Financial Performance and Progress Report on
clearing of audit queries of the Department
Presented to the Portfolio Committee
08 March 2011
Presented by
Cathy Motsisi
Chief Financial Officer
1
Purpose
• To present the financial performance of the
department as at the 31 January 2011.
• To provide a progress report on the
clearing of audit queries.
2
Total Department: Financial Performance per
Economic Classification
%
Spent
Adjusted
Budget
Allocation
2010/11
Exp as 31
Jan 2011
R'000
R'000
1 121 432
911 486
76%
82%
80%
Goods and services
529 975
417 839
79%
86%
64%
Property Management
318 027
291 302
92%
86%
97%
Transfers and subsidies
3 029 610
3 205 570
84%
92%
84%
Infrastructure
1 375 982
730 732
53%
76%
55%
136 137
64 489
47%
60%
63%
7 388 081
5 548 060
75%
86%
75%
Economic classification
Compensation of employees
Machinery and equipment
Total
%
Spent3
1 Jan
2011
NT
Bench
mark
31 Jan
2010
3
Breakdown of the Expenditure Capital BudgetInfrastructure
Item
Departmental
Allocation
Actual
Expenditure
R’000
R’000
% Spent
Jan 2011
% Spent
Feb 2011
200 661
79 212
39%
37%
Accessibility for
disabled people
22 300
13 208
59%
55%
Dolomite Risk
Management
28 888
7 086
25%
27%
Land Ports of Entry
545 452
307 001
56%
80%
Prestige
438 681
250 039
58%
66%
RKTP
140 000
66 631
48%
63%
1,375 982
723 176
53%
63%
TOTAL
4
Summary of Projects per status
Status
Description
Total number of Projects
4
PI issued ( Expenditure is for
consultants only
101
4b
Tender Stage
39
5
Tender recommendation
stage
45
5A
Pre site handover
12
5B
Construction Stage
112
6A
First delivery stage
29
7
Final delivery stage
80
8
Construction completed
86
TOTAL
505
5
Financial Performance per Programme –
(Benchmark 83%)
Programme
Adjusted
budget
allocation
2010/11
R'000
Prog 1. Administration
Exp as 31
Jan 2011
Exp
% as
at 31
Jan
2011
Exp
% as
at 31
Jan
2010
R'000
629 344
580 080
92%
83%
Prog 2. Immovable Asset Management
5 199 437
4 178 049
80%
77%
Prog 3. Expanded Public Works Programme
1 479 110
744 333
50%
59%
Prog. 4 Property and Construction Industry
Policy Regulation
30 039
22 910
76%
59%
Prog 5. Auxiliary and Associated Services
26 867
22 689
84%
75%
7 364 797
5 548 061
75%
75%
Total
6
Expenditure Analysis- Earmarked Funds January 2011
Function
Office Accommodation
Budget
‘000
Expenditure
31 Jan 2011
‘000
% Spent
31 Jan 2011
318 027
291 302
91%
1 375 982
730 732
53%
CIDB
63 665
63 655
100%
CBE
25 527
25 527
100%
Agrement Board
8 982
8 982
100 %
Boundary Fencing
7 000
6 300
90%
612 967
612 967
100%
1 865 227
1 865 227
100%
EPWP Incentives to Provinces
331 004
89 492
27%
EPWP Incentives to
Municipalities
622 996
276 623
44%
10 515
10 515
100%
DPW Infrastructure
Aug of PMTE
Property Rates – Conditional
Grants
IDT Intermediaries
7
Expenditure Analysis- Earmarked Funds Cont.
Function
Expenditure
31 Jan 2011
‘000
Budget
‘000
% Spent
31 Jan 2011
EPWP – Non State Sector
179 811
179 811
100%
EPWP – Non State Sector
(Province)
56 537
56 537
100%
CETA (HR)
2 341
0
0%
Parliamentary Villages
6 982
6 982
100 %
Energy Efficiency (PPM)
75 000
-
0%
Audit fee
29 166
27 317
94%
Compensation for Losses
1 945
-
0%
State Function
5 112
8 826
173 %
17 467
13 863
79%
Distress relief
1
0
0%
Loskop Settlement
1
0
0%
5 616 255
4 274 658
76%
Common Wealth War Graves
Total
8
Devolution of Property Rates Grant
Province
Budget Allocated
Amount
Transferred to
Provinces
R’000
Actual payments
to Municipalities
R’000
Balance
Expenditu
re
%
Eastern Cape
181 672
181 672
134 374
47 298
74%
Free State
222 386
222 386
151 919
70 467
68%
Gauteng
294 457
294 457
1 475
292 982
0.5%
KwaZulu Natal
709 891
709 891
290 156
419 735
41%
Limpopo
15 154
15 154
7 577
7 577
50%
Mpumalanga
57 615
57 615
58 297
-682
101%
Northern Cape
39 600
39 600
29 858
9 742
75%
North West
79 990
79 990
53 391
26 599
67%
264 462
264 462
259 660
4 802
98%
1 865 227
1 865 227
986 707
878 520
53%
Western Cape
Total
9
Progress report on the
clearing of audit queries
10
Audit Qualification
Audit Finding
Progress to Date
Qualification
Immovable tangible Capital assets
and minor assets
Information from Asset Register was extracted and
prioritized according to blank and incomplete fields.
