Budgetary Review and Recommendation Report of the Portfolio Committee on Human Settlements on the Budget Vote 31 – Human Settlements for the financial year end 31 March 2012, dated 17 October 2012

Performance Analysis per Programme

2.1 Programme 1 – Administration

The purpose of the programme is to provide strategic leadership and administrative and management support services to the Department and promote and facilitate the flow of information between the Department and its stakeholders.

The Department reported that the programme was initially allocated a budget of R232.4 million during 2011/12 financial year. The expenditure on this programme after the adjustments amounted to R222, 1 million which leaves the variance of R55.8 million. However, taking into consideration the virements that were made amounting to approximately R11million, a total expenditure remains at approximately 74%.

The directorate: Special Investigations reported to have spent only R25, 8 million of its original allocation of R56, 1 million which was adjusted to R44, 7 million. It was indicated that under spending came about as a result of late invoicing by the SIU. The Chief Directorate Internal Audit, Risk Management and Special Investigations reported a saving of R18, 9 million but only R11, 3 million of the saving could be utilised.

The Department attributed the deviation from the planned target to the unavailability of clients for opening meetings, client delays in commenting on reports, the slow receipt of information required, as well as capacity constraints in the Internal Audit function. In this respect, the Department acknowledges that under-expenditure in Programme 1 is also due to a moratorium placed on the filling of non-critical post pending the outcome of the departmental turnaround strategy. This state of affairs is a critical issue, and further engagement with the Department is required about what posts constitute “non-critical.” There is a need to review the department’s inability to meet targets on filling vacancies.

2.1.1 Comments of the Portfolio Committee

The department’s under-spending has been attributed to delays in refurbishing and acquiring office space. This has been a recurring element over the past three years. The department’s inability to secure office space has a negative impact on outputs, and ultimately service delivery.

There is lack of accountability as to where the variance of R7.6 million that emanates from the money that was not spent by the Chief Directorate Internal Audit, Risk Management and Special Investigations

The Department, does not, however, indicate how this “saving” was achieved. It should be noted that this sub-programme only managed spend about 45% of the total of 31 audits planned for 2011/12, resulting in seventeen audits not completed during the review period.

2.2 Programme 2 – Housing Policy, Research and Monitoring

The purpose of the programme is to develop and promote policies on human settlement and housing supported by a responsive research agenda and to monitor and assess the implementation, performance and impact of national housing policies and programmes.

The programme was initially allocated R39.2 million during 2011/12 financial year and this amount was adjusted with additional funding of R227 000 to provide for salary increases. Programme 2 has spent approximately 82% of its allocated budget.

The Department indicated that the under-expenditure resulted from non-filling of vacant posts. Another contributing factor was that a research project on the development of a national framework to assess the sustainability of human settlements was not completed as required.

It was reported that new focus was on low-income housing contracts: Fifty nine housing projects were identified for investigation. A total of 42 investigations were completed while 17 are ongoing. The total value of the 59 identified contracts amounted to R4 179 610 935. Fruitless and wasteful expenditure amounting to R27, 9 million was uncovered in respect of three investigations. Potential losses suffered by the provincial Departments of Human Settlements amounted to R71, 8 million and were uncovered in respect of five investigations. Potential recoveries amounting to R101, 9 million were identified in respect of three investigations. Disciplinary matters (misconduct) in respect of departmental officials were identified in eight investigations. The misconduct related mainly to transgressions of the National Housing Act, the National Housing Code and the Public Finance Management Act (PFMA).

Project-level monitoring confirmed the existence of good-quality constructions in all provinces that provide beneficiaries with a formal dwelling, as well as access to basic services and secure tenure. In addition, social and economic amenities are also provided. However, progress relating to some projects is still hampered by, poor workmanship, slow administration of beneficiaries, poor planning, project location, lack of beneficiary education and alignment among various government departments. Initiatives to address these challenges are being developed and implemented.

2.2.1 Comments of the Portfolio Committee

Program two (Housing Policy, Research and Monitoring) is of high importance within the department. This program is responsible for providing “capacity where there was lack thereof and “conducting extensive research on the use of alternative technologies, and many other critical aspects encompassed in Human Settlements”. There should not be a logistical or incidental problem in spending funds allocated to research.

The capital allocated to research should be relatively easily transferred into tangible outcomes. There was a variance of R307, 000 in Management, R1, 104,000 in Policy Development and R3, 059,000 in Research between the final appropriation and the actual expenditure. In addition, the actual expenditure in management and research has gone down since the previous year and only marginally increased in policy development. This is strange considering that inflation should indicate a need for a higher expenditure (that considerable inflation has occurred this financial year is demonstrated by the report on page. 20) but also in view of the lag that research has in the delivering of tangible outcomes.

2.3 Programme 3: Housing Planning and Delivery Support

The purpose of the programme is to support the implementation and delivery, building capacity, and liaising and communicating with stakeholders for effective housing and human settlements programmes, and to co-ordinate and monitor the implementation of priority projects and the sanitation programme.

Programme 3 was initially allocated R156.1 million and was adjusted to approximately R200, 7 million. A total of R186.7million was spent which translates to 93%. The under-expenditure was reported to be as a result of the moratorium on filling of non-critical vacancies.

2.3.1 Comments by the Portfolio Committee

The Department’s expenditure reporting for this programme appears to be inconsistent, with varied amounts cited in the 2011/12 annual report. For example, one table reflects the adjusted appropriation as R200.7 million, while another table in the same annual report reflects this as R193 million. However, both figures are refuted by the 2012 Estimates of National Expenditure, as well as the 2011 Adjusted Estimates of National Expenditure – which reflect the adjusted appropriation as R195 million. Inconsistent and inaccurate expenditure reporting by the Department has a negative impact on Parliament’s constitutional mandate to perform effective and efficient oversight over the Executive. Further, an annual report serves as an important instrument to give an account as to how a department utilised money appropriated by Parliament, and such account must be accurate and reliable.

The Committee noted that there was a virement of R5 million from Programme 1. However, the amount that is reflected from the section 32 reports of the national treasury states that an amount of R7 million was recorded as a virement contradictory to what the department has reported.

2.4 Programme 4: Housing Development Finance

The programme is responsible for funding housing programmes and human settlement development programmes. It also provides financial and grant management services. Furthermore, it promotes investment in housing finance. It mobilises and promotes financial probity within housing institutions. In addition, it manages all matters provided for the Home Loan Mortgage Disclosure Act (No. 63 of 2000).^{^[2]}

The programme was allocated R21.9 billion, of which R14.9 billion was allocated to the Human Settlements Development Grant. The Rural Household Infrastructure Grant (RHIG) was allocated a total amount of R257, 5 million (2011/12) after adjustments of R26 million from the roll-over, and out this amount an amount of R187.3 million was spent which translates to 72% expenditure (under-expenditure of R70.2 million was recorded. An amount of R487 million was allocated to the Department’s entities. In the adjustment estimate additional funding of R180 million was provided for the Housing Disaster Relief Grant, while R344 000 was provided for salary increases.

In Programme 4 the Department has an under-expenditure of R91.5 million for the year 2011/12.

The Department indicated that the delay which resulted in the under-expenditure in the provision of toilets. RHIG resulted in resistance by some communities during its implementation. Other factors which posed challenges in its implementation are non-availability of the building materials and difficult conditions.

2.4.1 Comments by the Portfolio Committee

It should be noted that the Department’s expenditure reporting for this programmes also appears to be flawed, since it indicates that through an adjustment the allocation increased from R21.995 billion to R22.201 billion. However, both the 2012 Estimates of National Expenditure, as well as the 2011 Adjusted Estimates of National Expenditure confirm that the programme was adjusted to R22.197 billion through a virement of R4 million to Programme 3 for the payment of consultants and professional services intended for the national upgrading programme.

Another inaccuracy in reporting relates to the allocation to the RHIG. According to the 2011/12 annual report this grant was awarded R100 million, with a roll-over of R26 million in the adjustment estimate. However, RHIG was in fact appropriated R231.5 million, which increased to R257 million with the adjustment indicated above. The R100 million referred to the Department was in fact the 2010/11 allocation to RHIG and not the 2011/12 allocation, as reported by the Department’s 2011/12 annual report.

The Portfolio Committee conferred with the Standing Committee on Appropriations that the sanitation programme should remain with the Department.

