department of public works p resentation of 2010/11 annual report to the portfolio committee on...

DEPARTMENT OF PUBLIC WORKSDEPARTMENT OF PUBLIC WORKS

PPRESENTATION OF 2010/11 ANNUAL REPORT RESENTATION OF 2010/11 ANNUAL REPORT TO THE PORTFOLIO COMMITTEE ON TO THE PORTFOLIO COMMITTEE ON

PUBLIC WORKSPUBLIC WORKS

19 OCTOBER 2011 19 OCTOBER 2011

1

OUTLINE OF THE PRESENTATIONOUTLINE OF THE PRESENTATION

• Minister’s Foreword• Accounting Officer’s Overview• Achievement per Programme/ Sub-Programme• Financial Performance and Audit Reports for the year

ended 31 March 2011

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MINISTER’S FOREWORD

Planning for the fiscal year 2010/11 was guided by the following government policy priorities:

• Poverty alleviation and addressing unemployment• Building the state’s capacity to implement programmes and policies of

government• Investment in productive infrastructure• Implementation of government-priority projects

Critical attention was paid to the following flagship programmes:• Up-scaling of Expanded Public Works Programme • Enhancement of the Immovable Asset Register• Energy Efficiency • Implementation of the Government Immovable Asset Management Act

(GIAMA) • Improvement to the Land Ports of Entry

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MINISTER’S FOREWORD cont…

The Annual Report of the Department of Public Works articulates the enormity of the task that confronted the Department in the financial year 2010/11:

• Reconfiguring the Department to address the ten priority areas of Government

• Strengthening institutional pillars and guidelines for implementation of the Government Immovable Asset Management Act (GIAMA) of 2007.

• The Department has made progressive attempts to manage assets of the State (a complex portfolio indeed) evident through – development of Asset Management Plans,– the enhancement of the data integrity of the Asset Register, – the acceleration of unutilized property disposals.

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Despite the global economic downturn, the Department managed to deliver the following infrastructure projects:

• Completion of a significant number of police stations and magistrates courts;• Completed construction of Golela Land Port of Entry and upgraded Vioolsdrif

(Namibia) Lebombo (Mozambique) ahead of the country hosting the 2010 FIFA World Cup tournament.

• Embassy residences were completed and handed-over in Nigeria, Ethiopia and Lesotho while the Oliver Reginald Tambo Military Development Academy was officially opened and handed over by President Jacob Zuma to the people of Uganda

• Foundations were laid for memorial structures at Matola in Mozambique as well as in Angola.

• In collaboration with the Department of Defence, the Department accelerated the construction of community bridges.

• The eradication of inappropriate school structures across the rural landscape of South Africa.

MINISTER’S FOREWORD cont…

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ACCOUNTING OFFICER’S OVERVIEW In support of Government national goals, the Department continued to enhance it’s legislative environment through the review of the Expropriation Act, the Built Environment Professions Act s and the process of establishing Agrément South Africa as a juristic person.

The Department has prioritised the management of its immovable asset portfolio through:•Enhancement of the Asset Register and vesting of assets in collaboration with DRDLR and Provinces

The Department has intensified collaboration with other spheres of government for improved service delivery to communities. This includes:•release of 6327 hectares for land and 1031 hectares for human settlement,

•the bridge building project together with the Department of Defence for six bridges in the following areas:

– Nquqhu river crossing.

– Port St Johns Ntafutufu bridge

– Daluhlanga bridge in Umzimvubu Municipality

– Bailey bridge constructed across Lefukufuku river in Tsomo

– Macoza pedestrian bridge in King Sabata Dalindyebo Municipality in Umtata

– Cezu pedestrian bridge in King Sabata Dalindyebo Municipality in Umtata

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ACCOUNTING OFFICER’S OVERVIEW cont…For the year under review the Department undertook many construction and maintenance projects amounting to approximately R5,7 billion. The building programme consists of minor projects (3 months) and major projects running over three years with various start and completion dates. Some examples of the projects completed and handed over were the following:•Free State: Newly constructed DPW Regional offices•Limpopo: Nylstroom Prison and Leshego Treatment Centre•North West: Joubertinah Police Station, Klerksdorp•Eastern Cape: Renovations & repairs for Home Affairs, Justice & Royal (Great) Place•Gauteng: Magistrate Courts in Tsakane & Thokoza•Mpumalanga: Magistrate Court in Ekangala•Northern Cape: New Generation Prison & Galeshewe Magistrate Court•KwaZulu – Natal: Renovations & repairs to Chatsworth Police Station

Facilities on behalf of Justice were recently completed and handed over at places as

diverse as Galeshewe (Kimberley), Colesburg, Pietermaritzburg and Butterworth, amongst others.

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ACHIEVEMENTS PER PROGRAMME /

SUB-PROGRAMME

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1. FINANCE AND SUPPLY CHAIN MANAGEMENT

Outcome Output PerformanceIndicator

Target 2010/11 Progress Report Reasons for deviation

Create an efficient,competitiveand responsiveinfrastructurenetwork

Implementedaction plan forGAAP complianceon PMTE

Implementedaction plan

70% achievement 44% Target Achieved.Out of the 16 action outputson the PMTE action plan, only7 actions were achieved.

The outputs not achievedare due to the delays in theacquisition of the financialsystems.The system will be acquiredonce the PMTE data iscompleted.

Improvedrevenue & debtorsmanagement onthe PMTE

Reduced debtorsbook

50% reduction 62% Achieved. During theperiod under review on thereduction of the debtors book- (R1, 3billion of the R2 billion).

