Department of Public Works 1st Quarter 2013/14 expenditure report

Public Works and Infrastructure

14 August 2013
Chairperson: Ms M Mabuza (ANC)
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Meeting Summary

The Department of Public Works (DPW) presented its first quarter 2012/13 performance and expenditure report, highlighting progress, achievements and challenges. The data contained in the report had been collected, then cleaned and analysed, and then presented for accountability purposes. DPW was trying to improve its quality of performance information. Improvements and achievements were highlighted, particularly for programmes 1 and 2. Under the Administration Programme, the DPW cited an improved Annual Performance Plan, a better understanding of the planning process and better overall management. Risk had been assessed and prioritised, and governance had improved. Supply Chain Management remained a weak area, but DPW was committed to working with the Auditor-General and National Treasury to rectify the problems. Programme 2: Immovable Asset Management accounted for 48% of the budget. The completion of the Asset Register was on track, despite some delays and difficulties linked to the size and complexity of the project, as well as a historical lack of guiding principles. Programme 4 dealt with leases, and the DPW had now completed a desktop review of 2 778 leases, had set criteria for the lease backlog, and was currently focusing on 1 316 leases that required attention as month-to-month, expired and shortly-to-expire leases. A standardised lease contract had been developed for use by all the regions. 90% of projects with “6a” status were completed in the quarter, as well as centralisation of the function of Prestige Management. The draft revision of the Expropriation Bill, taking into account public comment, had been done. Internal plans and policies, including those on human resources, intergovernmental relations, finance and supply chain management, were drafted.

Challenges included the delay in acquisition of the Property Management Trading Entity building, low spending on some projects, delays in implementation of integrated plans and challenges with interpretation of “irregular expenditure” which were being discussed with National Treasury. There were also some problems with the Property Management Information System. DPW was adopting a cautious, yet thorough approach to addressing the problems. It wanted to improve spending, but was determined not to spend simply for the sake of doing so. It was attempting to deal with all outstanding audit queries and trying to re-analyse spending of 2009 to address the incompleteness of that year’s accounts. Many of the problems were ascribed to dependencies from the past, where outcomes from one programme were reflected as inputs into another, causing knock-on delays, as well as the lack of sound founding policies, and organisational structure inconsistencies. DPW proposed that project charters be formulated, with continuous feedback and recommendations on programmes. A Management Information System would have to be developed, evaluations would be done on performance and budget, and all policies must be put in place and properly implemented. A separate presentation on the finances was given, indicating that DPW had spent 20% in this quarter, with breakdowns also given by region and type of spending.

Members questioned the distribution of budget and resources, asking why there was greater spending in some areas than others. They were concerned about the under-spending, but the DPW reiterated that it would spend only where it was satisfied that this was necessary and relevant, but would improve its monitoring over the next quarters. Problems with the billing system, and the attempts to resolve it, were raised, and Members also questioned what had been done to approve and implement fraud prevention plans. Overall, the Committee noted that it would maintain a close watch on the DPW’s activities, and urged everyone to work hard to ensure delivery of services.
 

Meeting report

Chairperson’s introductory remarks
Before handing over to the Department of Public Works (DPW or the Department) to give its presentation, the Chairperson reiterated the goals and duties of both the Committee and Department members, noting that there was a model, that all public servants must display honesty, and recognise that their task was to serve South Africa and to achieve service delivery. Honesty and service delivery were the main objectives behind the work of both the Committee and Department.

Department of Public Works 1st quarter 2013/14 performance and expenditure report
Mr Mziwonke Dlabantu, Director General, Department of Public Works, tabled the first quarter report and explained that it showed a mixture of highlights and achievements. He explained that the purpose of the meeting was to take the Committee through what the Department had done in the period, and said the Department would be asking for advice and recommendations from the Committee on any of the problems encountered by the Department in this quarter.

