DPWI & PMTE Audit Action Plan & 2021/22 Annual Performance Plan, with Minister & Deputy Minister

Meeting report

The Chairperson spoke of the current work of the Portfolio Committee which is going to three provinces to conduct public hearing on the Land Expropriation Bill. In that context, she referenced a phenomenal woman who was at the forefront as political activist, Charlotte Maxeke. Apologies were noted from the DPWI CFO.

Ministry of Public Works & Infrastructure opening remarks
Minister Patricia De Lille welcomed the oversight by the Committee. On Sunday we had a discussion on the importance of the oversight role of the Committee and the impact it has made on the Department. Today for the first time all the acronyms will be presented in full. DPWI is in the process of aligning policies for implementation. Some of the challenges in DPWI were caused by the non-adherence to existing policies. A policy library has been established to remind the administration that what is implemented should be aligned to policy and that process is ongoing.

Deputy Minister Noxolo Kiviet spoke about change management within DPWI to get back to the Batho Pele principles. Hopefully this will lead to better audit outcomes and speeding up service delivery. Key performance areas for senior management have been restructured to ensure DPWI reaches an unqualified audit. Public Works has performed well over the years with several unqualified audits while the big struggle is with the Property Management Trading Entity (PMTE) that does not have a good record. The PMTE is functioning as a bank account and it is not linked to the seven key priorities. Action is being taken but there is great need to make this department better with the alignment of the legal mandate.

DPWI Audit Action Plan & 2021/22 Annual Performance Plan
Mr Lesteja Toona, DPWI Chief Director: Internal Control, provided an overview of the background and historical context of DPWI over the last 10 years. It gave an analysis of the audit outcomes of DPWI and PMTE. This was followed by the action audit action plans for DPWI and PMTE

Ms Carmen Joy Abrahams, EPWP Acting Deputy Director General, said the audit findings by the Auditor General (AG) indicated that the Expanded Public Works Programme (EPWP) participants and projects are not sufficiently reported on the EPWP reporting system. The EPWP provides a reporting system to more than 350 public bodies. The Accounting Officer nominates individuals to capture the data on the EPWP reporting system. The findings indicate that not all projects are reported on the system and that certain participant information in terms of the Ministerial Determination are not loaded against the supporting evidence. The attendance registers, payments and proof of payments are a requirement for record keeping and for when physical audits take place. The standard operating procedures are in place within DPWI and it informs public bodies on the reporting requirements and the performing of audits. The DPWI system ensures that the data is validated against the population register of the Department of Home Affairs. DPWI plays a coordinating role by conducting public body visits to ensure compliance. During 2020/21, 227 public body visits were conducted and inspection took place. Feedback was then provided to the public bodies in terms of findings and requirements. There are public bodies that were non-compliant, and letters had to be issued by the Acting Director General to the various Accounting Officers on the areas of non-compliance. In addressing the reporting and under reporting in terms of the conditional grants, public bodies must provide project lists and funding allocations and DPWI check and monitors that the funded projects are registered on the system. The Auditor-General has indicated that there is still non-compliance, in terms of the Ministerial determination, and public bodies utilising their own funding. Where there is non-compliance, DPWI is unable to exclude them from the EPW reporting system. It will then be another under-reporting finding. The under-reporting and poor data records are interrelated.

DPWI then presented the APP (see document).

Discussion
Ms A Siwisa (EFF) said that although DPWI says there are proper monitoring and evaluation systems frameworks and process in place, the presentation does not indicate consequence management implemented against officials and this affects the audit outcomes. How is DPWI addressing non-compliance after training was received since there was no indication of consequence management? There is a problem with checklists when it comes to big projects, does DPWI physically check if everybody complies?

The Department did not provide the Committee with all the documents and no indication of how compliance is done. How often does DPWI conduct oversight to ensure what is being reported on did happen? We are sitting with a department presenting a plan to improve and expecting the Committee to have confidence in the follow up on the plan. It is disappointing that the proper documentation was not sent to the Committee. DPWI mentions providing shelter for gender-based violence (GBV) victims. DPWI talks about GBV externally, but nothing is mentioned internally. What are the internal plans within DPWI on GBV cases? She sought clarity on Infrastructure South Africa (ISA).

Ms S Van Schalkwyk (ANC) said the absence of the DPWI CFO is a great concern. She sought clarity on the timelines and implementation status of the ARCHIBUS system. Another item raised continually by the Auditor General (AG) is the inability to collect management fees from client departments and the huge debt that leads to non-achievement of stated performance objectives. Are the measures indicated by DPWI bearing fruit or is it planning to find alternative strategies to improve? There is a concern about the instability of senior management positions.