Collected Revenue 80% collection 97% Achieved. Revenuecollected on invoices issuedduring the period underreview.

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1. FINANCE AND SUPPLY CHAIN MANAGEMENT Cont..




Improved Internalfinancial controls

Developed policiesand procedures (7policies)

90%implementation

80% Achieved. During theperiod under review, Seven (7) policies developed/reviewed for implementation, namely:• Petty cash,• Irregular expenditure,•Unauthorized expenditure,•Fruitless expenditure,• Corporate Credit card,• Movable assets policy,• Travel & cellular phone• Logis user manualmanagement.

The Debt managementcompliance checklist, PFMAYear end process (accruals/commitments) drafted.

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1. FINANCE AND SUPPLY CHAIN MANAGEMENT Cont…




Improvedmanagement ofmovable assets

credible AssetRegister

90% compliance by31 March 2011

90% Achieved. The movableasset register is compliant

Improved Paymentsof invoices

Payment register 80% 66.7% Achieved. Non compliance and latesubmission of invoices

Improvedmanagement ofmovable assets

Credible AssetRegister

90% compliance by31 March 2011

90% Achieved. The movableasset register is compliant

Improved Paymentsof invoices

Payment register 80% 66.7% Achieved. Non compliance and latesubmission of invoices

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1. FINANCE AND SUPPLY CHAIN MANAGEMENT Cont…




Improved SupplyChain Management

Compliance withSLA- contract awardedto HDI (BEE) aboveR100 000

80% compliance 82.69% Achieved.(a) Number of contractsawarded to HDI (BEE)Companies = 1080. Valueof contracts awarded toHDIs = R471 432 657.35(b) Number of contractsawarded to Non HDIs =224. Value of contactsawarded to Non-HDIs =R131 336 941.25

Compliance withSLA- contract awardedto HDI (BEE) aboveR100 000

80% compliance Credible DPW SuppliersAccredited 607 applicationforms of the 3749. Total of4330 suppliers receivedapplication forms.Total accreditation of suppliers= 16.19%.

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2. CORPORATE SERVICES


Target 2010/11

Progress Report Reasons for deviation

An efficient,effective andDevelopment-orientedpublicservice and anempowered, fairand inclusivecitizenship

Enabling IT systemsto support coreoperational areas

Functional ITsystems headlinedby:I-E Works

100%implementation

50% Achieved SCOA: The challenges arewith business rules governing matching fields per payment types. DATA MIGRATION: Thestructural differences between the two databases.

EPWP-Web BasedSystem

100% implementationachieved.

Virtual PrivateNetwork

VPN project is 100% complete and is in operation.

Video-Conferencing

100% implementationcomplete between AVN andCape Town.

BusinessIntelligence System(SAS)

100% implementation of BASand EPWP, 75% interface toIEWorks.

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2. CORPORATE SERVICES cont…Outcome Output Performance

IndicatorTarget 2010/11



Human Resources Management Plan

Reduced vacancy rate

Vacancy 10% of the establishment.

20.68% vacancy (536 filled of the total establishment)

Only critical vacant and funded positions were prioritised for filling

Creation of new positions

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2. CORPORATE SERVICES cont…Outcome Output Performance

IndicatorTarget 2010/11 Progress Report Reasons for

deviation


Compliancewith NationalIntelligenceAgencyRequirements

Implement thenew DisabilityStrategy

Transfer criticalskills courtesyof internationalbilateral &agreements

Number ofemployees vetted

180 employees peryear

78 employees were vetted thirty six (36) Secret Clearances, thirteen (13) TopSecret and twenty nine (29) Confidential).

NIA’s internal processes.

Number ofcompanies vetted

1000 companiesper year

413 companies were cleared and incorporated into the database.

Dependency on the client (projects) to provide requestsfor clearance for serviceproviders.

Employmentstatistics for thedisabled people

1% of staffestablishment

1.15% Achieved.Total employedis 56 (1.15%) –out of staff complement

Skill transferprogrammes linkedto internationalagreements

200 beneficiaries 450 beneficiaries receivedcritical skills from 91 CubanTechnical advisors

(CTAs).

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2. CORPORATE SERVICES cont…




Provide legalexpertise &advice that offerscompliance

Reduction inbacklog of legalcases

30% reduction 15% Achieved.

Litigation Casescumulatively: 878Actual cases : 294Finalised :45Pending :188New matters : 61

Depend upon Court processes

100% Achieved. Total no. of ContractAdmin cases handled: 1426Drafted : 232 Commented:145Signed: 920Amended : 48Guarantees released: 32 Guarantees received: 48

100% Achieved. Total legal advisoryServices: 510Oral : 263Written: 247

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3. INTERNAL AUDIT



Create efficient,competitiveand responsiveinfrastructurenetwork

Improvedcompliance with allprescripts

Audit reportsFunctional AuditCommittees

80% compliance 92% Achieved;•100% Risk Assessment, •100% Audit Committee meetings •76% Implementation of Audit Plan.

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4. STRATEGIC MANAGEMENT UNIT




Integrated RiskManagementStrategy/Policy

Approved strategy/policy

60% compliance 60% Achieved:•Enterprise Risk Management Strategy approved •All risk registers cleaned up in preparation for 2011/12 risk assessment•High risk registers have been reviewed and updated

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5. MONITORING & EVALUATION



Skilled andcapable workforceto support aninclusive growthpath

M&E policyformulation andimplementation(guided by theimplementationof the M&E GreenPaper)M&E Framework/Policy

M&E Policy/Framework

Policy implementation

100%

30%

100% Achieved,:•M&E policy developed –currently undergoing internal consultation

Quarterly performance reports submitted to relevant structures.

