DHS & entities 2021/22 Annual Report: Auditor-General & DPME input; with Deputy Minister

Meeting report

Ms Corné Myburgh, Business Unit Manager, Auditor-General South Africa (AGSA), said it was their privilege to share with the Committee the 2021/22 audit outcomes of the human settlements portfolio and the sector. She hoped that the insights shared would assist the Committee in its oversight role and enable it to move closer to public confidence where the citizens could also have a more positive lived experience from the portfolio.

AGSA presentation
Mr Londoloza Songwevu, Senior Audit Manager, AGSA, presented the audit outcomes of the human settlements portfolio. [Please see the electronic presentation for full details, including the specific recommendations to the Committee on pages 40 and 41.]

Overall, the portfolio had remained stagnant regarding the audit outcomes over the years surveyed - from 2019 to 2022. The only improvement was in the Community Schemes Ombud Service (CSOS) which, over the last period, had resolved their issue of completeness of revenue. There was regression in the Estate Agency Affairs Board (EAAB) and the fund linked to it. The entity that replaced the EAAB, the Property Practitioners' Regulatory Authority (PPRA), had been active for two months before the year-end and received a qualified audit outcome.

On overall performance, the portfolio only achieved 51.4% of its targets. Just two of its nine entities, the National Home Builders Registration Council (NHBRC) and the CSOS, reported significant achievements of their targets in the 2021/22 financial period. This raised concerns about whether the entities in the portfolio were fulfilling their different mandates. The National Department of Human Settlements (DHS) evaluated the quarterly performance reports of the entities and provided recommendations and action plans to improve. However, there was no evidence that the monitoring process had led to improvements in performance.

On financial management and compliance, there was a weak control environment around the production of financial statements in the portfolio as a whole. All the financial statements submitted to AGSA for audit had material misstatements except for the financial statements of the DHS itself. Most of these issues were resolved before AGSA concluded the audit. Exceptions were the Housing Development Agency (HDA), the EAAB and the PPRA. AGSA’s recommendations around the control environment and producing financial statements were not necessarily implemented and action plans had not yielded the desired results. If this did not change going forward, the audit outcomes of the portfolio were unlikely to change.

There were no going-concern issues with any of the entities. There was a regression in compliance with key legislation. For the first time in a number of years, the DHS found itself having to report on irregular expenditure, a big jump from the 2020/21 period. A big chunk of irregular expenditure resulted from the Social Housing Regulatory Authority (SHRA), which had an interim board approving transactions related to procurement processes. This would be deemed irregular by the Social Housing Act. The entity had since appointed a permanent board.

The closing balance of irregular expenditure continued to increase, reflecting the portfolio’s regression in consequence management. 83% of irregular expenditure was not dealt with, with the HDA having not instituted any investigations to ascertain and assess irregular expenditure. NHBRC officials who made/permitted irregular expenditure left the employment of the entity before investigations were concluded.

There was no improvement in the average of total targets achieved in terms of the DHS’s Medium Term Strategic Framework (MTSF). A key concern was the target of “number of title deeds registered”. The human settlements sector continued to under-plan for achievement. There was a planned target of 39% but it achieved only 29%. The sector still could not achieve its lower targets.

Key AGSA recommendations included monitoring action plans to ensure issues were addressed to avoid repeat findings. Consequence management should be applied to prevent recurrence of irregular, and fruitless and wasteful expenditure.

DPME presentation
Ms Pinky Kekana, Deputy Minister of Planning, Monitoring and Evaluation, suggested that the Department of Planning, Monitoring and Evaluation (DPME) made their presentation immediately as there were certain areas that overlapped with that of AGSA. For example, title deeds were a ticking time bomb from the side of the Department, AGSA was picking it up and it remained an unfinished matter. Presenting consecutively would allow Members to see the synergy between the presentations.

Ms E Powell (DA) and Mr T Malatji (ANC) supported the recommendation from the Deputy Minister.

Deputy Minister Kekana introduced the team from front-line monitoring that was responsible for DHS-related issues. The team used various research methodologies and relied on institutions like StatsSA and other evidence-based research.

Ms Kefiwe Sethoabane, Chief Director, DPME, presented the report on the assessment of the DHS’s annual performance. [Please see the electronic presentation for full details.]

The DPME used a variety of data sources, including government think tanks, research institutions, universities and multilateral organisations, to analyse progress. It also conducted verification visits to selected sites to understand the impact of policy in the lived experience of users. Its Results-Based framework focused on achieving outcomes and impacts, particularly the long-term widespread improvement in society.

