North West Provincial Department of Human Settlements on progress made on recommendations in June 2012 oversight report; FFC briefing on audit outcomes of Department & PSC on Department's capacity to spend its allocated budget

Human Settlements, Water and Sanitation

15 October 2013
Chairperson: Ms B Dambuza (ANC)
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Meeting Summary

The Committee received presentations from the Financial and Fiscal Commission (FFC) and the Public Service Commission (PSC), which were crucial for the preparation of the Budgetary Review and Recommendations Report (BRRR). The commissions would present observations on the key findings of how the Department of Human Settlements (DHS) budget was spent. The commissions could also touch on the spending for the first quarter of 2013, if that information was available. The Committee also received a presentation from the North West Provincial Department of Human Settlements, Public Safety and Liaison on the progress made on recommendations made by the Committee in their 2012 Oversight Report. 
 
The FFC briefed the Committee on the audit outcomes of the National Department of Human Settlements (DHS). They interacted last year with the DHS around the Rural Housing Infrastructure Grant (RHIG) programme. There were still challenges with the programme when looking at the performance of the grant. There also were challenges relating to the Urban Settlements Development Grant (USDG) expenditure. Stakeholders in the budgeting process were currently doing a broad review of what the grants ought to achieve. That process was being spearheaded by National Treasury (NT) and the Department of Cooperative Governance and Traditional Affairs (Cogta) and some of the issues would come in there. That might result in some changes. The departments looked at addressing the challenges that the grants encountered. There had been rumours of relocating the RHIG to another department and the FFC was opposed to such a move. The commission preferred a very stable system where reporting and challenges were dealt with. There also were issues with the actual achieved against the targets that had been set. A trend that had become apparent was while allocations had increased over the years, the number of units delivered on the ground had decreased.
 
The Public Service Commission spoke to the DHS’s capacity to spend its allocated budget according to their business plans and Annual Performance Plan (APP). The function of the DHS was critical as it spoke to the rights that were entrenched in the Constitution. The state had a responsibility to ensure decent housing and sanitation for people. The issue with DHS having the capacity to deliver within the available resources was critical and needed to be addressed. Housing was developmental by nature; it spoke to human dignity and social justice. The commission would share findings on how the budget had performed, and express a view to the extent to which the DHS had been able to spend resources. RHIG was under performing, and DHS had spent less than 50% of the amount allocated for the programme. DHS should comment on that given that rural development was the priority of this government. The Department was spending the budget and yet it was not meeting the targets it set. Some of the reasons the Department ascribed under-spending to included vacancies, the State Information Technology Agency (SITA), delayed invoicing from the Special Investigations Unit (SIU), delayed research studies and the National Upgrading Support Programme (NUSP). The Auditor-General found there were challenges with reliable and corroborative evidence for the variances that had been identified in the programmes. DHS struggled to align the targets and the outputs as per the approved APP. These were internally set documents and once targets had been missed there would be questions. A number of departments still struggled years after the planning framework had been adopted to align properly the targets and the outputs.

Members raised concerns on the possible move to transfer the USDG grant directly to municipalities. This would make it impossible for DHS to monitor and account for the grant if it did not do the transfers. Members raised concerns with the inability and the lack of compliance by senior managers to sign performance agreements, and to do financial disclosures. Vacancies, missed targets, and under expenditure were still areas of concern at the DHS. Members sought clarity on how the entities could ensure compliance to the good governance principles and the professional ethics. Members were less impressed with R311 million paid to two officials on suspension in the past year, and the 48 economists that the Department wanted to employ. A report was requested on this matter.

The North West Provincial Department of Human Settlements (Provincial Department) had met with relevant municipalities in an attempt to confirm the properties in question. Discrepancies had been identified and raised by the Phokwane Municipality with regards to the properties. The province could not finalise all the issues. A member of the public had claimed that some of the properties that were old stock were transferred free of charge to members of the community. A technical team and conveyancers were in Pampierstad to resolve the issue in order to fast track the transfer of the old stock. A similar meeting would be held the following day in Mothibistad and would confirm there were no old stock properties in that particular area. The MEC pushed the team to ensure they met timeframes and the promised target date on winding down the asset register was met. The entity had intended to conclude by the end of October, but an indication from the AG was that audits would be concluded at the end of December.

Members congratulated the province and appreciated the manner it responded to the recommendations.
 

Meeting report

Opening remarks
The Chairperson said the presentations from the Financial and Fiscal Commission (FFC) and the Public Service Commission (PSC) were crucial for the preparation of the Budgetary Review and Recommendations Report (BRRR). The commissions would present observations on the key findings of how the Department of Human Settlements (DHS) budget was spent in 2012. The commissions could also touch in the spending for the first quarter of 2013, if that information was available.

Financial and Fiscal Commission Presentation
Mr Bongani Khumalo, FFC Chairperson, said the presentation would contextualise the audit outcomes. The FFC interacted last year with the DHS around the Rural Housing Infrastructure Grant (RHIG) programme. There were still challenges with the programme when looking with the performance of the grant. There also were challenges relating to the Urban Settlements Development Grant (USDG) expenditure. Stakeholders in the budgeting process were currently doing a broad review of what the grants ought to achieve. That process was being spearheaded by National Treasury (NT) and the Department of Cooperative Governance and Traditional Affairs (Cogta) and some of the issues would come in there. That might result in some changes. The departments looked at addressing the challenges that the grants encountered.

