of the learner contractors and committed to provide the training and mentoring forthe learnercontractors.
• In addition, the CIDB partnered with the Jobs Fund - a government initiative funded by National Treasury to implement the Construction Industry SME Development Project. This initiative sought to develop 195 small and medium enterprises (SMEs), create 1 950 new permanent full-time and 100 newshort- term full-time positions, and train 2 050beneficiaries.

 

Audit outcomes:

• The cidb received an unqualified opinion with findings in other areas.
• The main challenge hindering the cidb from obtaining a clean audit is the quality of the annual financial statements and annual performance report received for auditingpurposes.
• 33 findings raised , 10resolved
• 23 findings to be followed upwith root causes(minor)

The matters that need attention for the organisation are:

• Lack of skilled staff tosupport keypersonnel
• Failure to focus root causesof the auditfindings
• Key positions that werenot filled ontime
• Record keeping deficiencies which delay the auditprocess
• Inadequate control measures to detect material findings in the financial statement and performancereporting

 

 

6.3. THE COUNCIL FOR THE BUILT ENVIRONMENT (CBE)

6.3.1. Background

The Council for the Built Environment (CBE) is a schedule 3A entity established by the Council for the Built Environment Act (No. 43 of 2000). This entity is responsibleforregulatingthe councils for the built environment professions of architecture, engineering, landscape architecture, project and construction management, property valuation and quantitysurveying.Together with these built environment professional councils (BEPCs), the CBE has the responsibility to“regulate those Built Environment Professions who conceptualise, design, build, maintain and transfer social and economic infrastructure”[20] for the South African communities. As such, the entity and the BEPCsplay a pivotal role in the implementation of programmes that give effect to the basic rights that all South Africans deserve.

 

6.3.2. Legislative Mandate

The objectives of the CBE as per section 3 of the CBE Act, 2000 are to:[21]

• Promote and protect the interest of the public in the built environment.
• Promote and maintain a sustainable Built Environment and natural environment.
• Promote on-going human resources development in the Built Environment.
• Facilitate participation of the Built Environment Professions in integrated development in the context of national goals.
• Promote appropriate standards of health, safety and environmental protection in the Built Environment.
• Promote sound governance of the Built Environment Professions.
• Promote liaison in the field of training in the Republic and elsewhere and to promote the standards of such training in the Republic.
• Serve as a forum where the Built Environment Professions can discuss relevant issues.
• Ensure uniform application of norms and guidelines set by the Professional Councils throughout the Built Environment.

 

 

 

6.3.3. Financial Information for 2019/2020

	Programme	Budget ‘000	Actual ‘000	Over/Under ‘000
	Programme1: Administration	47 804	48 851	(1 047)
	Programme 2: Skills for Infrastructure Delivery	11 505	10 684	821
	Programme 3: BE Research, Information and Advisory	415	346	69
	Programme 4: Regulation and Oversight of six CBEP	981	952	29
	Programme 5: Government Policies andPriorities	45	37	8
	Total	60 750	60 870	(120)
	Assets (additions)	-	1 358	(1 358)
	Total including assets (additions)	60 750	62 228	(1 478)

 

Revenue

• The total revenue generated amounted to R60.243million.
• The CBE received a grant allocation of R52.796 million from DPW.
• The CBE received R2.110 million from the CBEP levies.
• Other sources of funding was the operating income of R4.391(partnership funding such as CETA) million and interest of R0.921million

Expenditure

• The total budgeted expenditure for the year was R60.750million.
• The actual expenditure incurred amounted to R60.870 million (0.19%) overspent. Over expenditure as a result of approved surpluses utilised during the currentyear.

