Department of Public Works Annual Report 2010/11, asset register & audit of land for human settlements
Meeting Summary
The Department of Public Works (DPW) briefed the Committee on the Annual Report 2010/11, noting that in this year it had concentrated on alleviation of poverty and addressing unemployment, building capacity in the State to implement programmes, making investment in productive infrastructure and implementation of government-priority projects. Some examples of capital investment were cited, including the National Library at Tshwane and Head Office building for the Department of Health. There had been about R2 billion infrastructure projects, which included several mega-infrastructure projects at border posts. The Department ran about 6 000 projects in each financial year, with a total budget around R7 billion per year. The management of the immovable asset register received priority, both through working to enhance the asset register itself, and by vesting assets, in collaboration with Department of Rural Development and Land Reform, and the provinces. It had released over 6 000 hectares of land, and another 1 031 hectares for human settlements. It had attended to building of bridges in collaboration with communities. Action plans were taken to implement Generally Accepted Accounting Practices in the Property Management Trading Entity, although these were only partially successful due to delays in the acquisition of financial systems. The Department had managed to reduce its debt and collect more revenue, and had managed to improve some internal controls. It claimed to have 90% compliance on asset management improvement. There was, however, a problem with payment of invoices. The Department had under-performed against its targets for IT services to support core areas, reduction of vacancies, which were currently at 20.68%, and security vetting of employees. It had also under-performed on targets for employment of disabled people. There had been better compliance with audit prescripts. There were plans to develop a risk management policy and there were a number of meetings to try to improve inter-departmental cooperation. A vesting master plan was completed, but only 16 out of 34 Service Level Agreements wee signed. The DPW had managed to meet and exceed targets for increasing revenue from state assets and implement energy efficiency programmes. A report was given on the Precinct Master Plan in Tshwane and maintenance projects at sites. The target of 80% completion of projects within time, cost and quality was not met fully. Expanded Public Works Programme (EPWP) incentives also fell short of targets, and the government Immovable Asset Management Act guidelines were deferred pending consultation on the best approach to extending this to local government. It was noted that the DPW had managed to spend 98% of its budget, and was recruiting to fill all vacant positions. The under-expenditure was explained. The DPW had received a disclaimer from the Auditor-General, because of lack of supporting documentation provided on the asset register. Although the Department held a different view, it had agreed that there were some instances of non-compliance, and it did agree with some findings on gross negligence and deliberate transgression of policies. Other issues of concern to the Auditor-General were the failure to submit documentation on time, and the large bank overdraft.
Members raised a number of questions, and it became apparent that time did not allow for these to be answered, so the Department and Committee agreed that a full response would be furnished in the new year, when the Department next presented to the Committee. Members wanted to get clarity on the site for the new magistrate’s courts, bridges that were built and a complete breakdown of all properties in all provinces. Members noted that the Department seemed to be trying to improve, but there was simply not enough discipline enforcement, particularly against provinces who did not provide reports, or their failure to enforce time limits, whilst the Chairperson stated his concern with various comments of the Auditor-General relating to lack of proper management by the Department. Another Member noted that there seemed to be too much corruption and that matters were not being properly attended to. Several Members commented on the need to invest in the rural areas; one suggested that the Department should be seeing to this investment, and should be trying to halt rural to urban migration, whilst others suggested that private investors only took steps once government had built the infrastructure, and thought that the Committee needed to brainstorm how investors could be encouraged to invest and support at a much earlier stage. Members asked DPW to investigate and list the state buildings that were occupied, by whom they were occupied, what property DPW was renting, and for whom, and what buildings were standing empty. They also urged that DPW must do its own oversight in the provinces, citing several projects that were not moving as expected. They were particularly concerned about a project where there were now serious environmental concerns being raised, although the project was practically complete, and wondered if this was not irregular or fruitless expenditure. Members wanted to know what had been done and what steps taken in respect of the fruitless expenditure identified. In respect of the staff, Members queried what retention strategies, if any, were in place, particularly for engineers, commented that there was inconsistent information about staff disciplinary matters, and said that more had to be done on disabled employment. Members were also concerned about the poor uptake on EPWP incentives and the lack of labour-intensive methods by municipalities. They enquired how far the Department had gone in eradicating corruption in tenders. They noted that although the Department disagreed with the Auditor-General, that report was in the public domain and the issues had to be addressed. Several Members noted their concern that the asset management process still was uncertain, as there still appeared to be uncertainty about who owned what building, across the spheres, and urged that inspections should be done. They noted the challenges around the Construction Industry Development Board (CIDB) ratings, problems with the Service Level Agreements, and vetting of companies. They urged that the Department and Minister needed to adopt a firm stance on the Industrial Development Corporation, as it was the Department who had to account in all these matters.