Table 3: Housing Disaster Relief Grant

Province	Funds allocated and transferred (R’000)	Funds spent R’000	Percentage spent
Eastern Cape	56 700	0	0%
Free State	44 100	16 631	38%
Gauteng	36	0	0%
KwaZulu-Natal	31 140	3 503	11%
Limpopo	21 474	0	0%
Mpumalanga	360	360	100%
Northern Cape	10 350	10 350	100%
North West	15 840	2 360	15%
Total	180 000	33 212	18%

Source: Annual report of the Department of Human Settlements

The department indicated that the Disaster Relief Grant was received after the MTBS process. These funds were transferred to the provinces only in February 2012 which made it impossible for some provinces to spend.

2.6 Programme 5: Strategic Relations and Governance

Programme 5 is responsible for overseeing the management of housing institutions through performance and corporate planning monitoring as well as policy advocacy and governance oversight. It provides integrated business solutions and support as well as business information and related products by maintaining the housing and human settlements database^{^[3]}.

The programme was initially allocated R155.5 million during the 2011/12 financial year. This amount was adjusted with a roll-over amount of R4.3 million for specialised services provided by the State Information Technology Agency, and R3.196 million for the completion of the Department’s turnaround strategy. Additional funding of R447 000 was provided for salary increases.

A virement of R6 million was made from Programme 1 to fund the Govan Mbeki Human Settlements Awards 2011/12.

A total budget of programme 5 amounted to R166.4 million, of which R105.4 million was spent. The under-spending of R61 million was mainly due to a delay in payments for infrastructure, architectural enhancement and support services for the HSS, the projected expenditure on communications and the non-filling of non critical vacancies.

The delay in the procurement of computer services is estimated to have resulted in under-spending of R32 million. The installation of the virtual private network (VPN), at a cost of about R4 million, was delayed due to non-occupation of additional office space. Only R8.2 million was spent of the adjusted allocation of R43 million for computers.

Table 5: Expenditure per programme against the allocations reflected on National Treasury’s Adjusted Estimate of National Expenditure

Programme	Voted for 2011/12	Roll-over & adjustments (R’000)	Virements	Total Allocation (R’000)	Allocations as per the ENE 2011 (R’000)	Expenditure (R’000)	(%) Spent
Administration	232 435	676	-11000	222 111	233 111	166 237	74.8%
Housing Policy, Research & Monitoring	39 215	227	-	39 954	39 442	32 866	82.2%
Housing planning & delivery Support	156 163	31848	5000	193 011	195 011	186 733	96%
Housing Development Finance	21 995 147	206352	-	22 201 499	22 197 499	22 105 262	99.5%
Strategic Relations and Governance	155 535	7943	6000	169 478	160 478	105 064	61%
Total	22 578 495	247046	-	2 282 541	22 615 741	22 596 162	99.0%

Source: Annual report of the Department of Human Settlements

Table 6: Spending by Programme as reflected in the Annual Report 2011/12

Programme	Total allocation (R’000)	Expenditure (R’000)	Variance (R’000)	Spent (%)
Administration	222 111	167 552	54 559	75.4%
Housing Policy, Research & Monitoring	39 442	32 954	6 488	83.6%
Housing planning & delivery Support	200 011	187 350	12 661	93.7%
Housing Development Finance	22 197 499	22 105 620	91 879	99.6%
Strategic Relations and Governance	166 478	105 444	61 034	63.3%
Total	22 825 541	22 598 920	226 621	99.0%

Source: Annual report of the Department of Human Settlements

Table 5 above on the expenditure per programme against the allocations reflected on National Treasury Adjusted Estimate of National Expenditure reflects expenditure as reported by the Department – (figures highlighted in red) do not correspond with the figures from the National Treasury. The total expenditure has been cited as R2, 282 billion, even though the Housing Development Finance Programme’s budget already exceeds R22 billion.

Comments of the Portfolio Committee

The Portfolio Committee has observed from Table 5 above that there is a huge discrepancy reported in the allocations of the Department of Human Settlements. The Department reported that the total allocation for the 2011/12 budget allocations per programme were as follows:

· Programme 1: Administration. The Department reflected a total of R222 111 million, whereas the National Treasury has reflected a total of R233 111 was appropriated

· Programme 2: Housing Policy, Research and Monitoring. The Department reflected a total of R39 954, whereas the National Treasury reflected a total of R39 442 million

· Programme 3: Housing planning & delivery. The Department reflected a total of R193 011, but the total appropriated on the National Treasury is reflected as R195 011

· Programme 4 Housing Development Finance. The Department reflected a total of R22 201 499 million, whereas the National Treasury reflected a total of R22 197 499 million

· Programme 5 Strategic Relations & Governance. The Department reflected a total of R169 478, whereas the National Treasury reflected of R160 478 million

3. Progress Report on Outcome 8

3.1 Upgrading of Informal Settlements

The department has indicated that, in its programme of upgrading informal settlements, it has achieved 91 558 serviced sites and this translates to 22.8% of total target of 400 000 households.

Comments of the Portfolio Committee

The Committee has observed a slow pace of delivery in the upgrading of informal settlements. The rate at which the Department is delivering, makes it impossible for the target of 400 000 to be met by 2014.

3.2 Rental Accommodation

On the provision of Rental Accommodation, the Department indicated that 11 334 units were provided. This translates to 14.2 % of the total of 80 000 units.

3.3 National Upgrade Support Programme (NUSP)

It has been indicated that 46 out of 49 (94%) targeted Municipalities were offered technical assistance.

Six Provincial NUSP structures have been established in EC, KZN, LP, MP, NC, and WC)

3.4 Accreditation of Municipalities

It was reported that 17 Municipalities were assessed by Capacity and Compliance Assessment Panel and the Department was awaiting MEC’s approval to be awarded with accreditation compliance certificates

It was also indicated that the first tranche payment of the USDG was made to relevant Metropolitan Municipalities.

3.5 Access to Basic Services

The Department indicated that during the period under review, 158 337 households were provided with access to sanitation facilities, bringing the total to 418 709.

It was further indicated that based on the Cabinet Lekgotla’s decision, operational plans were developed to target areas where backlogs were the highest

3.6 Release of Land for Human Settlement Development

The Department reported that the Housing Development Agency (HDA) has identified and assessed over 17 000 hectors of state suitable land for release in 2011/12. A total of 1 066 hectors of land has been released to municipalities while 1 329 hectors were in advance stages of release.

3.7 Increased Urban Densities

The Department has reported that it has developed a policy document to address the dynamics of Built Environment, which will assist provinces and municipalities with regard to increased densities. HDA has identified 309 properties of which 812, 83 hectors is owned by Transnet. These properties were identified for development of medium to high density. The HDA has also developed mechanism to ensure that well located land is released for development in accordance with higher density.

3.8 Land-Use Management Framework

The Department has reported that the Department of Rural Development and Land Reform has released “Spatial Planning and land Use Management Bill for public consultation and that comments were received and analysed by the Department of Rural Development and Land Reform for further engagements with the key stakeholders.

3.9 Mortgage Default Insurance (MDI) Guarantee

The Department has reported that it has not secured concurrence of the National Treasury to affirm the safety of the institutional arrangements to launch the MDI into the financial markets. All commercial banks have confirmed interest in supporting MDI implementation project. Consolidation of the Human Settlements Development Finance Institutions has been approved; therefore relevant approvals were being obtained including National Treasury and Cabinet.

