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DEPARTMENT OF PUBLIC WORKSDEPARTMENT OF PUBLIC WORKS

PPRESENTATION OF 2009/10 ANNUAL REPORT RESENTATION OF 2009/10 ANNUAL REPORT TO THE PUBLIC WORKS PORTFOLIO TO THE PUBLIC WORKS PORTFOLIO

COMMITTEE COMMITTEE

19 OCTOBER 2010 19 OCTOBER 2010

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Outline

• Minister’s Overview• Presentation per Programme/ Sub-Programme• Financial Performance and Audit Reports for the year

ended 31 March 2010

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MINISTER’S OVERVIEW

Planning for the fiscal year 2009/10 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 projects of government-priority

pojects

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MINISTER’S OVERVIEW

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) • Dolomite management Land Ports of Entry

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MINISTER’S OVERVIEW

Public Entities have implemented the following programmes: IDT: Construction of infrastructure on behalf of government CIDB: National Contractor Development Programme and

establishment of Contractor Contact Centres in all provinces CBE: Assessment of the skills pipeline in the built

environment Agrément South Africa: Issuing of fit-for-purpose certificates

for non-standardised products and increasing participation in the Innovation Hub – with a view to market alternative building materials for human settlements

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Some challenges faced

The following challenges were faced, but progress was made in each:

Adjudication of tenders to prevent fraud and corruption

Internal controls Risk management capability EPWP web-based reportingLease management and fast tracking the

vesting process remain challenges5

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Programmes/Sub-programmes

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ACHIEVEMENTS PER PROGRAMME/ SUB-PROGRAMME

Programme 1: Finance & SCM

Outcome Target Achievements

Sound financial management within the department and its trading account

All AG issues on DPW (including Trading Account 2007/08 annual report fully addressed.

Movable Assets

The asset register is developed and fully functional . All assets which could not be accounted for previously have been have been verified and reconciled to the financial system. System corrected and aligned to existing furniture per location. The work done in this area is clearly demonstrated by the clean audit report on movable assets.

Weaknesses in internal control

Operation “Re Ya Patala” (call centre) established to honour 30 days payment notice.

Polices reviewed and check lists were introduced

GAAP Compliance

Action plan for GAAP compliance was developed and is being implemented. Integration of PMIS and WCS through iE Works to create a reliable business system was completed during the year under review. This will enable the linking of capital budget to properties.

Significant improvement has been done to reconcile old balances to enable improved revenue collection.

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ACHIEVEMENTS PER PROGRAMME/ SUB-PROGRAMME

Programme 1: Finance & SCM

Outcome Target Achievements

Financial system that will enable GAAP compliance, the system will be procured in July 2010.

Revenue Recoverable

Significant improvement has been done to reconcile old balances to enable improved revenue collection.

98% of the claims submitted during the year under review were honoured by client departments. Although we have been able to collected some of the long outstanding amounts from client departments, there is still a huge debt which is doubtful and which may have to be resolved with NT.

National Treasury approves 30% of additional funds requested through MTEF and Adjusted Estimates

Prioritized funding approved through adjusted estimates, enabling the department to address over expenditure on compensation of employees as well as to accommodate the filling of new posts.

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Outcome Target Achievements

Awareness on fraud prevention Facilitation of updating of fraud prevention strategy

DPW fraud prevention strategy implemented and awareness created.

Programme 1: Internal Audit & Investigation Services

ACHIEVEMENTS PER PROGRAMME/ SUB-PROGRAMME (cont….)