There had been rumours of relocating the RHIG to another department and the FFC was opposed to such a move. The FFC preferred a very stable system where reporting and challenges were dealt with as opposed to shifting the grant. There were issues with the actual achieved against the targets that had been set. The difference between what was planned and what was achieved appeared too big, and DHS should look at revising the targets downward to ensure targets were achievable. One issue that kept coming and should be interrogated was the decrease in the number of units delivered against an increased allocation in respect to the Human Settlements Development Grant (HSDG). Allocations increased over the years, and yet units were on the decline. The FFC was not sure what caused this trend, but was aware there was money allocated to address houses that were substandard. If the trend continued, the backlogs could increase and it would take longer to eliminate them. The Committee should look into the issue and engage the DHS.

The FFC was finalising a report on the two sets of public hearings it hosted in relation to the funding model. It took some time for the DHS to finalise the consultations, but it had since made an input. There was not much difference in issues identified by the DHS and those raised by stakeholders. The report would be tabled on Friday and the report would be shared with the Committee.

Mr Sabelo Mtantatho, Senior Researcher: FFC, said DHS’ budget allocation had tripled since 2006, and that trend was expected to increase to well over R32 billion in 2016. He noted that R23 billion of the R25.1 billion budget was taken up by conditional grants. The DHS expenditure was good, and had consistently clocked around 90% in the past three years. There was a slight dip in performance in the 2012/13 due to RHIG and the provincial transfers that were withheld. The DHS had indicated that Limpopo and the EC could not spend all of their funds in the last quarter. Over 95% of the budget was transfers and subsidies; 3.8% was allocated for entities. Programme 4 – Housing Development Finance – took most of the budget.

He detailed spending performance by programme since 2009/10 and said decreases were noticeable in Programme 1 due to vacancies. Vacancies were still a challenge for DHS, even last year this situation had not changed. Programme 4 recorded little under expenditure and the programme generally showed good performance. There was slight improvement on programme 5. Expenditure challenges were with the RHIG and the EC and Limpopo transfers that were withheld. Both these provinces were historically challenged with spending. This was a concern and needed to be attended to.

Mr Mtantatho took the Committee through a graph that detailed conditional grant spending from 2005-2013. It became apparent two municipalities under-spent the HSDG. He reiterated that although allocation for the grant had been increasing, the number of units on the ground decreased. The USDG was under spending in some metros, but there was a general improvement in DHS’s entities expenditure.

Mr Eddie Rakabe, Senior Researcher: FFC, said the DHS had set out to deliver 320 mortgages, and only 50% of the targets were delivered and on incremental loans only 25% of the targets had been met. There also was a challenge with the National Housing Finance Corporation (NHFC). The DHS performed well on the upgrading of informal settlements as well as on buying suitable land for human settlements.

The DHS exceeded the target on land by 359%, and had met the 100% achievement in the informal settlements upgrades. On land the challenge could well be that targets were set too low. The accreditation of municipalities’ continued well and 6 metros and 10 other were being assessed. There was a significant improvement in the performance indicators and their breakdown compared to 2011. The DHS had revised its annual targets on housing units. The overall attainment rate for targets was 53% and this was concerning.

The AG findings had identified the RHIG as a challenge. Performance indicators were inadequate and incomplete. Non-reliability of targets was another challenge when compared to the information provided with respect to Programme 2, 3, and 5. This was nevertheless not to suggest there was no improvement in the performance of the DHS. Some targets set for 2012/13 were achieved, but there might be a need to further revise some targets like release of land. The 359% was just inexplicable.

He took the Committee through recommendations that had been previously made and the progress made with regards to implementation. He cited the recommendation on accreditation and said it was accepted by the DHS. Six metros were in the process of being accredited. By June 2013 all metros should be accredited to perform the housing provision functions. This would now entail that the USDG money would flow directly from NT to the metros so that they could have a better control of the grant than they currently had.

Government had to pursue development of a spatial compact urban form of cities by developing and adopting appropriate policies and financing instruments. This recommendation too was accepted. Recommendation on strengthening of monitoring and evaluation in the human settlements sector was not fully addressed. Developing a monitoring system for verification of housing projects delivered by provinces also had not been fully addressed. The DHS should continue with reviewing its annual targets in line with capacity to deliver.

Discussion
The Chairperson requested that the Committee be clarified on the USDG being channelled directly to metros. She failed to understand how FFC could support a view that USDG funding be paid directly to metros, while on the HSDG it supported that the money be transferred by DHS to province. There was a disjuncture there, and that needed to be considered. The Committee differed with the view of the FFC that the grant be transferred to metros; for monitoring purposes the money ought to be transferred from DHS to municipalities as direct implementers.

The Chairperson said DHS mandate was to transfer funds and that the money should go to the Department and then got allocated. The challenge with the USDG was that municipalities refused to comply with the conditions of the grant and were building soccer pitches, cemeteries and community halls with the money. They utilised the USDG as they pleased. The grant was specifically intended for bulk infrastructure challenges. The DHS was caught in the crossfire as it had to report on the money, and yet the challenge was down at the local government level.

The Chairperson requested that the comment on allocations peaking and units delivered dipping be contextualised on how the cost of materials influenced this trend. There was a 2007 resolution that the Department needed to conduct a study on the cost of materials and its influence in the output of units. The Committee should resolve to ask the FFC to undertake the study since the DHS had failed. This was within the mandate of the FFC to conduct research on behalf of the Committee.