3.10 Sustainable Human Settlements and Basic Services Task Team

The sustainable human settlements and basic services task team is convened jointly by COGTA and NDHS to report on:

(a) Rapidly Growing Towns and Cities;

(b) Informal Settlement Upgrade Programme in the 45 municipalities;

(d) Report by the Presidential Infrastructure Commission on SIP 7

Table 8: Human Settlements Development Grant

HUMAN SETTLEMENTS DEVELOPMENT GRANT (HSDG)
Provinces	Total Available	Transferred Funds	Spent by Provinces	Spent vs. Total Available	Spent as % of Total Available	Unspent as % of Total Available
	R'000	R'000	R'000	R'000
Eastern Cape	2,177,676	2,177,676	1,897,076	280,600	87%	13%
Free State	913,907	913,907	903,431	10,476	99%	1%
Gauteng	3,804,611	3,804,611	3,786,015	18,596	100%	0%
KwaZulu-Natal	2,769,871	2,769,871	2,769,872	-1	100%	0%
Limpopo	1,398,914	1,398,914	1,259,394	139,520	90%	10%
Mpumalanga	916,677	916,677	916,673	4	100%	0%
Northern Cape	322,639	322,639	322,617	22	100%	0%
North West	998,376	998,376	1,148,708	-150,332	115%	-15%
Western Cape	1,638,845	1,638,845	1,635,001	3,844	100%	0%
Total	14,941,516	14,941,516	14,638,787	302,729	98%	2%

Source: Annual report of the Department of Human Settlements

Table 9: HSDG non-financial performance

HSDG NON – FINANCIAL PERFORMANCE
Province	Annual Delivery Targets			Delivery Performance as at 31 March 2012			Variance Delivery sites	Variance Delivery Top Structure	Total Variance Delivery
Province	Sites(units)	Top Structure (units)	Total Delivery Targets	Sites	Top Structure (units)	Total Delivery Performance	Variance Delivery sites	Variance Delivery Top Structure	Total Variance Delivery
Eastern Cape	15,660	15,419	31,079	5,990	14,498	20,488	(9,670)	(921)	(10,591)
Free State	7,680	7,526	15,206	7,400	9,070	16,470	(280)	1,544	1,264
Gauteng	15,606	34,294	49,900	15,803	22,521	38,324	197	(11,773)	(11,576)
KwaZulu-Natal	8,860	25,587	34,447	5,426	22,119	27,545	(3,434)	(3,468)	(6,902)
Limpopo	3,000	13,410	16,410	1,752	13,619	15,371	(1,248)	209	(1,039)
Mpumalanga	8,235	10,394	18,629	1,515	7,702	9,217	(6,720)	(2,692)	(9,412)
Northern Cape	1,530	3,480	5,010	1,456	3,683	5,139	(74)	203	129
North West	8,688	17,883	26,571	10,559	16,333	26,892	1,871	(1,550)	321
Western Cape	13,085	12,640	25,725	8,686	11,065	19,751	(4,399)	(1,575)	(5,974)
Total	82,344	140,633	222,977	558,587	120,610	179,197	(23,757)	(20,023)	(43,780)

Source: Annual report of the Department of Human Settlements

Table 10: Urban Settlements Development Grant

URBAN SETTLEMENTS DEVELOPMENT GRANT

Municipalities	Total Available	1 July 2011 - 31 March 2012
Municipalities	Total Available	Transferred Funds	Spent by Municipality	Spent vs. Total Available	Spent as % of Total Available	Unspent as % of Total Available
	R'000	R'000	R'000	R'000
Buffalo City	423,446	423,446	79,699	343,747	19%	81%
Nelson Mandela	502,626	502,626	262,195	240,431	52%	48%
Mangaung	411,995	411,995	163,153	248,842	40%	60%
Ekurhuleni	1,094,276	1,094,276	504,305	589,971	46%	54%
City of JHB	1,027,970	1,027,970	470,176	557,794	46%	54%
City of Tshwane	891,081	891,081	349,874	541,207	39%	61%
eThekwini	1,091,574	1,091,574	558,323	533,251	51%	49%
City of Cape Town	824,030	824,030	287,972	536,058	35%	65%
Total	6,266,998	6,266,998	2,675,697	3,591,301	43%	57%

Source: Annual report of the Department of Human Settlements

Entities Reporting to the Minister

1. National Housing Finance Corporation (NHFC)

The institution is mandated to make housing finance accessible and affordable to low- and middle-income households. It searches for new ways to mobilise finance for housing from sources outside the state in partnership with the broadest range of organisations. It also provides wholesale finance and acts as a fund and risk manager. The entity has two expanded mandate which include the Mortgage Default Insurance as well as the Finance Linked Individual Subsidy Programme (FLISP). The purpose of MDI is to ensure that households in the gap-market have improved access to affordable mortgage finance through the Mortgage Default Insurance (MDI) insurance.

The insurance guarantee against default is intended to encourage the major banks to offer housing finance in the R3 500 to 12 000 income bracket, because these loans would be insured by the MDI, relieving the banks of the responsibility of insurance.

Audit opinion

The entity received unqualified Audit report during the 2011/12 financial year.

2. Housing Development Agency (HDA)

The agency is mandated to facilitate the acquisition of land in a way that supplements the capacities of government across all spheres. It also provides project management expertise to human settlement projects and facilitates the development of projects through accelerated and innovative project packaging. Part of its role is to enhance the capacity of municipalities and provinces to deliver integrated, sustainable human settlements.

Land remains a priority in the Outcome 8 mandate of delivering 6 250 hectors of land by 2014.

Progress

The HDA conducted 156 pre- acquisition feasibility studies. HDA reported that it has acquired 2 500 hectors of land for Human Settlements Development. In its Land identification and planning programme, the HDA identified suitable properties located in the proximity to municipal infrastructure.

In the 2011/12 financial year the HDA identified 35 219 hectares of state and state-owned enterprise (SOE) land to be released for the establishment of human settlements. A total of 13 598 hectares were formally submitted for release from custodian departments, the approval of which is pending.

Comments of the Portfolio Committee

· Irregular expenditure amounting to R425 579

· Lack of clarity on the feasibility studies that were conducted

· Lack clarity on how much was rectified in the area of Joe Slovo Park in Cape Town

· Lack clarity on the operating costs

· A surplus of 17.7 million that has not been clarified

3. National Home Builders Registration Council (NHBRC)

Its mandate is to provide housing consumers with warranty protection against defects in new homes, and to provide protection against failure of builders to comply with their obligations in terms of the Act. It provides an exclusive regulatory function in the home building environment.

Comments of the Portfolio Committee

The committee is concerned by the lack of capacity, especially with regards to fact that there are few inspectors in all the regions. The Department reported that there was an irregular expenditure of R201 million incurred by the NHBRC.

Interaction with the Auditor General

The NHBRC received unqualified audit opinion with other findings. The Auditor General has identified the following issues on the NHBRC.

Leadership

· The accounting authority did not exercise adequate oversight responsibility over financial and performance reporting and compliance and related internal controls

· The accounting authority did not adequately review the financial statements and the report on predetermined objectives prior to the submission for audits. There was material non compliance by the entity with legislation

· The IT governance framework was not sufficient to support and enable the business, to deliver value and improve performance. General and application controls are not adequate and focussed to achieve reliable and accurate data outputs

Financial and performance management

· The decision and implementation of formal controls over the IT system were not adequate, as limited to no reliance could be placed on the accuracy and validity of financial information obtained from the system.

· Management did not have adequate control to ensure compliance with legislation. The procurement process did not fully comply with the requirement of the supply chain legislation management requirements

Governance

The internal audit department was not functioning effectively in the period under review.

4. Social Housing Regulatory Authority (SHRA)

The SHRA was established in terms of the Social Housing Act (Act 16 of 2008). The main objective of SHRA is to regulate and support the social housing sector in order to accelerate the delivery of sustainable and financially viable social housing projects. It is responsible for the disbursement of institutional investment and capital grants to social housing institutions.

The entity received unqualified audit report with findings.

Institutional programme

SHRA reported that during the 2011/12 financial year the organization approved a total of 18 Institutional Intervention Grants. The Grants that were awarded cover a number of different grants including:

· Project feasibility Grant

· Staff Gear-up and Accreditation; and Specific Intervention Grants

Performance of SHRA

SHRA reported that it has accredited 18 Social Housing Institutions (17 conditional and 1 full, 8 declined).

The report indicated that the investment target of 1 712 units was surpassed when 4 127 units were approved from a total 13 entities including private sector delivery agents on Social Housing Investment Programme.

Financial performance of SHRA

SHRA reported that as at 31 March 2012, its books showed a deficit of for the year of R68 618 362 with an accumulated surplus of R59 649 410.

Policy initiatives

The entity reported that a position paper on Property Management in the sector was developed around 13 key issues facing the sector, a discussion forum was convened to provide expects input to the paper which was handed over to the Department for consideration.

5. Thubelisha and Servcon

The process of winding down (liquidation) of Servcon and Thubelisha was initiated in 2008, at which stage the Department indicated that the detailed closure plan was to be completed within two months, and the entire process was scheduled to be completed within six months. The closure of the two entities should be fast-tracked.