The key performance areas (KPA) of the DG and DDG are restructured to include a clean audit as an output; do these KPAs stipulate corrective measures? It is a recurring concern about the filling of senior management posts which affects the performance of DPWI. What are the timelines for filling the position of Director General? How does DPWI plan to address high under-expenditure on compensation of employees,  as this has been occurring before Covid-19.

Ms M Hicklin (DA) referred to the PFMA that sets clear guidelines on monthly, quarterly and annual performance targets and timeframes. However, there is no clear timeframe in DPWI on the delivery of reports. The immovable asset register is incomplete and reports are not submitted regularly. This feeds into the PFMA requirements. The instability of DPWI leadership is a major concern with the seven major key strategic areas headed by an acting DG or acting DDG. This is important for the smooth running of DPWI and it cannot continue with this instability in management positions.

The EPWP is not functioning as it should. The programme receives vast amounts of monies to ensure that there is compliance, partnership support, compensation of employees, and technical support for departments and entities. However DPWI is still faced with EPWP not functioning correctly. Somewhere along the line, someone must take responsibility to ensure that this department is managed in the correct way. The ongoing matter of SAGE and the ARCHIBUS system needs to be clarified. She asked about the R68.3 million to use the ARCHIBUS system if the asset register is incomplete and there are differences between SAGE and ARCHIBUS. How can the only challenge about the immovable asset register be stated to be the valuation of assets? The funds for monitoring were cut by R300 000 in the budget. Why are monies being decreased if DPWI is deficient in this area? She could not interrogate the Annual Performance Plan as it was not received in advance by the Committee

Ms S Graham (DA) commended DPWI for maintaining an unqualified audit report under severe constraints. Part of that was that many of the challenges had been shifted to PMTE which is now carrying the burden of non-compliance on the four matters of leases, expenditure and accruals, project management and the immovable asset register which was first raised in 2012/13 but remains an issue. These four matters are discussed annually and remain a concern within DPWI. While there is a specific audit action plan to address all findings, these four areas remain non-compliant. It is a concern because specific problems are addressed but the overall matters are not looked at. Proper policies and frameworks are not in place to address these.

The framework is not giving DPWI a mandate to allow and enforce regulations. We cannot punish the implementation agency. The DPWI mandate must be strengthened through legislation, policies, regulations and frameworks to address non-compliance of departments and entities with EPWP and non-payment of leases. It is all very well to deal with the Auditor General findings, but we must look at DPWI's role to determine its exact functionality to give it the proper mandate. The PMTE remains an entity of ongoing concern since liabilities exceed assets. It is almost as if DPWI has a problem with raising profit. There are R2.7 billion of assets. We can look at the immovable asset register and the list of the valuation roll and the deemed cost of valuation. What are we doing to ensure DPWI is getting value for money from the assets?

There must be mechanisms in place in charging client departments for the use of DPWI assets. This will start to turn PMTE around and generate income as a department. The lack of permanent employees in strategic posts remains a concern. Why the reinstatement of contract workers in strategic posts instead of appointing permanent employees? She requested a response on the two employees who were reinstated and the 65 contract workers who won their case recently at the bargaining council. This response should determine if processes are in place to absorb these contract workers in the strategic positions.

It is difficult to interrogate the APP document that was not submitted within the required timeframe. She sought clarity on the type of entity that Infrastructure South Africa (ISA) is and what the oversight role of DPWI is. What mechanisms does DPWI have in place for remote working during the COVID-19 pandemic  and how is DPWI going to exercise oversight over the five councils?

Ms L Shabalala (ANC) echoed the instability of senior management. She is concerned about the staff morale with a department that is unstable. If DPWI has strong monitoring processes why does it also need monitoring and evaluation service providers? If monitoring and evaluation are outsourced, what does that mean for the internal audit unit within DPWI? What is the turnaround strategy for state events. Is it not time to utilise internal human resource personnel instead of referring to implementing agents?

Ms L Mjobo (ANC) asked for an indication on the types and categories of properties owned by different departments and entities.

Department response
Mr Imtiaz Fazel, DPWI Acting Director General, said that different members from DPWI will respond to the relevant questions.

Mr Toona replied that consequence management is implemented within DPWI but it was not indicated what was implemented and in which areas in the presentation. Going forward all reports will indicate this. The current framework on irregular expenditure requires the Accounting Officer to undertake consequence management and Treasury expects reports to contain these.