Development andimplementation ofan M&E Framework

Compliance withM&E policy

80% 80% Achieved:Consultative workshops held to ensure:-(a) alignment to the reporting template(b) qualitative and quantitative verification (c) submission of Portfolio of Evidence (PoEs).

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6. INTERGOVERNMENTAL RELATIONS



Efficient anddevelopmentoriented publicservice andempowering, faircitizenship.

Improved,sound relationswith spheresof governmentand entitiesthrough relevantintergovernmentalstructures

Scheduledintergovernmentaland other relatedstructures

100% compliancewith prescripts(8 meetingscoordinated perannum – 2 perquarter)

32 intergovernmental andother related meetings coordinated :•8 public participation imbizos,•24Parliamentary meetings,•5 oversight visits

Manage entities 8 Meetings facilitatedbetween the Minister and entities,

Appointment of Boardmembers for CBE, AgrementSA and CIDB concluded

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7. ASSET INVESTMENT MANAGEMENT


Target 2010/11 Progress Report

Reasons for deviation


Accurate andcompleteinformationon immovableassets in theAsset Register(Land = 35 746Structures (onproperty level)= 72 816. Total= 108 562) as atOctober 2009

AR fields populatedwith essentialinformation

90% populated97 705 properties

82% of the Asset Registerfields populated.

Improvements for essentialInformation concentratedon properties confirmed as National Properties.

*AR fieldspopulated withsupplementaryinformation

10% populated 10 856 properties

Not achieved Project on Supplementary infoput on hold untilessential is completed.Priority on AG findings(minimum requirements)

Approved &ImplementedNational Vestingplan

100% completedplan

100% achieved

Vested State land 55%19 660 land parcels

35% of land parcels vested

In process of aligning Dept Rural Dev &Land Reform statistics to DPW Asset Register

Approved AmnestyCall Strategy andCampaign

100% completedstrategy

100% Achieved

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7. ASSET INVESTMENT MANAGEMENT cont…




User AssetManagementtemplates 1 – 12

Populatedtemplates for27 NationalDepts & 7Entities

90% complete 90% Achieved:•34User AssetManagement Plan templates completed for 2010/11.

Prioritised andfunded projectsidentified incollaboration withClients.

ImplementationProgrammes (CWIP,PMIP)

100% approvedand signed off

100% Achieved:•implementationprogramme for 2011/12 signed by all client depts

Draft a& finalisedService LevelAgreements (SLA) & Service DeliveryStandards (SDS)

Signed SLA byusers

Signed SLA 16 out of 34 SLAs signedwith users.

Client request on amendmentof the SLA caused delays in signing

Well managedimmovableassets in line withProperty Portfoliostrategies

Approved portfoliostrategies

Property portfoliostrategiesdeveloped (70%)

59% Achieved on PropertyPortfolio Strategiesdevelopment.

Inadequate resources

Effective C-AMPSthat address User Requirements(U-AMPS)

Approved C-AMPdocument for eachDepartment

User Departmentshave C-AMPs inplace (70%).

45 % of C-AMPS developed Inadequate resources

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Developedstrategies toincrease revenueon superfluousbut not redundantState assets

Approved andimplementedrevenue generatingstrategy.

Revenue increaseon leased out State owned properties (10 %).

Investment strategy completed and undergoing internalconsultation.

Well implementedspecial AIMprograms (Energy efficiency,Water efficiency,Accessibility toState buildings andRehabilitationprogram).

Reduced energyconsumption

3% reduction onkilowatts hourused on State owned buildings(37 180 KW/H)

206 134 499 kilowatts(kw/h) reduced.

Reduced waterconsumption.

2% reductionon kilolitresconsumed onState buildings.

10% Achieved on thereduction of waterconsumption during theperiod under review.

Accessiblebuildings topeople withdisability.

64 Buildingsidentified andmade accessible.

121 buildings were madeaccessible.

Rehabilitatedbuildings

Buildingsidentified for theimplementationof rehabilitationprogrammewithin MTEF (64)

7 out of 64 buildings werecompleted during theperiod under review.

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Developed disposalprogram

Approved disposalprogramb. Facilitate disposalof propertiesfor commercialpurposes (30).

Foreignpropertiesidentified fordisposal (20).

6 properties were disposedduring the period underreview, while 7 propertiesidentified for disposal.

Subject to release ofapprovals by DIRCO

14 propertiesapproved fordisposal byMinister forcommercialpurposes.

25 properties in the process ofapproval

Effective releaseof land for landreform purpose

Letters of releaseof land to RegionalLand ClaimsCommissioners

Properties to bedisposed for landreform purposes(55).

34 out of 55 properties weredisposed for land reformpurposes

21 properties are in the process of being approved.

Effective release ofland for housingand agriculturalpurposes or anyother socioeconomicobjectives.

MOUs signed withHuman Settlement,Agriculture, etcList of propertiessent to relevantDepartments.

1 000 hectares ofland parcels

1031 hectares of land werereleased for human settlementpurposes

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Analyses informingimmovable assetportfolio, propertyand projectinvestments

Completedand approvedanalyses withrecommendationson investmentfor the DPWimmovable assetportfolio

List of identifiedpossibilitiesof Portfoliosegmentation foranalysis50% completionof annual requestsfor analysis ofimmovable assetportfolio persegments

A consolidated list has beencompleted.96% of Annual requestscompleted.

