outline

Portfolio Committee PresentationPortfolio Committee Presentation

DEPARTMENT OF PUBLIC WORKSDEPARTMENT OF PUBLIC WORKS

Report on the performance of the entities and the actions from Report on the performance of the entities and the actions from the Auditor’s General reportthe Auditor’s General report

12 March 201312 March 2013

By the Director GeneralBy the Director General

1DPW presentation to PC, 12 March 2013

1.Purpose

2. Background

3. 2012-13 entities Performance review/report as at 31 December 2012 and progress on 2011-12 audit outcomes

3.1. Council for Built Environment (CBE)

3.2. Agrement South Africa (ASA)

3.3. Independent Development Trust (IDT)

3.4. Construction Industry Development Board (CIDB)

4. Way forward

OutlineOutline

DPW presentation to PC, 12 March 2013 2

1. Purpose of the Presentation1. Purpose of the Presentation

Present the department’s perspectives pertaining the entities performance as at third quarter of 2012-13 financial year and their progress in dealing with auditing findings.


•Public Entities were established to deliver government functions to the members of public in line with department’s mandate and as defined by their respective act/governing legislation. •The department as the shareholder should monitor and evaluate the performance of the public entities to ensure that pre-determined objectives are attained.•The department is empowered by PFMA to create a culture of accountability, openness and transparency in public administration and also to advocate for value for money in the procurement of goods and services by public entities. To this end, the Minister has extended the requirement to the six (6) professional councils to comply to PFMA. •The department has three (3) entities that are listed in terms of the PFMA, namely:

(i) The Independent Development Trust (IDT) listed as a Schedule 2 Major Public Entity(ii) The Construction Industry Development Board (CIDB) listed as Schedule 3A National Public Entity(iii)The Council for Built Environment (CBE) listed as Schedule 3A National Public Entity and its six (6) professional councils(not yet compliant with the PFMA).

•However, the fourth Public Entity which is governed by the Ministerial delegation is known as Agrėment South Africa.•The oversight tool employed by the department entails scheduling of quarterly meetings between the Executive Authority and entities to review performance in the governance, financial management and performance management areas thereby providing focused intervention when required.

2. Background2. Background


3.1.CBE Performance Review/Report

• The CBE and professional councils have 13 concurrent mandates for which the CBE must develop policy guidelines/frameworks to ensure consistent application across the built environment professions.

• The CBE has so far developed the following Eleven (11) policy frameworks for implementation and alignment by professional councils

– IDoW policy-2009/10,Continuous Professional Development (CPD)

– Recognition of Prior Learning [RPL] , Code of Conduct for professions , Determination of professional fees,

– Competency standards for registration; Registration of built environment professionals; Recognition of voluntary associations;

– Appeals and tribunals; International Agreements and Accreditation of built environment programmes

• The outstanding policy frameworks on Standard Generation Body and Recognition of New Professions and Categories, are under review

• The Green House Gas mitigation study, which is anchored on the Long Term Mitigation Strategy (LTMS) 2008 Cabinet decision and Kyoto Protocol obligations, is with the department and to be used in compiling a comprehensive review of our green agenda, including enhancement and consideration on appropriate time to report to cabinet in implementing the LTMS decisions.

• On international accords and agreements, an agreement with the Republic of Ugandan have been concluded to operationalise the Bilateral Agreement between RSA and Uganda. We’re also engaging our Zambian counter parts, initiating processes towards mutual recognition of Professions and Qualifications. These agreements will be used to crystallize a firm process in reinforcing national interests onwards and congruence with the Republic’s Foreign Policy doctrine, in particular the African Agenda.


3.1.CBE Performance Review/Report

• Partnership - Dept of Labour in the development of Health and Safety in Construction Accord; signed by both Ministers of Labour and Public Works with COSATU+FEDUSA+NACTU. In the context of the turnaround, the health and safety report of CBE will be used in strengthening our contracting arrangements.

• The research products on Skills Audit (2008) responses and the State of the Built Environment Professions Industry (2010), were used in the Inaugural Built Environment Professions Indaba of the Industry. The Policy position recommendations were developed with Transformation being the permeating backbone and various skills development initiatives were formulated. These will guide our PICC inputs.

• The CBE Bursary Scheme has produced its first 8 graduates in different built environment.• Work on establishment of a structured, quality assured and transparent candidacy program &

workplace training for candidates that will ultimately lead to acceleration professional registration . Co-operation discussions with CETA for quality assurance of programmes, mentors &workplace training.

• Interventions in UKZN; re-opening of QS and Construction Management academic programmes & Landscape Architecture at Durban University of Technology.

• Partnership with MISA (Municipal Infrastructure Support Agency), for technical skills development initiatives in municipalities.

• Progress made on Skills Plan inputs for the Presidential Infrastructure Projects – contract conditions to support skills development.


