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Independent Development Trust Presentation to the Portfolio Committee on Public Works 2012/13 Annual Report 5 November 2013. Presentation Overview. Contextual Background Performance Highlights Governance Human Resource Management Financial Information Conclusion.
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Independent Development TrustPresentation to the Portfolio Committee on Public Works 2012/13 Annual Report5 November 2013
Presentation Overview • Contextual Background • Performance Highlights • Governance • Human Resource Management • Financial Information • Conclusion
Rationale for IDT’s Existence • PRIMARY PURPOSE: IDT is a development agency mandated to support government with the implementation of its programmes. The Trust is mandated “to use its resources together with strategic partners, in ways which … will best serve to enable poor communities in the Republic of South Africa to access resources and recognise and unlock their own potential, so as to continuously improve their quality of life”. • VISION: “… the leading knowledge-based development agency.” • MISSION STATEMENT: The IDT, together with strategic partners, will enable poor communities to recognize and unlock their own potential for sustainable development. • State-owned Entity within the DPW ‘family’. IDT is predominantly aligned to the mandate of the Department of Public Works.
Positioning and Projected Impact • STRATEGIC POSITIONING: IDT poised to be “the leading public sector programme management agency.” To this end, the IDT • will continue to add value to the national development agenda by aligning to and contributing directly to the DPW mandate; • is set to deliver programmes in excess of R6 billion in 2013/14 with around 90 per cent delivering social infrastructure; • will advance the Public Works niche in the application of alternative construction methodologies in social infrastructure delivery; and • PROJECTED IMPACT: The IDT is on the ground, able to directly impact the lives of the citizens, as well as provide government with reliable feedback on the effectiveness of its polices.
2012/13 Strategic Thrust: National Focus • Informed by its Mandate, the IDT strives to advance and contribute towards 7 specific national strategic outcomes:
Sustainability of the IDT • IDT’s going concern status is in a fragile state due to erosion of its main fund. • NDPW is developing a business case for the long term sustainability of the IDT. In the intervening period, i.e. before the new mandate and funding model are determined, it is necessary that bridging finance be provided to safeguard solvency which is currently under threat. • The need for recapitalisation or a different but secure funding model, was identified in 2006. To date Cabinet has not made a decision in this regard, as the NDPW is still developing the Business Case. • National Treasury has made an allocation of R50m per year for the 2013/14 to 2015/16 MTEF period. The allocation is insufficient to secure financial solvency. • Management has developed an Operation’s Refocus and Streamlining Strategy and Plan due to be implemented from the beginning of the third term i.e. 01 January 2014 subject to Board approval. The plan seeks to institute improvements in service offering, upscale capacity and institute operational efficiency. Regrettably, the intervention is likely to result in some job losses.
Overview of Performance • The analysis of the IDT’s 2012/13 performance reflects that: • Ten (10 or 50 per cent) targets were exceeded; • Three (3 or 15 per cent) targets delivered as planned; • Six (6 or 30 per cent) targets were partially achieved; and, • One (1 or 5 per cent) target was not achieved.
Portfolio Spend • IDT completed 259 new/replacement social infrastructure facilities. 11 of the 259 facilities constructed were completed new schools. • Social Infrastructure comprised 89.1% of the programme spend. • School facilities constituted 50% and health facilities 19% of the infrastructure portfolio.
Growth in Business Portfolio (Programme Expenditure Trends: 2009-13) • Annual programme expenditure a proxy indicator of IDT’s contribution to service delivery, eradication of infrastructure backlogs, impact on employment creation, poverty and inequalities; • IDT delivered programmes to the value of R5.6bn, 25% above the target of R4.5bn; • Surpassed performance in prior years; • Projected expenditure for 2013/14 FY in excess of R6bn.
Governance Structures: Board & Board Committees • The IDT has a Board with 10 Trustees all of whom are non-executive : • Public nomination ratio and shareholder. • The responsibilities and fiduciary duties of the Accounting Authority are discharged through the Board. • In line with best practice, the roles of the Chairperson and Chief Executive Officer are separate. • The Board Charter details the responsibilities of the Board. Responsibilities are undertaken through the following Sub-committees: • Audit and Risk Committee • Finance Committee • Strategic Planning and Programme Committee • Human Resources and Corporate Services Committee
Key Compliance Indicators 2012/13 Shareholder Compact Compliance Record Portfolio Committee Hearings 2012/13 Financial Year
Terminations Terminations by Grade Reasons for Terminations
Audit Report for the year ended 31 March 2013 • The IDT received its 11th consecutive unqualified audit report • The Auditor-General (AGSA) included an Emphasis of Statement in the report – this referred to “the existence of a material uncertainty on future operational needs that may cast significant doubt on the IDT’s ability to operate as a going concern” • The report deals with Other Legal and Regulatory requirements: • On predetermined objectives – significantly important targets with respect to Objective 1.2: Integrated Social Infrastructure Development , are materially misstated.