Meeting report
Department of Public Works Annual Report 2010/11, asset register & audit of land for human settlements
The Chairperson welcomed the delegation from the Department of Public Works (DPW) as well as two members of the Gauteng Provincial Legislature, Mr Joggie Boers (ANC), Chairperson: Infrastructure Development Portfolio Committee in the Gauteng Provincial Legislature, and Ms Jacqueline Mofokeng (ANC), Member of the Infrastructure Development Portfolio Committee in the Gauteng Provincial Legislature .
Mr Mandla Mabuza, Acting Director-General, Department of Public Works, outlined the main policy principles in the financial year 2010/11. These included poverty alleviation and addressing of unemployment, building the State’s capacity to implement programmes and policies of government, making investment in productive infrastructure and implementation of government-priority projects.
He noted that some examples of concrete capital investment in productive infrastructure included the completion of construction of the National Library in Tshwane Metro, and the head office for the Department of Health. The total investment in productive infrastructure amounted to around R2 billion, making government the single biggest player in the investment in productive infrastructure.
Critical attention was paid to a number of programmes, and despite the global economic downtown the Department of Public Works (DPW or the Department) managed to deliver on a number of mega-infrastructure projects, including the construction and upgrade of border posts with
The Department had prioritised the management of its immovable asset register, both through working to enhance the asset register itself, and by vesting its assets, in collaboration with Department of Rural Development and Land Reform, and the provinces. The Department had also increased inter-governmental collaboration to improve service delivery, by releasing 6 327 hectares of land and 1 031 hectares for human settlement. The Department had also worked together with the Department of Defence and Military Veterans, to build several community bridges.
Ms Cathy Motsisi, Chief Financial Officer, Department of Public Works, stated that during the year under review the Department had undertaken construction and maintenance projects that amounted to R5,7 billion. Examples of such projects included the building of magistrates’ courts in several provinces, the building of correctional service centres, police stations and repairs to government buildings. An action plan for instituting Generally Accepted Accounting Practices in the Property Management Trading Entity (PMTE) was only 44% successful, due to delays in the acquisition of financial systems. However, the Department was successful in reducing the debtors’ book and collecting more revenue. The Department had improved internal controls, although the target of 90% implementation was not reached, as some policies were still in the draft stage. The Department also successfully achieved 90% compliance with asset management improvement, through a credible asset register. However, there was a problem with the payment of invoices, due to non-compliance and late submission of invoices. The Department was far below its target of 80% compliance as it only accredited 16,19% of suppliers.
Mr Chance Zaba, Acting Chief Director: Human Resources Management, Department of Public Works, stated that the Department had only achieved 50% of its goal of having 100% enabled IT services to support core areas. This occurred due to problems with the structural integration of data. The Department’s target to reduce the vacancies to 10% was also not reached. Only the critical vacant positions were filled, due to over-expenditure on employees in other areas, since more posts were created. The current vacancy rate was 20,68%. The Skills Transfer System benefited 450 employees, more than double the target. Less than half of the targeted number of employees were vetted for security clearance. The reduction of the backlog of legal cases was also lower than expected, due to court processes.