Completedand approvedanalyses andrecommendationson investment forthe DPW unutilised,non-projectrelated immovableproperties

50% completionof annual requestsfor analysis ofunutilised, non-projectrelatedassets

65% of Property analysiscompleted

Completedand approvedanalyses andrecommendationson investmentoptions for DPWimmovable assetprojects

80% completion ofannual requests forproject investmentanalysis

76% of Project investmentanalysis completed.

Inadequate resources.

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Valuation ofimmovable assetportfolio andproperties

Completedand approvedvaluation of theDPW immovableasset portfolioin compliancewith accountingrequirements

80% immovableassets in theportfolio valued

The principle of valuebenchmark has been agreedwith all parties concerned asR1 plus improvements.

Proposed AccountingValuation methodology isin discussion with relevantauthorities.

Approved marketvaluations ofimmovable assetproperties

50% completionof requests forimmovableproperty market

86% of requests for newmarket valuations have beencompleted.

Successfulnegotiation withlocal authoritieson municipalvaluations

Compilationof a calendartracking municipalvaluations

The calendar tracking formunicipal valuations wascompiled.

Inadequate resources toprocess and contest municipalvaluations.

50% annualmunicipal valuationcalendar appraisedand negotiated.

Target not achieved duringthe period under review.

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8. INNER CITY REGENERATION, PROJECT MANAGEMENT & PROFESSIONAL SERVICES



An efficient,competitiveand responsiveeconomicinfrastructurenetwork

Toolkit for design & Technical solutionsinformed by policy position papers.

Reviewed andupdated normsand standardsfor DepartmentalInfrastructure.

50% review ofcurrent norms andStandards.

50% of current norms andstandards reviewed.

Revitalisation anddevelopment ofICR - rural townsto serve as service centres for rural Economies.

Feasibility studiesand projects on all prioritised towns, sites and projects.

Feasibility studieson 5 prioritisedtowns / sites

Preliminary workplanapproach for development ofsmaller centres compiled:•Mthatha•Modjadji•Kokstad•Mount Frere

Limited human resources focused on Tshwane.

Revitalisation of the Capital City.

Precinct planningfor Pretoria prioritisingSalvokop.

The developmentof the precinct plan project for Pretoria Inner City, and the completion ofSalvokop precinct.

Precinct Master Plan in operational phasefollowing the signing of SLAwith the City of Tshwaneon the 2 February 2011 andsubsequent appointment ofa consortium by the City in collaboration with DPW.

Complex opentender adjudication processes.

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8. INNER CITY REGENERATION, PROJECT MANAGEMENT & PROFESSIONAL SERVICES Cont…



Maximise utilisationof State propertieswithin Major cities

Partnerships andMoU’s with Metro’sto improve or tofind alternativeutilisation ofidentified facilitiesin line with innercity rejuvenation.

Agreements with3 cities.

Not Achieved :•SLA & related Addendum between the Department & City of Tshwane signed by both parties on 2 Feb 2011 and 11 March 2011, respectively.

Focus on Tshwane Inner City as a pilot.

Construction ofCapital Projects.

Completionof capital andrefurbishmentprojects inaccordance with the Capital Works ImplementationProgram.

80% completionof projects withintime, cost andQuality.

79% Achieved;Capital projects targeted: 342:Capital projects on:•Construction – 72•Practical Completion Stage – 72•Final Delivery Stage – 91•Projects Closed – 107.

Delays due to site clearance processes and Environmental Impact Assessment (EIA) studies required for new developments.

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8. INNER CITY REGENERATION, PROJECT MANAGEMENT & PROFESSIONAL SERVICES Cont…


Target 2010/11


An efficient,competitiveand responsibleeconomicinfrastructureNetwork.

Construction of MaintenanceProjects.

Completion ofmaintenanceprojects inaccordance withthe PlannedMaintenanceImplementationPlan.

80% completionof projects within time, cost andQuality.

59% Achieved;Total projects targeted - 133Planned Maintenance Projects on •Construction – 55•Practical Completion Stage – 36•Final Delivery Stage – 30•Projects Closed – 12

Multi year nature of projects.

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9. SPECIAL PROJECTS



An efficient,competitiveand responsibleeconomicinfrastructureNetwork.

Construction ofbulk earthworks for PAP.

CompletedEarthworks.

99% Project has been deferred

Process for EnvironmentalImpact Assessment has been re-started due to discovery of a wetland.

Decentemploymentthrough inclusiveeconomic growth.

Built and upgrade2010 stadia at hostCities.

Safe infrastructureas per the buildingRegulations

100% safe andfunctional stadiabefore June 2010

Projects completed and handed over in Q1

Built, upgrade and maintained border Posts.

Improvedoperational areas at the border

100% functionalborder post

Progress on Border Posts:•Golela: 100% complete;•Skilpadhek: 65% complete and operational for 2010 purposes•Lebombo: phase 1 completed

Delays due to performance challenges of contractors. Contractors terminated in January 2011.New contractors will complete work in August 2011.

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10. REGIONAL OPERATIONS MANAGEMENT



To createan efficient,competitiveand responsiveeconomicinfrastructurenetwork

Capital projects Completionof capital andrefurbishmentprojects inaccordance withthe Capital WorksimplementationProgram.


Cumulative expenditure at 92%;732 projects on constructionStage;99 projects completed;255 projects retention period.Completed;Final accounts for 72 project paid off.