Mr Dlabantu explained the “three-phase”  approach and methodology of data collection and evaluation of work. Phase one included data collection and compliance, phase two included data cleansing and analysis, and the third phase incorporated the accountability process. Mr Dlabantu said the key focus of this approach was to encourage the use of quality performance information for decision making and resource management, and ultimately provide an assessment on the overall performance of the Department.

Mr Dlabantu started with the achievements of Programme 1: Administration. Here, he highlighted an improvement in the annual performance plans, a better understanding of the planning process, and accommodation needs, and better overall management of the Department of Public Works. He noted that the sub-programmes of the Administration programme included the Internal Audit and Investigation Services, Strategic Management Unit, Monitoring and Evaluation, Intergovernmental Relations, Finance and Supply Chain Management, and Corporate Services.

Achievements (more fully detailed in the attached presentation) were described as including the overall improvement in the Annual Performance Plans, prioritisation of risk factors –particularly those at a high level, more thorough institutional support, and well-coordinated governance of the Department. He noted that the Department’s preoccupation with improving these processes took up a lot of time, and this explained the delays experienced in other areas of work. He identified Supply Chain Management as remaining a weak area, but reinforced the Department’s commitment to working with the National Treasury to collectively fix some of the problems.

Programme 2: Immovable Asset Management was the largest programme within the Department, taking up 48% of the Department’s allocation budget. This programme sought to achieve the first four strategic objections of the Department of Public Works. The sub-programmes included: Strategic Asset Investment Analysis, Project and Professional Services, Inner-City Regeneration, Operational Management, Key Accounts Management, Prestige Management, and Finance.  He stated that the completion of the Asset Register project was on track, despite some of the delays and challenges experienced along the way, which were largely due to the magnitude of this programme, its complexities, and a lack of guiding principles.

He noted, in respect of Programme 4, that leases were an essential component. He highlighted that a desktop review had been completed on 2 778 leases, in an effort to address the leasing backlog. Despite the difficulties, major progress was observed in three areas. Firstly, there had been determination of criteria in regard to the lease backlog, which would focus on month-to-month leases, leases that had expired, and leases that were due to expire on 31 March 2013.

He reiterated that 2 778 leases had been reviewed. Of these, 1 316 were identified as leases that required attention, revision or renewal. These were regarded as backlog leases.

The DPW had now developed a standardised lease contract for approval and for use by all the regions.

Other achievements under Programmes 2 and 4 included the completion of projects with a 6a status. About 90% were completed in the first quarter. The DPW had completed drafts of Precinct Development Plans for two government precincts, West Capital and Paul Kruger. The function of Prestige Management had been centralized, to create executive control and visibility, with an interim management structure. The Department had also completed the draft revision of the Expropriation Bill, based on public comments received.

Mr Dlabantu continued to summarise the highlights of each programme. He reiterated the DPW’s commitment to investing properly within the Department. He emphasised the importance of, and the work done by the Internal Audit, SMU, and Monitoring and Evaluation programmes under Programme 1, the Strategic Asset Investment Analysis, Project and Professional Services, and Inner-City Regeneration projects under Programme 2, the Policy branch of Programme 4, and the Auxiliary and Associated Services project of Programme 5. He again congratulated Programmes 1 and 2 managers on their achievements.

Programme 1 had completed the draft Human Resources plan, and intergovernmental relations governance meetings had been held. Finance policies, and draft supply chain management policies were drafted. Under Programme 2, he reiterated that the DPW had done the Operations Management leases desktop review, had attended to Key Accounts Management, and Prestige Management had also done noteworthy work.

Mr Dlabantu then proceeded to describe some of the challenges in this quarter. There were delays with the acquisition of the Property Management Trading Entity (PMTE) building. There was low spending on some projects. There were delays in the implementation of the Infrastructure Delivery Improvement Programme (IDIP) , which was central to planning projects. There were some challenges in the definition of  the “irregular expenditure receiving priority”, but the DPW was holding discussions on, and attempting to reach agreement on that with the National Treasury. The Property Management Information System (PMIS) also showed some challenges.