Ms Lydia Bici, Deputy Director General: Construction and Property Policy Regulation, Department of Public Works, commented that compliance with the audit prescripts had been higher than the target in this financial year, having reached 92% compliance compared with the target of 80%. Business plans were created to assist the Department to develop a risk management policy. 32 inter-governmental meetings were held to assist communication between the spheres of government.
Ms Sassa Subban, Deputy Director General: Asset Investment Management, Department of Public Works, stated that a vesting master plan had been completed. Only 16 out of 34 Service Level Agreements (SLAs) were signed, due to delays by clients. The Department exceeded all targets in increasing the revenue from superfluous state assets, and from implementing efficiency programmes on energy, water, accessibility to state buildings and rehabilitation programmes. The Department also developed a disposal programme, but 25 properties were in the process of approval. There was also effective land release for reform purposes, as well as for housing or agriculture.
Mr Obed Molotsi, Acting Deputy Director General: Special Projects, Department of Public Works, stated that the Precinct Master Plan in Tshwane was in its operational phase. The target of 80% completion of projects within time, cost and quality was not met fully, due to delays in site clearance processes and Environmental Impact Assessment (EIA) studies. The maintenance projects only were achieved by 59%, rather than 80% as targeted, due to their multi-year nature. The construction of earthworks at one site was deferred, due to the discovery of a wetland, so that the Environmental Impact Assessment was restarted.
Mr Stanley Henderson, Deputy Director General: Expanded Public Works Programme, Department of Public Works, stated that the Department had underperformed against the targets of employing individuals with disabilities, having only 0,45% disabled employees, rather than the target of 2%. Mr Henderson explained that this was due to the nature of the projects. The wage incentives were also awarded to a lesser extent than the target, due to the under-reporting on EPWP, as well as the fact that many municipalities were not implementing their projects in a labour-intensive manner.
Ms Lydia Bici, Deputy Director General: Construction and Property Policy Regulation, Department of Public Works, explained that the Government Immovable Asset Management Act (GIAMA) guidelines were not implemented as targeted (50%), as the Department was still attending to the consultation on the best approach to take on the framework and action plan, with a view to extending GIAMA to local government.
Ms Motsisi then dealt with the report on spending. She noted that the Department had spent 98% of its budget overall. The under spending on the compensation of employees was due to additional funds being reprioritised, arising out of the filling of some vacant posts. The Department had started a high recruitment drive to fill all vacant positions. The under-spending on goods and services was due to an energy efficiency agreement with the Independent Development Trust (IDT). The under-spending on machinery and equipment related to the planned purchase of furniture and IT equipment for the Department’s new premises. The under-spending on transfers and subsidies could be attributed to the slow reporting on EPWP work opportunities created by municipalities and provinces.
She noted that the Department had, for the 2010/11 financial year, received a disclaimer from the Auditor-General. This was based on several issues. The Auditor-General (AG) had reported that the asset register was not supported by complete documentation. The response by the Department’s management was that the asset register was not irregular, as the AG had reported, although there were instances of non-compliance. The second issue related to irregular expenditure. The Department agreed with some of the Auditor General’s findings of gross negligence and deliberate transgression of policies. On the issues of the public-private partnership (PPP) and lease commitments, she reported that the documentation was not submitted on time to the Auditor General. The Auditor General was also concerned with the large bank overdraft of the Department.
Ms Subban explained that the creation of a complete and accurate immovable asset register was a huge task. Land was released for human settlement in most provinces with 1 070 hectares released in Gauteng, 1 050 hectares released in Northern Cape, 77 hectares released in North West, and 432 in the Eastern Cape. There appeared to be an error on the presentation relating to the figures in the
Discussion
The Chairperson thanked the Department for the report. However, he expressed several concerns. Firstly, he noted that the report stated that a Magistrate’s Court had been built in
Mr H Groenewald (DA,
Mr Groenewald commented that there were many things going wrong in the
Mr Groenewald was also concerned that there was substantial corruption within the DPW, as it seemed that not much was being done.