There is progress on client debt and collection of fees. Collection was strengthened from clients, there is progress but not entirely. PMTE as a going concern is a matter of concern to management as well. Short-terms liabilities and short-terms assets are the issue. Some clients have confirmed the debt but do not have the necessary budget. Engagements also took place with National Treasury to increase the PMTE budget allocation. The genesis is the debt that clients owe DPWI; this turns into an overdraft. DPWI at times spend money it does not have and struggles to collect money. The current business model in DPWI is the issue. DPWI is striving to be profit driven and use department assets to generate income. What clients are charged is not near market value to run its operations. However continual engagements are held with National Treasury.

The Acting DDG for Corporate Services replied about the filling of positions by noting the Real Estate management position is filled, the Construction Project Management vacancy is filled permanently and the Immovable Asset Register position is also not vacant. The senior management positions for EPWP and Facilities Management have been advertised but shortlisting has not been conducted as the process is panelled by the Ministry. The recruitment for SCM and Inter-Governmental Coordination have been concluded and recommendations have been made. There is a focus on driving recruitment in DPWI to fill vacant strategic position by June 2021. There is an effect if looking at the numbers of appointments per month. The recruitment of the Regional Manager in Cape Town has started and the Regional Manager in Mthatha will start soon.

The award on the extension and reinstatement of contract positions was received and is currently being looked at by the internal legal and labour relations team. Currently scrutiny on the award is taking place to see if reinstatement is appropriate in terms of the technicalities. The implementation of the ARCHIBUS system was not successful. This went out on tender but it requested National Treasury to cancel the tender. The terms of reference are being revised so that when the tender goes out for the third time, it will attract the appropriate service providers in terms of the specifications.

Ms Abrahams replied that the EPWP is trying various approaches including public body visits to ensure compliance. Legislation is in place particularly section 12 of the EPWP Ministerial Determination on keeping records. However, there is a need to strengthen the DPWI coordination role. A policy document is currently developed for consultation and approval. There are many engagements on enforcement within the EPWP to ensure that the principles are strengthened in the programme. There is also a process underway in DPWI legislation to strengthen the Expanded Public Works Programme.

Mr Siboniso Sokhela, DPWI Acting Chief Director: Immovable Asset Register, replied about the completeness of the asset register. Since 2012/13 DPWI was not qualified by the Auditor General due to the completeness of the immovable asset register. The qualification by the AG was on the valuations. There are not actual issues on the completeness of the register.

Mr Toona explained that there were interface challenges between SAGE and the ARCHIBUS system. Service providers were necessary as internal staff were dealing with current issues and the previous years' issues were outsourced to external service providers. The R68.3 million for the ARCHIBUS system was not only on staff training and development but was for support on the interface between the two systems. This was to ensure continuous support to complete all the modules to train staff on the system. All the modules were not implemented, and part of the funds was to source a service provider to ensure training on the implementation of the modules.

Ms Sasa Subban, DPWI DDG: Real Estate Investment Services, DPWI, replied that land and buildings are recorded in the DPWI asset register. Verifications are done with deeds downloads and the register to reconcile. DPWI has vast number of custodians of immovable assets which include provincial and municipal custodians. These custodians all have asset registers. DPWI is planning to move and transfer information into a single repository to get the national register correct. DPWI will provide the asset register as requested.

Mr Wasnaar Hlabangwane, DPWI DDG: Construction Project Management, replied that DPWI conducts oversight physically to ensure compliance. Every second week progress meetings are conducted as well as inspection meetings and issues of non-compliance are recorded in the minutes.

Mr Nkosana Kubeka, DPWI Chief Director: Property Management Operations, replied that the proposal to utilise secondees from the implementing agent to support DPWI on some of the tasks is noted. Engagements will follow with the implementing agents.

Ms Nyeleti Makhubele, DPWI Acting DDG: Facilities Management, replied that investigations are conducted on illegal occupants. There is a daily increase in properties being illegally occupied. A process of rectification is planned and will start in October. There is a letting out strategy to generate income through assets. DPWI is busy finalising the different categories from which to generate income.

Acting Director General Fazel replied that the corrective measures in the KPA on clean audits depends on the nature of the transgression. In the past performance information was a challenge as it was seen as not being substantiated by evidence. This was a misrepresentation and led to audit findings. In the next audit cycle the adverse findings will be substantiated and subjected to consequence management for senior managers to take responsibility.

The concern about monitoring and evaluation over the audit action plan is noted. DPWI has strong monitoring processes for the audit action plans. There are weekly audit steering committee meetings in DPWI. Departmental monitoring and evaluation meetings take place with Internal Control and the Internal Audit Unit to discuss the audit action plan progress.