She said another concerning matter was surrendering funds to NT while there were running projects in some municipalities that required funding. A performing province like the NC could be recommended to get the money that had not been used. Work was happening in the NC and units were visible.

Ms G Borman (ANC) concurred and said using the USDG for any purpose other than infrastructure was of great concern. The Committee picked up that there had been improvement in the DHS’s expenditure since 2009, but vacancies were still there. If they were not filled one could hardly meet the targets and could not spend.

Ms Borman sought clarity on the process of reviewing the targets upward and downward. What guide could DHS use on this aspect to ensure proportionality to the budget?

Ms Borman wondered if an increase in cost of materials influenced the trend of increased allocation against the decrease of units delivered. The City of eThekwini had previously delivered 18 000 units a year and yet now they were down to 5 000. Had any research been done on the increase cost and how it influenced in delivery? She said there were planning issues that were fundamental.

Ms Borman pointed that the eThekwini was missing on the USDG allocations slide. There also was a concern with the NHFC achieving low targets. There were opportunities for the gap market; but both presentations had failed to mention poor performance by entities looking after the gap market. They too were complaining about economic conditions not being good. She requested that the FFC assess the performance by entities on this area of performance.

Mr S Mokgalapa (DA) wanted to know the view of the FFC on possibly extending the USDG to other municipalities that were hamstrung for infrastructure. The metros were failing to spend, and when that happened they did so in areas not intended for the money, and thus a view was to expand the grant to other municipalities.

Mr Mokgalapa asked if there would be any benefits if the USDG were directly transferred to municipalities. It was preferable if the FFC could support the stance of the Committee that the grant be centralised. It would be a challenge for DHS if it were to report on funds transferred where there had been no delivery. DHS could not report on funds it had not allocated. If the Department transferred the funds, it could monitor and assist when there were challenges with the implementing agents. The Committee would prefer that the FFC supported that view.

Mr Mokgalapa said he looked forward to receiving the funding model report; this would go a great deal in helping the Committee when it prepared for the green paper. The main thing that the Committee found hard to comprehend was under-spending on the RHIG. It was also in the interest of the Committee that the FFC indicate what it considered to be the best funding model that could be used to ensure performance on the RHIG and the USDG. The issue was not from where the money was transferred but capacity.

Mr Mokgalapa sought clarity on whether the FFC had engaged the HDA on the land it had released with a view of ascertaining the number of units that could be built on it. How accessible was this land to centres of economic activity. The FFC’s report appeared to be inconsistent with what the AG said. The funding model was the highlight of the presentation. He requested that the status on accreditation criteria be elaborated on.

Ms P Duncan (DA) asked what would the FFC recommend to the Committee on how to reverse the trend of increased allocations and declining unit delivery. This was a serious matter. She said the monitoring and evaluation (M&E) at the DHS was not up to date. DHS M&E unit should be strengthened. Monitoring capacity was concerning especially because 95% of the budget was allocated to municipalities and required an improved monitoring. When one allowed money to go to other spheres of government how could one track spending. The quarterly reporting did not appear adequate. These issues ought not to reflect again in the report of the Department. The M&E was critical in making sure that money was spent.

Ms J Sosibo (ANC) requested an analysis of only achieving the 47% performance targets. Ascribing this to late appointment of service providers was simply insufficient. When the Department did planning it was suppose to know when to appoint and the capacity of the service provider. Why DHS appointed late, she asked? Was it not better for the money to be shifted to other programmes as opposed to opting for rollovers; which was better between shifting to performing programmes and applying for rollovers from NT?

Responses
Mr Khumalo concurred with Members that the USDG indeed was initiated to deal with bulk infrastructure. The challenge in terms of DORA, reporting on the USDG was in relation to the entire capital infrastructure; this was not comprehensive and specific. Members ought to raise concerns in DORA. Department should prepare a submission in the DORA for 2014. NT still welcomed inputs and this was the only way to deal with how and where the USDG was spent.

In relation to availing grants to other municipalities, the Finance Minister, Mr Pravin Gordhan, announced a broader review of all the grants when he made his budget speech. A task team of officials from such departments as Cogta, NT, Statistics SA, FFC, DPSA and SALGA was tasked with this job. The task team reported to a high-level reference group of DDGs. The process would scrutinise all of the grants, but he said he would not want to pre-empt the outcomes of that process.

The FFC had been clear on what needed to happen to priority programmes. For priority programmes there was a need to look at how grant funding was spent, and when grants failed to perform to the required level that challenge should not be addressed by shifting to other sphere. Shifting tended to undermine the broader credibility of the system. There was no guarantee that grants funding would perform once shifted to other programmes. This position had not changed and the Commission was steadfast to that.

The strategic plan was crucial when it came to setting targets. This was part of the resource envelope; looking at financial resources at your disposal, legislation a department operated under, and the people that a department had. It was not easy to get this right. Setting targets was guesswork, but the critical question was how realistic could departments be given the knowledge of the work they undertook, and the understanding of what resources they required in dealing with delivery. Targets setting required a bit more than thumb sucking, but still there was not magic way of arriving at them. This was an intuitive exercised that was informed by the environment one worked in. When the AG made findings, he looked at what one had promised to deliver, and what was achieved.