Delays due to site clearance processes and Environmental Impact Assessment (EIA) studies required for new developments.

Maintenanceprojects

Completion ofmaintenanceprojects inaccordance withthe plannedmaintenanceimplementationPlan.


100% cumulative expenditure;29% completion ofmaintenance projects;298 projects on construction;119 projects completed.Final accounts for 15 projectscompleted.

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10. REGIONAL OPERATIONS MANAGEMENT Cont…




Procured leasedaccommodationand state ownedaccommodation.

Conclusion of new leases, renewalsand managementof existing leasesin accordancewith the leasingimplementationProgramme.

80% of leasesmanaged withintime, costs andPrescripts.

Total no. of leases= 2985 of 3029•44 terminated from the system).Renewals/management ofexisting leases:•507 expire in 18 months•818 expire beyond 18 months•813 expire in 6 months•702 expire in 12 months•145 expired by end March 2011Cumulative expenditure = R2729 373 689 (100%).

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10. REGIONAL OPERATIONS MANAGEMENT Cont…





Propertyand facilitiesmanagementand maintenanceprojects

Letting, Cleaning,Day-to-DayMaintenance,utilisation,ConditionAssessment, AssetRegister updatingand provisionof Security inaccordancewith prescriptsand contractualObligations.

70% of prescriptsrequirementsand contractualobligations met.

Totalnumber of projects managed= 593.

593 projects managed.Cleaning and

Garden Services= 557

Day-to-Daymaintenance ±4,950

TheDepartment attended to 25365 unplanned maintenancecalls.

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12. EXPANDED PUBLIC WORKS PROGRAMMEOutcome Output Performance

IndicatorTarget 2010/11 Progress Report Reasons for

deviation

4.5M workopportunitiescreated for poorand unemployedby 2014

Number of workopportunitiescreated perannum in EPWPProgrammes

Work opportunitiesand FTE

642 000 workopportunities and260 000 full timeEquivalents.

626 935 work opportunitieswere created.203 690 full time equivalents

Validations of work opportunities were still underway.

Project description inconsistent with the target group.

Public Bodies are under reporting on EPWP as well as not implementing their projects labour-intensively

Overallparticipationtargets

Annual DesignatedGroup Targets:

At least 55% ofworkers are womenAt least 40% of theworkers are youthAt least 2% ofworkers are PeopleWith Disabilities

62% women51% are youth0.45% people with disabilities

Wage incentivedisbursed toqualifyingbodies

Percentage ofwage incentivedisbursed

65% disbursement

59% of the incentive has beenaccessed.

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13. CONSTRUCTION & PROPERTY POLICY REGULATION




Efficient andeffectiveDevelopment orientedPublicService and anempowered, fairand inclusivecitizenship.

GIAMA life-cycleAsset Managementpolicies

Life-cycle propertymanagementpolicies developed/aligned to GIAMA

50% development/alignmentof policies•Planning,•Acquisition,•Maintenance,•Disposal, •Outdoor Advertising,•Leasing•Letting for Commercial Purposes and•Demolition.

50% Target achieved.

Framework andplan of actionfor roll-out ofGIAMA to LocalGovernment.

Approvedframework andPlan of Action.

50% of planof actionimplemented

A framework and an actionplan developedand undergoingconsultation.

Extensive engagement ofInternal and external stakeholders (COGTA, NT) on the best approachtowards extension ofGIAMA to local government.

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13. CONSTRUCTION & PROPERTY POLICY REGULATION Cont…




Efficient andeffectiveDevelopment orientedPublicService and anempowered, fairand inclusivecitizenship.

Legislative Review/development toensure relevanceand optimalcontribution tonational goals.

Agrément SA andExpropriationBills submitted toParliament andExpropriation Act.

Tabling ofAgrément SA Bill to Parliament

The business case for theestablishment of Agrèment SA as an National Public Entity in terms of the PFMA has been developed for submission to National Treasury for approval

Consultation withstakeholders took longer thananticipated

DPW’scontribution to thetransformation ofthe Constructionand PropertySectors

Plans to roll-outimplementation ofConstruction andProperty Chartersto other spheres of government

50% rolloutGazetting ofProperty Charteras a ‘code of goodpractice’.

Application to gazette theProperty Charter as a ‘codeof good practice’ (in terms ofsection 9 of the BBBEE Act,2003) submitted to Minister ofTrade & Industry for approval.

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FINANCIAL PERFORMANCE AND AUDIT REPORTS FOR THE YEAR

ENDED 31 MARCH 2011

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Financial Performance – Economic Classification

Current Financial Year (2010/11)

Previous Financial Year (2009/10)

Economic Classification

Final Budget

Allocated

Expenditure % Spent

Under –expenditure

R’000

Final Budget

Allocated

Expenditure % Spent

R’000 R’000 R’000 R’000

Compensation of Employees

1 112 717 1 089 693 98% 23 024 988 148 976 101 99%

Goods & Services

883 003 819 046 92% 63 957 899 933 894 397 99%

Interest and Rent on land

8 848 8 848 100% 0 2 962 2 962 100%

Payments for Financial Assets

54 836 54 836 100% 0 40 341 40 341 100%

Transfers & Subsidies

3 788 130 3 302 542 87% 485 588 2 607 897 2 478 372 95%

Payment for Capital Assets

1 517 263 1 340 569 88% 172 140 1 509 849 1 295 976 85%

TOTAL 7 364 797 6 615 534 90% 749 263 6 049 130 5 688 149 94%

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Financial Performance Report 2010/11