Mr Dlabantu confirmed that the Department was adopting a cautious attitude towards managing the system and may dedicate this Friday to brainstorming more.

Mr Dlabantu told the Chairperson that he had concerns around how to reach a better understanding of the proper alignment, and achieve the coordination that would be needed to fix these challenges and avoid future delays.

He said that the Department wished to improve spending, repeated that the DPW hoped to reach consensus with the National Treasury on the outstanding queries, and re-analyse the expenditure figures of 2009, to fix the problem of incompleteness of accounts.

Mr Dlabantu then explained the progress that the Department had made in responding to the findings of the Auditor-General (AG). He discussed the importance of the interim arrangement for PMTE, the analysis of irregular expenditure, appointments of acting Deputy Director Generals, the capacity of the Internal Audit Unit, the Lease Commitment Policy and review and audit of lease agreements. He also covered the comments in relation to the draft Contingent Liability/Asset Policy. The audit on Moveable Assets had been completed, as had also the draft Capitalisation Policy, the draft Policy on Trade and other Payables, and the draft Pre-payment Policy.

Mr Dlabantu believed many of the issues and complications that the DPW still faced were due to dependencies inherited from the past, the lack of sound foundational policies, and challenges with the organisational structure. He explained that dependencies were indicators that were structured in such as way that the output on one programme became an input into another, and if any delays occurred in the first programme, this would have a knock-on effect on others, causing all linked programmes to encounter problems and delays. The absence of foundational policies setting precedents for how work and procedures should be done within the Department remained a challenge to its current processes. The challenges with the organisational structure posed problems to the functionality and effectiveness of the Department, and had the potential to hinder the future success of those four programmes.

Mr Dlabantu set out some proposals for the future. He suggested that it would be necessary to conclude project charters and align these to programmes of the Department. There was a need to have continuous feedback and recommendations on the progress of the programmes. He proposed the development of a Service Delivery Improvement Plan. It would be necessary to develop and maintain a Management Information System, to serve as a comprehensive central database on the programmes. Findings and evaluations must be done in respect of performance and budget, and overall the Department must ensure that it created, implemented and monitored approved policies, guidelines and procedures.

Financial information
Mr Cox Mokgoro, Chief Financial Officer, Department of Public Works, tabled and explained the financial figures for the first quarter. He specifically highlighted the spending to date, which, at R1.2 billion rand, represented 20% of the total allocation. This was below, but not exactly in compliance with the budgeted 25% spending for this quarter. However, he  explained that the DPW wanted to keep pace with spending but not simply spend for the sake of it.

He provided a detailed account of how much money was allocated for each programme (see attached presentation for full details), but noted that there was also a breakdown of money spent per region, as outlined in slide 36. He noted that Durban, KwaZulu Natal, showed a much higher percentage of both budget allocation and spending. The expenditure analysis of the PMTE was described as lower than the previous year, because the cleaning, gardening and planned maintenance for the properties were lower than the guideline percentage of 25%.

Mr Dlabantu emphasised the listing of the DPW’s “top ten” clients, showing that the South African Police Service and South African Department of Defence were the largest clients.

Discussion
Ms A Dreyer (DA) was most concerned with the unequal distribution of money and resources across the country.

A DPW official explained the variances within South Africa, and said that this was directly linked to the infrastructure. Some regions needed more assistance than others. In addition, in this quarter, there had been a need for more financial interventions in some areas of Cape Town than in others, whilst in some predominately rural areas, more time and resources were needed.

Mr Mfezeko Gwazube, Project Manager, DPW, added that many of the challenges the Department faced in this quarter were organisational in nature, and the Department would work harder to make the budget more transparent.

A Member expressed his concerns about the under spending of budget allocated in this quarter. He pointed out that the Department, having spent 20%, had achieved 5% less spending than what was budgeted and allocated. The money was allocated for the specific purpose of delivery.

Mr Gwazube reiterated that the Department had taken the conscious decision not to spend merely for the sake for spending or fulfilling the budget quota. He conceded, however, that it was necessary to increase the monitoring for the upcoming quarter, and keep pace with the budget set for each quarter.