On state events and funerals, DPWI has made a huge effort to develop a new standard for state funerals. This will be aligned to categories and expenditure.

Mr Fazel replied that unoccupied properties remain vulnerable but there is a letting out strategy in place to ensure assets generate income. He noted that consequence management influences the morale as there are 30 officials facing disciplinary hearings and 10 cases at court on irregular appointments

The Chairperson noted that the Committee did not receive the presentation on the APP and the Annual Performance Plan (APP) was only received on the day of the meeting. She noted a statement in the APP that does not form part of the DPWI mandate. On page 4 of the APP, statements are made about Infrastructure South Africa (ISA) as if it has taken place, but it has not. According to Parliament's timelines, the Committee must report by 13 May 2021 on the APP and budget. This means it is not possible to discuss the APP in full at a later stage. The Committee is disappointed in the non-submission of reports and documentation. What DPWI missed, the Committee will pick up.

Minister's response
Minister De Lille explained that the Annual Performance Plan (APP) was received on Friday at 12:45pm and there was incorrect information. The document reflected inaccurate information on the mandate of DPWI. The document was discussed and some corrections made on Sunday. On Monday morning at 11:18am, the APP was sent to the Committee secretary. This does not excuse DPWI not to submit timeously. The Minister apologised and requested if the document can be interrogated at a next meeting.

In the latest report from the Audit Committee it was stipulated that the ARCHIBUS system was supposed to be implemented within a period of twelve months. It has not been completed within six years. The report reflects the reasons why the system was not implemented. The business case was to support the operations of DPWI core business as Integrated Workplace Management System (IWMS) software. Over the past six years DPWI contracted two implementing partners to assist with the implementation of the ARCHIBUS system. The first company was LDM and was paid R16.5 million between 2015 and 2017. The other implementing partner was Deloitte and Touche between 2013 and 2016 and a company called ACC TAC and the total amount paid to the companies was R42 million. These were part of the audit findings.

In October 2020 the immovable asset register information was transferred from an Excel spreadsheet to the ARCHIBUS system. The Audit Committee found that although the information was now digitally available, duplications happened in the process. Out of desperation we turned to National Treasury for assistance because a tender was to go out to complete the rollout of the ARCHIBUS system to the value of R37 million. National Treasury was tasked to intervene and it has seconded two people to assist DPWI prepare the proper specifications to digitise the immovable asset register.

The Acting DG cancelled the tender that was planned to go out. This is the current situation with the system as the contract between the ARCHIBUS system and DPWI came to an end in 2018. It will not be proper for DPWI to continue to use external companies to complete the work of the ARCHIBUS system. The ARCHIBUS system consists of ten modules and in the past six years only eight of the 10 modules were completed and only three were implemented. Although all the money was paid to ARCHIBUS system, only three of the modules were activated. National Treasury conducted a full assessment of the situation and pointed out the shortcomings in the tender specifications used by the Department in the past six years.

The new specifications are now in the process of being drafted and the Acting DG will take over to ensure that a proper tender goes out with the proper specifications to digitise the immovable asset register. The Committee can expect feedback within the next two months. The current information and the condition of the immovable asset register cannot be used as baseline to work from and it causes a delay. The Government Immovable Asset Management Act (GIAMA) provides directions on how to dispose and to whom DPWI can dispose. The DPWI strategy is being reviewed because the strategy only deals with disposals to the market. GIAMA also directs DPWI to utilise assets to community-based organisations and NGOs but DPWI does not have a policy in place to ensure this happens.

Closing remarks
The Chairperson thanked the Minister and the team and the Committee appreciate the presentation made. The Committee see the weaknesses and are the partners of DPWI. The story of ARCHIBUS system is horrifying and is an ongoing concern. The amount that was spent on the ARCHIBUS system versus six years later and nothing has happened.

There are improvements because some of the challenges have been shifted to PMTE – the Committee sees it and has raised it. PMTE is accumulating debt and there are amounts that cannot be collected. The Committee is concerned about the immovable asset register.

There are issues about the Public Works Act and the immovable asset register. Does DPWI know exactly how many assets they own, as some assets are illegally occupied or unoccupied for many years? There are municipalities who want to use available land but claim DPWI has not come back to them. DPWI must take all the assets into account and not just what the Auditor General reports on. It is proper to request DPWI and PMTE provide detailed up-to-date information. Detailed reports need to be submitted on actual amounts spent on systems and what was done. The next meeting will deal with that report and the APP presentation will be discussed. The goal is ultimately to secure a clean audit report.

The meeting was adjourned.