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  2. OUTLINE 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 • Update on the process to address asset register challenges • Update on the audit of land for human settlement purposes PCMS GEN: 383698

  3. 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 PCMS GEN: 383698

  4. 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. PCMS GEN: 383698

  5. MINISTER’S FOREWORD cont… 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. PCMS GEN: 383698

  6. 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 PCMS GEN: 383698

  7. 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. PCMS GEN: 383698


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  38. Financial Performance – Economic Classification PCMS GEN: 383698

  39. Financial Performance Report 2010/11 PCMS GEN: 383698

  40. 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 programmewith the IDT. A roll over amount of R40, 9 million has been requested. PCMS GEN: 383698

  41. 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 ofmud 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. PCMS GEN: 383698

  42. Virements 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. PCMS GEN: 383698

  43. 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. PCMS GEN: 383698

  44. DPW Audit Report PCMS GEN: 383698

  45. 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. PCMS GEN: 383698

  46. Basis of the disclaimer on the Audit Report • 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. PCMS GEN: 383698

  47. 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. PCMS GEN: 383698

  48. Basis of the disclaimer on the Audit Report cont. Other expenditure Estimated 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. PCMS GEN: 383698

  49. Basis of the disclaimer on the Audit Report cont. 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. PCMS GEN: 383698

  50. Basis of the disclaimer on the Audit Report cont. 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 PCMS GEN: 383698