Mr Groenewald asked what the presenters meant by the reference to “rural cities”, and noted that if “cities” were to be established, then this would require investment, and there was none currently in the rural areas. He asked what the Department intended to do about the matter. He also wanted to know how rural to urban migration could be brought to a halt, noting that there was overcrowding and lack of resources in urban areas to cope with such large numbers of people. He urged that people needed to be encouraged to remain in rural areas.
Mr Groenewald referred to Moses Kotane municipality, where an industrial site, costing millions to build, was standing empty. He noted that nothing was happening there, and he asked that the DPW must investigate.
Mr Groenewald added that, in general, the Department should make oversight visits to areas, to see what was happening. In the past year, he had asked the Department what was happening with the incomplete magistrate’s court in Schweizer-Reneke. The Department had promised that it would be finished within a few months, but nothing had been done in a year and a half. He stated that the Department must take action in these cases.
Mr Groenewald commented that R500 million was invested in Merafong City municipality, but there were now plans to move the community from one place to another, due to the dolomite rock in that area.
The Chairperson interjected to note that this issue was one to be dealt with the Department of Human Settlements and not Department of Public Works.
Mr Groenewald asked how many State buildings were standing incomplete or empty in the country, and also wanted a breakdown of these figures in each province.
Mr Z Mlenzana (COPE,
Mr Mlenzana asked for an indication of the level of involvement of the affected municipalities in the Inner City Regeneration Project.
Mr Mlenzana asked if the DPW had any retention strategy for its employees. He referred to the 112 vacancies, out of a total of 347 engineering posts (as set out in Table 3.3, on page 193 of the Annual Report). While 23 engineers had been hired, 44 had left the Department (set out in Table 5.2, on page 196 of the Annual Report). Of the 190 engineers, only five had received promotions, (as set out in Table 5.4 on page 196 of the Annual Report). He asked if there was anything done to encourage employees to stay with the Department. He also noted that out of 178 engineering and related professionals, only six benefited from performance rewards (set out in Table 7.3, on page 200 of the Annual Report).
Mr Mlenzana then turned to disciplinary issues, commenting that Table 5.3 (on page 196 of the Annual Report) and Table 11.2 (on page 206 of the Annual Report) contradicted each other. He asked whether the Department had dismissed six, or seven employees.
Mr Mlenzana expressed his concern on the Expanded Public Works Programme (EPWP), where only 56% of the incentives to provinces were disbursed. This concern extended also to the EPWP Infrastructure Incentives to municipalities, where only 44% of the money allocated was disbursed. The reason for this was that the Department did not get feedback from the provinces and municipalities. He therefore asked what strategy the Department had to address this. Another reason for the current failure was that projects were not designed to be EPWP-compliant. He asked how the DPW intended to force, or encourage provinces and municipalities to comply and develop labour-intensive EPWP programmes.
Mr Mlenzana commented also on the Equity comparatives. Throughout phase one, the Department had struggled to meet 2% compliance. He asked what measures had been put in place to change this.
Mr Mlenzana made the point that the President’s State of the Nation Address of 2010 had stated that one of the strategic priorities of government was to eradicate corruption in the procurement of tenders. He wanted to know how far the Department had gone in realising this goal.
Mr Mlenzana referred to points 7, 8 and 9 on page 75 of the Annual Report, where the Auditor-General had reported on the financial statements of the Department. There appeared to be a refusal by the Department to report on contraventions of the financial management system. He stated that as
Ms M Themba (ANC,
Ms Themba thought that there were so many issues raised in this report that a full day was needed to debate it, not just one afternoon.
Ms J Mofokeng, ANC Member, Infrastructure Development Portfolio Committee, Gauteng Provincial Legislature, asked if the acceleration of the construction of community bridges, in collaboration with the Department of Defence, had been budgeted for. She had thought that this acceleration was the direct result of a public outcry.
