ANNUAL REPORT 2012 - 2013 · 1. Introduction 51 1.1 Personnel related information 51 1.2 Employment...

12012 -2013 ANNUAL REPORT

DEPARTMENT OF HUMAN SETTLEMENTSANNUAL REPORT 2012 - 2013

2 2012 -2013 ANNUAL REPORT

TABLE OF CONTENTS

PART A GENERAL INFORMATION

1. Information about the department 5

2. List of abbreviations / Acronyms 6

3. Strategic overview 7

4. Legislative and other mandate 7

4.1 Constitutional Mandate 7

4.2 Legislative Mandates 7

4.3 Policy Mandates 9

4. 4 Planned Policy Initiatives 9

5. Organisational Structure 10

6. Entities reporting to the department 10

7. Foreword by the MEC 11

8. Overview by the Accounting Officer 12

PART B PERFORMANCE INFORMATION

1 Statement of Responsibility 15

2 Auditor General’s Report: Predetermined Objectives 16

3 Overview of the Departmental Performance 16

3.1 Service Delivery Environment 16

3.2 Service Delivery Improvement Plan 17

3.3 Organisational Environment 17

3.4 Key Policy Development and Legislative Changes 18

3.5 Strategic Outcome Oriented Goals 18

3.6 Performance Information per Programme 19

3.6.1 Programme 1: Administration 19

3.6.2 Programme 2: Housing Needs, Research and Planning 21

3.6.3 Programme 3: Housing Development, Implementation, Planning and Targets

23

3.6.4 Programme 4: Housing Assets Management 34

3.7 Summary of Financial Information 36

PART C: GOVERNANCE

1. Introduction 41

2. Risk Management 44

3. Fraud and Corruption 45

4. Minimising Conflict of Interest 45

5. Code of Conduct 45

6. Health, Safety and Environmental Issues 45

7. Internal Control Unit 46

8. Report of the Audit Committee 46


PART D: HUMAN RESOURCE MANAGEMENT

1. Introduction 51

1.1 Personnel related information 51

1.2 Employment and vacancies 52

1.3 Job evaluation 53

1.4 Employment changes 54

1.5 Employment equity 55

1.6 Performance rewards 59

1.7 Foreign workers 61

1.8 Leave utilization 62

1.9 HIV/AIDS and health promotion programmes 63

1.10 Labour relations 67

1.11 Skills development 68

1.12 Injury on duty 70

1.13 Utilization of consultants 70

PART E: FINANCIAL INFORMATION

• Report of the Audit Committee * Report in Part C, on page 46 46

• Report of the Accounting Officer 74

• Report of the Auditor-General 81

• Appropriation Statement 88

• Notes to the Appropriation Statement 98

• Statement of Financial Performance 100

• Statement of Financial Position 101

• Statement of Changes in Net Assets 102

• Cash Flow Statement 103

• Notes to the Annual Financial Statements (including Accounting policies) 104

• Disclosures Notes to the Annual Financial Statements 121

• Annexures 132


PART AGENERAL INFORMATION


1. GENERAL INFORMATION

Name of the Department: Human Settlements

Physical Address: Lebohang Building 7th Floor Cnr St. Andrews and Markgraaff Streets Bloemfontein Free State 9301

Postal Address: PO Box 211 Bloemfontein 9300

Contact Telephone Numbers: Head of Department: 051 403 3883 Chief Financial Officer: 051 405 5391 Chief Director: Corporate Services: 051 403 3655

E-Mail Address: Head of Department: [email protected] Chief Financial Officer: [email protected] Chief Director: Corporate Services: [email protected]

Website Address: www.freestateonline.fs.gov.za www.fscogtahs.gov.za


2. LIST OF ABBREVIATIONS / ACRONyMS

Breaking New Ground: BNG

Community Residential Units: CRU

Department of Cooperative Governance and

Traditional Affairs: COGTA

Department of Human Settlements: HS

Enhanced Extended Discount Benefit Scheme: EEDBS

Finance Linked Individual Subsidy Programme FLISP

Historically Disadvantaged Individuals HDIs)

Housing Development Agency: HDA

Integrated Development Plans: IDP

Memorandum of Understanding: MOA

National Home Builders Registration Council NHBRC

National Upgrading Support Programme: NUSP

National Urban Reconstruction Housing Agency: NURCHA

People’s Housing Process: PHP

National Housing Finance Corporation NHFC

OHS

Safety, Health, Environment, Risk and Quality: SHERQ


3. STRATEGIC OVERVIEW

Vision: Integrates and sustainable human settlements

Mission: The department will develop cohesive, sustainable and integrated human settlements in the Free State

Values: The department’s inherent values as informed by, among others, Batho Pele principles are:(a) Professionalism, Integrity and Leadership(b) Value for Money and Accountability (c) Partnership(d) Compassion and Empathy(e) Restoration of Dignity and Resilience(f) Environment - Friendly

4. LEGISLATIVE AND OTHER MANDATES

4.1. Constitutional Mandate

The Constitution of the Republic of South Africa, 1996, redefined local government as a sphere of government that is distinctive from, yet interdependent and inter-related with provincial and national government. Importantly, the Constitution conferred developmental duties to local government

4.2. Legislative and other Mandates

(i) Constitution of the Republic of South Africa Act No 108 of 1996: The Constitution obligates and enjoins the state through the Department of Human Settlements to take legislative and other measures to ensure the progressive realisation of this right.

(ii) Public Finance Management Act No. 1 of 1999 (as amended by the Public Finance Management Amendment Act No. 29 of 1999) To regulate financial management in the national and provincial governments; to ensure that all revenue, expenditure, assets and liabilities of those governments are managed efficiently and effectively; to provide for the responsibility of persons entrusted with financial management in those governments; and provide for matters connected therewith.

(iii) Preferential Procurement Policy Framework Act No Act 5 of 2000: To regulate procurement of goods and services for the Department in compliance with section 217 of the Constitution by ensuring that all procurement processes are fair, transparent, equitable, competitive and cost effective

(iv) Division of Revenue Act of every year during 2010/2014: To provide for the equitable division of revenue raised nationally among the national, provincial and local spheres of government for the 2010/2014 financial year; to provide for reporting requirements for allocations pursuant to such divisions; to provide for the withholding and the delaying of payments; to provide for liability for cost incurred in litigation in violation of the principles of co-operative governance and intergovernmental relations; and to provide for matters connected therewith.

(v) Conversion of Certain Rights into Leaseholds or Ownership Act No. 81 of 1988: This Act provides for the conversion of certain rights of occupation issued to a holder of a site situated in a township whether such township has been formalized or not- established under the now revoked Black Communities Act 4 of 1984, into leasehold or ownership. The Act therefore makes provision for the determination of affected sites or persons; an inquiry into affected sites; grievance (appeal) procedures; and the issuing of leaseholds or transfer of ownership.

(vi) Black Communities Development Act No. 4 of 1984: The Act was repealed save for Chapter 6 and the Regulations thereto. As will appear from the above paragraph, this Act is the principal Act 81 of 1988 and makes provision for the designation of certain areas as development areas and makes provision for township establishment.

(vii) Upgrading of Land Tenure Rights Act No. 112 of 1991: This Act makes provision for the upgrading of informal rights, viz., and the deeds of grant, leaseholds and quitrent title permission to occupy.

(viii) Interim Protection of Informal Land Rights Act: This Act recognizes certain informal rights to land. One of the functions of the section is to resettle people who are unlawfully occupying land. In the process, it is incumbent on


the section to ensure that the informal rights to land are recognized in the process of such resettlement.

(ix) The Housing Act No. 107 of 1997: Through this legislation, existing and future, and the Housing Code, the Department of Housing is carrying out its legislative imperative as set out in the Housing Act, 1997. Section 2 of the Housing Act, 1997 (Act No. 107 of 1997) compels all three spheres of government to give priority to the needs of the poor in respect of housing development (section 2(1)(a)). In addition all 3 spheres of government must ensure that housing development provides as wide a choice of housing and tenure options as is reasonably possible -

a) is economically, fiscally, socially and financially affordable and sustainableb) is based on integrated development planningc) is administered in a transparent, accountable and equitable manner, and upholds the practice of good

governance (Section 2(1)(c)).

(x) Prevention of Illegal Eviction from and Unlawful Occupation of Land Act of 1998: The Prevention of Illegal Eviction from and Unlawful Occupation of Land Act was promulgated in 1998. The Act repeals the Prevention of Illegal Squatting Act No. 52 of 1951 and makes provision for a fair and equitable process to be followed when evicting people who have unlawfully invaded land, from their homes. The Act also makes it an offence to evict legally without due process of law.

(xi) The Housing Consumers Protection Measures Act of 1998: The Act provides for the establishment of a statutory regulating body for homebuilders. The National Home Builders Registration Council will register every builder and regulate the home building industry by formulating and enforcing a code of conduct. The implementation of the Act is monitored continuously

(xii) The Rental Housing Act No. 50 of 1999: This Act repeals the Rent Control Act of 1976 and defines Government’s responsibility for rental housing property. It creates mechanisms to promote the provision of rental housing and the proper functioning of the rental housing market. To facilitate sound relations between tenants and property owners, it lays down general requirements for leases and principles for conflict resolution in the rental-housing sector. It also makes provision for the establishment of Rental Housing Tribunals and defines the functions, powers and duties of such Tribunals. Provincial housing departments are establishing Rental Housing Tribunals.

(xiii) Home Loan and Mortgage Disclosure Act of 2000: The Act provides for the establishment of the Office of Disclosure and the monitoring of financial institutions serving the housing credit needs of communities. It requires financial institutions to disclose information and identities discriminatory lending patterns. The act will come into operation during 2003.

(xiv) Subdivision of Agricultural Land Act No. 70 of 1970: This Act is used for Town Planning advice to the Department of Land Affairs on the subdivision of agricultural land.

(xv) The Development Facilitation Act No. 67 of 1995: This Act provides directive principles to guide the drafting, adoption and implementation of all policies and legislation for all spheres of government regulating spatial planning, land use management and land development.

(xvi) The Townships Ordinance No. 9 of 1969: This Ordinance is used for the establishment of towns, subdivision and consolidation, amendment of the general plan and the amendment of town-planning schemes. The townships board is also instituted in terms of this ordinance.

(xvii) Disestablishment of SA Trust Limited Act No. 26 of 2002: The winding down of the South African Housing Trust and the transfer of functions relating to financial obligations were completed during the end of 2002 and the beginning of 2003 in terms of Act 2002: Disestablishment of SA trust Limited Act, 2002.

(xviii) The Removal of Restrictions Act No. 84 of 1967: In terms of this act, land use is changed by means of either title conditions or rezoning.

(xix) The Less Formal Township Establishment Act No. 113 of 1991: This Act is specifically for guiding rapid township establishment where housing is in dire need.

(xx) The Physical Planning Act No. 125 of 1991: This Act governs secondarily deals with land uses on farmland that is not agriculture related by way of permits and it also enables the amendment of guide plans and the evaluation of consistency regarding land development

(xxi) Public Audit Act 25 of 2004: Regulates the audit of Government Departments and State Owned Enterprises

(xxii) Social Housing Act, Act 16 of 2008: Regulates the Social Housing Market


(xxiii) National Spatial Development Perspective (NSDP): The NSDP also included a mechanism aimed at aligning spatial choices around government investment and development spending across all sphere of government. This approach seeks to focus the bulk of fixed investments of government on those areas with the potential for sustainable economic development. In these areas, Government’s objectives of both promoting economic growth and alleviating poverty will best be achieved. In areas of limited potential, it is recommended that beyond a level of basic services, which all citizens are entitled government, should concentrate primarily on social investment such as human resource development, labour market intelligence and social transfers to give people in these areas better information and opportunities to gravitate towards areas with economic potential.

4.3. Policy Mandates

a) Free State Growth and Development Strategy and Provincial Spatial Development Frameworkb) State of the Nation Addressc) Budget Vote Speech of the (National) Minister of Human Settlementsd) Premier’s State of the Province Addresse) Budget Speech of the MECf) Human Settlements Provincial Outcome Based Plang) MEC’s Service Delivery Agreementh) The Comprehensive Housing Plan

4.4. Planned Policy Initiatives

· Policy on housing assistance for Orphaned and Vulnerable Children.

This policy will regulate circumstances where under orphaned and vulnerable children will be provided with housing assistance and opportunities.

· Policy on housing assistance for Land Restitution Beneficiaries.

This policy will regulate circumstances where under beneficiaries of land claim restitution will be provided with housing assistance and opportunities.

· Policy on housing assistance for Military Veterans.

This policy will regulate circumstances where under military veterans will be provided with housing assistance and opportunities.

· Policy on alternative building methods, technology, material etc .

This policy will regulate the conditions where under contractors will be allowed to utilize alternative building methods, technologies and materials.


5. ORGANIZATIONAL STRUCTURE

INTERNAL AUDIT O Themba

Director Tel. 051 403 3645

OFFICE OF THE HoD M. Mokoena

Director Tel. (051) 403 3655

SECURITY MANAGEMENT AND ANTI-CORRUPTION

Vacant Director

DDG: HUMAN SETTLEMENTS MC Monyela

Deputy Director-General Tel. (051) 405 4727

FINANCIAL AND SUPPLY CHAIN MANAGEMENT CHIEF DIRECTORATE

D Hattingh Chief Financial Officer Tel. (051) 405 5391

CORPORATE SERVICES CHIEF DIRECTORATE

Vacant Chief Director

DEPARTMENT OF HUMAN SETTLEMENTS Tim Mokhesi

Head of Department Telephone No: 051405 4727

MEMBER OF THE EXECUTIVE COUNCIL: COOPERATIVE GOVERNANCE, TRADITIONAL

AFFAIRS AND HUMAN SETTLEMENTS S.M. Mlamleli

Executive Authority Tel. No. 051 405 5732

6. ENTITIES REPORTING TO THE DEPARTMENTNONE


7. FOREWORD By THE MEC

One of the foundations of civilised society is creation of a community that, in a democratic society, is established in a human settlement that conforms to the basic human rights. For is it not the standard that was set by the Freedom Charter that: “All people shall have the right to live where they choose, be decently housed, and bring up their families in comfort and security; ...?” This is the centre-piece of our responsibility to provide and coordinate human settlements in the province, as integrated human settlements is an element of establishing communities in a decent manner.

We have in the past decade successfully availed land for human settlement in which our people have been decently housed. And many settlements today bear testimony that we have not diverged from our vision.

The Free State government remains committed to the provision of decent shelter and settlements wherein people have access to clean water and proper sanitation.

As a collective, we remain committed to accelerating the delivery of housing as a key strategy for poverty alleviation and utilizing the provision of housing as one of the major job creation strategies.

Despite numerous challenges, the department soldiered on in its quest to provide decent housing to needy Free State citizens. To mention some of our successes:

• Low-income affordable housing units were constructed

• Deeds of transfer were registered in favour of qualifying beneficiaries

• Erven were planned and surveyed for human settlement development purposes.

• Municipalities were supported for level 1 accreditation, while the Mangaung Metro was supported for level 2

accreditation.

• Households in newly-formalized areas were provided with access to basic water and sanitation

• The department was able to spend 99% of its grant funding.

As I indicated earlier, we had challenges in the past year but I remain optimistic that we are equal to the task. The challenges that came our way were met head on and we will continue to work hard to improve our performance for the benefit of our people.

SM MLAMLELIEXECUTIVE AUTHORITy FOR COOPERATIVE GOVERNANCE, TRADITIONAL AFFAIRS AND HUMAN SETTLEMENTS

MEC SM MLAMLELIEXECUTIVE AUTHORITy


8. OVERVIEW By THE ACCOUNTING OFFICER

The apartheid legacy of spatially and economically marginalizing the poor resulted in people living far from job opportunities and major services, typically in “dormitory” type residential areas. Many of our people continue to survive without basic services in the many informal settlements as a result. Even those of our people who have jobs and a consistent salary find it difficult to sustain a decent quality of life, as they fall outside of the subsidy bracket but at the same time are unable to afford and access the mortgage products available from commercial banks.

In the comprehensive effort to address the spatial distortions of the past and to stimulate the entire residential property market, the Human Settlements MinMec as well as the cabinet approved the Comprehensive Plan for the development of Sustainable Humans Settlements - popularly known as the Breaking New Ground (BNG) plan on 2 September 2004.

The said BNG had the following objectives underpinning it, namely

• Stimulation of residential property market

• Spatial restructuring and integration

• Social ( medium density) housing

• Informal Settlements upgrading

• Institutional Reform and Capacity Building

• Housing Subsidy Funding System Reforms

• Job creation and poverty alleviation.

Several pilot projects were implemented under each of these principles and objectives following the four main interventions as enshrined in the 2009 National Housing Code. Within this broader vision, the department is committed to meeting the following specific objectives.

• Accelerating the delivery of housing as a key strategy for poverty alleviation

• Utilizing provision of housing as a major job creation strategy

• Ensuring that property can be accessed by all as an asset for wealth creation and empowerment

• Leveraging growth in the economy

• Combating crime, promoting social cohesion and improving quality of life for the poor.

• Supporting the functioning of the entire single residential property market to reduce duality within the sector

by breaking the barriers between the first economy residential property boom and the second economy slump.

• Utilizing housing as an instrument for the development of sustainable human settlements, in support of spatial

restructuring.

After the 2009 national and provincial elections the Presidency introduced the Outcome Based approach to the implementation of the Medium Term Strategic Framework that embodied the five priorities of the ruling party for the 2009 – 2014 elective cycle. The Human Settlements sector was assigned the role and responsibility of implementing Outcome 8: Sustainable Human Settlements and Improved Quality of Household Life.

Consequently, the National Minister and the MEC signed a delivery agreement in 2009 in which the province through the MEC, committed itself that for the period 2009-2014 it will:

• Upgrade 26 400 households in well-located informal settlements with access to basic services and security tenure.

• Develop 5 280 well-located and affordably priced rental accommodation

• Accredit 1 Metropolitan Municipality

N MOKHESIACCOUNTING OFFICER


• Expand the National Upgrading Support Programme to six municipalities.

The above commitments are an integral part of the three Outputs that characterize Outcome 8 namely:

• Output 1: Accelerated Delivery of Housing Opportunities

• Output 2: Improve access to sanitation in newly-formalized areas

• Output 3: Mobilization of well-located public land for low-income and affordable housing

Outcome 8 targets can only be realized on the assumption that adequate funding will be available towards achieving the above targets. This is however unfortunately not the case. Human settlement delivery is primary funded through the Human Settlements Development Grant (HSDG), which is not nearly adequate towards achieving the target of 26 400. Despite some achievements since 2009, the targets as contained in Outcome 8 will not be realized unless alternative funding is secured through the equitable share or through partnerships with private business.

Moving towards 2014, we have indicated that we will consolidate and finalize all outstanding and/or incomplete human settlement projects, thereby ensuring that we provide adequate shelter to beneficiaries who have been waiting for their houses for a considerable time now. New projects towards achieving the targets as per Outcome 8, and specifically in relation to Output 1, will therefore only be identified after 2014. Output 1, will only be identified after 2014.

N. MOKHESIHOD: HUMAN SETTLEMENTSDate: 2013/05/31


PART BPERFORMANCE INFORMATION


1. STATEMENT OF RESPONSIBILITy FOR PERFORMANCE INFORMATION By THE ACCOUNTING OFFICER

(i) The Accounting Officer is responsible for the preparation of the department’s performance information and for the judgements made in this information.

(ii) The Accounting Officer is responsible for establishing, and implementing a system of internal control designed to provide reasonable assurance as to the integrity and reliability of performance information.

(iii) In my opinion, the performance information fairly reflects the performance information of the department for the financial year ended 31 March 2013.

N. MOKHESIHOD: HUMAN SETTLEMENTSDate: 2013/05/31


2. AUDITOR GENERAL’S REPORT: PREDETERMINED OBJECTIVES

Usefulness of information

A total of 16% of significantly important indicators in relation to the overall mandate of the department were not verifiable in that valid processes and systems that produce the information on actual performance did not exist. This was due to lack of controls in the relevant systems of collection, collation, verification and storage of actual performance information.

Reliability of information

A total of 25% of significantly important targets with respect to programme 2: housing needs, research and planning are not reliable when compared to source information or evidence provided. This was due to the lack of monitoring of the completeness of source documentation in support of actual achievements.

In addition, a total of 20% of significantly important targets with respect to programme 3: housing development, implementation, planning and targets are not reliable when compared to the source information and/or evidence provided. This was due to the lack of frequent review of validity of reported achievements against source documentation.

Achievement of planned targets

Of the total number of 61 targets planned for the year, 40 were not achieved during the year under review. This represents 66% of total planned targets that were not achieved. This was mainly as a result of inadequate capacity due to inadequate staffing and prolonged disciplinary suspensions.

3. OVERVIEW OF THE DEPARTMENTAL PERFORMANCE

3.1 Service Delivery Environment

3.1.1 The Free State Department of Human Settlements has a wide variety of tasks related to its specific provincial mandates. In policy terms, the Housing Arrangement Act was put in place in 1993 to support the political changes and to rationalize housing funding and housing provision such that housing would no longer be the responsibility of racially defined housing units, but would be centrally funded and co-ordinated. The Housing Arrangement Act also designated Provincial Housing Boards as the main delivery agents within the four provinces. The original four boards became nine in 1997 when the Housing Act of 1997 was enacted so that each of the newly established provinces would have its own housing board.

3.1.2 In 1999, the Free State Province enacted its own Free State Housing Act, which made provision for a Free State Provincial Housing Board as the primary delivery agent of state-supplied-housing. In keeping with the roles defined by the National Housing Act, the Free State Housing Boards were intended to help facilitate housing provision. They did not however; last very long and with the introduction of the National Housing Code in 1998, the ultimate responsibility for Housing was handed to provincial housing MECs. Thus, in 2000, there was an amendment to the Free State Housing Act in which the Free State Provincial Housing Board was abolished, and all roles and responsibilities for housing provision were handed over to the department.

3.1.3 The (provincial) Department of Human Settlements has realistically only been involved in the actual process of housing allocation and delivery for a little under ten years. Given the backlog that the Free State Province had to deal with, along with the administrative challenges that it inherited, this is not a very long time to create a functional human settlements department. In addition to this, the original Housing Code and Housing Subsidy Scheme were changed and broadened in 2003 with the introduction of the New Comprehensive Plan for Housing Delivery (Breaking New Ground) and the Department has also recently, been restructured. These constant upheavals affected the department and its ability to administer and facilitate the delivery of housing needed in the province.


3.1.4 Despite numerous challenges, the department succeeded to achieve the following during the past (2012/2013) financial year:· 3 706 Low-income affordable housing units were constructed, including:

- 115 Dilapidated houses were renovated- 63 Emergency / disaster housing units were constructed- 14 Housing units were constructed as per the People’s Housing Process- 205 Incomplete houses were completed- 3252 Breaking New Ground (BNG)

· 2 075 Deeds of transfer were registered in favour of qualifying beneficiaries· 11961 Erven were planned and surveyed for human settlement development purposes· 3 Municipalities were targeted for the expansion of the National Upgrading Support Programme (NUSP).· Mangaung Metro was supported for level 2 accreditation.· 3 410 Households in newly-formalized areas were provided with access to basic water.· 4 626 Households in newly-formalized areas were provided with access to basic sanitation.· Consumer education trainers were mentored in all municipalities· All municipalities were capacitated on various housing programmes and councilors were trained on Human

Settlements policy and programmes · 346 rental units were delivered through the Social Housing Programme in Brandwag, Mangaung.· 233 Units were delivered through the Community Residential Units (CRU) Programme in Matjhabeng.

3.2 Service Delivery Improvement Plan

The Service Delivery Implementation and Improvement Plans were not done due to the suspension of Senior Managers and Budget Limitations.

3.3 Organizational Environment

In alignment with changes made at the national government level after the 2009 elections, the previous Department of Local Government and Housing was divided into two separate departments during 2009, i.e. the Department of Cooperative Governance and Traditional Affairs (COGTA), and the Department of Human Settlements (HS), both under the control of a single Member of the Executive Council. This implied the creation of adequate capacity in both departments in relation to Programme 1 Services (e.g. Corporate Services, Office of the CFO, Internal Audit and Risk Management, Security Management and Anti-Corruption and District Services). Due to financial – and human resources constraints and as a transitional arrangement (pending the availability of sufficient funding), both departments made, since 1 September 2009, use of a ‘shared’ Programme 1 Services, creating numerous challenges for both departments, worsened by a lack of available funds (budget) to create sufficient human resources capacity in either of the two departments.

During the recent financial year (e.g. 2012/2013), the macro and micro organizational structures and post establishments of the department were henceforth revised towards (a) aligning it with the new mandates of the departments and (b) create sufficient Programme 1 capacity in both departments. Towards the end of the year under reporting, Programme 1 Services (with concomitant functions and personnel) were also ‘split’ between the Department and the Department of Human Settlements, thereby creating such capacity within each of the two departments. The budget and assets attached to the personnel being transferred to the Department of Human Settlements will however only be transferred during the 2013/2014 financial year.

The implementation of the newly approved (revised) organizational structures and post establishments will be implemented in a phased-in approach, especially considering the lack of existing human resource capacity in the ‘shared’ Programme 1 Services, and will be dependent on the extent to which sufficient funds are made available to the department towards enabling the department to fill its identified critical vacancies.


3.4 Key Policy Developments and Legislative Changes

A new Provincial Planning Bill to replace the old and outdated legislation for land use in the Free State, that will also be aligned with the Constitutional Court’s decision on land use and land development, is in the process of being developed, funded by the National Department of Rural Development and Land Reform. The proposed legislation is based on the principles of the proposed National Spatial Planning and Land Use Bill that has been submitted to the General Assembly and is presently under consideration. Considering the lengthy processes involved in promulgating new legislation, the current situation (e.g. the continued functioning of the provincial Townships Board) will however continue until the new proposed legislation has been enacted.

The Monitoring, Support and Intervention Bill that has been developed by the national Department of Cooperative Governance will also affect government’s approach to municipal interventions in terms of Section 100 and Section 139 of the Constitution.

No Key Policy Developments and Legislative Changes were made during the year under review.

3.5 Strategic Outcome Orientated Goals

The strategic goals of the department identified during the development of the 2010/2015 Strategic Plan of the department are as follows:

(i) Goal 1: Creation of a department geared towards service excellence

This goal strives to ensure that leadership and support are provided to the department in accordance with all applicable Acts and policies, thereby enhancing the effective and efficient functioning of the department. In achieving this, the department achieved the following during the year under review.

This goal strives to ensure that leadership and support are provided to the department in accordance with all applicable Acts and policies, thereby enhancing the effective and efficient functioning of the department. The following serve as an overview of the department’s performance against this goal:

(a) The Strategic Plan and Annual Performance Plan of the department were fully aligned with Outcome 8, the Medium Term Strategic Framework and the Provincial Growth and Development Strategy. Quarterly non-financial performance reports were compiled and submitted to various stakeholders towards monitoring the extent to which the department succeeds in achieving its targets. A Monitoring and Evaluation Policy was also drafted towards improving monitoring and evaluation mechanisms and processes in the department.

(b) The Audit Committee of the department functioned effectively during the year under review, meeting quarterly towards ensuring the successful implementation of the approved Audit Charter, 3-Year Internal Audit Plan and monitoring the extent to which decisions of the Audit Committee are implemented effectively within the department.

(c) All new employees were trained on the Code of Conduct and all senior managers disclosed their financial interests, thereby promoting ethical and professional conduct within the Department.

(d) The financial delegations of the department were updated and successfully implemented.(e) The performance of all employees on levels 1 - 12 within the department was assessed, moderated and

implemented following the approval of the Executive Authority(f) The organizational structure and post establishment of the department was aligned with the revised macro

structure of the department and successfully implemented in the department, only reflecting filled and critical (funded) vacant posts on PERSAL

(g) The Work Place Skills Plan was updated, approved and implemented in the department(h) The department’s Recruitment Policy was approved and implemented successfully in the department, resulting

in the retention of various officials towards maintaining skills and competencies in the department(i) Disciplinary cases and lodged grievances were dealt with on an ongoing basis(j) The department’s Annual Procurement Plan was developed and implemented(k) The Supplier Database was developed in line with National Treasury requirements, and Bid Committees were

established(l) Processes for setting inventory levels, placing of orders, receiving, inspection and the issuing of goods were

documented


(m) The department’s Disposal Strategy was put in place and the Disposal Committee was established(n) Budget expenditure reports were compiled and submitted monthly, cash flow projections were done regularly,

monthly exception reports on the payment of suppliers were submitted to Treasury and an Invoice Tracking System was in place

(ii) Goal 2: : Improved housing delivery planning

Through the achievement of this goal, the department strives to facilitate, manage and supervise the development and alignment of the following plans:

· Housing Chapters of Municipal IDPs (Housing Sector Plans)· Provincial Multi-Year Housing Development Plan· Business Plan for the Human Settlements Development Grant· The Implementation Plan for the achievement of Outcome 8 targets.

Some of the noted successes of the department towards achieving this goal during the year under review are as follows:

· Business Plan for the Human Settlements Development Grant· The Annual Performance Plan· The Implementation Plan of the Outcome 8 for 2013/2014

(iii) Goal 3: Management of Housing Interventions

This goal aims to plan for the implementation of the various programmes through allocation and approval of subsidies under those various programmes and thereby accelerate housing opportunities.