Analysis by the Committee on Utilization of Consultants using Appropriated Funds: Department of Human Settlements

As of the financial year 2011-2012, the Department of Human Settlements Annual Report indicate that there was a total of 26 companies involved in various projects entrusted to them by the Department. Information obtained from the Annual Report thus indicate that the Department awarded different contracts to different companies based on their field of expertise, resulting in R91 562 136, 16. The biggest contract, valued at R41 654 553, 48, went to the company in charge of “[project management for the implementation of the Rural Household Infrastructure Programme,” for the duration of 24 months. This simply is one of the examples of how the Department uses consultants to complete its projects.

However, in another study conducted by EPRI in October 2012, the findings demonstrate that lucrative contracts with consultants do not necessarily mean effective work or useful way of spending allocated funds. The study demonstrates that despite the fact that such lucrative contracts are awarded to consultants with the concept of efficiency and accountability in mind, “it remains unclear what has been achieved, i.e. how many houses/settlements have been built…” Consequently, the study reveals that there is a lack of accountability, fairness, and sustainability in a way that funds are handed over to the concerned consultants. There is no clear indication as to where the funds are spent and the conditions for expenditure.

Furthermore, the committee has learned that from the study conducted by EPRI that excessive utilization of consultants does not necessarily translate into cost effective performance output and efficient utilization of resources. Despite all the lucrative contracts awarded to consultants, there are no clear outputs or tangible results.

4. Report of the Auditor-General (AG)

The AG has reported that the Department of Human Settlements has received unqualified audits with other findings.

4.1 Material under-spending of the Rural Household Infrastructure Grant

As disclosed in the appropriation statement, the Department materially under-spent the budget on Programme 4, Sub-programme: Rural Household Infrastructure Development, by R70 155 000 of a total allocation of R257 508 000. As a consequence, the Department did not achieve some of its objectives in respect of providing sanitation services to rural communities.

4.2 Predetermined Objectives

The material findings are as follows:

4.2.1 Usefulness of information

4.2.2 Measurability

· Performance indicators not well defined as required by the FMPPI

The Framework for Financial Managing Programme Performance Information (FMPPI) requires indicators and measures to have clear, unambiguous data definitions so that data can be collected consistently and is easy to understand and use. A total of 22% of the indicators relevant to Programme 2: Housing Policy, Research and Monitoring, Programme 3: Housing Planning and Delivery Support and Programme 4: Housing Development Finance was not well defined in that clear, unambiguous data definitions were not available to allow for data to be collected consistently. This was due to the requirements of the FMPPI not being correctly applied due to a misinterpretation of the requirements.

4.2.3 Performance targets not specific

The FMPPI requires performance targets to be specific in clearly identifying the nature and required level of performance. A total of 27% of the targets relevant to Programme 2: Housing Policy, Research and Monitoring, Programme 3: Housing Planning and Delivery Support and Programme 4: Housing Development Finance was not specific in clearly identifying the nature and the required level of performance. This was due to the requirements of the FMPPI not being correctly applied due to a misinterpretation of the requirements.

4.2.4 Performance targets not measurable

FMPPI requires performance targets to be measurable. The required performance could not be measured for a total of 28% of the targets relevant to Programme 2: Housing Policy, Research and Monitoring, Programme 3: Housing Planning and Delivery Support and Programme 4: Housing Development Finance. This was due to the requirements of the FMPPI not being correctly applied due to a misinterpretation of the requirements.

4.3 Additional Matter to the above material findings:

Achievement of planned targets

Of the total number of 172 planned targets, (Number of targets) were not achieved during the year under review. This means that 23% of the total number of the planned targets was not achieved during the 2011/12 financial year.

4.3.1 Compliance with laws and regulations

The AG performed procedures to obtain evidence that the entity has complied with applicable laws and regulations on financial matters, financial management and other related matters. The findings of the Auditor General on material non-compliance with specific matters in key applicable laws and regulations, as set out in the General Notice issued in terms of the PAA, are set out below.

4.3.1.1 Annual financial statements, performance report and annual
report

The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework and were not supported by full and proper records, as required by section 40(1) (b) of the PFMA. Material misstatements of disclosure items identified by the auditors in the submitted financial statements were subsequently corrected, resulting in the financial statements receiving an unqualified audit opinion.

4.3.1.2 Procurement and contract management

The evaluation criteria, system to be used in awarding preference points for procurement and maximum points to be awarded for historically disadvantaged individuals were not specified in bidding documents, as required by section 7 of the Preferential Procurement Policy Framework Act of South Africa, 2000 (Act 5 of 2000).

4.3.1.3 Expenditure management

The Accounting Officer did not take effective steps to prevent irregular, as well as fruitless and wasteful expenditure, as required by section 38(1)(c)(ii) of the PFMA and Treasury Regulation 9.1.1. Contractual obligations and money owed by the Department were not settled within 30 days or an agreed period, as required by section 38(1) (f) of the PFMA and Treasury Regulation 8.2.3.

4.3.1.4 Human resource management and compensation

A human resource plan was not in place, as required by Public Service Regulation 1/III/B.2 (d). Persons in charge at pay points did not always certify that the employees receiving payment were entitled there to, as required by Treasury Regulation 8.3.4.

Employees were appointed without following a proper process to verify the claims made in their applications, in contravention of Public Service Regulation 1/VII/D.8.

4.3.1.4 Asset management

Proper control systems to safeguard and maintain assets had not been implemented, as required by section 38(1) (d) of the PFMA and Treasury Regulation 10.1.1(a).

4.4 Internal Control

The AG indicated that he has considered internal control relevant to his audit of the financial statements and report of information on predetermined objectives and compliance with laws and regulations. The matters reported below under the fundamentals of internal control are limited to the significant deficiencies that resulted in the findings on the report of information on predetermined objectives and the findings on compliance with laws and regulations included in this report.

4.4.1 Leadership

The Accounting Officer did not exercise adequate oversight responsibility regarding financial and performance reporting, compliance with laws and regulations, and related internal controls.

4.4.2 Financial and performance management

Management did not prepare regular, accurate and complete financial and performance reports that were supported and evidenced by reliable information.

Management did not review and monitor compliance with laws and regulations.

4.4.3 Other reports

4.4.3.1 Investigations

Investigations were conducted as a consequence of alleged financial misconduct by a senior management member regarding non-compliance with sections 66 and 70 of the PFMA.

The Public Protector is currently conducting an investigation into alleged financial misconduct by the Accounting Officer of the Department.

(Refer to the Annual Report of the Department of Human Settlements (page 99 – 102)).

5. Committee interaction with the Office of the AG

The AG said that even though the Department received unqualified report, there a number of concerns with regard to departmental performance, which include the following:

· IT controls are not always secure. This poses a risk of information being compromised. There is a lack of IT security policy.

· The supply chain management is in a high risk area.

· No proper user account management controls, meaning that more than one person is using one password.

· The Department argues that their IT is managed by the SITA, however, this has been refuted by the Auditor-General, and the Department should manage its own IT operations.

· The AG asserts that the turn-around strategy has been finalised but the vacancy rate is still very high.

· Lack of risk management policy from programme one to five.

· The Human Resource plan has not been approved.

· The entities do not have monthly financial statements a management tool.

· Sited root causes are as follows: lack of adequate review of Accounting Financial Standards (AFS) including Audit Committees; lack of consequences for transgressors; action plans are inadequate or not implement correctly to address PY matters reported; lack of understanding of FMPPI Framework; SMART criteria; poor understanding of why and which key controls are essential (monthly reconciliation are not conducted such as assets reconciliations).

6. Public Service Commission Report

The Committee received briefings from the Public Service Commission (PSC) on the annual performance of the Department of Human Settlements (DHS).

The PSC has a Constitutional mandate to provide oversight over the national and provincial spheres of government and to promote performance and other public service values (Section 295 of the Constitution and Public Service Act). It has developed a monitoring and evaluation framework with indicators in relation to the assessment of the performance of government departments, public entities and constitutional institutions. This framework has been used to assess the (i) governance and (ii) programme performance of the Department of Human Settlements. The PSC has considered amongst other things reports of the Auditor-General (AG) and the Department of Public Service and Administration (DPSA) in its assessment of the Department of Human Settlements.

The PSC informed the Committee that the PSC Act was under review and amendments were published for public comments. The amendments includes amongst others, the powers to enforce compliance with comprehensible and fundamental recommendations made by PSC.

