Briefing
to Public Works Portfolio Committee
Remedial Action Auditor-General NDPW Findings
Presented by
Finance Stabilization Team – Cox Mokgoro
28 November 20121
Audit Findings - Historical Perspective Context resulting in negative audit outcomes Departmental response to context of negative audit
outcomes Key stabilisation Projects Key audit findings of disclaimed audit opinion &
high-level remedial action
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Financial Year DPW PMTE
2007/2008 Unqualified Unqualified
2008/2009 Qualified Adverse
2009/2010 Qualified Qualified
2010/2011 Disclaimed Disclaimed
2011/2012 Disclaimed Disclaimed
DownwardSpiral
Situation calls for decisive action – hence TURNAROUND!!!!
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Instability of leadership in DepartmentHR matters
Inadequate or lack of properly competent staff at all levels High level of vacancies
Lack of due diligence to controls & compliance Led to widespread mal-administration & fraudulent activities
No enforcement of accountability & disciplinePoor Monitoring & evaluationInadequacy of IT systems (controls, not integrated)PMTE business case not finalisedLack of proper planning (strategic & operational)
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Leadership Minister has met with all staff at Head Office (HO) & all 11 Regional
offices to instil new ethos, ethics, practices and cultures. Minister also met with all Unions in Bargaining Council to solicit buy-in
for change. Implementation of all MinTop & EXCO decisions closely monitored &
Senior Management to be held accountable.Vacancies & capacitation of department
DG position advertised and will hopefully be filled prior to end of current financial year.
Head-hunting for CFO underway as previous interview did not yield desired outcome.
Process to fill critical professional vacancies underway with assistance of CBE (40% of the 220 identified vacancies to be filled in current year)
In-sourcing in the interim. Establishment of joint teams with client Departments.
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Other initiatives Joint Auditor-General & NDPW two-day workshop held with all Chief
Directors & Directors to unpack audit report and agree on corrective measures.
Corrective action plans for audit findings developed with clear timelines of execution, bi-weekly meetings held to monitor progress.
Dedicated focussed teams under leadership of subject-specialists driving the action plans established.
Acting DG issued instructions to subject-specialists for timeous execution of above plans (2 months period allowed for achievement of positive outcomes).
Plan for Increased capacity of internal audit unit underway & will be finalised by end January 2013, intended to speed up investigations of alleged mal-administration cases for further corrective action.
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Acknowledging internal capacity challenges within Department, time constraints to effect basic fundamental changes in light of scale of what needs to be achieved, external intervention has been sought for the following key projects in order to stabilise the Department:
Compilation of Immovable Asset Register
Lease review and audit
Finance, SCM & review of construction and infrastructure projects
Intention is a BIG BANG approach for quick stabilisation of Department
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Tender issued Tender Awarded Service provider on Board Project on Target
Compilation of Immovable Assets Register Lease Review & Audit Finance, SCM & Review of Construction Projects
Programme fully underway expected to be substantially completed 31 March 2014.
Extensive reconciliation of National & Provincial current IARs completed against Deeds Registry.
Outstanding land parcels meant for vesting in Provinces have been identified.
Framework for vesting of all land parcels is being developed.Majority of land parcels to be vested expected to be completed by
31 March 2014.National Treasury has been requested to enhance the Sector
Specific Guide to allow for interim disclosure arrangements which can be applied uniformly across government. These arrangements deal with unvested properties as a fair value model to be applied.
Physical verification of immovable assets is due to start in January 2013.
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SIU investigations intensified and reports issued to Department
Auditor-General performed special audit on leases & provided useful recommendations.
Service provider appointed (start duty 3rd Dec 2012) to audit all leases (lease files & physical verification of buildings occupied or so deemed) with a follow-up on Lease environment Business Process Re-engineering (BPR). Service provider to recommend improvements on BPR.
Audit and review of all leases to be completed by 28 February 2013.
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Service provider award expected to be made prior to December 2012 recess. Successful bidder to start 2nd week of January 2013. Terms of Reference include proposals for the following:
Enhancement of finance & Supply Chain Management (SCM) functions with specific objective to clear all negative audit findings;
Conduct a comprehensive analysis of a sizeable sample of infrastructure projects to identify potential risk areas for monitoring and for further corrective action by Department;
Conceptualise and implement a change management strategy for Department; Implement a formalised skills transfer programme for existing NDPW & PMTE
staff; and Engage interns from unemployed graduates for the project with clear and
formalised Skills Development Plan. Deliverables
Non-negotiable deliverables aligned to financial year-ends (2012/13 & 2013/14) as minimum requirements to achieve improved audit outcomes.
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FINDING NDPW PMTE Actions AssessmentOperating leasesLease commitmentsLease revenueMunicipal rates & taxes
Technical accounting treatment of transactions
Technical accounting treatment of transactions – cut off, etc
Implementation of contract management system Business Process Re-engineering of leasing function
Enhance lease IT platform
Review tenant installation policy Validate data integrity on PMIS Introduce policy on advance lease payments
FINDING NDPW PMTE ACTIONS AssessmentRelated Party transactions
No support for assumptions used to determine indirect costs incurred on behalf of PMTE
No support for assumptions used to determine indirect costs paid for PMTE by NDPWLack of proper accounting system for receivables & receivables unreconciled
Review model for apportionment of costs
Interim decision to specify PMTE related line functions to define interim working structure
Enhance accounting guide for use by Regions Identify all state properties not transacted at arm’s length
FINDING NDPW PMTE ACTIONS AssessmentTrade & other Receivables
Could not verify debtors balance at Y/ETechnical accounting treatment of balance – provide for an impairment provision
Assessment of individual debtors through reconstruction and reconciliation
Reconstruct the disputed debtors
Implement billing and accounting IT system Approval for system obtained from National Treasury
Budget Management
Budget management not formalised
Budget management not formalised
Comprehensive monthly reporting to EXCO Budget management process to be enhanced Close out all in-active open orders
FINDING NDPW PMTE ACTIONS AssessmentFinance Policies Policies outdated
& overtaken by numerous circulars
Policies outdated & overtaken by numerous circulars
Policies relating to prescribed accounting standards to be developed and implemented
Contingent assets N/a Assessment of
probability of inflows due to claims by PMTE not done appropriately
Engage legal & State Attorneys in legal case assessment