Some of the noted successes of the department towards achieving this goal during the year under review are as follows:

· 3 706 Low-income affordable housing units were constructed,· 2 075 Deeds of transfer were registered in for qualifying beneficiaries.· 11 961 Erven were planned and surveyed for human settlement development purposes.· Four municipalities were supported for level one accreditation, while the Mangaung Metro was supported

for level 2 accreditation.· 8 036 Households in newly formalized areas were provided with access to basic water and sanitation.· 461 Community Residential Units approved and upgraded in Masimong: Matjhabeng Local Municipality.· 346 new affordable rental units were delivered through Social Housing in Brandwag: Mangaung Metro.· 1 091 new housing applications were captured on HSS.

(iv) Goal 4: Management of housing assets and the Extended Enhanced Discount Benefit Scheme (EEDBS)

· This goal aims at the effective management of housing assets and the upgrading of Land Tenure. · There are no notable successes achieved in this programme during the year under review.

3.6 Performance Information per Programme

3.6.1 PROGRAMME 1: ADMINISTRATION

(a). Purpose of the ProgrammeThis programme aims to provide support to the Head of Department and regulates the compensation of Executive Management and their offices.

(b). Brief description of the Programme This programme consists of the following sub-programmes:

(i) Corporate Services

(c). Core services rendered by the Programme• Support to the Head of Department through the effective and efficient functioning of the Office of the HoD


• Special programmes related to gender equality, people with disabilities, youth and women empowerment (iro the Department of Human Settlements).

(d). Strategic Objectives, Programmes and Sub-Programme Plans

Sub-Programme Corporate Services

Strategic Objective Title: Effective functioning of the Office of the HoD

Objective statement To create and maintain a conducive environment for improved service delivery by providing effective

and efficient support to the Head of Department

No. Programme Performance Indicator Annual

Target

2012/2013

Actual

achievement

2012/2013

Remarks

1. No. of employees targeted through

quarterly information sessions

and/or learning networks towards

improving their knowledge and

understanding in relation to Special

Programmes

82

(50% sHS)

0 Target not achieved due to special programmes being

under review

2. No. of collaborative Special

Programmes events held

8 3 Targets not fully achieved due to the programme

being reviewed. The Women’s Day celebration for

female employees at different levels was however

held successfully and the department supported the

provincial event dealing with 16 Days of activism

against the Abuse of Women.

3. No. of senior management meetings

held in the Department

10 11 Target over-achieved due to the pro-active planning

of the departments current projects and programmes

in preparation for the new financial year, e.g.

2013/2014.

4. No. of working days within which

documents submitted for the

consideration of the HoD and/or

MEC are considered and forwarded

to the Office of the MEC

7 7 The incoming and outgoing correspondence between

the offices of the HOD and MEC was effectively

managed during the year under review.

5. No. of working days within which

incoming correspondence are

registered and forwarded to the

responsible Programme Managers

5 5 The incoming and outgoing correspondence between

the offices of the HOD and relevant Directorates was

effectively managed throughout the year.

6. No. of days within which programme

managers respond to queries

14 14 Enquiries were responded to within 14 working;

enquiries that however needed further investigation

took longer.

(e). Strategy to overcome areas of under-performance

Employees targeted through quarterly information sessions and/or learning networksTarget not achieved due to special programmes being under review

Collaborative Special Programmes events heldTarget not achieved due to special programmes being under review and the department will continue to participate in the provincial programs


(f). Linking performance with budget

2012/2013 2011/2012

Sub-Programme

Name

Final

Appropriation

Actual

Expenditure

(Over)/Under

Expenditure

Final

Appropriation

Actual

Expenditure

(Over)/Under

Expenditure

Corporate Services 32 232 32 086 146 19 725 19 658 67

3.6.2 PROGRAMME 2: HOUSING NEEDS, RESEARCH AND PLANNING

(a). Purpose of the Programme

The aim of the programme is to facilitate and undertake housing delivery planning, implementation, monitoring and evaluation.

(b). Brief description of the Programme

This programme consists of the following Sub-Programmes:(ii) Administration(iii) Policy(iv) Planning(v) Research.

(c). Core services rendered by the Programme

(i) The management of housing projects(ii) The provision of technical services for all housing projects(iii) The development, maintenance of housing policies and facilitating the implementation thereof(iv) Conducting of comprehensive planning in relation to human settlement delivery in liaison with all stakeholders(v) The management of all housing contracts and contractors.


Sub-Programme Policy

Strategic Objective Title: Housing Regulatory Framework

Objective statement To provide a regulatory framework for human settlements

No. Programme

Performance Indicator

Annual

Target

2012/2013

Actual

achievement

2012/2013

Remarks

1. Provincial Housing

Demand Database

developed and updated

1 0 Not achieved due to a lack of adequate human resources within the

specific unit

Ways of working within the department has been amended towards

allocating this responsibility to another unit within the department

who has adequate capacity.

2. No. of houses enrolled

with NHBRC

9,000 7468 The process on enrolling identified projects was delayed by the

incomplete verification of documents required for enrolment

purposes.

The suspension of the majority of Senior Managers in the

department (pending the outcome of a forensic investigation) also

contributed to the delay. The department continuously engaged

with the NHBRC in order to fast track the enrolment process.


No. Programme

Performance Indicator

Annual

Target

2012/2013

Actual

achievement

2012/2013

Remarks

3. No. of job

opportunities created

through resettlement

and housing

construction projects

5 040 0 The contractual agreement between the contractors and the

department does not specify that contractors are obliged to report

on the number of job opportunities created hence the department

is not able to monitor the situation. The department is exploring

mechanisms towards addressing this challenge during the new

financial year (e.g. 2013/2014).

4. No. of meetings held

with all relevant

stakeholders towards

developing the

2013/2014 Integrated

Multi-Year Housing

Delivery Plan

1 0 Target not achieved due to a lack of human resource capacity within

the department. A submission to appoint service providers to assist

municipalities to compile housing chapters (which will culminate in

the Integrated Multi-Year Housing Delivery Plan) is being drafted for

further consideration.

5. No. of meetings held

with all relevant


developing a Provincial

Human Settlement

Infrastructure Plan

1 2 The department over-performed in this are due to an increased

emphasis being placed on this project.

6. No. of review

meetings held with

all stakeholders and

reports produced

towards monitoring

progress in relation to

Outcome 8 outputs

and targets within the

Province

4 0 The Outcome 8 Technical Working Group has been appointed in the

4th quarter and will commence with its work in the new financial

year. However, Individual ad hoc meetings were held with different

stakeholders during the year under review towards improving

service delivery e.g. with relevant sector departments, CENTLEC,

ESKOM, NURCHA, etc.

7. No. of human

settlement delivery

impact studies

conducted

1 1 A national human settlements delivery impact study was conducted

by the National Department of Human Settlements

Sub-Programme: Research

No. Programme

Performance

Indicator

Annual

Target

2012/2013

Actual

achievement

2012/2013

Remarks

Standardized Performance Indicators

No. of

research

papers

completed

1

(Housing

for Special

Needs)

1 The National Department of Human Settlements finalized a research project

dealing with housing assistance for orphaned and vulnerable children and the

findings thereof was made available in a report issued by said Department.



Provincial Housing Demand Database developed and updated

The department has drafted the terms of reference for the appointment of service providers to populate the Housing Demand Database Questionnaire with the objective of consolidating the collated data into the database.

Houses enrolled with NHBRC

There is significant progress regarding the enrolment of housing projects, the department will continuously engage the NHBRC to ensure enrolment of projects and houses.

Job opportunities created through resettlement and housing construction projects

The department has enlisted the technical support of Institutions like NURCHA, E’TSHO and MAFURI to collate the necessary statistics relating to job opportunities from the various contractors during the 2013/2014 financial year.

Meetings held with all relevant stakeholders towards developing the 2013/2014 Integrated Multi-Year Housing Delivery Plan

A Tender/Bid will be issued to appoint the service providers to assist municipalities to develop the Housing Chapters of Municipal IDPs, which will in turn inform the Integrated Multi-Year Housing Delivery Plan

Review meetings held with all stakeholders and reports produced towards monitoring progress in relation to Outcome 8 outputs and targets within the province

A Technical Working Group has been established to championing the collation of information from the various stakeholders leading the compilation of reports on progress in relation to Outcome 8 Outputs and Targets.


2012/2013 2011/2012

Sub-Programme

Name

Final

Appropriation

Actual

Expenditure

(Over)/Under

Expenditure

Final

Appropriation

Actual

Expenditure

(Over)/Under

Expenditure

Administration 1 673 1 438 235 1 609 1 433 176

Policy 2 386 1 886 500 2 192 1 958 234

Planning 9 754 9 548 206 1 542 1 496 46

3.6.3 PROGRAMME 3: HOUSING DEVELOPMENT, IMPLEMENTATION, PLANNING AND TARGETS

(a). Purpose of the ProgrammeThe aim of the programme is to provide individual subsidies and housing opportunities to beneficiaries in accordance with housing policies


This Programme consists of the following Sub-Programmes:

i) Administrationii) Financial Interventionsiii) Incremental Interventionsiv) Social and Rental Interventionsv) Rural Interventions



(i) Beneficiary Management(ii) Subsidies Management(iii) Grant Management(iv) Management of Housing Construction Inclusive of Infrastructure Roll-Out Projects


Sub-Programme Financial Interventions

Strategic Objective Title: Enabling environment for improved housing delivery

Objective statement To facilitate immediate access to housing goods and services and to create an enabling environment for

implementation support

Non-Standardized

No. Programme

Performance

Indicator

Annual Target

2012/2013

Actual

achievement

2012/2013

Remarks

1. No. of low-income / affordable housing units constructed in prioritized areas:

(i) Public servants 200 0 The NHFC was appointed to implement the FLISP programme

in terms of the SONA 2012/13. The intended beneficiaries

will therefore be provided for through the FLISP.

(ii) Military Veterans 60 2 Target not achieved due to delays being experienced with

regard to the approval of beneficiaries on the HSS. Proposals

to approve overrides on the HSS (towards approving

the correct beneficiaries) are being finalized for further

consideration.

(iii) Teachers in

farm areas

25 0 Six (6) foundations have been casted in Diyatalawa; the

contractor is busy with the construction of the wall plates.

The annual target was not fully achieved due to the

unavailability of the required geotechnical reports to be

used for the purpose of foundation designs and registration

with the NHBRC. Once obtained from the Department of

Education, the construction of the remaining 19 cottages will

commence in the 2013/14 financial year.

(iv) Dilapidated

houses

890 115 Not achieved due to a lack of adequate human resource

capacity in the Department. Interim measures have been

taken within the Department to improve the Department’s

capacity in this regard.

(v) No. of 2-roomed

houses improved

into 4-roomed

houses

186 0

(vi) Incomplete

houses

1389 205 Target not fully achieved due to a number of contractors’

contracts being terminated due to them not achieving the

agreed milestones. The Department has already taken

specific steps to improve contract management, thereby

introducing specific penalties when contracts are not

performance as per their signed contract.


No. Programme

Performance

Indicator

Annual Target

2012/2013

Actual

achievement

2012/2013

Remarks

(vii) Breaking New

Ground (BNG)

7316 3252 Not achieved due to the following challenges:

· Shortage of approved beneficiaries

· Slow payments to contractors, in some instances as a

result of queries

· Slow process of court in appointing new beneficiary

· Time constraints for terminating non performing

contractors

· Time constraints to establish new sites.

Interim measures have been taken within the Department to

improve the department’s capacity in this regard to improve

housing construction / delivery.

(viii) House

builds (16 days,

Women’s Build,

Youth Build)

1988 55 Target not fully achieved due to the termination of the

original contractor’s contract (due to poor performance). A

new contractor has been appointed during the 3rd quarter to

continue with the project.

(ix) Emergency /

Disaster

1674 63 Not achieved due to delayed payments to contractors,

resulting in the project being delayed. Eight (8) foundations

were casted at the Maluti a Batlokoa project; wall plate

building material is being delivered towards completion of

the project.

(x) People’s Housing

Process

120 14 Not achieved due to delayed payments to contractors,

resulting in the project being delayed. Eight (8) foundations

were casted at the Maluti a Batlokoa project; wall plate

building material is being delivered towards completion of

the project.

(xi) Land Restitution 167 0 Target not achieved due to insufficient funds delaying the

installation of infrastructure services at some of the sites

2. No. of (new)F

captured on HSS

10000 1091 Target not achieved due to the Department prioritizing the

completion of incomplete houses. The Department is in the

process of establishing a Project Management unit, which

will amongst others, improve coordination and identify

areas where interventions are required. This will enable the

Department to meet with specific municipalities towards

improving the completion and submission of applications

forms in line with allocated projects.

3. No. of deeds of transfer registered in favour of qualifying beneficiaries:

• Enhanced

Extended

Discount Benefit

Scheme(EEDBS)

500 129 The Department intends to utilize the conveyancing database

(panel) created by the Department to register the transfer

of the properties affected in all other towns of the province.

The submission to deviate from the policy requirement

on assessment of the properties has been submitted for

approval.


No. Programme

Performance

Indicator

Annual Target

2012/2013

Actual

achievement

2012/2013

Remarks

Act 81 of 1988 1500 1025 Target not fully achieved due to some title deeds in

Mangaung Metro and Kopanong Local Municipality not

being lodged at the Deeds Office (e.g. no Township Register

numbers exists). Most of the Townships in Mangaung do not

have section 14 lodgements at the Office of the Registrar

of Deeds (due to failure by municipalities to comply with

the CRC 7/2010). The Mangaung Metro has appointed a

conveyancing firm to re-lodge the title deeds at the Office of

the Registrar of Deeds. The same firm is also appointed to

lodge section 14 at the Office of the Registrar of Deeds.

Act 107 of 1997 5635 921 Target not fully achieved due to not all conveyancers signing

the extension of contracts despite the Department urging

them to do so.

The expression of interest has been advertised inviting

conveyancing firms and attorneys to lodge their particulars

for the creation of database from which the Department will

make future appointments.

4. No. of township

registers opened

20 10 Target not achieved due to the Ngwathe Municipality

still having to confirm bulk capacity (water supply, sewer

treatment plant and waste disposal site). The Township

Register also needs to be opened once a confirmation

letter is received from the Municipality regarding liquid

and solid waste disposal. The potable water supply plant

is due for construction from March 2013 onwards. District

Steering Committee meetings were held to ensure that all

the challenges identified are adequately addressed, thereby

facilitating the opening of township registers

5. No. of meetings

held with relevant


identifying suitable land

for human settlement

development

4 12 More meetings were held with landowners to fast track the

identification of suitable land for housing construction.

6. No. of parcels of

land identified

and transferred to

municipalities for

development purposes

10 9 Target not fully achieved due to ongoing discussions with

identified landowners. The Housing Development Agency

was appointed (HAD) to assist the Department with this

programme.


No. Programme

Performance

Indicator

Annual Target

2012/2013

Actual

achievement

2012/2013

Remarks

7. No. of erven planned

and surveyed

(injunction)

8000 11961 The Department is awaiting confirmation from the relevant

municipalities to confirm the capacity of bulk services before

Township Registers can be opened. Landfill sites have also

not been registered yet. Steering committee meetings were

held per Municipality to resolve problems and to obtain the

comments from relevant stakeholders. Approval was granted

for the following areas:

· 2632 Botshabelo (2000) 200

· Villiers (200) Ext. 12 approved by the MEC on 6 June 2012.

· 831 Rammulotsi (1044)Ext. 10

· 831 Matlwangtlwang 831

· 800 Petsana Ext 6, general Plans approved on 31 May 2012

· 690 – Qalabotjha Ext 7

· 363 – Qalabotjha

· 1000- Mautse Ext 4

· 1000 – Rammulotsi Phase 3

8. No. of municipalities

supported towards

accreditation

4 on level 1

Readiness:

· Metsimaholo

· Dihlabeng

· Matjhabeng

· Moqhaka

4 The following municipalities were supported during the

quarter under review:

· Metsimaholo

· Dihlabeng

· Matjhabeng

· Moqhaka

1 on level

2 readiness

Mangaung

1 Support was continuously provided during the year under

review for the Mangaung Metro’s level 2 accreditation

9. No. of programmes

approved and

funded under the

accreditation of

municipalities

4 4 The following projects were funded:

· Social Housing

· Informal Settlement Upgrading

· Project Linked

· Hostel Upgrading (CRU).

10. No. of houses handed

over to beneficiaries

together with title

deeds

5 635 304 Target not fully achieved due to a lack of adequate human

resources capacity within the Department. 921 Title Deeds

(Act 107) were received for current projects of which 304

were handed to beneficiaries

11. No. of municipalities

targeted for the

expansion of the

National Upgrading

Support Programme

3

· Matjhabeng

· Dihlabeng

· Metsimaholo

3 Meetings and workshops were held with the 6 NUSP

Municipalities and not only with the 3 identified ones.


Sub-Programme: Incremental Interventions

No. Programme Performance

Indicator

Annual Target

2012/2013

Actual

achievement

2012/2013

Remarks

Non-Standardized Performance Indicators:

1. No. of Households

(erven) in newly-

formalized areas

provided with access to

water

8846 (e.g.

Vogelfontein)

3410 Target not fully achieved due to budget constraints. 3410 sites

in the following Municipalities were connected with water.

· Mangaung Metro

· Ngwathe LM

· Matjhabeng LM

· Setsoto LM

· Mantsopa LM

No. of Households

(erven) in newly-

formalized areas

provided with access to

sanitation

8846 4626 Target not fully achieved due to budget constraints. 4626

sites in the following Municipalities were connected with

Sewer:

· Nketoana LM

· Mangaung Metro

· Masilonyana LM

· Matjhabeng LM

· Setsoto LM

· Moqhaka LM

· Mantsopa LM

· Masilonyana LM

· Nketoana LM

No. of meetings held

and reports produced,

in liaison with the water

and electricty sectors,

towards monitoring

and reporting on the

provision of potable

water and electricity to

households (erven) in

newly-formalized areas

4 6 The department over-performed on this area due to the

matter being prioritized as such. The following meetings were

attended:

· 18 January 2013: High mast lights in Van Stadensrus

(Centlec)

· 13 – 15 February 2013: MIG quarterly meetings

Km of streets constructed

in newly-formalized areas

10.5 km

(6.2 Rammulotsi

4.3 Warden)

3.1 km The last portion of the 6.2 km road in Rammulotsi was

completed during the year under review. The Warden project

was completed in the previous financial year; the retention

amount was however only released in the current financial

year.

No. and type of social

amenities constructed:

- Multi-Purpose

Community Halls

3

· Warden

· Bothaville

· Wesselsbron

0 Target not yet fully achieved, Progress was as follows as at the

end of the 2012/2013 financial year:

· Warden Hall: 80% completed. The contractor has been off-

site due to outstanding matters regarding claims that still

need to be resolved. It is expected that practical completion

will be achieved in the 2013/2014 financial year

· Nala Hall: No significant progress has been made as the

consultant on the project refuses to release designs to the

Municipality due to delays in processing his claim.

A meeting was held in Warden on 6 March 2013 to address

the challenges experienced.




Indicator

Annual Target

2012/2013

Actual

achievement

2012/2013

Remarks

No. of meetings held

with sector departments

towards determining

progress on the

construction of social

amenities in newly-

formalized areas

4 9 More meetings that originally planned was held due to the

complexity of issues involved e.g. 13-15 Feb MIG quarterly

and the District Steering Committee Meetings for planning and

Surveying of erven in Matjhabeng, Ngwathe and Mafube

No. of municipalities

mentored on consumer

education:

· Metro

· Local Municipalities

1

19

1

11

Municipalities were mentored on request. The following 13

municipalities were mentored during the year under review:

· Mangaung Metro (2)

· Maluti-a-Phofung (2)

· Dihlabeng

· Nala LM

· Matjhabeng LM

· Masilonyana LM

· Mafube

· Naledi

· Letsemeng

· Mantsopa

· Mohokare

· Setsoto


capacitated on the

following housing

programmes:

· Human Settlement

Development Policy

· Introduction to Human

Settlement Policy

· Training for Building

Inspectors

· Public Housing

for Planning and

Engineering

1 Metro

4 DM

19 LM

1

4

19

The Mangaung Metro as well as all 19 local municipalities was

capacitated on the some aspects of the Housing Development

Policy. The Public Housing for Planning and Engineering was

not done due to a lack of funding. During the 4th quarter, a

partnership was established to conduct this programme in the

2013/2014 financial year.

No. of reports produced

on the extent to which

municipalities have

informed households

on matters related to HS

delivery

4 4

All four identified municipalities reported on the extent to

which they have informed households on matters related to

HS delivery




Indicator

Annual Target

2012/2013

Actual

achievement

2012/2013

Remarks

No. of partnerships

established and

maintained towards

improving human

settlement delivery:

· Capacity Building

· Research

· Funding

· Internships –

experiential training

Housing institutions

5 6 The department entered into an Agreement with Emendo

to fast-track service delivery through a Turnkey project and

the following other partnerships were entered into and

maintained during the year under review:

· Ruwacon

· NHBRC

· NURCHA

· NHFC

· University of the Free State

No. of emerging youth –

and women contractors

mentored and supported

18 0 Target not achieved due to the process of developing

a comprehensive programme for the mentoring of the

emerging youth – and women contractors being delayed. The

department is developing a programme to collaborate with

stakeholders to implement a two-year phased development

approach.


supported and

capacitated on the

Housing Subsidy System

20

(review done and

technical support

provided)

10 The following municipalities were supported and capacitated

on the Housing Subsidy System during the year under review:

· Mangaung Metropolitan Municipality

· Tokologo Local Municipality

· Mantsopa Local Municipality

· Matjhabeng Local Municipality

· Setsoto Local Municipality

· Moqhaka Local Municipality

· Naledi Local Municipality

· Phumelela Local Municipality

· Nala Local Municipality

· Letsemeng Local Municipality

The program is currently placed on hold due to other

prioritized identified within the department


capacitated on the

successful roll-out and/

or maintenance of

the Housing Demand

Database (metro and

local municipalities)

1: Mangaung

0 Target not achieved due to the terms of reference not being

finalised.


Sub-Programme: Social and Rental Interventions

No. Programme

Performance

Indicator

Annual

Target

2012/2013

Actual

achievement

2012/2013

Remarks


No. of CRU units approved and

upgraded

· Mangaung

(Bloemfontein)

(Silver City and

Dark City)

Feasibility

Study in

process

0 Target not achieved due to the bid processes not being finalized yet. Bid

Evaluation and Bid Adjudication processes are underway

· Metsimaholo

(Sasolburg)

(Hostel No. 4)

Construction

commence

0 Delayed due to the bidding processes still being in process.

· Matjhabeng

(Masimong and

G Hostel)

228 461 The Masimong Project was finalized during the year under review. The

project has socio-economic facilities such as a crèche, church taxi depot,

and recreational centre with football & netball pitches. The old kitchen

was converted into a clothing factory. Private security and a property

management company are on site as well as a business centre with a

bank, post office, mini-supermarket and a hair salon. G Hostel: Target

not achieved due to the municipality still having to take a final decision

on the actual site where development needs to take place.

Standardized Performance Indicators:

2. No. of new

affordable rental

units delivered

through Social

Housing

402

(Brandwag)

346 56 of the 402 units are still outstanding due to budget constraints

experienced; these units will only be completed during the 2013/2014

financial year

Sub-Programme: Rural Interventions

No. Programme

Performance

Indicator

Annual

Target

2012/2013

Actual

achievement

2012/2013

Remarks



Sub-Programme: Rural Interventions

No. Programme

Performance

Indicator

Annual

Target

2012/2013

Actual

achievement

2012/2013

Remarks

1. No. of rural - and farm worker housing units approved and completed towards contributing to the construction of low-income

/ affordable housing units:

· Rural

751 395 Target not achieved due to delayed payments to the contractors and

poor work performance by contractors. Contract management will

be improved within the Department towards improving construction

delivery.

· Farm Worker 50 0 Target not achieved due to the geotechnical reports being outstanding

iro the following areas:

· Unicom in Tweespruit

· Ons Anker in Hennenman

· Luckhoff School in Luckhoff

· Kgotsofalo in Tierpoort.

The department is liaising with the Department of Education to ensure

that there are geotechnical reports for the identified areas. In respect

of Diyatalawa, there is a geotechnical report and the contractor has

casted foundations for the 6 units to be constructed; the construction

of the walls is in process.


o Low-income / affordable housing units constructed in prioritized areas including rural - and farm worker housing units

o The department will equip district offices with requisite technical skills.o The department will develop a credible and reliable contractor database.

· Mangaung (Bloemfontein) (Silver City and Dark City)

Service Provider currently at the final stages of the CRU Feasibility Study, which entails the completion of Detailed Designs ready for construction as well as Bid Documents and a Contractor, will be appointed in due course

· Metsimaholo (Sasolburg) (Hostel No. 4) Bid advertised, Evaluation and Adjudication processes have been completed, and a Contractor has been appointed. Project will be launched during the first quarter of 2013/2014

· Matjhabeng (G Hostel) Service Provider currently busy with the final stage of the CRU Feasibility Study which entails the completion of Detailed Designs ready for construction as well as Bid Documents and a Contractor will be appointed in due course

· (New) Applications captured on HSS

Du e to housing backlog experienced by the department in the last financial year, it was decided that attention should be drawn to completion of incomplete houses, and no new allocations were made.

· New affordable rental units provided through Social Housing (Brandwag) Sufficient funds have been budgeted to ensure completion of the remaining 56 units of Phase 1 of the project during the 2013/2014 financial year


Deeds of transfer registered to qualifying beneficiaries

· Enhanced Extended Discount Benefit Scheme (EEDBS)- An approval to deviate from the policy framework has been granted to enhance transfer of more sites.

· Act 81 of 1988- The department will be engaging municipalities to release the information required in terms of Chief

Register Circular (CRC) 7/2010.- The department will engage the municipalities to re-lodge mother titles that have been withdrawn and

effect section 14 lodgements.

· Act 107 of 1997- The department is creating a panel of transferring firms (conveyancers) who will be instructed to register

the outstanding deeds.

· Houses handed over to beneficiaries together with title deeds- Out of 921 title deeds (as per Act 107) which were received for the current projects, 304 were handed to

beneficiaries and the rest could not be managed as the department’s human resource was thinly stretched under the year under review.

Parcels of land identified and transferred to municipalities for development purposes

The department will give approval to the HDA for the payment of land parcels. Regarding state land, the department is in discussions with other government institutions with a view to release the land suitable for human settlements.

o Erven planned and surveyed Steering committee meetings were held per Municipality to resolve problems and to obtain comments from relevant stakeholders. These meetings will be held continuously with the municipalities to ensure achievement of this goal.

o Households (erven) in newly- formalized areas provided with access to water and sanitation To amend the MOA to stipulate the roles of each stakeholder with timeframes. (The challenge with the funding not available from 1st April and the delay in terms of the finalisation of the business plan).

o Township register opened

The conveyance contract for low cost housing projects instructs the conveyances to open the township registers where there are none. The department will engage the planning stakeholders to solicit the information necessary to open the township registers.

o Municipalities mentored on consumer education Metro Local Municipalities The department will develop the annual programme for mentoring municipalities on consumer education.

o Emerging Youth and Women contractors mentored and supported The department will develop a skill enhancement programme for the emerging contractors, which will be implemented in the MTEF period.

o Municipalities supported and capacitated on the Housing Subsidy System The department will develop a programme towards support and further capacitate municipalities on HSS.

Municipalities capacitated on the successful rollout and/or maintenance of the Housing Demand Database (metro and local municipalities)

The department will revise and expedite the process of approving the Draft Terms of Reference.


Social amenities constructed

Multipurpose Community Halls Warden: The Department of Human Settlements will assist with the shortfall amount in respect of the hall that is

being built in warden.Wesselsbron: The funds will be made available in the financial year 2013/2014 to construct the hall in Wesselsbron.


2012/2013 2011/2012

Sub-Programme

Name

Final

Appropriation

Actual

Expenditure

(Over)/Under

Expenditure

Final

Appropriation

Actual

Expenditure

(Over)/Under

Expenditure

Administration 55 165 51 431 3 734 37 644 36 577 1 067

Financial

Interventions

286 734 286 676 58 156 860 157 767 (907)

Incremental

Interventions

314 004 297 869 16 135 724 652 695 411 29 241

Social & Rental

Intervention

361 487 361 486 1 101 743 100 089 1 654

Rural Intervention 29 579 29 578 1 36 218 36 013 205

3.6.4 PROGRAMME 4: HOUSING ASSETS MANAGEMENT

(a). Purpose of the ProgrammeThe aim of the programme is to regulate rentals and provide for the effective and efficient management of housing assets


This Programme consists of the following Sub-Programmes:

o Administrationo Enhanced Extended Discount Benefit Schemeo Housing Properties Management


o Management/maintenance of housing assets/propertieso Implementation of the Enhanced Extended Discount Benefit Scheme (EEDBS)


Sub-Programme Administration

Strategic Objective Title: Management and maintenance of housing assets / properties

Objective statement To ensure that housing assets / properties and rentals are effectively and efficiently managed


Target

2012/2013

Actual

achievement

2012/2013

Remarks

Non-Standardized Performance Indicators

1. No. of sold to beneficiaries

• Rental top structure

• Sites

- - -



Target

2012/2013

Actual

achievement

2012/2013

Remarks

2. No. of (existing) rental units

transferred (to beneficiaries) :


• Sites

68 0 The properties in Kroonstad must still be vested in

terms of Section 14 of the Housing Act. The original

title deeds for the following areas also still need to be

obtained:

· Kroonstad

· Welkom

· Odendaalsrus.

The applications are with the State Attorney.

