1 DEPARTMENT OF PUBLIC WORKS P RESENTATION TO THE PORTFOLIO COMMITTEE ON PUBLIC SERVICE ADMINISTRATION 23 FEBRUARY 2011

2 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

3 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

4 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

5 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.

6 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 –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.

7 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.

8 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

9 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.

10 THANK YOU!