Ms Mofokeng referred to the topic of inter-governmental relations, noting that eight public participations imbizos were held, which was quite a large number, but noted that in Gauteng, there was lack of knowledge about what land was owned by national, provincial and local government. Sometimes prices were paid which were below market value. This issue could be solved by holding inspections. In
Ms Mofokeng then referred to the challenges of the Construction Industry Development Board (CIDB) at the provincial level. Some people who did not have the right rating were still being given business by government, and the converse also happened, when those with the right rating received no work.
Ms Mofokeng was also worried about the lack of employment of people with disabilities. Only 2% employment of those with disabilities occurred in the EPWP. The Department should be looking into the capabilities of disabled people, to increase this percentage.
Ms Mofokeng highlighted problems with the Service Level Agreements.
Ms Mofokeng asked where were the 450 beneficiaries who had received critical training from Cuban Technical Advisors.
Ms Mofokeng asked why the payments register had only achieved 66, 7% improvement.
Ms Mofokeng also asked why the Department had a lot of outstanding guarantees.
Mr R Tau (ANC,
Mr Tau commented that political will was needed in order to deal with the IDT. There was certainly the money available to eradicate mud schools.
Mr Tau noted his concern with the PAP project, noting that 99% of the construction work had been done, but that there were environmental concerns. He asked how the DPW would justify this work, and whether the expenditure would be regarded as wasteful, and how, in the first place, the construction could have been done without a full and proper environment impact assessment.
Mr Tau felt that the Inner City Regeneration Project was still a work in progress, but also commented that this was not a new plan presented by the Department.
Mr Tau agreed that Mr Groenewald had raised an interesting point on investment in rural areas. However, instead of questioning the Department as to how it was investing in rural areas, Mr Tau thought that it would be useful to ask how the different political parties would promote the notion of rural development, so that they could speak to the owners of private capital and encourage them to invest in these areas. Government was putting in the necessary infrastructure, but there was a need to question how to take this project forward. The Department could not be expected to also provide investment. He described private investors as “parasitic” in the sense that they would wait for government to build infrastructure before coming in. Although there was work being done to improve the infrastructure, government simultaneously needed to encourage private investors to move in and create jobs and build the rural economy.
Mr Tau would like to see a new approach to eradicate mud schools. Education was a priority of government, and government had seen the impact that the mud schools had had in lowering the quality of education in rural areas. He was looking forward to seeing the strategic plans in the following year.
The Chairperson’s comments focused on the issues raised by the Auditor General. Firstly, he felt that it was not true that the Department had finalised the assets dating back to the era of the former homelands.
The Chairperson agreed with Ms Mofokeng’s concerns about inter-governmental relations, and the confusion about which entity owned what assets.
The Chairperson wanted to know whether there was still land owned by the State that could be used, pointing out that under the apartheid government, unused land belonging to the Department of Public Works was often taken to plant crops or forestry. He gave an example of several hectares of land that were released for sale in Mpumalanga, noting that within four minutes of the land being put up there were three separate transactions concluded.
The Chairperson asked how far the Department was with compiling a list to update the Committee. In the
The Chairperson questioned the issues around irregular expenditure, including the very late submission of accounts and the procedures with tenders. He commented that it was alleged that some people were taking shortcuts. The findings of the Auditor General are very worrying, particularly in relation to irregular expenditure. Even though the Department held a different view to that of the Auditor General, the AG’s report was in the public domain and the Department could not seek to hold back any of the opinions offered.
The Chairperson noted that the AG had commented on the leadership in the DPW, which repeatedly did not do what it was supposed to do. He said that there was a simply failure to function properly. The Auditor-General stated, several times, that the Accounting Officer had failed to fulfil his duties. This was a shocking state of affairs.
