Dinaledi Schools Grant expenditure report for the third quarter of 2012/13: hearings with National Treasury & Western Cape

NCOP Appropriations

08 May 2013
Chairperson: Mr T Chaane (ANC, North West)
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Meeting Summary

The National Treasury (NT) said that the key outputs for the Community Library Services Grant included the purchasing of library materials, library services for the visually impaired, construction of new libraries, the upgrading and maintenance of existing libraries, and the appointment of additional library staff.  At the end of the third quarter, 60.2% of the grant had been spent.  Over the 2014 Medium Term Expenditure Framework, provincial departments’ budgets were set to be significantly augmented in order to enhance capacity in the sector,

It was currently dealing with issues such as the delayed invoicing from SITA for the library information management system, as this delayed payments and spending, resulting in poor reports; staff shortages in Supply Chain Management (SCM) units, delaying the procurement processes; and staff in SCM units in some provinces not being adequately skilled to ensure a smooth and efficient procurement process.  The appointment of contractors not capable of carrying out infrastructure projects had resulted in delays and poor workmanship.  The technical and management shortcomings within Public Works departments used as implementing agents for projects, had contributed to delays in delivery.

The Committee raised questions about the trend of spending in the provinces since 2009,the  transfer of grant funds by provinces to big cities, the keeping back of grant money to balance provincial books, service level agreements; and under-spending.

The Department of Arts and Culture (DAC) presentation drew attention to the inconsistent salary structures that existed between library employees in local governments and those in provincial governments. The DAC had since requested the Department of Public Service and Administration to intervene by putting in place a system that was consistent between the two spheres of government. Staff retention and turnover posed a serious challenge in the sector.  The policy gaps at local government level created an unsustainable funding challenge to service delivery. The inability of provinces to fund the total cost of the service remained a challenge for some municipalities.

R597 million had been allocated for the 2013/14 period, with the major share going to the predominantly rural provinces. 14 new libraries had been completed in 2012/13, while 37 libraries had been upgraded in 2011/2012. Services for the visually impaired had been established in 36 community libraries.

The Committee raised questions about the inadequate allocation to Limpopo, the effect of transferring funds by provinces to the municipalities, the implications of rolling over funds, the location of upgraded libraries in KZN, the disparity between figures presented by the NT and the Department, and the issue of employing temporary staff.
 
The Limpopo Department of Sports, Arts and Culture (LDSAC) reported that no projects had been planned for the 2012/13 financial year due to the backlog experienced in the previous years.  The Senior Manager for library services, the Provincial Librarian and the Infrastructure Manager did not possess the requisite skills and competencies to manage libraries. The Department’s reliance on the capacity of the LDPW to implement and monitor infrastructure projects was also a challenge which impacted on the outcomes.   Other challenges included the LDSAC SCM unit’s lack of capacity to procure other services required for libraries; the non-alignment of infrastructure projects to the Integrated Development Plans (IDPs) of relevant municipalities, as well as the plans of LDPW and LDSAC; the inability to mediate land disputes between the municipalities and the traditional leadership; and the change in the administrators at the LDPW that led to processes having to start afresh whenever there was a change.

The Committee raised questions about the specific location of new libraries, the lack of timeframes for the deliverable outputs, the Department’s struggle to complete projects dating back to 2009, variances in the cost of building libraries, and the basis for the allocations to Limpopo, in the absence of projects for 2013.

The Eastern Cape Department of Sports, Arts and Culture (ECDSAC) said that challenges affecting the provinces in terms of the Community Library Services Grant grant were cross cutting.  The delivery of infrastructure was a challenge to all departments, and as a result, the Cabinet had instituted a Provincial Infrastructure Unit to assist all departments to deliver infrastructure.  There had been renovation projects that had been cancelled by the implementing agent due to the non-performance of contractors.  ECDSAC had found itself in a difficult situation because it had two implementing agents - the Department of Public Works dealing with renovations, and the Coega Development Corporation that dealt with the construction of the new libraries. There were challenges associated with the two agents, such as engaging contractors that were not in ECDSAC’s database and hence posing a problem with the Auditor General. This had resulted in it taking a long time to appoint service providers. Some contracts were slowed down due to the cash-flow projections – in some instances, the contractors would just leave site. Implementing agents were also using emerging contractors with cash-flow problems, something that impacted on the performance of the construction.  There were four projects that had taken off late due to land allocation issues and council resolutions by the municipalities.  There were challenges with the compensation of employees, but the conditions of employment for contract workers were not attractive for many of the people that the ECDSAC employed, and since most could not be employed on a permanent basis, there was a high turnover in the library sector.

Members raised questions about emerging contractors, the adjudicating and vetting of tenders,   whether one monitoring coordinator was sufficient for 145 schools in the province, and the disparity in the figures presented.
 