The PSC reported that the website of the Department had the required information and that showed an improvement. However, PSC also indicated that reports on the website are formatted in such a way that it is not easy to download. It was pointed out, that, it was only after an enquiry that the Department through Director-General provided the required documents.

The PSC stated that it does not have information on the entities reporting to the Minister of Human Settlements. However, PSC indicated that on the Department of Human Settlements the information covered issues of financial management, expenditure and performance, development orientation, accountability, professional ethics, transparency, good human resource practices and employment equity.

Financial management

PSC stated that the Department has a matter of emphasis in relation to the restatement of corresponding figures e.g. Rural Household Infrastructure Grant (RHIG) revealed material under-spending, and there were unaudited supplementary schedules with regard to this Grant.

The PSC indicated that Department of Human Settlements has spent 99% of its budget. Nonetheless the Department achieved 77% of its target during the period under review. Although the Department almost spent its entire budget, the achievement of pre-determined out-puts were fairly low, due to under-spending as a result, of amongst others delays in implementing projects, securing office space and a moratorium on filling non-critical positions pending the completion of the turnaround process. It has been stated that a greater concern was the under expenditure of R187 million on the Rural Household Infrastructure Grant. It was further reported that, the Department’s contractual obligations and invoices were not paid within the stipulated period of 30 days.

Professional ethics

Although the DHS has the Special Investigations Directorate and a Whistle-Blowing policy in place to prevent and detect corrupt activities and ensure that corrupt practises in the sector are reduced. It was found that:

· Feedback and closure rate in respect of National Anti-Corruption Hotline cases were unacceptably low e.g. 113 case were referred to the SIU only 7% feedback received and only 2% cases closed which leaves a balance of 111 outstanding cases as at August 2012.

· Financial Disclosure Framework demonstrated an improvement as submission were made on due date.

· Managing potential conflicts that senior managers may have between their private business interests and their official responsibilities. PSC reported in 2010/11 financial year 32% that senior managers in the DHS may have potential conflicts between their private interest and official responsibilities. It was reported that 21 officials may have potential conflicts, six officials have many companies and two officials were sharing companies.

· Report on finalised misconduct cases – PSC reported that in 2010/11 financial year the DHS failed to submit an input to them. In 2011/12 financial year the Department reported two cases of financial mismanagement, one involving an amount of R100 million. However, there was no loss to the State in that case.

Transparency

The DHS website was not user friendly and most documents available on the website are not easily accessible for downloading them. There was no link on the DHS website for the DHS Annual Report for 2010/11, however, as at 1 October 2012, contrary to what the Department should have done.

Human Resource Practises

The PSC stated that the DHS did not have a human resource plan as required by the Public Service Regulations by the end of the financial year, 31 March 2012. The overall vacancy rate in the Department was 21.1%, but this had increased to 24.4% as at June 2012. The vacancy rate in respect of professionals and Senior Management members was very high. The PSC noted that on average, it took the DHS over two years to fill posts.

Development orientation

As per the SA General Household Survey, the highest percentage of households living without toilet facilities or having to use bucket toilets was found in the Eastern Cape (17, 0%); Limpopo (7, 9%); Northern Cape (7.6%) and Mpumalanga (6.7%). It was further noted that 15, 5% of households felt that the walls of their dwellings we weak or very week, 15.1% felt that the roof was weak.

Employment equity

The PSC reported that the DHS had 93.5% of black employees, 36.4% were women and 0, 3 % were people with disabilities.

7. Financial and Fiscal Commission (FFC) presentation on the DHS performance

The FFC stated that DHS has spent 99% of its funds and yet achieved fewer targets. Part of the reason for this low level of the achievements of targets and high spending resulted from the DHS’ transfer funds to implementing agencies such as entities and provinces and municipalities. The FFC said however, that the funds were not spent on the core functions of the DHS itself, and that was one reason for the apparent discrepancy.

The FFC indicated that the set delivery targets should be aligned to the available budget. The FFC further alluded that the actual number of housing units delivered in the 2011-2012 was not reflected in the Annual Report of the Department for the period under review. The FFC said that by December 2011, the Department reported that number of houses completed were 88 441 (for three quarters) – therefore it was unlikely that the target of 220 000 would be reached. Furthermore, the actual delivery has never reached 220 000 since 2007/8. In 2007/8 delivery of houses totalled 146 465, in 2008/9 delivery of houses totalled 160 403, in 2009/10 delivery of houses totalled 161 854, and in 2010/11 delivery of houses totalled 121 879.

The Department target for 2011/12 financial year was to support the development of 20 000 units. However, less than half of this target was achieved as 5 813 units were delivered. The reason provided by the Department for failure to achieve this target were as follows: limited funding, delays in the approval plans and released of the land

The target for upgrading informal settlements and to provide proper services and land tenure is 400 000 households by 2014, however, there is no yearly target for Department in relation to the upgrading of informal Settlements and to improve proper services and land tenure. Furthermore, the actual performance in relation to the upgrading of informal settlements and to provide services and land tenure was not reflected in the Department Annual Report for the period 2011/2012.

Acquiring land for affordable housing

The FFC indicated that the target for acquiring hectares of well-located state-owned land for low-income and affordable housing was set at 6 250, however, a total of 13 598 hectares were formally submitted for release, and yet the Department did report on the actual hectares of land that were released during the period under review.

Gap market

The Department did not report on the actual performance in relation to the target of supplying affordable housing finance to 600 000 households in the gap market.

Social Housing Foundation (SHF)

An amount of R3m was provided for closure of SHF and this amount was not spent. Furthermore, it was reported in the annual report of the Department that this money was not required. This raises questions on the planning and costing of activities (financial and fiscal implications not properly done) by the DHS

8. Concerns of the Portfolio Committee on Human Settlements

· Programme plans and target of the Department do not correspond with its budget and outputs

· Employment equity of the Department with regard to number of women in senior management position and also of people with disabilities is very low below 50% per cent and this is not in line with the government prescript on employment equity.

· Many people in the Department are appointment on an acting capacity in senior management positions.

· Output performance of the Department fell far below the performance expenditure.

· The Public Service Commission did not get information on the entities reporting to the DHS

· The report shows that the entire budget was spent yet the achievement of the predetermined targets is very low, this suggests fiscal dumping on the side of the Department.

· Employees are suspended for a period exceeding three months with a full remuneration.

· Lack of the existence and the implementation of the human resource plan by the Department.

· There were many areas of non-expenditure across various programmes of the Department, even though the Department has recorded 99% spending of its budget.

· Lack of alignment between target achieved and budget spend.

· Unrealistic targets set by the Department.

· Lack of capacity and lack plans to build capacity by the Department, provinces, municipalities and departmental entities.

· Under-expenditure of RHIP.

· Immeasurable targets.

· Lack of compliance to Supply Chain Management (SCM) procedures and IT security.

Issues raised by Committee: improvement of RHIP performance, alignment of performance targets and budget allocation, better planning, capacitating of the Department and provinces, municipalities, accountability of entities

Impact Assessment of Policy Implementation

In the period under review, the Department has created over 76 000 job opportunities, of these, about 50 000 were direct, 5 000 indirect and 22 000 induced.

With the drive from the National Home Builders Regulation Council, the Department piloted the building of houses using alternative technologies, including the use of recycled materials.

SAWIC is in charge of relatively large projects. China Square is one of their outstanding projects and they have completed 500 houses. They are also involved in the Soul City project, rectifying 1 000 units that have been badly built.

Regarding public-private partnerships, the Department has a successful partnership initiative with a number of stakeholders, for example, houses were built in Mazista and Skierlik in the North West Province on land donated by a farmer.

The Vulindlela-enhanced People’s Housing Project (PHP) project is initiated in Msunduzi Municipality in the rural area of Pietermaritzburg. Their target is to build 25 000 housing units in five years. They have completed 6 000 as at 09 May 2012. The project has created many job opportunities.

Progress on Outcome 8 Target Outputs

Upgrading of Informal Settlements

– 91 358 serviced sites

– 22,8% of total target of 400 000 households

Rental Accommodation

– 11 334 units

– 14,2% of total of 80 000 units

Access to Basic Services

– Sanitation: 2011/12 up to 30 September 2011 provided 158 337 households with access to sanitation facilities, bringing total since April 2010 to 418 709 households;

– The delivery of 116,056 completed houses and 56697 serviced cites from April 2011 to 31 March 2012 has created 81,868 employment opportunities.