The DHS’s total expenditure for the period ending 31 March 2022 was R30.9 billion, representing approximately 98% of the allocated funds. Overall, 64% of the targets set in the Annual Performance Plan (APP) for 2021/22 were achieved. Of 53 targets, 34 had been achieved, 14 partially achieved and five not achieved by 31 March 2022. The DHS’s targets set in the MTSF 2019 – 2024 were likely to be achieved, except for title deeds. The highest performing programme was Programme 5: Affordable Housing Programme with 86% of targets achieved. Programme 2: Integrated Human Settlements achieved 58% but did not achieve 17%, while partially achieving 25%.

Key achievements included: 136 Priority Development Areas (PDAs) declared (100%); exceeding the target of 94 with grants allocation (Human Settlements Development Grant and Informal Settlements Upgrading Grant); the delivery of subsidised houses, serviced sites and rental units increased from 252 846 to 295 497 (46%); and policy revision of the Financed Linked Individual Subsidy Programme (FLISP). Persistent challenges included: slow progress on implementation programmes for PDAs with seven completed of 94 targeted; lack of progress on rezoning of 16,3395 ha of land acquired – a target for the 2021/22 financial year.

The main recommendations to the Committee were that it should support five issues identified by the DPME: the release and rezoning of land for housing; the resolution of policy issues to allow upgrading of informal settlements; the establishment of an appropriate funding mechanism for Human Settlement programmes; and the need to address the title deed backlog, including Committee support for an intergovernmental Title Deed Summit.

Discussion
Ms N Tafeni (EFF) welcomed the annual report. The Auditor-General (AG) had raised concern during both the 2019/20 and 2020/21 annual reports about internal control deficiencies in the DHS. While the AG found no significant deficiencies in internal control in 2021/22, it was noted that the DHS did not have sufficient monitoring controls to ensure the proper implementation of the overall process of planning and that reporting was improved. Why was the reported underlying data used to determine the amount of the annual performance report not reviewed appropriately to ensure that the correct amounts had been used in the reports?

A further question directed to the DHS about its response to the AG’s report was interrupted by the Chairperson.

The Chairperson reminded Ms Tafeni that the DHS was not in the meeting and could not respond to questions directed to it. The DHS would be addressing the Committee that afternoon. Members could only ask clarity-seeking questions to AGSA and the DPME who were providing their views on the annual report. This would allow Members to have context and understanding of the issues raised, to better interact with the DHS.

Ms Tafeni said that in the second report, an amount of R51.5 million was not transferred and was set aside to fund procurement of a property in Cape Town. The transfer could not be made as the HDA failed to provide the required Section 38 Public Finance Management Act (PFMA) certificate, for the DHS to process the transfer. What was the nature of the acquisition of the property and why did the HDA fail to provide the required certificate? Challenges related to rezoning land within PDAs were also due to the submission of applications. For example, at Emfuleni, they frequently changed the layout plan and therefore the application for rezoning could not be concluded. How was the Department responding to this challenge at the municipality? A total of 50 777 serviced Urban Settlements Development Grant (USDG) sites were not completed out of an annual target of 55 000, meaning that only 7.78% of the target was met. Some metros did not provide performance information. What were the reasons for the failure of metros to provide performance information? She had joined the meeting late, so she was uncertain if she heard the presenters well. Some of her questions were written before the meeting.

Ms S Mokgotho (EFF) sought clarification on whether she could ask the DHS questions now and whether they could only refer questions to AGSA and the DPME. After receiving the clarification, she directed her questions to AGSA. The AG had mentioned that the HDA had not instituted any investigations to ascertain and assess irregular expenditure during the past years. No action had been taken on the reported irregular expenditure. The AG had stated that the NHBRC officials who made and/or permitted irregular expenditure left the NHBRC before investigations were concluded. Had AGSA made any recommendations to the Minister of Human Settlements to enforce audit recommendations and to ensure that they were implemented without fail? Could AGSA make a recommendation of what should happen to the Director-General (DG) and the DHS’s accounting officers for not implementing the recommendations made by the AG?

Ms Powell welcomed the presentations. The Committee had to be deeply concerned with the information presented that day. Notably overall, only 51.4% of targets were achieved for the whole portfolio. 71% of targets were not achieved at the HDA, 63% were not achieved at the National Housing Finance Corporation (NHFC), 85% were not achieved at the Property Practitioners Regulatory Authority (PPRA) and 67% were not achieved at the EAAB. Some provinces did not provide basic performance information on their failure to deliver houses. The financial management control deficiencies were stark in the reports received for the past three years. Again, there was non-compliance in procurement and contract management, quality of financial statements and, most importantly, the prevention of irregular, unauthorised, and fruitless and wasteful expenditure recorded at various entities.

