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Annual Report 2011/12

DEPARTMENT OF PUBLIC WORKS Portfolio Committee Presentation 10 th October 2012 Parliament of the Republic of South Africa. Annual Report 2011/12. Purpose. Purpose of the Presentation by the Department of Public Works

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Annual Report 2011/12

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  1. DEPARTMENT OF PUBLIC WORKSPortfolio Committee Presentation10th October 2012Parliament of the Republic of South Africa Annual Report 2011/12

  2. Purpose • Purpose of the Presentation by the Department of Public Works • To reflect on the achievements and challenges of the Department of Public Works during the financial year 2011/12 based on the 2011 State of the Nation Address theme of JOB CREATION. • Objective of the Portfolio Committee on Public Works • To consider the achievements and challenges of the Department of Public Works as reflected in the Annual Report.

  3. Extracts from the 2011/12 SONA: • … ‘To address the concerns facing the country, we have declared 2011 a year of job creation through meaningful economic transformation and inclusive growth…’ • Implications for DPW: • … ‘Other departments have launched their own initiatives, for example the Re YaPatala (We Pay) initiative of the Department of Public Works…’ • … ‘Our Expanded Public Works Programme aims to create 4, 5 million work opportunities, and more than a million opportunities have been created already since the beginning of Phase 2.Part of the programme focuses on repairing our roads networks…’ Outcome 4: Decent employment through inclusive economic growth.

  4. Operation Re YaPatala Background • Support government stated intention of decent job creation by ensuring service providers are paid on time; • Central point to deal with backlog of unpaid invoices; • Targets unpaid invoices older than 30 days; • Feedback on progress provided within seven working days; • Interfacing with calls logged from Presidential hotline and SEDA’s SMME; • Successes for financial year 2011/2012 • 745 calls logged; • R17 million value of calls logged and resolved; • Challenges • Majority of calls relate to day-to-day and construction; • Lack of feedback by PM to service providers when invoice is queried or lack of supporting document; • Manual system of Operation Re YaPatala; • Lack of awareness of existence of Operation Re YaPatala; • Lack of monitoring system to track calls received until payments is effected; • Service providers not having relevant documents for appointment, e.g. Order Number or appointment letter;

  5. Programme Analysis • Programmes are assessed based on their contribution to the following: • Job Creation – 2011/12 SONA Theme • Service Delivery • National Policies (NGP, PICC) • International Policies and Treaties • (MDGs) Government’s Outcomes

  6. PROGRAMME 2: IMMOVABLE ASSET INVESTMENT MANAGEMENT Programme: Asset Register Management

  7. PROGRAMME 2 : IMMOVABLE ASSET INVESTMENT MANAGEMENT Programme: Asset Register Management

  8. Programme: Asset Register Management • Overall Assessment • DPW initiated the change of strategy to enhance the IAR, as a result the Service Provider was appointed in October 2011 to programme manage the Immovable Asset Register Enhancement Programme to ensure completeness and accuracy of IAR by 31 March 2014. • An analysis of the IAR was conducted to determine the Term of Reference for the appointment of Service Provider(s) to conduct physical verification. • DPW is continuously engaging Department of Rural and Land Reform (DRDLR) and provinces to fast track the process of issuing Item 28 (1) Certificates.

  9. PROGRAMME 2: Immovable Asset Investment Management Sub Programme: Strategic Asset Investment Analysis

  10. PROGRAMME2: Immovable Asset Investment Management

  11. Sub Programme: Strategic Asset Investment Analysis • Overall Assessment • GIAMA requires that Custodians on an annual basis compile a Custodian Asset Management Plan (C-AMP) that addresses User Departments needs as indicated in their respective User Asset Management Plans (U-AMPs). The Chief Directoratehas completed 2013/14 CAMP and will submit to National Treasury. However, this was achieved in the absence of key elements; viz. UAMPs, condition assessments and performance assessments standards; required for a comprehensive and compliant C-AMP. The outcomes of the C-AMP will be shared with relevant User Departments so that it informs planning going forward. • Planning for projects; both planned maintenance and DPW capital; to be implemented in 2012/13 was concluded with all relevant stakeholders. Going forward, planning will be aligned to IDIP. Delays with procurement processes contributed to accessibility projects not being implemented on time. As part of national priorities to reduce energy and water consumption 8 025 752 kilowatts and 4 324 210 kilolitres was saved during the financial year. Improvements with monitoring and verification of savings for energy consumption will be done in conjunction with the Department of Energy • Progress with regard to release of land to address socio economic development is hampered by requests that are not supported by detailed developmental plans aligned to municipal IDIPs, hence the target was not achieved.