– The information above is based on employment definition of one person employed for a period of one year.

– The employment opportunities created during the financial year 2011/12 is estimated to be 54031 direct jobs

– A further 27,838 indirect jobs created from the suppliers of building material as well as expenditure from income of employees.

Rural Household Infrastructure Programme

Job creation

– A total number of 4 726 jobs were created through RHIP

Health and Hygiene Education

– 24 470 households reached with Health and Hygiene education through RHIP

Overall comments by Committee

The Committee believes that the mission of the Department leaves no doubt that it functions under the guiding principles whose objective is “to facilitate the creation of sustainable human settlements and improved quality of household life.” Such principles are deeply imbedded in the values that the Department is morally and legally obliged to demonstrate a reasonable degree of accountability, fairness, choice, quality, affordability, among others things to honour its role. On that regard, the utilization of consultants on behalf of the Department must respect the core values of the Department in order to effectively serve the needs of those people the various projects ought to benefit. Hence, this analysis looks at the relationship between the Department and consultants, and the quality of work consultants do by using appropriated government funds.

Despite the fact that such lucrative contracts are awarded to consultants with the concept of efficiency and accountability in mind, “it remains unclear what has been achieved e.g. some contracts have no clear role.

Consequently, the study reveals that there is a lack of accountability, fairness, and sustainability in a way that funds are handed over to the concerned consultants without any clear indication or a sense of direction as to where such funds are to be spent and on what conditions.

The incapacity of all parts involved to appropriately and efficiently spend the funds in a responsible way that benefit the people in desperate need of housing facilities, suggests that there might be a conflict of interest.

The most alarming issue in the long-term and survival of the Department is the question of sustainability. In these hard economic times and fiscal challenging years, the Department ought to find ways to limit the number of consultants it awards contracts. The implication of that recommendation has to do with the fact that many of the tasks some of these companies do are indeed overlapping. Hence, by merging some of them, the Department will have more control of where the money goes and how it is being spent. Such will help in many ways. First, it will eliminate the conundrum of having to deal with so many and ineffective consultants. Thus, consultant will be held accountable should they fail to respect the conditionality of the contract. Second, such restructuring will permit the Department to focus on the beneficiaries by keeping track of the progress of the projects being done and where funds are being spent. Third, conflict of interest will be minimized as contracts to companies will be given to companies on the basis of meritocracy vis-à-vis their experience within the respective field.

Concerns

The Committee was concerned about the issue of sustainability in the long term and survival of the Department.

Overall comments and observation by the Committee

Policy and legislative issues

· Since the reconfiguration of the Department of Human Settlements in 2009, the Department is still operating under the Housing Act, the White Paper of Human Settlements and also the Human Settlements Bill has not been finalised and implemented by the Department. This delay in the processing, finalisation and implementation of White Paper on Human Settlements and also the Human Settlements Act has negative impact on the service delivery of the Department of Human Settlements to achieve government objectives as outlined in the Medium Term Strategic Framework for 2009-2014.

· The development and review of two key human settlement planning instruments, namely the Guidelines for Human Settlements Planning and Design, and Housing Chapters of Municipal IDPs, were held in abeyance until the turnaround process within the Department has run its course.

· Slow pace of integration of Breaking New Ground (BNG).

· The committee has observed that there is high number of senior positions where managers are acting in more than one position, e.g. Chief Director Monitoring is also acting as Chief Director National Sanitation. Chief Director Implementation Support is also acting as Deputy Director General Service Delivery. Acting Chief Director IT and Systems is also acting as Chief Director Management Information Services. Acting Deputy Director General Chief Finance Office is also acting as Chief Director Financial Services. Chief Director Financial Services is also acting as Deputy Director General Chief Financial Officer. Meanwhile the position of Chief Director Rental Housing and People Housing Process (PHP) is vacant.

· Representatively of Women in Senior Management is estimated at less than 30% and that of people with disabilities is far less

· The Department Human Settlements has not yet developed a policy on Sanitation programme. This delay in the implementation of Sanitation policy has negative impact on the effectiveness and efficiency provision of Sanitation more especially in the rural areas and the informal settlements.

· A Policy directive by the President to transfers Sanitation function from the Department Water Affairs and to Human Settlements has not yet been fully implemented. This is a great concern to the Committee as this makes it difficult for the Committee to exercises its oversight mandate in ensuring that the dignity of the citizen is maintained and restored as well ensuring that the MDG targets are met.

According to the Report of the Auditor-General, which is contained in the 2011/12 Annual Report of the Department of Human Settlements, The Department did not implement the required government prescripts, for example:

Comply with Section 5 of the FFC Act with regard to the accreditation of municipalities

More needs to be done regarding educating people in communities on how to use the toilets they are being given. Do we have a programme that will teach people how to use their toilets – what to do and what not to do, especially with flushing toilets.

General Expenditure of the Department needs demonstrates whether the expenditure meets the strategy plans and the policy directive of the department.

· Alignment of the expenditure and strategy plans of the Department and policy directives and policy impact

The committee has observed that the Department has not adequately used its voted allocations, e.g. RHIP, disaster relief grant, USDG as well filling of vacancies. Generally, the Department reported under-expenditure across all programmes.

Education

· Capacity Development, through its Training and Skills Development unit, implemented programmes aimed at empowering beneficiaries and communities to be active citizens and members of their communities in the creation of sustainable human settlements. The role of sector stakeholders was also given prominence through forming partnerships with institutions of learning to implement training programmes specific to human settlements. This training contributes to the improvement of understanding of the human settlements sector and the property market. Local government councillors and political representatives were empowered through councillor induction workshops on human settlements. The knowledge and information gleaned from these workshops will assist them in implementing human settlements programmes.

The Committee has observed that the Department do have internships and bursary programmes, but it is not clear as who has benefited in this programmes.

There was no educational programme pertaining to the sanitation awareness e.g. awareness of World Toilet Day and Hand Wash Campaign, the MDI and FLISP programme.

People need to be educated around the Housing Code, e.g. when and how will they be allowed to sell their houses, and etc. This a major challenges in areas where people find themselves selling their houses prematurely.

The Department should roll-out programmes to assist people with their title deeds after signing of happy letters.

Health

· In terms of health priority more needs to be done in the education of communities regarding simple hygiene – washing hands when you’ve been to the toilet. A clean community will be a healthy community.

· Litter is a problem in this country – in most of the areas where the Committee visited as part of its oversight functions observed that there was littering by the communities, and this was unacceptable. Communities should be educated on part of taking ownership of the new houses and should not be using the opportunity to educate the community regarding on how to manage litter.

· The sanitation programme and the expenditure and its strategic plans are not aligned.

· Lack of monitoring in hygiene and promotion policies.

· The cost effectiveness of the system used need to be researched.

Employment

· When developments are identified, people need to be trained in skills required for the development so that the community benefits in a more sustainable way in creating jobs. Perhaps some training could be given to people on how to do simple maintenance on their houses; how to grow a small garden. Cosmo City was a good example of the gardening classes run on a Saturday morning for members of the community.

· Promotion of Housing Cooperatives in communities could provide a major intervention in job creation. If fully supported, cooperatives can potentially encourage communities to be involved in the construction of their own houses.

· People’s Housing Process is another form of intervention that could be explored in helping to alleviate poverty and unemployment. When communities are provided with security of tenure, such communities do not become dysfunctional; in fact productivity is seen to be prevailing when people have secure form of shelter.

· Sanitation could also be another form of employment creation, particularly the RHIP programme. Communities are trained in the manufacturing and assembling of slaps used to erect toilet units. This is sustainable way of providing training because even when the project comes to its completion, people would be left with everlasting skills that they can continuously use to make a living. In areas where Ventilated Improved Pits (VIPs) are used, people could use the sludge coming out of the pit, dry it out and manufacture manure that would in return be used in industries and gardens grow vegetables. Furthermore, people could be provided with skills to continuously maintain the VIP units.

Fighting crime

· Human settlements must take a centre stage in the fighting of crime and creating safer communities. Densely populated informal settlements are prone to criminal activities because of the nature in which the settlements are developing. People are not able to belong to structures such as community policing forums and etc. These types of settlements also promote crime because it is difficult to police in the area mainly because houses are not enumerated. The Department should take an initiative to profile all the informal settlements and create an occupancy database. This kind of an initiative could help a great deal in fighting crime. Much more still needs to be done to fight crime in these communities.