The point on cost of materials carried some validity when it came to the observation about increased allocations and declining number of units. Indeed, there were issues relating to the costs. There was general price collusion that took place; but also rectification of poorly built houses could be ascribed as having contributed to the decline in the number of units delivered. The truth was that while money had been availed, there were too many shabbily built houses. The DHS needed to look at the accountability framework for those who built houses that did not comply with norms and standards. All of this required effective performance monitoring systems. DHS could elaborate on the point but definitely if there were escalations in prices that could result in the drop of units delivered.

On submissions made to the 2014/15, government departments should be forced to conduct expenditure reviews at the outer year of the Medium Term Expenditure Framework (MTEF). This was where they could indicate what drove the cost and the budget. This should involve the provinces and the municipalities as well, and the country should be able to pick up what the key issues were. This was what could be done to arrest the trend.

The FFC was challenged because its foot soldiers struggled to get information on entities. He promised to request FFC foot soldiers to follow-up on issues that had been raised on the NHFC and other entities. The Committee should remember the figures reflected in the FFC presentation were just transfers. The figures did not tell what the entities had done with the money and if that were to be the case the presentation would entirely be different.

The FFC had been working hard with the DHS on accreditation assignment process meant for the 6 metros. Work had been done there and the FFC supported the process. The Commission had raised issues that had to be addressed and the Department had committed that it would set in place mechanisms to deal with those processes. Capacity would always come up with regards to accrediting municipalities with the housing function. Some municipalities had built the capacity before the accreditation debate started, but had since lost it while the process dragged.

The late appointment of service providers on RHIG was something the Department could share light on. This was the same challenge encountered last year. DHS should indicate where the action plans to address this challenge were. The AG raised this as well. The AG had the dashboard that it used to address performance and one a programme kept falling into the “red” category; it was a clear indication something had to be done.

Mr Rakabe said the WC and Gauteng provinces were ready for accreditation and both provinces were ready to sign. There were challenges in KZN. The gap market was a problem, but a process to address the gap market had been set up. The report to be tabled on Friday would share some light on this aspect.

Mr Mtantatho said leaving eThekwini out on the USDG figures was purely a mistake. The metro was allocated R1.3 billion for the year and all of that money was spent.

DHS comments
Mr Anton Arendse, DHS Chief Director: Planning, said he would not provide a detailed response to some of the issues that had been raised. The FFC presentation concurred with much of what the Department had presented to the Committee. An issue had been raised about exceeding the targets on land acquisition. This was an extraordinary achievement by the HDA given how protracted land negotiations could be. In the preceding year, the same targets were not achieved, and would probably take a long while to record that kind of achievement again. He disputed the suggestion that the target was set too low.

The Chairperson interjected and clarified that the FFC was simply saying the target ought to be revised. That was appreciated, but DHS needed to check where the land was situated, and what could be done with it.

Mr Arendse said that the delivery targets were met was warmly received. But DHS would not respond directly to the increased allocations and decreased number of units comment. DHS reporting had already begun to explain this situation. Even NT accepted that the allocation bought more. He explained that when the norms and standards on RDP houses were upped, it became natural that the number of units in yield terms would decrease. There was that aspect and it needed to be recognised. He cited a scenario with eThekwini where the metro was encouraged to build houses from its coffers, and was promised it would be reimbursed. The metro never got that money and it reflected badly on their books, yet this was a function the metro was not mandated to do.

The Chairperson interjected again and asked why it reflected badly, because the metros had a responsibility as well to provide houses.

Mr Arendse replied he would not venture into the details of the arrangement with the metro, but an undertaking was that money would be taken from the USDG. This was before the accreditation process was introduced. eThekwini used its own funding, only to be reimbursed by the province and that did not happen. The metro’s books showed a gap on a mandate they were not mandated to perform.

Ms Lucy Masilo, DHS Chief Investment Officer, said the issues around the RHIG and vacancies were adequately discussed the previous week. A DDG had been appointed to fill a vacancy in one of DHS’s divisions. At the end of every quarter DHS went out to monitor projects. This division was fully functional, and it compiled reports for the attention of the DG on site visits.

Ms Borman sought clarity on DHS view on making a submission to NT on DORA.

Mr Arendse replied that DHS would be making a submission to the Division of Revenue Bill (DORB). Particular recommendations would be made on the grant framework.

The Chairperson asked if the DORB recommendations had been prepared already, and if so, could the Committee be furnished with a copy.

Mr Arendse replied that the NT had requested that and it would be availed to the Committee.

The Chairperson appreciated the FFC’s work and pleaded with themto continue the good work.

Public Service Commission presentation
Mr Ben Mthembu, PSC Chairperson, said the function of the DHS was critical as it spoke to the rights that were entrenched in the Constitution. The state had a responsibility to ensure decent housing and sanitation for people. The issue with DHS having the capacity to deliver within the available resources was critical and needed to be addressed. Housing was developmental by nature; it spoke to human dignity and social justice. The commission would share findings on how the budget had performed, and express a view to the extent to which the Department had been able to spend resources.

Ms Moira Marais-Martin, PSC: Northern Cape Commissioner, said the presentation was prepared with mainly information from the Department’s annual reports. It looked at such matters as financial management and whether the Department upheld and responded to the AG comments. Under-spending on the RHIG programme continued to be a challenge for the Department. Page 218 of the annual report indicated a contingent liability, which meant there was risk that some people might want to claim from DHS.