 

6.3.4. Summary of Performance Information

• The CBE achieved 63% of the performance targets that it set for itself – 12 out of 19 targets were achieved.
• It enrolled 152 learners in the Mathematics and Science support programme– six exited the programmeandtwo didnotwritetheNationalSeniorCertificate(NSC)examinations.Ofthe144learners who wrote the examination, 42 may be accepted at universities of technology (UoTs) and 55 at historical universities.
• Fifty-four candidates were mentored in the Structured Candidacy programmefrom the provinces of NorthWest,FreeState,NorthernCape,WesternCape,LimpopoandGauteng.Fourcandidatesachieved professional registration, and two submitted their registration applications with the Engineering Council of South Africa(ECSA).
• The CBE exceeded its annual target by placing 167 Built Environment students for Work Integrated Learning (WIL).There was a positive variance of 67. Out of the supported 167 students, 95 completed their WILprogramme.
• An oversight report on the accreditation of academic programmes undertaken by the CBEP, was developed and submitted to the Council. It should be noted that there were no visits during the last quarter of the financialyear.
• During the 2019/20 financial year, three national departments and two metropolitan municipalities were engaged on the implementation of the CBE Structured CandidacyFramework.
• Twelve collaborative engagements and one Built Environment Indaba were hosted by 31 March 2020. The CBE hosted its third National Transformation Indaba on 9 and 10 October 2019. In addition, the following four Transformation Collaborative Forums in collaboration with DPWI were successfully convened following the National TransformationIndaba:
  • Procurement Policy andLegislation
  • Women Empowerment and GenderEquality
  • Occupational Special Dispensation(OSD)
  • SkillsPipeline
• One advisory report that analysed the state of compliance with health and safety regulations by the CBEP wasdeveloped.

- Policy advocacy together with voluntary initiatives concerned through public-private-labour partnerships would be a key factor in ensuring optimum compliance with health and safety legislation within the Built Environment in South Africa.

• One research report on the potential impact of the Fourth Industrial Revolution (4IR) on Expanded Public Works Programme (EPWP) practices wasdeveloped.

- The study recommended that labour intensive methods should be used as an opportunity to upskill EPWP participants and centralize innovation and entrepreneurship; and prepare EPWP participants for digital capacitation, including the higher levels of the programmeimplementation.

• One research report on the viability of an implementation plan to incorporate digitalisation and technologies of 4IR into BE academic curricula wasdeveloped.

- Sixty percent (66%) of the academic institutions have not incorporated digitalisation and 4IR technologies into the curriculum. Literature points to an increased adoption of ICT to support Built Environment education, making teaching and learning more virtual.

• Fourteen of the fifteen appeals due for decision were decided within the statutory time limit of 60 days. The fifteenth appeal, lodged during the fourth quarter, is due for decision during the first quarter of the 2020/21 financialyear.

 

Key challenges and remedial action:

• The slow growth in the core baseline funding and increased costs of compliance is an ongoing challenge, which is not sustainable without focused efforts. The increasing governance and compliance demands continue to precipitate unfunded additional investments in human capacity in theorganization.
• Programme 1.1: annual target was not achieved. One hundred percent of the processes in the COBIT 5 Continuous Improvement Road Map were not implemented. The Information Communications Technology (ICT) Governance Framework was not approved due, more work was required on the framework developed, this will be finalized and be sent to Council for approval in the new financialyear.
• Programme 1.2: annual target was not achieved. The Integrated Electronic Built Environment System (IEBES) was not implemented in the six CBEP. The engagements and agreement to integrate happened with four CBEP. The two remaining CBEP (ECSA and SACPCMP) are implementing independent systems that will be integrated with theIEBES.
• Programme 1.3 target was not achieved due to the final sign off of the knowledge management platform was notcompleted
• Programmes 4.2 and 4.3 were not achieved. The workshop did not happen due to the Covid-19 Lockdown-The Covid Emergency Plan proposed Written Notes as an alternative to meetings and workshops, which was sent out to replace the workshop. No responses were received from the participants. It should be noted that the CBE was able to publish the scope of work (identification of work) for all the CBEP during this financial year. Competition Commission was engaged on several occasions to consult them on the scope of work of the sixCouncils.
• Programme 4.4 target was not achieved. The final report on progress by the CBEP on the alignment of their policies with the Ministerial approved Policy Frameworks was developed; however, it was not submitted to theMinistry.
• Programme 4.5 target was not achieved. Due to the Covid-19 lockdown, the CBEP cancelled their scheduled Council meetings for the approval of thestrategic plan document. The CBE was therefore unable to submit Strategic Plans andAPP of the CBEP to DPWI. They have advised that the documents will be submitted in the first quarter of the new financialyear.