Issues as highlighted by the Auditors

No issue raised Summarised finding Status to date1 Restatement of

corresponding figuresThe corresponding figures for 31 March 2011 have been restated as a result of an error discovered during 2012 in the financial statements for the Council of Built Environment at, and for the year ended, 31 March 2011 (note 27 of AFS).

•Done.•AFS amended accordingly•AFS now produced on a quarterly base

2 Strategic planning and performance management

The accounting authority did not submit the proposed strategic plan to the executive authority for approval at least six months before the start of the financial year of the designated department, contravention with the requirements of TR 30.1.1 and 30.1.2

•Partly achieved •August 2012 submission not achieved. (Matter has been highlighted to Auditor General)•January submission of Annual Performance Plan and Strategic plan achieved submitted

3 Annual financial statements, performance and annual reports

The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework as required by section 55(1) (b) of the Public Finance Management Act.

•Partly achieved •AFS amended accordingly•AFS now produced on a quarterly base

4 Procurement Contracts were awarded to bidders who did not submit a declaration on whether they are employed by the state or connected to any person employed by the state, Treasury regulation 16A8.3 and Treasury regulation 16A9.1 were not upheld

•Achieved •All suppliers requested to produce the relevant document, SBD 4 and 9 prior to being appointed.

5 Expenditure Management

The accounting authority did not take effective steps to prevent irregular expenditure and fruitless and wasteful expenditure, as required by section 51(1)(b)(ii) of the Public Finance Management Act.

•Achieved• Control measures in place to monitor non compliance and bring the relevant officials to book.

6 Asset management and liability management

Bank reconciliations were not performed on a weekly basis, as required by Treasury Regulation 31.1.2(j).

•Achieved•Bank Reconciliations performed weekly in line with regulation.


Governance and Financial review

Expenditure by Category

2012/2013 Budget Allocation (R'000)

Budget year to date 31 December 2012

(R'000)

Actual Expenditure as at 31 December 2012

(R'000) Variance to date noted in (R'000)

1: Administration 17 356 12 046 11 384 662 (5%)

2: Built Environment Academy

3 058 1 116 1 088 28 (3%)

3: Center for Innovation and Intergrated Planning

8 363 5 889 5 253 636 (11%)

4: Public Interest 2 511 1 454 1 279 175 (12%)

Total 31 287 20 506 19 003 1 502 (7%)

• All members of council appointed accordingly• Dealing with Challenges within governance matters within the board of council is

underway through the ministers intervention.


• The Board's Technical sub-committee focused on key objectives & ensured Agrément South Africa was well governed.

• Agrément finances statements are audited and received a clean audit report: There were no matters of emphasis.

• The Agency’s transactions are subject to the policies, procedures and governance processes of the CSIR.

• The CSIR has received an unqualified audit report from the office of the Auditor General for the last few years and has been hailed as an example of good financial management.

• Draft Agrement South Africa Bill is being developed for tabling to Parliament in 2013.

3.2. Agrément South Africa (ASA) performance review


3.3. Independent Development Trust (3.3. Independent Development Trust (IDTIDT) Performance Highlights and ) Performance Highlights and ConcernsConcerns

– Generated turnover of R6.9bn (141%) against a target of R4.7bn, i.e turn over refers to the

value of programmes managed on behalf of government departments

– Delivered programmes to the value of R4.06bn (106%) against a target of R3.8bn. Delivered

programmes refers to value of programmes spend on behalf of government departments

– R2.265bn (56%) of total expenditure spent was on BBBEE against a target of 60%. This

improvement since the 2nd Quarter (43.3%) is significant and largely attributed to the

support given to service providers with obtaining their BBBEE certificates.

– 24 567 (102%) work opportunities created in IDT’s programmes against the target of 24 000.

– 39 839 (112%) EPWP: NSS work opportunities created against the target of 35 000

• Concern area:

– The targets pertain to generating additional funds or resources, namely, value of resources mobilised, management fees and establishing a resource mobilisation unit.

– Value of Resources Mobilised: R26.3m achieved against a target of R190m. The IDT reported that it focused its human resources on delivering client contractual commitments. Further the IDT reported that it had resource challenges for establishing resource mobilisation capacity as no funding was availed by National Treasury in the 2012/13 financial year.

11 DPW presentation to PC, 12 March 2013

IDT PERFORMANCE CONCERNS (CONT.)

% MANAGEMENT FEES INVOICED: About 3% was achieved against a target of 4.5% based on

programme expenditure. IDT reported that clients are reluctant to agree to pay the projected

management fees. While the IDT does not have a legislated mandate or authority to insist on

these fees, the challenge of managing the gap between the IDT’s projections and the actual

revenue generated from programme delivery is likely to persist


STATUS OF AUDIT ACTION: 2011/12 AUDITS

• The IDT had an unqualified audit report in the 2011/12 financial year. The other audit queries

whose status is summarised in the graph below are of housekeeping nature.