Non-compliance on preventing irregular, unauthorised, and fruitless and wasteful expenditure had been recorded at six of the nine entities. The portfolio had not adequately implemented action plans developed to respond to non-compliance raised in prior years. Entities continued to transgress laws and regulations governing financial matters as had previously been reported. The Committee noted that R943 million worth of irregular expenditure (83%) was still not dealt with. Again, at the HDA, fruitless and irregular expenditure continued unabated. The HDA had not instituted any investigations to ascertain or assess irregular expenditure during the past years. No action had been taken on the reported irregular expenditure identified during the audit, resulting in a qualified opinion on the irregular expenditure disclosure. The entity had instituted no processes for consequence management due to a lack of adequate oversight responsibility being exercised by the accounting authority (aka the board) and a lack of accountability by management. Again in the 2021/22 year, uncompetitive and unfair procurement processes amounted to R189 million and there was no evidence that the HDA was instituting any remedial, criminal or disciplinary action for previously reported irregularities. She said it felt like Groundhog Day with the same report coming to the Committee three years in a row. Her understanding was that it meant corrupt officials were being protected. Despite previous guarantees to Parliament, no action had been taken. This was also despite the accounting authority guaranteeing that punitive action and consequence management would be guaranteed for previous transgressions. On the EAAB and the Estate Agency Fidelity Fund, there were qualified audit findings on compliance due to misstatements in the annual financial statements and non-compliance with supply chain management processes. As was raised repeatedly when the EAAB appeared before the Committee, it had had all sorts of excuses about why the allegations were not material but now there were findings by the AG on this matter. One root cause of some of the regressions at the entity that the AG had noted again, and that was raised in Committee repeatedly, was its inadequate IT system design. Although the entity had said for years that it would address the IT system, it was still not being customised to meet the specific requirements that classify transactions. She wanted to further address a question to the Committee.

The Chairperson asked Ms Powell to address her questions to AGSA and DPME first before addressing questions to the Committee.

Ms Powell said that Parliament, in the National Assembly, had adopted the Committee’s 2021 BRRR report (which referred to the previous year’s AGSA report and the DHS annual report), This was an official report that contained recommendations for remedial action. One of the three recommendations adopted by the Committee and by Parliament to prevent the recurrence of issues seen that day was that management across entities had to exercise oversight responsibility regarding internal controls. They also had to take effective and appropriate steps to prevent irregular and wasteful expenditure. Investigations had to be conducted and consequence management had to be instituted on affected officials. Audit action plans to address root causes of irregular, and fruitless and wasteful expenditure had to be developed. And importantly, progress on the audit action plans, investigations and consequence management had to be provided to the Committee quarterly. Secondly, the DHS had to provide progress reports to the Committee on the results of all investigations into allegations of fraud and corruption.

Additionally, the DHS had to ensure that consequence management was taken against corrupt officials. It had to furnish the Committee with progress reports by “the second quarter of this financial year” which was now the previous financial year. It then had to take disciplinary actions against staff who caused this expenditure and inform the Committee of all actions taken by the first quarter of this financial year, which had already gone. The Committee had to regularly monitor and follow up with both the executive authority, the Minister and the accounting officer and authority to the DG and the boards on the progress on all audit action plans put in place by the DHS and entities to ensure improvement in audit outcomes. The Committee was required to monitor vacancies to ensure the stability of leadership, follow up with the entities that incurred irregular, fruitless and wasteful expenditure, and enforce consequence management. Despite the recommendations that progress on all audit action plans, investigations and consequence management should be provided for the Committee quarterly, the AG noted that the HDA audit outcome had remained stagnant from the previous financial year due to material misstatements and an even weakened control environment. This had seen an increased number of internal control deficiencies during the year. The AG also noted management’s slow response in addressing and improving key risk areas through the audit action plan, which remained the key cause of adverse findings. It was clear from these findings that, in part, this had been allowed to happen because the Committee was derelict in fulfilling its own recommendations made before Parliament in summoning and requesting that the executive authority, the accounting authority and the accounting officer present their quarterly plans on turnaround to the Committee. Almost a full year had passed and the Committee had yet to receive a single quarterly progress report on turnaround plans from an entity. Letters requesting a parliamentary inquiry from herself to the Office of the Chairperson into the affairs of the HDA had been ignored. The Committee had instead accepted time and again the fruitless and unfulfilled guarantees of entities when they came before the Committee once a year. Regarding the PFMA Section 81.1, an accounting officer for a department or a constitutional institutional commits an act of financial misconduct if that accounting officer willfully or negligently fails to comply with certain requirements of the PMFA and makes or permits unauthorised expenditure. She was interrupted by a Member.