Audit Report for the year ended 31 March 2013 • Compliance with laws and regulations: • Material misstatements of expenditure and revenue were identified and subsequently corrected • Goods, works and services were not procured through a procurement process which is fair, equitable, transparent and competitive • Effective steps were not taken to prevent fruitless and wasteful expenditure • Effective and appropriate steps were not taken to collect all moneys due
Audit Report for the year ended 31 March 2013 • Other Reports – reference made to an investigation which was concluded during the year where necessary actions was taken by management, and 2 investigations which are in progress.
Comments on the Audit Report for the year ended 31 March 2013 • Misstatements in the financial statements: • The only significant value related to the accrual of programme expenditure. There was no net effect to the Statement of Position. • Fruitless and wasteful expenses: • Total fruitless and wasteful expenditure was R 708k, this included: Penalties and interest on late payment of VAT of • R 457k, SARS has advised the IDT that the penalties and interest are to be reversed. The balance consisted of additional printing costs incurred on the Annual Report and interest on Telkom and office rentals where invoices were received late.
Comments on the Audit Report for the year ended 31 March 2013 • Accounts receivable: • Management fees owing by client departments amounted to approximately R 64 million (77% of the total accounts receivable). R 36 million has been recovered and the outstanding balance is being actively followed up. • Procurement: • Management is very aware of compliance with legislative and regulatory requirements and the need to fulfil the often urgent needs of client departments. • The IDT will continue to ensure that procurement risks are mitigated and will apply its policies and procedures taking cognisance of the needs of beneficiaries. • Intervention instituted which resulted in the identification of weaknesses and interventions. Implementation still on hold awaiting Board approval.
Audit Action Plan • The Audit Action Plan has been prepared and approved by the Audit and Risk Committee to address the issues raised by the Auditor-General. • Systems and procedures will be enhanced where necessary to mitigate against recurrences of the matters identified in the audit. • An Internal Control Dashboard is prepared quarterly for review by the Audit and Risk Committee.
Going Concern and Funding • The going concern principle is the assumption that an organisation will remain in business for the foreseeable future. The measurement is usually for a rolling period of twelve months. • This implies that the entity will not be forced to halt its operations and liquidate its assets within this time frame. • The IDT has, in the past, been able to rely on the investment fund to fund its operations. • With the fund almost depleted, the organisation now must: • Rely on a funding allocation from Treasury, either wholly or partly for support; and/or • Generate sufficient management fees from clients to fund the operating expenditure.
Cost Containment overview • The cost containment strategy seeks to balance the increasing demand for the IDT’s services and the resources required to meet that demand with the need to control and limit cost increases. • Whilst the Efficiency ratios exceed the targets set, there is the real risk that quality is being compromised and resources are being stretched to the limit; • There is a need for the IDT to control those elements which it can influence, namely – • programme portfolio size and quality; • cost of resources; and • management fees recovered
Management Fees for the financial year • Management fees for the financial year ended 31 March 2013 amounted to R 188 906, a 35% increase compared with the total of R 139 486 raised in the 2011/12 financial year. • Based on the programme expenditure for the year, management fees billed averaged slightly more than 3,3%, which in line with the average rate achieved in the previous year.
Programme expenditure analysis • The IDT’s programme expenditure grew significantly over the three years 2010/11 to 2012/13: • Financial year Value Increase • 2010/11 R 2,3 billion • 2011/12 R 4,2 billion + 83% • 2012/13 R 5,6 billion + 33%
2012/13 Financial Performance • Financial Year 2012/13: Revenue : Actuals v Budget
2012/13 Financial Performance • Financial Year 2012/13: Expenditure : Actuals v Budget
2012/13 Financial Performance • Financial Year 2012/13: Revenue and Expenditure : Actuals v Budget
2012/13 Financial Performance • Financial Year 2012/13: Analysis of Administration Expenditure : Actuals v Budget
Highlights • IDT is in a precarious position: • Has and pursues its existing Mandate geared at eradicating poverty, inequality and reducing unemployment. • Pursues integrated development approach in its social infrastructure delivery enabling community ownership. • Its total projected portfolio for the 2013/13 – 2015/16 MTEF stands at R20bn • Its efficiency ratio is at an impressive 6.6%, against a target of 8% • Has a contingency of committed and well qualified development specialists, largely built-environment professionals. • Yet it is struggling with securing long-term funding from government. • Has committed itself to becoming substantially a self-sustaining entity.
Recommendations • That the Committee notes the IDT’s 2012/13 Annual Report • That the Committee notes the IDT’s areas of over and under achievement and notes the reasons advanced as well as actions proposed. • That the Committee notes in particular the ‘going concern status’ of the IDT.