2010/11 2009/10

Budget Expenditure Exp %

Budget Expenditure Exp %

R'000 R'000 % R'000 R'000 %

Prog 1. Administration

679,455

679,455 100%

774,228

773,429 100%

Prog 2. Immovable asset management

5,203,722

4,968,520 96%

4,480,625

4,265,082 95%

Prog 3. Expanded public works programme

1,415,783

914,940 65%

715,722

584,042 82%

Prog 4. Property and construction industry policy regulation

39,021

28,029 72%

38,031

25,996 68%

Prog 5. Auxiliary and associated services

26,816

24,139 90%

40,524

39,600 98%

Subtotal

7,364,797

6,615,534 90% 6,049,130

5,688,149 94%

Analysis of the under-spending

Compensation of employees:

•The under spending of R23,024 million is due to additional funds reprioritized for the filling of vacant posts. During the third quarter of the financial year the Department commenced with a high recruitment drive aimed at filling all the funded vacant posts.

•The lag period between the interviews, appointment letters and the assumption of duty usually averages two months. Consequently for some of the appointments made in February and March, assumption of duty took place in the new financial year.

Goods & Services:

•The savings of R63, 957 million under goods and services relates to commitments under the energy efficiency programme with the IDT. A roll over amount of R40, 9 million has been requested.

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Analysis of the under-spending cont.

Capital and Infrastructure:•Under spending of R 120, 109 million for infrastructure relates to funds committed through the IDT as an implementing agent for the transformation of mud schools. A rollover amount has been requested for the committed amount.

Machinery & Equipment:•The under spending of R56 585 million largely relates to furniture and IT equipment which was planned for DPW’s new premises at the CGO building. Due to some incomplete construction work and interior design work, the move was deferred to the second quarter of the new financial year.

Transfers & Subsidies:•The under spending of R 485,588 million by EPWP is largely attributable to the slow reporting of EPWP work opportunities created by municipalities and provinces.

Payments for financial assets:•The expenditure of R 54.8 million relates to amounts written off against savings from current payments.

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Virements

Pr 1 Pr 2 Pr 3 Pr 4 Pr 5 Total

Compensation of employees

R’000

R’000 R’000

(13 810)

R’000

R’000 R’000

(13 810)

Goods and services 39 521 13 810 (41 550) 1 752 13 533

Interest and rent

Transfers and subsidies 1 800 268 (8 982) 8 982 (2 068)

Capital assets 8 778 (9 793) 1 015

Financial assets 12 265 277

Total 50 111 4 285 (63 327) (8 982) -51 0

Programme 1 was increased by R50 million to offset over spending in goods and services, transfers and capital payments.

Programme 2 was increased by R4,2 million to offset current payments (goods and services). The amount of R4,2 million was the net effect of R 13,8 million virement of current payments from Programme 3 and R 9,8 million to Programme 1 and 3 for machinery and equipment and virement from Programme 5 for transfers and subsidies.

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Virements cont.

• Programme Three was reduced by R63,3 million to offset goods and services in programme One and Two, and transfers and subsidies in programme Four.

The R63,3 million is the net effect of current payment of R 55,4 million,

R 8,9 million of transfers and subsidies to programme One and Five for

current payments and programme four for transfers and subsidies. R 1 million

virement for machinery and equipment from programme Two.

• Programme Four was increased by R 8,9 million to offset over spending under transfers and subsidies.

• Programme Five was reduced by R 51,000 to offset overspending of transfers and subsidies in programme One and Two. The R 51 000 is the net effect of R 2,017 million for current payments from programme Two and R2,068 million to programme One and Two.

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DPW Audit Report

44

Basis of the disclaimer on the Audit Report

Immovable Asset Register

•I was unable to obtain sufficient and appropriate audit evidence to satisfy myself as to the completeness, existence, rights, valuation and allocation of properties recorded in the immovable asset register of the Department stated at R3 498 747 000 in note 34 to the financial statements.

•As disclosed in note 34 to the financial statements, the corresponding figure for immovable assets has been reduced by R6 091 920 000 in order to address a prior year misstatement. No supporting documentation was available for the restatement. Consequently, I was unable to obtain sufficient appropriate audit evidence to satisfy myself as to the existence, completeness, valuation and allocation of, and rights pertaining to, the restated immovable assets corresponding figure of R2 238 008 000.

45


• Management Response

The Department downloaded all construction projects which were completed between 1 April 1999 to 31 March 2011 from WCS system and the same was done for purchases for the same period. This information was captured on an excel template.

At the same time the regions continued to populate information on vested properties and also correcting the Title deeds numbers, Erf number, etc.

The exercise was completed after submission of the AFS including the population of information gathered into the PMIS. This led to the challenges of providing reconciliations to the AG and also validating the information captured by the regions.

We have now appointed a service provider who will assist the Department in conducting a more comprehensive analysis of the register and then determining the scope of work for completing of the asset register.

The appointed service provider will act as a Programme Manager for the comprehensive enhancement of the asset register.

46

Basis of the disclaimer on the Audit Report cont.

Irregular Expenditure (17,948 million)

•Payments amounting to R16 552 542 were made in contravention of the supply chain management requirements. The amount was not included in irregular expenditure relating to the current year, disclosed at R1 396 000 in note 26 to the financial statements, resulting in irregular expenditure being understated by an estimated R153 025 890.

Management Response •While the Department agreed with some of the findings, there are a number of cases where we are not in agreement with the findings of the AG. We are currently compiling a comprehensive report on each of the disputed amounts for further discussions with the Auditor General and National Treasury.