 

6.4. The Independent Development Trust

       Note that due to instability in the entity, the Annual Report has not been tabled at this entity. The analysis of performance and audited financial statements remain outstanding as the AG has not yet completed the audit process.

 

 

7. FINDINGS AND OBSERVATIONS

OUTCOME OF THE ANALYSIS OF THE PERFORMANCE OF THE DPWI and PMTE

 

Key matters:

7.1. Under-performance and under-expenditure of the appropriated budget

The DPWI only achieved 18 (or 48.6 percent) of its 36 targets[22].

It spent R7.76 billion, of its total allocated budget of R7.91 billion for 2019/20. This means that under-expenditure of R146.8 million of the total appropriated budget.

 

7.2. Leadership instability - Human Resource Management

This matter has been raised previously as lying at the root of non-compliance, weak financial management, inadequate monitoring of compliance, and governance challenges.

The analysis in this report showed that key leadership positions in the department and the PMTE is having a negative impact on the operations of the department. Key programmes remain led by personnel that are in acting positions. These vacancies in senior management positions resulted in inadequate monitoring of compliance of financial framework, that has negative effects onprocurement and contract management, and expenditure management.

 

7.3. Risk of malpractice and corruption – ongoing investigations

In spite of establishing the Governance Risk and Compliance Branch, and putting in place steps to proactively deal with malpractice and corruption, the department and PMTE continue to be exposed to such practices. 

Several investigations that are in process implicated officials in senior management positions.

7.4. Irregular expenditure

The value of the irregular expenditure of R190.9 million as per Note 25 of the audited Annual Financial Statements, reported by the AG remainedincomplete.The department reported that senior management was still in the process of quantifying the full extent of the irregular expenditure (R83.9 million under Note 25.2 which details current and prior year irregular expenditure (added to current year), still under determination and investigation. An additional R6.3 million from the 2018/19 financial year represented a prior error that was reported as irregular expenditure; this had since been corrected, following a determination test conducted on procurement processes in terms of National Treasury Instruction Note 2 of 2019/20.The majority of the irregular expenditure disclosed in the Annual Financial Statements was caused by expenditure on State Funerals where payments were made in excess of the contractamounts – this is the same matter that was under investigation.

7.5. Risk to operating as a going concern

The AG included a final note following the Audit Report regarding the possibility that the Department of Public Works and Infrastructure might cease to be a going concern, given certain, financial and material conditions.

7.6. Impact of the Corona Virus National Disaster Intervention Plan on the AFS

The AG also noted the possible Implications of COVID-19 on the Annual Financial Statements of the Department. The department’s role (in terms of the Corona Virus National Disaster Intervention Plan) was to provide accommodation for the quarantine sites to the Department of Health and the mobilisation of Expanded Public Works Programme participants in Public Health Care Services inclusive of Public Health Education, as well as screening and referrals.

 

 

8. RECOMMENDATIONS

The committee recommends that the Minister must ensure that the department reports to it in each of the quarterly performance reports on:

8.1. The recruitment project to get the correct capacity within the department and the PMTE to ensure clean governance, compliance with the regulatory framework, and the PFMA;

8.2. The recruitment project to get the correctly capacitated personnel appointed to the PMTE across the 11 regional offices to manage the immovable asset register, leases, and maintenance contracts.

8.3. A full report on efforts to address the leadership vacuum that continue to threaten stability and consistency that is required in the monitoring, compliance and reporting regime that is required for the department to effect its mandate.

8.4. A report on the change management to strengthen theweaknesses in the control, compliance and risk environment of the department and the PMTE to consistently get a clean audit in the sixth administration. This should include a comprehensive report on consequence management and the action plan, including proactive steps to ensure accountability in terms of all compliance weakness that were noted by the PC on PWI and the AG.

