DID CAPITAL WORKS DRAFT REPORT 12 August 2013

CONFIDENTIAL

DEPARTMENT OF INFRASTRUCTURE

DEVELOPMENT

CAPITAL WORKS AND MAINTENANCE

INTERNAL AUDIT REPORT

Confidentiality Statement This report has been prepared for the soleand exclusive use of the Department. It may therefore not be madeavailable to anyone other than authorised persons within theDepartment, or relied upon by any third party. No part of this workmay be reproduced or transmitted in any form by any means,electronic or mechanical, including photocopying and recording, orby information storage or retrieval systems, except as permitted, inwriting, by Gauteng Audit Services (GAS).

IMBUMBA HOUSE, 75 Fox Street, Johannesburg./Private Bag X112, Marshalltown, 2107

GAUTENG AUDIT SERVICESFuelling Good Governance

INTERNAL AUDIT REPORTEnq: Ms Judith NqunqaTel : 011 689 4647

Cell: 071 860 7734Fax: 011 355 2476

E-mail: Judith [email protected]: DID-RC3-1314-001

Date: 10 November 2022

Mr B. Netshiswinzhe Head of Department Head of DepartmentDepartment of Infrastructure DevelopmentPrivate bag x 91MarshalltownJohannesburg2107

REVIEW OF CAPITAL WORKS AND MAINTENANCE AT DEPARTMENT OF INFRASTRUCTURE DEVELOPMENT

We hereby submit our internal audit report for the review performed onCapital Works and Maintenance. It records the result of our audit andrecommends possible ways in which the controls could be improved toovercome the identified weaknesses. The report is set out in twosections:

Section A: An executive summary.Section B: The detailed report with the audit findings andrecommendations.

We would be pleased to provide you with further assistance so do nothesitate to contact me on 011 689 4647 or 071 860 7734, Director on011 689 8286 with any queries.

Page 1 of 1

Tel: (011) 689 6000, Fax: (011) 355 2112Physical Address: 75 Fox Street, Imbumba House, Marshalltown,

Johannesburg Postal Address: Private Bag X112, Marshalltown, 2107

www.gautengonline.gov.za Hotline: 0860 428 8364

http://www.gautengonline.gov.za/

We would like to take this opportunity to express our appreciation to thevarious members of your staff for the assistance and courtesy afforded tous during the course of this audit.

Yours sincerely

___________________________________________________

Ms J. Nqunqa DateChief Director: Risk and Compliance Audit Gauteng Audit ServicesGauteng Department of Finance

HEA-COM-1213-003 Page 1 of 45

Tel: (011) 689 6000, Fax: (011) 355 2112Physical Address: 75 Fox Street, Imbumba House, Marshalltown,

Johannesburg Postal Address: Private Bag X112, Marshalltown, 2107

www.gautengonline.gov.za Hotline: 0860 428 8364

http://www.gautengonline.gov.za/

DEPARTMENT INFRASTRUCTURE DEVELOPMENT REFERENCE: DID-RC3-1314-001INTERNAL AUDIT REPORTCAPITAL WORKS AND MAINTENANCE

TABLE OF CONTENTS

ITEM PAGE

Distribution list 2

Section A: Executive summary 3

Section B: Detailed report 41. Introduction 42. Background 43. Objective of the audit 44. Scope of the audit 45. Approach and methodology 56. Fraud and internal control 57. Risk definition 58. Summary of positive observations 69. Summary of significant findings 610. Management comments 711. Disagreements with management and acceptance of

risks7

12. Audit opinion/Conclusion 713. Acknowledgement 714 Summary of audit results 8

DRAFT For internal use only - not to be divulged to external partiesPage1 of 29


DISTRIBUTION LIST

Designation Name E-mail address Take Action

Secure Action

For Information

Reviewed Prior to

Deputy DirectorGeneral

ZoliswaNtombela

[email protected]

X

Chief Director:GAS

Ms J. Nqunqa [email protected] X

Deputy Director General: Branch Infrastructure Development

Mr M. ????? @gauteng.gov.za X

Acting ChiefFinancialOfficer

Mr T. Tabane @gauteng.gov.za X

Chief Director: Ms N. Xiva @gauteng.gov.za XDirector: RiskManagement

Mr R.Phelembe

@gauteng.gov.za X

Director:Regions

Mr E. Vele @gauteng.gov.za X

Chief Director:Capital Works

Mr M. Selepe [email protected]

X

Director:Planning andDesign

Mr R. Makhumisane

[email protected]

X

Director:ProjectconstructionManagement

Mr T. Nyasha [email protected] X

Director:ProfessionalService

Ms T.Raletsemo

[email protected]

