1. portfolio committee on ON the Independent development trust
Briefing TO the
portfolio committee on
public works
ON the Independent development trust
06 November 2018

2. outline ITEM SLIDE № 1. Purpose 2. Background
3. Problem statement of the IDT
4. Stakeholder consultations
5. Options analysis
6. Forms of public service delivery models
7. Establishment of Public Entities
8. Recommendation

3. PURPOSE
To brief the Portfolio Committee on Public Works about the status towards the reconstitution and rescheduling of the Independent Development Trust (IDT).

4. BACKGROUND
IDT established in 1990, as an independent, civil society, temporary grant-making agency with a R2 billion Government endowment to be invested, with the returns to be utilised to enable disadvantaged communities to access resources, and recognise and unlock their potential to continuously improve their quality of life.
A change in the IDT’s mandate in 1997 saw an increase in its services offered to the State at no cost to the latter and with no adjustments to its funding from the fiscus. This adversely impacted on the IDT’s capital base. This was exacerbated by increasing overheads stemming from its growing portfolio of programmes and decreasing interest rates.
Financial modelling undertaken in 2006, indicated that the IDT’s grant would be exhausted by 2012/13. In light thereof, the IDT embarked on a course of securing its long-term future. The interventions were two fold. One sought to introduce a cost-recovery mechanism to a category of the IDT services (i.e. programme management) as part of a short-term intervention, while the other sought to initiate a process of developing a business case for the long-term sustainability, in accordance with the revised mandate of the organisation.

5. PROBLEM STATEMENT OF THE IDT
Erosion of the R2 billion Government endowment - exhausted by 2012/13.
A change in the IDT’s mandate in increase in services offered to the State with no adjustments to its funding.
Increasing overheads stemming from its growing portfolio of programmes and decreasing interest rates.
Change in Mandate – Changed from a DFI to State Infrastructure Development entity.
Cost-recovery mechanism failed to generate sufficient revenue (short term measure).
Earlier versions of the Business Case failed to address the revised IDT’s core function and its long-term financial sustainability the long-term sustainability.

6. PROCESS TO ESTABLISH Public Entity
Business Case (mandate) Develop (2014) – Not approved by Executive Authority
Delivery of Social Infrastructure
Social facilitation
Mandate determines HR Capacity & Operational needs.
Financial model determines total operating cost of entity - operations
HR & Finance model developed outside approved Business Case (mandate).
Mandate approved by Executive Authority
Develop HR structure
Develop finance model (Operations + HR)
Develop final Business Case (mandate + HR + Finance)
Approval of Business Case by Joint Committee ( NT or DPME)
Submit Business Case to Cabinet for approval
Establish Public Entity through legislation

7. PROCESS TO ESTABLISH Government component
Develop final Business Case (mandate + HR + Finance)
Approval of Business Case by Cabinet
Establish Government Component through the Public Service Act, 1994
Proclamation through Government Gazette.

8. PROGRESS TO DATE 2015 – Business Case (Mandate) developed
Development of Social Infrastructure
Social Facilitation
Mandate - Not approved by Executive Authority
Finance & HR Model developed
Current concerns in Business Case
Discussions-IDT Schedule 2
IDT requires funding from fiscus
HR model & Finance model not aligned to 2015 Mandate
Mandate Creep
Is IDT the most efficient (Cost) to deliver social infrastructure.

9. TRANSFERS MADE TO IDT TO DATE
The IDT has been undergoing a self-renewal process for the past five years intended to attain the following objectives:
A self-funding agency that is able to fund costs from its revenue.
Cost effectiveness attained through interventions such as attaining balance between core and support services; review of human resources to decrease top-heavy structure, institution of cost containment measures, etc.
An efficient services offering for clients in terms of cost, quality and speed in projects delivery.
The National Department of Public Works has provided the IDT with financial assistance to support its transition into a self-sustaining organisation after the capital endowment of R2 billion was substantially depleted in 2010/111. The transfers were as follows:
2011/12 – R150 million
2012/13 – R 50 million
2013/14 – R100 million
2014/15 – R50 million
2015/16 – R50 million 9

10. TRANSFERS MADE TO IDT TO DATE
Further to the allocation above, the IDT made a request for further allocation to address its projected deficit over the MTEF period (2017/18 – 2019/20) as well as the going concern risk. The entity was required to review its mandate and refocus its role in order to attain financial sustainability.
In assisting the entity and, with the approval of the National Treasury (NT) , the Department set aside from its own baseline of 2017/18 an amount of R111,066 million for the IDT.
Funding for 2018/19, according to the NT, was processed through a reprioritisation of funds within the vote of the DPW. The transfer of the total R28 million has been made in two tranches of R14 million in April and July The IDT required this amount in the shortest period in order to cover the cost incurred for retrenchments and continuing with the transformation process. 10

11. CONDITIONS BY NT FOR THE ALLOCATION
The allocation of R111,066 was granted with the following conditions:
Submission of monthly revenue and expenditure reports to the NT within 15 days following the end of each month.
Proposal by DPW of revised drawings providing for the additional funding for the IDT for approval by the NT on the basis of accurate estimation of the IDT’s monthly costs.
Submission of final Organisational Development Review report to the NT by the last day of November 2017.
Submission to the NT, by the end of January 2018, by the Accounting Authority of the IDT of a costed plan demonstrating how the IDT will, by the end of 2017/18, bring costs into alignment with own-generated revenue
Submission of a restructuring plan to the NT by the end of January 2018.
IDT not to fill any vacancies beginning from July 2017 and until finalisation and implementation of a restructuring plan agreed upon with the NT.
Submission to the NT of the final business case for the ‘future IDT’ by the end of November 2017.
All the payments were transferred to the IDT with confirmation of the above conditions by both the IDT and NT. 11

12. GOING FORWARD
Approval of IDT mandate by the Executive Authority (November 2018)
“IDT be established as a government agency to develop social infrastructure commissioned by government in a manner that helps eradicate poverty, creates employment, and fosters sustainable and cohesive communities”
Recommend IDT be establish as a Government Component.
HR Structure proposed – similar to GTAC – use of panels of competent persons.
Requested GTAC to assist with the development of:
HR Model
Revise Financial model - total operating cost of entity
A Task Team (DPW, NT, & IDT) is to be established to advise on an immediate response to the IDT challenges and long term sustainability.

13. GOING FORWARD Develop Final Business Case Approval of Business Case
Submit Business Case to Cabinet for approval
Establish Public Entity through legislation

14. END