Details of the under expenditure on the RHIG were contained in page 285 of the annual report. DHS had spent less than 50% of the amount allocated for the programme. DHS should comment on that given that rural development was the priority of this government. The Department was spending the budget and yet it was not meeting the targets it set. Some of the reasons the Department ascribed under-spending to included vacancies, the State Information Technology Agency (SITA), delayed invoicing from the Special Investigations Unit (SIU), delayed research studies and the National Upgrading Support Programme (NUSP).

The AG found there were challenges with reliable and corroborative evidence for the variances that had been identified in the programmes. DHS struggled to align the targets and the outputs as per the approved annual performance plan (APP). These were internally set documents and once targets had been missed there would be questions. A number of departments still struggled years after the planning framework had been adopted to align properly the targets and the outputs.

The Public Protector (PP) had conducted an investigation into the Accounting Officer (Director General), but by the time the annual report was prepared the investigations had not been completed. There were spending norms that were indicated by NT month-to-month and quarterly. Departments had to comply with those norms, and if deviations occur then there had to be explanations. The DHS had consistently under-spent from August to March 2013.

New initiatives and systems were put in place in the development orientation expected of all the public service departments. This resulted in a creation of new cities and this was crucial in addressing the housing backlogs. Total of 243 municipalities were supported with water resources and the development of their Integrated Development Plans (IDPs). The process was assisted with the fact that sanitation programmes were prioritised. The Department supported 45 Water Services Authorities (WSAs) in seven provinces. There had been significant delivery achievement but that had to be contextualised against the targets set by the DHS.

On professional ethics, the PSC looked at the extent to which the DHS completed the investigations that had been referred. There had been an increase in the number of cases reported but success rate and completion remained unsatisfactory. Financial disclosures were a challenge at DHS. If managers continually failed to disclose their financial interests, there could be conflict interest with senior managers wanting to do work for the DHS.

A concern had been raised by the Department of Public Service and Administration (DPSA) about officials doing business with government. DHS had previously done well on disclosures, and that record was maintained in 2011. The story was entirely different for 2012/13; no disclosure forms were received from senior managers. This implied senior managers could neither be assessed nor held accountable. She indicated 87% of the disclosure forms had since been received. This was another area the Department might want to comment on.

Commissioner Marais-Martin also highlighted the issue with precautionary suspensions. The challenge with these was the cost associated with them. Precautionary suspensions should not exceed 60 days or two paid months. In 2011/12 no one was on suspension, and in the year under review 2 officials were on suspension. Cases seemed to drag for too long and were mainly financial misconduct cases - of 268 cases being investigated 265 were pending. This had a potential to result in irregular expenditure being incurred by the DHS. The DHS was generally transparent, and that its website was user-friendly. All documents like the annual reports were uploaded onto the website. This was in line with the objectives of the Protection of Access to Information Act (PAIA). Annual reports were key in analysing accountability. The only concerning thing was that the DHS strategic plan was still not on the website.

There was a high vacancy rate at the DHS and this was a concern. The DHS had implemented a turnaround strategy in 2012/13 that improved the turnaround time; but that had not improved the vacancy rate. She also highlighted issues with the grievance management. When a grievance was lodged, the DHS should follow that up, and then if an employee was still aggrieved that could be launched with the PSC. DHS did not stick to its processes internally. But there was a serious attempt to manage grievances at the DHS.

Commissioner Marais-Martin said a lot of areas needed improvements at DHS. Spending trends should improve as they pointed to inadequate financial management controls and that mitigating strategies were required. DHS did not mention how it could better manage the process of transferring money to the entities and the provinces. Employment equity was also looked at. The Department still grappled with employing women and people with disabilities at senior management level.

The Commission was made aware of a complaint DHS was investigating in the EC on housing and the management of funds allocated for housing. The report would be availed to the Committee once the investigation had been completed. The complaint regarded how contracts were awarded for building and to what extent the province monitored. It looked as though substantial money had been used. There had been a marginal drop in spending, but a much more significant drop was on reaching the targets. The AG findings on RHIG’s material under-spending should be addressed, as the programme was an important area of emphasis of the current administration. Performance management was problematic. If the Department was healthy and compliant it assisted with accountability. The PSC was not sure if performance assessments happened at senior management level, if it did not happen that became a big challenge. There was insufficient capacity to deal with cases reported in the anti-corruption hotline. The Department was nevertheless in a huge recruitment drive to fill vacancies. There was noticeable progress in the upgrading of informal settlements programme.

Discussion
Mr Mokgalapa commented that the PSC presentation confirmed what was on the Annual Report. The AG and the FFC had also made the same findings. But, it was interesting that the PSC brought something new in terms of governance and the professional ethics. Too much focus had been on under-spending and not on governance.

Mr Mokgalapa sought clarity on the statement that out of the 268 cases investigated last year “265 were pending”. Disclosures by senior managers and the performance agreements were concerning. Internal controls at the DHSwere not up to standard, and this pointed to the IT challenge that DHS was confronted with.

Mr Mokgalapa asked what the PSC could do to ensure compliance to the good governance principles and the professional ethics.

Ms Borman said there was correlation between vacancies, under-spending and missing the targets. She proposed that presentation be prepared on the investigation by the PP into the DG. She said evaluations were a matter of concern.