Meeting report

National Treasury: Community Library Services Grant 3rd and 4th Quarter Expenditure – 2012/13
Mr Edgar Sishi, Chief Director , Provincial Budget Analysis: National Treasury, said that the Community Library Services Grant was established to transform urban and rural community library infrastructure, facilities and services (primarily targeting previously disadvantaged communities) through a recapitalised programme at provincial level, in support of local government and national initiatives.

Key outputs
Key outputs, according to the framework to the grant published in terms of the Division of Revenue Act, include the purchasing of library materials, library services for the visually impaired, construction of new libraries, upgrading and maintenance of existing libraries, and additional library staff appointments.

Spending as at 31 December 2012
At the end of the third quarter 60.2% of the grant had been spent, with Gauteng at 77.3%, KZN at 81.9%, Mpumalanga at 71.5% and Western Cape at 73.6% the high spenders. The lowest spenders were the Eastern Cape at 42.2%, Limpopo at 37.9% and North West at 50.6%.  Gauteng had slowed down its spending in terms of year-on-year growth, following its problem of over-spending in the previous years.

Spending as at 31 March 2013
The Eastern Cape had not recovered from the poor spending of the third quarter, with its year-on-year growth in the fourth quarter showing a 28,7% under-spending on the grant. There were declines in expenditure in KZN (-1.6%), Limpopo (-1.3%) and Northern Cape (-14.3%).  Gauteng and the Western Cape had spent all the funds of the grant, with percentages of 101.2% and 100% respectively.  This was mainly due to the transfer of a vast majority of the funds to municipalities that were operating the libraries in their metropolitan centres.

Performance information
The National Treasury (NT) had a business planning process for the grant and provinces submitted the overall plans of their targets for the coming year through the Department of Arts and Culture to the National Treasury, and reports were made every quarter against the targets. Although the provinces had targeted to purchase 177 200 library material items, only 60116 had been purchased.  This was an indication of a problem in performance and the setting of targets. Provinces were setting targets that were higher than what they could achieve.  The Eastern Cape, North West and Limpopo were the main underperformers due to poor planning and significant delays in the Supply Chain Management (SCM) process, from the tender to the delivery of materials.

The provinces had built five new libraries – Eastern Cape (one), KZN (two) and Limpopo (three) --against a target of three. This was not a case of overachieving, as there were balances from previous periods. Some of the delays in the delivery were related to reliance on the Department of Public Works in a number of provinces to get the libraries built. The provinces had provided 32 libraries with new furniture against a target of 39.  In Limpopo, the slow tender and adjudication process had contributed to under performance.

Other developments
During the 2012/13 financial year, the sector, along with provincial departments, had to deal with the reclassification of certain library material as part of the assets of the Department. Previously these were considered consumables, but the Auditor-General had required that these be reclassified -- a process that would take the provinces a considerable period of time.

Over the 2014 Medium Term Expenditure Framework (MTEF), provincial departments’ budgets were set to be significantly augmented. Provinces were set to receive an additional R385 million in 2014/15 and R680 million in 2015/16 for purposes of enhancing capacity in the sector, addressing issues arising from the function shift, and providing for dual purpose libraries.

Transfers
Gauteng had transferred about R29.8 million of R56.8 million (53%) of the funds to municipalities – mostly to the large cities and towns in the province such as City of Johannesburg, City of Tswane and Ekurhuleni. These funds had been transferred in terms of the budget documents of 2012/13, for transparency purposes. Western Cape had transferred about R47.8 million out of the R56.1 million (about 85%) to municipalities. A major share of the money was to the City of Cape Town and George.

Provinces had signed service level agreements with municipalities and reporting was relatively good, and so it was now possible to gauge and see how the money was being spent. However, due to the difference in the financial years, spending reports by the municipalities reflected a lag as at 31 March 2013.  Municipalities had used most of the funds to purchase materials and furniture, and to pay staff as part of their operational activities.

Challenges
The National Treasury was currently dealing with issues of delayed invoicing from SITA for the library information management system, as this delayed payments and spending, resulting in poor reports; staff shortages in SCM units, delaying the procurement processes; and staff in SCM units in some provinces were not adequately skilled to ensure a smooth and efficient procurement process.

The appointment of contractors not capable of carrying out infrastructure projects resulted in delays and poor workmanship, as had happened in the Eastern Cape.  The technical and management shortcomings within Public Works departments used as implementing agents for projects, contributed to the delays in delivery.
 
Discussion
Mr C de Beer (ANC, Northern Cape) said that R97,1 million had not been spent in terms of the grant allocation.  Researchers should do the homework for the Committee on the trends of spending of the grant since 2009. There seemed to be no progress, with challenges recurring and being brought up each year – something was wrong in the command structure that was responsible for giving instructions on monitoring and evaluation.

Mr B Mashile (ANC, Mpumalanga) asked for the relevance of the ‘projected outcome’ column in the third and fourth quarter financials for the grant.  The fourth quarter financials indicated that the Western Cape had spent 100% and Gauteng 101.2% through transfers to the big cities – did the figures reflect funds transferred or funds spent? There was a need for a proper reflection of expenditure.