X


DEPARTMENT INFRASTRUCTURE DEVELOPMENT REFERENCE: DID-RC3-1314-001INTERNAL AUDIT REPORTCAPITAL WORKS AND MAINTENANCE SECTION A

EXECUTIVE SUMMARY

Objective and Scope

The objective of the engagement is to evaluate the adequacy and effectivenessof controls in responding to risks within the Department’s oversight andoperations regarding the effectiveness and efficiency of operations andprograms in the Capital Works and Maintenance Units.The audit was limited to xxxx. As agreed with Management, our sample selectionwas extracted from transactions processed during the period 1 November 2012 to30 April 2013.Audited Unit Audit

classification

Inherentrisk rating

Type

IntergovernmentalRelations

Medium High Risk & Compliance X Follow-up

Performance Ad Hoc

Computer Consulting

Opinion We are of the opinion that, at the time of the audit review,no material inefficiencies or lack of effectiveness existed inthe Capital Works and Maintenance Units. However, themonitoring activities were inadequate and ineffective. Anomalies and/or improvement opportunities that requiremanagement’s attention to ensure the effective functioning ofthe monitoring activities and related processes wereidentified and are included in Section B on page 8.

SignificantFindings

The inefficiencies in document management and changemanagement controls that may negatively affect businesscontinuity in the event of disastrous incidents.

Risk Management mechanisms do not deliver a demonstrablesystem of dynamic risk identification, assessment,monitoring, reporting and communication to all relevantstakeholders.

Limit to 5.Agreed action& plannedfollow-up

The risk management process will be reviewed and aligned withthe risk management process that was introduced at the end of2010. This will be done with extensive interaction andproposal from the risk manager.



DETAILED REPORT

1. INTRODUCTIONWe recently completed a review on the Capital Works and Maintenancewithin the Department of Infrastructure Development, in terms of theapproved three-year rolling plan for the 2012/13 financial year. The purpose of this report is to communicate the results of the audit toand assist management, where applicable, in improving the processes andcontrols around the Capital Works and Maintenance in such a manner as toprovide reasonable assurance that their goals will be achieved.

2. BACKGROUND OF THE CAPITAL WORKS AND MAINTENANCE

Text. (Audit area’s budget, staff establishment, etc)

3. OBJECTIVE

The objective of the engagement was to evaluate the adequacy andeffectiveness of controls in responding to risks within the Department’soversight and operations regarding the effectiveness and efficiency ofoperations and programs in the Capital Works and Maintenance (the Unit).

4. SCOPE OF THE AUDIT

The audit covered the Head Office and regional offices and entailed theassessment of the following internal control components in terms of ourcontrol framework:

Control Environment Review of the adequacy and effectiveness of the control environment,

namely, management’s philosophy and operating style, organisationalstructure of the Unit, and methods of assigning authority andresponsibility within the Unit around the Capital Works andMaintenance.



Risk Assessment Review the processes within the Unit for identifying and analysing

risks, including fraud risk, to achieving the objectives of the Unitand the Department.

Control Activities Review the actions established by management to help ensure that

management’s directives to mitigate risks to the achievement ofobjectives are carried out.

Information and Communication Review systems in place to provide the Unit with information needed to

carry out day-to-day internal control activities that enable all staffto understand the internal control responsibilities and theirimportance to the achievement of the set objectives.

Monitoring Activities Review activities to effect on-going and/or separate evaluations to

ascertain that the principles of internal controls are present andfunctioning.

4.1 Scope limitation

This internal audit did not cover the xxxx.

5. APPROACH AND METHODOLOGY

The audit was conducted in accordance with the Standards for theProfessional Practice of Internal Auditing. Internal Audit followed arisk-based approach to execute this audit. A preliminary survey wasconducted to gain an understanding of key processes of . Through generaldiscussions, reviewing of documentation, walkthrough testing andverifying the effectiveness of controls on a sample basis, Internal Auditgathered evidence to support the findings and opinion that is expressedin the audit report. The COSO internal control framework was used as abasis for the overall opinion contained in this report.

6. FRAUD AND INTERNAL CONTROL

Internal audit work is planned with a reasonable expectation of detectingsignificant control weaknesses in the areas reviewed. However, internal



audit procedures alone, even when carried out with due professional care,do not guarantee that fraud will be detected. Accordingly, our reviewsand investigations as internal auditors should not be relied upon as thesole means of disclosing fraud, defalcation or other irregularities thatmay exist.