Ms Sihlwayi raised a point order and reiterated that the Chairperson’s directions that if Members wanted to address the DHS on the basis of the two presentations, that time would be in the afternoon. She said she listened to the very valuable questions from Ms Powell. She said that the Member needed to address her questions directly to the DHS in the Committee’s presence.

The Chairperson requested that Ms Powell finalise her questions.

Ms Powell said she was addressing the AG and had material questions on legislation. In terms of Section 83.2 of the PFMA, every member of a board is individually and severally liable for financial misconduct. In terms of  Section 80.4, a charge of financial misconduct against an accounting officer or an official referred to in the legislation must be investigated, heard and disposed of in terms of the statutory conditions of the appointment. In terms of Section 65(b) of the PMFA, the executive authority, that being the Minister responsible for the department or public entity, must table in the National Assembly the findings of a disciplinary board and any sanctions imposed by a board which heard such a case of financial misconduct. She had written a number of letters to the entities requesting these Section 65(b) letters. From the HDA’s perspective, there were no Section 65(b) findings which meant that no disciplinary action had been taken in terms of financial misconduct despite the mounting irregular expenditure. Could the AG guide the Committee regarding the Public Audit Act and the PFMA, given the lack of punitive action demonstrated for a third year in a row by the HDA? What remedies were available to individual Members of the Committee to hold individual officials and members of the accounting authority and the boards liable for these adverse findings? Could the AG provide the Committee with some guidance on the specific recommendations that the Committee should be making to the Minister and the new or the acting DG to take in terms of consequence management, punitive action and disciplinary measures? Most Members of the Committee were tired of seeing the same findings presented to them year in and year out. The Committee needed to do some internal introspection and reckoning as to why it had not fulfilled its BRRR recommendations, tabled in Parliament, regarding the quarterly hearings with the entities. Was it permissible at that stage for any of the Members to go and lay criminal charges against the accounting authorities of the boards for the massive financial transgressions, with specific highlight to the R189 million of the HDA, in terms of the provisions of the PFMA and the Public Audit Act?

Ms N Sihlwayi (ANC) said she missed the first presentation as she was at the airport. She would speak on the DPME’s presentation. The presenter spoke about a process of result-based management where they could see that targets were not near their achievements and a strategy needed to be established to help turn around the situation. She could imagine that the DPME would not be able to do that outside an internal monitoring structure of the DHS. Would it not be helpful for the DHS to have internal audit and internal monitoring structures with which the DPME met before the medium-term assessment where it could know the performance of the Department programme to programme? That needed to be done because when they came at the last moment, the damage had already been done. So she wanted to check whether it was possible that the DHS have internal audit and monitoring structures outside the programmes. On the issue of the slow progress on the title deeds, was the DPME aware that municipalities should have a technical land planning department or unit to address the issues of zoning schemes and land schemes and be able to give an Erf verification before a house was built? The issue of title deeds’ slow progress was because technical processes had not happened and houses were just built on Erfs that were not well prepared for the property owner. Could the DPME go down and understand why the title deeds were not progressing? The problem was that title deed applications would be sent to the land department, when all which had happened was the municipality’s role and responsibility. Could the DPME go down and understand the detail of the process behind the slow progress of the title deeds? In the DPME’s recommendations, which she liked, the last one stated that it would have a summit of all responsible departments to avoid the issue of a silo mentality. The DPME did not mention South African Local Government Association (SALGA), the Department of Cooperative Governance and Traditional Affairs (COGTA), and especially technical departments, to avoid some of the issues. If they could include those she would appreciate it.

Mr A Tseki (ANC) said that AGSA and DPME gave the Committee comfort in saying that something was being done to ensure that the portfolio delivered on what it had promised. They said that achieving an unqualified or clean audit did not automatically reflect on service delivery. Money could be spent at 100% or 98% as the DHS did in its good financial reports, but achieving its targets was a challenge and the Committee needed to note this. The DPME ran short of giving the Committee solutions to the persistent challenges of the DHS. Could they provide solutions, because in the last three years, the Committee had been asking about consequence management and it did not see it coming? He did not want to say that this was because of the Minister of Human Settlements, Ms Mmamoloko Kubayi. But even before she came to address the Committee, he emphasised that these issues were done by warm bodies. If the Committee was talking to the people who were not doing justice to the plans, what more could the Committee say? Could AGSA and the DPME comment? From his position, he had lots of questions because every quarter, the same questions were being asked but targets were not being met.