Ms Borman sought clarity on whether there was a challenge with investigating and closing off cases. What was the problem? She said failure to submit disclosure forms was more administrative than operational. Why were the disclosure forms not submitted?

Ms Borman said the cost of keeping people on suspension longer than the 60 days should worry the Department. The Committee’s interest was that all the money should go to delivery.

Ms Sosibo sought clarity on the suspension with pay rule, and asked whether payment of the officials continued if they remained suspended after the 60 days.

Mr Mokgalapa sought clarity on whether it was correct that the two senior managers on suspension cost the DHS R311 733 million, as per the presentation.

Commissioner Marais-Martin replied that the figure was contained in the Annual Report that was prepared by the DHS. This meant the officials involved were quite senior, or it was a mistake. And if that were to be the case, then action ought to be taken against the official who presented the figure, as the annual report was a public document.

The Chairperson said the DHS should provide the Committee with a copy of the AG’s management report, and also clarify the Committee about the cost of using consultants. She voiced discomfort with DHS seeking to employ 48 economists whilst it was and engineering-oriented department. This was precisely the reason DHS did not move forward; this was not a department for economic development; what would these economists be doing?

The Chairperson said the DHS also lacked a risk management strategy. Also missing from the presentation was the number of senior managers doing work for the DHS, and they were not included even in the annual report.

PSC Response
Commissioner Mthembu replied that the role of the PSC was to ensure that disclosure forms were submitted on time. With regards to financial disclosure framework officials were expected to submit their financial interests to the PSC no later than 31 May. The PSC would then have to inform the executive authority of officials who failed to submit by deadline. Often the executive authority would indicate corrective measures to the PSC, but some would not bother and would also not take any disciplinary measures against the senior managers.

Performance agreements were submitted to the PSC, but often there were logistical challenges. Once performance agreements had been submitted, they were quality assured. Failure to comply with this requirement also resulted in the officials concerned being reported to the executive authority. Every year the PSC would issue a report of which departments had complied or not. That report was then submitted to the Committee on Public Service and Administration, who in turn decided on the next course of action. The commission did not have enforcement authority; it only provided information to the Committees to enforce compliance. The commission looked to revise the PSC Act in order to make provision for enforcement of the disclosures and signing performance agreements. In 2010, a report was submitted to the Committee on Public Service and Administration on non-compliance by a certain department. The Committee subsequently summoned all senior managers to Parliament for an explanation. A number of good things happened the following year and there was 100% compliance by that department.

Ms Marais-Martin said generally government departments were challenged with providing information and pointing out risks. They also lacked capacity to investigate anti-corruption cases. The PSC had compiled a report that looked at the capacity, or lack thereof, to implement the Tracker Act (Prevention and Combating of Corrupt Activities Act). There were minimum requirements that departments needed to adhere to. DPSA was also pushing to establish ethics officers within departments. The intention was to ensure departments put in place mechanisms to combat corruption.

The matter concerning officials on suspension was a concern. She was not sure if DHS had made a mistake on the figure provided in the annual report. It was advisable that departments should not be quick on placing officials on suspension, but should rather look where in the structure such officials could be temporarily accommodated. Departments just put officials out of the system and yet they got paid. There was a provision in law that officials could be placed elsewhere while being investigated, somehow departments did not like the provision. When an official was suspended, the decision to place him out of the system had to be based on whether the official might destroy evidence or interferes with witnesses. The country operated in a judiciary system where a person was innocent until proven guilty. This made departments struggle with finalising cases.

DHS response
Mr Arendse commented that he would not be able to provide answers to some of the issues raised. He said the invitation did not specify that it would look at general items within the DHS.

The Chairperson interjected and said the issues raised by the PSC related to information that was already available, and that as a senior manager, he would have sat in meetings that addressed the matters contained in the annual report.

Mr Arendse replied he would prefer if DHS was allowed time to go back and prepare written responses to some of the information that was required. Regarding the targets it would be useful to breakdown the numbers, and look at the operations of the DHS and the actual delivery. He said regarding the hotline comment, it was useful to note, a report that was submitted to one of the Cabinet committees. That report indicated that the DHS responded more to the calls than the presentation seemed to be suggesting.

The Chairperson asked where would the PSC got its information. She requested that Members called the number, to see if it worked.

Mr Arendse indicated he was done with his inputs, and said DHS would take the presentation back and would provide a response. DHS had established cordial and healthy working relations with a number of entities including the FFC. Probably it had to do the same with the PSC; this was not to suggest cosy relationships but an honest and cooperative relationship.

The Chairperson pointed out that the Committee needed a report on performance agreements and the PP investigations into the accounting officer. She requested that the officials respond on performance agreements and the cost of using consultants.

Ms Masilo replied the due date for submission of performance agreements “was tonight”. All the outstanding agreements would be signed and submitted to the PSC.

The Chairperson interjected and sought clarity on exactly when the information was required.

Ms Masilo replied the due date was tonight. She explained that the Deputy Minister, Ms Zoe Kota, undertook the trip to New York but that was approved only when she had come back. She requested that DHS be allowed to go back and prepare further explanation on other issues like irregular expenditure, and the 48 economists.

The Chairperson reminded the officials that they needed to provide the AG’s management report to the Committee.

