section 100(1)(b) implementation in limpopo department of roads and transport

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SECTION 100(1)(b) IMPLEMENTATION IN LIMPOPO DEPARTMENT OF

ROADS AND TRANSPORT

PROGRESS REPORT PRESENTATION TO THE SELECT

COMMITTEE ON FINANCES, NCOP, 15-16OCTOBER 2013

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Presentation Outline

Background information The process Progress to date Responses and progress on issues raised by SCOF Way forward Recommendations

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Background Information

This presentation seeks to report back on the progress made in the implementation of Section 100(1)(b) of the RSA Constitution.

Good and commendable progress has been achieved; mainly in the department whereas some work still needs to be done at the Roads Agency Limpopo (RAL) and the Gateway Airports Authority Limited (GAAL). Challenges at the two agencies range from legislative, governance and resources management. It is still relevant to pursue the investigation on the appropriate model to deliver roads infrastructure in the Province.

The team has entered a final phase focusing on a handing over process in the department while setting up appropriate systems and turnaround plan for RAL and GAAL to ensure sustainability of the recovery path.

The Process

DIAOGNOSIS:Status QuoSystemsPeople

TURNAROUND:StabilizeInvestigateReview

IMPLEMENT:StructureSystemsPeople

NEW

NO

RMAL

ITY

EXIT

& M

ON

ITO

R

TURNAROUND / RECOVERY PLAN

We are here

Progress to date

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Finalised the diagnosis and developed a Turnaround/ Recovery Plan focusing on the following key issues: Organisational re-alignment and learning Public entities restructuring Financial management Contract management Public transport Cost containment

Cash situation stabilized. The Department has not over spent on the 2012/13 current budget.

Paid all outstanding invoices with 99% currently being paid within the required 30 days. Implementing cost containment measures.

Introduced internal controls i.r.t SCM in general and also invoice verification in particular.

Progress to date…

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Aligned the 2012/13 budget to the Strategic Plan, APP and broken it down to project level.

Seconded an official from the Department to act as interim CEO for the duration of the intervention.

Reviewed 11 financial management at RAL. Reviewed and amended 14 policies at GAAL. Re-instated the CEO of GAAL Improved contract management in the department. Implemented 80% of the Public Protector’s recommendation.

Outstanding issues are related to either legal or criminal processes underway.

Progress to date…

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Obtained unqualified Audit Report for 2012/13 Cleared the payments backlog at RAL. Stopped the usage of hand written chegues at GAAL and working on

total reliance on electronic transactions for all payments. Forensic and related investigations progressing satisfactorily: The intervention team referred 33 suspicious invoices to the forensic

investigators. 5 cases have been registered with the police as a result of the forensic

investigation commissioned by the Treasury at the start of the intervention, The SIU/ACTT indicates that 9 service providers and 2 officials of the

department have been arrested in connection with the potholes contracts. Former CEO and an official of RAL as well as a private service provider

have been arrested on fraud and corruption charges. There are also 30 cases of conflict of interest, financial non-disclosures,

doing remunerative work outside without permission.

Responses to issues raised in the SCOF report

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Issues Responses4.1 Cash position The department and the two agencies all reflect positive cash

balances with no danger of over-spending and/or huge over commitments. Since the intervention there has never been a single payment run that was missed.

4.3 Thirty day payment compliance

The department and GAAL are at 95% compliance. The remaining 5% is due to protracted disputes over invoice or payment certificate information; especially in the case of infrastructure projects. The latter also apply for RAL

4.4 Cost containment measures

The department was able to realize a saving of R11, 642m as a result of cost containment mainly on the following goods and services non-core items as well as R47, 813m on machinery and equipment compared to 2011/12 financial year.

Responses to issues raised in the SCOF report…

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Issues Responses4.5 Revenue

enhancement strategy

The department remains one of the top contributors to the provincial revenue. In 2012/13 it collected R301,568m against the budget of R292,439m and the projection for 2013/14 is R356,456m

4.6 Reduction of compensation of employees

The department increased compensation of employees by R26m in the current financial year (to address job evaluations backlog) and 5.6% in the MTEF.

4.7 Infrastructure Delivery Management System

Infrastructure delivery acceleration plans for both the department and RAL have been developed.


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Issues Responses4.8 Organizational

realignment and strengthening

All top positions in the department have been filled. The Board of Directors of RAL has been disbanded after three members resigned and there were only two left; as such it could no longer quorate for meeting and able to form sub-committees. Nominations for the new Board will be called in October 2013. The positions of CEO, CFO, Executive Managers Engineering and Corporate Affairs have been advertised and should be appointed before year end. The investigation on the appropriate model to deliver on specialized services that was focused on RAL has been expanded to include GAAL and should pronounce on the future thereof. The CEO of GAAL is also back from suspension and the (interim) Board will also be appointed before year end.


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Issues Responses4.9 Financial

management skills and capacity

There has been assistance from the Provincial Treasury on training in financial management in general but also in SCM in particular. The department also took the Bid committee members through the PALAMA induction training. GAAL and RAL also combined efforts and held a joint training session in financial management.