  12. PROGRAMME 2: Immovable Asset Management Programme: Key Account Management

  13. PROGRAMME 2: Immovable Asset Management Programme: Key Account Management

  14. Programme: Key Account Management Overall Assessment: The Key Account Management (KAM) program, as the Department’s front office servicing the accommodation needs of its significant client base remains a key priority. In the year under review, there was a degree of improvement in the following areas: Enhanced client relations resulted in an additional 6 SLA’s being signed, All nine User Departments for whom DPW procures Capital Works submitted their approved Capital Works Implementation Programs (CWIP) in accordance with prescribed timeframes, Increased Executive support for the key role of KAM as the Department's front office to User Departments and the need for heightened responsiveness by officials, Commence to refocus the Department into a client-driven mode with KAM spearheading the delivery of all User Department accommodation requirements across the entire value-chain.

  15. Programme: Key Account Management Overall Assessment: The focus moving forwards, in support of the Department’s Turnaround, will include: Ensuring a strong customer-focussed orientation in the Department in order to define, and deliver against, the needs of clients. The development of a Client Value Proposition that is responsive to accommodation needs of individual clients across the DPW value chain, Appropriate capacitation and resourcing of the KAM Branch to drive the customer focus approach throughout the organization.

  16. PROGRAMME 2: PROFESSIONAL SERVICES Programme: Projects and Professional Services

  17. PROGRAMME 2: Purpose: Programme: 2 Projects and Professional Services

  18. Programme: 2 Projects and Professional Services • Overall Assessment • key projects were concluded and these projects enabled the security cluster Departments to provide the much needed services to the communities around these completed facilities. • Other completed Projects included: • Forensic Laboratory in Parow (for SAPS) • New Generation Correctional Facilities in Kimberly and Brandvlei for DCS • Supreme Court of Appeal in Bloemfontein • Pietermaritzburg Magistrate Building • Pietermaritzburg Colonial Building for the Department of Justice. • The Department has completed and commissioned the printing Web Machines for the Government Printing Warehouse. The operation of this printing warehouse enables the Government of South to have printing capacity for identity documents for South African and other countries that require such assistance from South Africa. • For South Africa to be on par with the first world in academia and various research fields, its researchers require world class facilities for their research work. For that reason the Department of Public Works has upgraded the Marion Island Research Station, which complies with the standard on environmental sustainability parameters. 

  19. PROGRAMME 3: EXPANDED PUBLIC WORKS PROGRAMME

  20. PROGRAMME 3: EXPANDED PUBLIC WORKS PROGRAMME

  21. Programme: EXPANDED PUBLIC WORKS PROGRAMME • Overall Assessment : • The EPWP achieved 97% of its 2011/12 work opportunity targets. To ensure that the Programme achieved it annual targets, intensive engagements were undertaken with public bodies to ensure their participation in the Programme. • In November 2011,  DPW hosted the 2nd annual EPWP Municipal Summit. The Summit resolved that EPWP institutional arrangements would be strengthened through the continued formation of EPWP District Steering Committees and the development of EPWP municipal policies. In 2011/12, eight (8) new EPWP District Steering Committees were created, in addition to the eleven (11) District Steering Committees that were already operational . • Furthermore, by the end of the financial year, 271 municipalities signed protocol agreements,  committing them to achieving specific EPWP targets.

  22. Programme: EXPANDED PUBLIC WORKS PROGRAMME • Overall Assessment : • 69% of the wage incentives were disbursed across the Infrastructure, Social and Environment and Culture Sectors. • To ensure an improved draw-down of the incentive in subsequent financial years, the incentive grant model was revised. The model would ensure that especially rural municipalities have easier access in order to intensify employment-intensive programmes and projects. The revised model would be implemented as from the 12/13 financial year.

