cidb presentation of annual report 2011/12 october 2012 development through partnership

cidb

Presentation of Annual Report 2011/12

October 2012

development through partnershipcidb

Presentation Layout

• Mandate – Legislative framework & Mandate

• Priorities and challenges in 2011/12• Annual Performance Summary• Financial Performance/A-G Report

– Financial Performance– Report of the A-G– Corrective Action Plan


cidb MandateThe mandate of the cidb is to:

Provide strategic leadership to construction industry stakeholders;Promote sustainable growth of the construction industry and the participation of the emerging sector in the industry;Promote improved performance and best practice of public and private sector clients, contractors and other participants in the construction delivery process;Promote uniform application of policy throughout all spheres of government and promote uniform and ethical standards, construction procurement reform, and improved procurement and delivery management – including a code of conduct;Monitoring and regulating the performance of the industry and its stakeholders, including the registration of projects and contractors.

Transformation

Delivery

Performance

Growth

Capability

Common Focus

Highlights for 2011/12

– Contractor Development and Training/ support – Quality services at Contact Construction

Centres– Monitoring Industry Performance– Industry Skills delivery– Development of Best Practice standards– Implementation of Infrastructure Delivery

Management Toolkit– Compliance and regulations enforcement– Efficient registration services


Challenges for 2011/12

– Delay in submitting frameworks (including Standards) for the Best Practice i.e Project Assessment Scheme and the Best Practice Project Contractor Recognition Scheme to the Board for approval due to delays in stakeholder consultation

– Delay in finalising regulations amendments– Delay in new CRM system and EDMS

implementation– Delay in finalising the Framework for

Municipal Toolkit


Annual

Performance Summary and impact

2011/12

Growth and Contractor Development

Enterprise Development

– National Contractor Development Programme-NCDP ( Framework) updated, communicated and published.

– Client Capacitation completed at all provinces.

– Provincial contractor training in all 9 provinces completed including 7 catalytic projects


Growth and Contractor Development

Quality services at cidb provincial Offices (Construction Contact Centres – CCC’s)

Annual average of 93.8% on compliance was achieved on the accuracy of data captured (90% target).– Annual average of 96,6% on compliance with over the

counter 48 hour registration turnaround time was achieved (95% target).

– Annual average of 92.3% registration compliant documents produced (90% target).


Construction Industry Performance Monitoring industry performance

– Construction Industry Indicators (CIIs) published communicated and applied (low rate and depth of transformation, economic conditions and slow rate of public sector spend…)

– Quarterly Monitor published, communicated and applied (State of industry development)

– SME survey published communicated and applied– Quarterly provincial outreach communication sessions held

in 4 provinces

Infrastructure skill delivery

– cidb Post Graduate Conference held.


Procurement and Delivery Management

Support on procurement reform

– Public sector clients training sessions conducted in all provinces.

Compliance and regulations enforcement – Case law reports published quarterly.– Anti-corruption strategy developed.– Hearings on non-compliance

conducted (Audit blitz conducted)


Procurement and Delivery Management

Infrastructure Delivery Improvement– Evaluation of the impact of the cidb Toolkit

achieved. – IDMT training completed in all provinces.– Evaluation of the impact of pilot programme on

cidb Gateway process completed


Construction Registers Service

Efficient registration service

– The 21 working day turnaround time was achieved for compliant Grade 2-9 applications, including the processing of annual updates.

– Queries administered within the stipulated turnaround time of 48 hours.