Ms Marais-Martin commented DHS officials ought to remember that the information presented was from the DHS’s own documents. If anything was incorrect someone in the DHS ought to be held accountable. The PSC did not have an adversarial relationship with any department, as earlier insinuated. That the PSC did not have good working relationship with DHS was regrettable. This was an oversight body and had a responsibility to brief any Portfolio Committee to understand the information contained in the annual reports.

The PSC would take the explanation that the information would be submitted tonight, and would raise that with the Department of Performance, Monitoring and Evaluation (DPME). She pointed out that the DHSt had failed to point out reasons for the less than 50% expenditure on the RHIG. It might be that there were legitimate reasons for under-expenditure and the PSC accepted that, but being defensive about them would not help achieve anything. The commission accepted that the information would be submitted by deadline tonight.

Mr Mthembu clarified that the deadline referred to was only set by DPME, only after departments failed to honour the deadline of 31 May. He insisted that the DHS missed the deadline.

North West Provincial Department of Human Settlements presentation
The Chairperson noted the commitment by the Eastern Cape and the North West (NW) MECs who always availed themselves whenever their provinces were appearing on technical issues in Parliament. The North West Provincial Department of Human Settlements, Public Safety and Liaison (the Provincial Department) would make a presentation on how it responded to the Committee’s recommendations during an oversight visit last year. Upon arrival from oversight visits, the Committee had to report to the Speaker. The Committee had to reflect on progress in the reports it compiled. This was the basis of inviting the province.

Adv Chris Moller, NW Housing Corporation (NWHC) in the Provincial Department, said the presentation would give progress report on the process of winding down the corporation, and what it had been doing with its properties in the NW. The Provincial Department had met with relevant municipalities in an attempt to confirm the properties in question. Discrepancies had been identified and raised by the Phokwane Municipality with regards to the properties. The province could not finalise all the issues. A member of the public had claimed that some of the properties that were old stock were transferred free of charge to members of the community. A technical team and conveyancers were in Pampierstad to resolve the issue in order to fast track the transfer of the old stock. A similar meeting would be held the following day in Mothibistad and would confirm there were no old stock properties in that particular area.

The MEC pushed the team to ensure they met timeframes and the promised target date on winding down the asset register was met. The entity had intended to conclude by the end of October, but an indication from the AG was that audits would be concluded at the end of December. Officials worked vigorously with the AG to confirm the assets. It would be vital to repeal the Act, and deal with the remaining assets in terms implementation protocols with regards to the concerned provinces.

Financial statements audits for 2009-2010 had been finalised and awaiting the report from the AG. The AG was currently busy with 2011/12 audits, and would thereafter finish off with 2012/13 and 2014. The 2014 Audit would delay because the entity would have to close off its banking account. A submission had been made to the provincial treasury for an approval to open a trading account that would only deal with the revenue of the corporation. This would not be a normal trading account; but only to receive revenue from the properties that would be disposed off, and then transfer that revenue to the provincial exchequer account.

Once the bank accounts had been closed, and the new trading account opened, NWHC would be able to finalise the audits for 2014. The NWHC had submitted the contingency plan to the executive council (Exco) where it proposed issues to be dealt with in terms of contingency plan like the litigation. Unfortunately closing down the corporation would not make litigation go away. There would have to be a process to manage that, and a suggestion had been given to Exco for approval.

The assets register had been divided into three categories: debtors (there were 1153 assets in this category and were bought using money from the Public Investment Corporation (PIC), investment portfolio of properties (there were over 4000 of these properties that belonged corporation, but there was no proof of signed offers to purchase or lease agreements. The contingency team would have to regularise these agreements in relation to the properties) and the inventory portfolio (this consisted of 1695 properties that were mainly vacant stands.

The intention was to first look at which of the vacant stands could be utilised by the provincial department of human settlements. If they were found not to be suitable for human settlements the land would be disposed off at market value with proceeds taken to the provincial fiscus). It was the intention to collect all outstanding revenue for the corporation and dispose that to the provincial exchequer account. Lastly, there was an intention to conclude investigations into alleged irregularities.

The finalisation of audits delayed this process, as it was dangerous to allege payment irregularities. The audit process would confirm if any payments were made irregularly so on these properties. The corporation would follow that up with the National Prosecuting Authority (NPA) to conclude the processes and if need be to prosecute those fingered to have been involved in some kind of irregularities in the sale of these properties. The NW did not intend dumping these issues on other provinces.

Mr Nono Moloyi, the NW MEC for Human Settlements, indicated that the Exco approved the contingency plan on 2 October. He clarified that when it came to the irregularities there was a team that comprised the NPA, the Hawks, and departmental officials to deal with the matters. Once the audit had been completed they would start with the processes. He indicated a provisional document had been availed by the AG in this regard for initial investigations.

The Chairperson congratulated the province and said this matter nearly slipped through the cracks.

Mr Alfonso Manual, NW Human Settlements Chief Director (CD): Strategy, said he would provide details on the rest of the recommendations that had been made on the oversight. The recommendations regarded partnerships with mining houses and issues of bulk infrastructure. Various mining houses like Anglo Platinum had availed pieces of land to the Department for purposes of providing top structures. He indicated negotiations were still ongoing with Lonmin on the piece of land they had availed to the DHS but only to renege and request that houses be built only for Lonmin employees. The provision of bulk infrastructure remained the competency of local sphere that reported to Cogta.

