Department of Environmental Affairs Annual Report 2010/11

Water and Sanitation

10 October 2011
Chairperson: Mr J De Lange (ANC)
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Meeting Summary

The Department of Environmental Affairs (DEA) submitted its Annual Report 2010/11 to the Committee. The main focus was on financial issues, where the DEA went into considerable detail about various categories of funding. It was noted that an unqualified audit opinion was given. The audit report on donor funding was not yet available. Action Plans to address any issues raised by the Auditor-General (AG) had been submitted. The Department, overall, spent 96% of its allocations, but some funds were also spent that had been rolled over from the previous year. There had been underspending on Climate Change, because of savings on the polar vessel, on  Environmental quality and protection , and Environmental Awareness and International Relations. The moneys surrendered and rollovers sought were fully set out, as well as the budget adjustments. Various specific spending categories were highlighted. Transfers to public entities were lower than the previous year, but the Committee expressed the view that iSimingaliso should receive more, and South African National Biodiversity Institute (SANBI) less. Expanded Public Works Projects (EPWP) were run in relation to sustainable livelihoods, wetland rehabilitation, acclimitisation, working for coasts, board walks, parks. and waste collection. There had been some drop due to the transfer away of the fisheries and tourism projects. An R80 million rollover was requested for capital assets, in respect of the polar vessel, and R5.2 million in respect of the Air Quality Monitoring Station. There were decreases in foreign aid assistance and donor funding. There were a number of challenges with the agencies who experienced shortfalls and slow own-revenue generation.

The Auditor-General South Africa (AGSA) gave a presentation comparing the audit outcomes of the Department and its entities, noting the changes from previous financial years, and commenting on the matters of emphasis, which related to material misstatements, inconsistency between Estimates of National Expenditure (ENE) and the strategic planning, some misstatements on annual performance, underperformance in relation to set targets, and reasons for variance were not included in the performance report. There was some unauthorised or irregular expenditure in relation to SANParks. There were concerns about the continuation of SANBI as a going concern.

The Department then summarised the key achievements across its programmes. It had exceeded targets on procurement on black economic empowerment, and on finalisation of complaints about environmental quality and protection, as well as conducting baseline compliance investigations. It had  rehabilitated 24 939 hectares of land and 94 hectares of wetland, but had not managed to achieve the 8% target for Transfrontier Conservation Area projects financed by investors. Although 18 493 new work opportunities were created, this was short of the targets of 20 000.

Members sought more detail on spending on advertising and communication, urged increased employment of disabled people, and were very critical of amounts allocated to consultants, calling for a full report on this, including the names of those paid. In particular, the Chairperson was strongly critical of the high amounts paid to external legal consultants, saying that the work was well within the scope of the Department’s legal services unit. The Chairperson and Committee also demanded the promised report on bonuses, noting that in principle the Committee was opposed to bonuses being paid, and that it wanted to express its view before the Minister approved them. A full schedule of bonuses paid in 2010/11 was sought. Another report on additional funding was requested. Members asked about the criteria for funding entities, including what business cases were presented for Buyisa-E-Bag, questioned what advertising and marketing campaigns were run, why work targets were not achieved, and the difference between the reports produced.

Meeting report

Chairperson’s opening remarks
The Chairperson, after outlining the Committee programme for this week, noted that in the following  week  the Minister would be presenting the White Paper, and it was hoped that National Treasury (NT) might be able to brief the Committee on how it was proposed that the Carbon Tax would work. Public hearings would be held on the White Paper, and, if possible, issues of rhino poaching would be discussed. Acid mine drainage progress reports would also be sought. Waste management had been a neglected issue and there should be more focus on it.

Department of Environmental Affairs Annual Report 2010/11
Ms Nosipho Ngcaba, Director-General, Department of Environmental Affairs, had been asked by the Committee to focus on areas that might not be in annual report, such as areas where more funding might be requested, as this would assist the Committee in formulating a view on whether the recommendations would be supported.

Ms Esther Malcan, Chief Financial Officer, Department of Environmental Affairs, noted that the Department of Environmental Affairs (DEA or the Department) had received an unqualified audit from the Auditor-General (AG), which represented an improvement on the previous years. At the time of preparation of the Annual Report, it was still awaiting the audit on donor funding, which would be finalised by end-September. There had been compliance in disclosing matters in the financial statements, and the Department had complied with requirements in relation to reporting requirements, policy frameworks and classifications. The Department had complied with all requirements relating to transfers to agencies and other organisations, as all transfers had received prior management approval, as well as National Treasury approval. All Action Plans to address matters raised by the Auditor-General were submitted.

