Independent Development Trust

Presentation to the Portfolio Committee

on Public Works 2012/13 Annual Report2012/13 Annual Report

5 November 2013

Independent Development Trust

Presentation to the Portfolio Committee

on Public Works 2012/13 Annual Report2012/13 Annual Report

5 November 2013

Presentation OverviewPresentation Overview

1. Contextual Background

2. Performance Highlights

3. Governance

4. Human Resource Management

5. Financial Information

6. Conclusion

1. Contextual Background

2. Performance Highlights

3. Governance

4. Human Resource Management

5. Financial Information

6. Conclusion

1.Contextual

Background

1.Contextual

Background

Rationale for IDT’s ExistenceRationale 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.

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 ImpactPositioning 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

1. 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.

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

1. 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 Focus2012/13 Strategic Thrust: National Focus

Informed by its Mandate, the IDT strives to advance and contribute towards 7 specific national strategic outcomes:Informed by its Mandate, the IDT strives to advance and contribute towards 7 specific national strategic outcomes:

Outcome 1 Improved quality of basic education

Outcome 2 A long and healthy life for all South Africans

Outcome 4 Decent employment through inclusive economic growth

Outcome 5 A skilled and capable workforce to support an inclusive growth path

Outcome 7 Vibrant, equitable and sustainable rural communities and food security for all

Outcome 8 Sustainable human settlements and improved quality of household life

2012/13 Strategic Goals & Objectives2012/13 Strategic Goals & Objectives

STRATEGIC GOALS

STRATEGIC OBJECTIVES

OBJECTIVE STATEMENT

1. Sustainable development

1.1 Empowered communities

To build empowered and cohesive communities through the delivery of people centred development solutions.

1.2 Integrated social infrastructure development

To effectively deliver integrated and social infrastructure in marginalised communities.

2. Effective and efficient administration

2.1 Effective, efficient and compliant administration

To ensure excellence in delivery.

2.2 Transformed IDT

To become a development agency that is self- sustaining and is able to generate funding from alternative sources, besides total reliance on the fiscus.

Sustainability of the IDTSustainability 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.

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.

2.Performance

Highlights

2.Performance

Highlights

Overview of Performance 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.

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.

NO. OF

TARGETS

EXCEEDED ACHIEVE

D

PARTIALLY

ACHIEVED

NOT

ACHIEVED

TOTA

L

20 10 3 6 1 20

 PERCENTA

GE

50% 15% 30% 5% 100%

Performance Against Pre-determined Targets: LegendPerformance Against Pre-determined Targets: Legend

CODE %

Over achieved 121 and above target

Achieved 100 -120

Partially Achieved 80- 99

Not achieved 79 and below

Performance Against Pre-determined Targets (SO 1.1)Performance Against Pre-determined Targets (SO 1.1)

Performance Against Pre-determined Targets (SO 1.2)Performance Against Pre-determined Targets (SO 1.2)

KPI: OUTPUT MEASURE 2012/13 TARGET

ACHIEVEMENT

% VARIANCE

Value of total programme spend R4.5bn R 5.648 bn (125%)

25.5

Total number of new and replacement social infrastructure facilities excluding household facilities

300 259 

-13.6

Empowered communities with bias to women and youth

BBBEE Spend60% of total programme

spend

63% (R3.554b)

5

Value of contracts awarded to Women

25% of total programme

spend

18%(R1.035bn)

-28

Approximate value of Youth spend

15% of total programme

spend

12%(R 652.06m)

 

-20

Integrated transformative community development impacting on people’s lives

Number of job opportunities created by the IDT

30,000 

34 534 15.1

Number of job opportunities created (EPWP 2 NSS)

30,000 42 447 41.49

Performance Against Pre-determined Targets (SO 2.1)Performance Against Pre-determined Targets (SO 2.1)

KPI: OUTPUT MEASURES 2012/13 TARGET ACHIEVEMENT % VARIANCE

Improvements in the contents of the compliance Audit reports

Timeous submissions of statutory documents to Executive Authority (EA) and National Treasury (NT)

100% Compliance Full Compliance. 

Average management fee % charge based on total social infrastructure

4.5% 3.3%(R 188.9 m)

-26.6

% Efficiency ratio 10% 6.6% 3.4 Alignment with corporate

governance codes Duly constituted and operational

Executive Management and Board Committee meetings

Timeous submission of Quarterly Corporate Performance Reports

Full Compliance

Productive organisational culture & effective people management

100% Compliance with performance management system.