7. RISK DEFINITION

7.1 Definition

Internal audit defines risk as the likelihood of an adverse eventoccurring that could result in missed business opportunities, as well asthe Department’s not attaining its primary goals and objectives. Weassess this risk based upon two parameters, viz. the likelihood that therisk will occur and the impact the event could have on operations. Theclassification of findings is determined from the residual riskassociated with each finding after consideration of the adequacy and/oreffectiveness of controls.

7.2 Category

Impact: The possible effect of the weakness in control on the division.Likelihood: The probability that the risk will occur.

7.3 Risk rating

Rating Impact Likelihood TimelinessH - High Significant effect on meeting

strategic objectives, with long-term effects on reputation,substantial losses, possibly inconjunction with otherweaknesses in the controlframework and/or image.

It is probableunless we dosomething aboutit.

The risk needsto be addressedimmediately.

M - Medium Limited effect on meetingstrategic objectives with short-term effects on reputationand/or image.

It couldhappen, if itis not givenattention.

The risk needsto be addressedwithin threemonths.

L - Low Minimal effect on meetingstrategic objectives withlimited effect on reputationand/or image.

It is notexpected tohappen exceptin unusualconditions.

The risk needsto be addressedwithin sixmonths.



8. SUMMARY OF POSITIVE OBSERVATIONS

Text.

Control Environment Methods of assigning authority and responsibility within the Unit

around the Capital Works and Maintenance were...

Risk Assessment The processes within the Unit for identifying risks were…

Control Activities The actions established by management to help ensure that management’s

directives to mitigate risks to the achievement of objectives arecarried out were...

Information and Communication Systems in place to provide the Unit with information needed to carry

out day-to-day internal control activities that enable all staff tounderstand the internal control responsibilities and their importanceto the achievement of the set objectives were...

Monitoring Activities

Activities to effect on-going and/or separate evaluations to ascertainthat the principles of internal controls are present and functioningwere...

9. SUMMARY OF SIGNIFICANT FINDINGSDetails of our findings are contained in Section B of this report. Thefollowing is, however, a summary of the most significant findings:1. Finding 1: heading in a full sentence.2. Finding heading in a full sentence.3. Finding heading in a full sentence.4. Finding heading in a full sentence.5. Finding heading in a full sentence.



10.MANAGEMENT COMMENTS

The matters raised in this report have been discussed with Mr Xxx Xxx,the Xxxx - Xxxxx. His comments, where applicable, have been included inSection B of the report.

11.DISAGREEMENTS WITH MANAGEMENT AND ACCEPTANCE OF RISKS

Although evidence of the anomalies was provided to line management, thefollowing findings were disputed and consensus could not be reachedbetween GAS and management:

Xxx.

12.AUDIT OPINION/CONCLUSION

Guidance: The formulation of the opinion requires consideration of theaudit findings and their respective ratings, management’s understandingof what would constitute a satisfactory level of control (eg, managementmay decide satisfactory means 90% of transactions are conducted in linewith the established procedures), that sufficient evidence was gatheredto be reasonably certain that evidence and point of time or the timeperiod over which the opinion is expressed. The findings (positive andnegative) are mapped to the COSO components and the components rated.Ratings of all COSO components should be considered to determine whethercontrols provide reasonable assurance that management objectives will beachieved. Inadequate and ineffective / /adequate but ineffective //adequate and effective / /partially adequate and effective.



13. ACKNOWLEDGEMENT

We would like to express our appreciation to the staff members of theCapital Works and Maintenance Units for their assistance and co-operationduring the course of the audit.

Kind regards

____________________________ ______________________Ms Phumzile Thanjekwayo DateDirector - Risk and Compliance AuditGauteng Audit ServicesGauteng Department of Finance



SUMMARY OF AUDIT RESULTS

No. Result Rating Page

Control Environment1. There was no control measure in place

for disclosure over conflict ofpersonal interest regarding staffmembers implementing project activitieswithin Capital Works H 7

2. Certain Service Delivery Agreementsbetween the Department and ClientDepartments were not made available foraudit review. H 9

Risk Assessment

Control Activities3. Project files did not contain evidence

of review on technical work performedon projects

H 114. There were shortcomings in allocating

business opportunity of capitalprojects to service providers H 13

5. The consultant was paid for the servicenot appointed for H 15

6. Consultant provided professionalservices without a formal appointmentletter. H 17

7 Projects were put on hold H 198 Unreasonable duration taken for

completion of projects H 219 There were inefficiencies regarding

filling system on capital worksprojects H 24



No. Result Rating PageInformation and Communication

Monitoring Activities10 Budget for capital projects for certain

Client Departments was exceededH 26



1.THERE WAS NO CONTROL MEASURE IN PLACE FOR DISCLOSUREOVER CONFLICT OF PERSONAL INTEREST REGARDING STAFFMEMBERS IMPLEMENTING PROJECT ACTIVITIES WITHIN CAPITALWORKS

STANDARD

Section 38(1)(a)(i) of the PFMA states the Accounting Officerfor a Department, Trading Entity or Constitutional Institution,must ensure that the Department, Trading Entity orConstitutional Institution has and maintains effective,efficient and transparent systems of financial and riskmanagement and internal control.