Mr Sishi responded that the inclusion of the ‘projected outcome’ column was a standard requirement that provinces complete a projection.  The National Treasury reported on the spending by municipalities, but the report in terms of what the municipalities spent in terms of section 71 of the Municipal Finance Management Act would be coming out at the end of May 2013. The NT report would detail what the municipalities were doing with the grant.

The Chairperson said that what Gauteng was doing, by transferring the money to municipalities, should stop. The Committee had made recommendations to this effect but the practice was still on-going.

Mr De Beer added that some municipalities kept the grant money back to be able to balance their provincial books.

Mr D Joseph (DA, Western Cape) asked if all libraries in the provinces had service level agreements, or were some managed by provinces? On the inability of contractors to deliver, he asked if there were adjudication committees to screen all applicants by looking at their history of work and the minimum criteria for the delivery of quality work.

Mr Sishi said that the landscape could not be the same. In the Western Cape, many libraries were run by the municipalities and therefore the province transferred the money to them so that they could do the work, but in the Eastern Cape the province was running the libraries, especially those under construction. The capacity to run a library in the City of Cape Town was quite different from the capacity to run a library in a municipality in the Eastern Cape.

On the issue of poor contractors, he said that the NT had asked Public Works why it was difficult to apprehend bad contractors. Further questions had been raised on the vetting measures in place and adjudication processes. The NT was working with the Construction Industry Development Board on developing a system where people were graded in terms of the work they could do. This had to be done to ensure that emerging contractors were not hindered from coming into the system.  

Mr W Makhubela (COPE, Limpopo) said that the use of the grant to pay staff, as had been reported by the National Treasury, was a misdirection of the grant.

Mr Sishi replied that it was part of the framework of the grant that in instances where a need existed, provinces and municipalities could use some of the money to pay staff.

Mr B Mashile (ANC, Mpumalanga said that where money was transferred to municipalities by the provinces as implementing agents, the provinces should get reports on expenditure from the municipalities and have these verified before making their own reports on expenditure. The NT had to be vigilant on the reports from the provinces on the expenditure of the grant.

The Chairperson added that in instances of under-spending, monies were usually returned to the National Treasury – was it the same with provinces under-spending?

Mr Sishi said that there was a provision in the Municipal Finance Management Act that allowed for the unspent funds to go through a municipal roll-over process and to be spent in the following year for committed activities. In instances where the municipalities were unable to prove that the roll-over funds were committed to identifiable requirements, they would have to be returned to the national revenue fund.

Department of Arts and Culture: Community Library Services Grant
Mr Sibusiso Xaba, Director-General: Department of Arts and Culture (DAC), said that since 2012 there had been considerable discussion between DAC and the Department of Basic Education (DBE) and an agreement had been reached that the grant was to be used as a measure to supplement the education system. The focus areas for the grant included infrastructure development, information and computer technology, library resources, staff capacity and visually impaired readers’ needs.

Key priorities and challenges
The grant was aimed at addressing issues of skills development, disparities in services provision and promotion of the library sector.  Despite some successes with regard to the implementation of the grant, there were still gaps and challenges. Community libraries were a function of the provincial governments, despite inadequate funding to handle this function.

Inconsistent salary structures existed between library employees in local governments and library employees in provincial governments. The DAC had since requested the Department of Public Service and Administration to intervene by putting in place a system that was consistent between the two spheres of government. Staff retention and turnover posed a serious challenge in the sector.

The policy gaps at local government level created an unsustainable funding challenge to service delivery. The inability of provinces to fund the total cost of the service remained a challenge for some municipalities. The building of new libraries was being undertaken by the provinces, with the exception of Gauteng and Western Cape.

Monitoring and evaluation
In line with the requirements of the Division of Revenue Act, 2012, the DAC was responsible for the monitoring and evaluation of the grant. Quarterly meetings were held with all the nine provinces to discuss the progress, challenges and the way forward in the implementation of the grant projects. Provinces submitted monthly financial and quarterly performance reports to the DAC. The DAC also conducted evaluations on the performance of the grant every year, in addition to monitoring visits to projects and site meetings that were held regularly.

Expenditure by 31 March 2013
In the 2012/13 year there was a roll-over of R50 million spread across all provinces, with the exception of KZN and the Western Cape. There was projected under-expenditure for 2013/14 of R32 million, with the exception of Gauteng province which was projecting a slight over-spend.