Overall observations of the Portfolio Committee on Human Settlements

· In programme 1, the Committee observed that the Department has reported that they have a total of R18, 9 million on saving but only R11, 3 million was utilised in 2011/12 financial year. The Department should explain to the Committee what happened to the remaining amount of R7.6 million on the savings;

· The Committee observed that there is still lot of vacancies whereas the Department promised the Committee in previous financial years that they will fill the vacant positions. There are huge negative implications for the service services delivery as a result of failure by the Department to fill its vacant positions as promised in the previous financial year?

· Since 2009 the Department has failed to make provisions for office space whereas the Department keep on under spending its budget in its regards. The Department should explain to the committee on what measures they have put in place to make provisions for office space;

· In programme 2, the Committee observed that there were additional allocations (R227 000). The Department should explain to the Committee on what is the rationale behind this allocation since the Department has spent only 82% of its allocated budget;

· In programme 3, the Committee observed that there is a total amount of R713 000. The Department should explain to the Committee on where this money did came from and why it is included on the tabled.

· However, in another study conducted by Economic Policy Research Institute (EPRI) in October 2012, the findings demonstrate that lucrative contracts with consultants do not necessarily mean effective work or useful way of spending allocated funds. The study demonstrates that despite the fact that such lucrative contracts are awarded to consultants with the concept of efficiency and accountability in mind, “it remains unclear what has been achieved. The fact that many of the tasks some of these companies do are indeed overlapping and further considering the hard economic times and fiscal cliff, the Committee recommends that the Department should find ways to limit the number of consultants it awards contracts.

9. Recommendations of the Portfolio Committee on Human Settlements

9.1 To the Minister of Finance

Having observed that there is huge discrepancy in figures received from the Department of Human Settlements and the National Treasury information, the Minister of Finance should:

· Investigate the discrepancies between the funds that have been allocated to the Department of Human Settlements and the Department of Human Settlements’ own records of funds received from the National Treasury; refer to Table 5 and Table 6 of this report.

The Department reported that it could not produce some of the legislations and also could not achieve some of its targets due to budget constraints. Therefore, the Committee recommends that the Minister of Finance should:

· Consider a systematic enquiry in relation to this challenge and address it appropriately, where possible (for example, amongst others refer to the page 41 table 11 of Annual report of the Department of Human Settlements performance indicator 1, page 42 White Paper on Human Settlements, page 52, performance indicator 1, second column under reasons for variance, page 56 performance indicator 2).

As some of the Metros utilise the Urban Settlements Development Grant (USDG) to other programmes such as sport fields, building cemeteries, community halls etc, of which the latter is already budgeted for by other government departments and institutions.

· Consider reviewing and strengthening the guidelines with regard to the USDG in the next Division of Revenue Framework, in an endeavour to achieve a common understanding of the intent of the grant. This will further assist in achieving the critical aspect of addressing bulk infrastructure hindering the development of qualitative and sustainable human settlements.

In 2004, Cabinet took a decision that post-1994 to 2002 constructed units with serious structural defects should be rectified, in an endeavour to restore, maintain dignity of the citizen and support the poor. Therefore, it is recommended that the Minister should:

· Consider ring-fencing the funding allocation for rectification programme as some of the provinces are not implementing the programme due to various reasons such as lack of funding, commitment and good will.

· Consider that in future the Department’s funding model address the issues of different typologies, dolomites and hard rocky areas as these usually hamper and delays housing delivery.

9.2 To the Minister of Performance Monitoring and Evaluation

The Minister should:

· Accelerate the facilitation of the full transfer of sanitation function to the Department of Human Settlements including its legislation and regulations in line with President Proclamation on the transfer of sanitation function.

9.3 To the Minister of Human Settlements

The Minister of Human Settlements should:

· Implement the agreed resolution with the Parliament to appoint the Auditor-General of South Africa to conduct an Integrated Special Audit and the system of underperformance of the RHIP programme. Report progress before the end of November 2012.

· Ensure that the Department comply with section 7 of the Preferential Procurements Policy Framework Act (PPPFA) of, 2000 (Act 5 of 2000) and within 30 days after the adoption of this Report by the National Assembly submit to National Assembly a progress report with regard to implementation of the systems and plans, which should assist the Department to comply with the said Act (i.e. that the evaluation criteria, systems used in awarding preference points for procurement and maximum point for historically disadvantaged individuals are specified in the bidding documents as required by PPPF.

· Ensure that the Accounting Officer take effective steps to prevent irregular, as well as fruitless and wasteful expenditure, as required by section 38(1) (c) (i) of the PFMA and Treasury Regulations 9.1.1 and that contractual obligations and money owed by the Department are settled within 30 days or at an agreed period as required by section 38(1) (f) of the PFMA and Treasury Regulation 8.2.3. Furthermore, the Minister should within 30 days after the adoption of this Report by the National Assembly submit to Parliament a progress report on the implementation of the systems and plans, which should assist the Accounting Officer of the Department of Human Settlements to effectively prevent irregular, as well as fruitless and wasteful expenditure as required by section 38(1) (c) (ii) of the PFMA and Treasury Regulations 9.1.1.

· Ensure that the Department comply with the National Treasury prescripts regarding the Framework for Managing Programme Performance Information (FMPPI) and within 30 days after the adoption of this Report by the National Assembly submit to the National Assembly a progress report on the implementation of the systems and plans, which should assist management of the Department of Human Settlements to ensure that (i) performance indicators of the departmental programmes are well defined, (ii) performance targets of the departmental programmes are specific and also that (iii) performance targets of the departmental programmes are measurable.

· Ensure that the Department comply with section 40(1) (b) of the PFMA and within 30 days after the adoption of this Report by the National Assembly submit to Parliament a progress report on the implementation of the systems and plans, which should assist the Department to ensure that the Department’s financial statements are prepared in accordance with the prescribed financial reporting framework and are also supported by full and proper records as required by section 40(1)(b) of the PFMA.

· Submit a progress report on the implementation of the systems and plans, which should assist the Department to ensure that financial statements disclosure items of the Department are in line with required prescripts and are also correct before submitting them to auditors.

· Submit a progress report with regard to the implementation of the Human Resource Plan in the Department of Human Settlements as required by the Public Services Regulations 1/III/B.2(d).

· Submit a progress report with regard to the implementation of the systems and plans, which should assist the Department of Human Settlements to ensure that persons in charge at pay points always certify that the employees receiving payment are entitled to do as required by the Treasury Regulations 8.3.4.

· Ensure that the Department review its Housing Code to extend the Southern Cape Coastal Condensation Allowance (SCCCA) funding to all coastal provinces and to maintain consistency in the application of norms and standards.

· Submit a progress report with regard to the implementation of the systems and plans, which should assist the Department of Human Settlements to ensure that proper processes are in place to verify the claims made in the employment applications as required by the Public Service Act of 1999 and Public Service Regulations of 2001,1/VII/D.8.

· Submit to Parliament a progress report on the implementation of the systems and plans, which should assist the Department to ensure that “proper control systems to safeguard and maintained assets” are in place as required by section 38 (1) (d) of the PFMA and Treasury Regulation 10.1.1. (a).

· Submit a progress report on the implementation of the systems and plans, which should assist the Accounting Officer of the Department of Human Settlements to exercise adequate oversight responsibility regarding financial and performance reporting, compliance with laws, regulation and related internal control and also submit to National Assembly a progress report on the disciplinary action against employees who were responsible for incurring irregular expenditure as required by section 51(e)(iii) of the PFMA.

· Present a draft National Sanitation policy and Master Plan on sanitation. This should be submitted to the Committee within 30 days after the adoption of the report by the National Assembly.

· Fast-track the regulation, norms and standards in the sanitation programme.

· Submit a progress report on the implementation of the systems and plans, which should assist management of the Department of Human Settlements to prepare regular, accurate and complete financial and performance reports that are supported and have evidence reliable information.

· Fast-track the process of the resubmission for the Rental Housing Bill to Parliament.

· Submit a progress report on the implementation of the systems and plans, which should assist senior management to comply with sections 66 and 70 of the PFMA.

· Ensure that more service providers are appointed to roll-out the rural sanitation programme in order to speed up the process and within 30 days after the adoption of this report by the National Assembly submit to it a progress report on the implementation of this recommendation.