The register has already been updated to reflect
properties per town and per region. This will enable a
structured approach to the register enhancement
initiatives.
The department did not have a
complete asset register of all
immovable properties belonging to
the national government under the
custodianship of the Department of
Public Works, as disclosed at R1 in
note 31.3.
Process of analyzing authenticity of information is
ongoing. Progress monitored monthly to ensure
population of identified blank and incomplete fields
on the Asset Register
Vesting Master Plan is already being implemented.
To date 101 land parcels have been vested against a
set target of 10 975 for the year 2010/11.
Cumulatively 12627 land parcels have been vested
representing 58% of the 23922 target for 2014.
11
Audit Qualification – Progress report cont.
•
The Amnesty call is due for implementation from 1st March. Systems are currently
being set up at head office and regions to ensure a seamless implementation of the
initiative dubbed “Operations Buyisa”.
•
We are in the process of appointing service providers to assist with the
comprehensive enhancement of the asset register. The bid has already been
advertised. According to the project plan a service provider will be appointed by end
of March. Target date for completion of the project is March 2013. The audit
qualification is targeted for clearing by March 2012.
•
.
32 Contract workers have already been appointed to assist with the vesting process.
•
A technical task team including National Treasury was established in August 2010 to
oversee the fast tracking of the vesting and clearing of audit queries. The main focus
of the task team is to ensure uniformity and compliance across spheres of
government on the immovable asset management issues.
•
The department has already taken a resolution to switch off PMIS on the 31st March
2011 to enable full migration to iEWorks. We are in the process of appointing an
independent firm of auditors to provide assurance on the internal controls within the
system.
12
Audit Qualification
Audit Finding
Progress to Date
. Irregular expenditure
The structure for the compliance unit has been approved
and we are currently in the process of filling the post of
the head of the unit. Interviews will take place before end
of February.
The department did not follow the
proper procurement process for
all procurement which resulted in
irregular expenditure.
The department did not have
adequate systems and
procedures to identify and record
irregular expenditure.
Various check lists within the SCM and Finance sections
were developed and implemented since October 2010 to
enable proactive identification of irregular expenditure.
We have also improved the templates used for recording
of irregular expenditure.
On a monthly basis regions are reminded to submit any
irregular expenditure identified..A consolidated report is
forwarded to NT monthly
Measures have already been put in place to review
compliance matters on all transactions prior to
commencement of the year end audit.
13
Emphasis of Matter
Audit Finding
Progress to Date
. Fruitless
Some of the problems emanated from cases where
clients vacate building before the end of the contract
or where there are court judgements in favour of
contractors.
and wasteful
As disclosed in note 25 to the
financial statements, fruitless and
wasteful expenditure to the
amount of R389,000 was
incurred
We have already started a project to verify occupancy
on leased property to enable proactive identification
and resolving of possible fruitless expenditure
emanating from unused buildings.
The irregular, and fruitless expenditure policy
developed will contribute significantly to creating
awareness on root causes of non compliance issues.
14
Report on other Legal and Regulatory
Requirements
Audit Finding
Progress to Date
Lack of effective, efficient and
transparent systems and internal
controls
regarding
performance
management (applicable at an
overall performance management
level)
Inadequate content of strategic plan
The draft M&E policy has been finalized and submitted for
approval. It is envisaged that the policy will be rolled out by
mid March.
A Circular No. 1 of 2010 articulating the programme
schedule for the 2010/11 cycle was circulated and
implemented during the year under review.
The M&E has started to engage with respective
branches/business units on a quarterly basis to confirm
alignment of quarterly performance reports to the reporting
requirements and ensure quality control.
M&E has been escalated to EXCO where reports are
discussed and corrective measures are taken.