Medium Term Expenditure Framework allocations: 2013 – 2016
R597 million was allocated for the 2013/14 period, with the following provincial breakdown: Eastern Cape – R72 million, Free State – R62 million, Gauteng – R63 million, KZN – R63 million, Limpopo – R56 million, Mpumalanga – R72 million, Northern Cape – R75 million, North West – R64 million and Western Cape – R67 million. The predominantly rural provinces were getting the biggest share of the budget

2012/2013 performance
14 new libraries had been completed in 2012/13, with the following breakdown: Eastern Cape (one) at Mount Ayliff, Gauteng (one) at Oliefantsfontein, KZN (one) at Qhudeni, Limpopo (six) at Musina Nancifield, Molepo, Mulati, Shongoane, Saselemane and Vlakfontein, Mpumalanga (one) at Masoyi, Northern Cape (one) at Sesheng, Northwest (two) at Khuma and Letsopa; and Western Cape (one) at Vredenburg.

37 libraries had been upgraded in 2011/12, with 10 in the Eastern Cape, one in the Free State, two in Gauteng, two in KZN, three in Mpumalanga, four in the Northern Cape, four in North West and 11 in the Western Cape. Visually impaired services were established in 36 community libraries, with four in Mpumalanga, 20 in the Northern Cape and 12 in the Eastern Cape.

A total of 79 library staff had been appointed and up to 900 library employees’ contracts renewed in 2012/13.  The DAC was also funding capacity building for library staff to study further – 35 staff in Mpumalanga and 20 in Free State had received bursaries to study library-related courses.

255 366 items of new library material, including books, educational toys, education DVDs and CDs had been purchased and distributed to community libraries. The conversion to a new library system had taken place in some community libraries in five provinces: 23 in the Eastern Cape, 42 in KZN, 29 in Mpumalanga, 26 in North West and 32 in the Northern Cape. Provinces were prioritising the issue of ICT infrastructure and making sure that there was public internet access in the community libraries.

Challenges
The job evaluation process for librarians had remained unresolved by the Department of Public Service and Administration (DPSA), despite numerous follow-ups by the DAC. Employment of staff on contract remained a serious challenge, but provinces like Free State and KZN had started with the process of appointing contract workers into permanent positions. The major concern was the fate of such staff should the grant come to an end, and whether provinces would be able to continue to employ the staff.

Salary disparities between the three spheres of government continued to create an unstable environment while the capacity to manage infrastructure projects remained a concern in some of the provinces. The DAC, together with the provinces, was looking at diversifying delivery and implementing agencies. Some provinces had resorted to the use of provincial-based agencies to sustain delivery.

Discussion
Mr Joseph said that although he supported infrastructure in rural areas, the 2011 South African census indicated that there was high population growth in KZN, Gauteng and Western Cape. The mind-set of the DAC should perhaps shift to such areas in providing services, without necessarily neglecting rural areas.

The Director-General responded that on the one hand, people moved to urban areas because of a lack of facilities in rural areas and that the only way to curb rural-urban migration was to build facilities in rural areas. On other hand, the reality was that people just moved and the trend would continue. The grant was focused on under-serviced areas, which in this case were the rural areas, although planning for urban migration would also be under consideration.

Mr Makhubela applauded the increased grant allocation to the poor provinces. although this could be increased for Limpopo. which was the most rural despite its size.

Although the Director-General agreed with the fact that Limpopo was not getting adequate funding, he added that the when making the allocations, the DAC and the National Treasury looked at what was submitted by the provinces in their business planning process, as well as the trend over the years (three years of delivery). Capacity building was not an over-night process and some provinces had built this over time. The DAC continued to work with provinces that were experiencing challenges in ensuring that they met their targets by building more libraries and spending the grant.

Mr Mashile said it was not fair that provinces that transferred monies received increased allocations while those that were doing a lot and under-spending, were actually being penalised through reduced allocations. He cited the example of Gauteng, and urged the National Treasury to look into this. Were the roll-over funds for infrastructure development? There should be a salary cap for library staff, because there was a possibility of funds allocated to municipalities being consumed on this item.

The Director-General said that the transfer of funds by some provinces to municipalities was an unfair situation, because it appeared that some provinces were spending better than the others, whereas that was not the case. DAC had been discouraging the practice, with the exception of those metros that had the capacity. The agreement was that the provinces were going to do the delivery themselves and not the municipalities, and in provinces with no capacity, the transfer of funds had been stopped. 

The DAC was going to use funds for capacity building in the provinces, given the substantial increase in the grant allocations. The regulations allowed for use of some of the grant funds for infrastructure and to build capacity in the provinces and in the DAC.

There was a difference in the expenditure figures presented by the DAC and those presented by the National Treasury, and yet one would have expected them to be the same. Was there a map that would make it possible for one to track the location of the libraries throughout the country?

Mr Puleng Kekana, Director: DAC, said that there was a slight difference in the figures presented by the NT and those presented by the DAC, and these would be reconciled. There was no map for tracking the libraries, but there was a directory of public libraries showing libraries per province and their location and contact details.

Mr P Zulu (IFP, KZN) asked for the location of the upgraded libraries in KZN. How long would the temporary staff continue working in that capacity?

Mr Kekana said that the DAC was trying to deal with the issue of temporary staff, but putting a time frame to it was not possible. The two upgraded libraries in KZN were located in Mpophomeni and Loskop.