96% compliance with performance contracts73% compliance with midterm reviews

Portfolio Spend 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.

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)

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.

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.

F/Y

PORTFOLIO TARGET

 PROGRAMME EXPENDITURE(M)

% EXPENDITURE

2001/2002 350 300 862002/2003 750 650 872003/2004 850 748 882004/2005 950 768 81

2005/2006 1 000 551 552006/2007 1 000 1 079 1082007/2008 1 200 1 167 97

2008/2009 1 500 1 313 882009/2010 1 500 1 635 1092010/2011 2 000 2 251 1132011/2012 2 400 4 137 1722012/2013 4 500 5 647 126

 Total 18 000 20 246 112%

Analysis of spend in empowerment indicators over the MTEFAnalysis of spend in empowerment indicators over the MTEF

Financial Financial YearYear

Value of Total Value of Total Portfolio Portfolio

Spend (million) Spend (million) (R)(R)

Women Spend Women Spend (million) (R)(million) (R)

Value of BEE Value of BEE Spend Spend

(million) (R)(million) (R)

No. of Job No. of Job OpportunitiesOpportunities

2008/09 1 313 205 630 53 581

2009/10 1 635 399 1 067 64 502

2010/11 2 272 581 1 530 58 5802011/12 4 137 1 030 2 098 68 2322012/13 5 647 1 035 3 554 76 981

Total 15 004 3 250 8 879 321 876

Portfolio spend per programme & regionPortfolio spend per programme & region

Portfolio spend per Government Priorities 2012/13Portfolio spend per Government Priorities 2012/13

Expenditure by Strategic ObjectiveExpenditure by Strategic Objective

SUB-PROGRAMME STRATEGICOBJECTIVE

BUDGET

(R’000)

ACTUAL

(R’000)

(OVER)/ UNDER-

EXPENDITURE

EMPOWERED AND COHESIVE COMMUNITIES 

50 714 54 328 (3 614)

SOCIAL INFRASTRUCTURE 180 543 192 959 (12 416) EFFECTIVE, EFFICIENT & COMPLIANT ADMINISTRATION

111 571 119 148 (7 577)

 TRANSFORMED IDT 52 886 8 243 44 643

 TOTAL 395 714 374 678 21 036

3.Governance

3.Governance

Governance Structures: Board & Board Committees 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:

1. Audit and Risk Committee

2. Finance Committee

3. Strategic Planning and Programme Committee

4. Human Resources and Corporate Services Committee

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:

1. Audit and Risk Committee

2. Finance Committee

3. Strategic Planning and Programme Committee

4. Human Resources and Corporate Services Committee

OrganogramOrganogram

Key Compliance IndicatorsKey Compliance Indicators

DATE OF HEARING

PURPOSE

16 October 2012 Present the 2011/12 Annual Report to the Portfolio Committee07 August 2012 Presentation to the Committee on Energy Efficiency in

Government Departments12 March 2013 Report on the performance of the DPW Public  Entities and

the Actions from the Auditor General’s management report

DATES DOCUMENT SUBMITTED TO

01 August 2012 2012/13 First Quarter Report Office of the Minister and DG

30 August 2012 2011/12 Annual Report Executive Authority, Department of Public

Works and National Treasury

30 October 2012 2012/13 Second Quarter Report Office of the Minister and Director General

31 January 2013 2012/13 Third Quarter Report Office of the Minister and Director General

28 February 2013 2013/14 – 2017/18 Strategic Plan Executive Authority, Department of Public

Works and National Treasury

30 April 2013 2012/13 Fourth Quarter Report Office of the Minister and Director General

2012/13 Shareholder Compact Compliance Record 2012/13 Shareholder Compact Compliance Record

Portfolio Committee Hearings 2012/13 Financial YearPortfolio Committee Hearings 2012/13 Financial Year

4.Human Resources

Management

4.Human Resources

Management

Staff Establishment Staff Establishment

Terminations Terminations

Reasons for Terminations Reasons for

Terminations

Terminations by GradeTerminations by Grade

TERMINATION REASON

2012/13 TOTAL

CONTRACT EXPIRED

20

DEATH 3DISMISSED 1RESIGNATION 26GRAND TOTAL 50

GRADEFUNCTIONS TOTAL

PG04 General Managers 4PG06 Programme Managers , Legal Advisers, Managers 7PG07 Compliance Officer, and a Costing Engineer 3PG08 Personal Assistants, Researchers 4PG09 Programme Implementation Managers 14PG10 Programme employees (e.g. administrators) 7