Section 30. (1)(2) of the Public Service Act states that:o (1) no employee shall perform or engage himself or herself to

perform remunerative work outside his or her employment inthe relevant department, except with the written permissionof the executive authority of the department.

o (2) for the purposes of subsection (1) the ExecutiveAuthority shall at least take into account whether or not theoutside work could reasonably be expected to interfere withor impede the effective or efficient performance of theemployee's functions in the department or constitute acontravention of the code of conduct contemplated in section41 (1) (b) (v).

FINDING

Although the Senior Management completed and signed thefinancial disclosure. There was no control measure in placewithin the Capital Works to ensure that other categories ofstaff members, namely Internal Project Planner and ProjectManagers are required to disclose conflict of personal interestthat may influence objectivity and independence in theimplementation of Capital Works activities.

It was further established that the following employees wereeither in directorship or partnership in corporate entities orbusiness institutions outside the employment arena:



Employee’s Name

Persal Number

Employee’s Responsibility within Capital Works

Corporate Name

Employee’sRelationship to Corporate

Entity Status of Activeness

Khomane O.M. 21642664 ProjectManager

WestendConstructionand Paving

Member In Business

Nuku S. 26645157 ProjectManager

TrinityProjectManagement

Director In Business

Mudau O. 22757970 ProjectPlanner

MaruoMinerals

Director In Business

Employee’s Name

EmployeePersal Number

Employee’s Responsibility within Capital Works

Corporate Name

Employee’sRelationship to Corporate

Entity Status of Activeness

Mphahlele M. 22247653ProjectPlanner

Bakgaga keBahlodi LekoaInvestments

Member AR Finalderegistration

Makgae N. 22024956ProjectPlanner

BakgatlhaGeneral Workand Trading

Member AR Finalderegistration

CAUSE

Management not persuasive enough to obtain advice and support fromHuman Resources and Risk Management regarding developing controlmeasures to ensure disclosure on possible conflict of personalinterest by staff members below senior management level.

EFFECT



Conflict of interest may occur resulting in collusion andnepotism.

RATING

High

RECOMMENDATION Capital Works management should liaise with Human Resources andRisk Management in writing and obtain assistance regardingdeveloping control measures which will ensure that the staffmembers below senior management level will disclose possibleconflict of personal interest.

MANAGEMENT COMMENTIn appreciation of the risk in this operational space andrelated complexity, the department engaged SecurityAgency as the best suited to assist in conductingassessments and clearance of officials. Unfortunately theprocess could not proceed due to logistical limitations.Through interaction with Risk management and HumanResources Management.

ACTION PLAN

Person responsible: Implementation date:



2. CERTAIN SERVICE DELIVERY AGREEMENTS BETWEEN THEDEPARTMENT AND CLIENT DEPARTMENTS WERE NOT MADEAVAILABLE FOR AUDIT PURPOSES

STANDARD

Section 38(1)(a)(i) of the PFMA states that the Accounting Officerfor a Department, Trading Entity or Constitutional Institutionmust ensure that the Department, Trading Entity or ConstitutionalInstitution has and maintains effective, efficient and transparentsystems of financial and risk management and internal control.

FINDING A request of the under mentioned Service Delivery Agreements(SDAs) between the Department and Client Departments regardingcapital project services were not provided for audit purposes.Therefore we could not verify that the SDAs were signed forapproval by DID and Client Departments. The following serves asdetails: Department of Economics and Development; Department of Health; Department of Road and Transport; and Department of Social Development.

CAUSE

Follow ups were not performed with Legal Unit to determineprogress and developments regarding the finalization and signingof SDAs.

EFFECT It may be difficult to hold the Department or Client Departments

accountable for inappropriate actions or sub-standardperformance in the absence of signed SDAs.

Lack of SDAs may lead to uncoordinated activities resulting inineffective and inefficient utilisation of available resources.



RATINGHigh

RECOMMENDATIONThe Capital Works Management Unit should: on dealing with legal agree on a turnaround times regarding the

completion of the delivery of the requested tasks – facilitatingsigning off of the SDAs with Client Departments; and

escalate to the Accounting Officer (HoD) challenges regardingthe signing of the SDAs.