Regulation 68 applications are not available yet.

Proposals on the devolution of the properties in terms

of section 15 of the Housing Act are being drafted for

further consideration.

3. No. of housing assets devolved to

municipalities in terms of section

15 of the Housing Act, 1997:


• Sites

- - -

4. No. of debtors reduced per

financial year

68 0 Proposals for the transfer of the remaining 68

properties to the municipalities have been submitted

for further consideration.

Non-Standardized Performance Indicators

1. No. of housing assets maintained

20

0 Target not achieved due to housing assets being

transferred to the legitimate occupants; no

maintenance is done unless a specific request has

been received. For the period under review, no such

requests were however received.


Rental units transferred (to beneficiaries):o Rental top structure o Sites The properties in Kroonstad must still be vested in terms of Section 14 of the Housing Act. The original title deeds for the following areas also still need to be obtained:

o Kroonstado Welkomo Odendaalsrus

The applications are with the State Attorney. Regulation 68 applications are not available yet. Proposals on the devolution of the properties in terms of section 15 of the Housing Act are being drafted for further consideration.

Debtors reduced per financial year The eventual transfer of the remaining 68 houses will contribute to a significant reduction of debtor. Housing assets maintained With possible transfer of these remaining 68 houses, maintenance would be unnecessary.



2012/2013 2011/2012

Sub-Programme

Name

Final

Appropriation

Actual

Expenditure

(Over)/Under

Expenditure

Final

Appropriation

Actual

Expenditure

(Over)/Under

Expenditure

Administration 936 828 108 1 586 1500 86

3.7 Summary of financial information

a. Departmental Receipts

2012/2013 2011/2012

DEPARTMENTAL RECEIPTS ESTIMATE ACTUAL

AMOUNT

COLLECTED

(OVER)/

UNDER

COLLECTION

ESTIMATE ACTUAL

AMOUNT

COLLECTED

(OVER)/

UNDER

COLLECTION

R’000 R’000 R’000 R’000 R’000 R’000

Tax Receipts

- Casino Taxes

- Horse Racing Taxes

- Liquor licences

- Motor vehicle licenses

Sale of goods and services

other than capital assets

50 55 (5) 50 34 16

Fines, penalties and forfeits 50 11 39 200 156 44

Interest, dividends and rent

on land

Sale of capital assets

Financial transactions in

assets and liabilities

100 127 (27) 20 615 (595)

TOTAL 200 193 7 270 805 (535)

b. Programme Expenditure

2012/2013 2011/2012

EXPENDITURE PER

PROGRAMME

TOTAL

VOTED

R’000

ACTUAL

EXPENDITURE

R’000

VARIANCE

R’000

TOTAL

VOTED

R’000

ACTUAL

EXPENDITURE

R’000

VARIANCE

R’000

Administration 32 232 32 086 146 19 725 19 658 67

Housing Needs, Research &

Planning

8 936 8 098 838 14 928 14 240 688

Housing Development 1 046 969 1 027 040 19 929 1 057

117

1 025 857 31 260

Housing Asset Management 936 828 108 1 586 1 500 86

Total 1 089 073 1 068 052 21 021 1 093

356

1 061 255 32 01


c. Transfer Payments (excluding public entities)

NAME OF TRANSFEREE PURPOSE FOR

WHICH THE

FUNDS WERE

USED

COMPLIANCE

WITH S 38

(1) (J) OF THE

PFMA

AMOUNT

TRANSFERRED

(R’000)

AMOUNT

SPENT By

THE ENTITy

REASONS

FOR THE

FUNDS

UNSPENT By

THE ENTITy

Individual Support Housing Housing Support Yes 5 688 5 688 N/A

Housing Fin Linked Indv Sub Prog Housing Support Yes 84 000 84 000 N/A

Rectification of housing stock pre 1994 Housing Support Yes 22 402 22 402 N/A

Social and economic facilities Housing Support Yes 24 24 N/A

Accreditation of municipalities Housing Support Yes 3 000 3 000 N/A

Institutional Support Housing Support Yes 139 297 139 297 N/A

Operational Capital Budget Housing Support Yes 55 955 55 955 N/A

Procurement of land Housing Support Yes 76 997 76 997 N/A

Intergraded Residential Development

Phase 1

Housing Support Yes 168 248 168 248 N/A

Intergraded Residential Development

Phase 4

Housing Support Yes 110 867 110 867 N/A

People Housing Process Housing Support Yes 2 289 2 289 N/A

Enhanced Extended Discount Benefit Housing Support Yes 94 94 N/A

Unblocked of blocked projects Housing Support Yes 33 283 33 283 N/A

NHBRC Enrolment Housing Support Yes 5 234 5 234 N/A

Emergency Housing Assistant Housing Support Yes 653 653 N/A

Military Veterans Housing Support Yes 197 197 N/A

Women’s Build Housing Support Yes 1 175 1 175 N/A

Youth Development Programme Housing Support Yes 3 106 3 106 N/A

Community residential unit Housing Support Yes 222 187 222 187 N/A

Rural housing: community land right Housing Support Yes 28 652 28 652 N/A

Farm worker housing assistance Housing Support Yes 926 926 N/A

Housing Disaster relief grant Housing Support Yes 11 334 11 334 N/A

H/H Empl S/BEN Leave Gratuity Employee

Welness

Yes 222 222 N/A

The table below reflects the transfer payments, which were budgeted for in the period 1 April 2012 until 31 March 2013, but no transfer payments were made:

NAME OF TRANSFEREE PURPOSE FOR WHICH

THE FUNDS WERE TO

BE USED

AMOUNT

BUDGETED FOR

(R’000)

AMOUNT

TRANSFERRED

(R’000)

REASONS WHy FUNDS WERE

NOT TRANSFERRED

None


d. Public Entities

NAME OF PUBLIC ENTITy SERVICES RENDERED

By THE PUBLIC ENTITy

AMOUNT

TRANSFERRED

TO THE PUBLIC

ENTITy

AMOUNT

SPENT By THE

PUBLIC ENTITy

ACHIEVEMENTS OF THE

PUBLIC ENTITy

University of the Free State Training 500 500

e. Conditional Grants and Earmarked Funds Paid None

f. Conditional Grants and Earmarked Funds Received

No conditional grants and earmarked funds received during the year under review. Conditional grants transferred to housing institutions for implementation of programmes on behalf of the department are included in the transfers to households as disclosed above.

g. Donor Funds No donor funds were received during year under review.

h. Capital Investment, Maintenance and Asset Management Plan

2012/2013 2011/2012

INFRASTRUCTURE

PROJECTS

FINAL APPRO-

PRIATION ON

ACTUAL

EXPENDITURE

(OVER)/

UNDER

EXPENDITURE

FINAL

APPROPRIATION

ACTUAL

EXPENDITURE

(OVER)/

UNDER EX-

PENDITURE

R’000 R’000 R’000 R’000 R’000 R’000

New and

replacement assets

1 419 1 009 410 1 180 1 077 103

Existing

infrastructure

assets

- Upgrades and

additions

- Rehabilitation,

renovations and

refurbishments

- Maintenance and

repairs

Infrastructure

transfer

- Current

- Capital

TOTAL 1 419 1 009 410 1 180 1 077 103

· Progress made in implementing the asset management plans

The asset acquisition plans were compiled for the previous financial year and were signed by the Head of the department and were further submitted to Provincial Treasury. The procurement was also done in line with these plans even though


there were deviations resulting from the split of the two departments.

· Changes in Asset Holdings over the period Under Review including information on disposals, scrapping and loss due to theft

The department made progress in updating the asset register. Even though unauthorized movements of assets are still a challenge, there are control measures to improve the situation. In the year under review, no disposals were conducted in the previous financial year due to limited human resources in the Asset Management Unit as the Unit is rendering the shared services for both departments. There is however progress in this regard as indicated by the fact that the Disposal Committee has been appointed and the process will take place in the beginning of the second quarter in the current Financial Year.

· Measures taken to ensure that the departmental asset register remained up-to-date during the year under review

The department has employed 2 interns in asset management to ensure that there is more capacity to ensure that the departmental asset register is continuously maintained.


PART CGOVERNANCE


1. INTRODUCTION

The following governance structures were operational within the department during the year under review towards ensuring that the department maintains the highest standards of governance; thereby effectively, efficiently and economically utilizing the department’s resources:

NAME OF COMMITTEE PURPOSE OF COMMITTEE

Senior Management

Committee

a) To consider and/or propose transverse policies and/or strategies affecting the functioning of the

department

b) To share information and/or decisions related to the work of the department

c) To coordinate and integrate matters impacting on the functioning of the department

d) To agree on ways of working towards improving the effective and efficient functioning of the

department

e) To report on and/or monitor the financial and/or non-financial performance of the department

f) To identify and mitigate risks impacting negatively on the effective and efficient functioning of the

department

g) To make proposals to and/or render advice on matters related to the effective and efficient

functioning of the department

PDMS Moderating

Committee: Levels 1 - 12

· To assess the collective outcome of performance assessment results of departmental employees

· To make recommendations to the relevant approval authority (Executive Authority / Head of

Department) on the granting of performance awards and pay progression, taking into account the

availability of funds

· To make recommendations on disciplinary actions to be taken against supervisors who do not take

responsibility for the correct implementation of the PDM system in their units (to the Head of

Department).

PDMS Dispute Body:

Levels 1 - 12

· To address disagreements between jobholders and their supervisors on ratings (towards reaching agreement).

· To make recommendations to the departmental Moderating Committee on the rating of employees where there

is disagreement

· To make recommendations regarding actions to be taken where supervisors did not execute their

responsibilities with regard to the PDM System (to the Head of Department)

PDMS Moderating

Committees: Senior

Managers

· To assess the outcome of performance assessment results of senior managers.

· To make recommendations to the relevant approval authority (Executive Authority / Head of

Department) on the granting of performance awards and pay progression, taking into account the

availability of funds

PDMS Quality Assurance

Committees

· To evaluate the overall outcome of performance reviews of components in line with the normal distribution curve.

· To evaluate the standards and norms for similar jobs, thereby ensuring consistency across similar occupational jobs

within the department.

· To refer assessments back to supervisors where motivations do not substantiate points allocated.

· To make recommendations to the departmental Moderating Committee on the granting of

performance awards and pay progression, taking into account the availability of funds

· To make recommendations on financial implications and any other matters toward improving the successful

implementation of the PDMS.

Job Evaluation Quality

Assurance Committee

· To do quality control on the job evaluations executed within a provincial department before it is sent

to the Provincial Quality Assurance Committee

· To ensure that all dynamics related to a specific job within a provincial department has been taken

into consideration with the job evaluation.

· To oversee the job evaluation processes within a provincial department

· To enhance the application and understanding of the job evaluation system within a provincial

department



Employee Health and

Wellness Committee

The committee assists the Employee Health and Wellness Programme by facilitating the following related

functions:

· Occupation Health and Safety

· Bereavement

· Sports and Recreation

· Health Promotion

Skills Development

Committee

· To provide guidelines for the department of Cooperative Governance and Traditional Affairs and

department of Human Settlements with regard to the training, education and development of all

members of staff as well as providing a clear vision and framework to guide the skills development

revolution in the department and to transform it (i.e. skills development) into a dynamic, needs-

based and pro-active instrument capable of contributing to the strategic intentions of the

department.

· To strategically link human resource development initiatives to broader processes of organizational

development in the department.

· To promote access by all employees to meaningful training and education opportunities.

· To promote the empowerment of previously disadvantaged groups.

· To facilitate the development of effective career paths for all employees in the department.

· To promote life-long learning in the department.

· To ensure that training and development in the department is demanded needs based and

competency-based.

· To transform the department into a learning organization.

· Advise the HoD on the implementation of training, education and development programmes and the

implementation of the Human Resources Development Policy.

· Oversee the development and implementation of the WSP

· Monitoring and evaluation of skills development in the department

· Give advice to management on issues of skills development

· Determine the need for allocation of bursaries in the department

· Determine the availability of funds for maintaining existing and allocating new bursaries

· Recommend the granting of bursaries in the Department

· Ensuring at least that one percent of the personnel expenditure of the department is allocated for

skills development.

· To make recommendations on the implementation of internships and Learnerships in the two

departments

IT Steering Committee a) To review, monitor, prioritize and make recommendations to the HODs on major IT projects, investments.

b) To ensure alignment with governance compliance, risk management and support to the strategic and

operational objectives of both departments.

DITC a) To provide guidelines to all DITC members and their alternative representatives in the application

and management of committee procedures, when requests for procurement of IT equipment are

received and presented to the committee.

b) The guidelines are to promote departmental efficiency and effectiveness that will lead to improved

service delivery.



Skills Development

Committee

· To provide guidelines for the department of Cooperative Governance and Traditional Affairs and

department of Human Settlements with regard to the training, education and development of all

members of staff as well as providing a clear vision and framework to guide the skills development

revolution in the department and to transform it (i.e. skills development) into a dynamic, needs-

based and pro-active instrument capable of contributing to the strategic intentions of the

department.

· To strategically link human resource development initiatives to broader processes of organizational

development in the department.

· To promote access by all employees to meaningful training and education opportunities.

· To promote the empowerment of previously disadvantaged groups.

· To facilitate the development of effective career paths for all employees in the department.

· To promote life-long learning in the department.

· To ensure that training and development in the department is demanded needs based and

competency-based.

· To transform the department into a learning organization.

· Advise the HOD on the implementation of training, education and development programmes and

the implementation of the Human Resources Development Policy.

· Oversee the development and implementation of the WSP

· Monitoring and evaluation of skills development in the department

· Give advice to management on issues of skills development

· Determine the need for allocation of bursaries in the department

· Determine the availability of funds for maintaining existing and allocating new bursaries

· Recommend the granting of bursaries in the department

· Ensuring at least that one percent of the personnel expenditure of the department is allocated for

skills development.

· To make recommendations on the implementation of internships and Learnerships in the two

departments;

Audit committee Role of the Audit Committee

The role of the Audit Committee is to consider the internal audit plans and activities of the department

and managements plans and processes concerning good governance. The committee takes a special

interest in all communications that affect the manner in which a department is audited and will therefore

take note of the external audit plans and activities. It provides one of the channels of communication

between customers, management and the internal and external auditors.

Responsibilities of the Audit Committees

The Audit Committee should assist the governing board in carrying out its oversight responsibilities as

they relate to the Department’s:

a) Internal Control;

b) Financial and other reporting practices;

c) Compliance with laws, regulations and ethics; and

d) Other responsibilities

In addition to all the above, the audit committee should include the review of items highlighted by the

internal auditors and the Auditor General in order to provide the necessary assistance to the relevant

Executive Authority.



Finance and Budget

Committee

h) Provide oversight on the annual budget process, annual report process and the audit process of the

department

i) Review and make recommendations on the annual budget, annual report and the audit process of

the department

j) Provide strategic oversight on the financial and non-financial matters of the departments

k) Provide recommendations on the short and long-term strategic financial and non-financial

objectives of the department

Risk Management

Committee

The Risk Management Committee’s role is to review the risk management progress and maturity of the

department, the effectiveness of risk management policies, strategy and plan, the key risks facing the

department, and the risk action plans to address these key risks.

Objectives/Duties of the Risk Management Committee:

a. Review the risk management implementation plan, policy, strategy and recommend for

approval by the Accounting Officer

b. Review the risk appetite and tolerance developed by management and recommend for

approval by the Accounting Officer

c. Develop the Charter for the Committee for approval by the Accounting Officer and

oversee the performance of the risk management function

d. Review the department’s risk identification and assessment methodologies to obtain

reasonable assurance of the completeness and accuracy of the risk register

e. Evaluate the effectiveness of mitigating strategies to address the material risks of the

department

f. Report to the Accounting Officer any material changes to the risk profile of the

department

g. Review the fraud prevention policy and recommend for approval by the Accounting

Officer

h. Evaluate the effectiveness of the implementation of the fraud prevention policy

i. Review any material findings and recommendations by assurance providers on the

system of risk management and monitor that audit action plans is implemented to

address the identified weaknesses

j. Develop key performance indicators to measure the effectiveness of the risk

management performance

k. Interact with the Audit Committee to share information relating to material risks of the

institution

l. Provide timely and useful reports to the Accounting Officer on the state of Risk

management

m. Dictate the need for the Risk Management Committee to work through sub-committees.

2. RISK MANAGEMENT

The department has the Shared Risk Management Committee that is chaired by an external member to assist the Accounting Officer to discharge his roles and responsibilities on the risk management. The Committee held three meetings to review the Risk Management Policies and discuss progress on the risk identification and assessment workshops for 2012/2013 financial year.

The risk assessments were done at strategic and operational levels but not completed due to non-availability of management because of official commitments (majority are on suspensions) and the lack of capacity in the risk management unit to perform all the required functions. The Risk Management Policy and the Risk Implementation Plan for 2012/2013 were approved by Accounting Officer.

The effectiveness of risk management of the Department and the Risk Management Committee were evaluated on biannual basis by the Provincial Treasury Monitoring and Evaluation Directorate and two reports were issued


on the maturity levels in accordance to Financial Maturity Capability Model. The Risk Management Unit and Risk Management Committee achieved 74% and 65% respectively compared to the expected 80% as a result of the delays to finalise the risk assessments workshops, draft Risk Management Strategy and the lack of risk monitoring.

The Risk Management Structures and Committee for Department of Human Settlements are currently relooked and revised to comply in 2013/2014 with the minimum requirements of the Risk Management Framework. The department’s Risk Management is affected by insufficient budget allocated to the department to address the implementation of risk management.

The Risk Management Committee evaluated the Performance Audit Report that was completed for 2012/2013 on 21 May 2013. The Audit Action Plans are available to improve communication and processes of risk management in the department.

3. FRAUD AND CORRUPTION

The following policies for both departments are still in draft format and will be finalised by the end of June 2013.

· Fraud Prevention Policy and Plan· Gift and Donation Policy· Whistle Blowing Policy

4. MINIMISING CONFLICT OF INTEREST

As prescribed by chapter three of the Public Service Act, 1994 (Act No. 103 of 1994), read with related regulations regarding financial disclosures, some Senior Management Members (SMS) completed the disclosure forms and these were signed off by the Executive Authority. These disclosures formed the basis to minimize conflict of interest. These reports were presented to the office of Public Service Commission as required by the Act.

The Cluster Audit Committee’s overall opinion on the Financial Statements, effectiveness of internal audit as well as the system of internal control is encapsulated in the Report of the Cluster Audit Committee.

5. CODE OF CONDUCT

The department utilises the public service code of conduct, to inform its employees of what conduct is acceptable and not in the organisation, as well as to manage and regulate incidences of unacceptable conduct.

Where there is an allegation of a breach of any of the conditions in the code of conduct, the allegation is referred in writing to the labour relations unit to assist with investigation and to recommend to the HEAD of Department, depending on the nature of the misconduct. Where the misconduct is found to warrant a formal process disciplinary steps are invoked.

6. HEALTH, SAFETy AND ENVIRONMENTAL ISSUES

The Employee Health and Wellness Programme provides services to both COGTA and HS and these services include:

Safety, Health, Environment, Risk and Quality (SHERQ)As per the requirements of the OHS policy, Onsite OHS inspections were conducted in Bloemfontein and all District offices and Traditional Council offices. Coupled to these were inspection reports from all the above offices submitted by committee members for further attention. All the findings were subsequently attended to successfully in all offices mainly by sensitising relevant stakeholders.

Wellness Management (EAP, Bereavement and Sports)A total number of 39 employees of which 24 were admitted in hospitals and wellness centres were assisted through the EAP interventions, these presented with symptoms of stress, major/depression, anxiety and trauma. All these cases were dealt with successfully.


Sports and RecreationThe programme has coordinated a total number of 17 soccer games against other government departments and private sector. The outcome of these activities promoted fitness and brought employees in COGTA and HS together in an attempt to improve social cohesion.

BereavementThe programme has dealt with a total number of 8 funerals of deceased employees and provided support to 23 employee’s next of kin deaths ranging from employee’s spouses, parents, children, brothers and sisters.

7. INTERNAL CONTROL UNIT

The Internal Control Unit was very much under capacitated in terms of human resources during the financial year under review. In the light of this, a consulting firm was appointed to assist the in regard to their various functions. With this assistance, the following functions were performed within this unit:

· Evaluating all documents before processing and approving them on BAS and LOGIS for compliance.· Safekeeping of all documents in terms of the above-mentioned.· Updating registers in terms of Unauthorised, Irregular and Fruitless and Wasteful Expenditure· Updating registers on commitments and accruals.

8. REPORT OF THE AUDIT COMMITTEE

The Shared Audit Committee of the Department of Cooperative Governance and Traditional Affairs is pleased to present its report for the financial year ended 31 March 2013.

Background Information

The Shared Audit Committee has non-executive status in an advisory capacity to the Accounting Officer; it is thus meant to assist the Accounting Officer in fulfilling its oversight responsibility as follows:

i. The integrity of the department’s financial statements and financial reporting process

ii. System of internal control

iii. The audit process, and

iv. The department’s process for monitoring compliance with laws, regulations and the code of conduct.

In discharging its responsibilities, the Shared Audit Committee is not itself responsible for the planning or conducting of audits or for any determination that the financial statements of the department are complete and accurate or in accordance with generally recognised accounting procedures. This is the responsibility of management and the independent auditors.

The committee’s role is that of an independent monitoring and evaluation of activities within the department. The Shared Audit Committee was appointed by the Member of Executive Council: Free State Provincial Treasury in consultation with Member of Executive Council: Cooperative Governance, Traditional Affairs and Human Settlements, for a period of three years, with effect from 01 January 2011.

Thus, the members are currently serving the third year of their term.

Audit Committee Members and AttendanceThe Shared Audit Committee consists of the members listed hereunder and should meet at least four (4) times per annum as per its approved Audit Committee Charter.


During the year under review, four (4) meetings were held as reflected in the table below.

Name Capacity Meeting Date:25 May 2012

Meeting Date:30 July 2012

Meeting Date:19 October 2012

Meeting Date:15 February 2013

Ms M M

Nkomo

Chairperson * * * *

Mr G S

Majola

Member Apology * * *

Ms M M M

Mdlalo

Member Apology Apology * #

Mr R I

Mokoena

Member * * * *

Dr C D Olivier Member * * * *

- Legends: * - Attended the meeting # - Resigned in January 2013

Audit Committee Responsibility

The Shared Audit Committee reports that it has complied with its roles and responsibilities arising from Section 38(1) (a) of the Public Finance Management Act and Treasury Regulation 3.1.1 to 3.1.16 concerning its establishment and Terms of Reference.

S38(1)(a) S38(1)(a)(ii) of the PFMA state the following:

(PFMA) (1) “The accounting officer for a department,

(a) Must ensure that department,…. has and maintains-

(ii) a system of internal audit under the control and direction of an audit committee complying with and operating in

accordance with regulations and instructions prescribed in terms of sections 76 and 77”

The Shared Audit Committee also reports that during the financial year under review it has reviewed and adopted appropriately:

· The Revised Audit Committee Charter,· Revised Internal Audit Charter,· Revised Internal Audit Coverage Plan for the period,· Revised Internal Audit Manual,· A report on the Performance against the approved Internal Audit Coverage Plan,· A report on the progress on the implementation of recommendation by the Auditor-General South Africa, · Key Control Matrix and Dash Board Reports and· Risk Management and Risk Management Committee Reports.

The effectiveness of internal control

During the year under review, several instances of non-compliance were reported by the Internal Audit Directorate that resulted in a breakdown in the functioning of internal controls. Further, the systems of internal controls were not entirely effective for the year under review, as compliance with prescribed policies and procedures were lacking in certain instances.

The Internal Audit Directorate presented the Activity Reports during the above-mentioned sittings of the Shared Audit Committee, the reports of which included performance against the approved internal Audit coverage plan with all supporting documents, which highlighted the shortcomings as outlined in the above paragraph.

The Shared Audit Committee is pleased to report that, whilst the objectives of the Internal Audit Directorate and


the Auditor-General South Africa are different, the Auditor-General South Africa, determined that, based on their assessment of the scope of specific work performed, the objectivity and technical competence of the Internal

Audit Directorate, and whether the work is carried out with due care, the reports issued during the year under review will be taken into consideration in the performance of the external audit work.

All the reports issued had thus been distributed to Auditor-General South Africa for that purpose.

The quality of in year management and monthly/quarterly reports submitted in terms of the PFMA and the Division of Revenue Act.

The Shared Audit Committee noted all in year management and quarterly reports submitted in terms of the PFMA and the Division of Revenue Act to Provincial Treasury. These reports were presented at each Shared Audit Committee meetings as per the schedule above.

Review and Evaluation of Financial Statements

The Shared Audit Committee has:

· Reviewed and discussed the unaudited annual financial statements to be included in the annual report with the Accounting Officer’s Report,

· Reviewed progress on Auditor-General South Africa’s management report and management responses thereto for the 2011/2012 financial year and the effect of which to the current audit,

· Reviewed changes in accounting policies and practices,

· Reviewed the department’s compliance with legal and regulatory provisions,

· Reviewed significant adjustments resulting from the audit

The Shared Audit Committee noted that there would be adjustments on the annual financial statement with regard to the disclosure notes for Average Number of Employees, Contingent Liabilities, Related Party Transactions, as well as the Annexure for Contingent Liabilities. These changes would be addressed on or before submission of the Annual Financial Statements for audit purposes by 31 May 2013.

Notwithstanding the above-mentioned, the Shared Audit Committee is of opinion that the draft annual financial statements be accepted for audit purposes.

Internal Audit Directorate

The Shared Audit Committee is satisfied that the Internal Audit Directorate is operating effectively and that in all the reports perused and approved it has addressed the risks pertinent to the department in its audits.

The Shared Audit Committee expressed its concern on the three-year and annual internal audit coverage plans, which were not risk, based due to the none-completion of the risk assessment processes by the risk management sub-directorate.

The Shared Audit Committee expresses a concern on the Three Year and Annual Internal Audit Coverage Plan, which is not risk based due to none completion of the risk assessments which is a competency of the Risk Management Sub-Directorate.

The Shared Audit Committee concerns were reported and escalated to the accounting officer on several occasions during the financial year.

The Shared Audit Committee is also concerned with the capacity in the Directorate, concerning the filling of the two


vacant positions of Assistant Internal Auditors identified as critical positions on the staff establishment.

Auditor-General South Africa

The Shared Audit Committee is satisfied that there is a cordial relationship between the Auditor- General South Africa and the Department due to the following:

· The Shared Audit Committee met with the Auditor-General South Africa to ensure that there is no unresolved issues · The Auditor-General South Africa met periodically with management to discuss the progress on the implementation

of the recommendations in the management reports, · The Auditor-General South Africa attendance of the Shared Audit Committee meetings as well as their participation

in the shared audit committee meetings during the audit of the annual financial statements,· The Internal Audit Directorate’s Three Year and Annual Internal Audit Coverage Plan, Performance against the

approved Plan as well as all audit reports, which are issued and distributed to Auditor-General South Africa.

______________________

Ms Maleho NkomoChairperson of the Audit Committee

Date: 31 July 2013


PART DHUMAN RESOURCE

MANAGEMENT


1. INTRODUCTION

The department’s Human Resources Management component provides service in the field of human resources provisioning, human resources utilization as well as policy development.

Set HR priorities for the year under review and the impact of these priorities

The focus from a human resources perspective is the filling of critical vacancies with skilled individuals that will be in a position to enhance service delivery.

Workforce planning framework and key strategies to attract and recruit a skilled and capable workforce

Workforce planning is a systematic process for identifying the human resources required to meet departmental goals and developing the strategies to meet these requirements. Workforce planning is a systematic process for identifying the human resources required to meet departmental goals and developing the strategies to meet these requirements. The department has a Scarce Skills policy to attract and retain scarce skills in the department.

· Employee performance management framework· Employee wellness programmes

Policy Development

· Highlight achievements· Indicate challenges faced by the department· Give a brief description of future HR plans / goals

The processes of developing the HR Plan must to be based on the strategic objectives of the department because the HR Plan is about giving effect to the people aspect of the strategy. The White Paper on Human Resources Management in the Public Service (Section 4.2) notes, “Human Resources planning is essential in order to ensure that an organisation’s human resources are capable of meeting its operational objectives.”

In essence, this document represents the HR Plan for the department and is assigned to conducting a thorough analysis of the environment within which the Department operates, relevant critical challenges it is facing and the subsequent HR implications.

The issue of the development of human capital also stands in direct relationship with economic growth and development in the country. A clear acknowledgement within the Free State Growth and Development Strategy is the importance of the management and development of human capital. In this regard, a Provincial Human Resource Management and Development Strategy was approved by the Executive Council. This will enable the province to ensure that its human capital is aligned to realise its economic growth and development expectations.

1.1 Personnel Related Expenditure

The following tables summarize the final audited personnel related expenditure by programme and by salary band. In particular, it provides an indication of the following:

· Amount spent on personnel.· Amount spent on salaries, overtime, homeowner’s allowances and medical aid.

1.1.1 Personnel Related Expenditure

The following tables summarize the final audited personnel related expenditure by programme and by salary band. In particular, it provides an indication of the following:


Amount spent on personnel

PROGRAMME PERSONNEL EXPENDITURE (R’000)

1. ADMINISTRATION 15 787

2 HOUSING NEEDS, RESEARCH & PLANNING 5 541

3. HOUSING DEVELOPMENT 42 858

4. HOUSING ASSET MANAGEMENT 715

TOTAL 64 901

The spending of the department related 6.07% to compensation of employees. This is because of the Conditional Grant received on an annual basis.