Financial Performance/AG Report 2011/12

OVERVIEW

• Financial Performance– Actual vs. Budget– Annual Financial Statements

• Report of the Auditor-General– Opinion– Emphasis of matter: Irregular expenditure

• Corrective Action Plan• Fruitless and wasteful expenditure

Financial Performance (Actual vs. Budget)

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Budget (R'000) Actual (R'000) Variance (R'000)

2011/12

Revenue

Register Revenue 41,252 47,737 6,485

Interest Income 2,662 4,600 1,938

Transfer payments from DPW 65,959 65,959 -

Other Income - 165 165

Total Revenue 109,873 118,461 8,588

Expenditure

Administrative Expenditure 27,613 32,977 -5,364

Capital / other 500 3431 -2,931

Personnel Expenditure 54,158 61,064 -6,906

Professional Expenditure 27,602 14,920 12,682

Total Expenditure 109,873 112,392 -2,519

Financial Performance (Annual Financial Statements)

• Revenue

– Revenue from government increased by 3,6% from R63,665m in the previous year to R65,959m.

– Revenue from registers increased by 5,9% from R45,073m in the previous year to R47,737m.

• Total expenditure

– Total expenditure increased by less than 2% compared to the previous year.

•Finance income

– Interest income increased by 11% from R4,132m in the previous year to R4,600m.

•The Deficit

– Surplus for the year is R6,068m inclusive of R4,589m non cash items.

Financial Performance (Annual Financial Statements) cont.

•Cash & Cash Equivalents

– Cash & cash equivalents remained average when compared between previous year and current year with a minimal decrease of less than 1%.

•Accounts Payable & Income Received in advance

– Total Payables decreased by R1,249m from R19,086m.

– Income Received in advance decreased by R1,239m to R27,576m from R26,337m.

Financial Performance (Annual Financial Statements) cont.

Report of the Auditor-General

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Opinion

The cidb received an unqualified audit report in the 2011/12 financial year with the following matters:

Emphasis of Matter:

•Restatement of corresponding figures: relating to provision of debt impairment amounting to R456k•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)


Report of the Auditor-General

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Item 1: Restatement of corresponding figures

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.


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Item 2: Irregular expenditure (R11,781m)

Section A: details of irregular expenditure – not recoverable (tot.: R3,929m):i) Five year lease not initially approved by the National Treasury (since condoned): R478k

ii) Transactions where notice was not given to Treasury and AG (warning issued, no losses): R1,454m

iii) Extension of contracts (relates to old tenders): R1,997m

Report of the Auditor-General cont.


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Item 2: Irregular expenditure (R11,781m)

Section B: details of irregular expenditure – under investigation (tot.: R7,852m):i) Transactions procured without following open tender/procurement processes: R1,58m

ii) Transactions procured without obtaining original and valid tax clearance certificate: R3,75m

iii) Bids awarded with clerical errors: R2,522m

Report of the Auditor-General cont.


AG Management Letter Report & Corrective Action Plan

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development through partnership

The AG has raised a number of issues in the management letter report for the 2011/12 financial year. In response to these matters the cidb has designed a Corrective Action Plan (CAP) monitoring tool. The CAP sets down:

•Timelines within which the issues will be resolved•Who the responsible official is, to resolve the issue•The specific action to be taken to resolve the issue Monitoring is performed by the CEO, Audit Committee and the Board.

A-G Management Letter Report & Corrective Action Plan

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Over and above the Correction Action Plan, the AG has developed a dashboard document which lists the key control matters that the cidb must take care of during the course of the new financial year (2012/13) in order to avoid a qualification. Regular meetings between the AG, CEO and CFO where progress is assessed, have been arranged for this financial year. The cidb Internal Audit unit has also started with the follow up audit on the matters raised by the AG in the management letter report.

List available of all the detailed matters raised by the AG in the management letter report and corrective actions undertaken

..….Thank you……

Discussion / responses to questions


Audit Findings Action Plan Description and Narrative

Cash and cash equivalents; and investments

• The authorised bank signatories on bank accounts were not properly updated with the

banks – this has been corrected.

Presentation and Disclosure • Continuous training is being undertaken to improve the technical skills of the Finance personnel.

• Irregular expenditure register has been developed and it is currently being attended to by the CFO. Furthermore, a circular has been issued to all staff regarding management’s “zero tolerance” approach to such expenditure

• Commitment schedule will also be kept for review by CFO on a regular basis.