• However the AGSA report cited the main contributor to the concerns observed under the topic for

Internal Control and Leadership to be performance information, Compliance with laws and

regulations and financial reporting.


STATUS OF AUDIT ACTION PLAN

A total of 51 audit queries were raised

during 2011/12 financial year,

Majority of which related to Programme

expenditure, management, Non-

Compliance with laws and regulations and

Governance issues,

100% of audit queries raised in 6 of the 11

categories are complete

As at 31 December 2012 an average of

83% of the audit queries were addressed

During quarter 4, emphasis will be placed

on addressing the outstanding and

enhancing controls especially on

Programme management and Non-

Compliance issues


LONG TERM SUSTAINABILITY OF THE IDT

Department is conversant with the background and problem statement relating to the IDT’s

Long-Term Sustainability.

Hence the Minister has undertaken to resolve the short term problem through a reallocation

of DPW funds to the IDT. For 2013/14 R50m has been allocated with a further R50m

provided per year for 2014/15 and 2015/16.

National Treasury is supporting NDPW in the review of the IDT’s business case. This

process is expected to be completed by end of June 2013.

The business case will be the basis for the IDT’s new / revised mandate and funding.

The country cannot afford to loose the capacity that the IDT provides to government hence

the matter of the IDT’s long term sustainability has been entrusted by the Minister to the

Deputy Minister to manage.


Key achievements

• Amendments to the CIDB Regulations dealing with registers of contractors were published for public comments.

• The cidb, together with other DPW entities facilitated, the Construction Industry Transformation Summit, which was held on 23 November 2012.

• The cidb Standard for Indirect Targeting for Enterprise Development has been endorsed through a public comment process, and will be submitted to the cidb Board in January 2013 for final approval.

• The cidb Requirements for Contractor Performance Reports (for Grades 2 to 9) has been endorsed by Stakeholders for gazetting for public comment.

• National Contractor Development Programme and CDP Guidelines launched by Minister at KZN 5 Dec 2012 MINMEC

• Compliance with the legislated turnaround time on processing compliant Grade 2-9 is envisaged to be cleared in the end of fourth quarter.

3.4. Construction Industry Development Board (CIDB)3.4. Construction Industry Development Board (CIDB)


Audit Findings by Auditor General: 2011/12 Audit Report on CIDB

17

Audit Findings Status to date

1. The corresponding figures for 31 March 2011 were restated as a result of an erroneous disclosure of the provision for debt impairment amounting to R456k discovered during the 31 March 2012 audit in the financial statements.

the reconciliations are done on a monthly basis and checked as well as reviewed by two independent persons to ensure completeness and accuracy. The persons responsible for the drafting of the financials are now receiving regular training on the GRAP changes as they are introduced. The financials will also be checked and reviewed by two independent persons prior to submitting for audit

2. Irregular expenditure: relating to determining of the full extent of irregularities amounting to R11,781m (thus indicating an increase of R2,515m when compared with that of the previous year)

the SCM structure has since been beefed up with the following positions: •Manager – started in November 2012;•Senior Practitioner – started in March 2012;•Practitioner – started in November 2012

Furthermore, the SCM function has been fully centralised within SCM which was not the case in 2011/12. A checklist has been developed so as to verify that all processes have been complied with prior to awards – this is checked by a senior practitioner. All irregular acquisitions have been submitted to Treasury an/or the Board to be condoned. An SCM policy with the delegations thereto as well as the cidb delegations have been finalised and approved. All SCM officials are undergoing training and have also signed code of conduct. All employees involved in bid committees have undergone training and they have been formally appointed.

3. Item 3: Performance indicators not well defined: relating to the usefulness and reliability of the information in the APP

for the 2012/13 financial year; the cidb has engaged the assistance of an external independent review (KPMG) to review the performance information and alignment between the Strategic Plan, APP and quarterly reports. The input received from the auditors has been used to finalise the SP and APP for the 2013/14 thus addressing the shortcomings identified previously

DPW presentation to PC, 12 March 2013

Within the broader context of turnaround strategy as well as strengthening internal mechanisms for oversight role over entities, the department will ensure that:

•Interventions on governance arrangements of CBE and their management of professional councils is intensified;

•Sustainability of IDT as a going concern through the development of business case and relevant legislation is receiving urgent attention under the guidance of two Deputy Ministers of Public Works and Finance respectively;

•A special attention is also paid to an international agreements under the auspices of CBE to strengthen government foreign policy outlook and attraction of skills;

•Policy question on the activation of cidb second register of built environment service providers need to be revisited.

•Business case and legislation to establish Agrement South Africa as a juristic person is being finalised.

Way forwardWay forward


Thank you


outline

Documents

public entities

members of public

public administration

backgrounddpw presentation

major public entityii

professional councilsnot

built environment professions

performance management