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Programme 1: Monitoring & Evaluation

Outcome Target Achievements

Operationalization of M&E - creating understanding of the unit’s functionality

Milestones achieved in Development and implementation of M&E policy/strategy (guided by the GWM&E Policy Framework and the nine constitutional values and principles)

The M&E policy is almost complete

Monitor operations of business units for improved service delivery, evaluating programme/project performance and impact

Improved buy-in and Compliance to reporting Structured reporting template completed and implemented

Develop web based system that is integrated into existing systems

An enabling system that complement the M&E Framework

Functional web-based system developed is been developed, in the interim the manual system is in place

ACHIEVEMENTS PER PROGRAMME/ SUB-PROGRAMME

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ACHIEVEMENTS PER PROGRAMME/ SUB-PROGRAMMEProgramme 1: Corporate Services

Outcome Target Achievements

Effective and efficient management of Learnership, Artisan Trainees, Internship Young Professionals and Mentorship Programmes

269 Young Professionals

250 Interns

258 Learners

147 Artisan Trainees

Young Professionals =106 (3 Interns translated to Young Professional Programme)

Interns = 276 (19 Interns were absorbed internally and 26 Interns were appointed externally)

Learners = 74 (13 Learners were absorbed internally and 10 were appointed externally)

Artisans Trainees = 29 (1 Artisan Trainee absorbed internally)

Young Professionals who obtained registration:

Town Planning = 1

Property Valuation = 2

Quantity Surveying = 1

Architecture =1

64 Learners completed the Learnership Programme

1 Artisan Trainee obtained trade certificate

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ACHIEVEMENTS PER PROGRAMME/ SUB-PROGRAMME

Programme 2: Asset Investment Management

Outcome Target Achievements

Improved service delivery to meet clients expectation

All user departments enter into SLA’s with DPW by 31 March 2010

SLA finalized and submitted to 40 User Departments for signature

Effective and efficient asset management and GIAMA implementation

100% completed CAMP 31 August 2009.

C-AMP completed for 11 User Departments

Improved Portfolio Performance 10% consumption (kw/h) on Government Buildings by 31 March 2010.

10% reduction achieved.

17 buildings retrofitted 3,473 kw/h saved

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ACHIEVEMENTS PER PROGRAMME/ SUB-PROGRAMME

Programme 2: Asset Investment Management

Outcome Target Achievements

Number of state owned buildings prioritized to be made accessible to people with disability each year

200 buildings 114 are in construction, 38 buildings completed and 22 in design and procurement

Efficient and effective asset management

30% analysis concluded by 31 March 2010 U-AMPS costed for 16 user departments

Valuation of state property portfolio

Remaining 30% of portfolio valued by 31 March 2010

Valuations currently reflected on the asset register as R1 or at cost.

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ACHIEVEMENTS PER PROGRAMME/ SUB-PROGRAMMEin line with the ENE

Programme 2: Asset Investment ManagementOutcome Target Achievements

Percentage of state owned buildings rehabilitated each year (out of 1053 earmarked for rehabilitation)

5% Services completed (Civitas; Merebank and Bluff)

5 services are in construction, 37 in planning

Total number of immovable assets (out of 136089 – tenancy level) on the department’s register that comply with GRAP requirements

108 562 – property level

80% 75% of 108 562 (Property level) complies with minimum accounting requirements

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ACHIEVEMENTS PER PROGRAMME/ SUB-PROGRAMME

Programme 2: Regional OperationsOutcome Target Achievements

Transformed Construction Industry 30% construction budget spent on transformation of the industry by 31 March 2010

List of 126 CIPs submitted, with an expenditure amounting to R66m

30% of tender on projects above R100m must be subcontracted to BEE contract by 31 March 2010

Two projects identified – Johannesburg and H/O (both are BEE projects) –

Transformed property Industry 10% Increase year on year on the number of BEE entities (especially women, youth and disabled) participating in the Property Industry by 31 March 2010

Total leases= 3028

Total leases towards BEE = 686, amounting to R73 048 753. 31.47% of value went towards BEE entities

Statutory Compliance improved service delivery

53 state-owned buildings complying with OHSA and NBRS by 31 March 2010

53 state-owned buildings rehabilitated..

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ACHIEVEMENTS PER PROGRAMME/ SUB-PROGRAMME

• Programme 2: Inner City Regeneration

Outcome Target Achievements

Improved service delivery to meet clients expectation

Client needs in 6 towns/cities in 3 Provinces incorporated into municipal IDPs by Nov 2009

Spatial research conducted for IDPs in Umtata, Matatiele, and Cape Town, in addition to an IDP for Tshwane

Efficiency and effectiveness in provision of services to clients

60 % of sites should be State-owned and 40 % private-owned by 31 March 2010

Feasibility studies concluded for Stats SA Head Office, clearance of the required sites in progress for Berea Park and Salvokop.