· Ensure that new service providers are appointed and that the contract for non-performing service providers is terminated and within 30 days after the adoption of this Report by the National Assembly submit to Parliament a progress report on the implementation of this recommendation.

· Ensure that the Department rollout an awareness programme to inform people in the GAP market about the FLISP Programme in their respective provinces and within 30 days after the adoption of this Report by the National Assembly submit to Parliament a progress report on the implementation of this recommendation. FLISP was pronounced by the President in his State- of- the-Nation Address

· Ensure that the Department develop a policy guideline that would assist in speeding up the processes of Environment Impact Assessments (EIAs) and within 30 days after the adoption of this report by the National Assembly submit to it a progress report on the implementation of this recommendation.

· Ensure that the Department develop a policy framework that would regulate the process of issuing title deeds and within 30 days after the adoption of this report by the National Assembly submit to it a progress report on the implementation of this recommendation.

· Ensure that the Department disaggregate, per province, targets for ensuring proper services and security of tenure with regard to the achievement of the target of 400 000 households by 2014. This would assist the Committee in enhancing its oversight responsibility in respect of meeting targets of Outcome 8, as well as progress towards achieving the MDGs. The Minister should within 30 days after the adoption of this report by the National Assembly submit to it a progress report on the implementation of this recommendation.

· Ensure that the Department complies with the Financial and Fiscal Commission legislation in relation to the accreditation of municipalities and within 30 days after the adoption of this Report by the National Assembly submit to Parliament a progress report on the implementation of this recommendation.

· Ensure that the Department provides the latest statistics on the housing backlog. This is because the last national backlog figure was sitting at
2, 1 million. The Committee needs to be briefed as to whether the number is decreasing or increasing and the possible contributing factors thereto, e.g. the migration to cities or the growing number of the population.

· Ensure that the Department accelerate the filling of vacant posts as it impacts on delivery. In addition gender equity and people with disability to be addressed, especially at the senior management level.

· Ensure that legislation is brought before Parliament, including the following: an integrated Human Settlements Bill, White Paper on Housing, White Paper on Sanitation, etc

· Ensure that the Department presents its leave policy to the Committee. This is because the Committee observed that there is a high level of sick leave at management level.

· Ensure that the Department presents to the Committee the Whistle Blowing Policy and Human Resource Plan.

· Ensure that the Department table quarterly progress reports in relation to the issues raised by the Auditor-General.

· Ensure that the Department find alternative office accommodation as a matter of urgency as this has been recurring over the past few years as it is detrimental to the output and service delivery of the Department e.g. the filling of vacancies has an impact on the installation of the virtual private network (programme 5).

· Ensure that the Department present to the Committee on which vacancies constitute non-critical post and which ones are deemed critical

· Ensure that the Department brief the Committee as to what could be the recourse in the event that the service providers including the property owners do not meet their contractual obligations.

· Ensure that the Department explain to the Committee the shortfall of R7.6 million from the SIU allocation. There were 113 cases that were referred to the SIU, only 2% was resolved and the 111 were still outstanding.

· Present clear challenges of not completing all cases referred to the SIU and on plan to deal with outstanding cases and plans to fast-track them.

· Ensure that the Department together with its internal audit committee brief the Committee on challenges facing the functioning of the audit committee.

· Ensure that the Department brief the Committee on system of internal control, risk management, strategy and plans.

· Ensure that the Department and the State Information Technology Agency (SITA) brief the Committee on the Service Level Agreement with the Department.

· Explain to the Committee the reason why more money was spent on the monitoring of research done by the Department whereas less research was done.

· Ensure that the Department brief the Committee on the reason for not spending the allocated funds and also the plans to address the under expenditure.

· Ensure that the Department brief the Committee on the progress report and timeframes with regard to the plans developed and implemented to address challenges of poor workmanship, slow administration of beneficiaries, poor planning and location, lack of beneficiary education and alignment among various government departments.

· Ensure that the Department present to the Committee progress on the profiling of informal settlements.

· Ensure that the Department brief the Committee on the amount of R713 000 that was meant for salary increases but not reflected in the Department’s annual report, yet it reflected on the Adjusted Estimates of National Expenditure.

· Brief the Committee on the breakdown of the R5 million that was set aside for sanitation also on the progress report of the Ministerial Task Team.

· Present reviewed plans regarding the implementation of the sanitation programme on a quarterly basis. This should include plans and the monitoring and evaluation on the programme.

· Appoint the office of the AG to conduct a Special Integrated Audit on RHIG and provide quarterly progress reports.

· Present a recovery plan to the Committee which will assist the Department to accelerate the delivery of the Outcome 8 in all areas raised above.

· Ensure that the Department present the progress report with regard to achievement of 80 000 target of rental units by 2014.

· Ensure that the Department brief the Committee on the excessive utilisation of consultants and outcome of such exercise.

· Ensure that the Department receives monthly reports from its entities with regard to financial performance, policy implementation, operational performance and administrative performance and this reports in its quarterly report to Parliament for the Portfolio Committee on Human Settlements

· Ensure that the Department and the National Housing Finance Corporation brief the Committee on the progress report on outcome 8 with regard to Mortgage Default Insurance and Finance Linked Individual Subsidy Programme

· Ensure that the Committee’s concern about the high interest rate charged by the NHFC and the Rural Home Loan Fund to consumers is addressed and provide progress report to the National Assembly.

· Ensure that the Department provides a progress report and outcomes of the investigations conducted on the NHBRC’s alleged fraud and corruption activities.

· Ensure that the Department fast-track the finalisation of the amendments to the Housing Consumer Protection Measures Act, 1998 (Act No. 19 of 1998), and provide feedback to the Committee in this regard.

· Ensure that the Department, together with the Board of the NHBRC - appear before the Committee to provide clarity on remedial actions that the NHBRC should take following of the report the Auditor-General.

10. CONLUSION

Following the President’s Proclamation in 2009 to change the Department of Housing to Human Settlements, a need arose for housing not only about providing a roof on top of people’s heads, but also to provide sustainable and integrated human settlements where people could work, pray, play, and have access to other amenities that they need for their day-to-day living. South Africa was party and signatory to the United Nations Millennium Development Goals of providing proper and sustainable shelter, sanitation as well as eradicating informal settlements by 2014.

It is against this backdrop that the Department of Human Settlements should be commended for their tireless work of ensuring that South Africa meets all the targets of the Millennium Development Goals, especially the ones that relate to Human Settlements. There are many challenges that have been identified and the progress seems to be a bit slow and at times makes the nation believe that these goals are close to impossible. A lot still needs to be done to fast-track service delivery on the ground. The Department should be commended again for their 99% budget expenditure, but it would be much appreciated if the level of expenditure could translate into tangible outputs on the ground that will make South Africa meet its MDG targets by 2014.

Furthermore, it is important for the Department to work towards the achievement of other national priorities.

The Committee has noted progress on the running projects across Provinces including the National Priority Projects.

The Department should strengthen its Monitoring and Evaluation as well as its Project Management and Expenditure Management.

The Portfolio Committee on Human Settlements wish to thank the Minister and his Department for the cooperation and support. Including the following institutions: Office of the Auditor-General, the Public Service Commission, the Financial and Fiscal Commission, as well as the Economic Policy Research Institute, for their contributions and support during interactions with the Committee in the drafting of the Budgetary Review and Recommendation Report (BRRR) process with regard to the Budget Vote 31 - Human Settlements for the period 2011/2012.

Report to be considered.

[2] Department of Human Settlements (2011), p. 18.

1. Introduction

2. Table 2: Report on the Departmental Expenditure for 2011/12

Programme	Voted for 2011/12 (R’000)	Roll-over & adjustments (R’000)	Virements (R’000)	Total Allocation (R’000)	Actual Expenditure spent (R’000)	Over-/ under expenditure (R’000)
Administration	232 435	676	-11000	222 111	166 237	55 874
Housing Policy, Research & Monitoring	39 215	227	-	39 954	32 866	6 576
Housing planning & delivery Support	156 163	31848	5000	193 011	186 733	14 008
Housing development Finance	21 995 147	206352	-	22 201 499	22 105 262	91 507
Strategic Relations and Governance	155 535	7943	6000	169 478	105 064	61 414
Total	22 578 495	247046	-	2 282 541	22 596 162	229 379