Another Member was concerned with the poor scheduling within the Department’s billing system in relation to invoices, noting that there was not smooth collection of invoices.

Mr Mokgoro explained that this was the nature of the invoice collection cycle. The Department issued the invoices and, within thirty days, client invoices would be processed. The DPW officials were working with National Treasury, hoping to bring it on board, with a view to re-examining and  re-prioritising the budgets. DPW wanted to try to move matters along more swiftly and to enhance efficiency in order to properly execute all that it should be doing.

Ms P Ngwenya-Mabila (ANC) wanted to follow up on a question previously asked by one of her colleagues about the fraud prevention plans of the Department. She asked if the DPW had managed to review the fraud prevention plans, and asked for an indication of its current status.

An official from the Department said that whilst he could not precisely recall the date on which the fraud prevention strategy was developed, training had started on this, with the responsibility delegated to the Human Resources division, and using the HR resources to assist with the training.

The Chairperson extended her thanks to the Department for the work done in this quarter. She and other Members would be closely watching the DPW, to ensure that it was transparent and was properly implementing the recommendations of this Committee, to ensure the advancement and future effectiveness of its work. She noted that people should be willing to sacrifice their time for the good of the country. She was critical of those people who were not working hard enough to ensure that services were delivered to citizens, in the best manner possible. She said that the Committee would need to follow up on some of the discrepancies in the budget and service delays in this quarter.

The meeting was adjourned.
Chairperson’s introductory remarks
Before handing over to the Department of Public Works (DPW or the Department) to give its presentation, the Chairperson reiterated the goals and duties of both the Committee and Department members, noting that there was a model, that all public servants must display honesty, and recognise that their task was to serve South Africa and to achieve service delivery. Honesty and service delivery were the main objectives behind the work of both the Committee and Department.

Department of Public Works 1st quarter 2013/14 performance and expenditure report
Mr Mziwonke Dlabantu, Director General, Department of Public Works, tabled the first quarter report and explained that it showed a mixture of highlights and achievements. He explained that the purpose of the meeting was to take the Committee through what the Department had done in the period, and said the Department would be asking for advice and recommendations from the Committee on any of the problems encountered by the Department in this quarter.

Mr Dlabantu explained the “three-phase”  approach and methodology of data collection and evaluation of work. Phase one included data collection and compliance, phase two included data cleansing and analysis, and the third phase incorporated the accountability process. Mr Dlabantu said the key focus of this approach was to encourage the use of quality performance information for decision making and resource management, and ultimately provide an assessment on the overall performance of the Department.

Mr Dlabantu started with the achievements of Programme 1: Administration. Here, he highlighted an improvement in the annual performance plans, a better understanding of the planning process, and accommodation needs, and better overall management of the Department of Public Works. He noted that the sub-programmes of the Administration programme included the Internal Audit and Investigation Services, Strategic Management Unit, Monitoring and Evaluation, Intergovernmental Relations, Finance and Supply Chain Management, and Corporate Services.

Achievements (more fully detailed in the attached presentation) were described as including the overall improvement in the Annual Performance Plans, prioritisation of risk factors –particularly those at a high level, more thorough institutional support, and well-coordinated governance of the Department. He noted that the Department’s preoccupation with improving these processes took up a lot of time, and this explained the delays experienced in other areas of work. He identified Supply Chain Management as remaining a weak area, but reinforced the Department’s commitment to working with the National Treasury to collectively fix some of the problems.

Programme 2: Immovable Asset Management was the largest programme within the Department, taking up 48% of the Department’s allocation budget. This programme sought to achieve the first four strategic objections of the Department of Public Works. The sub-programmes included: Strategic Asset Investment Analysis, Project and Professional Services, Inner-City Regeneration, Operational Management, Key Accounts Management, Prestige Management, and Finance.  He stated that the completion of the Asset Register project was on track, despite some of the delays and challenges experienced along the way, which were largely due to the magnitude of this programme, its complexities, and a lack of guiding principles.