The strategic plan of the department
did not include the indicators
(measures) and targets for all of the
department’s programmes as
required by Treasury Regulation
5.2.3(d).
Workshops were held with all the business units to ensure
that the plans submitted applies the “SMART” principle.
The reports have been designed to reflect on the reasons
for deviations.
15
Report on other Legal and Regulatory
Requirements
Audit Finding
Progress to Date
Series of workshops held with individual
Planned and reported performance
branches/business units where the review and
targets not specific, measurable and
re-alignment of targets and indicators were
time bound
articulated.
Planned and reported indicators or
measures not well defined
Planned and reported indicators or The 2010/11 strategic plan shows significant
improvement compared to the previous financial
measures
year.
not verifiable
16
Compliance with Laws and Regulations
Audit Finding
Progress to Date
Public Finance Management Act No. 1
of 1999 and Treasury Regulations of
2005
Non-adherence to requirements
Contrary to the requirements of
Treasury Regulation 8.2.3 and section
38(1)(f) of the PFMA, the accounting
officer did not in all instances pay
creditors within 30 days from
receipt of an invoice.
We have set up interim systems where all invoices are
received at registry, recorded and stamped before
forwarding to respective units for work certification.
All invoices older than 30 days are investigated for
reasons of late payments and noted in the register which
is forwarded to the CFO monthly for review and
addressing of late payments.
We are in the process of enhancing the initiatives put in
place through “Operation Re Ya Patala” by setting
making the unit visible at reception and re-advertising the
toll free number in all identified media.
We have also engaged IT to leverage on the existing
EDMS system for the development of an electronic
tracking tool. The system has already been developed
and it is currently piloted at head office.
17
Report on other Legal and Regulatory
Requirements
Audit Finding
Progress to Date
Contrary to the requirements of Treasury
Regulation 16A.7.4, the department did not
obtain approval from the relevant treasury for
letting immovable state property at tariffs lower
than market-related rates.
This problem relates to old contracts that
were implemented before the market
related benchmarks were enforced.
Contracts are renewed to market rates as
and when they expire
Public Service Regulations, 2001 (PSR)
Contrary to the requirements of
PSR 1/III/B2(d), an approved human resource
plan for the 2009-10 medium-term expenditure
framework was
not in place.
The human resource plan gets reviewed
after three years. The new revised plan
has been finalized and submitted through
the relevant stakeholders for approval..
18
Other Reporting – Internal Controls
Audit Finding
Progress to Date
. Leadership
The accounting officer does not exercise
oversight responsibility over reporting and
compliance with laws and regulations and
internal control and furthermore, the internal
policies and procedures pertaining to the
monitoring and reporting of compliance with
laws and regulations were not always aligned
to the applicable laws and regulations,
resulting in numerous instances of noncompliance with laws and regulations.
The executive management team of the department has
taken a clear resolution of taking the lead in all
operations.
Since July last year all DDG’s have been allocated
different regions for oversight management and providing
support.
The Accounting officer has engaged in a number of
workshops and meeting with the regional managers to
attend to the challenges of service delivery and also
inculcating the culture of good governance.
The structure has also been reviewed to enable proper
governance of the operations of the department.
To this end Property management and Capital projects
functions have been restructured to enable better decision
making.
The Accounting officer have also improved the awarding
of big contracts by creating a Special Bid Adjudication
Committee which reviews all procurement above R20
million. This committee consist mainly of Chief Directors
and DDG’s.
19
Other Reporting – Internal Controls
Audit Finding
Progress to Date
. Financial and performance management
To date the following policies have been drafted /
reviewed:
Revenue Management - draft
SCM Policy - completed
Irregular, Fruitless and wasteful expenditure –
completed
Debtors Management - completed
Movable Assets Management Policy - completed
Entertainment Policy- completed
Petty Cash Policy- completed
We have developed check lists throughout the finance
operations to improve compliance with policies.
A policy portal will be developed by end April 2010 to
enable all policies to be accessible as and when
required.
Significant work has been done with regards to the
drafting of other policies such as planning and
budgeting. These policies will be finalised and ready for
implementation by 1st April.
The department did not have documented and
approved internal policies and procedures to
address planning,
implementation, monitoring and reporting
processes and events pertaining to
performance management and reporting.
20
Other Reporting – Investigations
Audit Finding
Investigations in progress
Several investigations are currently
being carried out within the department
relating to matters of fronting, the misuse
of state vehicles, conducting business
while employed by the public service,
the unauthorized sale of government
houses, allegations of overpayments,
delay of payments and irregular
awarding of tenders. The
investigations were still ongoing at the
reporting date.