4.10

Procurement management

Internal control weaknesses have been improved and SCM policies and procedures reviewed, hence the favourable audit report for the department. Efforts are being made to ensure that the same applies for RAL and GAAL. At RAL the national DOT deployed and interim CFO and CEO who both have financial management skills. At GAAL the Financial Manager is being investigated for irregularities in the management of finances.


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Issues Responses4.11 Audit

The department got an unqualified audit opinion while RAL and GAAL got qualified. RAL’s audit opinion is still outstanding

4.12 Expenditure trends As at 30 September the expenditure of the department was at 29%, that of RAL at 13% and that of GAAL at 59%. While there is no danger of overspending there is a need to guard against under- expenditure. This will be monitored carefully to ensure that service delivery is not hindered. Infrastructure delivery plans of both the department and RAL have been developed.


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Issues Responses4.13 Restructuring of

public entitiesThe Board of Directors of RAL has been disbanded after three members resigned and there were only two left; as such it could no longer quorate for meeting and able to form sub-committees. Nominations for the new Board will be called in October 2013. The positions of CEO, CFO, Executive Managers Engineering and Corporate Affairs have been advertised and should be appointed before year end. The investigation on the appropriate model to deliver on specialized services that was focused on RAL has been expanded to include GAAL and should pronounce on the future thereof. The CEO of GAAL is also back from suspension and the its (interim) Board will also be appointed before year end.


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Issues Responses9.3 Management of procurement processes,

absence of guidelines, changing of Administrators and the fact that the intervention process was new, created challenges in as far as effective implementation was concerned

There has never been a change of an Administrator for Roads and Transport since the start of the intervention. The Minister of Transport recently approved delegations of authority to the provincial MEC for Roads and Transport.

9.4 Under spending on conditional grants occurred according to planned slow down in spending to contain costs. There were investigations in certain cases involving tenders/contracts by National Treasury and underperformance by the departments

Infrastructure delivery acceleration plans for both the department and RAL have been developed to ensure that both do not again under-spend on conditional grants.


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Issues Responses9.17 The Provincial Department of Roads and

Transport assisted the GAAL with R50 million funding but the agency generated only R6 million

The investigation on the appropriate model to deliver on specialized services that was focused on RAL has been expanded to include GAAL and should pronounce on the future thereof

9.18 The Administrator for the Department of Roads and Transport reported satisfaction on the basis that much of the ground had been covered and the majority of issues had been resolved. Concerns were expressed over infrastructure and winding down GAAL, to which the MEC and HOD concurred

Already the department is doing invoice verification and the intervention team monitors. There are considerations to hand over the entire payment processing function with the procurement to follow.


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Issues Responses10.11 The Provincial Department of Roads

and Transport should facilitate the winding down of the GAAL so that its future can be speedily established

The investigation on the appropriate model to deliver on specialized services that was focused on RAL has been expanded to include GAAL and should pronounce on the future thereof

10.13 The Office of the Premier should submit a report to the House about the investigations that are being done, regarding the suspension of the GAAL CEO, as a matter of urgency

The CEO was suspended by the previous Board that was itself dissolved by the former MEC. That Board contested their dissolution and a legal opinion confirmed that it was irregularly dissolved; however by the time legal clarity on the matter was obtained the Board’s term of office had naturally expired. The CEO has since returned to his position.


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Issues Responses10.14 The Administrator for the Department

of Roads and Transport should submit a service delivery report to the House, three months after the adoption of this report, detailing the plans to resolve infrastructure issues

An Infrastructure Service Delivery Plan has been developed and delivered to Parliament

Way forward

The gradual hand over to the provincial department as per Cabinet decision of 12 August 2013. Identify more responsibilities that can be handed over immediately, in the next 3 months.

Filling of key positions especially at RAL. Finalise an appropriate model to deliver roads infrastructure for the

province. Prosecute outstanding DC cases. Develop a monitoring system to ensure sustainability of the

intervention gains Develop a comprehensive close out report that includes lesson

learned, deployment strategy for future interventions.

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Concluding Remarks Cabinet announced on 12 August 2013 that the teams should start a “6

months period of hand over to the Premier and his new Executive.” Already the department is processing all payments and the intervention team only monitors the process.

The provincial department has stabilised and the team can spend more time at RAL to ensure that systems are in place at assumption of duty by the new team (new Board and competent management team).

Generally, there has been support and cooperation from the Department led by the HOD.

However at RAL there are still challenges with regard to cooperation mainly due to instability related to high vacancy rate at key positions. There seems to also be a high level of anxiety among staff as a result of the ongoing investigations. It is hoped that filling of key positions would result in certainty and therefore stability at the agency.

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Recommendations

It is recommended that SCOF note progress made with regard to the implementation of Section 100(1)(b) of the Constitution in the Limpopo Department of Roads and Transport.

THANK YOU

section 100(1)(b) implementation in limpopo department of roads and transport

Documents

limpopo department of

commendable progress

official of ral

roads agency limpopo

turnaround plan

intervention team

outstanding issues

forensic investigation