The DMPE raised the Theory of Change for Human Settlements. That weekend Members were going to an international conference with the Council for Scientific and Industrial Research (CSIR). Among the agenda items, they would be dealing with informal settlements and slums. The human settlements Theory of Change fits very well into the agenda. The presentation slides followed the constitutional requirement that says everyone has the right to access to housing. But in the absence of having that access, what was next? He always asked himself “What if a human rights lawyer could present a very objective or qualitative case against the DHS using this clause?” He knew that there was a proviso somewhere that said delivery depended on financial resources and other things in terms of policy. But he believed the Department would lose that case, particularly in instances where money had been used up, but there were no achievements regarding the plans. Those were contradictions in his view. The National Development Plan (NDP) indicated that South Africa was the most unequal society. This reflected that the portfolio was not moving in the direction it was supposed to. The presentation reflected an overall view of performance in terms of units, land and title deeds marked red. The title deeds were worse. What could the Committee say to the DHS that it had not said before? He requested AGSA and DPME to assist the Committee in this regard. He could not even ask specific questions because the DPME had presented principles everyone had agreed on when they joined Parliament in 2019. The portfolio was only at half the target of 300 000 serviced sites that it said it would deliver in five years and only 18 months were left. How could such challenges be dealt with?

The Chairperson welcomed the presentation and said that it was empowering. On the achievements, the DHS had performed at 51% in the audit, but the budget reflected a 98% spend. The correlation between the two did not sit well with her. What could be the problem in this regard? AGSA said that it had engaged the Department and the Minister on findings and the recurring findings. As AGSA interacted with the DHS, did it understand its governance structure regarding the internal audit and audit committees? Were they doing what they were supposed to do? If so, did they give management their opinion, and was management implementing those opinions from the audit committees? She liked the slide that illustrated the structures that were supposed to work together to ensure that outcomes were beneficial to society [Slide 3]. It showed the audit committee and the internal audit committee. Were the governance structures in the system not fragmented such that they did not talk to one another? She was asking this because, looking at the audit committee of the DHS, she was uncertain as to whether they just audit the Department function only without looking at the entities. If so, as the DHS interacted with entities, were they following up on issues? What were they saying about the issues of the governance structures? The last time the Committee interacted with the EAAB, the Committee called the HDA as well and came to assist in presenting on their stabilisation of the entity. She had raised the issue that the EAAB did not have internal audit and the CEO had been suspended. It was towards the time of writing the annual reports. Would these issues not affect the outcome of the annual report itself because the critical people who were supposed to take decisions, such as a CFO, an internal auditor, and the CEO were not there? The chair in that meeting promised they would do their best—but now the entity had regressed from an unqualified to a qualified audit opinion. Even the Fidelity Funds, which had never been qualified before, were now qualified. The issue was then whether the governance structures that were supposed to assist oversight in the DHS and the entities were effective. Were the audit committees manned by people who had the required capacities? The Committee met with the HDA on 25 May 2022, after the Committee had received a presentation from the Special Investigating Unit (SIU). The Committee asked the chair why the SIU was busy with investigations and why the entity was not doing its part to deal with the structures. On the same day, the HDA presented that they were investigating and even submitted a condonation report to the Committee that Members had asked them to submit. Now it was the AG’s finding that the entity had not done anything. Was this because the entity dealt with irrelevant things or did they not deal with root causes? Because usually, the Committee asks that the entity’s action plan deal with the root causes.  

She welcomed the issues raised by the DPME. AGSA raised the issue that in the MTSF, the DHS had approved the target and it was approved by Treasury when it was in fact supposed to be approved by Cabinet. She heard the DPME confirm this and sought clarity on this point. The Strategic Plan and APP were presented to Parliament and if there was any amendment, were they not supposed to be presented to the Committee so that it could be aware that there was that amendment of the target? She welcomed the proposal of the title deed summit because the Committee intended to have a workshop with the DHS on title deeds and the Committee would want to participate in this proposed summit. On the reporting mechanisms, was it not the time to assist the DHS with these mechanisms as it reports, particularly to Parliament and the DPME? The reports that were given to the DPME and National Treasury had to be presented to Parliament as quarterlies because pertinent issues were being dealt with in those reports. But when those reports came to Parliament, the format could result in missing issues.

Deputy Minister of DPME Response
Ms Kekana noted what the Chairperson had raised about the sequencing of reports between the DPME, the Committee and Parliament. On the amendment of targets or when a department wanted to amend its APP, that process could not arrive in Parliament without the Committee having gone through it and approving it to become amended through Parliament. That meant that difficult questions had to be asked when amendments were made. Such as: “did the Department just thumb suck when it originally did the APP and its targets? Why was it coming in the middle of the year to make those amendments?” Certain things reflected “malicious compliance”—with people just ticking boxes, although they realised that certain things or targets could not be achieved under normal circumstances. She liked the approach of AGSA the previous day, where it had been presented before the DPME and was pleased that the Committee had taken the same approach. The reality was that all departments had monitoring and evaluation units. Even if the DPME was able to give departments reports indicating where they were lacking, no act empowered the DPME to provide feedback, and the departments simply did not comply with certain things on those reports. Therefore, the DPME reviewed this issue and the status of the DPME so that whatever they said goes. The DPME’s Minister, Mr Mondli Gungubele and the DG had created a forum for all DGs and Ministers where they take them through all the issues. Ministers became very angry when Minister Gungubele reported on their underperformance. So the Portfolio Committee was empowered to put the DHS on its toes because the DPME had reports that were authentic. They monitored and conducted on-site visits to determine where there was underperformance. The Deputy Minister apologised that she had to leave the meeting early.