The Chairperson was also worried about the administration of the asset register. The Department had stated that it has found about 2 000 properties. He said that there was a need to attend to the matters urgently. The Department must improve in this regard. He asked to whom IDT was accountable. The Department was the entity that had to make application for funding, and explain how it would be used, and not IDT, and there was a need for the DPW to accept its responsibilities in regard to accounting for those funds. If the money for EPWP was not used, then consideration must be given to who was responsible. If the proposals for more budget were not accepted, due to under-spending, then money would not be released. There were no concrete proposals as to how this project could be improved. There seemed to be a lack of communication between provincial and national departments. He asked why the DPW was failing to hold other entities to account.
The Chairperson also referred to the comments around private investment in the rural areas, commenting that “charity begins at home”.
The Chairperson noted that it would be necessary to arrange a meeting with the Department of rural Development and Land Reform. In 1994, a lot of people stole land and now it was impossible to give people the correct papers to prove their ownership of their properties. The Department would have to follow up and put these issues right.
The Chairperson noted the underspending and asked if this arose through lack of capacity, or lack of directives. He urged that the Department must address these issues honestly.
The Chairperson wanted to know how many people had been charged in respect of the irregular expenditure, and how much money was lost. He noted that when service delivery marches happened they were directed against government, although the lack of delivery took place through the actions of officials.
The Chairperson drew attention to page 78 of the Annual Report, where the Auditor-General stated: ‘The internal audit function did not assess the operational procedures and monitoring mechanisms over all transfers made, including transfers in terms of Division of Revenue Act, as per the requirements of Treasury Regulation 3.2.8’ The Chairperson stated that it was unacceptable that the Department was unable to meet the deadlines of the Auditor General.
Mr Mlenzana appreciated that a number of questions were asked of the Department but noted the lack of time to deal with all issues adequately. He wondered if the Department should return with full answers in the following year.
The Chairperson said that the Committee would be busy already with other issues in the following year.
Mr Tau seconded the suggestion of Mr Mlenzana. He appreciated the honesty displayed by the Department, and accepted that the Department faced a number of problems and challenges. He encouraged the Department to do more work on these issues. He thought that the comments and questions raised should be used as the basis for the reporting in the next year.
Mr Mabuza said that he would respect the process. He undertook to provide written answers to the questions asked, and said this would be provided in conjunction with report on the strategic plan.
The Chairperson agreed to this and asked that the main management team should attend the next meeting also.
The Chairperson noted that the Department should follow up and that Members would also think about the role of big business in the rural areas.
Adoption of minutes
Ms L Mabija (ANC, Limpopo) asked why the Committee was adopting minutes in the presence of the Department, but the Chairperson explained that they needed to be adopted now, as this had been postponed a number of times.
The minutes of 2 August were tabled.
Ms M Themba (ANC,
The minutes of 6 September were tabled.
Mr Mlenzana asked why the members of delegations were not listed by name.
The Committee Secretary responded that this was not usually done.
Mr Mlenzana said, and Ms Themba agreed, that it was not sufficient merely to note that the Department had made a presentation.
The Chairperson agreed that the records must reflect the proceedings of the meeting.
Mr Mlenzana moved for the adoption of the minutes, but expressed his concern that these minutes contained a very summarised note of the debates.
Members adopted the minutes of 6 September, with amendments.
The minutes of 20 September were tabled.
Ms Themba pointed out that the names of the members of a delegation were again not included.
Ms Mabija complained that not every member had a copy of the minutes.
The Chairperson responded that all of the minutes had been emailed to the Members.
Mr Mlenzana noted that these minutes were even briefer than the last, and contained no more than a summary of a summary. They could not be regarded as complete because much of the information was not included.
Ms Themba proposed that the minutes be referred back to the Secretary for correction.
Prince M Zulu suggested that the adoption of the Minutes of 20 September, 1 November and 15 November be deferred.
The Chairperson agreed, and decided to refer those back to the Secretary for correction.
The meeting was adjourned.
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