MANAGEMENT COMMENT

ACTION PLAN

Person Responsible:

Implementation Date:



3.PROJECT FILES DID NOT CONTAIN EVIDENCE OF REVIEW ONTECHNICAL WORK PERFORMED ON PROJECTS

STANDARD

Section 38(1)(a)(i) of the PFMA states that the Accounting Officerfor a Department, Trading Entity and Constitution must ensure thatthe Department, Trading Entity and Constitutional Institution hasand maintains effective, efficient and transparent systems offinancial and risk management and internal control.

FINDING

Although record in Professional Service indicated that certaintechnical work performed on capital projects - namely designs;architect drawings; civic /structural engineer reports wasassessed for quality assurance; in 15 sampled projects none offiles contained documented evidence to confirm such qualityassurance. CAUSE

Management not reviewing project files to ensure that all requiredproject documents are in file. EFFECT

Poor management of records and documents may make it difficultto retrieve required evidence on reviews of technical work forfuture purposes.

Disputes and queries may not be timely resolved due to lack ofdocumented evidence to confirming reviews of technical work.

RISK RATING

High

RECOMMENDATIONDRAFT For internal use only - not to be divulged to external partiesPage15 of 29


Capital Works management should:

instruct project planners and managers to file into the projectfile evidence of reviews performed on technical work and otherrelated reviews done by Professional Service.

Regularly perform a spot check of the project files and ensurethat all required documents for the project are in file; and

Utilise a checklist that will guide the project planner andmanager on documents which needs to be on file.

MANAGEMENT COMMENTS

DID appoint service providers who are professionallyaccredited with statutory councils and in position ofprofessional indemnity insurance. As per the contractsentered into with the professionals, any random checksconducted by internal officials does not exonerateservice providers from their professional responsibility.

ACTION PLAN

In a quest for continuous improvement, business process reviewwill be conducted by the directorate.

Person Responsible:

Director Professional Services. Implementation Date: 1 December 2013



4.THERE WERE SHORTCOMINGS IN ALLOCATING BUSINESSOPPORTUNITY OF CAPITAL PROJECTS TO SERVICE PROVIDERS

STANDARD

Paragraph under GPG Procurement Strategy of the Gauteng ProvincialGovernment Supply Chain Management Manual, states that thepromotion of BEE and SME development within the Constitution andthe regulatory framework points to the need to use procurement asan instrument of economic empowerment. Within this context,Government and GPG specifically is bound to conduct processes thatallow all citizens, who wish to supply to Government, to have afair and equal opportunity to do so.

FINDING

During the audit, it was noted that the consultant Tau PrideMoteko Consortium was awarded a tender in managing most of theprojects within the Capital Works without a fair work distributionto other vendors. The total number of projects allocated was about192 and details are tabled below:

ProjectDescription

Management servicerequired

Total number ofProjects Awarded

Restorative repairs Management ofConstruction

37

Additions Schools- Grade Rat schools

Clinics for Health Department

Management ofConstruction

15

Restorativerepairs, NewSchools, upgradeand Renovations

Management on thePreparation andCompilation of theproject FinalAccounts

92

School forrestorative repairs

Site hand-over toConstructor

48

Total ProjectsAllocated

192



CAUSE

Client to provide – forwarded to SCM.

EFFECT

The objective of the upliftment and development of BEEs andSMEs for the purpose of the country’s economic empowerment maynot be achieved.

The Department’s image may be tarnished as the public may viewsuch a practice as prejudice.

The quality of work managed by the consultant may becompromised.

RISK RATING

High

RECOMMENDATION

Capital Works management should follow up with Supply ChainManagement (SCM) instances of repeated awarding of businessopportunities to one service supplier and establish reasons andevidence thereof.

SCM should regularly update and maintain a database of vendors toensure that as many vendors with services frequently required andneeded by the Department are readily available on the databaseawaiting the tendering procedures and awarding of business.

FINALISE ONCE SCM HAS PROVIDED CAUSE

MANAGEMENT COMMENTS

ACTION PLAN

Person Responsible:




5.CONSULTANT PROVIDED PROFESSIONAL SERVICES WITHOUT AFORMAL APPOINTMENT LETTER

STANDARD

Section 38 (1) (a) (i) of the PFMA states that the AccountingOfficer for a Department, Trading Entity and Constitution mustensure that the Department, Trading Entity and ConstitutionalInstitution has and maintains effective, efficient andtransparent systems of financial and risk management andinternal control.

According to the Departmental standard operating proceduresafter the awarding of the tender to the successful



constructor, a letter of appointment form the DepartmentalAcquisition Committee (DAC) is submitted to the constructorinforming him / her to sign a contract with the Department sothat construction on the project site may commence as perterms and conditions on the contract.