PG11Administrators e.g. Programme Implementation Assistants; Admin Assistants

5

PG13 Receptionists, Filing clerks, Data Capturers 5PG18 Office Attendants , Cleaners 1GRAND TOTAL   50

5.Financial

Information

5.Financial

Information

Audit Report for the year ended 31 March 2013Audit 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 2013Audit 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 2013Audit 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 2013Comments 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 2013Comments 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 PlanAudit 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 FundingGoing 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/orGenerate sufficient management fees from clients to fund the operating expenditure.

Cost Containment overviewCost 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 yearManagement 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.

Investment FundInvestment Fund

Details Movement on the Fund in the year ended 31 March

2013

R’000

Movement on the Fund in the six months to 30 September 2013

R’000

Opening balance at 1 April 2012/1 April 2013 277 519 169 728

Withdrawn to fund operating expenses (176 000) (40 000)

Funding allocated from Dept of Public Works 50 800 -

Growth on investments – net of fees 17 409 3 441

Closing balance 169 728 133 168

Bank account balance. (includes R 50 million received from Treasury in June 2013)

3 472 50 200

Total funds available 173 720 139 967

Funding available in months:

Based on budget of R 40m 4,3 3,5

Based on YTD actual of R 30m 5,7 4,7

Programme expenditure analysisProgramme 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 Performance2012/13 Financial Performance

Financial Year 2012/13: Revenue : Actuals v Budget

Description2012/13ActualR’000

2012/13BudgetR’000

2012/13Variance

%

2011/12 ActualR’000

Management fees 188 906 202 500 (6,7%) 139 486

Treasury allocation 50 800 - - 150 000

Investment income 17 866 9 000 98.5% 27 194

Interest and other

income

6 110 - - 4 716

Total Revenue 263 682 211 500 24,7% 321 396

2012/13 Financial Performance2012/13 Financial Performance

Financial Year 2012/13: Expenditure : Actuals v Budget

Description2012/13ActualR’000

2012/13BudgetR’000

2012/13Variance %

2011/12 ActualR’000

Employment expense 220 760 251 998 (12,4%) 236 896

Administration expense 145 854 146 000 0,1% 182 815

Finance costs 1 107 1 000 (10,7%) 349

Depreciation and amortisation 6 249 6 716 6,9% 5 897

Other expenses:

Fruitless & wasteful expenses

Programme expenditure –

remedial work

708

-

-

-

-

-

53

4 138

Total Expenditure 374 678 405 714 7,6% 430 148

2012/13 Financial Performance2012/13 Financial Performance

Financial Year 2012/13: Revenue and Expenditure : Actuals v Budget

Description2012/13ActualR’000

2012/13BudgetR’000

2012/13Variance

%

2011/12 ActualR’000

Total Revenue 263 682 211 500 24,7% 321 396

Total Expenditure 374 678 405 714 7,6% 430 148

Total Deficit for the

financial year

(110 996) (194 214) 42,8% (108 752)

Prior year adjustments 1 970 - - (164)

Closing balance on

Main Fund (Equity)

219 776 - - 328 802

2012/13 Financial Performance2012/13 Financial Performance

Financial Year 2012/13: Analysis of Administration Expenditure : Actuals v Budget

Description2012/13ActualR’000

2012/13BudgetR’000

2012/13Variance %

2011/12 ActualR’000

Consultancy fees – skills not

available within the organisation

35 182 22 020 (59,8%)

49 205

Development initiatives 20 948 16 000 (30,9%) 10 424

Travel and accommodation 26 318 25 790 (2,0%) 38 221

Rentals – buildings 8 563 13 192 35,1% 7 144

Workshops 4 769 12 930 63.1% 14 868

Total 95 780 89 932 - 119 862

Percentage of total

Administration expenses

66% 62% - 66%

6.Conclusion

6.Conclusion

HighlightsHighlights

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 R20bnIts 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.

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 R20bnIts 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.

RecommendationsRecommendations

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.

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.

THANK YOUTHANK YOU