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DEPARTMENT OF PUBLIC WORKSDEPARTMENT OF PUBLIC WORKS

PPRESENTATION TO THE PORTFOLIO RESENTATION TO THE PORTFOLIO COMMITTEE ON PUBLIC SERVICE COMMITTEE ON PUBLIC SERVICE

ADMINISTRATIONADMINISTRATION

23 FEBRUARY 201123 FEBRUARY 2011

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Purpose

The purpose of this presentation is to discuss

measures implemented by the department in

addressing the reported Irregular and Fruitless

expenditure with the PortFolio Committee on

Public Administration

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Fruitless and Irregular Expenditure

An amount of R30,8 mi9llion 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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Fruitless and Irregular Expenditure

• Fruitless expenditure: R 389 thousand

– An amount of R389k was reported as fruitless expenditure. This amount relates to cases in Jo’burg 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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Progress to date – Irregular Expenditure

• Setting up of a compliance unit:

– The structure has been approved and we currently in the process of filling the post of the head of the unit. Interviews will take place before end of February.

• Develop new policies and improve internal controls:

– Policy on irregular expenditure has been developed and consulted with all relevant un its for comments. Rollout of the policy started in January.

– New check lists have been developed to enable proactive identification of causal factors.

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

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

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Progress to date – Irregular Expenditure

– 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 visited all regional offices to conduct a random check of compliance with SCM policies.

– We have also developed a checklist and process with legal services regarding the contract documents. This measure is also compensated by the copies that we are now keeping in the SCM unit.

– We are currently exploring the scanning solution with IT for safe keeping of documents.

– We have implemented the process of verifying all awards with NT before awarding to ensure that we don’t award to black listed service providers.

– We have implemented compliance with the CIDB when advertising and awarding bids. All regions have been registered as users on the CIDB database to allow easy access.

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Progress to date – Irregular Expenditure cont.

• Most of the cases reported are still under investigation and disciplinary measures will be undertaken once the liability is determined.

• The newly proposed structure seeks to address internal controls and contract management within the department. It is therefore extremely important to have the structure approved and filled.

• EXCO has taken to centralise all contracts of the department. This will address the issues of missing documents and limitations of scope.

• The proposed review of the SCM processes will to a large extent also address the irregular expenditures which come as a result of policy conflicts. For example the interpretation of negotiated and nominated procurement processes requires alignment with National Treasury guidelines.

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Emphasis of Matter

Fruitless and wasteful

• As disclosed in note 25 to the financial statements, fruitless and wasteful expenditure to the amount of R389,000 was incurred

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Progress to date

• 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.

• 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 initiatives aimed at improving internal controls and engaging client departments where the fruitless expenditure is as a result of non-compliance will contribute significantly to reducing fruitless expenditure.

• The department is also reviewing the organizational design to redirect resources to areas such as property management.

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THANK YOU!THANK YOU!