Portfolio Committee Presentation DEPARTMENT OF PUBLIC WORKS Report on the performance of the entities and the actions from the Auditor’s General report 12 March 2013 By the Director General DPW presentation to PC, 12 March 2013 1
Outline 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 DPW presentation to PC, 12 March 2013 2
1. 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. DPW presentation to PC, 12 March 2013 3
2. Background • • • 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 3 A National Public Entity (iii)The Council for Built Environment (CBE) listed as Schedule 3 A 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. DPW presentation to PC, 12 March 2013 4
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 – IDo. W 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. DPW presentation to PC, 12 March 2013 5
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. DPW presentation to PC, 12 March 2013 6
Transform ation • Slow pace of transformation in the BE sector • Poor representation of women and black people in the BE industry • Poor throughput rates from tertiary education levels Skills • Poor maths and science literacy level (from high school level) developme • Registration bottlenecks within BE professions nt Delivery constraint s • Mandates of CBE and Professional Councils were never fully costed • Funding and human resource capacity constraints at Professional Council level • Funding constraints at CBE level particularly on the bursary scheme DPW presentation to PC, 12 March 2013 7
Issues as highlighted by the Auditors No issue raised Summarised finding 1 Restatement of The corresponding figures for 31 March 2011 have been • Done. corresponding figures restated as a result of an error discovered during 2012 in • AFS amended accordingly the financial statements for the Council of Built Environment • AFS now produced on a quarterly base at, and for the year ended, 31 March 2011 (note 27 of AFS). 2 Strategic planning and The accounting authority did not submit the proposed • Partly achieved performance strategic plan to the executive authority for approval at least • August 2012 submission not achieved. management six months before the start of the financial year of the (Matter has been highlighted to Auditor General) designated department, contravention with the • January submission of Annual Performance requirements of TR 30. 1. 1 and 30. 1. 2 Plan and Strategic plan achieved submitted 3 Annual financial statements, performance and annual reports The financial statements submitted for auditing were not • Partly achieved prepared in accordance with the prescribed financial • AFS amended accordingly reporting framework as required by section 55(1) (b) of the • AFS now produced on a quarterly base Public Finance Management Act. 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 16 A 8. 3 and Treasury regulation 16 A 9. 1 were not upheld 5 Expenditure Management The accounting authority did not take effective steps to • Achieved prevent irregular expenditure and fruitless and wasteful • Control measures in place to monitor non expenditure, as required by section 51(1)(b)(ii) of the Public compliance and bring the relevant officials to Finance Management Act. book. 6 Asset management and liability management Bank reconciliations were not performed on a weekly basis, • Achieved as required by Treasury Regulation 31. 1. 2(j). • Bank Reconciliations performed weekly in line with regulation. DPW presentation to PC, 12 March 2013 Status to date • Achieved • All suppliers requested to produce the relevant document, SBD 4 and 9 prior to being appointed. 8
Governance and Financial review • • All members of council appointed accordingly Dealing with Challenges within governance matters within the board of council is underway through the ministers intervention. Expenditure by Category 2012/2013 Budget Allocation (R'000) Actual Expenditure as Budget year to date 31 at 31 December 2012 Variance to date noted December 2012 (R'000) in (R'000) 1: Administration 17 356 12 046 11 384 662 (5%) 2: Built Environment Academy 3: Center for Innovation and Intergrated Planning 3 058 1 116 1 088 28 (3%) 8 363 5 889 5 253 636 (11%) 4: Public Interest 2 511 1 454 1 279 175 (12%) 31 287 20 506 19 003 1 502 (7%) Total DPW presentation to PC, 12 March 2013 9
3. 2. Agrément South Africa (ASA) performance review • • • 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. DPW presentation to PC, 12 March 2013 10
3. 3. Independent Development Trust (IDT) Performance Highlights and Concerns – Generated turnover of R 6. 9 bn (141%) against a target of R 4. 7 bn, i. e turn over refers to the value of programmes managed on behalf of government departments – Delivered programmes to the value of R 4. 06 bn (106%) against a target of R 3. 8 bn. Delivered programmes refers to value of programmes spend on behalf of government departments – R 2. 265 bn (56%) of total expenditure spent was on BBBEE against a target of 60%. This improvement since the 2 nd 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: R 26. 3 m achieved against a target of R 190 m. 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 12 DPW presentation to PC, 12 March 2013
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. 13 DPW presentation to PC, 12 March 2013
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 14 DPW presentation to PC, 12 March 2013
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 R 50 m has been allocated with a further R 50 m 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. 15 DPW presentation to PC, 12 March 2013
3. 4. Construction Industry Development Board (CIDB) 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. DPW presentation to PC, 12 March 2013 16
Audit Findings by Auditor General: 2011/12 Audit Report on CIDB Audit Findings Status to date 1. The corresponding figures for 31 the reconciliations are done on a monthly basis and checked as well as reviewed by two March 2011 were restated as a result independent persons to ensure completeness and accuracy. The persons responsible for the of an erroneous disclosure of the drafting of the financials are now receiving regular training on the GRAP changes as they are provision for debt impairment introduced. The financials will also be checked and reviewed by two independent persons prior to amounting to R 456 k discovered submitting for audit during the 31 March 2012 audit in the financial statements. 2. Irregular expenditure: relating to the SCM structure has since been beefed up with the following positions: determining of the full extent of • Manager – started in November 2012; irregularities amounting to R 11, 781 m • Senior Practitioner – started in March 2012; (thus indicating an increase of • Practitioner – started in November 2012 R 2, 515 m when compared with that of the previous year) 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 17
Way forward 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. DPW presentation to PC, 12 March 2013 18
Thank you DPW presentation to PC, 12 March 2013 19
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