Public Works Budgetary Review and Recommendations Report

Meeting report

Election of Acting Chairperson
The Committee Secretary explained that the Chairperson of the Committee was absent and therefore the Committee would have to appoint an acting Chairperson. He explained that he was going to request nominations from Members and if only one Member was nominated, the nominated Member would be declared the acting Chairperson. Thereafter, he requested nominations.

Ms E Masehela (ANC) nominated Mr F Adams (ANC).

Dr C Madlopha (ANC) seconded the nomination of Mr Adams

There were no other nominations and Mr Adams was elected to chair the meeting.
 
Briefing on the Budgetary Review and Recommendations Report (BRRR)
Mr Shuaib Denyssen, Committee Content Advisor, indicated that the report would be focused on the performance of the Department of Public Works (DPW) and its entities over the 2015/16 financial year. The Committee had noted a substantial decrease in the financial and staff allocations of programmes failing under the Department, with a concomitant increase in that of the Property Management Trading Entity (PMTE). In the expenditure per programme, the main concern for the Committee was that R3.7 billion was allocated to Programme 4: Property and Construction Industry Policy and Research. This was 59% of the Department’s budget that totalled R6.3 billion. The Committee was concerned about the review of the White Papers, and eventual draft legislation that remained incomplete.  The Committee had also noted the explanations that had been given in its interaction with the Department that much of the allocation in the 2015/16 financial year to this specific programme was transfers to the PMTE, the Construction Industry Development Board (CIDB), Council of Built Environment (CBE) and Agreement South Africa (ASA) that also does research into construction industry related matters that have an impact on policy.
 
Mr Denyssen pointed out that the Department had received an unqualified audit opinion for the second year since the Turnaround Strategy was implemented. The following additional matters were listed by the Auditor-General (AG):

• The AG did not identify any material findings on the usefulness and reliability of the reported performance information for Programme 2 and 4
• The AG had identified material misstatements in the annual performance of Programme 2, 3 and 4
• Management only corrected some of the misstatements, therefore, the AG raised material findings on the reliability of the reported performance information
• Financial statements were not fully prepared in accordance with the Modified Cash Standard prescribed by the National Treasury, as required by section 40(1) (b) of the Public Finance Management Act (PFMA) and Treasury Regulation 18.2
• There is a need to expand capacity in the risk management and internal audit units
• There is a need to ensure optimal functioning of these units to address risk and internal control deficiencies across the Department
• Proper record-keeping was not always implemented in a timely manner to ensure that complete, relevant and accurate information was accessible and available from public bodies  to support performance reported by the Department

Mr Denyssen added that the AG was unable to determine whether any adjustments were necessary to property rates stated as R1.1 billion in the financial statements - the comparative amount for 2015 was R819.8 million. The Committee was also concerned that the growth of the Independent Development Trust’s (IDT) workload was having unintended consequences. This related to finalising the reconfiguration of the entity into government’s key project management agency for social development and social infrastructure projects. The Committee also made a number of recommendations to the Minister and these included:

• Ensures that the Review of the Public Works White Papers are undertaken as per the Annual Performance Plan and Strategic Plan so that the large amounts allocated to Programme 4 does not end up as a futile exercise
• Ensures that Programme 4 complete the Revised Built Environment Professions (BEP) Policy by the second quarter of the next financial year and report to the Committee by the third quarter of the next financial year on the status of this policy
• Reports to the Committee by the third quarter of the following financial year on the status of CIDB Amendment Bill
• Instructs the CBE to concretely address the challenges relating to the stability at top and senior management levels
• Instructs CBE to improve the manner in which it reports information in the Annual Report. From the budget allocations reported per programme, it appears as if a faction of the budget is spent on the implementation of the programme targets

Discussion
Ms D Kohler-Barnard (DA) mentioned that the Committee was told that the asset register had been completed but it looked like this was not completely true. The consequence of not having an asset register was huge and this was something that needed to be flagged in the report. The Committee was also not furnished with a final date by when the Department would complete the asset register.
 
The Acting Chairperson also expressed concern that the country had not been able to compile and complete the asset register since 1994. It was also stated in the early stages of 1994 that the asset register would be ready by the first quarter of 1995 but this did not happen.
 
Dr Madlopha also agreed that the Department needed to deal with the asset register matter as there was no country in the world that did not have an asset register. There were assets that were stolen but it was reported that the Department was still conducting investigation on these properties. This problem of stolen properties was caused by the fact that there was lack of a proper hand-over of property. The Department should brief the Committee on those assets that were alleged to be stolen and provide a progress report on the matter.
 
Ms Kohler-Barnard indicated that on 15 November 2016, the Department had said that the asset register was finalised in March this year and it had raised R112 billion worth of property but the reality was that there were still properties that belonged to the Department but they were not on the asset register.
 
Dr Madlopha suggested that the Department should be afforded an opportunity to further clarify on which asset register that had been completed and the ones that still required to be completed.
 
Mr S Sithole (IFP) recommended that there should be a point that speaks about transformation in the recommendations of the report as the Committee had been pushing for transformation to take place within the Built Environment. There should also be recommendations that spoke about addressing the problem of fruitless, wasteful and irregular expenditure.
 
Ms Kohler-Barnard explained that PMTE incurred about R246 million of fruitless and wasteful expenditure and irregular expenditure amounted to R5 billion.  
 
Mr Denyssen mentioned that irregular expenditure did not mean that the money had been stolen or there was an act of corruption. In essence, irregular expenditure was caused by people who were not doing the work they were supposed to be doing on a daily or weekly basis and mistakes could happen because of lack of adequate capacity or training. The report should also flag that PMTE should address all matters that had been pointed out by the Auditor-General on the matters of emphasis. The verification of data on the number of jobs that had been created under the Expanded Public Works Programme (EPWP) should also be included in the report as the Department had stated that there were efforts in place to train municipalities in the process of verification of data.
 
Ms Masehela agreed with Mr Sithole that transformation should indeed appear in the recommendations as it was important. The report should also speak about the maintenance of projects and buildings that are being commissioned.
 
The Acting Chairperson proposed that the Committee should ask the Department to provide information on the provinces that still had outstanding information on the asset register and those that had already concluded their asset register.
 
Mr Filtane proposed that the Committee should be clear that the Department needed to fix the recurring problem of failure to deliver a review of the policy texts as this had been consistently stated in the Annual Performance Plan as one of the plans to be achieved. The Committee should also notify the Department to provide plans in place to deal with the problem of failure to sign the Service Level Agreement (SLA) with Parliament. It was concerning that the Department had only delivered 8 of requested 39 movable assets (office and residential) provided to Prestige Clients within 60 days of receiving the request. The Committee should also be clear that leadership across the portfolio should provide updates on steps that are being taken to ensure effective oversight responsibility regarding financial and performance reporting and compliance. There should also be an update on consequence management on cases where there had been transgression like unauthorised and wasteful expenditure and also irregular expenditure.   
 
Ms Masehela suggested that the Committee should be provided with a percentage of the total of 1 098 of the unfilled posts so as to check as to how this would relate to the acceptable standard of vacancies.
 
Dr Madlopha indicated that the Committee should be specific on where there should be transformation within the Built Environment. It was quite clear that there was a lack of transformation within CIDB and CBE and this was a matter to be flagged in the report.
 
The Acting Chairperson suggested that the Committee should adopt the report today with all the amendments to be made by the Content Adviser. Members would need to be emailed the report with all the amendments so as to reach a consensus before the report is presented in the House.  The Committee would meet next week to adopt all the outstanding minutes for the year.  The report was adopted with amendments.
 
The meeting was adjourned.