•Measures were put in place during the year to detect and proactively prevent the irregular expenditure however, some of the issues discovered by the AG which we are in agreement with shows that there was gross negligence and deliberate transgression of policies.

•All cases are currently being assessed to enable speedy identification of root causes and responsible

•people. We are now in a better position to deal with the responsible officials decisively as controls were put in place in the previous financial year.

47


Other expenditureEstimated value = R154 648 753

•Documents supporting the above could not be accessed by the AG as they are still with the SIU. •This amount was then extrapolated to the total goods and services budget of R819 million and the capital budget of R1.3 billion.

Management Response:

•The Department disputes the manner in which it was raised to a disclaimer.

48


Lease Commitment

•The Department erroneously did not include operating lease commitments in the prior year financial statements, hence the corresponding figure for operating lease commitments has been restated by R115 039 000 in order to address the prior year misstatement. No supporting documentation was available for the restatement. Consequently, I was unable to obtain sufficient appropriate audit evidence to satisfy myself as to the obligation, valuation and classification of the operating lease commitments corresponding figure of R115 039 000 as disclosed in note 24.1 to the financial statements.

Management Response

•The schedule was available but not submitted on time to the AG. The CFO has issued a warning letter to the Director responsible for the error.

49


Contingent liabilities & Assets•The Departmental Financial Reporting Framework Guide, Chapter 8, section 29.1 stipulates that civil claims against the state must be disclosed as contingent liabilities at the most likely amount that the court will settle on. The Department however did not perform any assessment as to the most likely settlement amounts, therefore the valuation of claims against the Department of R29 395 000, disclosed in note 20 to the financial statements, could not be confirmed. •Unconfirmed balances to the value of R3, 6 million were not included in the disclosure note resulting in the contingent liabilities being understated.

Management Response

We are currently developing systems and processes relating to

contingent liabilities. The circular will outline:• Validation of cases• Separation of contractual obligations• Methodology for assessing litigation cases• Reporting at Regional and Head Office level• Separation of PMTE and DPW cases

50


Public Private Partnership

•The Departmental Financial Reporting Framework Guide, Chapter 8, section 39 stipulates that amongst others, the Department must disclose all current and capital expenditure relating to the PPP arrangement in the disclosure notes. Furthermore, the guidance states that Departments must take care to provide information about all obligations they might have in terms of these agreements.

•As disclosed in note 30 to the financial statements the Department is participating in a PPP for the lease of vehicles. However neither lease expenditure nor lease commitments has been included in the disclosure note.

Management Response

•The schedule was available but not submitted on time to the AG. The CFO has issued a warning letter to the Director responsible for the error.

51

Emphasis of Matters

Material Losses

Amounts written off: R2,369 million

Duplicate Warrant Vouchers issued between the period 1996- 1999. The amounts were written off on the basis that the actual documents are missing and the debts are irrecoverable...\AUDIT 2011\JOBURG OFFICE WRITE OFFS OF WARRANT VOUCHERS.xls

Amount written off: R48,20 million

This amount relates to transactions which happened between the period 1999 - 2004. Extensive reconciliations were conducted with the support of the Sizwe Ntsaluba consultants. The Department used to have an account called “No Projects”. This account was used mainly for capital projects, and any other transaction that could not be accounted for properly. ..\AUDIT 2011\Copy of Consolidated Khathu-write off-No project.xls

52

Report on other legal and Regulatory RequirementsPredetermined Objectives:Usefulness of information

•The reported performance information was deficient in respect of the following criteria:

– Consistency: The reported objectives, indicators and targets are not consistent with the approved strategic plan.

– Measurability: The indicators are not well defined and verifiable, and targets are not specific and measurable.

Reliability of information

•The reported performance information was deficient in respect of the following criteria:

– Validity: The reported performance did not occur and does not pertain to the entity.

– Accuracy: The amounts, numbers and other data relating to reported actual performance have not been recorded and reported appropriately.

– Completeness: All actual results and events that should have been recorded have not been included in the reported performance information

Management Action Plan:

1.Capacitation and refocusing of the M&E unit

2.Improved quarterly reporting

3.Enforcing Accountability and Responsibility

4.Enhance Internal Auditing of performance information

53

PMTE Annual Report

54

Statement of Financial Position

2011 2010 2009

Assets R’000 R’000 R’000

Current Assets

Trade & Other Receivables 2 035 134 2 238 045 2 073 435

Cash & Cash Equivalents 2 158 8 997 6 567

2 037 292 2 247 042 2 080 002

Accumulated loss (404 674) (363 339) (188 470)

Liabilities

Current Liabilities

Trade & Other Payables 1 187 203 934 936 722 197

Bank Overdraft 1 254 763 1 675 445 1 546 275

Total Accumulated Funds & Liabilities

2 037 292 2 247 042 2 080 002

55

Note 3- Trade & Other Receivables

Less than 1 to 3 Older than Total 1 year years 3 years R’000 R’000 R’000 R’000 Claims recoverable 113 515 - - 113 515Claims recoverable - PACE 143 911 - - 143 911Claims recoverable – CA 216 595 - - 216 595Disallowances 18 183 190 497 11 633 220 313Debtors operating lease 443 059 - - 443 059Accommodation debtors – State owned