The grant structure made it illegal for provinces or municipalities to use the grant to pay for their own existing staff – the funds could, however, be used to get new people into the system. The DAC was looking at a mechanism for assisting municipalities with their own staff. There would be agreement with the National Treasury on what portion of the grant could be used.

The Chairperson said that the difference in the figures presented by the DAC and the NT was not as ‘slight’ as Mr Kekana had put it. The disparity had to be explained by the DAC. In terms of monitoring and evaluation, using North West as an example, he said that there were nice buildings with no facilities like computers, and the staff were more like security guards and not librarians, as they lacked training. The Monitoring and Evaluation reports were ‘rubbish’, as they did not give a true reflection of what was happening on the ground and the team assigned to perform this role was doing a disservice to the provinces.

Mr Mashile said that the DAC should verify the issue of grant money being used to pay existing staff.

Limpopo Department of Sports, Arts and Culture: 3rd and 4th quarter conditional grant spending
Ms Dipuo Letsatsi-Duba, Member of the Executive Council, Limpopo Department of Sports, Arts and Culture, said that the province was facing challenges in relation to issues of service delivery, and libraries in particular. Other challenges included Supply Chain Management, implementing agents (Public Works), the monitoring of libraries, and the quality of work at the libraries.

Background
Ms Basani Baloyi, Head of Department: Limpopo Department of Sports, Arts and Culture (LDSAC), said that no projects had been planned for the 2012/13 financial year due to the backlog experienced in the previous years. All library infrastructure projects were implemented by the Limpopo Department of Public Works (LDPW) through contractors employed by them. In 2010/11 and 2011/12 there had been no service delivery agreements entered into with LDPW and this had resulted in a backlog due to the misalignment of LDSAC and LDPW annual performance plans. This had also led to the treatment of LDSAC projects as ad hoc projects, as they did not appear in the LDPW plans.

Libraries were not standardised and this had resulted in most of them not being costed accordingly.  This had led to variation orders in all the libraries that were being built in Limpopo.  None of the implemented projects had been subject to litigation.

Although a high level interdepartmental team comprising LDSAC, LDPW, Provincial Treasury and DAC had been established in December 2011 to develop a turnaround strategy to improve the grant spending, resulting in a detailed plan that had been developed and submitted to the LDPW for implementation, no implementation had taken place and no reasons had been given.  Following an infrastructure meeting convened by the Director-General, LDSAC had been informed that the service providers would be appointed before 31 March 2013 and that the budget would be committed.

Library conditional grant transfers for 2012/13 financial year and expenditure trends
LDSAC transferred R21.2 million in April, R17.9 million in July, R21.6 million in October; and R7.9 million in January 2013, making a total of R68.8 million. 72% had been spent at the end of the year with an under-spend of 28% (R19.1 million).  LDSAC’s expenditure trends were greatly affected by the delays in the implementation of projects. There had been 38% spending in April, 56% in July and 60% in October.

Grant allocations and breakdown of the allocation per economic classification
The total conditional grant budget for 2012/13 was R68.8 million, and a roll-over of R13.8 million had been received during the adjustment budget in November 2012, bringing the total allocation to R82.6 million. R45 million of the total budget had been allocated for library infrastructure (54% of the total allocation of the grant).

The economic classification showed that there was no adjustment in the compensation of employees, which remained at R11.7 million.  There was an adjustment of R2.5 million on goods and services, to bring the total amount to R23.5 million from R21 million. There was an adjustment of R11.3 million on buildings and other fixed structures bringing the total allocation amount to R45 million from R33.7 million, while machinery and equipment received no adjustment, leaving the amount at R2.2 million. The adjustments brought the total allocation of the grant to R82.6 million.

Infrastructure expenditure
The expenditure as at 31 March 2013 was 74% (R33.5 million) out of a total allocation for the library infrastructure of R45 million. The unspent budget of R11.3 million would be used for the additional scope of work and the repairs and maintenance of the eleven libraries. An amount of R10.8 million had been committed and requested as roll over.

Planned infrastructure projects for 2009/2010 and 2010/2011
The backlog of projects that LDSAC was still dealing with were: the building of the Ga-Phaahla library (Sekhukhune District) that was budgeted at R367 000 in 2012/13 (86% had been spent at the end of the fourth quarter); and the building of Thulamela library (Vhembe District) that was budgeted at R1.1 million in 2012/13, with a spend of 81% at the end of the fourth quarter.

The 2010/11 projects were: the building of Bakgoma library (Waterberg district) that was budgeted at R2.4 million in 2012/13, with a spend of 67% by the end of the fourth quarter; and the building of Rapotokwane library (Waterberg district) that was budgeted at R1.8 million in 2012/13 with a spend of 61% at the end of quarter four.  2011/12 projects included the building of libraries at Saselamani (Mopani District), Mulati (Mopani District), Mutale (Vhembe District), Shiluvane, Vlakfontein (Sekhukhun District), Musina-Nancefield  (Vhembe District), Molepo  (Capricorn District); and Shongoane (Waterberg District).  