He read the entire document on recommendations and how the department had attempted to address them.

The MEC clarified that discussion had been ongoing with Lonmin’s vice presidents about the land the company had promised to donate. The company’s Chief Executive Officer (CEO) then wrote the department a letter to this effect. It was against this background that the department included the portion of land on its revised business plan. Unfortunately, Lonmin had reneged and were talking about things that were not necessarily in the agreements about the land. The company wanted the department to build houses for their employees.

He raised the matter with both the CEO and the vice-president to mainly indicate their behaviour was unacceptable. They had promised to discuss the matter internally and would come back to the department. There might be delays with construction on this piece of land while Lonmin executives disagreed. But it was hoped they finalised the matter as soon as possible so that construction started on time.

Discussion
The Chairperson sought clarity on NHBRC quarrels with the province and the rectification of 405 units. The Committee had also resolved that municipalities where the mining towns projects would be happening would be accounting on the projects. Members felt the municipalities were the right people to account on the projects and not the provinces and the National Department.

The MEC commented the province would move with speed on the mining towns’ projects.

Mr Mokgalapa asked if the department had been able to appoint a permanent Head of Department (HOD).

The MEC replied no; the department had been awaiting a qualifications verification process for the candidates that had been short-listed. That had since happened and the names would be submitted to the Premier for approval. Hopefully the Provincial Department would have an HOD by December.

Ms Duncan said she was happy with the progress made by the province. She sought clarity on the title deeds backlogs. The percentage of 60.5% backlogs appeared slightly larger; what strategies would the MEC put in place to address that? More than a million people in the country in RDP houses were without title deeds. This was unfair and tantamount to ripping people off an opportunity to be part of the mainstream economy. The issue of security of tenure had to be addressed.

The MEC replied there had been a programme of going all over the province providing title deeds. Out of 210 000, only 91 000 had not been issued and that could not be 60%. The programme was still ongoing, and the provincial department intended to finish off the backlog in this financial year and, if not, at least record 80% achievement by year-end.

Ms Mnisi said the partnership with mining houses was laudable, especially given how problematic this partnership had been in the Northern Cape. The performance of the HDA was satisfactory in the province. She said she was still concerned with sanitation in the province. Could progress on eradication of bucket system be elaborated on; there were serious challenges on this aspect in the province.

The MEC said there were no bucket systems in the NW, and that he still looked for the buckets in the NW but could not find them. The challenge might be there in informal settlements, and these structures should be dealt with once and for all. He said a study the Department commissioned indicated those who lived in shack were often people who had houses, but opted to let them to foreign business people for income generation purposes. Most of those who stayed in the shacks were employed people and could afford houses.

Another official replied even if that were to be the case, sanitation was a function of local government. But as part of the programme for human settlements, where buckets were found they were dealt with.

The Chairperson clarified that the official was speaking about scheduling of RHIG. Sanitation was with human settlements and that it had accepted this responsibility.

The official continued and said the province nevertheless provided a comprehensive services on all projects, including roads, sanitation, and electricity.

Ms Sosibo sought clarity on whether conditions of living for people at Popo Molefe informal settlements had improved. She asked about a dilapidated hostel the Committee had found on its oversight visit.

The MEC said in terms of the Human Settlements Development Grant (HSDG) the province attended to sanitation matters. As it related to money allocated, the National DHS should take responsibility. Such money was earmarked for the NW, but controlled nationally. The National Department appointed service providers and contractors; last time the DHS indicated it had appointed uMvula Trust and the IDT. The province did not have any say except to indicate that it ought to be involved in the planning of human settlements projects in the province.

Mr Mokgalapa congratulated the province on winning the Govern Mbeki award for human settlements projects, and also for attaining an unqualified audit opinion. He said although the acting HOD performed well, the province should appoint a permanent HOD.

Mr Arendse commented that the entire sector grappled with targeting for specific programmes. There was another issue was bulk infrastructure provision. SIP 4 dealt with bulk services across the NW. The USDG went to the metros, and yet when one looked at the settlements that grew the most were the next tier towns – the mining towns. They got too little money that was woefully inadequate from the MIG. This validated the point by the Committee that the USDG be extended to other municipalities.

Another official clarified that the NHBRC had been engaged on the matter of the 405 houses due for rectification; the entity had already assessed the affected houses and priced them. But the province could not move since the matter was still sub judice. The SIU had been involved on the matter and were investigating the company that built the houses. But also that the houses were illegally occupied in 2009; the municipality had attained a court order to evict. The NHBRC could not go ahead with rectification until these issues were resolved, and the contractor had to bare the cost. The provincial department would not incur any cost.

The Chairperson commented the Committee was opposed to the eviction of people, as officials had allowed them to overstay in the houses. Such an action would be in contravention of the Prevention of Illegal Evictions (PIE) Act provisions. The Committee was not in favour of officials using the court system to govern, and evicting citizens whom they were duty bound to serve. Alternative accommodation would have to be found for those people. The provincial department and the municipality had not complied with the PIE Act. How was it possible that government could litigate the people it served, she rhetorically asked. People needed houses, this was the simple reason they occupied those houses. They also indicated that the provincial department took too long to allocate already built houses to people. The task for the province would be to go into the area and identify how many people qualified for the RDP housing, service stands, and or bonded housing. The court action was despicable.

The meeting was adjourned.
 

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