  23. PROGRAMME 4: CONSTRUCTION AND PROPERTY POLICY REGULATION

  24. PROGRAMME 4: CONSTRUCTION AND PROPERTY POLICY REGULATION Purpose: To regulate and promote growth and transformation in the construction and property industries To promote uniformity and best practice in the construction sector and in the immovable asset management in the public sector

  25. PROGRAMME 4: CONSTRUCTION AND PROPERTY POLICY REGULATION Purpose: To regulate and promote growth and transformation in the construction and property industries To promote uniformity and best practice in the construction sector and in the immovable asset management in the public sector

  26. PROGRAMME 4: CONSTRUCTION AND PROPERTY POLICY REGULATION Purpose: To regulate and promote growth and transformation in the construction and property industries To promote uniformity and best practice in the construction sector and in the immovable asset management in the public sector

  27. PROGRAMME 4: CONSTRUCTION AND PROPERTY POLICY REGULATION Overall Assessment:

  28. Financial Performance • DPW …………………..30 • PMTE…………………..44

  29. Financial Performance Report 2011/12

  30. Financial Performance – Economic Classification

  31. Analysis of the over-spending Compensation of employees: • Expenditure for compensation of employees was R1.270 billion which amounted to 101% against the budgeted allocation. The Department has overspent compensation of employees by R17.110 million and overspending is in both programme one and two. The overspending on compensation of employees is classified as unauthorised expenditure. Goods & Services: • Expenditure for goods and services was. R1.033 billion and expenditure is equivalent to 100% of the allocation. Programme two had overspending in the amount of R4 million on goods and services mainly due to the energy efficiency project where funding allocated was not sufficient to cover the commitment. Overspending is due to advance being made to the Independent Development Trust (IDT) during 2010/11 financial year with the roll over not being approved by National Treasury. With the project continuing in 2011/12 financial year this gave rise to over spending. This overspending has been classified as unauthorised expenditure.

  32. Analysis of the under-spending Transfers & Subsidies: • Expenditure under transfers and subsidies for the year ended is R3.656 billion and expenditure is equivalent to 91% of the total allocation. Under-spending in the amount of R357 million in transfers and subsidies related to the Expanded Public Works Programme (EPWP) incentives to provinces and municipalities. Programme four resulted in overspending on transfers and subsidies and the overspending has been classified under unauthorised expenditure. Capital and Infrastructure: • Expenditure for infrastructure is R1.011 billion and expenditure is equivalent to 70% of the total allocation. Under-spending in infrastructure is equal to R425 million. • Under spending on payments for capital assets relate to infrastructure with the budget of R425 million not being spent at the end of the financial year. Machinery & Equipment: • Expenditure under machinery and equipment (including software) is R87.7 million and expenditure is equivalent to 96% of the total allocation. Under spending in machinery and equipment is equal to R3.9 million.

  33. Reasons for under expenditure of budget • National Treasury Policy Instruction: For the period from May 2011 to July 2011, tender process was interrupted by the NT Circular requesting projects procurement information for concurrence. Three month was lost while awaiting concurrence to advertised. • Planning and registering projects while having money on hand remain problematic. Ideally the building program must be completed prior to requesting funds from National Treasury. • Program Approved (Workshops, Water Operators Program, Horticulture Program at Port of Entries) were not allocated funds from DPW Capital - Suspension of Programs. • Low Expenditure of Allocation by IDT (School Program) affects transfer of Funds • Late issuing of Procurement Instructions in particular for Accessibility Program. Funded PI where confirmed in September 2011 for implementation in same year. • Instability of project leadership at Regional Offices were head of Projects Positions cannot be filled (Pretoria, Mmabatho, and Polokwane) due to lower classification of the Post and Strict Criteria of OSD.

  34. Virements • Programme 1 was increased by R41.614 million from programme 2 and 3 to offset the over spending on goods and services and payment for capital assets. • Programme 2 was increased by R16.083 million to offset current payments (compensation of employees and goods and services). The amount of R16.083 million is the net effect of R51.998 million virement of current payments from programme 3, R2.792 million for compensation of employees from programme 3, and R23.508 million to programme 1 and 3 for machinery and equipment. • The virement also includes an amount of R15.200 million approved by Treasury to move funds • from payment for capital asset to goods and services.