Compensation of employees
Out of the total budget allocation of R11.7 million for the compensation of employees, 72% (R8.5 million) had been spent as at 31 March 2013. The recruitment of employees could not be done, as the new libraries had not been completed and were not functional.  R3.2 million was unspent, but the vacant positions had since been advertised.

Goods and services
The budget allocated for goods and services was R23.5 million, out of which R7.6 had been spent as at 31 March 2013 (32%). There had been poor spending in the areas of data lines, books, periodicals, office furniture and office equipment due to the late appointment of service providers, challenges in the SCM unit and the incomplete libraries.

Capacity constraints which impacted on the outcomes
The Senior Manager for library services, the Provincial Librarian and the Infrastructure Manager did not possess the requisite skills and competencies to manage libraries. The Department’s reliance on the capacity of the LDPW to implement and monitor infrastructure projects was also a challenge which impacted on the outcomes.

Other challenges included the LDSAC SCM unit’s lack of capacity to procure other services required for libraries; the non-alignment of infrastructure projects to the Integrated Development Plans (IDPs) of relevant municipalities, as well as the plans of LDPW and LDSAC; the inability to mediate land disputes between the municipalities and the traditional leadership; and the change in the administrators at the LDPW that led to processes having to start afresh whenever there was a change.

Department’s monitoring capacity
The LDSAC relied on the national Department’s personnel to provide oversight on the infrastructure projects. An inter-Departmental Team comprising the Provincial Treasury, LPDW and DAC had been established, with meetings scheduled on a weekly basis.  A monthly inter-departmental forum on infrastructure projects was convened by the LDPW, in addition to the quarterly progress meetings convened by DAC and the weekly visits to libraries by the LDSAC staff.

Commitments to date: roll over requests
LDSAC had requested a roll over of R10.8 million for the completion of nine libraries to ensure that these were functional. There was also a request for a roll over of R4.6 million on goods and services to address issues ranging from the procurement of promotional materials, to furniture, building materials, maintenance, and completion of cabling,

Interventions
LDSAC had made the following interventions: the appointment of a competent Senior Manager to head the SCM unit; advertisements for the positions of Infrastructure Manager, Acquisition Librarians and ICT specialists; the transfer of the qualified Senior Manager from the Museum and Heritage unit, to Head, Library Services and the librarian from HRM, to Library Services; the appointment of a General Manager to provide strategic leadership; contracting service providers directly for the maintenance of all libraries; and a request to the LDPW Administrator to appoint the Independent Development Trust to assist in the building of new libraries.

Infrastructure plans for 2013/14
The LDSAC was going to build two new libraries in Phokwane and Nzhelele. Eight libraries were to be upgraded (Aganang, Letsitele, Lebowakgomo, Westenburg, Giyane, Phalaborwa, Ga–Kgaphane and Vaalwater). Maintenance would be carried out at 10 libraries in Polokwane, Rixile, Leboneng, Alldays, Tzaneen, Groblesrdal, Mogwadi, Mukondeni, Soetfontein and Musina).
  
Discussion
Mr Makhubela said that Limpopo had been identified by the National Treasury as one of the main under-spenders due poor planning and significant delays in the SCM process from tender to delivery. How would this be related to the Director-General’s statement that the capacity of SCM should be built through the years so that Limpopo would be able to get the proper allocation? In terms of the location of the new libraries, he said that Limpopo had to be specific as opposed to generalising as this would create confusion over which libraries were being maintained and which would be the new ones.

Ms Baloyi in response said that the element of poor planning was true, because there was a lack of synergy between what LDSAC and LDPW were doing, in addition to strained relations between the two.  She added that LDSAC would get back to the Committee concerning the specific location of the two new libraries.  Musina-Nancefield was a new library, following the collapse of the previous library.

Mr  Joseph  asked if the two new libraries represented 54% of the budget allocation for libraries, or if this included the eight libraries that required upgrading?

Ms Baloyi said that the new libraries were part of the allocated budget for 2013/14, so they were not part of the roll over.

Mr De Beer said that there were no timeframes on what Limpopo was going to do.  How were the austerity measures affecting the LDSAC?   He also sought clarification on the late appointment of service providers due to challenges in the SCM unit’.

Ms Baloyi responded that the LDSAC would report back to the Committee with the real timeframes for the completion of the libraries. The business plans, however, gave an indication of the completion times. The austerity measures had brought about this situation, as there were limitations on what the  LDSAC could do and what it could not do. On the late appointment of service providers, she said that these had been appointed at a very late stage and that the SCM unit had not done forward planning in terms of the feedback from the LDPW on the status of the building. The moratorium on appointments had affected the capacity of the LDSAC to increase the numbers in the SCM unit.