• Mock financials are also planned for the interim audit.

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Listed below are the detailed matters raised by the AG in the management letter report:


Expenditure Incorrect capturing identified in the accounting system:

•Regular reconciliations are performed and variance reports and analysis done by

supervisor(s). •Continuous professional development for staff

responsible for information capturing.

Non-compliance with applicable legislation

• Irregular expenditure not prevented: review of the SCM policy and the delegations of authority currently underway, this will consequently lead to the review of processes which will seek to eradicate irregular expenditure going forward.

• Audit committee appointment done during the year not approved by the Accounting Authority: delegations are currently under review for finalisation by end of October.

26development through partnership



Non-compliance with applicable legislation (cont…)

• No internal audit charter in place during the year: draft for final sign-off by the Board.

• No effective and appropriate steps taken to ensure collection of all monies due: this matter related to a backlog which was being phased out over time.

Governance issues • Remuneration committee charter was not approved during the year: in draft for finalisation by November.

Performance Information Information not well defined and at times not consistently reported upon:•Annual staff training to be provided during strategic sessions•IAU to conduct regular audit and highlight shortcomings•A quality review process to be effected by an independent person prior to approval.




Other administrative matters • Capturing of journal reference number incorrectly in the system: a numbering sequence system has been developed, this register will be checked prior to journals being approved.

• Instances where costs that should have been capitalised were expensed: Continuous professional development for staff responsible for information capturing

• Information not timeously submitted to auditors: in future, the management of all audit queries will be centralised in the CFO’s office for monitoring and follow-up.

• Discrepancies w.r.t. assets on the floor and the register: asset verification will be performed and reconciliations timeously attended to prior to the end of the financial year.




Policies and procedures • Non-compliance with revenue and debtors’ policies: due care is being exercised in adhering to policies and write-offs will only be processed once a year.

• Non-compliance with cell phone policy: a review of this policy is currently underway, this comes with transferring of the risk to staff as opposed to the Board.

• Policy on intangible assets not updated: the policy has since been reviewed accordingly.

• Policies not appropriately signed-off: this is being attended to in line with the review of the delegations of authority.

• Cell phone policy not approved by the delegated official: this is being attended to in line with the review of the delegations of authority.




Information technology • No formally approved governance framework: motivation for adoption of framework being done

• No formally approved IT strategic plan: since approved by the IT Steering Committee

• DR plan not approved on physical (PDF) document: being attended to

• No signed SLA for CRS support service provider: since signed

• No Information Security Officer or delegated responsibilities: security review to be done in the coming year and completed once in every 2 years

• No formally documented and approved user account management policy for CRS, Finance, HR: policy to be developed and approved

• No formally approved user account procedures for CRS, Finance, HR: procedures to be documented

• No access request forms for CRS, Finance, HR: request form to be developed




Supply chain management A number of matters were raised around SCM with many resulting to irregular expenditure as well as the following:•Procurement need and economy:•List of prospective suppliers:•Quotations:•Competitive bidding:•IC deficiencies on policy and procedures:•Compliance wit prescripts, regulations, PFMA and PPPFA:•Other procedural deviations:•Stakeholder engagements:A holistic approach in dealing with SCM matters is being implemented. This includes a turnaround strategy on SCM which has resulted in the centralisation of this function within Financial Management, the appointment of an SCM Manager to provide a strategic focus and guidance, the review of the policy and the delegations relating to SCM, the review and training of all bid committees.



Fruitless and Wasteful Expenditure (R63K)

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A. An amount of R29k was paid for cellphone airtime on a stolen phone that was not timeously reported.

B. An amount of R33k was incurred i.r.o. interest penalty charged for early withdrawal of funds.

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cidb presentation of annual report 2011/12 october 2012 development through partnership

Documents

provincial contractor

best practice of public

delivery management

best practice i

improved procurement

emerging sector

registration of projects

private sector clients