1.1.2 Amount spent on salaries, overtime, homeowner’s allowances and medical aid

PROGRAMME SALARIES OVERTIME HOMEOWNERS ALLOWANCE (HOA)

MEDICAL ASSISTANCE

AMOUNT (R’000)

SALARIES AS A % OF PERSONNEL COST

AMOUNT (R’000)

OVERTIME AS A % OF PERSONNEL COST

AMOUNT (R’000)

HOA AS A % OF PERSONNEL COST

AMOUNT (R’000)

MED ASST AS % OF PERSONNEL COST

1. ADMINISTRATION PROGRAMME 1

10 485 64.4% 25 0.2% 433 2.7% 573 3.6%

2 HOUSING NEEDS, RESEARCH & PLANNING PROGRAMME 2

3 648 65.8% - - 94 1.7% 138 2.5%

3. HOUSING DEVELOPMENTPROGRAMME 3

29 391 68.6% - - 1 216 2.8% 1 995 4.7%

4. HOUSING ASSET MANAGEMENT PROGRAMME 4

520 72.7% - - 24 3.4% 27 3.8%

TOTAL 44 044 67.9% 25 -% 1 767 2.7% 1 933 3%

The spending in terms of salaries, overtime, homeowner’s allowances and medical assistance made up 73.6% of the compensation of employees.

1.2 Employment and Vacancies

The following tables summarize the number of posts on the establishment, the number of employees, vacancy rate, and whether there are employees additional to the establishment.

TABLE 1.2.1 – EMPLOYMENT AND VACANCIES BY PROGRAMME, 31 MARCH 2013

PROGRAMME NUMBER OF POSTS

NUMBER OF POSTS FILLED

VACANCy RATE

NUMBER OF POSTS FILLED ADDITIONAL TO THE ESTABLISHMENT

1. ADMINISTRATION 284 55 81% 0

2. HOUSING NEEDS, RESEARCH AND PLANNING 76 27 65% 0

3. HOUSING DEVELOPMENT 254 127 50% 1

4. HOUSING ASSET MANAGEMENT AND PROPERTY MANAGEMENT

7 2 71% 0

TOTAL 621 211 66% 1


TABLE 1.2.2 – EMPLOYMENT AND VACANCIES BY SALARY BAND, 31 MARCH 2013

SALARy BAND NUMBER OF POSTS


VACANCy RATE


LOWER SKILLED LEVELS 1-2 0 0 0% 0

SKILLED LEVELS 3-5 119 35 71% 0

HIGHLY SKILLED PRODUCTION LEVELS 6-8

290 105 64% 0

HIGHLY SKILLED SUPERVISION LEVELS 9-12

180 51 72% 0

SMS LEVELS 13-16 32 20 38% 1

MEC 0 0 0% 0

TOTAL 621 211 66% 1

TABLE 1.2.3 – EMPLOYMENT AND VACANCIES BY CRITICAL OCCUPATIONS, 31 MARCH 2013

CRITICAL OCCUPATIONS NUMBER OF POSTS


VACANCy RATE


TECHNICAL/ENGINEERING RELATED ADVISORY SERVICES

10 8 20% 0

TOTAL 10 8 20% 0

1.3 Job Evaluation

The following table summarized the number of jobs that were evaluated during the year under review. The table also provides statistics on the number of posts that were upgraded or downgraded.

TABLE 1.3.1 – JOB EVALUATION, 1 APRIL 2012 TO 31 MARCH 2013

SALARy BAND NUMBER

OF POSTS

NUMBER

OF JOBS

EVALUATED

1.4.2012

-31.3.2013

% OF POSTS

EVALUATED

1.4.2012

-31.3.2013

POST UPGRADED 1.4.2012

-31.3.2013

POSTS DOWNGRADED

1.4.2012 -31.3.2013

NUMBER % OF POSTS

EVALUATED

NUMBER % OF POSTS

EVALUATED

LOWER SKILLED

LEVELS 1-2

119 0 0% 0 0% 0 0%

SKILLED LEVELS

3-5

290 0 0% 0 0% 0 0%

HIGHLY SKILLED

PRODUCTION

LEVELS 6-8

0% 0 0% 0 0%

HIGHLY SKILLED

SUPERVISION

LEVELS 9-12

180 1 1% 0 0% 0 0%

SMS LEVELS

13-16

BAND A

BAND B

BAND C

BAND D

32 0 0% 0 0% 0 0%


MEC 0 0 0% 0% 0 0%

TOTAL 621 1 0.2% 0 0% 0 0%

TABLE 1.3.2 – PROFILE OF EMPLOyEES WHOSE SALARy POSITIONS WERE UPGRADED DUE TO THEIR POSTS BEING UPGRADED, 1 APRIL 2012 TO 31 MARCH 2013

BENEFICIARIES AFRICAN ASIAN COLOURED WHITE TOTAL

FEMALE 0 0 0 0 0

MALE 0 0 0 0 0

TOTAL 0 0 0 0 0

EMPLOyEES WITH A DISABILITy 0 0 0 0 0

TABLE 1.3.3 – EMPLOYEES WHOSE SALARY LEVEL EXCEEDED THE GRADE DETERMINED BY JOB EVALUATION, 1 APRIL 2012 TO 31 MARCH 2013

Total number of employees whose salaries exceeded the level determined by job evaluation in 2012/2013

0

TABLE 1.3.4 – PROFILE OF EMPLOyEES WHOSE SALARy LEVEL EXCEEDED THE GRADE DETERMINED By JOB EVALUATION, 1 APRIL 2012 TO 31 MARCH 2013

BENEFICIARIES AFRICAN ASIAN COLOURED WHITE TOTAL

FEMALE 0 0 0 0 0

MALE 0 0 0 0 0

TOTAL 0 0 0 0 0

EMPLOyEES WITH A DISABILITy 0 0 0 0 0

1.4 Employment Changes

The following tables provide a summary of turnover rates by salary band and critical occupations.

TABLE 1.4.1 – ANNUAL TURNOVER RATES BY SALARY BAND FOR THE PERIOD 1 APRIL 2012 TO 31 MARCH 2013

SALARy BAND NUMBER OF EMPLOyEES PER BAND AS ON 1 APRIL 2012

APPOINTMENTS AND TRANSFERS INTO THE DEPT

TERMINATIONS AND TRANSFERS OUT OF DEPT

TURNOVER RATE

LOWER SKILLED LEVELS 1-2

0 0 0 0%

SKILLED LEVELS 3-5 35 22 3 7%

HIGHLY SKILLED PRODUCTION LEVELS 6-8

105 3 1 2%

HIGHLY SKILLED SUPERVISION LEVELS 9-12

51 9 11 1%

SMS LEVELS 13-16 20 6 2 1%

TOTAL 211 40 17 49%


TABLE 1.4.2 – ANNUAL TURNOVER RATES BY CRITICAL OCCUPATION FOR THE PERIOD 1 APRIL 2012 TO 31 MARCH 2013

CRITICAL OCCUPATION NUMBER OF EMPLOyEES AS ON 1 APRIL 2012

APPOINTMENTS AND TRANSFERS INTO THE DEPT

TERMINATIONS AND TRANSFERS OUT OF DEPT

TURNOVER RATE

TECHNICAL/ENGINEERING RELATED ADVISORY SERVICES

8 0 0 0%

TOTAL 8 0 0 0%

TABLE 1.4.3 – REASONS WHy STAFF ARE LEAVING THE DEPARTMENT

TERMINATION TyPE NUMBER % OF TOTAL*

DEATH 3 1.4%

RESIGNATION 1 1%

EXPIRY OF CONTRACT 10 4.73%

DISMISSAL/OPERATIONAL CHANGES 1 1%

DISMISSAL/MISCONDUCT 0 0%

DISMISSAL/INEFFICIENCY 0 0%

DISCHARGE DUE TO ILL-HEALTH 0 0%

RETIREMENT 1 1%

TRANSFERS TO OTHER PUBLIC SERVICE DEPARTMENTS 2 0.9%

OTHER 0 0%

TOTAL 17 8.1%

TOTAL NUMBER OF EMPLOYEES WHO LEFT AS A % OF THE TOTAL EMPLOYMENT* 8.1%

TOTAL EMPLOyMENT = 211

1.5 Employment Equity

The following tables provide a summary of turnover rates by salary band and critical occupations.

TABLE 1.5.1 – TOTAL NUMBER OF EMPLOYEES (INCLUDING EMPLOYEES WITH DISABILITIES) IN EACH OF THE FOLLOWING OCCUPATIONAL CATEGORIES, AS ON 31 MARCH 2013

PROGRAMME PERSONNEL EXPENDITURE (R’000)

1. ADMINISTRATION 15 787

2 HOUSING NEEDS, RESEARCH & PLANNING 5 541

3. HOUSING DEVELOPMENT 42 858

4. HOUSING ASSET MANAGEMENT 715

TOTAL 64 901

The spending of the department for compensation of employees was 6.07%. This is because of the Conditional Grant received annually.


TABLE 1.5.2 – TOTAL NUMBER OF EMPLOYEES (INCLUDING EMPLOYEES WITH DISABILITIES) IN EACH OF THE FOLLOWING OCCUPATIONAL BANDS, AS ON 31 MARCH 2013

PROGRAMME SALARIES OVERTIME HOMEOWNERS ALLOWANCE (HOA)

MEDICAL ASSISTANCE

AMOUNT (R’000)

SALARIES AS A % OF PERSONNEL COST

AMOUNT (R’000)

OVERTIME AS A % OF PERSONNEL COST

AMOUNT (R’000)

HOA AS A % OF PERSONNEL COST

AMOUNT (R’000)

MED ASST AS % OF PERSONNEL COST

1. ADMINISTRATION PROGRAMME 1

10 485 64.4% 25 0.2% 433 2.7% 573 3.6%

2 HOUSING NEEDS, RESEARCH & PLANNING PROGRAMME 2

3 648 65.8% - - 94 1.7% 138 2.5%

3. HOUSING DEVELOPMENTPROGRAMME 3

29 391 68.6% - - 1 216 2.8% 1 995 4.7%

4. HOUSING ASSET MANAGEMENT PROGRAMME 4

520 72.7% - - 24 3.4% 27 3.8%

TOTAL 44 044 67.9% 25 -% 1 767 2.7% 1 933 3%

The spending in terms of salaries, overtime, homeowner’s allowances and medical assistance made up 73.6% of the compensation of employees.

572012 -2013 ANNUAL REPORTTA

BLE

1.5.

3 –

RECR

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58 2012 -2013 ANNUAL REPORTTA

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1.5.

5 –

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10

00

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1

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PRO

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592012 -2013 ANNUAL REPORTTA

BLE

1.5.

7 –

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1.6

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RA

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760

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206

34 4

16

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ITE

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313

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TABL

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(ben

efici

ary)

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SKIL

LED

LEV

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3-5

735

20%

304

286

HIG

HLY

SKI

LLED

PRO

DU

CTIO

N

LEVE

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846

105

43.8

%43

59

457

HIG

HLY

SKI

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SU

PERV

ISIO

N

9-12

1641

39%

367

22 9

38

CON

TRAC

T (L

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100%

174

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00

TOTA

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186

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0613

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UM

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ROU

P%

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TOTA

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ITH

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GRO

UP

COST

(R

’000

)AV

ERA

GE

COST

PER

EM

PLO

yEE

BEN

EFIT

TED

(R 0

00)


TABL

E 1.

6.3

– PE

RFO

RMA

NCE

REW

ARD

S BY

CRI

TICA

L O

CCU

PATI

ON

S LE

VEL

1-1

2, 1

APR

IL 2

012

TO 3

1 M

ARC

H 2

013

CRIT

ICA

L O

CCU

PATI

ON

BEN

EFIC

IARy

PRO

FILE

COST

NU

MBE

R O

F BE

NEF

ICIA

RIES

NU

MBE

R O

F EM

PLO

yEES

(p

osts

)%

OF

TOTA

L W

ITH

IN

OCC

UPA

TIO

NTO

TAL

COST

(R’0

00)

AVER

AG

E CO

ST P

ER E

MPL

OYE

E R’

000

(BEN

EFIC

IARY

)

TECH

NIC

AL/

ENG

INEE

RIN

G R

ELAT

ED

AD

VISO

RY S

ERVI

CES

78

87.5

%24

835

429

TOTA

L7

887

.5%

248

35 4

29

TABL

E 1.

6.4

– PE

RFO

RMA

NCE

REL

ATED

REW

ARD

S (C

ASH

BO

NU

S), B

Y SA

LARY

BA

ND

FO

R SM

S

SALA

Ry B

AN

DS

BEN

EFIC

IARy

PRO

FILE

TOTA

L CO

ST(R

’000

)AV

ERA

GE

COST

PER

EM

PLO

yEE

NU

MBE

R O

F BE

NEF

ICIA

RIES

NU

MBE

R O

F EM

PLO

yEES

% O

F TO

TAL

WIT

HIN

SA

LARy

BA

ND

S

Band

A to

D2

1216

.7%

109

54 5

00

TOTA

L2

1216

.7%

109

54

00

1.7

F

orei

gn W

orke

rsTh

e ta

bles

bel

ow s

umm

ariz

e th

e em

ploy

men

t of f

orei

gn n

ation

als

in th

e de

part

men

t in

term

s of

sal

ary

band

and

maj

or o

ccup

ation

.

Tabl

e 1.

7.1:

For

eign

wor

kers

by

sala

ry b

and

Non

e.

Tabl

e 1.

7.2:

For

eign

wor

kers

by

maj

or o

ccup

ation

Non

e.


1.8

Leav

e uti

lizati

onTh

e fo

llow

ing

tabl

es p

rovi

de a

n in

dica

tion

of th

e us

e of

sic

k le

ave

and

disa

bilit

y le

ave,

incl

usiv

e of

the

cost

of t

he le

ave.

TABL

E 1.

8.1

– A

NN

UA

L LE

AVE

FOR

THE

PERI

OD

1 JA

NU

ARY

201

2 TO

31

DEC

EMBE

R 20

12

SALA

Ry B

AN

DTO

TAL

DAy

S TA

KEN

AVER

AG

E D

AyS

PER

EMPL

OyE

EN

UM

BER

OF

EMPL

OyE

ES W

HO

TO

OK

LEAV

E

LOW

ER S

KILL

ED L

EVEL

S 1-

20

00

SKIL

LED

LEV

ELS

3-5

335

1034

HIG

HLY

SKI

LLED

PRO

DU

CTIO

N L

EVEL

S 6-

819

6319

105

HIG

HLY

SKI

LLED

SU

PERV

ISIO

N L

EVEL

S 9-

1256

517

34

SEN

IOR

MA

NAG

EMEN

T LE

VELS

13-

1624

614

17

CON

TRAC

T LE

VELS

1-2

00

0

CON

TRAC

T LE

VELS

3-5

1414

1

CON

TRAC

T LE

VELS

6-8

00

0

CON

TRAC

T LE

VELS

9-1

25

32

CON

TRAC

T LE

VELS

13-

1613

131

TOTA

L31

4116

194

TABL

E 1.

8.2

–CA

PPED

LEA

VE

FOR

THE

PERI

OD

1 JA

NU

ARY

201

2 TO

31

DEC

EMBE

R 20

12

SALA

Ry B

AN

DTO

TAL

DAy

S O

F CA

PPED

LEA

VE

TAKE

NAV

ERA

GE

NU

MBE

R O

F D

AyS

TAKE

N

PER

EMPL

OyE

EAV

ERA

GE

CAPP

ED L

EAV

E PE

R EM

PLO

yEE

AS

AT 3

1/12

/201

2

LOW

ER S

KILL

ED L

EVEL

S 1-

20

00

SKIL

LED

LEV

ELS

3-5

66

38

HIG

HLY

SKI

LLED

PRO

DU

CTIO

N L

EVEL

S 6-

811

328

HIG

HLY

SKI

LLED

SU

PERV

ISIO

N L

EVEL

S 9-

120

00

SEN

IOR

MA

NAG

EMEN

T LE

VELS

13-

160

00

CON

TRAC

T LE

VELS

1-2

00

0

CON

TRAC

T LE

VELS

3-5

00

0

CON

TRAC

T LE

VELS

6-8

00

0

CON

TRAC

T LE

VELS

9-1

20

00

CON

TRAC

T LE

VELS

13-

160

00

TOTA

L17

329


TABL

E 1.

8.3

– LE

AVE

PAYO

UTS

FO

R TH

E PE

RIO

D 1

APR

IL 2

012

TO 3

1 M

ARC

H 2

013

REA

SON

TOTA

L A

MO

UN

T (R

’000

)N

UM

BER

OF

EMPL

OyE

ESAV

ERA

GE

PAyM

ENT

PER

EMPL

OyE

E

Leav

e pa

yout

for

2012

/13

due

to n

on-u

tilis

ation

of l

eave

for

the

prev

ious

cy

cle

533

17 6

67

Capp

ed le

ave

payo

uts

on te

rmin

ation

of s

ervi

ce fo

r 20

12/1

3 29

413

22 6

15

Curr

ent l

eave

pay

out o

n te

rmin

ation

of s

ervi

ce fo

r 20

12/1

319

99

22 1

11

TOTA

L54

625

21 8

40

1.9

HIV

/AID

S an

d H

ealt

h Pr

omoti

on P

rogr

amm

es

TABL

E 1.

9.1

– ST

EPS

TAKE

N T

O R

EDU

CE T

HE

RISK

OF

OCC

UPA

TIO

NA

L EX

POSU

RE

UN

ITS/

CATE

GO

RIES

OF

EMPL

OyE

ES ID

ENTI

FIED

TO

BE

AT H

IGH

RIS

K O

F CO

NTR

ACT

ING

HIV

AN

D R

ELAT

ED D

ISEA

SES

(IF

AN

Y)KE

y ST

EPS

TAKE

N T

O R

EDU

CE T

HE

RISK

No

parti

cula

r oc

cupa

tiona

l cla

ss o

r ca

tego

ries

of e

mpl

oyee

s ar

e by

nat

ure

of th

eir

wor

k da

nger

ousl

y ex

pose

d to

the

of c

ontr

actin

g H

IV/A

IDS

This

dep

artm

ent h

as n

o oc

cupa

tiona

l cat

egor

ies

who

se n

atur

e ex

pose

s its

em

ploy

ees

to th

e ri

sks

asso

ciat

ed w

ith H

IV/A

IDS.


TABLE 1.9.2 – DETAILS OF HEALTH PROMOTION AND HIV/AIDS PROGRAMMES (TICK THE APPLICABLE BOXES AND PROVIDE THE REQUIRED INFORMATION)

QUESTION yES NO DETAILS IF yES

1. HAS THE DEPARTMENT DESIGNATED A MEMBER OF THE SMS TO IMPLEMENT THE PROVISIONS CONTAINED IN PART D VI OF CHAPTER 1 OF THE PSR, 2001? IF SO, PROVIDE HER/HIS NAME AND POSITION

X No designated SMS member has been specifically appointed to implement the provisions as stipulated in the PSR. Currently, this responsibility is carried out by the Director: Human Resources Management and Organizational Development, clearly this SMS member has a whole range of other responsibilities to manage. Name: Ms. N.A MatiwanePosition: Director: Human Resources Management and Organizational Development

2. DOES THE DEPARTMENT HAVE A DESIGNATED UNIT OR HAS IT DESIGNATED SPECIFIC STAFF MEMBERS TO PROMOTE THE HEALTH AND WELL BEING OF YOUR EMPLOYEES? IF SO, INDICATE THE NUMBER OF EMPLOYEES WHO ARE INVOLVED IN THIS TASK AND THE ANNUAL BUDGET THAT IS AVAILABLE FOR THIS PURPOSE

X No budget is designated to the Employee Health and Wellness unit; funds are being injected per request for a specific project from other programmes within the broader Corporate Services Chief Directorate.

3. HAS THE DEPARTMENT INTRODUCED AN EMPLOYEE ASSISTANCE OR HEALTH PROMOTION PROGRAMME FOR YOUR EMPLOYEES? IF SO, INDICATE THE KEY ELEMENTS/SERVICES OF THIS PROGRAMME

X The department has introduced Employee Health & Wellness programmes like: -EAP referral services - Sporting activities for employees -Observing related National/ International Health calendar day activities

4. HAS THE DEPARTMENT ESTABLISHED COMMITTEES AS CONTEMPLATED IN PART VI E.5 (E) OF CHAPTER 1 OF THE PSR 2001? IF SO, PLEASE PROVIDE THE NAMES OF THE MEMBERS OF THE COMMITTEES AND THE STAKEHOLDER/S THAT THEY REPRESENT

X Employee Health and Wellness committee and their respective components:

OFFICES OF THE MEC and HOD: Mr. Percy RamosediCORPORATE SERVICES CHIEF DIRECTORATE: Mr. Mahlaku Botsane Mr. Mohau Phahlo Mr. Mangaliso Xaba Mr. Deon Theron - RetiredFINANCIAL AND SUPPLY CHAIN MANAGEMENT CHIEF DIRECTORATE: Mr. Tefo LetantaDEPARTMENT OF HUMAN SETTLEMENTS: Mr. Senkie Ketlhoilwe Ms. Tiny Moalosi Ms. Maleshoane Mofokeng-resigned Mr. Sabata Lebone Mike MoepaneDISTRICT SERVICES CHIEF DIRECTORATE: Ms. Machogo Ms. Motaung Mr. Buthelezi Ms. Z.D Motiki Mr.J.Z Mdi Ms. P Jase Ms. Lizzy Morake Ms. N Plaatjies-Resigned Mr. J Wolff Mr. T Mateza



5. HAS THE DEPARTMENT REVIEWED ITS EMPLOYMENT POLICIES AND PRACTICES TO ENSURE THAT THESE DO NOT UNFAIRLY DISCRIMINATE AGAINST EMPLOYEES ON THE BASIS OF THEIR HIV STATUS? IF SO LIST THE EMPLOYMENT POLICIES/PRACTICES SO REVIEWED

X At the moment, the department is operating on the Employee Health and Wellness Strategic Framework for the Public Service, issues of unfair HIV discrimination are being dealt with accordingly and employees are continuously made aware of these matters. The department is currently in the process of reviewing and customizing its 4 Employee Health &Wellness related policies including that of HIV& AIDS, STI and TB for approval by the HoDs.

6. HAS THE DEPARTMENT INTRODUCED MEASURES TO PROTECT HIV – POSITIVE EMPLOYEES OR THOSE RECEIVED TO BE HIV – POSITIVE FROM DISCRIMINATION? IF SO, LIST THE KEY ELEMENTS OF THESE MEASURES

X These measures are covered by the above process.

7. DOES THE DEPARTMENT ENCOURAGE ITS EMPLOYEES TO UNDERGO VOLUNTARY COUNSELING AND TESTING? IF SO, LIST THE RESULTS THAT YOU HAVE ACHIEVED

X During the departmental HCT campaign, the following were discovered:

HCT Results for Females: 18 out of the 61 participants were tested.3 (4.9%) participants tested positive.15 (24.6%) participants tested negative.This equates to a 29.5% uptake.

HCT Results for Males: 10 out of the 38 participants were tested1 (1.6%) of participants tested positive.9 (23.7%) of participants tested negative.This equates to a 26.3% uptake.



8. HAS THE DEPARTMENT DEVELOPED MEASURES/INDICATORS TO MONITOR AND EVALUATE THE IMPACT OF ITS HEALTH PROMOTION PROGRAMME? IF SO, LIST THESE MEASURES/INDICATORS

X Outcome of the departmental Health Promotion programme:

Results Summary: Female Participants:99 out of the 1000 expected employees participated in the wellness screening. Out of the 99 participants 61 were females. This equates to a 9.9% uptake.Family history: 0 (0%) of the participants reported a low risk of family history related health risks - including heart problems; high blood pressure, high cholesterol, diabetes, stroke and cancer.Heart disease history: 49 (80.3%) of the participants reported a low self-history of heart symptoms and/or problems.Exercise: 12 (19.7%) of the participants reported that they are active (exercise) >3 hours per week, and are thus at low risk as a result of a lack of exercise. However, there are 42 (68.9%) who are at moderate to high risk.Weight control: 31 (50.8%) reported that they are at low risk in terms of weight control. However, 19 (31%) are at moderate risk in terms of managing their weight.Stress: 31 (50.8%) reported a moderate risk in terms of stress levels, and 4 (6%) reported a high risk.Alcohol: 39 (63.9%) of the participants reported a low risk in terms of alcohol use.BMI: 33 (54%) of the participants had a BMI rating of between 26 and 30; and 12 (19.7%) had a BMI rating of between 30.1 and 35 (moderate risk).Waist circumference: 11 (18%) of the participants measured low risk; however 38 (62.3%) measured high risk.Glucose: 40 (65.6%) measured 5.5 to 5.9; with only 8 (13%) measured at >7 (high risk).Blood pressure: 43 (70.5%) of the participant’s blood pressure measure within low risk parameters. However the remainder is at moderate to high risk.Cholesterol: 52 (85.2%) measured <5.2 (low risk).

Results Summary: Male Participants:99 out of the 1000 expected employees participated in the wellness screening. Out of the 99 participants 38 were males. This equates to a 9.9% uptake.Family history: 0 (0%) of the participants reported a low risk of family history related health risks - including heart problems; high blood pressure, high cholesterol, diabetes, stroke and cancer.Heart disease history: 27 (71%) of the participants reported a low self-history of heart symptoms and/or problems.Exercise: 10 (26.3%) of the participants reported that they are active (exercise) >3 hours per week, and are thus at low risk as a result of a lack of exercise. However, there are 23 (60.5%) who are at moderate to high risk.Weight control: 23 (60.5%) reported that they are at low risk in terms of weight control. However, 8 (21%) are at moderate risk in terms of managing their weight.Stress: 17 (44.7%) reported a moderate risk in terms of stress levels, and 7 (18.4%) reported a high risk.Alcohol: 20 (52.6%) of the participants reported a low risk in terms of alcohol use.BMI: 22 (57.9%) of the participants had a BMI rating of between 26 and 30; and 8 (21%) had a BMI rating of between 30.1 and 35 (moderate risk).Waist circumference: 10 (26.3%) of the participants measured low risk; however 7 (18.4%) measured high risk.Glucose: 21 (55.3%) measured 5.5 to 5.9; with only 5 (13.2%) measured at >7 (high risk).Blood pressure: 21 (55.3%) of the participant’s blood pressure measure within low risk parameters. However the remainders are at moderate to high risk.Cholesterol: 29 (76.3%) measured <5.2 (low risk).