Mr Mashile wanted to know how long the Head of Department had been in that position, because it seemed that LDSAC was struggling to complete projects dating back to 2009. What new plans were in place for getting some of these projects completed? The LDSAC presentation had indicated under-expenditure of R19 million, while the National Treasury put the figure at R32 million – which one was the correct figure? There was a need for an investigation into the variation of prices for the building of libraries – for instance, some libraries cost R400 000 while others cost R5 million. Clarification was needed on the refusal to pay on periodicals upfront. What was the role of the Infrastructure Manager when the LDSAC indicated that it relied on the LDPW?

Ms Baloyi said that she was appointed in mid-November 2011. In terms of the new plans, the strained relations between LDSAC and LDPW had now improved with engagements on a weekly basis. On the appointment of the IDT, LDSAC had engaged Public Works and the Auditor-General because if LDSAC was to appoint IDT, the consultancy fee would have been classified as irregular expenditure. Public Works had to appoint IDT as one of the state-owned-entities, to avoid the irregular expenditure. 

Regarding the variation of prices, the LDSAC had appointed the Auditor-General’s Forensic Unit to investigate all the variation orders and irregularities had been identified. The matter had since been referred to Public Works to take disciplinary action against the officials involved.  Concerning the payment for periodicals, she said that the supplier in question had been appointed in January 2013 but he wanted payment for the entire year, and as part of managing the risk, LDSAC could not pay that money.

The appointed Infrastructure Manager was going to help LDSAC to monitor the projects because the LDPW was more like a ‘referee than a player’. It had been discovered that all six libraries that had been built had been declared irregular by the A-G because proper procurement processes had not been followed. The Infrastructure Manager would be able to check the progress of the projects in addition to evaluating the performance of contractors. This Infrastructure Manager’s position was for the duration of the grant.

The Chairperson referred to the additional scope of work and how much was spent, and noted that some libraries were 100% complete and yet at the same time there was work that had not been completed in order to have these libraries functional. On the expenditure shortfall (86%), would this lead to a saving or was it outstanding invoices that still had to be paid, and hence a request for roll over?  Turning to the National Treasury, he wanted to know on what basis the allocations were made, since LDSAC did not have projects for 2013.  There was a disparity in the number of libraries that had been built, according to the National Treasury and Limpopo, that required an explanation. 

Ms Baloyi said that “100% complete” meant that from a structural and technical point of view, the libraries were complete but the libraries could not be functional in the absence of water, security fencing, burglar proofing, and air conditioning. The question of completeness was a point of argument with Public Works, who deemed the libraries complete from a structural point of view.

Concerning the shortfall for the additional scope of works, it meant that in some instances, invoices had not been submitted or that the goods had been delivered at the end of the financial year, hence the non-payment of money.  This could not be termed as a saving.

With regard to the number of libraries built in the 2011/12 financial year, the number of libraries to be completed was six.  However, the sites were handed over to the contractors only in 2012, which meant that the libraries could not be completed in the financial year and had to be brought forward to 2012/13.

The Chairperson said that it would be appreciated if the report from the A-G Forensic Unit on the variation orders and the persons responsible would be sent to the Department of Public Service Administration (DPSA) in the province to follow up.  Public Works would not be able to take any action, as this concerned its officials. The Committee would be able to follow up with DPSA regarding the disciplinary action taken on the officials.

The Chairperson said that North West would not be presenting, in the absence of their Member of the Executive Committee.

Eastern Cape Department of Sports, Arts and Culture: 3rd and 4th quarter Community Library Services Grant spending for 2012/13
Ms Xoliswa Tom, MEC, Eastern Cape Department of Sports, Arts and Culture (ECDSAC), said that the challenges affecting the provinces in terms of the grant were cross-cutting, and the delivery of infrastructure was a challenge to all departments. As a result, the Cabinet had instituted a Provincial Infrastructure Unit to assist all departments to deliver infrastructure.

Mr Mzolisi Matutu, Head of Department, ECDSAC, presented the purposes, objectives and expected outcomes of the grant in his introduction.

Budget structure for the grant and outputs for the third and fourth quarters
36% had been spent on salaries, 40% on capital expenditure, with goods and services sitting at 22%. The amount committed in terms of the third and fourth quarter performance was the unspent amount, and that it would be carried forward to another quarter. The five outputs for the grant were: the construction of new structures, renovation, upgrading of existing libraries, compensation of employees, library services for the visually impaired; and purchasing of library material. 

In the third quarter, ECDSAC had budgeted R3.261 million for the construction of new libraries. However, the amount spent was R1.769 million and the balance carried over was R1.492 million. The budget for the third quarter, with all the five outputs for the conditional grant was R23 million and what was spent was R8.9 million leaving a committed/unspent amount of R3.2 million. In the fourth quarter, the total budget was R87.6 million and R65.7 million, representing 74.9% had been spent, leaving an unspent amount of R21 million.