Improved service delivery At least 6 Government precincts in 3 cities and 3 towns by 31 March 2010

In collaboration with COT, consultants will be appointed to assist on planning for the Salvakop/Church Square/Marabastad and Civitas Precincts)

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ACHIEVEMENTS PER PROGRAMME/ SUB-PROGRAMME

• Programme 2: Inner City Regeneration

Outcome Target Achievements

Efficient provision of accommodation to clients

Six development plans for three towns and three cities by 31 March 2010

Projects executed within specified timeframes and costs to satisfaction of clients by 31 March 2010

34 RAMP Projects completed. Three foreign projects completed. Civitas HO for DoH completed, and phase one of the Waterkloof Air force Runway, including three year lift management and maintenance programme on all state owned properties completed.

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ACHIEVEMENTS PER PROGRAMME/ SUB-PROGRAMMEin line with the ENE

Programme 3: Expanded Public Works ProgrammeOutcome Target Achievements

Number of youths participating in the national youth services programme

6000 2500

Number of learners participating in the Vuk’uphile learnerships 1000 511

Total number of municipalities reporting on EPWP 85 130

Number of work opportunities created 550 000 625 859

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ACHIEVEMENTS PER PROGRAMME/ SUB-PROGRAMME

Programme 3: Construction and Property Policy Regulation

Outcome Target Achievements

Improved performance, growth and development of the construction and property sectors

Comprehensive analysis reflecting DPW interventions by March 2010.

Databases on skills supply and construction sector macro data developed.

Adequately capacitated industries Finalization and approval of the Skills Development Strategy by March 2010.

The skills development strategy approved.

Effective legislative framework for DPW’s Public Entities to ensure achievement of DPW’s objectives

Effective legislative environment for Public Entities to achieve DPW’s objectives by 31 March 2010

Expropriation Bill under review

Agrément SA business case is been developed

GIAMA guidelines approved by March 2010

Immovable Asset Register guidelines submitted to National Treasury for consideration.

Valuation model developed and vesting guidelines are currently being developed .

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Financial Performance and Audit Reports for the year ended

31 March 2010

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Financial Performance and Audit Reports for the year ended

31 March 2010

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Total Dept- Financial Performance 2009/10

2009/10R’mil

2008/09R’mil

Budget allocation R6 049 R4 302

Actual Expenditure R5 688 R4 197

Spending as a percentage 94% 97,6%

Unspent funds R361 R105

Unspent funds as a percentage

5.98% 2.4%

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DPW - Financial Performance 2009/10

Current Financial Year (2009/10) Prior Financial Year (2008/09)

Economic Classification

Budget(R’000)

Expenditure(R’000)

%Spent

Allocated(R’000)

Expenditure(R’000)

% Spent

Compensation of Employees

988,158 976,101 99% 868,261 917,099 106%

Goods & Services

902,885 897,359 99% 736,614 735,914 100%

Financial transactions in assets and liabilities

40,341 40,341 100% 7,220 7,220 100%

Transfers & Subsidies

2,607,897 2,478,282 95% 1,512,705 1,510,718 100%

Payment for Capital Assets

1,509,849 1,295,976 86% 1,177,192 1,026,036 87%

TOTAL 6,049,130 5,688,149 94% 4,301,992 4,196,987 98%

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DPW - Fruitless and Irregular Expenditure

An amount of R30,8 million was reported as Irregular Expenditure

for the 2009/10 financial year. This amount included R5 mil from

prior years.

Details:

• Proper procurement processes not followed – R15,683 mil• Tax clearance certificate not attached – R11,719 mil

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PMTE – Financial Performance

• The department has managed for the first time to report the PMTE financial statements in line with Generally Accepted Accounting Principles as directed by the PFMA.