FINDING

The audit review revealed that consultant Dayabhai SchruederArchitects proceeded with the planning of the establishmentand upgrading of 8 Drivers Licence Testing Centers (DLTC)without a formal appointment letter from DepartmentalAcquisition Committee (DAC) and signing of the contract.

It was further noted that when the consultants were formallyappointed and contracted to the project officially, DayabhaiSchrueder Architects was appointed and contracted to work on 4Testing Centers only instead of 8.

CAUSE

Management allowed the consultant to commence with the planning ofthe project without the formal appointment letter fromDepartmental Acquisition Committee (DAC).

EFFECT

No recourse to the Department for non-performance or sub-standardwork where terms and conditions on work to be performed were notagreed in writing.

RATING

High

RECOMMENDATION

Capital Works Management should:



instruct to the Internal Project Planners to ensure that nowork must be performed by the consultant without a writtenappointment letter approved by DAC; and

emphasise to the Internal Project Planners that no work mustperformed prior to obtaining the appointment letter and signingof a contract between the DID and the consultant agreeing onterms and conditions of work performance.

MANAGEMENT COMMENTMeasures are in place to prevent reoccurrence of similar nature inthe business unit.

ACTION PLAN




6.THE CONSULTANT WAS PAID FOR SERVICES THEY WERE NOTAPPOINTED FOR

STANDARD

Paragraph 9.1.1 of the Treasury Regulation states that theAccounting Officer of a Department must exercise all reasonablecare to prevent and detect unauthorised, irregular, fruitless andwasteful expenditure, and must for this purposeimplement effective, efficient and transparent processes offinancial and risk management.

FINDING

The inspection of the Dinokeng Game Reserve project file revealedthat consultants Paul & Partners Engineering and QuantitySurveying invoiced the Department an amount of R296,954.34 on 19November 2010 and paid for services of Quantity Surveying yettheir appointment letter specifies that they were appointed forstructural engineering services. The planning file was notprovided to confirm and obtain documented evidence that thestructural engineering service was provided.



CAUSE

Lack of a control to ensure that the Internal Project Plannerreconcile actual work performed against the work to be performed /requested and ensure that the consultant was paid for the serviceappointed for.

EFFECT

Escalation of project costs due to failure to detect irregular,fruitless and wasteful expenditure.

RISK RATING

High

RECOMMENDATION

Capital Works management should:

task the Internal Project Planners to perform reconciliation ofinvoices against the appointment letter from DACs and work schedule prior to a recommendation for the processing of payment; and

include in the Internal Project Planner’s job allocation / assignment (IPP) the task of reconciliation to ensure that it is performed.

MANAGEMENT COMMENTS

Payments reconciling statements reflecting recovery ofamount in question was submitted to GAS. The challengeswere part of the transitional teething problems



experienced post separation of DPTRW and they have beenaddressed.

ACTION PLAN

Person Responsible: Implementation Date:



7.PROJECTS WERE PUT ON HOLD

STANDARD

Section 9.1.1 of the Treasury Regulations state that theAccounting Officer of a Department must exercise all reasonablecare to prevent and detect unauthorised, irregular, fruitless andwasteful expenditure, and must for this purpose implementeffective, efficient and transparent processes of financial andrisk management.

FINDING

The inspection of the Driver’s Licence Testing Centers (DLTC) andVosloorus Old Age Home renovation project files revealed that thefollowing projects were put on hold. Project Name Year for

Request for service

Period Projecton Hold

Reasons for on Hold

Expenditure incurredon Project

MamelodiDLTC

2010 3 years - July2010 to July2013-the timeof auditreview

Land ownershipnot finalised

R94,107.82

MabopaneDLTC

2010 3 years - July2010 to July2013-the timeof auditreview

Demographicboundaries notclearly resolved

R92,864.04

VosloorusOld Age Home

2008 4 years 2009to July 2013-

Budget notavailable

R60,236.44



the time ofaudit

CAUSE

Inadequate information provided on the Request for Service (RFS)memorandum thus impacting negatively on the planning of theprojects.

EFFECT Capital Works may not meet its Annual Performance Plan resulting

in under performance. The expected service delivery of the Departments may be poor and

negatively impacting on the communities.

RATING

High

RECOMMENDATION

Capital Works management should: standardize the template for Request for Service to ensure that

the required, complete correct, accurate and relevantinformation is provided by the Client Department to enable fast-tracking the planning of projects; and

communicate the standardised template to Client Departments andencourage their input, buy-in and implementation.