Variance explanations
The tender for modular libraries had been delayed and it had ultimately been awarded in February 2013. The reason for the delay was that the tender had been referred to the Independent Bid Award Committee which had identified challenges in the functionality. This was a setback, because it had been expected that the personnel in the SCM unit had the requisite skills. As a result, a forensic audit, to be carried out by the A-G, was to be instituted.

Concerning renovations, there were projects that had been cancelled by the implementing agent due to the non-performance of contractors.  ECDSAC had found itself in a difficult situation because it had two implementing agents - the Department of Public Works dealing with renovations, and Coega Development Corporation that dealt with the construction of the new libraries. There were challenges associated with the two agents, such as engaging contractors that were not in ECDSAC’s database and hence posing a problem with the A-G. This had resulted in a long period of appointing the service providers. Some contracts were slowed down due to the cash-flow projections – in some instances, the contractors would just leave site. Implementing agents were also using emerging contractors with cash-flow problems, something that impacted on the performance of the construction.  There were four projects that had taken off late due to land allocation issues and council resolutions by the municipalities.

There were challenges with the compensation of employees, but the conditions of employment for contract workers were not attractive for many of the people that the ECDSAC employed, and since most could not be employed on a permanent basis, there was a high turnover in the library sector. For instance, 10 people could leave at once, requiring the ECDSAC to start afresh as required by the A-G in order to follow all the right procedures.

Trends in allocations, constraints and remedial actions
ECDSAC had slid back in terms of the annual expenditure, from 80% to 74.9%. Some of the constraints were that Coega, as an implementing agent, had capacity problems but it was also true that other provinces such as KZN and Mpumalanga were using its services. The National Department had since advised ECDSAC to look for an alternative implementing agent and this had led to discussions with the IDT, which would be contracted as an implementing agent.      

The Office of the Premier had introduced a unit to assist in the monitoring of infrastructure progress and also to unlock bottlenecks as a way of addressing contracts being awarded to contractors with cash-flow problems. Through the assistance of the National Department of Arts and Culture, ECDSAC was in the process of appointing a person with technical skills in the Department.

Monitoring capacity and achievements
There were measures in place to ensure that reporting was done according to the business, annual and operational plans, and that reporting was also done on a quarterly and annual basis so as to allow for the proper monitoring of the grant in the communities.

In terms of achievements, since the inception of the grant in 2007 and 2008, out of 145 libraries in the province, 84 had been renovated while nine container libraries and 11 modular libraries had been distributed to rural areas. 85 libraries were connected to the internet, with 60 planned to be connected in the 2013/14 financial year.

Discussion
Mr Makhubela commented that following the reports by the National Treasury and DAC, the Head of Department for the Eastern Cape Department of Sports, Arts and Culture was expected to adjust his report to address the issues raised in those reports that were likely to bring about a disparity.

Mr Mashile said that if the Coega Development Corporation performance was found wanting as an implementing agent, all that the Department had to do was to terminate the contract. There was a need to investigate the ownership of Coega.  With regards to Public Works using emerging contractors, how were the tenders for contractors adjudicated or vetted?  In some instances, catering companies had been contracted to do construction work. The adjudication process was not appropriate, and this had to be solved internally. 

Mr Matutu said that with the appointment of a technical person to sit on the Bid Adjudication Committee, interventions would be carried out at the point of identifying contractors that did not meet the requirements. The Department of Arts and Culture was helping with the beefing up of the internal technical unit.

The Committee also pointed out that most of the problems that were hampering the delivery of ECDSAC were emanating from other departments, such as Public Works. Was one coordinator able to monitor all the 145 schools in the Eastern Cape?

In response to the issue of problems emanating from other departments, the MEC said that it was for this reason that the Executive Council had established a high-level Infrastructure Unit that would address challenges in SCM and other related problems. She added that one coordinator could not do all the monitoring work in the whole province, but the National Department was trying to ensure that there was enough capacity to carry out the monitoring. 

The Chairperson said that in the absence of the MEC for North West, no presentation would be made to the Committee. It was the executive that was accountable to the Committee and it was becoming a habit for the MEC not to show up whenever North West was called to present before the Committee. The matter would be taken up with the Premier of North West Province.

The Chairperson said that the Director-General for the Department of Arts and Culture should reconcile his report with the reports of the Eastern Cape and Limpopo and send a proper one to the Committee. He added that the monitoring team was not doing good work, advising that the D-G should go without the monitoring team to personally check the libraries.

Mr Sishi said that the National Treasury was going to coordinate with the National Department to agree on the method of assessing delivery, as the NT only took a snap shot and not a cumulative record from previous periods.

The Chairperson said that National Treasury reporting had to be uniform in terms of the deliverables as contained in the reports of the provinces, with no disparities. Verification had to be done through monitoring, because the completeness of some of the libraries was also questionable. 

Mr Mashile observed that the quality of the reports was not good – they were a product of “cut and paste” of previous reports. There should be operational meetings between the Department of Arts and Culture and the provincial departments.

The meeting was adjourned. 

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