Department in R9bn shortfall

Bhisho wants clarity on human settlements’ variation orders

A dwindling budget, together with a raised set of standards, has created a shortfall of R9bn for the provincial department of human settlements.

This was revealed during a Bhisho standing committee on public accounts sitting, where the human settlements department was called to account on so-called “variation orders”, which allowed for money to be spent which was not in the budget. Committee chair and UDM MPL Max Mhlati said they wanted to know why there were variation orders.

“We realised that there is money added to projects – huge amounts of money – and we want you to tell us why,” he said. “Treasury must monitor this because it is the function of treasury to monitor funds.

“They must monitor because the variations change the amounts of tenders that had been given out already.

“This 20% variation can open the ground for corruption and we don’t want that.”

Human settlements acting head of department Daluhlanga Mpendu said the variations were as a result of the new norms and standards set by the national department of human settlements.

“New norms and standards came into place which included other features like ceilings, aprons and other things.

“That had a cost effect and we had to align our projects to fit in with those new norms and standards.”

The new norms and standards, Mpendu explained, had increased the cost of projects “by a couple of million”, depending on the stage the project was in. The department had over-committed its budget and one of the reasons was the new norms and standards which, he explained, had meant that a new feature had been added to houses. He said it sometimes happened in mid-project, leading to increased prices.

The national department had set variations at 20%, meaning contractors could go above the tendered amount by 20% when new norms and standards had been issued.

“Remember we did not plan for the new norms and standards, they came midway.

“That impacted on the overcommitment but we are beginning to address that situation and we are comfortable that we are addressing that.”

He said his department wanted to clear the shortfall.

“We have since reduced it by R2bn to R9bn in the last financial year. Reducing the budget over the years has led to those projects not being contained within our mediumterm expenditure framework (MTEF) budget. We are going beyond our MTEF budget.”

The department’s variations are:

● R91m for the 2010-11 financial year;

● R440m for the 2011-12 financial year;

● R170m for the 2012-13 financial year;

● R69m for the 2013-14 financial year; and

● R424m for the 2014-15 financial year.

This 20% variation can cause corruption and we don’t want that

Max Mhlati

Bhisho standing committee chair