The Chairperson thanked the Deputy Minister for being part of the meeting. She said that they would meet at the summit on title deeds. The Committee should be a part of that summit so that the title deeds issue was resolved as soon as possible.

AGSA Response
Mr Songwevu responded to questions about the investigations of the DHA’s irregular expenditure that was consistently reported on. He said that most of the board committees in the portfolio were appointed around November 2021. This was a commitment that the Minister made when she took over the portfolio. In the AG’s first interaction with her, she had said she was working on ensuring that all the entities at least had a permanent board appointed. She had to be commended that in most cases, most boards, at least most boards of directors, were appointed by November. This meant that at the HDA, for example, the board would have had three or four months to understand the issues that would have been raised previously. So when AGSA reported that there were no investigations on previous reported irregular expenditure, AGSA would have referred to the fact that the board or at least the interim board that was there before November did not investigate previous irregular expenditure. The new board would not have had enough time by 31 March 2022 to do anything about those issues raised. He said that when AGSA started its new audit cycle for 2023, one of the first focus areas it planned was to engage with those entities that had reported irregular expenditure and with their new boards to get a sense of what action had been taken on consequence management/investigations on the irregular expenditures. Then when AGSA had sessions with the Committee (such as the one earlier in 2022, where they discussed the status of the recommendations and implementation thereof), AGSA could indicate whether the new boards were indeed doing something or not doing anything about this irregular expenditure. The Chairperson had mentioned that in May 2022, (which would have been beyond the 2021/22 audit cycle), the Committee had met with the HDA board, indicating that something had been done about irregular expenditure. This had to be welcomed. He recommended that when the Committee met with AGSA early in 2023, there needed to be a focus on what the new boards were doing about this irregular expenditure.

Responding to Ms Powell’s request for recommendations that could be made by AGSA around financial misconduct and the lack of remedies, he suggested that in instances where financial misconduct had been reported, [the Committee should ask if] something had been done at least by the Department. For example, the investigation against the CEO at the EAAB. In instances where financial misconduct was reported, an investigation was carried out. This was a requirement of treasury regulation 4.1.3. The concern was that this seemed to not being happening at the HDA. The new board indicated that they were already investigating irregular expenditure. He would also recommend that the Committee ask the HDA whether any financial misconduct had previously not been reported to the Committee. With the new board having already demonstrated the appetite to perform investigations, further engagements on information around any specific reporting on financial misconduct should be easy for Members to get. Once the investigations had been performed and completed, perhaps it would be clearer for the HDA board to come back to Parliament and indicate what the investigations had identified about instances of financial misconduct. The recommendation, for now, was to allow the board to perform those investigations.

In response to the Chairperson’s comment on engagements with the Minister about the recurring findings raised in the presentation, the Minister was familiar with them and made commitments to try and address the issues. This included commitments around the MTSF processes and the amendment of the transfer of grants to provinces. On concerns and observations raised about governance structures per the entities, those governance structures did make recommendations but it might be found that there was a slow response from management to implement those recommendations. Similarly, when AGSA brought external auditors, they would make recommendations but the management was not necessarily responding with the urgency needed to address those issues. This then linked to the role of the DHS, which was responsible for performance monitoring of these entities. Issues were raised and recommendations were made but AGSA could not find evidence on whether the DHS went back to those recommendations it had made to address the findings reported to the entities. This was the discussion that was being had with the DHS. It was not enough to just raise findings on its monitoring processes and then not go back and see if the relevant entities had improved upon those identified issues. The Chairperson was correct in saying that the vacancies for senior executives impacted the control deficiencies. The AG was seeing this.

Over the years, looking at the portfolio, the outcomes of those entities with executives in place were not as bad as those that did not have executives appointed. But once executives were appointed in those entities that had vacancies, one would find that those with previously had permanent executives also had vacancies. This, in turn, would regress their control environments. Overall in the portfolio, one entity might have improved because it would have made the necessary appointments. However, because of resignations and dismissals in other entities, overall in the portfolio, one would see no improvement in the control environment. This was something that the DHS had to get right to ensure that there were no vacancies in senior executive positions across all entities at all material times where possible. As AGSA engaged with the role players within the accountability ecosystem, they gained insights, which they locked in and tracked going forward.