Progress to Date
Two cases of fronting are still under
investigation. The department has put in place
measures to reduce fronting. These measures
includes training staff on proactively identifying
fronting and risk issues relating to the Supply
Chain Management.
The case that was reported on misuse of
vehicles was investigated and it was found that
there was no evidence to substantiate the
allegation. The matter was therefore regarded
as closed.
Other cases are still under investigation
21
Property Management Trading
Entity
22
Audit Qualification
Audit Finding
Progress to Date
Revenue and receivables
State leases = 100% reconciled
Private leases = 3 years reconciliations 100
% done. There is a concerted effort to
finalise the remaining 3 yrs by end of July
2011.
I could not verify completeness, valuation, rights
and obligations of the trade receivables due to
the following:
The trade receivables balance of R2,38 billion
(2009: R2,1 billion) and as disclosed in note 4 to
the annual financial statements, does not agree
to the total per the individual debtors accounts.
The entity did not complete the process of
reconciling the difference between the trade
receivables at year-end with the underlying
accounting records. The entity embarked on an
extensive process of reconciling all debtor
accounts going back three years to the inception
date of entity.
Municipal services = Out of the 42 client
department, accounts of 30 clients have
been fully reconciled.
The remaining 12 accounts will be finalised
by end March.
We are also 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.
23
Audit Qualification
Audit Finding
Progress to Date
Related parties
The following are the related parties of PMTE:
Due to lack of a proper accounting system in
place for trade receivables and un-reconciled
individual trade receivables balances at yearend, I was unable to verify completeness,
valuation, rights and obligations of relatedparty balances as disclosed in note 17.2 of
the annual financial statements.
Expenditure and payables
South African Statements of Generally
Accepted Accounting Practice, IAS:39 (AC
133), Financial
Instruments: Recognition and Measurement
The time value of money was not taken into
account when disclosing the fair value of
payables as disclosed at R930 million (2009:
R722 million) in note 6 at year-end and the
prior year.
National Department of Public, Other
National Departments and Public Entities
reporting to the National
Departments because they are subject to
common control .
Specifications for the acquisition of a new
financial system have already been submitted to
National Treasury for approval.
IT is currently looking at possible systems that
can be compatible to the current operations
systems called iEWorks.
We have already started to review the financial
information to conduct a dry run of the
compliance with GAAP.
24
Emphasis of Matter
Audit Finding
Progress to Date
Restatement of corresponding figures
As disclosed in note 10 to the financial
statements, the corresponding figures for 31
March 2009 have been restated as a result
of
the Property Management Trading Entity
reporting in terms of South African
Statements of
Generally Accepted Accounting Practice (SA
Statements of GAAP) for the first time for the
year ended 31 March 2010.
This matter was unavoidable as we
were reporting in term of GAAP for the
first time. The conversion necessitated
the restating of previous year’s
balances.
25
Compliance with laws and regulations
Audit Finding
Progress to Date
Public Finance Management Act No 1 of 1999
and Treasury Regulations of 2005
Non-adherence to requirements
Contrary to the requirements of TR15.12.3, a
number of payments in excess of R2 000 were
effected electronically without approval having
been obtained from the relevant treasury.
Measures have been put in place to ensure
that appropriate approval is received before
exceeding the petty cash limits.
Contrary to the requirements of TR16A9.1(c), the The control measure for checking with NT
was implemented since July last year.
accounting officer did not check the National
Treasury’s database prior to awarding any
contract to ensure that no recommended bidder
nor any of its directors, are listed as companies
or persons prohibited from doing business with
the public sector
.
26
Compliance with laws and regulations
Audit Finding
Progress to Date
Contrary to the requirements of TR16A6.4,
the accounting officer did not report within 10
working days to the relevant treasury and the
Auditor-General, all cases where goods and
services above the value of R1 million (VAT
included) were procured.
Although it has been impractical to report
within 10 days, we have started reporting
since the previous financial year.
We are currently conducting a compliance
check with the Regions to check any
possible un-reported cases.
27
Compliance with laws and regulations
Audit Finding
Progress to Date
Construction Industry Development
Board Regulations, 2004 Non-adherence
to requirements
The control has been fully
implemented. All contracts are now
registered with the CIDB.
Contrary to the requirements of the CIDB
regulation 18(1A)(1) and section 22(3) of
the
CIDB Act, the contracts awarded above
R200 000, was not registered in the
register of construction contracts with the
CIDB within 21 working days
28
I thank you
29