  35. Virements cont. • Programme 3 was reduced by the net effect of R54.690 million to offset goods and services in programme 1 and 2. The R54.690 million is the net effect of current payment of R55.2 million to programme 1 and 2 and R609 000 from programme 2 machinery and equipment. • Programme 4 was reduced R2.792 million for compensation of employees to programme 2. • Programme 5 was reduced by R215 000 to offset overspending of goods and services in programme 2.

  36. DPW: Basis for disclaimer of opinion • Immovable assets • Immovable asset reconstruction still in progress. • Could not verify completeness, validity and accuracy of the immovable asset register. • Receivables for departmental revenue • The list of properties currently rented out could not be reconciled with the department’s immovable asset register. Could not verify completeness. • Lease commitments: Operating lease revenue • Supporting schedule compiled from PMIS and inability to supply the actual lease agreement in all instances. Limitation of scope. • Where lease agreements were provided, audit testing revealed an understatement of the commitments. • Absence of a complete and accurate immovable asset register thus unable to confirm completeness. • Operating leases • Could not supply sufficient appropriate audit evidence to substantiate operating lease expenditure paid to PMTE.

  37. DPW: Basis for disclaimer of opinion (continued) • Irregular expenditure • The department did not have an adequate system for identifying and recognising all irregular expenditure. • Inability to supply documentation for unsuccessful bidders for awards amounting to R27 633 288, could not determine whether awards were regular or not. • Fruitless and wasteful expenditure • The department did not have an adequate system for identifying and recognising all fruitless and wasteful expenditure. • Commitments • Could not substantiate contract price adjustment provisions (CPAP) amounting to R128 619 136. • Related party disclosure • The department was unable to supply sufficient appropriate audit evidence in support of the assumptions used to determine indirect costs incurred on behalf of the PMTE.

  38. Report on other legal and regulatory requirements – Compliance with laws and regulations • Annual financial statements, performance and annual report • The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework and supported by full and proper records. • Material misstatements identified by the auditors in the submitted financial statements were subsequently corrected. • Asset management • Proper control systems to safeguard and maintain assets were not implemented. Applicable to immovable assets. • Budgets • The budget for compensation of employees was exceeded. • Transfers that were not originally budgeted for were made without the approval of national treasury. • Human resources management • Appointments were made in posts which were not funded.. • Funded vacant posts were not in all instances filled within 12 months. • Persons in charge at pay points did not always certify that the employees receiving payment were entitled thereto. • The organisational structure was not in all instances aligned to the department's strategic plan

  39. Compliance with laws and regulations (continued) • Revenue management • The accounting officer did not take effective and appropriate steps to collect all money due. • Immovable state property was sold at below mark-related values. • Sufficient appropriate audit evidence could not be obtained that immovable state property was let at market-related tariffs. • Procurement and contract management • Goods and services with a transaction value below R500 000 were procured without obtaining the required price quotations. • Goods and services of a transaction value above R500 000 were procured without inviting competitive bids. Deviations were approved by the accounting officer even though it was not impractical to invite competitive bids. • Contracts were awarded to bidders who did not submit a declaration of past supply chain practices. • Employees of the department performed remunerative work outside their employment in the department without written permission from the relevant authority. • Allegations of fraud, corruption, improper conduct and failure to comply with the supply chain management system laid against officials and role players in the supply chain management system were not in all instances investigated.

  40. Compliance with laws and regulations (continued) Procurement and contract management (continued) • Appropriate action was not always taken against officials and role players in the supply chain management system where investigations proved fraud and corruption and improper conduct and failure to comply with the supply chain management system. • Persons in service of the department whose close family members, partners or associates had a private or business interest in contracts awarded by the department failed to disclose such interest. • The accounting officer did not in all instances report within 10 working days to the Auditor-General all cases where goods and services above the value of R1 million (VAT included) had been procured in terms of Treasury Regulation 16A6.4. • Sufficient appropriate audit evidence could not be obtained that all contracts and quotations were awarded in accordance with the legislative requirements as the entity did not implement proper record keeping in a timely manner to ensure that complete, relevant and accurate information was accessible and available to evaluate compliance. • Sufficient appropriate audit evidence could not be obtained that contracts and quotations were awarded to suppliers whose tax matters have been declared by the South African Revenue Service.