1.10 Labour Relations

TABLE 1.10.1 – COLLECTIVE AGREEMENTS 1 APRIL 2012 TO 31 MARCH 2013

SUBJECT MATTER DATE

TOTAL COLLECTIVE AGREEMENTS (PSCBC AND GPSSBC

RESOLUTIONS)

31 July 2012 (Resolution 1 of 2012)

02 August 2012 (Resolution 2 of 2012)

03 September 2012 (Resolution 3 of 2012)

04 February 2013 (Resolution 1 of 2013)

TABLE 1.10.2 – MISCONDUCT AND DISCIPLINARY HEARINGS FINALISED 1 APRIL 2012 TO 31 MARCH 2013

OF DISCIPLINARy HEARINGS NUMBER % OF TOTAL

CORRECTIONAL COUNSELLING 0 0%

VERBAL WARNINGS 0 0%

WRITTEN WARNING 4 44.4%

FINAL WRITTEN WARNING 2 22.22%

SUSPENDED WITHOUT PAY COUPLED WITH FWW 0 0%

FINE 0 0%

DEMOTION 0 0%

DISMISSAL 2 22.22%

NOT GUILTY 0 0%

CASE WITHDRAWN 1 11.11%

TOTAL 9

TABLE 1.10.3 – TYPES OF MISCONDUCT ADDRESSED AT DISCIPLINARY HEARINGS

TyPE OF MISCONDUCT NUMBER % OF TOTAL

FRAUD AND THEFT 0 0%

CODE OF CONDUCT 9 100%

ABUSE OF GOVERNMENT PROPERTY 0 0%

ABSENTEEISM, INSUBORDINATION, DEROGATORY LANGUANGE & CARRYING A FIREARM AT

WORK 0 0%

TOTAL 9

TABLE 1.10.4 – GRIEVANCES LODGED FOR THE PERIOD 1 APRIL 2012 TO 31 MARCH 2013

NUMBER % OF TOTAL

NUMBER OF GRIEVANCES RESOLVED 2 1%

NUMBER OF GRIEVANCES NOT RESOLVED 0 0%

TOTAL NUMBER OF GRIEVANCES LODGED 2 1%


TABLE 1.10.5 – DISPUTES LODGED WITH COUNCILS FOR THE PERIOD 1 APRIL 2012 TO 31 MARCH 2013

NUMBER % OF TOTAL

NUMBER OF DISPUTES UPHELD 4 1.9%

NUMBER OF DISPUTES DISMISSED 1 0.5%

TOTAL NUMBER OF DISPUTES LODGED 5 2.4%

TABLE 1.10.6 – STRIKE ACTIONS FOR THE PERIOD 1 APRIL 2012 TO 31 MARCH 2013

TOTAL NUMBER OF PERSON WORKING DAYS LOST 0%

TOTAL COST OF WORKING DAYS LOST 0%

AMOUNT (R’000) RECOVERED AS A RESULT OF NO WORK NO PAY 0%

TABLE 1.10.7 – PRECAUTIONARY SUSPENSIONS FOR THE PERIOD 1 APRIL 2012 TO 31 MARCH 2013

NUMBER OF PEOPLE SUSPENDED 13

NUMBER OF PEOPLE WHOSE SUSPENSION EXCEEDED 30 DAYS 13

AVERAGE NUMBER OF DAyS SUSPENDED 2647

COST (R’000) OF SUSPENSIONS R 4.298 462.24

None: A number of verbal cases were handled that cannot be included above. The department has also assisted with a number of cases in other departments. Training on all areas of Labour Relations were conducted

1.11 Skills Development

TABLE 1.11.1 – TRAINING NEEDS IDENTIFIED 1 APRIL 2012 to 31 MARCH 2013

OCCUPATIONAL CATEGORIES

GENDER NUMBER OF EMPLOyEES AS AT 1 APRIL 2012

TRAINING NEEDS IDENTIFIED AT START OF REPORTING PERIOD

LEADERSHIPS SKILLS PROGRAMMES AND OTHER SHORT COURSES

OTHER FORMS OF TRAINING TOTAL

LEGISLATURES, SENIOR OFFICIALS AND MANAGERS (level 13-16)

MALE

FEMALE

0

0

Executive Development

Management and Leadership

Executive Development ProgrammeCorporate GovernanceMonitoring and EvaluationStrategic PlanningRisk ManagementService Delivery ImprovementFinancial ManagementBudgeting Mentoring and coaching Policy DevelopmentProject Khaedu

0

0

PROFESSIONALS (level 9-12)

MALE

FEMALE

2

2



Monitoring and EvaluationRisk ManagementService Delivery ImprovementFraud Prevention and Anti-CorruptionFinancial ManagementBudgeting Mentoring and coaching Project KhaeduReport writingPublic Service InductionStrategic Records ManagementPolicy Development

2

2


TECHNICIANS AND ASSOCIATE PROFESSIONALS(level 6-8)

MALE

FEMALE

3

2

Report WritingBatho Pele PrinciplesCustomer CareSecretarial DevelopmentProject ManagementPresentation SkillsRecords ManagementPublic Service InductionComputer SkillsPolicy Development

3

2

CLERKS (level 1-5) MALE

FEMALE

1

1

Junior Management

Junior Management Report WritingSupervisory skillsComputer skillsFacilitation skillsBatho Pele PrinciplesCustomer CareSecretarial DevelopmentProject ManagementPresentation SkillsRecords ManagementPublic Service Induction

1

1

SUB TOTAL MALE

FEMALE

6

5

0 0 6

5

TOTAL 11 Executive Development


Corporate GovernanceMonitoring and EvaluationPerformance ManagementRisk ManagementFraud Prevention and Anti-CorruptionFinancial ManagementBudgeting Mentoring and coaching Project KhaeduDialogic FacilitationLabour RelationsConflict resolutionKnowledge managementReport writing

11

TABLE 1.11.2 – TRAINING PROVIDED 1 APRIL 2012 TO 31 MARCH 2013

OCCUPATIONAL CATEGORIES

GENDER NUMBER OF EMPLOyEES AS AT 1 APRIL 2013

TRAINING PROVIDED WITHIN THE REPORTING PERIOD

LEADERSHIPS SKILLS PROGRAMMES AND OTHER SHORT COURSES

OTHER FORMS OF TRAINING TOTAL

LEGISLATURES, SENIOR OFFICIALS AND MANAGERS (level 13-16)

MALE

FEMALE

0

0



Corporate GovernanceMonitoring and EvaluationStrategic PlanningPerformance ManagementRisk ManagementService Delivery ImprovementFraud Prevention and Anti-CorruptionFinancial ManagementBudgeting Mentoring and coaching Project Khaedu

0


PROFESSIONALS (level 9-12)

MALE

FEMALE

0

1



Corporate GovernanceMonitoring and EvaluationStrategic PlanningPerformance ManagementRisk ManagementService Delivery ImprovementFraud Prevention and Anti-CorruptionFinancial ManagementBudgeting Mentoring and coaching Project KhaeduPublic Service InductionStrategic Records Management

1

TECHNICIANS AND ASSOCIATE PROFESSIONALS

MALE

FEMALE

1

5

Junior Management Junior Management

Report WritingBatho Pele PrinciplesCustomer CareSecretarial DevelopmentProject ManagementPresentation SkillsRecords ManagementPublic Service Induction

6

CLERKS (level 1-5) MALE

FEMALE

1

0

Junior Management Junior Management

Report WritingBatho Pele PrinciplesCustomer CareSecretarial DevelopmentProject ManagementPresentation SkillsRecords ManagementPublic Service Induction

1

SUB TOTAL MALE

FEMALE

2

6

8

TOTAL 8 8

1.12 Injury on Duty

TABLE 1.12.1 – INJURY ON DUTY 1 APRIL 2012 TO 31 MARCH 2013

NATURE OF INJURy ON DUTy NUMBER % OF TOTAL

REQUIRED BASIC MEDICAL ATTENTION ONLY 2 1%

TEMPORARY TOTAL DISABLEMENT 0 0%

PERMANENT DISABLEMENT 0 0%

FATAL 0 0%

TOTAL 2 1%

1.13 Utilization of Consultants

Table 1.13.1: Report on consultant appointments using appropriated funds

PROJECT TITLE TOTAL NUMBER OF CONSULTANTS THAT WORKED ON THE PROJECT

DURATION: WORK DAYS

CONTRACT VALUE IN RAND



DURATION: WORK DAYS

CONTRACT VALUE IN RAND

TOTAL NUMBER OF PROJECTS

TOTAL INDIVIDUAL CONSULTANTS TOTAL DURATION:WORK DAyS

TOTAL CONTRACT VALUE IN RAND

Table 1.13.2: Analysis of consultant appointments using appropriated funds, in terms of historically disadvantaged individuals (HDIs)

PROJECT TITLE % OWNERSHIP BY HDI GROUPS % MANAGEMENT BY HDI GROUPS

NUMBER OF CONSULTANTS FROM HDI GROUPS THAT WORKED ON THE PROJECT

Table 1.13.3: Report on consultant appointments using donor funds


DURATION: WORK DAYS

DONOR AND CONTRACT VALUE IN RAND

TOTAL NUMBER OF PROJECTS

TOTAL INDIVIDUAL CONSULTANTS TOTAL DURATION: WORKDAYS

TOTAL CONTRACT VALUE IN RAND

Table 1.13.4: Analysis of consultant appointments using donor funds in terms of historically disadvantaged individuals (HDIs)

PROJECT TITLE % OWNERSHIP BY HDI GROUPS % MANAGEMENT BY HDI GROUPS

NUMBER OF CONSULTANTS FROM HDI GROUPS THAT WORKED ON THE PROJECT

Information on consultants is included in the financial information.


PART EFINANCIAL INFORMATION


Report of the Audit Committee 46

Report of the Accounting Officer 74

Report of the Auditor-General 81

Appropriation Statement 88

Notes to the Appropriation Statement 98

Statement of Financial Performance 100

Statement of Financial Position 101

Statement of Changes in Net Assets 102

Cash Flow Statement 103

Notes to the Annual Financial Statements (including Accounting policies) 104

Disclosures Notes to the Annual Financial Statements 121

Annexures 132

74 Department of Human SettlementsVOTE 13

REPORT OF THE ACCOUNTING OFFICER for the year ended 31 March 2013

REPORT By THE ACCOUNTING OFFICER TO THE EXECUTIVE AUTHORITy AND THE FREE STATE PROVINCIAL LEGISLATURE.

1. GENERAL REVIEW OF THE STATE OF FINANCIAL AFFAIRS

1.1 General review

In the 2012/2013 financial year, the department focussed its efforts on achieving its legislative mandate, but efficiency and effectiveness of service delivery continued to be impacted by the lack of sufficient capacity across all areas in the department.

1.2 Spending trends

The department spent R1 068 052 000 (98.1%) of its annual appropriation in comparison with 97.1% spent in the previous financial year. An under spending of R21 021 000 is reflected in comparison with R32 101 000 in the previous financial year.

The main drivers of the under spending are presented below:

• Programme 2: Housing Needs, Research and Planning (R838 000)

The main reason for the under spending is due to vacancies in Programme 2 that were not filled during the year under review. Furthermore, due to cost containment measures implemented in the department, the budget for a number of goods and services items in Programme 2 was not fully utilised.

• Programme 3: Housing Development (R19 929 000)

The main reason for the under spending on Programme 3 relates to funds not spent on the Housing Disaster Relief Grant R16 196 000. The under spending is attributed to poor performance by contractors, inadequate monitoring and implementation of projects as result of lack of technical expertise and officials on suspension.

More under spending on compensation of employees is due to positions that were not filled during the year under review in Programme 3.

Detail of the under spending per programme and economic classification is presented in the Notes to the Appropriation Statement.

1.3 Virement

A virement was applied that reallocated R2 388 000 to the Programme 1: Administration from the following programmes:

• Programme 2: Housing Needs, Research and Planning (R185 000)

• Programme 3: Housing Development (R2 203 000)

The main reason for the virement was to defray commitments as well as to prevent anticipated over expenditure at year-end on Programme 1. The virement was approved by the Accounting Officer and reported to the Provincial Treasury.

1.4 Fruitless and wasteful expenditure and irregular expenditure

As disclosed in disclosure note 24 to the Annual Financial Statements, the department incurred fruitless and wasteful expenditure of R1 127 000 during the year under review, mainly due to interest incurred on overdue accounts.

As disclosed in disclosure note 19 to the Annual Financial Statements the department issued a notice to all contractors on 31 December 2012, notifying them that all low-cost housing contracts were to expire on 31 March 2013 and that no further extensions on these contracts were to be provided beyond the set date. This was mainly to address the irregular expenditure incurred relating to the Housing Grant. Therefore, no commitments relating to these contracts were disclosed.

75Department of Human SettlementsVOTE 13


2. SERVICES RENDERED By THE DEPARTMENT

1.1 Services rendered

The following services were rendered by the department during the financial year under review:

• Housing project management and technical services

• Housing policy development, planning and research

• Housing contract and asset management

• Housing capacity building and partnership

• Informal settlements and land tenure services

• Information management and customer care services

• Housing subsidies and development

• People housing processes

• Social and rental housing

1.2 Tariff policy

The main source of revenue collected by the department is for the sale of tender documents, which were sold at a tariff of between R50 and R500 per tender document depending on the value of the contract.

1.3 Free Services

The department did not render any free services during the year under review that would have yielded significant revenue had a tariff been charged.

The department received free support services from the Department of Cooperative Governance and Traditional Affairs during the current and previous financial year. The support services encompassed the following functions:

• Corporate services:

- Human resources management

- Labour relations

- Skills development

- Organisational development

- Special programmes

- Employee assistance programme

- Job evaluation

- Performance and development management

- Strategic planning, monitoring and evaluation

- Structural designing services

- Communication, including publications and media relations

- Information technology



- Physical planning

- Departmental legal services

- Risk management

• Financial, Asset and Supply Chain Management services:

- Financial management and reporting

- Budget management

- Asset management

- Supply Chain Management

• Internal audit

• Security management

• Anti-Corruption

The Department of Cooperative Governance and Traditional Affairs budgeted for corporate services, financial, asset and supply chain management functions that rendered services to the Department of Cooperative Governance and Traditional Affairs as well as the Department of Human Settlements. The Department of Human Settlements shared in this service, with a total cost of R111 473 000 (2011/12: R127 931 000). The estimated value of the services rendered that relates to the Department of Human Settlements amounts to R90 947 000 (2011/12: R100 131 000).

3. CAPACITy CONSTRAINTS

The department experienced a critical lack of capacity in all areas to render effective and efficient services in accordance with its mandate. Key scarce skills such as engineering, project management, technical advisory services, and monitoring and evaluation have been severely depleted and the lack of capacity in these areas resulted in inadequate planning, slow implementation of programmes and insufficient monitoring of the numerous human settlements projects allocated in the province.

Due to the fact that Programme 1: Administration of the Department of Cooperative Governance and Traditional Affairs renders a shared service to both the department as well as to the Department of Human Settlements, there remains a critical shortage of support personnel especially within the financial management, supply chain management, asset management, communication, employee health and wellness and record management functions. This has negatively impacted the effectiveness and efficiency of support services rendered to both departments as well as compliance with laws and regulations.

In order to mitigate the impact of the mentioned capacity constraints on service delivery, the Accounting Officer employed service providers for project management, technical and engineering skills, financial management and asset management during the year under review. In accordance with the approved organisational structure of the Department of Human Settlements, the District Services function was transferred to the department with effect from 1 April 2012.

Limited funding has been availed to this department in the 2013/14 financial year to implement the resolution of the Executive Council that separate support services capacity should be established for the Department of Cooperative Governance and Traditional Affairs and the Department of Human Settlements.

4. UTILISATION OF DONOR FUNDS

The department did not receive donor funds during the year under review.

5. TRADING ENTITIES AND PUBLIC ENTITIES

The aim of the Free State Housing Fund was the provision of low cost housing in the Free State in terms of the Free State Provincial Housing Act, 1999 (Act No. 7 of 1999).



The Annual Financial Statements of the Free State Housing Fund are prepared in accordance with the South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) and the financial position, financial performance as well as the cash flows of the fund are presented in the separate Annual Financial Statements published in this annual report.

The Department of Human Settlements is currently in the process of phasing out the fund, but finalisation of this process is dependent on the repeal of the Act.

6. ORGANISATIONS TO WHOM TRANSFER PAyMENTS HAVE BEEN MADE

During the 2012/2013 financial year, the department made transfer payments to households and universities. Details of transfers to universities are disclosed in Annexure 1A and households are disclosed in Annexure 1B to the Annual Financial Statements. Transfers to state agencies are not separately reported as it forms part of transfer payments to households

7. CORPORATE GOVERNANCE ARRANGEMENTS

7.1 Audit Committee Functioning

The Cluster Audit Committee was established and functions in terms of regulation 3.1.1 to 3.1.16 of Treasury Regulations, 2005 (TR) which came into effect as a result of section 76 as well as section 77 of the Public Finance Management Act, 1999 (Act No. 1 of 1999) (PFMA). The Cluster Audit Committee was appointed by the MEC for Free State Provincial Treasury in consultation with the MEC: Cooperative Governance and Traditional Affairs and Human Settlements, for a period of three years, with effect from 1 January 2011. The members are thus currently serving the third year of their term.

During the period under review, the following had been fully achieved:

• The Cluster Audit Committee Charter had been reviewed and approved

• The Cluster Audit Committee convened regularly in order to candidly address its oversight roles and responsibilities as enshrined in the Cluster Audit Charter as well as in terms of TR 3.1.1 to 3.1.16

• The Cluster Audit Committee approved the Three Year and Annual Internal Audit Coverage Plan. The plan focused primarily on statutory audits, audits related to EXCO resolutions, Management Reports of the Auditor-General of South Africa, Ad-hoc assignments, follow-up audits as well as financial audits. The plan was approved taking into account the fact that the risk assessment was not concluded and therefore the plan would have been reviewed and re-presented once that process was completed. Consequently, the plan was not risk based, which reflected non-compliance with Treasury Regulations as well as the standards of professional practice of internal auditing.

• The Cluster Audit Committee commented on the Risk Management and Risk Management Committee Reports presented. The reports highlighted the level of risk exposures and mitigation controls instituted by management.

The Cluster Audit Committee approved an Action Plan based on the findings of the Auditor-General of South Africa for the 2011/2012 financial year. The progress reports were presented to the Cluster Committee, Provincial Treasury, Executive and Senior Management as well as the Auditor-General of South Africa.

As prescribed by chapter three of the Public Service Act, 1994 (Act No. 103 of 1994), read with related regulations regarding financial disclosures, some Senior Management Members (SMS) completed the disclosure forms and these were signed off by the Executive Authority. These disclosures formed the basis to minimize conflict of interest. These reports were presented to the office of Public Service Commission as required by the Act.

The Cluster Audit Committee’s overall opinion on the Financial Statements, effectiveness of internal audit as well as the system of internal control is encapsulated in the Report of the Cluster Audit Committee.

7.2 Risk Management

It is recognized that risk management is essential for sound strategic and financial planning and on-going business of the department. Concerted effort is currently underway to provide adequate human resource capacity and budgetary provision for risk management strategies to be implemented.



The Risk Management Committee has been established to, inter alia, develop and implement a comprehensive risk based cyclical strategic audit plan.

A service provider has also been appointed to assist the department to conduct risk assessment workshops for identification of risks within the department and the subsequent compilation of the risk register. An action plan to mitigate against the risks identified will also be compiled through interaction with the relevant officials from the department. It is anticipated that this process will culminate in the compilation of a fully compliant risk register (in line with National Treasury requirements) which will be presented to the Risk Management Committee for endorsement in the 2013/14 financial year.

8. DISCONTINUED ACTIVITIES/ACTIVITIES TO BE DISCONTINUED

The department did not discontinue any activities during the 2012/2013 financial year, nor is it envisaged that any activities will be discontinued in the near future.

9. NEW/PROPOSED ACTIVITIES

No new/proposed activities are planned in the forthcoming financial year.

10. ASSET MANAGEMENT

The department has captured all major and minor tangible and intangible assets on the LOGIS asset register which complies with the minimum prescribed requirements. All assets purchased during the year under review were procured through the LOGIS system and these assets are reflected as additions for the year on the asset register.

The annual stock take for the year under review has been conducted and the process of reconciling the integration of LOGIS and the Basic Accounting System (BAS) has been finalised. Since the LOGIS store for the Department of Human Settlements is only one year old, no assets were identified for the year under review that were due for disposal. The Accounting Officer still has to appoint the Disposal Committee that will deal with the disposal processes in future.

11. INVENTORIES

According to guidance issued by the National Treasury in July 2010, the department is required to disclose all work-in-progress and assets not yet transferred as inventory in an Annexure to the Annual Financial Statements.

Inventory on hand at year end represents housing units completed where title has not yet been transferred to the approved beneficiary. Work-in-progress includes all construction projects which are in process, but not completed at year-end.

The Department of Human Settlements is not able to determine the value of such inventory at year-end with reasonable accuracy due to the following challenges:

• The capacity constraints in project management are indicative of the risk that work-in-progress as per the Housing Subsidy System (HSS) may not be complete due to inspection schedules not being responsive to actual progress on the ground.

The HSS which is used to record all housing and human settlement projects has not been properly maintained over the years and includes outdated projects which have not been closed. A comprehensive data cleanup project will have to be undertaken in order to ensure reliable records of work-in-progress and housing units not yet transferred to beneficiaries.

The department has included these projects in the focus areas requiring attention in the future.

12. EVENTS AFTER THE REPORTING DATE

No significant events occurred after the reporting date and before the date of approval of these Annual Financial Statements that require adjustment or disclosure in the financial statements.



13. INFORMATION ON PREDETERMINED OBJECTIVES

The non-financial performance of the department in terms of its 2010/2013 Annual Performance Plan was monitored on a quarterly basis by means of non-financial performance review meetings involving all senior managers and relevant managers. Prior to these meetings, progress reports regarding non-financial performance information were gathered from all senior managers and consolidated. The purpose of the review meetings was to perform quality assurance of the reported quarterly progress on non-financial performance information.

Quarterly non-financial performance reports were compiled in accordance with the format provided by the Provincial Treasury, and the reports were submitted to the Provincial Treasury for their further consideration, after approval by the Accounting Officer.

14. SCOPA RESOLUTIONS

The table below reflects the status of implementation of SCOPA resolutions by the department:

Reference to previous audit

report and SCOPA resolutions

Subject Findings and progress

2/2008 Paragraph 3(b)(1) Housing Fund:

The department must:

• Prepare an action plan with

timeframes on the closing of

the housing fund; and

• Report on the progress with

the integration of the housing

fund into the department

A action plan was compiled and the department is in the process

of transferring the houses. Of the original 215 houses, 107 were

already transferred and the department is in the process of

transferring the remaing 108 houses.

2/2010 Paragraph 5 Capacity: Ensure that the financial

section of the department is

sufficiently capacitated by skilled

officials to ensure that financial

functions are properly executed

In terms of the support function related to the department no

additional funds were received from Provincial Treasury until

the end of the 2012/13 financial year. Funds were only made

available from 1 April 2013 to start the process although the

additional allocation is, in the case of both departments, not

sufficient to capacitate the most critical functions in the Support

Services Directorates. Provincial Treasury also only made funds

available in respect of Compensation of Employee, but no funds

were provided for operational matters, resulting in the possible

filling of some of the critical posts, but incumbents not being

provided with tools of the trade for those officials to perform

their functions effectively.

Officials on levels 13 and up were already split and the

department is in the process of splitting personnel on levels 1

to 12 after which the most critical posts will be advertised for

filling as from April 2013.

2/2010 Paragraph 8 Declaration of interest: Implement control measures to ensure that all employees declare their own, spouses’ and other close relatives’ interests in companies or closed corporations tendering, providing quotations or doing business with departments.

As prescribed by chapter three of the Public Service Act, 1994

(Act No. 103 of 1994), read with related regulations regarding

financial disclosures, some Senior Management Service

Members (SMS) completed the disclosure forms and these

were signed off by the Executive Authority. These disclosures

formed the basis to minimise conflict of interest. These reports

were presented to the office of Public Service Commission as

required by the Act.



The following resolutions were received in May 2013 for implementation in 2013/14:

Resolution 16/2013 Resolution 17/2013: A.2012 (Resolution 2/2012 paragraph 2) Resolution 17/2013 D.2012

15. PRIOR MODIFICATIONS TO AUDIT REPORTS

An Audit Implementation Action Plan was developed for all matters reported in the audit report and management report issued by the Auditor-General for the year ended 31 March 2012. Corrective measures were identified by the respective responsibility managers and progress is reported on a monthly basis. The Internal Audit Unit assists in monitoring the implementation of the action plan on a continuous basis.

Regrettably, due to capacity constraints, the department has not made as much progress as we would have wished. The department has mainly focussed on implementing internal control measures and the necessary systems to address the most significant matters reported which resulted in the modification of the prior year’s audit report.

16. EXEMPTIONS AND DEVIATIONS RECEIVED FROM THE NATIONAL TREASURy

The department did not apply for or receive any exemption from the PFMA or TR, or deviation from the financial reporting requirements for the current and previous financial years. The National Treasury advised that exemption is not required for the maintenance of the departmental asset register on Excel instead of LOGIS.

17. APPROVAL

The Annual Financial Statements set out on pages 88 to 142 have been approved by the Accounting Officer.

N. MOKHESI

ACCOUNTING OFFICER: HUMAN SETTLEMENTS

Date: 2013/05/31


REPORT OF THE AUDITOR GENERAL for the year ended 31 March 2013

REPORT OF THE AUDITOR-GENERAL TO THE FREE STATE LEGISLATURE ON VOTE NO. 13: DEPARTMENT OF HUMAN SETTLEMENTS

REPORT ON THE FINANCIAL STATEMENTS

Introduction

1. I have audited the financial statements of the Department of Human Settlements set out on pages 88 to 142, which comprise the appropriation statement, the statement of financial position as at 31 March 2013, the statement of financial performance, statement of changes in net assets, the cash flow statement for the year then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information.

Accounting officer’s responsibility for the financial statements

2. The accounting officer is responsible for the preparation of the financial statements in accordance with the Departmental financial reporting framework prescribed by the National Treasury and the requirements of the Public Finance Management Act of South Africa, 1999 (Act No. 1 of 1999) (PFMA) and Division of Revenue Act of South Africa, 2012 (Act No. 5 of 2012) (DoRA), and for such internal control as the accounting officer determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor-general’s responsibility

3. My responsibility is to express an opinion on the financial statements based on my audit. I conducted my audit in accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA), the General Notice issued in terms thereof and International Standards on Auditing. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance that the financial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

5. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my qualified audit opinion.

Basis for qualified opinion

Commitments

6. The department did not have an adequate system in place to maintain records of commitments for goods and services that have been approved and/or contracted but no delivery has taken place, which resulted in commitments being misstated. I was not able to determine the impact of the misstatement as it was impracticable to do so. In addition, I was unable to obtain sufficient appropriate audit evidence for the amounts disclosed as commitments in note 19 to the financial statements due to the information on the commitment register not agreeing to supporting documents and I could not confirm the disclosure by alternative means. Consequently, I was unable to determine whether any further adjustments to commitments stated at R964 667 000: 2012-13 (R2 095 649 000: 2011-12) in note 19 to the financial statements were necessary.



Accruals

7. The department did not account for accruals in terms of the Departmental financial reporting framework in the prior year as all goods and services that were received before year-end but not paid for were not disclosed as accruals. Consequently, the comparative figure (2011-12) for accruals as disclosed in note 20 the financial statements is understated by R3 578 917.

Qualified opinion

8. In my opinion, except for the possible effects of the matters described in the basis for qualified opinion paragraphs, the financial statements present fairly, in all material respects, the financial position of the Department of Human Settlements as at 31 March 2013 and its financial performance and cash flows for the year then ended, in accordance with the Departmental financial reporting framework prescribed by the National Treasury and the requirements of the PFMA and DoRA.

Emphasis of matters

9. I draw attention to the matters below. My opinion is not modified in respect of these matters.

Restatement of corresponding figures

10. As disclosed in notes 19, 20 and 23 to the financial statements, the corresponding figures for 31 March 2012 have been restated as a result of an error discovered during 2012-2013 in the financial statements of the department at, and for the year ended, 31 March 2012.

Material losses

11. As disclosed in note 23 to the financial statements, material losses were incurred by the department as a result of falsified and or forged claims emanating from collusion between employees, employees and suppliers and overriding of internal controls and the departments information systems. The department is currently investigating the full extent of this matter. Related losses amounting to R7.9 million have been identified in the 2011-12 period that relates to 2008-09 to 2011-12 financial periods. These known cases are included in irregular expenditure as disclosed. To date three officials have been dismissed for perpetuating this fraud.

Material under spending of the conditional grant

12. As disclosed in the appropriation statement, the department has materially under spent the budget on programme 3: housing development, implementation, planning and targets to the amount of R19 929 000. As a consequence, the department has not achieved its targets set for low-income/affordable housing units to be constructed in prioritised areas.

Additional matters

13. I draw attention to the matters below. My opinion is not modified in respect of these matters.

Unaudited supplementary schedules

14. The supplementary information set out on pages 132 to 142 does not form part of the financial statements and is presented as additional information. I have not audited these schedules and, accordingly, I do not express an opinion thereon.

Financial reporting framework

15. The financial reporting framework prescribed by the National Treasury and applied by the department is a compliance framework. The wording of my opinion on a compliance framework should reflect that the financial statements have



been prepared in accordance with this framework and not that they “present fairly”. Section 20(2)(a) of the PAA, however, requires me to express an opinion on the fair presentation of the financial statements. The wording of my opinion therefore reflects this requirement.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

16. In accordance with the PAA and the General Notice issued in terms thereof, I report the following findings relevant to performance against predetermined objectives, compliance with laws and regulations and internal control, but not for the purpose of expressing an opinion.

Predetermined objectives

17. I performed procedures to obtain evidence about the usefulness and reliability of the information in the annual performance report as set out on page 16 to 39 of the annual report.

18. The reported performance against predetermined objectives was evaluated against the overall criteria of usefulness and reliability. The usefulness of information in the annual performance report relates to whether it is presented in accordance with the National Treasury’s annual reporting principles and whether the reported performance is consistent with the planned objectives. The usefulness of information further relates to whether indicators and targets are measurable (i.e. well defined, verifiable, specific, measurable and time bound) and relevant as required by the National Treasury Framework for managing programme performance information (FMPPI).

The reliability of the information in respect of the selected programmes is assessed to determine whether it adequately reflects the facts (i.e. Whether it is valid, accurate and complete).

19. The material findings are as follows:

Usefulness of information

20. The FMPPI requires that it must be possible to validate the processes and systems that produce the indicator. A total of 16% of significantly important indicators in relation to the overall mandate of the department were not verifiable in that valid processes and systems that produce the information on actual performance did not exist. This was due to lack of controls in the relevant systems of collection, collation, verification and storage of actual performance information.

Reliability of information

21. The FMPPI requires that institutions should have appropriate systems to collect, collate, verify and store performance information to ensure valid, accurate and complete reporting of actual achievements against planned objective, indicators and targets.

A total of 25% of significantly important targets with respect to programme 2: housing needs, research and planning are not reliable when compared to source information or evidence provided. This was due to the lack of monitoring of the completeness of source documentation in support of actual achievements.

In addition, a total of 20% of significantly important targets with respect to programme 3: housing development, implementation, planning and targets are not reliable when compared to the source information and/or evidence provided. This was due to the lack of frequent review of validity of reported achievements against source documentation.

Additional matter

22. I draw attention to the matter below. This matter does not have an impact on the predetermined objectives audit findings reported above.



Achievement of planned targets

23. Of the total number of 61 targets planned for the year, 40 were not achieved during the year under review. This represents 66% of total planned targets that were not achieved during the year under review. This was mainly as a result of inadequate capacity due to inadequate staffing and prolonged disciplinary suspensions.

Compliance with laws and regulations

24. I performed procedures to obtain evidence that the entity has complied with applicable laws and regulations regarding financial matters, financial management and other related matters. My findings 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 as follows:

Annual financial statements

25. The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework and supported by full and proper records as required by section 40(1)(a) and (b) of the PFMA. Material misstatements of disclosure items identified by the auditors in the submitted financial statements were subsequently corrected and the supporting records were provided subsequently, but the uncorrected material misstatements and supporting records that could not be provided resulted in the financial statements receiving a qualified audit opinion.