• The transition from modified cash basis to GAAP came with some challenges relating to compliance with the International Accounting Standards on receivables and payables.

• Bank overdraft at year end was R1,67 billion (2008/09:R 1,5 billion)

2010

R’000

2009

R’000

Revenue 3,916,496 3,073,877

Operating Exp -3,974,119 -3,172,090

Deficit before tax -57,623 -98,213

Deficit for the year -57,623 -98,213

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PMTE - Fruitless and Irregular Expenditure

• Fruitless expenditure: R 392 000

– An amount of R392 000 was reported as fruitless expenditure. This amount relates to cases in Joburg where clients vacated the buildings before the end of the lease contracts.

• Irregular Expenditure: R 264 million

– No proper authorizing – R 4,2 million

– No tax clearance certificate – R82 million

– No supporting documents – R 109 million

– Procurement process not followed – R 69 million

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Audit Report - 2009/10

DPW

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DPW - Audit Qualification

Basis for qualification:

• Immovable Asset Register• Irregular Expenditure

Emphasis of Matter:

• Fruitless and wasteful expenditure to the amount of R389,000 was incurred

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Progress to date – Immovable Assets

• Information from Asset Register was extracted and prioritised according to blank and incomplete fields.

• Process of analyzing authenticity of information is ongoing• Progress monitored monthly to ensure population of identified blank and

incomplete fields on the Asset Register• Number of properties extracted = 33972, • Properties investigated = 18029 (54%) and properties updated on AR after

investigation = 8083 (24%)• Task Team formed to facilitate the vesting process (OAG, DRDRL, NT &

DPW) and GIAMA TECHNICAL COMMITEE) -sitting Quarterly• Inter-Ministerial Committee is also active in providing leadership and

support towards addressing challenges around immovable assets (Ministers of Finance, Public Works and Rural Dev. and Land Reform).

• Asset Register Guideline completed. To be discussed with OAG before end October 2010

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Progress to date – Irregular Expenditure • Setting up of a compliance unit:

– The unit is in the process of being established. We are currently evaluating the posts for finalization of the structure. Target date – Dec 2010.

• Develop new policies and improve internal controls:

– Policy on irregular expenditure has been developed and it is currently being circulated to regions for comments. It will be submitted for approval to the Accounting Officer by 31 Oct.

– Check lists have been improved. New checklists have also been developed for the Bid Adjudication Committee at Head Office. The checklist are currently being rolled out to the regions.

– Measures have been put in place to validated VAT registration for all invoices

– Capacity has been increased through the use of contractors while we are trying to prioritize funds for getting permanent staff.

– All regions have been allowed to work overtime in order to conduct a compliance check all documents retrospective from April 2010.

– As a compensating control, the head office officials will be visiting all regions to conduct a random check of compliance with SCM policies

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Audit ReportProperty Management Trading Entity

(PMTE)

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PMTE - Audit Qualification

Basis for qualified opinion:

• Revenue and receivables• Related parties• Expenditure and payables• Irregular Expenditure

Emphasis of matter:

Restatement of corresponding figures

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Progress to date – Revenue & Receivables Management

• We are currently continuing to resolve reconciling differences identified during the previous year’s reconciliation process and engaging client department to pay.

• Almost 90% of the reconciliations have been completed.

• Significant progress has already been made with the current revenue and debtors management as evidenced by the 98% collections at year end.

• We are in the process of increasing capacity to ensure sustainability of the work done by consultants as well as to improve technical skills relevant for the PMTE.

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Progress to date - Related Parties

• The following are the related parties of PMTE:– National Department of Public – Other National Departments and Public Entities reporting to the

National Departments because they are subject to common control .National Departments operate together to achieve a common objectives determined by Cabinet /Provincial Legislature

• Specifications for the acquisition of a new financial system have already been submitted for approval.

• IT is currently looking at possible systems that can be compatible to the current operations systems called iEWorks.

• We are targeting the end of Dec for acquisition of the system.

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THANK YOU!THANK YOU!

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