8.5. A comprehensive report on the processes undertaken by the Real Estate and Investment Service (REIS) branch of the PMTE to ensure the completeness of the Immovable Asset Register with specific reference to physical verificationand valuation to address the understatement of government’s immovable assets;

8.6. Progress with the project to get phase one ofthe Telkom Towers Project completed so that the 10 leases for South African Police Services (SAPS) can be released and a saving can be realised;

8.7. A report on efforts of the Construction Policy, Research, and Regulation (Programme 4) to strengthen the public works mandate by getting the public works bill completed within the sixth administration;

8.8. A report on the work that the Construction Policy, Research, and Regulation (Programme 4) is doing with the CIDB and CBE to amendthe construction industry and professional built environment acts to drive transformation in the construction and built environmentprofessional terrains;

8.9. A full report on developments to recoup the payments made to the contractor for the Beit Bridge Project, as well as to address the alleged malpractice that took place related to state funerals for the period under review;

8.10. A full report on outcomes of the investigative processes from 2010/11 to 2015/16, that was further extended to cover the period 2015/16 to 2019/20 related to matters that include state funerals and state functions in the Prestige Programme.

8.11. Acomprehensive report on negotiations with the National Treasury and client departments to address the collection of outstanding debt from client departments; the report to include steps taken to deal with the capacitation in the PMTE to ensure lease management and contracting that proactively prevents losses, and fruitless and wasteful expenditure;

8.12. A comprehensive report on the full cost andexpenditure to date of the Enterprise Resource Plan,the roll out of modules of Archibus and Sage, and capacitation of staff.

8.13. A report on the under-expenditure in Construction Projects Management and efforts to mitigate challenges experienced with contractors and client departments. Include a comprehensive list of projects, regional/provincial location, project managers, professional built environment personnel and the client departments that are involved over the year under review as well as for the medium term of the sixth administration.

 

 

Report to be considered.

 

 

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[1]Section 5(4), the Money Bills Amendment Procedure and Related Matters Act (Act 9 of 2009)

[2]Section 5(1) (a) to (f) of the Money Bills Amendment Procedure and Related Matters Act (2009).

[3]See the effects of this as part of the legal mandate in the section 3.1. below that providesan analysis of the alignment of the Strategic Plan, Annual Performance Plan (APP) and the Annual Reports (AR).

[4] Section 1(a) of the Public Finance Management Act (PFMA) (Act 1 of 1999 as amended by Act 29 of 1999).

[5] S1 and S36 of the PFMA.

[6] Explanatory memorandum on the Act, Division of Responsibility, PFMA.

[7] This committee had its first meeting on 2 July 2019. It used the Fourth Quarter financial Performance Report 2018-2019 as presented to it on 20 August 2019 as the basis on which to identify nodes of weakness and strengths of the DPWI.

[8] Ibid.

[9] Note that these targets are referred to as Sustainable Development Goals (SDGs) listed in “The 2030 Agenda for Sustainable Development”, adopted by all United Nations Member States in 2015.

[10] Ibid.

[11] Government Gazette no. 42657, Proclamation no. 49 of 2019, dated 23 August 2019.

[12] The Constitution (1996), Schedule 4 describes the concurrent mandate of the national department; the Government Immovable Management Act (GIAMA) (no. 19 of 2007) describes its mandated functions as immovable asset manager of national and provincial government.

[13] Public Finance Management Act, (No. 1 of 1999), Chapter 1, under definitions, defines the EA as follows “in relation to a national department, means the Cabinet member who is accountable to Parliament for that department;”

[14] DPWI SP 2020-2025 and APP 2020/2021, pp. 9 and 10.

[15] DPWI APP 2020/2021, p. 62

[16] Note that in various planning documents, this sub-programme is referred to as Intergovernmental Relations (IGR). The name has been changed to emphasise the coordinating function of the DPWI and the PMTE across government departments and levels.

[17] Programme 4 is often abbreviated as Policy.

[18] Department of Public Works (2019), p. 68: the target reads as follows: “Achieve 3.6 to 4.0 of the targeted index score for management practices.”

[19] CIDB Annual Report, 2018/19.

[20] CBE Annual Report (2018/19).

[21]Ibid

[22]Note the anomaly in the APP regarding performance targets stated referred to on p of this BRRR where the department excluded a target related to the performance management index. This finding is made with that in mind: Department of Public Works (2019), p. 68, the target reads as follows: “Achieve 3.6 to 4.0 of the targeted index score for management practices.”