15 April 2016 Public works sector focus areas audit outcomes 2014-15 Presentation to the Standing Committee on Appropriations 15 April 2016

Reputation promise/mission The Auditor-General of South Africa has a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, exists to strengthen our country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.

Discussion points History of public works focus areas audited 2014-15 PFMA History of public works focus areas audited Public works sector focus areas audit outcomes Root causes Sector challenges

SECTOR FOCUS AREAS (History) 2014-15 PFMA SECTOR FOCUS AREAS (History)

FOCUS AREAS a 5 2014-15 PFMA Sector focus areas 2014-15 2013-14 2012-13 Management of accommodation for client departments a Project management of infrastructure projects Expanded public works programme 5

1 Focus area 1: Management of accommodation for client departments 1 2014-15 PFMA 1 Focus area 1: Management of accommodation for client departments 1

Findings on Management of accommodation for client departments 2014-15 PFMA While WC has allocated funds to all its 8 education districts – GP only allocated operational expenses and LP managed training centrally which resulted in district specific training needs not addressed 2. All provinces are required to establish PTDI and only GP, LP and WC established these. However; the following shortcomings were identified in all three provinces audited: In Limpopo, there was limited budget impacting negatively on the implementation of training In Gauteng, the training budget was not timeously made available to the PTDI impacting negatively on planned training. In WC, the training provided by PTDI was not in all cases based on individual educators training needs NB: GP, LP and WC were the 3 provinces that had fully established PTDI in 2013-14 financial year thus these were the only provinces scoped for audit.

2 Focus area 2: Project management of infrastructure projects 2 2014-15 PFMA 2 Focus area 2: Project management of infrastructure projects 2

Findings on Project management of infrastructure projects 2014-15 PFMA No findings New findings Repeat findings Improved Stagnant or limited progress Regressed

2014-15 PFMA 3 Focus area 3: Expanded Public Works Programmes 3

Findings on Expanded Public Works Programmes 2014-15 PFMA No material findings were noted at provincial departments with regards to accounting for the Expanded Public Works Programme integrated grant for provinces; however challenges were encountered when verifying the reliability of reported performance of the EPWP. This was attributable to two factors. Inadequate records management and retention by implementing bodies and deficiencies in the information system being used for reporting. Based on the audit of EPWP projects across the country, we were unable to obtain sufficient appropriate supporting documentation to substantiate the creation of work opportunities reported for a large number of the projects in our sample. No findings New findings Repeat findings Improved Stagnant or limited progress Regressed

Findings on Expanded Public Works Programmes (cont… 2014-15 PFMA Furthermore, various control weaknesses around input validation controls and overall performance reporting were identified in the Integrated Reporting System (IRS). The IRS was used by the National Office to report on work opportunities created nationally, however as a result of the system shortcomings performance data reported was not in all instances accurate, valid and complete. No findings New findings Repeat findings Improved Stagnant or limited progress Regressed

Findings on Expanded Public Works Programmes (cont… 2014-15 PFMA The following exceptions were identified. Work opportunities overstated due to deceased beneficiaries reported Beneficiaries on reporting system with invalid identity numbers, thus validity of the affected beneficiaries could not be corroborated with adequate supporting documentation in the form of identity document. Beneficiaries paid below minimum wage resulted in non-compliance with the ministerial determination issued by the department of labour No findings New findings Repeat findings Improved Stagnant or limited progress Regressed

Public works sector budget 2014-15 PFMA Budget For the 2014-15 financial year, the Public works sector budget was R32,3 billion 14

2014-15 PFMA 4 4 Root Causes

Root Causes Root causes should be addressed 2014-15 PFMA Slow response in addressing the root causes of audit findings Weaknesses of Policies and Procedures Key positions vacant or key officials lacking appropriate competencies Poor coordination between the Public Works sector and client departments Root causes should be addressed

Root causes should be addressed (top three) 2014-15 PFMA Root causes Recommendation Slow response in addressing the root causes of audit findings Compilation of audit action plans addressing all material audit findings, these plans should contain deadlines and milestones as well as the party responsible for implementation. Consideration should be given to including responsibilities in performance contracts of relevant parties to ensure accountability. Leadership in departments to drive and monitor implementation of corrective actions proposed Internal audit to verify accuracy, completeness and validity of progress reported on action plans. Progress should be communicated to the Audit Committee and Portfolio Committee to enable oversight regarding the progress of resolving critical audit findings reported. Key positions vacant or key officials lacking appropriate competencies Stabilisation of leadership and appointing appropriately skilled officials in key positions should be expedited at remaining affected departments. The sector should determine the ideal ratio of project managers to projects and in line with this devise a strategy to ensure that all departments in the sector appoint project managers with the necessary credentials to bridge the existing gap.

Root causes should be addressed (top three) cont… 2014-15 PFMA Root causes Recommendation Weaknesses of Policies and Procedures Policies and procedures should be established or enhanced (where it already exist) to monitor and satisfy the accommodation needs of user departments. Furthermore, it should address all aspects surrounding conditional assessment and monitoring of the level of utilisation of all properties (state-owned and leased). Adherence to these policies will assist in compiling feasible planned maintenance strategies (including the addressing of the maintenance backlog) and enabling the departments to identify all vacant, unused land and office buildings. Thus enabling optimal utilisation of the state-owned property portfolio and avoiding fruitless and wasteful expenditure. The National Department of Public Works must provide the required oversight to ensure that policy consistency is achieved in the sector for cross cutting focus areas.

2013-14 PFMA 5 Challenges facing Public works sector 5

Challenges facing Public works sector Poor coordination between the public works sector and client departments meant that accurate accommodation needs could not be established. Inability of certain departments to establish the condition, and therefore availability, of suitable state-owned properties for accommodation. the quality and monitoring of projects are not in all instances of the desired standard. Effective, efficient and economic lease management is still a challenge in the sector. Capacity constraints remained a challenge for the sector. This was mainly caused by difficulties to attract and retain people with the right skills and experience to effectively and efficiently manage infrastructure projects. Budgetary constraints played a part as well, given the more competitive remuneration being offered by the private sector to critical resources for example engineers, architects and project managers.

6. Consolidated audit outcomes for the education sector Auditee Outcomes (2014/15) Outcomes (2013/14) Movement Audit Opinion PDOs Non-compliance with laws and regulations National Unqualified with findings Yes Eastern Cape Qualified Free State Unqualified without findings No Gauteng KwaZulu-Natal Limpopo Mpumalanga Northern Cape North West Western Cape