31 627 11 907 13 762 57 296

Accommodation debtors – Private leases

221 955 241 101 52 211 515 267

Debtors – Municipal services 360 030 179 040 - 539 070Municipal deposits 2 282 4 122 - 6 404Provision for impairment (18 166) (148 279) (53 851) (220 296) 1 532 991 478 388 23 755 2 035 134

56

Statement of Comprehensive Income

2011R’000

2010R’000

Revenue 4 755 326 3 799 249

Other Income 123 657 0

Total Revenue 4 878 983 3 799 249

Operating Expenses

Other operating expenses (392 416) (225 448)

Impairment reversal 76 192 0

Garden & Services (67 238) (68 887)

Cleaning Services (129 312) (72 217)

Property Maintenance (812 909) (626 821)

Lease Rentals on operating leases (3 011 552) (2 431 249)

Municipal Rates & Taxes (583 083) (549 496)

Total (4 920 318) (3 974 118)

Loss for the year (41 335) (174 869)57

Note 8 – Revenue

2011 2010 R’000 R’000

2011R’000

2010R’000

Accommodation charges – State Owned 948 403 825 812

Accommodation charges – Private Leases 3 058 138 2 291 395

Government grants (Augmentation) 612 967 588 411

Management fees 135 818 93 631

4 755 326 3 799 249

The amount included in revenue includes:

Income collected from immovable properties which are disclosed under the Department of Public Works

948 403 825 812

58

Audit Report

59


Irregular Expenditure•Payments amounting to R291 668 886 were made in contravention with supply chain management requirements. The amount was not included in irregular expenditure, disclosed in note 12 to the financial statements., resulting in irregular expenditure being understated.

Management Response•During the year under review internal controls around the irregular expenditure were significantly improved, however, it would seem the monitoring of those controls was inadequate. •We are currently analyzing each case reported with the aim of instituting disciplinary measures and also addressing the root causes. We have also acknowledged the challenges around document management. Most of the cases reported are as a result of missing tax clearance certificates and SDB documents. •The Department has already taken a decision of centralizing all contracts within the legal services. A project is currently undertaken to compile a list of all contracts currently running in the Department. This will enable the Department to proactively identify old transactions which are not complying with the prescripts.• The implementation of procurement plans will assist in reducing the number of urgent cases

60

Breakdown of Irregular Expenditure

Nature of Irregularity AmountR’000

Bids not advertised through the open tender process

34 858

Tax Clearance not attached 20 025

Winning bids not advertised 33 858

Payment made without a contract (Leases) 10 456

Variation order not authorised by delegated official

181 515

61

Fruitless Expenditure

Analysis of current Fruitless and wasteful expenditure

Agreed settlement on breach of contract & legal fees 118 326.00

Courts ruling 76 238.15

Interest Paid on Overdue Accounts 4 307 925.19

Rental payment- Non occupation of the building 2 268 581.73

Other 500.53

6 771 571.60

62

Basis of the disclaimer cont. Apart from the irregular expenditure reported under the PMTE, the basis of the disclaimer is largely attributable to the preparation of the Financial Statements for the PMTE.

SA GAAP COMPLIANCE

• Trade & Other receivables (IAS 39(AC 133)

• Revenue

• Related Parties

• Trade and other payables

During the preparation of the FS it became very clear that the only solution to correcting the debtors balances once and for all was to embark on a project of reconstructing all the debtors accounts from the date of inception of the PMTE, 2006.

• Municipal Services

• Private and State owned accommodation

• PACE( Project Accelerated Construction Expenditure)

• Current Account Capital Projects

While this was a sensible thing to do, it distorted the Trail Balance as the reconciliations were done outside the system, which meant some of the journals passed in the previous years could not be properly accounted for.

The reconciliation revealed a number of challenges including invoices which were not raised in the early years as result of system challenges.

These discrepancies impacted on the opening balances of the FS

63

Status of the Billing and Accounting system

• The PMTE was implemented in 2006 without a system, structure and relevant skilled staff.

• All invoices are issued manually and recorded in Excel. Money received are recorded in the same fashion.

– Risk of understating Revenue and misstatement of Debtors– No functionality to calculate discounting of amounts reported

• All trial balance items to be converted manually to accrual basis at year end.

– Risk of error in calculations– Additional journals to process

• Age analysis done manually by consolidating individual reports– Risk of incorrect reporting

• All accounts were reconstructed as from 1 April 2006

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Operationalization of the PMTE - Progress to date

• The structure has been approved and it is now 80 % filled by qualified

accountants.

• We have started with the sourcing of a financial management system

• Improvement of the monthly reconciliations

• Development of policies that are GAAP compliant

• Engagement with National Treasury on technical issues that could not be

resolved with the AG.

• Preparation of the interim FS which will require that we also lease the

CaseWare system.

• Fast tracking the iEWorks system to enable better management of leased

portfolio

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Achievements to date

• Improved controls with regards to the authorization of journals• Reduced incorrect allocations resulting with lesser correction journals• Correct billing• Reconciliations of systems• Almost completing the exercise of validation of accommodation with user

Departments to enable itemized billing

• A new structure was approved during 2010/11 to make provision for Debt

management, etc.

• 80% of positions were filled. Three Accountant employed.

• The balance will be finalized before the end of the year

• This will strengthen the management (1 CD & 1 D increased to 2 CD’s and 4

Directors) and the functioning of the unit.

• Increased Client focus and debt management

• Transfer of skills

66

department of public works p resentation of 2010/11 annual report to the portfolio committee on...

Documents

department of defence

immovable asset portfolio

spheres of government

priority areas of government

ministers foreword cont

ministers foreword planning

expropriation act

financial year