Assets management

26. Proper control systems to safeguard and maintain assets were not implemented, as required by section 38(1)(d) of the PFMA and Treasury Regulations (TR) 10.1.1(a).

Expenditure management

27. The accounting officer did not take effective steps to prevent irregular and fruitless and wasteful expenditure, as required by section 38(1)(c)(ii) of the PFMA and TR 9.1.1.

28. The accounting officer did not take effective steps to prevent losses resulting from criminal conduct, as required by section 38(1)(c)(ii) of the PFMA.

29. 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 TR 8.2.3.

Procurement and contract management

30. Goods and services with a transaction value below R500 000 were procured without obtaining the required price quotations, as required by TR 16A6.1.

31. Goods and services of a transaction value above R500 000 were procured without inviting competitive bids, as required by TR 16A6.1.

32. Contracts were awarded to bidders who did not submit a declaration of past supply chain practices such as fraud, abuse of SCM system and non-performance, which is prescribed in order to comply with TR 16A9.2.

33. The preference point system was not applied in all procurement of goods and services above R30 000 as required by section 2(a) of the Preferential Procurement Policy Framework Act, 2000 (Act No. 5 of 2000) and TR 16A6.3(b).

34. Contracts and quotations were awarded to bidders who did not submit a declaration on whether they are employed by the state or connected to any person employed by the state, which is prescribed in order to comply with TR 16A8.3.

HR management and compensation

35. Appointments were made in posts which were not approved and funded, as required by Public Service Regulation (PSR) 1/III/ F.1(a) and (d).



36. Sufficient appropriate audit evidence could not be obtained that advertisements for posts always specified the inherent requirements of the job and core functions, as required by PSR 1/VII/C.2.2.

37. Sufficient appropriate audit evidence could not be obtained that appointments were made in posts that were advertised, as required by PSR 1/VII/C.2.

38. Appointments were made without the recommendation of a selection committee and/or by selection committees which were not properly constituted in contravention of PSR I/VII/D1-4.

39. The accounting officer did not ensure that all leave taken by employees was recorded accurately and in full, as required by PSR 1/V/F(b).

40. Employees were compensated for overtime work which was not approved in advance, as required by PSR 1/V/D.2(c).

41. Funded vacant posts were not filled within 12 months, as required by PSR 1/VII/C.1A.2, this was due to moratorium on recruitment by the executive committee.

42. An approved human resource plan was not in place, as required by PSR 1/III/B.2(d).

43. Persons were appointed that do not meet the requirements for the job without approval of the deviation, in contravention of section 11(2) of the Public Service Act, 1994 and PSR 1/VII/D.5-8.

44. Sufficient appropriate audit evidence could not be obtained that those persons in charge at pay points certified that the employees receiving payment were entitled thereto as required by TR 8.3.4.

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

Service delivery

46. The allocation for the housing development grant was utilised for purposes other than those stipulated in the grant framework in contravention of section 16(1) of the DoRA.

47. Quarterly performance reports were not submitted to the relevant provincial treasury, the National Treasury and the transferring national officer, as required by section 12(2)(c) of the DoRA.

48. The provincial department did not submit the 2011-12 annual evaluation reports to the national department by 31 May 2012, in contravention of the DoRA framework, Gazette No. 35399 dated 31 May 2012.

49. The provincial department did not utilise the Housing Subsidy System for the administration of all the human settlement delivery processes, in contravention of the DoRA framework.

50. Sufficient appropriate audit evidence could not be obtained that the department did not make payments for the building of houses in excess of the approved contracted amount, which resulted in irregular expenditure, in contravention of TR 8.2.

51. The agreements between the department and the contractor did not include the total contract values, completion dates and were not appropriately approved.

52. The department had no recourse with regard to defaulting contractors as some contracts did not include a penalty clause.

53. The provincial department did not ensure that there was adequate project management, which resulted in limited monitoring and control over housing projects and the completion thereof within prescribed timelines.

54. Sufficient appropriate audit evidence could not be obtained that the quality of houses built was according to the specific requirements and the expenditure incurred.



55. Actual performance results for the following outputs were not reported on as per the Human Settlement Development Grant framework as they were not included in the annual performance plan: Number of acts passed and /or policy guidelines approved in respect of Programme 2: Housing needs, research and planning.

56. Sufficient appropriate audit evidence could not be obtained that the rebuilding/rectification process was performed on houses that did not qualify for rectification, in contravention of by Part 3 (2.3) of the Housing Code, issued in terms of section 4 of the Housing Act, 1997 (Act No. 107 of 1997).

57. Sufficient appropriate audit evidence could not be obtained that the rebuilding/ rectification of houses did not adhere to the prescribed minimum technical norms and standards, as required by Part 3 (2.5) of the Housing Code, issued in terms of section 4 of the Housing Act, 1997.

Internal control

58. I considered internal control relevant to my audit of the financial statements, annual performance report 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 basis for qualified of opinion, the findings on the annual performance report and the findings on compliance with laws and regulations included in this report.

Leadership

59. Although management has instituted disciplinary measures against officials implicated in fraud, these employees and contractors involved in the collusion to defraud the department have not been reported to the South African Police Service.

60. Management did not effectively exercise oversight responsibility regarding financial, performance reporting and compliance with laws and regulations and related internal controls, resulting in significant audit findings.

61. Management did not implement effective human resource management to ensure that adequate and sufficiently skilled resources were in place and that internal controls are implemented. This was mainly due to inadequate funding and resulted in the department not meeting its performance targets set in the annual performance plan.

62. Management did not effectively monitor the implementation of the action plans to address internal control deficiencies. This was due to prolonged disciplinary suspensions of officials and inadequate capacity. This resulted in repeat findings reported in the prior year.

Financial and performance management

63. Management did not ensure that the finance section has adequate capacity in terms of skills, as a result they did not implement proper record keeping in a timely manner to ensure that complete, relevant and accurate information is accessible and available to support financial and performance report.

64. Management did not implement adequate controls over daily and monthly processing of transactions and internal controls were not regularly evaluated for appropriateness of design and operating effectiveness. As a result the department was unable to detect and prevent fraudulent transactions processed over a period of three years.

65. Management did not adequately review and monitor compliance with laws and regulations, resulting in significant findings being reported on compliance with applicable laws and regulation. This was due to inadequate staffing and prolonged disciplinary hearings.

Governance

66. Management did not implement appropriate risk management activities to ensure that regular risk assessments, including consideration on IT risks and fraud prevention, were conducted and that a risk strategy to address the risks is developed and monitored.



OTHER REPORTS

Investigations

67. During the 2009-10 financial year the executive committee requested an independent consulting firm to conduct an investigation at 10 departments in the Free State. The investigation aimed to establish whether they had complied with legislative prescripts relating to payroll and supply chain management and whether any transgressions occurred in this respect. The report has been finalised, but has not yet been submitted to the department.

68. An independent firm is investigating six senior managers who are on suspension at the time of the audit for various offenses ranging from overriding of controls on Housing Subsidy System to changing project milestones for the benefit of housing contractors. The investigation was ongoing at the time of reporting.

69. An investigation is being conducted on suspected fraud in the payment of advances to material suppliers during 2010-11 financial year. The investigation commenced in June 2012 and was still ongoing at the time of reporting.

70. An investigation is being conducted on housing subsidies paid to beneficiaries. The investigation commenced in the 2008-09 financial year and was still ongoing.

BLOEMFONTEINDate: 2013/05/31

Bloemfontein

31 July 2013

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NOTES TO THE APPROPRIATION STATEMENTfor the year ended 31 March 2013

1. Detail of transfers and subsidies as per Appropriation Act (after Virement):

Detail of these transactions can be viewed in the note on Transfers and subsidies, disclosure notes and Annexure 1 (A-H) to the Annual Financial Statements.

2. Detail of specifically and exclusively appropriated amounts voted (after Virement):

Detail of these transactions can be viewed in note 1 (Annual Appropriation) to the Annual Financial Statements.

3. Detail on payments for financial assets

Detail of these transactions per programme can be viewed in the note on Payments for financial assets to the Annual Financial Statements.

4. Explanations of material variances from Amounts Voted (after Virement):

4.1 Per programme Final

Appropriation

Actual

Expenditure

Variance R’000 Variance as

a % of Final

Appropriation

Housing Needs, Research & Planning 8 936 8 098 838 9%

The main reason for the under spending is due to vacancies in Programme 2 that were not filled during the year under review.

Furthermore, due to cost containment measures implemented in the department, the budget for a number of goods and services items

in Programme 2 was not fully utilised.

Housing Development 1 046 969 1 027 040 19 929 2%

The main reason for the under spending on Programme 3 relates to funds not spent on the Housing Disaster Relief Grant R16 196 000.

The under spending is attributed to poor performance by contractors, inadequate monitoring and implementation of projects as result

of lack of technical expertise and officials on suspension.

Further under spending on compensation of employees is due to positions that were not filled during the year under review in Programme

3.

Housing Asset Management and Property

Management

936 828 108 12%

The main reason for the under spending was the closing down of the Free State Housing Fund, which was established to provide low

cost housing in the Free State in terms of the Free State Housing Act of 1999, and therefore activities within this programme were scaled

down.


NOTES TO THE APPROPRIATION STATEMENTfor the year ended 31 March 2013

4.2 Per economic classification Final

Appropriation

Actual

Expenditure

Variance Variance as

a % of Final

Appropriation

R’000 R’000 R’000 R’000

Current payments

Compensation of employees 67 441 64 901 2 540 3.80%

Goods and services 27 556 25 641 1 915 7.00%

Interest and rent on land 114 114 0 0.00%

Transfers and subsidies

Universities and technikons 500 500 0 0.00%

Households 991 986 975 830 16 156 1.60%

Gifts and donations 57 57 0 0.00%

Payments for capital assets

Machinery and equipment 1 419 1 009 410 28.00%

Employee compensation was under spent due to the suspension of senior managers and housing technicians in the current year. Also, the under spending relating to goods and services was mainly due to cost containment measures implemented in the Department and the closing down of the Free State Housing Fund as indicated above. The Housing Disaster Relief grant was under spent by R16 196 000 due to poor performance by contractors, inadequate monitoring and implementation of projects as result of lack of technical expertise and officials on suspension. Vacancies were not filled during the year due to insufficient funds. Therefore, machinery and equipment in the form of IT equipment and furniture were not purchased.

4.3 Per conditional grant Final

Appropriation

Actual

Expenditure

Variance Variance as

a % of Final

Appropriation

R’000 R’000 R’000 R’000

Human Settlement Development Grant 964 335 964 274 61 0.01%

Urban Settlement Development Grant 27 469 11 334 16 135 58,74%


STATEMENT OF FINANCIAL PERFORMANCEfor the year ended 31 March 2013

PERFORMANCE Note 2012/13 2011/12

R’000 R’000

REVENUE

Annual appropriation 1 1 089 073 1 093 356

TOTAL REVENUE 1 089 073 1 093 356

EXPENDITURE

Current expenditure

Compensation of employees 3 64 901 39 280

Goods and services 4 25 641 29 824

Interest and rent on land 5 114 24

Total current expenditure 90 656 69 128

Transfers and subsidies

Transfers and subsidies 7 976 387 987 639

Total transfers and subsidies 976 387 987 639

Expenditure for capital assets

Tangible capital assets 8 1 009 999

Software and other intangible assets 8 - 178

Total expenditure for capital assets 1 009 1 177

Payments for financial assets 6 - 3 311

TOTAL EXPENDITURE 1 068 052 1 061 255

SURPLUS/(DEFICIT) FOR THE YEAR 21 021 32 101

Reconciliation of Net Surplus/(Deficit) for the year

Voted funds 21 021 32 101

Annual appropriation 4 825 1 915

Conditional grants 16 196 30 186

SURPLUS/(DEFICIT) FOR THE YEAR 21 021 32 101


STATEMENT OF FINANCIAL POSITIONas at 31 March 2013

POSITION Note 2012/13 2011/12

R’000 R’000

ASSETS

Current assets 25 636 35 796

Unauthorised expenditure 9 29 -

Cash and cash equivalents 10 17 446 32 412

Prepayments and advances 11 175 83

Receivables 12 7 986 3 301

TOTAL ASSETS 25 636 35 796

LIABILITIES

Current liabilities 22 743 35 796

Voted funds to be surrendered to the Revenue Fund 13 21 050 32 101

Departmental revenue and NRF Receipts to be surrendered to the Revenue

Fund

14 37 3

Payables 15 1 656 3 692

TOTAL LIABILITIES 22 743 35 796

NET ASSETS 2 893 -

Represented by:

Recoverable revenue 2 893 -

TOTAL 2 893 -


STATEMENT OF CHANGES IN NET ASSETSfor the year ended 31 March 2013

NET ASSETS Note 2012/13 2011/12

R’000 R’000

Recoverable revenue

Irrecoverable amounts written off 2 893 -

Debts recovered (included in departmental receipts) (51) (4)

Debts raised 2 944 4

Closing balance 2 893 -

TOTAL 2 893 -


CASH FLOW STATEMENTfor the year ended 31 March 2013

CASH FLOW Note 2012/13 2011/12

R’000 R’000

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts 1 089 266 1 094 161

Annual appropriated funds received 1.1 1 089 073 1 093 356

Departmental revenue received 2 193 805

Net (increase)/decrease in working capital (6 842) (5 278)

Surrendered to Revenue Fund (32 260) (4 361)

Current payments (90 627) (69 128)

Payments for financial assets - (3 311)

Transfers and subsidies paid (976 387) (987 639)

Net cash flow available from operating activities 16 (16 850) (24 444)

CASH FLOWS FROM INVESTING ACTIVITIES

Payments for capital assets 8 (1 009) (1 177)

Net cash flows from investing activities (1 009) (1 177)

CASH FLOWS FROM FINANCING ACTIVITIES

Increase/(decrease) in net assets 2 893 -

Net cash flows from financing activities 2 893 -

Net increase/(decrease) in cash and cash equivalents (14 966) 23 267

Cash and cash equivalents at beginning of period 32 412 9 145

Cash and cash equivalents at end of period 17 17 446 32 412


ACCOUNTING POLICIESfor the year ended 31 March 2013

The Financial Statements have been prepared in accordance with the following policies, which have been applied consistently in all material aspects, unless otherwise indicated. However, where appropriate and meaningful, additional information has been disclosed to enhance the usefulness of the Financial Statements and to comply with the statutory requirements of the Public Finance Management Act, Act 1 of 1999 (as amended by Act 29 of 1999), and the Treasury Regulations issued in terms of the Act and the Division of Revenue Act, Act 1 of 2010.

1. Presentation of the Financial Statements

1.1 Basis of preparation

The financial statements have been prepared on a modified cash basis of accounting.

Under this basis, the effects of transactions and other events are recognised in the financial records when the resulting cash is received or paid. The “modification” results from the recognition of certain near-cash balances in the financial statements as well as the revaluation of foreign investments and loans and the recognition of resulting revaluation gains and losses.

In addition supplementary information is provided in the disclosure notes to the financial statements where it is deemed to be useful to the users of the financial statements.

1.2 Presentation currency

All amounts have been presented in the currency of the South African Rand (R) which is also the functional currency of the department.

1.3 Rounding

Unless otherwise stated all financial figures have been rounded to the nearest one thousand Rand (R’000).

1.4 Comparative figures

Prior period comparative information has been presented in the current year’s financial statements. Where necessary figures included in the prior period financial statements have been reclassified to ensure that the format in which the information is presented is consistent with the format of the current year’s financial statements.

1.5 Comparative figures - Appropriation Statement

A comparison between actual amounts and final appropriation per major classification of expenditure is included in the Appropriation Statement.

2. Revenue

2.1 Appropriated funds

Appropriated funds comprises of departmental allocations as well as direct charges against revenue fund (i.e. statutory appropriation).

Appropriated funds are recognised in the financial records on the date the appropriation becomes effective. Adjustments made in terms of the adjustments budget process are recognised in the financial records on the date the adjustments become effective.

Unexpended appropriated funds are surrendered to the National/Provincial Revenue Fund. Any amounts owing to the National/Provincial Revenue Fund at the end of the financial year are recognised as payable in the statement of financial position.

Any amount due from the National/Provincial Revenue Fund at the end of the financial year is recognised as a receivable in the statement of financial position.



2.2 Departmental revenue

All departmental revenue is recognised in the statement of financial performance when received and is subsequently paid into the National/Provincial Revenue Fund, unless stated otherwise.

Any amount owing to the National/Provincial Revenue Fund at the end if the financial year is recognised as a payable in the statement of financial position.

No accrual is made for amounts receivable from the last receipt date to the end of the reporting period. These amounts are however disclosed in the disclosure notes to the annual financial statements.

3. Expenditure

3.1 Compensation of employees

3.1.1 Salaries and wages

Salaries and wages are expensed in the statement of financial performance when the final authorisation for payment is effected on the system (by no later than 31 March of each year).

Other employee benefits that give rise to a present legal or constructive obligation are disclosed

in the disclosure notes to the financial statements at its face value and are not recognised in the statement of financial performance or position.

Employee costs are capitalised to the cost of a capital project when an employee spends more than 50% of his/her time on the project. These payments form part of expenditure for capital assets in the statement of financial performance.

3.1.2 Social contributions

Employer contributions to post employment benefit plans in respect of current employees are expensed in the statement of financial performance when the final authorisation for payment is effected on the system (by no later than 31 March of each year).

No provision is made for retirement benefits in the financial statements of the department. Any potential liabilities are disclosed in the financial statements of the National Revenue Fund and not in the financial statements of the employer department.

Employer contributions made by the department for certain of its ex-employees (such as medical benefits) are classified as transfers to households in the statement of financial performance.

3.2 Goods and services

Payments made during the year for goods and/or services are recognised as an expense in the statement of financial performance when the final authorisation for payment is effected on the system (by no later than 31 March of each year).

The expense is classified as capital if the goods and/or services were acquired for a capital project or if the total purchase price exceeds the capitalisation threshold (currently R5, 000). All other expenditures are classified as current.

Rental paid for the use of buildings or other fixed structures is classified as goods and services and not as rent on land.

3.3 Interest and rent on land

Interest and rental payments are recognised as an expense in the statement of financial performance when the final authorisation for payment is effected on the system (by no later than 31 March of each year). This item excludes rental for the use of buildings or other fixed structures. If it is not possible to distinguish between payment for the use of land and the fixed structures on it, the whole amount should be recorded under goods and services.



3.4 Payments for financial assets

Debts are written off when identified as irrecoverable. Debts written-off are limited to the amount of savings and/or under spending of appropriated funds. The write off occurs at year-end or when funds are available. No provision is made for irrecoverable amounts but an estimate is included in the disclosure notes to the financial statements.

All other losses are recognised when authorisation has been granted for the recognition thereof.

3.5 Transfers and subsidies

Transfers and subsidies are recognised as an expense when the final authorisation for payment is effected on the system (by no later than 31 March of each year).

3.6 Unauthorised expenditure

When confirmed unauthorised expenditure is recognised as an asset in the statement of financial position until such time as the expenditure is either approved by the relevant authority, recovered from the responsible person or written off as irrecoverable in the statement of financial performance.

Unauthorised expenditure approved with funding is derecognised from the statement of financial position when the unauthorised expenditure is approved and the related funds are received.

Where the amount is approved without funding it is recognised as expenditure in the statement of financial performance on the date stipulated in the Act.

3.7 Fruitless and wasteful expenditure

Fruitless and wasteful expenditure is recognised as expenditure in the statement of financial performance according to the nature of the payment and not as a separate line item on the face of the statement. If the expenditure is recoverable it is treated as an asset until it is recovered from the responsible person or written off as irrecoverable in the statement of financial performance.

3.8 Irregular expenditure

Irregular expenditure is recognised as expenditure in the statement of financial performance. If the expenditure is not condoned by the relevant authority it is treated as an asset until it is recovered or written off as irrecoverable.

4. Assets

4.1 Cash and cash equivalents

Cash and cash equivalents are carried in the statement of financial position at cost.

Bank overdrafts are shown separately on the face of the statement of financial position.

For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held, other short-term highly liquid investments and bank overdrafts.

4.2 Prepayments and advances

Amounts prepaid or advanced are recognised in the statement of financial position when the payments are made and are derecognised as and when the goods/services are received or the funds are utilised.

Prepayments and advances outstanding at the end of the year are carried in the statement of financial position at cost.



4.3 Receivables

Receivables included in the statement of financial position arise from cash payments made that are recoverable from another party (including departmental employees) and are derecognised upon recovery or write-off.

Receivables outstanding at year-end are carried in the statement of financial position at cost plus any accrued interest. Amounts that are potentially irrecoverable are included in the disclosure notes.

4.4 Inventory

Inventories that qualify for recognition must be initially reflected at cost. Where inventories are acquired at no cost, or for nominal consideration, their cost shall be their fair value at the date of acquisition.

All inventory items at year-end are reflected using the weighted average cost or FIFO cost formula.

4.5 Capital assets

4.5.1 Movable assets

Initial recognition

A capital asset is recorded in the asset register on receipt of the item at cost. Cost of an asset is defined as the total cost of acquisition. Where the cost cannot be determined accurately, the movable capital asset is stated at fair value. Where fair value cannot be determined, the capital asset is included in the asset register at R1.

All assets acquired prior to 1 April 2002 are included in the register R1.

Subsequent recognition

Subsequent expenditure of a capital nature is recorded in the statement of financial performance as “expenditure for capital assets” and is capitalised in the asset register of the department on completion of the project.

Repairs and maintenance is expensed as current “goods and services” in the statement of financial performance.

4.5.2 Immovable assets

Initial recognition

A capital asset is recorded on receipt of the item at cost. Cost of an asset is defined as the total cost of acquisition. Where the cost cannot be determined accurately, the immovable capital asset is stated at R1 unless the fair value for the asset has been reliably estimated.

Subsequent recognition

Work-in-progress of a capital nature is recorded in the statement of financial performance as “expenditure for capital assets”. On completion, the total cost of the project is included in the asset register of the department that is accountable for the asset.

Repairs and maintenance is expensed as current “goods and services” in the statement of financial performance.

4.5.3 Intangible assets

Initial recognition

An intangible asset is recorded in the asset register on receipt of the item at cost. Cost of an intangible asset is defined as the total cost of acquisition. Where the cost cannot be determined accurately, the intangible asset is stated at fair value. Where fair value cannot be determined, the intangible asset is included in the asset register at R1.

All intangible assets acquired prior to 1 April 2002 can be included in the asset register at R1.*



Subsequent expenditure

Subsequent expenditure of a capital nature is recorded in the statement of financial performance as “expenditure for capital asset” and is capitalised in the asset register of the department.

Maintenance is expensed as current “goods and services” in the statement of financial performance.

5. Liabilities

5.1 Payables

Recognised payables mainly comprise of amounts owing to other governmental entities. These payables are carried at cost in the statement of financial position.

5.2 Contingent liabilities

Contingent liabilities are included in the disclosure notes to the financial statements when it is possible that economic benefits will flow from the department, or when an outflow of economic benefits or service potential is probable but cannot be measured reliably.

5.3 Contingent assets

Contingent assets are included in the disclosure notes to the financial statements when it is probable that an inflow of economic benefits will flow to the entity.

5.4 Commitments

Commitments are not recognised in the statement of financial position as a liability or as expenditure in the statement of financial performance but are included in the disclosure notes.

5.5 Accruals

Accruals are not recognised in the statement of financial position as a liability or as expenditure in the statement of financial performance but are included in the disclosure notes.

5.6 Employee benefits

Short-term employee benefits that give rise to a present legal or constructive obligation are disclosed in the disclosure notes to the financial statements. These amounts are not recognised in the statement of financial performance or the statement of financial position.

5.7 Lease commitments

Finance lease

Finance leases are not recognised as assets and liabilities in the statement of financial position. Finance lease payments are recognised as a capital expense in the statement of financial performance and are not apportioned between the capital and the interest portions. The total finance lease payment is disclosed in the disclosure notes to the financial statements.

Operating lease

Operating lease payments are recognised as an expense in the statement of financial performance. The operating lease commitments are disclosed in the discloser notes to the financial statement.



5.8 Impairment

The department tests for impairment where there is an indication that a receivable, loan or investment may be impaired. An assessment of whether there is an indication of possible impairment is done at each reporting date. An estimate is made for doubtful loans and receivables based on a review of all outstanding amounts at year-end. Impairments on investments are calculated as being the difference between the carrying amount and the present value of the expected future cash flows / service potential flowing from the instrument.

6. Receivables for departmental revenue

Receivables for departmental revenue are disclosed in the disclosure notes to the annual financial statements. These receivables are written off when identified as irrecoverable and are disclosed separately.

7. Net Assets

7.1 Recoverable revenue

Amounts are recognised as recoverable revenue when a payment made in a previous financial year becomes recoverable from a debtor in the current financial year. Amounts are either transferred to the National/Provincial Revenue Fund when recovered or are transferred to the statement of financial performance when written-off.

8. Related party transactions

Specific information with regards to related party transactions is included in the disclosure notes.

9. Key management personnel

Compensation paid to key management personnel including their family members where relevant, is included in the disclosure notes.


NOTES TO THE ANNUAL FINANCIAL STATEMENTSfor the year ended 31 March 2013

1. Annual Appropriation

1.1 Annual AppropriationIncluded are funds appropriated in terms of the Appropriation Act (and the Adjustments Appropriation Act) for National Departments (Voted funds) and Provincial Departments:

2012/13

Final

Appropriation

Actual Funds

Received

2011/12

Appropriation

received

R’000 R’000 R’000

Administration 32 232 32 232 19 725

Housing Needs, Research & Planning 8 936 8 936 14 928

Housing Development 1 046 969 1 046 969 1 057 117

Housing Asset Management & Property Management 936 936 1 586

Total 1 089 073 1 089 073 1 093 356

1.2 Conditional grants

2012/13 2011/12

Note R’000 R’000

Total Grants Received 29 991 804 958 007

2. Departmental revenue

Note 2012/13 2011/12

R’000 R’000

Tax revenue

Sales of goods and services other than capital assets 2.1 55 34

Interest, dividends and rent on land 2.2 11 156

Transactions in financial assets and liabilities 2.3 127 615

Total revenue collected 193 805

Less: Own revenue included in appropriation 14 193 805

Departmental revenue collected - -

2.1 Sales of goods and services other than capital assets

Note 2012/13 2011/12

2 R’000 R’000

Administrative fees 55 34

Total 55 34



2.2 Interest, dividends and rent on land

Note 2012/13 2011/12

2 R’000 R’000

Interest 11 156

Total 11 156

2.3 Transactions in financial assets and liabilities

Note 2012/13 2011/12

2 R’000 R’000

Other Receipts including Recoverable Revenue 127 615

Total 127 615

3. Compensation of employees3.1 Salaries and Wages

Note 2012/13 2011/12

R’000 R’000

Basic salary 44 044 26 292

Performance award 1 275 555

Service Based 441 469

Compensative/circumstantial 561 98

Other non-pensionable allowances 10 568 7 227

Total 56 889 34 641

3.2 Social contributions

Note 2012/13 2011/12

R’000 R’000

Employer contributions

Pension 5 269 3 018

Medical 2 732 1 614

Bargaining council 11 7

Total 8 012 4 639

Total compensation of employees 64 901 39 280

Average number of employees 169 110

The Department of Human Settlements and the Department of Cooperative Governance and Traditional Affairs split during the previous financial year which resulted in a significant increase of average employees during the current year as employees were transferred from the Department of Cooperative Governance and Traditional Affairs to the Department of Human Settlements. The revised organisational structure resulting from the split was also approved during the current financial year which resulted in new appointments, over and above those mentioned above.



4. Goods and services

Note 2012/13 2011/12

R’000 R’000

Administrative fees 299 433

Advertising 423 1 976

Assets less then R5,000 4.1 206 237

Catering 559 2 181

Communication 1 089 1 043

Computer services 4.2 - 24

Consultants, contractors and agency/outsourced services 4.3 2 333 7 230

Entertainment 14 16

Audit cost – external 4.4 8 900 4 349

Inventory 4.5 572 966

Operating leases 3 170 1 486

Property payments 4.6 93 91

Travel and subsistence 4.7 6 439 8 312

Venues and facilities 632 402

Training and staff development 76 82

Other operating expenditure 4.8 836 996

Total 25 641 29 824

4.1 Assets less than R5,000

Note 2012/13 2011/12

4 R’000 R’000

Tangible assets

Machinery and equipment 206 237

Total 206 237

4.2 Computer services

Note 2012/13 2011/12

4 R’000 R’000

SITA computer services - 24

Total - 24



4.3 Consultants, contractors and agency/outsourced services

Note 2012/13 2011/12

4 R’000 R’000

Infrastructure and planning - 4 646

Legal costs 1 607 377

Contractors 726 825

Agency and support/outsourced services - 1 382

Total 2 333 7 230

4.4 Audit cost – External

Note 2012/13 2011/12

4 R’000 R’000

Regularity audits 3 736 4 349

Investigations 5 164 -

Total 8 900 4 349

4.5 Inventory

Note 2012/13 2011/12

4 R’000 R’000

Food and food supplies 110 65

Fuel, oil and gas 4 1

Other consumables 13 197

Stationery and printing 445 703

Total 572 966

4.6 Property payments

Note 2012/13 2011/12

4 R’000 R’000

Municipal services 93 91

Total 93 91

4.7 Travel and subsistence

Note 2012/13 2011/12

4 R’000 R’000

Local 6 211 7 924

Foreign 228 388

Total 6 439 8 312



4.8 Other operating expenditure

Note 2012/13 2011/12

4 R’000 R’000

Professional bodies, membership and subscription fees

7 2

Resettlement costs - 42

Gifts 7 2

Insurance

Printing and stationary

Freight

Other

74

515

115

118

62

730

-

158

Total 836 996

5. Interest and rent on land

Note 2012/13 2011/12

R’000 R’000

Interest paid 114 24

Total 114 24

6. Payments for financial assets

Note 2012/13 2011/12

R’000 R’000

Debts written off 6.1 - 3 311

Total - 3 311

6.1 Debts written off

Note 2012/13 2011/12

6 R’000 R’000

Nature of debts written off

Ngwathe - 257

Matjhabeng - 2 054

Thabo Mofutsanyana - 1 000

Total debt written off - 3 311

The amounts written off in the prior financial year relates to conditional grant advance payments to municipalities.