He noted, in respect of Programme 4, that leases were an essential component. He highlighted that a desktop review had been completed on 2 778 leases, in an effort to address the leasing backlog. Despite the difficulties, major progress was observed in three areas. Firstly, there had been determination of criteria in regard to the lease backlog, which would focus on month-to-month leases, leases that had expired, and leases that were due to expire on 31 March 2013.

He reiterated that 2 778 leases had been reviewed. Of these, 1 316 were identified as leases that required attention, revision or renewal. These were regarded as backlog leases.

The DPW had now developed a standardised lease contract for approval and for use by all the regions.

Other achievements under Programmes 2 and 4 included the completion of projects with a 6a status. About 90% were completed in the first quarter. The DPW had completed drafts of Precinct Development Plans for two government precincts, West Capital and Paul Kruger. The function of Prestige Management had been centralized, to create executive control and visibility, with an interim management structure. The Department had also completed the draft revision of the Expropriation Bill, based on public comments received.

Mr Dlabantu continued to summarise the highlights of each programme. He reiterated the DPW’s commitment to investing properly within the Department. He emphasised the importance of, and the work done by the Internal Audit, SMU, and Monitoring and Evaluation programmes under Programme 1, the Strategic Asset Investment Analysis, Project and Professional Services, and Inner-City Regeneration projects under Programme 2, the Policy branch of Programme 4, and the Auxiliary and Associated Services project of Programme 5. He again congratulated Programmes 1 and 2 managers on their achievements.

Programme 1 had completed the draft Human Resources plan, and intergovernmental relations governance meetings had been held. Finance policies, and draft supply chain management policies were drafted. Under Programme 2, he reiterated that the DPW had done the Operations Management leases desktop review, had attended to Key Accounts Management, and Prestige Management had also done noteworthy work.

Mr Dlabantu then proceeded to describe some of the challenges in this quarter. There were delays with the acquisition of the Property Management Trading Entity (PMTE) building. There was low spending on some projects. There were delays in the implementation of the Infrastructure Delivery Improvement Programme (IDIP) , which was central to planning projects. There were some challenges in the definition of  the “irregular expenditure receiving priority”, but the DPW was holding discussions on, and attempting to reach agreement on that with the National Treasury. The Property Management Information System (PMIS) also showed some challenges.

Mr Dlabantu confirmed that the Department was adopting a cautious attitude towards managing the system and may dedicate this Friday to brainstorming more.

Mr Dlabantu told the Chairperson that he had concerns around how to reach a better understanding of the proper alignment, and achieve the coordination that would be needed to fix these challenges and avoid future delays.

He said that the Department wished to improve spending, repeated that the DPW hoped to reach consensus with the National Treasury on the outstanding queries, and re-analyse the expenditure figures of 2009, to fix the problem of incompleteness of accounts.

Mr Dlabantu then explained the progress that the Department had made in responding to the findings of the Auditor-General (AG). He discussed the importance of the interim arrangement for PMTE, the analysis of irregular expenditure, appointments of acting Deputy Director Generals, the capacity of the Internal Audit Unit, the Lease Commitment Policy and review and audit of lease agreements. He also covered the comments in relation to the draft Contingent Liability/Asset Policy. The audit on Moveable Assets had been completed, as had also the draft Capitalisation Policy, the draft Policy on Trade and other Payables, and the draft Pre-payment Policy.

Mr Dlabantu believed many of the issues and complications that the DPW still faced were due to dependencies inherited from the past, the lack of sound foundational policies, and challenges with the organisational structure. He explained that dependencies were indicators that were structured in such as way that the output on one programme became an input into another, and if any delays occurred in the first programme, this would have a knock-on effect on others, causing all linked programmes to encounter problems and delays. The absence of foundational policies setting precedents for how work and procedures should be done within the Department remained a challenge to its current processes. The challenges with the organisational structure posed problems to the functionality and effectiveness of the Department, and had the potential to hinder the future success of those four programmes.