Ms Myburgh noted that there was more than one request by Members on what AGSA could recommend in holding entities accountable and ensuring improved performance. Parliament was embarking on the 2022 BRRR process and in her understanding, this was where the annual report was being reviewed, financial statements were being analysed and there was a general assessment of performance against available resources. Based on that assessment, the Committee could include recommendations on the future use of resources, linking these to the budget. These recommendations could potentially assist in improving future performance and holding entities accountable.

Ms Mmakgomo Tshatsinde, DDG: Public Sector Monitoring and Capacity Development, DPME, introduced herself and said that since Deputy Minister Kekana had left, she would wrap up the DPME’s response to the questions from the perspective of management.

Ms Sethoabane thanked the Committee for their questions and comments. She responded to the question from Ms Sihlwayi on whether it was possible for the DPME to work outside the current internal monitoring structures and on the process of the DHS in terms of doing the monitoring per programme. The DPME was working with the DHS, which had its own internal monitoring unit. DPME did not get to the level of working with the DHS’s internal audit unit. She agreed with Ms Sihlwayi that the slow progress on title deeds was due to the planning processes at the municipal level, where most things were not happening. Layout plans were being submitted and needed to be approved in the process of township establishment. Technical problems affected the processing of title deeds, particularly the ones with historical blockages like the 1994 and post-1994 title deeds. With the current title deeds from 2014 to 2019 up to the MTSF ending 2024, technical problems should not be experienced because the projects were approved before the contractors went on site. There were a number of reports that had been produced concerning the title deeds. One of these considered is the Title Deeds Restoration Grant that was set aside by National Treasury to address the title deeds problem. There was a need for a working relationship between municipalities and provinces, but it was not taken seriously. Some provinces did not put aside the budget for processing title deeds. So technical problems affecting the processing of the historic title deeds were possible but were not supposed to be happening with the current ones.

Mr Tseki had said that government could spend money but not achieve its targets. When projects were being implemented, it would be found that the budget was spent, but attempts to align the budget with the targets achieved were not successful. The process was to ask what the money had been used to buy, when the budget and the targets were being matched.

The DPME welcomed the request for solutions to the persistent challenges. The solutions that the DPME had proposed were captured in its recommendations, where it asked the DHS to focus on certain issues. One of the recommendations was that the DHS focus on the issue of rezoning the acquired land. This meant that the DHS had to work with all the relevant departments that dealt with rezoning. Also, when the DHS planned, it had to consider the timeframes required for rezoning. It was critical to prioritise this issue. If the DHS did not put this in their plan, rezoning would not proceed accordingly. Another solution that was proposed was the upgrading of human settlements. The DPME had picked up the inter-governmental relations (IGR) issues that the DHS needed to tackle. It needed to focus on capacity, especially at municipal level, when planning for informal settlements upgrading. The DHS also had to address the institutional arrangements to inform the whole value chain involved in housing development. The title deeds were the worst performing indicator, hence the DPME requested that Presidency and the DPME coordinate a Title Deeds Summit that would bring all relevant parties together, including the South African Local Government Association (SALGA) to ensure intervention on this indicator. The bad thing about the issue of the title deeds was that people were living in their houses without title deeds and could not move [i.e. sell their houses legally]. This affected economic growth because informal sales were made. She agreed there was no correlation between budget expenditure and performance indicator percentages. It was correct to say that the MTSF targets were revised not only for human settlements, but for all the priorities. The DPME tabled the revision of the MTSF targets to Cabinet. This was approved, which was why the results were reduced. Another reason that the targets were reduced was that the budget was cut during COVID. Budget re-prioritisation was required to respond to the pandemic. Under the MTSF, the DPME reported bi-annually. It had to report by June each year, and there would be another report soon, including the mid-term review report. Going forward, the DPME’s report would close the gaps alluded to between the expenses reported to Parliament by the DHS and National Treasury.