7. Transfers and subsidies

2012/13 2011/12

R’000 R’000

Universities and technikons Annex 1A 500 1 300

Households Annex 1B 975 830 985 972

Gifts, donations and sponsorships made Annex 1D 57 367

Total 976 387 987 639

Unspent funds transferred to the above beneficiaries 283 154 3 809

2012/13

- Included in transfers to households is R 3 000 000 which was transferred in regard to the establishment of the

project management office of the Mangaung Metro.

- Included in transfers to households is R 76 929 520 which was transferred to the Housing Development Agency for

the procurement of land.

- Included in transfers to households is R 118 000 000 which was transferred to the Social Housing Regulatory

Authority for the implementation of the Social and Rental Housing projects in the Free State Province.

- Included in transfers to households is R 446 057 which was transferred to The Utshani Fund for beneficiary subsidies.

- Included in transfers to households is R 515 620 which was transferred to the Maluti Batlokoa Project Trust Fund

for a housing project.

- Included in transfers to households is R 84 262 375 which was transferred to the National Housing Finance

Corporation for operational funding and FLISP respectively.

2011/12

- Included in transfers to households is R 2 059 282 which was transferred in regard to the accreditation of the

Mangaung Metro.

- Included in transfers to households is R 1 749 275 which was transferred to the Mangaung Metro for two housing

projects.

8. Expenditure for capital assets

Note 2012/13 2011/12

R’000 R’000

Tangible assets 1 009 999

Machinery and equipment 28 1 009 999

Software and other intangible assets - 178

Computer software 29 - 178

Total 1 009 1 177



8.1 Analysis of funds utilised to acquire capital assets – 2012/13

Voted funds Aid assistance Total

R’000 R’000 R’000

Tangible assets 1 009 - 1 009

Machinery and equipment 1 009 - 1 009

Total 1 009 - 1 009

8.2 Analysis of funds utilised to acquire capital assets – 2011/12

Voted funds Aid assistance Total

R’000 R’000 R’000

Tangible assets 999 - 999

Machinery and equipment 999 - 999

Software and other intangible assets 178 - 178

Computer software 178 - 178

Total 1 177 - 1 177

9. Unauthorised expenditure

9.1 Reconciliation of unauthorised expenditure

Note 2012/13 2011/12

R’000 R’000

Unauthorised expenditure – discovered in current year

9 29 -

Unauthorised expenditure awaiting authorisation 29 -

9.2 Analysis of unauthorised expenditure awaiting authorisation per economic classification

2012/13 2011/12

R’000 R’000

Current 29 -

Total 29



9.3 Analysis of unauthorised expenditure awaiting authorisation per type

2012/13 2011/12

R’000 R’000

Unauthorised expenditure incurred not in accordance with the purpose of

the vote or main division

29 -

Total 29 -

9.4 Details of unauthorised expenditure – current year

Incident Disciplinary steps taken/criminal

proceedings

2012/13

R’000

Performance to improve awareness on HIV/aids and child

trafficking

To be investigated 29

Total 29

10. Cash and cash equivalents

Note 2012/13 2011/12

R’000 R’000

Consolidated Paymaster General Account 17 426 32 392

Cash on hand 20 20

Total 17 446 32 412

11. Prepayments and advances

Note 2012/13 2011/12

R’000 R’000

Travel and subsistence 175 83

Total 175 83

12. Receivables

2012/13 2011/12

R’000 R’000 R’000 R’000 R’000

Note

Less than one

year

One to three

years

Older than

three yearsTotal Total

Claims

recoverable

12.1

Annex 3

215 502 - 717 512

Staff debt 12.2 91 - - 91 41

Other debtors 12.3 4 919 2 254 5 7 178 2 748

Total 5 225 2 756 5 7 986 3 301



12.1 Claims recoverable

Note 2012/13 2011/12

12 R’000 R’000

Provincial departments 222 17

Local governments 495 495

Total 717 512

12.2 Staff debt

Note 2012/13 2011/12

12 R’000 R’000

Salary Overpayment 9 29

Subsistence and Transport - 2

Telephone 47 9

Tax 34 1

Petty Cash 1 -

Total 91 41

12.3 Other debtors

Note 2012/13 2011/12

12 R’000 R’000

Supplier debt 7 127 2 739

EX Employee (Salary and Telephone) 51 9

Total 7 178 2 748

13. Voted funds to be surrendered to the Revenue Fund

Note 2012/13 2011/12

R’000 R’000

Opening balance 32 101 3 549

Transfer from statement of financial performance 21 021 32 101

Add: Unauthorised expenditure for current year 9 29 -

Paid during the year (32 101) (3 549)

Closing balance 21 050 32 101



14. Departmental revenue and NRF Receipts to be surrendered to the Revenue Fund

Note 2012/13 2011/12

R’000 R’000

Opening balance 3 10

Own revenue included in appropriation 193 805

Paid during the year (159) (812)

Closing balance 37 3

15. Payables – current

Note 2012/13 2011/12

R’000 R’000

Advances received 15.1 100 2 169

Other payables 15.3 1 556 1 523

Total 1 656 3 692

15.1 Advances received

Note 2012/13 2011/12

15 R’000 R’000

National Departments Annex 6A 100 2 169

Total 100 2 169

15.2 Other payables

Note 2012/13 2011/12

15 R’000 R’000

Housing Fund 1 556 1 523

Total 1 556 1 523



16. Net cash flow available from operating activities

Note 2012/13 2011/12

R’000 R’000

Net surplus/(deficit) as per Statement of Financial Performance 21 021 32 101

Add back non cash/cash movements not deemed operating activities (37 871) (7 657)

(Increase)/decrease in receivables – current (4 685) 5 011

(Increase)/decrease in prepayments and advances (92) 53

Increase/(decrease) in payables – current (2 036) (10 342)

Expenditure on capital assets 1 009 1 177

Surrenders to Revenue Fund (32 260) (4 361)

Own revenue included in appropriation 193 805

Net cash flow generated by operating activities (16 850) 24 444

17. Reconciliation of cash and cash equivalents for cash flow purposes

Note 2012/13 2011/12

R’000 R’000

Consolidated Paymaster General account 17 426 32 392

Cash on hand 20 20

Total 17 446 32 412


DISCLOSURE NOTES TO THE ANNUAL FINANCIAL STATEMENTSfor the year ended 31 March 2013

18. Contingent liabilities and contingent assets

18.1 Contingent liabilities

Note 2012/13 2011/12

R’000 R’000

Liable to

Claims against the department Annex 2A 57 873 2 110

Other departments (interdepartmental unconfirmed balances) Annex 4 - 4

Total 57 873 2 114

18.2 Contingent assets

Note 2012/13 2011/12

Nature of contingent asset R’000 R’000

Advance transfer payments were made to developers in the 2010/2011 and

prior financial years for material to be used in the construction of houses

in terms of the integrated Housing and Human Settlement Development

Grant. The advances which remained unspent at year end amounted to

R147 370 000 (2012: R212 179 000). These transfers have been referred

to the legal division in the current year as the benefits relating to these

payments have not been received. Summonses have been issued to the

value of R 101 838 315 for these cases and the Department is in the process

of issuing the rest of the summonses. The Department cannot estimate the

amount and/or benefits pertaining to these advances that will be realised

in the future.

- -

19. Commitments

Note 2012/13 2011/12

R’000 R’000

Current expenditure

Approved and contracted 44 087 574

Approved but not yet contracted - 5

44 087 579

Capital expenditure

Approved and contracted 808 232 2 094 571

Approved but not yet contracted 112 348 499

920 580 2 095 070

Total Commitments 964 667 2 095 649



Management noted certain errors in the comparative information during the current year. As a result of

these errors the prior year amounts were restated.

Commitments to the value of R 920 708 585 are in respect of a period longer than a year.

20. Accruals

2012/13 2011/12

R’000 R’000

Listed by economic classification

30 Days 30+ Days Total Total

Goods and services 8 475 1 789 10 264 2 230

Transfers and subsidies 31 611 5 705 37 316 180 421

Total 40 086 7 494 47 580 182 651

Note 2012/13 2011/12

R’000 R’000

Listed by programme level

Administration 8 940 1 976

Housing Needs, Research and Planning 54 32

Housing Development 38 586 180 643

Total 47 580 182 651

Note 2012/13 2011/12

R’000 R’000

Confirmed balances with other departments Annex 5 1 089 255

Total 1 089 255

Management noted certain errors in the comparative information during the current year. As a

result of these errors the prior year amounts were restated.

21. Employee benefits

Note 2012/13 2011/12

R’000 R’000

Leave entitlement 3 340 1 904

Service bonus (Thirteenth cheque) 1 730 1 029

Performance awards - 7

Capped leave commitments 2 032 1 406

Other 549 287

Total 7 651 4 633



22. Lease commitments

22.1 Operating leases expenditure

2012/13

Buildings and

other fixed

structures

Machinery

and

equipment Total

Not later than 1 year 25 1 954 1 979

Later than 1 year and not later than 5 years - 4 956 4 956

Later than five years - 713 713

Total lease commitments 25 7 623 7 648

2011/12

Buildings and

other fixed

structures

Machinery

and

equipment Total

Not later than 1 year 421 1 619 2 040

Later than 1 year and not later than 5 years 27 5 494 5 521

Later than five years - 1 383 1 383

Total lease commitments 448 8 496 8 944

22.2 Finance leases expenditure

2012/13

Machinery

and

equipment Total

Not later than 1 year 504 504

Later than 1 year and not later than 5 years 374 374

Total lease commitments 878 878

2011/12

Machinery

and

equipment Total

Not later than 1 year 195 195

Later than 1 year and not later than 5 years 35 35

Total lease commitments 230 230

LESS: finance costs 13 13

Total present value of lease liabilities 217 217



23. Irregular expenditure

23.1 Reconciliation of irregular expenditure

Note 2012/13 2011/12

R’000 R’000

Opening balance 1 975 876 996 096

Add: Irregular expenditure – relating to prior year - -

Add: Irregular expenditure – relating to current year 630 155 979 780

Less: Amounts condoned (7 121)

Irregular expenditure awaiting condonation 2 598 910 1 975 876

Analysis of awaiting condonation per age classification

Current year 623 034 979 780

Prior years 1 975 876 996 096

Total 2 598 910 1 975 876

Management have noted certain errors in the comparative information during the current year. As a result of these errors the

prior year amounts were restated.

Irregular expenditure amounting to R1 859 546 000 relating to the prior years has already been condoned by the Accounting

Officer of the Department. However, the Department is awaiting National Treasury’s final condonation of R1 855 663 000 and the

Department of Public Service Administration’s final condonation of R3 883 000 relating to this irregular expenditure.

23.2 Details of irregular expenditure – current year

Incident - Disciplinary steps taken/criminal proceedings 2012/13

R’000

Irregular expenditure incurred as a result of the Department procuring goods and/or services by means

other than through competitive bids / quotations and reasons for deviating from inviting competitive

bids / quotations have not been recorded / adequately recorded:

- Sufficient number of quotations not obtained (R10 000-R30 000) 681

- Sufficient number of quotations not always obtained and PPPFA requirements not always fully met

(R30 000-R500 000)

1 785

- Adequate tender procedures not followed (Above R500 000) 627 689

Housing Grant-proper procurement process not followed

Total 630 155



23.3 Details of irregular expenditure condoned

Incident - Condoned by (condoning authority)

Accounting Officer:

2012/13

R’000


other than through competitive bids / quotations and reasons for deviating from inviting competitive bids

/ quotations have not been recorded / adequately recorded:

- Sufficient number of quotations not obtained (R2 000-R10 000)

- Sufficient number of quotations not obtained (R10 000-R30 000)

(23)

(1 583)


(R30 000-500 000)

(5 515)

- Adequate tender procedures not followed (above R500 000)

Total (7 121)

23.4 Details of irregular expenditures under investigation

Incident 2012/13

R’000


other than through competitive bids / quotations and reasons for deviating from inviting competitive bids /

quotations have not been recorded / adequately recorded:

- Sufficient number of quotations not obtained (R10 000-R30 000) 681


(R30 000-R500 000)

2 483

Employees acted in higher vacant posts for an uninterrupted period exceeding 12 months without the

necessary approval

37

Adequate Tender Procedures not followed (above R500 000) 31 534

Appointment of employees on contract basis 3 846

Contracts taken over 12 874

Overtime worked 106

Housing grant-proper procurement process not followed 2 547 349

Total 2 598 910

Falsified and/or forged claims were identified in the current financial year relating to the 2008/09 to 2011/12 financial years. This

was mainly due to falsified and/or forged claims emanating from collusion between employees, collusion between employees

and suppliers and the overriding of internal controls in the department’s information systems. The Department is currently

investigating the full extent of this matter. Related losses amounting to R7,9 million has been identified in the 2012/13 financial

period that related to the 2008/09 to 2011/12 financial periods. These known cases are included in the total irregular expenditure

relating to the conditional grant as disclosed above. To date three officials have been dismissed for perpetuating this fraud. Once

these investigations have been finalised the Department will take appropriate action as prescribed by the PFMA and related

Treasury Regulations.



24. Fruitless and wasteful expenditure

24.1 Reconciliation of fruitless and wasteful expenditure

Note 2012/13 2011/12

R’000 R’000

Opening balance 841 841

Fruitless and wasteful expenditure – relating to current year 1 127 -

Fruitless and wasteful expenditure awaiting resolution 1 968 841

Current year fruitless and wasteful expenditure relates to interest on overdue payments as disclosed in Note 5 to the financial

statements.

No actions or disciplinary steps have been implemented, since these cases are still under investigation.

24.2 Analysis of awaiting resolution per economic classification

2012/13 2011/12

R’000 R’000

Current 232 26

Transfers and subsidies 1 736 815

Total 1 968 841

25. Related party transactions

Note 2012/13 2011/12

R’000 R’000

Non-interest bearing loan to/(from) Housing Fund 10 818 10 254

Total 10 818 10 254

The Housing Fund falls under the administration of the Department of Human Settlements and shares the same Accounting

Officer. Once the fund ceases to operate the bank balance will be surrendered to the Department. Management identified an

error in the current financial year on the loan receivable from the Housing Fund relating to the prior financial year. Therefore the

comparative amount was restated.

The Department of Public Works and Rural Development provided office accommodation to the Department of Human Settlements

in the Lebohang Building. No value for this service can be attributed to this transaction.

The Department of Cooperative Governance and traditional Affairs rendered a shared service on all corporate services, finance,

assets and supply chain management functions to the Department of Human Settlements to the value of R90 947 000 (R100 131

000). Management identified an error on the calculation of the comparative figure and therefore the amount was restated.

The Department of Provincial Treasury paid for the use of the transversal operational systems (BAS, PERSAL and LOGIS) on behalf

of the Department of Human Settlements to SITA. No value for this service can be attributed to this transaction.

All above mentioned related parties form part of the same Provincial Sphere of Government.



26. Key management personnel

No. of

Individuals

2012/13 2011/12

R’000 R’000

Political office bearers (provide detail below)

Officials:

Level 15 to 16 3 2 385 1 529

Level 14 (incl. CFO if at a lower level) 5 4 146 2 605

Family members of key management personnel 1 163 -

Total 6 694 4 134

The Auditor General calculated the figures for Key Management personnel and picked up a difference in calculations. The

Department did go and recalculate the figures and amend the Financial Statements accordingly.

27. Impairment

Note 2012/13 2011/12

R’000 R’000

Impairment

Debtors 5 -

Total 5 -

28. Movable Tangible Capital Assets

MOVEMENT IN MOVABLE TANGIBLE CAPITAL ASSETS PER ASSET REGISTER FOR THE YEAR ENDED 31 MARCH 2013

Opening

balance

Curr year

Adjust-ments

to prior year

balances

Additions Disposals Closing Balance

R’000 R’000 R’000 R’000 R’000

MACHINERY AND EQUIPMENT 3 660 - 430 - 4 090

Computer equipment 1 905 - 351 - 2 256

Furniture and office equipment 1 239 - 79 - 1 318

Other machinery and equipment 516 - - - 516

TOTAL MOVABLE TANGIBLE

CAPITAL ASSETS

3 660 - 430 - 4 090



28.1 Additions

ADDITIONS TO MOVABLE TANGIBLE CAPITAL ASSETS PER ASSET REGISTER FOR THE YEAR ENDED 31 MARCH 2013

Cash Non-cash

(Capital Work

in Progress

current costs

and finance

lease payments)

Received

current, not

paid

(Paid current

year, received

prior year) Total

R’000 R’000 R’000 R’000 R’000

MACHINERY AND EQUIPMENT 1 009 - (579) - 430

Computer equipment 351 - - - 351

Furniture and office equipment 79 - - - 79

Other machinery and equipment 579 - (579) - -

TOTAL ADDITIONS TO MOVABLE

TANGIBLE CAPITAL ASSETS 1 009 - (579) - 430

28.2 Movement for 2011/12

MOVEMENT IN MOVABLE TANGIBLE CAPITAL ASSETS PER ASSET REGISTER FOR THE YEAR ENDED 31 MARCH 2012

Opening

balance

Additions Disposals Closing

balance

R’000 R’000 R’000 R’000

MACHINERY AND EQUIPMENT 2 904 756 - 3 660

Computer equipment 1 608 297 - 1 905

Furniture and office equipment 797 442 - 1 239

Other machinery and equipment 499 17 - 516

TOTAL MOVABLE TANGIBLE ASSETS 2 904 756 - 3 660

28.3 Minor assets

MOVEMENT IN MINOR ASSETS PER THE ASSET REGISTER FOR THE YEAR ENDED 31 MARCH 2013

Intangible assets Machinery and

equipment

Total

R’000 R’000 R’000


Additions - 206 206

TOTAL MINOR ASSETS 56 2 113 2 169




equipment

Total

R’000 R’000 R’000

Number of minor assets at cost 20 1 323 1 343

TOTAL NUMBER OF MINOR ASSETS 20 1 323 1 343

MOVEMENT IN MINOR ASSETS PER THE ASSET REGISTER FOR THE YEAR ENDED 31 MARCH 2012


equipment

Total

R’000 R’000 R’000


Additions - 237 237

TOTAL MINOR ASSETS 56 1 907 1 963


equipment

Total

R’000 R’000 R’000

Number of minor assets at cost 20 1 183 1 203

TOTAL NUMBER OF MINOR ASSETS 20 1 183 1 203

28.4 Movable assets written off

MOVABLE ASSETS WRITTEN OFF FOR THE YEAR ENDED AS AT 31 MARCH 2013

Specialised

military assets

Intangible

assets

Heritage

assets

Machinery and

equipment

Biological

assets

Total

R’000 R’000 R’000 R’000 R’000 R’000

Assets written off - - - - - -

TOTAL MOVABLE ASSETS

WRITTEN OFF- - - - - -



MOVABLE ASSETS WRITTEN OFF FOR THE YEAR ENDED AS AT 31 MARCH 2012

Specialised

military assets

Intangible

assets

Heritage

assets

Machinery

and

equipment

Biological

assets

Total

R’000 R’000 R’000 R’000 R’000 R’000

Assets written off - - - 357 - 357

TOTAL MOVABLE ASSETS

WRITTEN OFF- - - 357 - 357

29. Intangible Capital Assets

MOVEMENT IN INTANGIBLE CAPITAL ASSETS PER ASSET REGISTER FOR THE YEAR ENDED 31 MARCH 2013

Opening

balance

Current year

Adjust-ments

to prior year

balances


Balance

R’000 R’000 R’000 R’000 R’000

COMPUTER SOFTWARE 629 - - - 629

TOTAL INTANGIBLE CAPITAL ASSETS 629 - - - 629

29.1 Movement for 2011/12

MOVEMENT IN INTANGIBLE CAPITAL ASSETS PER ASSET REGISTER FOR THE YEAR ENDED 31 MARCH 2012

Opening

balance


balance

R’000 R’000 R’000 R’000

COMPUTER SOFTWARE 451 178 - 629

TOTAL INTANGIBLE CAPITAL ASSETS 451 178 - 629



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143FREE STATE HOUSING FUNDFINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2013

FREE STATE HOUSING FUNDANNUAL FINANCIAL STATEMENTS

FOR THE yEAR ENDED 31 MARCH 2013

144 FREE STATE HOUSING FUNDFINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2013

CONTENTS GENERAL INFORMATION 145

ACCOUNTING OFFICER’S RESPONSIBILITIES AND APPROVAL STATEMENT 146

REPORT OF THE AUDITOR-GENERAL 147

ACCOUNTING OFFICER’S REPORT 149

STATEMENT OF FINANCIAL POSITION 150

STATEMENT OF FINANCIAL PERFORMANCE 151

STATEMENT OF CHANGES IN NET ASSETS 152

CASH FLOW STATEMENT 153

ACCOUNTING POLICIES 154

NOTES TO THE FINANCIAL STATEMENTS 162

145FREE STATE HOUSING FUNDFINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2013

FREE STATE HOUSING FUND

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2013

GENERAL INFORMATION

Accounting Officer: Mr. N. Mokhesi

Registered office: Lebohang Building Cnr St Andrews and Markgraaff Streets Bloemfontein 9301

Business address: Lebohang Building Cnr St Andrews and Markgraaff Streets Bloemfontein 9301

Postal address: P.O. Box 211 Bloemfontein 9300

Domicile and legal form: The fund is domiciled in Bloemfontein within the Free State Province, South Africa. The fund is a fund falling under the administration of the Free State Department of Human Settlements.

Jurisdiction: The fund falls within the jurisdiction of the Republic of South Africa.

Banker: Standard Bank of South Africa

Auditor: Auditor-General South Africa

Nature of business: The provision of low cost housing in the Free State in terms of the Free State Housing Act of 1999.

Level of assurance: These annual financial statements have been prepared in accordance with South African Standards of Generally Recognised Accounting Practices in order to provide users thereof with relevant and accurate economic information regarding the fund for the year ended 31 March 2013.

Supervised by: The annual financial statements are under the direction and supervision of Ms. D. Hattingh, Chief Financial Officer of the Department of Human Settlements.

146


ACCOUNTING OFFICER’S RESPONSIBILITIES AND APPROVAL STATEMENT FOR THE YEAR ENDED 31 MARCH 2013

The accounting officer of the fund is required in terms of the Public Finance Management Act No.1 of 1999 (PFMA) to maintain adequate accounting records and is responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is the accounting officer’s responsibility to ensure that the annual financial statements fairly present the state of affairs of the fund as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with South African Standards of Generally Recognised Accounting Practices. The external auditors are engaged to express an independent opinion on the annual financial statements.

The annual financial statements are prepared in accordance with South African standards of Generally Recognised Accounting Practices and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgments and estimates.

The accounting officer acknowledges that he is ultimately responsible for the system of internal financial control established by the fund and places considerable importance on maintaining a strong control environment. To enable the accounting officer to meet these responsibilities, standards for internal control have been set aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the fund and all employees are required to maintain the highest ethical standards in ensuring the fund’s operations are conducted in a manner that in all reasonable circumstances is above reproach. While operating risk cannot be fully eliminated, the fund endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.

The accounting officer is of the opinion, based on the information and explanations given by management that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.

The external auditors are responsible for independently reviewing and reporting on the fund’s annual financial statements. The annual financial statements have been examined by the fund’s external auditors and their report is presented on page 147.

The annual financial statements set out on pages 147 to 169, which have been prepared on the going concern basis, were approved by the accounting officer on and were signed by:

_______________________Head of DepartmentN. Mokhesi

Date: 31 May 2013

FREE STATE HOUSING FUNDACCOUNTING OFFICER’S RESPONSIBILITIES AND APPROVAL

STATEMENT FOR THE YEAR ENDED 31 MARCH 2013

147


REPORT OF THE AUDITOR-GENERAL TO THE FREE STATE LEGISLATURE ON THE FREE STATE HOUSING FUND

REPORT ON THE FINANCIAL STATEMENTS

Introduction1. I have audited the financial statements of the Free State Housing Fund set out on pages 149 to 169 which comprise

the statement of financial position as at 31 March 2013, the statement of financial performance, statement of changes in net assets and the cash flow statement for the year then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information.

Accounting Officer’s responsibility for the financial statements2. The accounting officer is responsible for the preparation and fair presentation of these financial statements in accordance

with South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) and the requirements of the Housing Act of South Africa, 1997, and for such internal control as the accounting officer determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor-General’s responsibility 3. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in

accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2001) (PAA), the General Notice issued in terms thereof and International Standards on Auditing. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

5. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Opinion

6. In my opinion, the financial statements present fairly, in all material respects, the financial position of the Free State Housing Fund as at 31 March 2013, and its financial performance and cash flows for the year then ended in accordance with the South African Standards of Generally Recognised Accounting Practice and the requirements of the Housing Act of South Africa, 1997 (Act No. 107 of 1997)

Emphasis of matters

I draw attention to the matters below. My opinion is not modified in respect of these matters

Significant uncertainties

7. The housing fund will be discontinued once the Housing Act, 1997 (No. 107 of 1997), is repealed. Specific timelines has however not been set in this regard. As a result the entity is in the process to clear all assets, accounts and transactions, but will only be able to close the fund once the housing act has been repealed.

Restatement of corresponding figures

8. As disclosed in the Statement of Financial Performance and in Note 10 to the financial statements, the corresponding figures for 31 March 2012 have been restated as a result of classification errors discovered during 31 March 13 in the financial statements of the Free State Housing Fund at and for the year ended 31 March 2012.

FREE STATE HOUSING FUNDREPORT OF THE AUDITOR-GENERAL

FOR THE YEAR ENDED 31 MARCH 2013

148

Related Parties

9. As disclosed in note 8 to the financial statements, the Free State Housing Fund’s management decisions are controlled by the Free State Department of Human Settlements. Amounts included in payables regarding related parties are R10 818 000.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

10. In accordance with the PAA and the General Notice issued in terms thereof, I report the following findings relevant to performance against predetermined objectives, compliance with laws and regulations and internal control, but not for the purpose of expressing an opinion.

Predetermined objectives

11. The entity did not report performance against predetermined objectives, but objectives were included in Programme 4 of the annual report of the Department of Human Settlements.

Compliance with laws and regulations

12. I did not identify any instances of 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.

Internal control

13. I considered internal control relevant to my audit of the financial statements, annual performance report 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 annual performance report and the findings on compliance with laws and regulations included in this report.

Leadership

14. Management did not monitor the implementation of action plans which resulted in a number of findings re-occurring in the current financial year.

Financial and performance management

15. Management did not implement proper record keeping in a timely manner to ensure that complete, relevant and accurate information is accessible and available to support financial reporting. This resulted in delays experienced during the audit.

16. Management did not implement controls over daily and monthly processing which resulted in misstatements in the financial statements.

Governance

17. Management did not implement appropriate risk management activities to ensure that regular risk assessments, including consideration on IT risks and fraud prevention, are conducted and that a risk strategy to address the risks is developed and monitored.

Bloemfontein

31 July 2013

FREE STATE HOUSING FUNDREPORT OF THE AUDITOR-GENERAL


149

ACCOUNTING OFFICER’S REPORT FOR THE YEAR ENDED 31 MARCH 2013

The accounting officer submits his report for the year ended 31 March 2013:

1. Review of activities

Main business and operations

The fund is established for the provision of low cost housing in the Free State in terms of the Free State Housing Act of 1999.

The operating results and state of affairs of the fund are fully set out in the attached annual financial statements and do not in my opinion require any further comment.

2. Going concern

It is the intention of the Accounting Officer to close the fund during the next financial year and therefore it is no longer a going concern as management intends to cease operations. SA Standards of Generally Recognised Accounting Practises 1 – Presentation of Financial Statements, requires that the financial statements should not be prepared on a going concern basis if management intends to liquidate the fund or to cease the trading. In view of this the carrying value of the assets, which were determined in accordance with the going concern basis, have been reviewed for possible impairment and changes which have occurred since the year end and consideration has been given as to whether any additional provisions are necessary as a result of the decision to cease operations. It is expected that all assets and liabilities will be transferred to the holding company, Department of Human Settlements, at their carrying value in the next financial period. Accordingly, management does not expect an alternative basis of preparation to be materially different from the going concern basis, and therefore the financial statements have been prepared on a going concern basis.

3. Events after the reporting period

The accounting officer is not aware of any other matters or circumstances arising since the end of the financial year.

4. Auditor

The Auditor-General South Africa will audit the fund as prescribed by the Public Audit Act No.25 of 2004.