MANAGEMENT COMMENTThe projects referred to are all proceeding except forMamelodi. Expenditure on project are on hold should notbe interpreted as fruitless expenditure. Ininfrastructure projects there are preliminary activities



including geotechnical investigations that are criticalto inform the way forward. Such can further determinetrue value and feasibility of the land considered forpurchasing. As well most of holds happen during thebeginning of the political office term when new leaderstake over and put department on new strategic path thatmight not necessarily prioritise such projects. Thefunctional solution to the matter is the development ofIntegrated Infrastructure plan linked to Gauteng 2055 andNational Development Plan. DID has done preliminary workand the project was migrated to Gauteng PlanningCommission.

ACTION PLAN




8.UNREASONABLE DURATION TAKEN FOR COMPLETION OF PROJECTS

STANDARD

Section 38(1)(c)(iii) of the PFMA states that the AccountingOfficer of a Department, Trading Entity or ConstitutionalInstitution must take effective and appropriate steps to manageavailable working capital effectively and efficiently.

According to the Departmental standard operating procedures theFinal Account is the project closure stage. This stage signalsthe end of the Defects Liability Period (DLP) and takes theform of a Final Inspection by all the role players in theproject and preparation of necessary documents relating to theproject, namely quantity surveyor’s report sworn under oath,final summary of project expenditure and other reports/documents. The Internal Project Manager (IPM) must ensure thatthe prepared and compiled documents are submitted toProfessional Services Directorate for accuracy scrutiny andacceptance.

FINDING

The planning and completion of construction on certain projectsnamely schools took unreasonable duration (2008 to 2012) about 4 years to be completed.

The planning of the Kliptown DLTC project took 2 years (2010 - 2012) whilst Temba planning stage which commenced in 2010 was still in progress during the audit review in July 2013.

It was further noted that there was a delay in the finalisationof the Final Account (final project closure stage) for the following projects:



ProjectName

Projectrequest andPlanning

PlannedProjectConstructioncompletionService

ProjectFinalisationof FinalAccount

Delays inMonths

TsakanePrimarySchool

2008 25 May2012

Final accountnot in fileat the timeof the auditreview inJuly 2013

13

DinokengGameReserve

Not in file 28 June2012

13 June 2013 11

BerthaGxowaGermistonHospital

Not in file 30 October2010

Final accountnot in fileat the timeof the auditreview inJuly 20132013

32

ProjectName

Projectrequest andPlanning

PlannedProjectConstructioncompletionService

ProjectFinalisationof FinalAccount

Delays in Months

RietvalleiPrimarySchool

2008 18 January2011

22 May 2013 16

WinnieMandelaPrimary

2008 01 June2011

Final accountnot in fileat the timeof the audit

12



review inJuly 2013

CAUSE

Certain school projects were a backlog inherited from the then Department of Public Works which had to be sorted by the CapitalWorks Unit.

Lack of succession planning, where the Internal Project Planner was on a lengthy leave of absence.

Management not performing follow ups to pursue the consultant tocompile, finalise and submit the Final Account timely.

Turnaround times have not been set.

EFFECT

Budgets overruns on projects. Increased project costs resulting in cancellation or shifting of

other critical programmes by the Client Departments. No documentary evidence to confirm final inspections regarding

the defects liability period (DLP) and complete product hand-over to Capital Works.

RATING

High

RECOMMENDATION

Capital Works Management should:

immediately assign the project to the responsible staff member where lengthy leave of absence has been taken;

follow up with the consultant to ensure that the Final Account is prepared, timely submitted to the Professional Service for quality assurance and finalization.

set turnaround times for expected completion of sub-processes within Capital Works; and



communicate the set turnaround times within Capital Works Directorates to ensure compliance and implementation.

MANAGEMENT COMMENTProject duration is impacted by variety of factors atdifferent stages. Schools in particular were put on holdseveral times and later on the prototype informing thedesigns was subject of protracted development process.All projects that delay at planning stage is in the maindue to client delayed decisions or holds. UnfortunatelyDID can not proceed on its own without client approval orrequired inputs.

All final accounts which took some time to conclude, withthe exception of Germinston have been concluded throughspecial intervention whereby the matter was handled as aspecial project. Germinston Hospital Project is stillsubject to contractual processes subsequent to which thecertificate will be issued. Non issuing of thecertificate to date is still within the provisions of thecontract. ACTION PLAN




9.THERE WERE INEFFICIENCIES REGARDING THE FILLING SYSTEM ON CAPITAL WORKS PROJECTS

STANDARD

Section 40, paragraph (1) of the PFMA states that theAccounting Officer for the Department, Trading Entity orConstitutional Institution must keep full and proper records offinancial affairs of the Department, Trading Entity or



Constitutional Institution in accordance with the prescribednorms and standards.