  41. Compliance with laws and regulations (continued) Strategic planning • The accounting officer did not ensure that the department had and maintained an effective, efficient and transparent system of internal control regarding performance management, which described and represented how the department's processes of performance planning, monitoring, measurement, review and reporting were conducted, organised and managed. • The accounting officer of the Department of Public Works did not finalise and approve the business case for running the trading entity and, consequently, did not formulate a policy and reporting framework for the head of the trading entity. • Banking and cash management • The entity’s main bank account was overdrawn throughout the reporting period in contravention of the requirements of Treasury Regulation 19.2.3.

  42. PMTE: Statement of Financial Position

  43. Statement of Comprehensive Income

  44. Revenue

  45. Trade & Other Receivables

  46. PMTE: Basis for disclaimer of opinion • Irregular expenditure • No adequate system for identifying and recognising all irregular expenditure. • Fruitless and wasteful expenditure • No adequate system for identifying and recognising all fruitless and wasteful expenditure. • Trade and other receivables • Reconstruction/reconciliation of the following receivables ongoing. • Claims recoverable – PACE • Claims recoverable – CA • Accommodation debtors - Private leases • Debtors - Municipal services • Inability to supply audit evidence in support of all recorded transactions. • Did not raise receivables for services rendered prior to year-end. • Impairment not done on individual basis according to SA GAAP. • Lack of audit evidence supporting statement that amortisation of debtors are immaterial. • IAS 17 requires that lease income from operating leases shall be recognised in income on a straight-line basis over the lease term. The calculation was performed

  47. PMTE: Basis for disclaimer of opinion (continued) incorrectly as it was based on information extracted from PMIS, which did not agree with information per actual signed lease agreements and used the incorrect escalation rate. • Prepayments • Based on estimate, not allowable in terms of SA GAAP. • Revenue • Planned maintenance erroneously being offset against revenue. • Trade and other payables • Insufficient evidence to support amounts recorded in advance account. • Lack of audit evidence supporting statement that effect of amortisation is immaterial. • Inability to confirm completeness of accruals and lack of audit evidence for accruals raised. • Straight-lining of leases performed incorrectly thus unable to verify fair presentation of lease creditor (see receivables for detail). • Lease rentals on operating lease • Inability to provide sufficient appropriate audit evidence (signed lease agreements) in all instances. • Incorrectly allocated refurbishment costs to lease expenditure.

  48. PMTE: Basis for disclaimer of opinion (continued) • Municipal rates and taxes • Lack of evidence to support municipal rates and taxes payments. • Inability to reconcile between IE Works and PMIS. • Other commitments • The entity could not provide sufficient appropriate audit evidence to support commitments to an estimated value of R1 776 360 963. • Commitments were overstated with an amount of R173 126 514 due to errors contained in the schedules supporting the amount disclosed in the financial statements. • Operating lease commitments • Inability to obtain sufficient appropriate audit evidence supporting operating lease commitments. • Calculation of the operating lease commitment was based on the straight-line lease payments instead of taking the minimum lease payments into account as per the requirements of IAS 17 • Contingent assets • Lack of evidence of probability assessment: requirement of IAS 37. • Related party disclosure • Inability to conclude on fair presentation due to matters reported under trade and other receivables. • The entity was unable to supply sufficient appropriate audit evidence in support of the assumptions used to determine indirect costs incurred by DPW on behalf of the PMTE.

  49. Compliance with laws and regulations (continued) • Expenditure management • Effective steps were not taken to prevent irregular and fruitless and wasteful expenditure. • Effective and appropriate disciplinary steps were not in all instances taken against officials who made and permitted irregular expenditure. • The accounting officer did not ensure that effective internal controls were in place for payment approval and processing. • Financial misconduct • Investigations have not yet been conducted into all allegations of financial misconduct committed by officials. • Investigations into allegations of financial misconduct against officials were not in all instances instituted within 30 days of discovery thereof. • Disciplinary hearings were not in all instances held for financial misconduct committed by officials.

  50. Compliance with laws and regulations (continued) • Revenue management • The accounting officer did not develop and implement appropriate processes that provide for the identification, collection, recording, reconciliation and safeguarding of information about revenue to ensure that all money due to the trading entity was collected. • The accounting officer did not take effective and appropriate steps to collect all money due. • Sufficient appropriate audit evidence could not be obtained that interest was charged on debts. • Banking and cash management • The entity’s main bank account was overdrawn throughout the reporting period in contravention of the requirements of Treasury Regulation 19.2.3.

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