Head of Department

Mr N Mokhesi

Date: 31 May 2013

FREE STATE HOUSING FUNDACCOUNTING OFFICER’S REPORT


150

Notes 2012/13

R’000

2011/12

R’000

ASSETS

Current assets

12 445 11 831

Trade and other receivables 3 71 53

Cash and cash equivalents 4 12 374 11 778

Assets held for sale 2 804 804

Total assets 13 249 12 635

EQUITY AND LIABILITIES

Capital and reserves

Accumulated surplus 2 431 2 374

Current liabilities

Trade and other payables 5 10 818 10 261

Total equity and liabilities 13 249 12 635

FREE STATE HOUSING FUNDSTATEMENT OF FINANCIAL POSITION

AT 31 MARCH 2013

151

Notes 2012/13

R’000

2011/12

R’000

Revenue 9 1 073 987

Expenses

Bad debts written off - (1 538)

Provision for Doubtful Debts (425) (1 336)

Loss on sale of properties - (414)

Impairment of assets held for sale - (2 864)

Other operating expenses

Finance expense

(83)

(543)

(141)

(2 627)

Operating Profit/(Loss) 22 (7 933)

Administration fees raised on property debtors

6 -

Capital adjustments on loans 29 -

Surplus/(Deficit) for the period 57 (7 933)

FREE STATE HOUSING FUNDSTATEMENT OF FINANCIAL PERFORMANCE


152

STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDED 31

Note Accumulated

Surplus

Total

R’000

Balance at 31 March 2011 6 206

Restatement due to prior period errors 10 4 101

Restated balance as at 31 March 2011 10 307

Restated deficit for the period (7 933)

Restated balance at 31 March 2012 2 374

Surplus for the period 57

Balance at 31 March 2013 2 431

FREE STATE HOUSING FUNDSTATEMENT OF CHANGES IN NET ASSETS


153

Note 2012/13

R’000

2011/12

R’000

CASH FLOWS FROM OPERATING ACTIVITIES:

Cash receipts from customers 250 5 997

Cash paid to suppliers and employees (494) (3 317)

Cash generated from operations 6 (244) 2 680

Interest received

Interest paid

840

-

606

(2 627)

Net cash flow from operating activities 596 659

Net (decrease)/increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

4

596

11 778

659

11 119

Cash and cash equivalents at end of period 4 12 374 11 778

FREE STATE HOUSING FUNDCASH FLOW STATEMENT


154

1. PRESENTATION OF ANNUAL FINANCIAL STATEMENTS

The principal accounting policies, applied in the preparation of these annual financial statements, are set out below. These accounting policies are consistent with those applied in the preparation of the prior year annual financial statements, unless specified otherwise.

1.1 BASIS OF PREPARATION

These annual financial statements were prepared in accordance with South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP), as issued by the Accounting Standards Board in accordance with Section 91(1) of the Public Finance Management Act, (Act No 1 of 1999).

The annual financial statements were prepared on the accrual basis of accounting and incorporate the historical cost conventions as the basis of measurement, except where specified otherwise.

In the absence of an issued and effective Standard of GRAP, accounting policies for material transactions, events or conditions were developed in accordance with paragraphs 8, 10 and 11 of GRAP 3 as read with Directive 5.

Assets, liabilities, revenues and expenses were not offset, except where offsetting is either required or permitted by a Standard of GRAP.

1.2 PRESENTATION CURRENCy

These annual financial statements are presented in South African Rand, which is the functional currency of the fund, and amounts have been rounded to the nearest thousand Rand.

1.3 GOING CONCERN ASSUMPTION

It is the intention of the Accounting Officer to close the fund during the next financial year and therefore it is no longer a going concern as management intends to cease operations. SA Standards of Generally Recognised Accounting Practises 1 – Presentation of Financial Statements, requires that the financial statements should not be prepared on a going concern basis if management intends to liquidate the fund or to cease the trading. In view of this the carrying value of the assets, which were determined in accordance with the going concern basis, have been reviewed for possible impairment and changes which have occurred since the year end and consideration has been given as to whether any additional provisions are necessary as a result of the decision to cease operations. It is expected that all assets will realise the amounts at which they are included in the statement of financial position and there will be no material additional liabilities.

Accordingly, management does not expect an alternative basis of preparation to be materially different from the going concern basis, and therefore the financial statements have been prepared on a going concern basis.

1.4 COMPARATIVE INFORMATION

Prior year comparatives

When the presentation or classification of items in the annual financial statements is amended, prior period comparative amounts are also reclassified and restated, unless such comparative reclassification and / or restatement is not required by a Standard of GRAP. The nature and reason for such reclassifications and restatements are also disclosed.

Where material accounting errors, which relate to prior periods, have been identified in the current year, the correction is made retrospectively as far as is practicable and the prior year comparatives are restated accordingly. Where there has been a change in accounting policy in the current year, the adjustment is made retrospectively as far as is practicable and the prior year comparatives are restated accordingly.

The presentation and classification of items in the current year is consistent with prior periods.

FREE STATE HOUSING FUNDACCOUNTING POLICIES TO THE FINANCIAL STATEMENTS


155

1.5 STANDARDS, AMENDMENTS TO STANDARDS AND INTERPRETATIONS ISSUED BUT NOT yET EFFECTIVE

The following Standards of GRAP and / or amendments thereto have been issued by the Accounting Standards Board, but will only become effective in future periods or have not been given an effective date by the Minister of Finance. The fund has not early-adopted any of these new Standards or amendments thereto, but has referred to them for guidance in the development of accounting policies in accordance with GRAP 3 as read with Directive 5:

GRAP no. GRAP name Gazetted effective date

GRAP 18 Segment reporting Not yet determined

GRAP 20 Related party disclosures Not yet determined

GRAP 25 Employee benefits 1 April 2013

GRAP 105 Transfers of functions between entities under common control Not yet determined

GRAP 106 Transfers of functions between entities not under common control Not yet determined

GRAP 107 Mergers Not yet determined

The impact of the application of the above GRAP’s will not be significant.

1.6 SIGNIFICANT JUDGMENTS AND ESTIMATES

The use of judgment, estimates and assumptions is inherent to the process of preparing annual financial statements. These judgements, estimates and assumptions affect the amounts presented in the annual financial statements. Uncertainties about these estimates and assumptions could result in outcomes that require a material adjustment to the carrying amount of the relevant asset or liability in future periods.

Judgements

In the process of applying these accounting policies, management has made the following judgements that may have a significant effect on the amounts recognised in the financial statements:

Estimates

Estimates are informed by historical experience, information currently available to management, assumptions, and other factors that are believed to be reasonable under the circumstances. These estimates are reviewed on a regular basis. Changes in estimates that are not due to errors are processed in the period of the review and applied prospectively.

In the process of applying the fund’s accounting policies the following estimates, were made: Allowance for bad debts

The measurement of receivables is derived after consideration of the allowance for bad debts. Management makes certain assumptions regarding the categorisation of debtors into groups with similar risk profiles so that the effect of any impairment on a group of receivables would not differ materially from the impairment that would have been determined had each debtor been assessed for impairment on an individual basis. The determination of this allowance is predisposed to the utilisation of estimates, assumptions and management judgements. In determining this allowance the estimates are made about the probability of recovery of the debtors based on their past payment history and risk profile.



156

An allowance for this was created on the following basis:

Amount of debt outstanding for 120 days or more as a percentage of the total debt outstanding Recommended write off

80-100% 100%

60-80% 80%

40-60% 60%

20-40% 40%

0-20% 20%

The basis used has changed from the prior year to reflect a more accurate provision calculation.

Effective interest rate

The fund uses an appropriate interest rate, taking into account guidance provided in the standards, and applying professional judgement to the specific circumstances, to discount future cash flows. The fund used the following in arriving at the effective interest rate used:

No Consideration Inputs related to the consideration

1 Market related rate used as starting point National Treasury guidelines

1.7 FINANCIAL INSTRUMENTS

Initial Recognition

The fund recognises a financial asset or a financial liability in its Statement of Financial Position when, and only when, the fund becomes a party to the contractual provisions of the instrument. This is achieved through the application of trade date accounting.

Upon initial recognition the fund classifies financial instruments or their component parts as financial liabilities, financial assets or residual interests in conformity with the substance of the contractual arrangement and to the extent that the instrument satisfies the definitions of a financial liability, a financial asset or a residual interest.

Financial instruments are evaluated, based on their terms, to determine if those instruments contain both liability and residual interest components (i.e. to assess if the instruments are compound financial instruments). To the extent that an instrument is in fact a compound instrument, the components are classified separately as financial liabilities and residual interests as the case may be.

Initial Measurement

When a financial instrument is recognised, the fund measures it initially at its fair value plus, in the case of a financial asset or a financial liability not subsequently measured at fair value, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability.

Subsequent Measurement

Subsequent to initial recognition, financial assets and financial liabilities are measured at fair value, amortised cost or cost.

All financial assets and financial liabilities are measured after initial recognition using the following categories:

(a) Financial instruments at fair value: • Derivatives.• Compound instruments that are designated at fair value i.e. an instrument that includes a derivative and a



157

non-derivative host contract.• Instruments held for trading.• Non-derivative financial assets or financial liabilities with fixed or determinable payments that are designated at

fair value at initial recognition.• An investment in a residual interest for which fair value can be measured reliably.

(b) Financial instruments that do not meet the definition of financial instruments at amortised cost or financial instruments at cost:

(b)(i) Financial instruments at amortised cost

Non-derivative financial assets or non-derivative financial liabilities that have fixed or determinable payments, excluding those instruments that the fund designates at fair value at initial recognition or are held for trading.

(b)(ii) Financial instruments at cost

Investments in residual interests, which do not have quoted market prices and for which fair value cannot be determined reliably.

The fund assesses which instruments should be subsequently measured at fair value, amortised cost or cost, based on the definitions of financial instruments at fair value, financial instruments at amortised cost or financial instruments at cost as set out above.

Concessionary loans

The part of the concessionary loan that is a social benefit or non-exchange revenue is determined as the difference between the fair value of the loan and the loan proceeds, either paid or received.

After initial recognition, the fund measures concessionary loans in accordance with the subsequent measurement criteria set out for all financial instruments.

Derecognition

A financial asset is derecognised at trade date, when:

The cash flows from the asset expire, are settled or waived;a) Significant risks and rewards are transferred to another party; orb) Despite having retained significant risks and rewards, the fund has transferred control of the asset to another fund.

A financial liability is derecognised when the obligation is extinguished. Exchanges of debt instruments between a borrower and a lender are treated as the extinguishment of an existing liability and the recognition of a new financial liability. Where the terms of an existing financial liability are modified, it is also treated as the extinguishment of an existing liability and the recognition of a new liability.

Gains and losses

A gain or loss arising from a change in the fair value of a financial asset or financial liability measured at fair value is recognised in surplus or deficit.

For financial assets and financial liabilities measured at amortised cost or cost, a gain or loss is recognised in surplus or deficit when the financial asset or financial liability is derecognised or impaired or through the amortisation process.

Offsetting

The fund does not offset financial assets and financial liabilities in the Statement of Financial Position unless a legal right of set-off exists and the parties intend to settle on a net basis.



158

Impairments

All financial assets measured at amortised cost, or cost, are subject to an impairment review. The fund assesses at the end of each reporting period whether there is any objective evidence that a financial asset or group of financial assets is impaired.

For financial assets held at amortised cost:

The fund first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant and individually or collectively for financial assets that are not individually significant. If the fund determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in the collective assessment of impairment.

If there is objective evidence that an impairment loss on financial assets measured at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset‘s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset‘s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through the use of an allowance account. The amount of the loss is recognised in surplus or deficit.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor‘s credit rating), the previously recognised impairment loss shall be reversed either directly or by adjusting an allowance account. The reversal shall not result in a carrying amount of the financial asset that exceeds what the amortised cost would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in surplus or deficit.

For financial assets held at cost:

If there is objective evidence that an impairment loss has been incurred on an investment in a residual interest that is not measured at fair value because its fair value cannot be measured reliably, the amount of the impairment loss is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed.

Policies relating to specific financial instruments

Cash and cash equivalents

Cash and cash equivalents are measured at amortised cost.

Cash includes cash on hand and cash with banks. Cash equivalents are short-term highly liquid investments that are held with registered banking institutions with maturities of three months or less and are subject to an insignificant risk of change in value.

For the purposes of the Cash Flow Statement, cash and cash equivalents comprise cash on hand and deposits held on call with banks.

Trade and other receivables

Trade and other receivables are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition and subsequently stated at amortised cost, less provision for impairment. All trade and other receivables are assessed at least annually for possible impairment. Impairments of trade and other receivables are determined in accordance with the accounting policy for impairments. Impairment adjustments are made through the use of an allowance account.



159

Bad debts are written off in the year in which they are identified as irrecoverable. Amounts receivable within 12 months from the reporting date are classified as current. Interest is charged on overdue accounts.

Trade and other payables

Trade payables are initially measured at fair value plus transaction costs that are directly attributable to the acquisition and are subsequently measured at amortised cost using the effective interest rate method.

1.8 NON-CURRENT ASSETS HELD FOR SALE

Recognition

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. If the sale is delayed by events or circumstances beyond the fund’s control and the fund remains committed to its plan to sell, this does not preclude the assets as from being classified as held for sale.

Measurement

Non-current assets held for sale (or disposal group) are measured at the lower of carrying amount and fair value less costs to sell.

A non-current asset is not depreciated (or amortised) while it is classified as held for sale or while it is part of a disposal group classified as held for sale

Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale are recognised in surplus or deficit.

Derecognition

Non-current assets and disposal groups held for sale are derecognised upon disposal of the item or where no further economic benefits or service potential is expected to flow from the asset or disposal group. Gains / loss that result from the derecognition of non-current assets or disposal groups held for sale are recognised in surplus / deficit in the period of the derecognition.

1.9 REVENUE RECOGNITION

Revenue from Exchange Transactions

Revenue from exchange transactions refers to revenue that accrues to the fund directly in return for services rendered or goods sold, the value of which approximates the consideration received or receivable, excluding indirect taxes, rebates and discounts.

Recognition

Revenue from exchange transactions is only recognised once all of the following criteria have been satisfied:

a. The fund retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;b. The amount of revenue can be measured reliably; andc. It is probable that the economic benefits or service potential associated with the transaction will flow to the fund and the costs incurred or to be incurred in respect of the transaction can be measured reliably.



160

Revenue arising out of situations where the fund acts as an agent on behalf of another entity (the principal) is limited to the amount of any fee or commission payable to the fund as compensation for executing the agreed services.

Specific exchange-revenue sources

Rental income arising from Non-Current Assets held for sale is recognised as it legally accrues in terms of the original contract until the date of disposal of the particular property.

Interest on loans is recognised at fair value on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity.

Interest received on the bank account represents an amount that is due to the Provincial Department of Human Settlements on winding-up of the fund and as such is credited directly to this liability included in Trade Payables.

Measurement

Revenue from exchange transactions is measured at the fair value of the consideration received or receivable taking into account the amount of any trade discounts and volume rebates allowed by the fund.

Expenditure from Exchange Transactions

The accounting policy for expenditure arising from exchange-transactions is similar to the policy for exchange revenue.

Revenue from Non-Exchange Transactions

Non-exchange transactions are transactions that are not exchange transactions.

Revenue from non-exchange transaction arises when the fund either receives value from another entity without directly giving approximately equal value in exchange or gives value to another entity without directly receiving approximately equal value in exchange.

Revenue from non-exchange transactions is generally recognised to the extent that the related receipt or receivable qualifies for recognition as an asset and there is no liability to repay the amount.

Grants, transfers and donations received or receivable are recognised when the resources that have been transferred meet the criteria for recognition as an asset and there is not a corresponding liability in respect of related conditions.

Measurement

An asset that is recognised as a result of a non-exchange transaction is recognised at its fair value at the date of the transfer. Consequently, revenue arising from a non-exchange transaction is measured at the fair value of the asset received, less the amount of any liabilities that are also recognised due to conditions that must still be satisfied.

Where there are conditions attached to a grant, transfer or donation that gave rise to a liability at initial recognition, that liability is transferred to revenue as and when the conditions attached to the grant are met.

Grants without any conditions attached are recognised as revenue in full when the asset is recognised, at an amount equalling the fair value of the asset received.

Interest earned on the investment is treated in accordance with grant conditions. If it is payable to the funder it is recorded as part of the creditor.

Expenditure relating to Non-Exchange Transactions

The accounting policy for expenditure arising from non-exchange transactions is similar to policy for non-exchange revenue.



161

1.10 SURPLUS OR DEFICIT

Income, expenditure, gains and losses are recognised in surplus or deficit except for the exceptional cases where recognition directly in net assets is specifically allowed or required by a Standard of GRAP.

1.11 POST-REPORTING DATE EVENTS

Events after the reporting date are those events, both favourable and unfavourable, that occur between the reporting date and the date when the financial statements are authorised for issue. Two types of events can be identified:

a) those that provide evidence of conditions that existed at the reporting date (adjusting events after the reporting date); andb) those that are indicative of conditions that arose after the reporting date (non-adjusting events after the reporting date).

The fund will adjust the amounts recognised in the financial statements to reflect adjusting events after the reporting date once the event occurred.

The fund will disclose the nature of the event and an estimate of its financial effect or a statement that such estimate cannot be made in respect of all material non-adjusting events, where non-disclosure could influence the economic decisions of users taken on the basis of the financial statements.

1.12 RELATED PARTIES

The fund has processes and controls in place to aid in the identification of related parties. A related party is a person or an entity with the ability to control or jointly control the other party or exercise significant influence over the other party, or vice versa, or an entity that is subject to common control, or joint control. Related party relationships where control exists are disclosed regardless of whether any transactions took place between the parties during the reporting period.

Where transactions occurred between the fund and any one or more government related parties, and those transactions were not within:

a) normal supplier and/or client/recipient relationships on terms and conditions no more or less favourable than those which it is reasonable to expect the fund to have adopted if dealing with that individual fund or person in the same circumstances; andb) terms and conditions within the normal operating parameters established by the reporting fund’s legal mandate;

Further details about those transactions are disclosed in the notes to the financial statements.

Information about such transactions is disclosed in the financial statements.



162

2012/13

R’000

2011/12

R’000

2. ASSETS HELD FOR SALE

Opening balance 804 4 201

Assets sold - (533)

Adjustment for impairment of assets held for sale - (2 864)

Closing balance at end of year 804 804

The Assets held for sale consists out of land and residential houses. The Free State Housing Fund has ownership of 108 housing

units. These units are occupied by tenants who are required to reimburse the fund for the usage thereof. It is, however, the intention

of the Housing Fund to dispose of the units to the occupants thereof. Whilst this has not occurred up to the year ended 31 March

2013, it remains the intention of management to dispose of the units to the occupants thereof within the next 12 months and it was

determined after year end that the majority of the assets have been disposed of in the next 12 months. Therefore, the units have

been disclosed as “Non-current assets held for sale”.

A prior period error was recognised relating to an impairment loss not recognised in the previous year.

3. TRADE AND OTHER RECEIVABLES

FROM EXCHANGE TRANSACTIONS

Rental debtors at gross value 1 717 1 336

Allowance for bad debts for rental debtors (1 696) -

Rental debtors at fair value 21 1 336

Loans to individuals at gross value 35 -

Allowance for bad debts for loans to

individuals at fair value (35) -

Loans to individuals at fair value - -

Properties sold at gross value 29 -

Allowance for bad debts for properties

sold (29) -

- -

Standard Bank - Finance income receivable 50 53

71 1 389

Debtors are charged interest as they become past due at a rate of 8, 5% per annum.

FREE STATE HOUSING FUNDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2013

163

Summary of Debtors by Customer Classification Consumers Industrial /

Commercial

R ‘000 R ‘000

as at 31 March 2013

Current (0 – 30 days) 33 50

31 - 60 Days 18 -

61 - 90 Days 18 -

91 - 120 Days 17 -

121 - 365 Days 17 -

+ 365 Days 1 678 -

Sub-total 1 781 50

Less: Provision for doubtful debts (1 760) -

Total debtors by customer classification 21 50

as at 31 March 2012

Current (0 – 30 days) 17 53

31 - 60 Days 17

61 - 90 Days 17

91 - 120 Days 17

121 - 365 Days 17

+ 365 Days 1 251 -

Sub-total 1 336 53

Less: Provision for doubtful debts (1 336) -

Total debtors by customer classification - 53

Reconciliation of the doubtful debt provision 2012/13

R’000

2011/12

R’000

Balance at beginning of the year 1 336 -

Contributions to provision 424 1 336

Balance at end of year 1 760 1 336

FREE STATE HOUSING FUNDNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2013

164

2012/13

R’000

2011/12

R’000

4. CASH AND CASH EQUIVALENTS

Cash on hand and bank balances 12 374 11 778

Total 12 374 11 778

Cash at Standard Bank earns 5% interest per annum.

5. TRADE AND OTHER PAyABLES

Sundry payables

Funds to be transferred to Department of Human

Settlements

-

10 818

7

10 254

Funds owed to the Department of Human Settlements

represented by the cash and cash equivalents of the fund

12 374 11 777

Funds owed to Housing Fund by the Department of

Human Settlements (1 556) (1 523)

Total 10 818 10 261

The intention of the fund is to settle the payable/receivable to the Department of Human Settlements in net, therefore

the amount owed by the department to the fund has been offset against the amount owed by the fund to the department.

The trade and other payables carry no interest and have no fixed repayment terms.

6. RECONCILIATION OF NET PROFIT

TO CASH GENERATED FROM

OPERATIONS

Surplus/(Deficit) for the year 57 (7 933)

Adjustments for:

- Interest received

- Provision for bad debts movement

- Interest paid

(840)

425

-

(606)

1 336

2 627

- Impairment of assets held for sale - 2 983

- Bad debt written off - 1 538

- Loss on disposal of assets - 414

Operating profit before working capital changes (358) 359

Changes in working capital:

-(Increase)/Decrease in Trade and other receivables (443) 2 742

- Increase/(Decrease) in Trade and other payables 557 (421)

Cash generated from Operations (244) 2 680


165

7. FINANCIAL INSTRUMENTS

Set out below is a comparison by category of carrying amounts and fair values of all of the

fund’s financial instruments:

Carrying amount Fair Value

Note 2012/13

R’000

2011/12

R’000

2012/13

R’000

2011/12

R’000

Financial Assets

Trade receivables 3 71 53 71 53

Cash and cash

equivalents 4 12 374 11 778 12 374 11 778

Financial Liabilities

Trade payables 5 10 818 10 261 10 818 10 261

The financial assets and liabilities by category:

The accounting policies for financial instruments have been applied to the line items below:

2013 Financial assets

at fair value

Financial assets and

liabilities at amortised cost

Total

Trade receivables - 71 71

Cash and cash equivalents 12 374 - 12 374

Trade payables - (10 818) (10 818)

12 374 (10 747) 1 627

2012 Financial assets

at fair value

Financial assets and

liabilities at amortised cost

Total

Trade receivables - 53 53

Cash and cash equivalents 11 778 - 11 778

Trade payables - (10 261) (10 261)

11 778 (10 208) 1 570

Risk Management

7.1 Maximum credit risk exposure

The credit risk of trade receivables is not manageable due to the fact that houses are being allocated to low-income tenants in terms

of Government policy to promote social housing. In the light of the above, significant provisions for bad debts have been raised against

trade receivables to achieve a recoverable carrying amount.


166

Credit risk consists mainly of cash deposits, cash equivalents and trade debtors. The fund only deposits cash with major banks with

high quality credit standing and limits exposure to any one counter-party.

Trade and other receivables are presented in the financial statements at amortised cost.

7.1.1 Collateral held and other credit enhancements

The credit risk exposure, as posed by the financial assets detailed above, is mitigated by collateral held in the form of the housing units

owned by the Free State Housing Fund in relation to these instruments. Such units remain the property of the fund until such time as

debts are settled and ownership is officially transferred.

7.1.2 Concentration of credit risk

The concentration of credit risk is mainly within the trade and other receivables, relating to debtors at year end, rather than in the

cash and cash equivalents of the fund.

7.2 Liquidity risk

The fund’s risk to liquidity is a result of the funds available to cover future commitments. The fund manages liquidity risk through an

ongoing review of future commitments and credit facilities.

Adequate utilised borrowing facilities are monitored.

The table below analyses the fund’s financial liabilities into relevant maturity groupings based on the remaining period at the Statement

of Financial Position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

2013 Not later than one month Later than one month and not later than

three months

Trade and other payables - -

2013 Later than three months and not

later than one year

Later than one year and not later than five

years

Trade and other payables 10 818 -

2012 Not later than one month Later than one month and not later than

three months

Trade and other payables - -

2012 Later than three months and not

later than one year

Later than one year and not later than five

years

Trade and other payables - 10 261

7.2.1 Concentration of liquidity risk

The concentration of credit risk is mainly within the trade and other payables, which relates to the liability payable to the Department

of Human Settlements.

7.2.2 Collateral held and other credit enhancements

The fund holds no collateral and / or credit enhancements that aid in the mitigation of the liquidity risk it is exposed to.

7.3 Interest rate risk

As the fund has significant interest-bearing assets, the fund’s income and operating cash flows are not substantially independent of

changes in market interest rates. At year end, financial instruments exposed to interest rate risk were as follows:

- Cash and cash equivalents


167

7.3.1 Concentration of interest rate risk

The concentration of interest rate risk is mainly within the cash and cash equivalents, as this is where the fund is most exposed to

changes in the interest rate.

7.3.2 Interest rate risk sensitivity analysis

The susceptibility of the fund’s financial performance to changes in interest rates can be illustrated as follows:

2013 impact 2012 Impact

Interest income

Interest rate increase of 100 basis points 124 118

Interest rate decrease 100 basis points (124) (118)

Interest expense

Interest rate increase of 100 basis points - -

Interest rate decrease 100 basis points - -

The following methods and assumptions were applied in the determination of the interest rate sensitivity analysis:

The main assumption utilised was that the interest rate would not change by more than a percent either way, due to stability in overall

rates in the country in the preceding financial year.

The method applied to determine the interest rate sensitivity analysis has the following limitations that may result in the information

not being fully representative of the actual future results:

Market rate volatility may impact the interest rates more than expected.

No changes were made to the methods and assumptions applied, in the prior year, to the determination of the sensitivity analysis.

7.4 Financial assets pledged as security

No financial assets have been pledged as security for liabilities in the current or prior year.

7.5 Defaults and breaches

No defaults or breaches occurred in the current or prior year.

7.6 Credit quality of financial assets carried at amortised cost/fair value

7.6.1 Method of determining credit quality of other current financial assets:

The credit quality of trade and other receivables from exchange transactions are determined and monitored with reference to historical

payment trends. Accordingly the credit quality of the customers included in the balance of trade and other receivables from exchange

transactions is determined internally through application of the fund’s own credit policy. Based on the evaluation of the historical

payment trends, customers included in the balance are categorised into groups as per note 1.6 in the financial statements.


168

7.6.1.1 Impairment disclosures for other current financial assets carried at amortised cost/fair value

Reconciliation between gross and net balances Gross Balances Provision for

Doubtful Debts

Net Balance

R’000 R’000 R’000

Rental debtors 1 717 (1 696) 21

Individual loan debtors 35 (35) -

Property debtors 29 (29) -

Total 1 781 (1 760) 21

Reconciliation of the doubtful debt provision

2013 2012

R’000 R’000

Balance at beginning of the year 1 336 -

Contributions to provision 424 1 336

Balance at end of year 1 760 1 336

8. RELATED PARTIES

The only related party of the fund is the Free State Department of Human Settlements, since the fund falls under the administration of

the Department, and since the fund shares the same accounting officer. The following represents the total closing balance of amounts

due by/(to) the Department. These amounts are not guaranteed. Once the fund ceases to operate, the bank balance will be surrendered

to the Department to cover the payable amount. All related party transactions are at arm’s length.

Statement of Financial Position: Note 2012/1 2011/12

R’000 R’000

Loan Account included in Accounts Payable 5 (10 818) (10 254)

9. REVENUE

Rent income 233 240

Property sold - 141

Finance income - Debtors 247 53

Finance income – Bank 593 553

Total 1 073 987


169

10. PRIOR YEAR ERROR

10.1 Items in Statement of Financial PositionDecrease in assets held for sale (6)

Increase in impairment of assets held for sale 6

-

The impairment in the prior year did not take into account the full write-down required to present the non-Current Assets held for

sale at their fair values. Therefore, an additional amount has been adjusted for.

10.2 Items in Statement of Financial Position

Decrease in trade and other payables 190

Increase in retained earnings (190)

-

Information came under the attention of management in the current year which indicated that trade and other payables were

overstated in the previous years.


Increase in trade and other receivables 1 311

Increase in retained earnings (1 311)

-

Events after balance sheet date indicated that the amounts for trade and other receivables were incorrectly calculated in the prior

year and therefore the balance was corrected.


Decrease in trade and other receivables (1 523)

Decrease in trade and other payables 1 523

-

The intention of the Fund is to settle the payable/receivable to the Department of Human Settlements in net, therefore the amount

owed by the Department to the Fund has been offset against the amount owed by the Fund to the Department in the current and

prior year. The comparative information was therefore restated accordingly.

10.5 Items in Statement of Financial PositionDecrease in Provision for bad debt 3 430

Decrease in Provision for bad debt expense (830)

Increase in retained earnings (2 600)

-

In the prior year the above amount was recognised as a provision for bad debt. Events after balance sheet date indicated that this

amount was actually recoverable and therefore the provision should not have been recognised, therefore the prior period error was

corrected.

11 CONSIDERATION OF CONSOLIDATION

The Department of Human Settlements has ultimate control of the Housing Fund. The controlling Department however prepares and

presents its financial statements on the National Treasury modified cash basis of accounting which does not require any consolidated

financial statements to be prepared.



NOTES


NOTES


NOTES

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