Section 38 (1)(d) of PFMA states that the Accounting Officerfor a Department, Trading Entity Or Constitutional Institutionis responsible for the management, including safeguarding andthe maintenance of assets, and for the management of theliabilities, of the Department, Trading Entity orConstitutional Institution.

FINDINGThe following inefficiencies were identified regarding CapitalWorks projects filling system: certain project documents were not on file but kept with

individuals responsible for the projects; documents were haphazardly placed into files, in no form or

order; the sequence of the files, where the projects had more than one

file, was not reflected; and project files had no index and file checklist.

CAUSE

The Directorate lack formalised guidelines regarding record anddocuments management and safeguarding of records.

EFFECT

Poor management of records and documents may make it difficultto retrieve required documents for future purposes.

Unavailability of documentary evidence to substantiatetransactions relating to Capital Works projects expenditure maynot be verified and confirmed.

Disputes and queries may not be timely resolved due to lack ofdocuments.

RISK RATING

High



RECOMMENDATIONCapital Works management should: develop clearly defined guidelines/procedures regarding

management of records and documents as well as the filingthereof. These guidelines should amongst others include thefollowing elements:

o use of a checklist reflecting all relevant documents to beincluded in the file;

o file index as a guide on documents contained within the file;o sequential numbering of the subsequent files where the

project has more than one file; o filing documents in a chronological order with the most

recent date on top.

communicate the approved guidelines to all involved parties forimplementation; and

regularly review the records management guidelines and align tonew practices.

MANAGEMENT COMMENTSPlease refer the query to Corporate Services Branch toadvice on new document management system.

ACTION PLANPerson Responsible:




10. CAPITAL PROJECTS BUDGET FOR CERTAIN CLIENTDEPARTMENTS WAS EXCEEDED

STANDARD

Section 38(1)(c)(iii) of the PFMA states that the AccountingOfficer of a Department, Trading Entity or ConstitutionalInstitution must take effective and appropriate steps to manageavailable working capital effectively and efficiently.

Paragraph 9.1.1 of Treasury Regulations states that “The AccountingOfficer of a Department must exercise all reasonable care to preventand detect unauthorised, irregular, fruitless and wastefulexpenditure, and must for this purpose implement effective, efficientand transparent processes of financial and risk management”.

PFMA section 39 paragraph 2(a) states that “the Accounting Officermust take effective and appropriate steps to prevent any overspendingof the vote of the Department or a main division within the vote.



FINDING

Inspection of the report on expenditure estimates against actualexpenditure for capital projects as at 31 March 2013 revealed thefollowing shortcomings: that Department of Health’s budget of R344,832,000.00 and

Department of Economic Development’s budget of R 7, 559, 444.59 for capital projects was exceeded by R64,672,061.60 and R1,102,701.59 respectively.

that recorded commitments on certified invoices on projects forservices rendered on behalf of Client Departments as at 31 March 2013 amounted to R62,811,657.29 and for the client Departments mentioned in the table below:

ClientDepartment

Budget as atMarch 2012/2013

Actual Expenditure as at March 2012/2013

Commitments onCertifiedInvoices as atMarch 2012/2013

Health R344,832,000.00 R409,504,061.63

R15,985,776.95

Education R1, 076,000,000.00

R763,886,886.64 R44,722,089.11

Social R47, 700,000.00 R38,653,883.22 R2,103,791.43TOTAL commitments – on certified invoices R62,811,657.29

CAUSE

There was no alignment between the Client Department’s estimatedbudgets to the planned projected costs.

EFFECT

Increased project costs resulting in the cancellation orshifting of other critical programmes by the ClientDepartments.

The Departments which exceeded their budget commence the nextfinancial year with accruals resulting in failure to deliver



on all projects planned for the following year. Commitments not honoured timely may result in project delays

and unnecessary litigations by the service providers. RATING

High

RECOMMENDATION

Capital Works management should engage the Client Departments insharing knowledge and guidance regarding project costing in orderto ensure that projects are adequately budgeted for.

MANAGEMENT COMMENTDID submits project costs and expenditure reports toclient department s on monthly basis. Further more,client projects review meetings are held monthly to shareand clarify issues. Processing of all payments includesclient’s authorisation per payment. It should be furthernoted that clients departments do not transfer budgetsto DID. However, further interaction will be explored toprevent repetition of the same. ACTION PLAN



DID CAPITAL WORKS DRAFT REPORT 12 August 2013

Documents

Transcript of DID CAPITAL WORKS DRAFT REPORT 12 August 2013