Ms Mmakgomo said that she was happy that the DPME’s reports were welcomed and being used. The DPME had quite extensive information and she had also asked that supporting documentation be submitted. There was the DPME’s consolidated report and there was one for Priority Five, where the DHS fits in in terms of the Seven Priorities of Government. There was also a report which was specific to human settlements. All the priorities were interlinked and working together. Government was trying to break the issue of working in silos. It was essential to look at the pack of information available on the DPME’s website and could be provided to the Committee at any time. The pack contained information on the extensive and intensive analyses the DPME had done. The issue of consequence management was a challenge. From the DPME’s monitoring perspective, sector monitoring was responsible for the MTSF. Recommendations were made in the DPME’s report on the question of irregular reporting. This was provided to the Committee and Cabinet. The DPME raised the issue that it did not have a lever to ensure that departments responded to its recommendations. The legislative side of this issue was being dealt with by the planning unit through a bill for the DPME to have teeth. In the 2021 cycle of reporting, the President took it upon himself to take over this part. All the DPME’s recommendations, as approved by Cabinet, were Cabinet decisions. DPME was then instructed to write letters with those cabinet decisions, directly to individual ministers. The letters were written to Ministers, co-chairs of clusters, and DGs. The DPME would be tracking performance. So the first year reports would be received at the level at which Cabinet was taking responsibility because the DPME had failed as its recommendations were not taken seriously, unlike Cabinet decisions. The departments were now reporting as 14 October was the deadline for the MTSF reporting, after they had reported on their APPs.

She noted the request about irregular reporting and the alignment in terms of the reporting template. The first time she came to the Committee with the team that was presented on this issue in 2020, the Committee was not at all happy with the DPME’s report, having said that it had cut and pasted from departmental information. She said the DPME had now changed how it reported and would be going into more detail in its reports. She could not remember which Member was at that time when the DPME was almost chased out of the meeting and was told that she was giving the Committee a pacifier. This was why she was happy to see the reports being accepted. However, she acknowledged the need for that alignment because the DPME not only dealt with reporting. Previously, there was a unit in planning which was dealing with the Electronic Quarterly Performance Reporting System (EQPRS) which everybody reported on and went to the writer of the APPs. Her section dealt with the ‘so-what’ question regarding the MTSF in the medium term and gave deeper information. Hence they were always chosen to come and represent the DPME in all spheres. If the team knew what would assist the Committee, it would customise the presentation. It would be very helpful so they know how far to go and what to put in the presentation. DPME was trying to empower Parliament and cabinet by contextualising and finding out what support was needed for what outcomes. It did not have a “one presentation fits all” approach. She appreciated guidance on how the DPME could serve the Committee better in terms of reports. The quarterly reporting unit was scared to come to the Committee because previously, the Committee was not happy with them, hence her team came with a little more detail on the quarterly reports. If a quarterly reporting mechanism was requested, her team would go back and work with that unit and other units, such as the front-line unit. Cabinet told her unit that it was not easy to see the difference in terms of the outcomes because the change reflected was very slow and the same things were being reported. This was why it was prescribed that the quarterly reporting be reduced to bi-annual reporting.

Regarding the amendment to the MTSF reporting, the MTSF itself was also linked to ministers. Ministers said they could not be measured on the pre-COVID targets, which is what pushed the DPME towards amendments. It was monitoring this closely as it also did not want under-targetting, which would defeat the purpose of the MTSF which was a five-year chunk of the NDP and would build up towards a measurement of the NDP. The APPs were a one-year build up to the MTSF. The DPME was busy with that alignment to ensure it did not water down plans. On Mr Tseki’s concern about the possibility of losing cases brought against the DHS, she agreed that indeed it would because things were not being done and it was frustrating. As a 62-year-old, it took her 34 years to get her title deed. What she did when she found out about the challenges of obtaining title deeds was to do a sit-in in Mankweng. She refused to leave until they attended to her. She had to use her own resources in the process, having even been made to pay R32 000 to get her clearance regardless of her receipts. The process was frustrating until she pulled out her government card that showed she was in the presidency, which was not appreciated. As government, DPME had to be sensitive to the communities regardless of where they were or whatever they did. This matter had to be looked at closely because these were constitutional matters and they were dealing with people’s lives who were being frustrated if government could not perform. The slow progress on all the issues could be addressed if they all worked together as a unit. She welcomed the Title-Deed Summit which the DPME had been pushing for. She requested continued help to sharpen the DPME’s tools and reporting mechanisms to add value in the long-term and improve the country.

The Chairperson thanked the DPME and AGSA for their responses. The Committee had been empowered to interact with the DHS through both the DPME and AGSA’s reports. She thanked the respective executive teams for their useful presentations. The Committee would continue to interact with them to improve its oversight role so that the people get what they deserve.

The AGSA was released so that the Committee could deal with in-house matters.

The Chairperson said that the Committee had received a request from the House Chair on its programme. It has to finalise the Section 76 Bill [Housing Consumer Protection Bill] to give the NCOP time to unfold with the processes of the Bill. The NCOP would be required to go on public hearings and do the same processes that the Committee had done. The request from the Office of the Chairperson was that the Committee’s report had to get to Parliament before the recess. The Committee programme had to be amended in this regard.

The Chairperson went through the proposed amendment to the Committee programme from 12 October to 2 December 2022.

The meeting was adjourned.