Mr Dlabantu set out some proposals for the future. He suggested that it would be necessary to conclude project charters and align these to programmes of the Department. There was a need to have continuous feedback and recommendations on the progress of the programmes. He proposed the development of a Service Delivery Improvement Plan. It would be necessary to develop and maintain a Management Information System, to serve as a comprehensive central database on the programmes. Findings and evaluations must be done in respect of performance and budget, and overall the Department must ensure that it created, implemented and monitored approved policies, guidelines and procedures.

Financial information
Mr Cox Mokgoro, Chief Financial Officer, Department of Public Works, tabled and explained the financial figures for the first quarter. He specifically highlighted the spending to date, which, at R1.2 billion rand, represented 20% of the total allocation. This was below, but not exactly in compliance with the budgeted 25% spending for this quarter. However, he  explained that the DPW wanted to keep pace with spending but not simply spend for the sake of it.

He provided a detailed account of how much money was allocated for each programme (see attached presentation for full details), but noted that there was also a breakdown of money spent per region, as outlined in slide 36. He noted that Durban, KwaZulu Natal, showed a much higher percentage of both budget allocation and spending. The expenditure analysis of the PMTE was described as lower than the previous year, because the cleaning, gardening and planned maintenance for the properties were lower than the guideline percentage of 25%.

Mr Dlabantu emphasised the listing of the DPW’s “top ten” clients, showing that the South African Police Service and South African Department of Defence were the largest clients.

Discussion
Ms A Dreyer (DA) was most concerned with the unequal distribution of money and resources across the country.

A DPW official explained the variances within South Africa, and said that this was directly linked to the infrastructure. Some regions needed more assistance than others. In addition, in this quarter, there had been a need for more financial interventions in some areas of Cape Town than in others, whilst in some predominately rural areas, more time and resources were needed.

Mr Mfezeko Gwazube, Project Manager, DPW, added that many of the challenges the Department faced in this quarter were organisational in nature, and the Department would work harder to make the budget more transparent.

A Member expressed his concerns about the under spending of budget allocated in this quarter. He pointed out that the Department, having spent 20%, had achieved 5% less spending than what was budgeted and allocated. The money was allocated for the specific purpose of delivery.

Mr Gwazube reiterated that the Department had taken the conscious decision not to spend merely for the sake for spending or fulfilling the budget quota. He conceded, however, that it was necessary to increase the monitoring for the upcoming quarter, and keep pace with the budget set for each quarter.

Another Member was concerned with the poor scheduling within the Department’s billing system in relation to invoices, noting that there was not smooth collection of invoices.

Mr Mokgoro explained that this was the nature of the invoice collection cycle. The Department issued the invoices and, within thirty days, client invoices would be processed. The DPW officials were working with National Treasury, hoping to bring it on board, with a view to re-examining and  re-prioritising the budgets. DPW wanted to try to move matters along more swiftly and to enhance efficiency in order to properly execute all that it should be doing.

Ms P Ngwenya-Mabila (ANC) wanted to follow up on a question previously asked by one of her colleagues about the fraud prevention plans of the Department. She asked if the DPW had managed to review the fraud prevention plans, and asked for an indication of its current status.

An official from the Department said that whilst he could not precisely recall the date on which the fraud prevention strategy was developed, training had started on this, with the responsibility delegated to the Human Resources division, and using the HR resources to assist with the training.

The Chairperson extended her thanks to the Department for the work done in this quarter. She and other Members would be closely watching the DPW, to ensure that it was transparent and was properly implementing the recommendations of this Committee, to ensure the advancement and future effectiveness of its work. She noted that people should be willing to sacrifice their time for the good of the country. She was critical of those people who were not working hard enough to ensure that services were delivered to citizens, in the best manner possible. She said that the Committee would need to follow up on some of the discrepancies in the budget and service delays in this quarter.

The meeting was adjourned.
 

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