The review of budget and expenditure showed that the Department had spent 96% of its allocated budget, but when moneys rolled over from the previous year were taken into consideration, it had actually achieved 100% spending. The Climate Change (CC) programme noted a 86% spending against budget, but it was clarified that there was in fact a saving on the polar vessel. This saving was also reflected in the environmental quality and protection category which showed 94% spending. Sector Services Environmental Awareness and International Relations showed 99.8% spending. All unspent funding was repaid to National Treasury. The figures in respect of moneys surrendered and rollovers were summarised in the attached presentation, as well as budget adjustments (see attached presentation for details).

In particular, Ms Malcan highlighted the amounts in respect of the polar vessel, the air monitoring systems, and Buyisa-e-Bag. R71.8 million had been transferred for the fisheries function, to the Department of Water Affairs. Adjustments had been made for compensation of employees, in line with a Bargaining Council resolution to adjust level 4 to 10 salaries. An amount of R3 million had been allocated for the South African Agulhas Polar Vessel.

There had been reprioritisations of R41.67million, in respect of property management, a transfer to the South African National Biodiversity Institute (SANBI) and R12.5 million to South African National Parks (SANParks) to manage the indigenous forests. She noted the allocation of R10.65 million for funding of the environmental awareness greening summit and the environmental conference.

She noted that the DEA had received a budget cut of R76 million in respect of operational expenses, similar to other government departments, but there was an increase of R78 million to the baseline to allow for funding of posts, Occupation Service Dispensation (OSD) and general increases.

The Chairperson noted that the Department had previously promised that it would provide a report on bonuses, but was concerned that there seemed to be provision made in the budget for bonuses despite the undertaking to present a report on this before bonuses were paid. The Committee was in principle opposed to payment of bonuses, and felt that there were attempts to ignore the issue. The Committee wanted to express its view before they were approved by the Minister.

Ms Ngcaba stated that the Minister was the person that needed to approve the issue prior to it being tabled to the Committee, and the Minister also wanted to sign off on certain documents, and had withdrawn the report on bonuses from the agenda. However, she assured the Committee that this reprioritisation related to the 2010/11 financial year, not the current year.

Ms Malcan continued by highlighting advertising on the environmental awareness campaign, which had doubled from the previous. Other significant expenditure related to consultants, and she noted that this included drafting of letters of appeal and other legislative documents (see attached documents).

She noted that the transfers to public entities were lower than the previous year, in respect of both SANParks and iSimangaliso, because of finalised projects for the World Cup. SANParks showed  a decrease in financial assistance in road subsidies, park expansions, rhino reaction and protection amongst others.

The Chairperson said that iSimangaliso was a great initiative as it was diversified, and recommended that it was in fact worthy of more investment.

Ms Malcan said that the transfer for Expanded Public Works Projects (EPWP) for 2010/11 was shown per province for sustainable land-base livelihoods, and this covered wetlands rehabilitation. SANBI did not fall provincially and was awarded R75 million. The EPWP covered acclimitisation, working for coasts, on dune and coastal rehabilitation, and board walks, where municipalities did not have capacity to budget for these, and people and parks. They also related to  waste collection, eco-towns and training.  The decrease in transfers for the EPWP was due to the transferring away of the fisheries function, as well as transfer of tourism projects to the National Department of Tourism.

The Chairperson interjected to ask for clarity on the decrease of about R100 million in the Working on Waste project, but an increase of about the same amount for people and parks.

Ms Ngcaba said that the allocations were linked to the plans by municipalities, but there would be further investigations into this. People and parks required preservation, including fencing of provincial parks, and infrastructure for conservation. Provinces were not funded adequately, and tended to neglect ranger and other key conservation functions.

Ms Malcan noted that  transfers to non-profit institutions were done annually. She noted that R11 500 from the Buyisa-E-Bag project, which suffered difficulties, was repaid to NT. She highlighted an increase to the Global Environmental Fund, being additional membership fees.

There was a R80 million roll-over on capital assets, repaid to NT in respect of the polar vessel.

The Chairperson asked what the R5.2 million roll over related to.

Ms Ngcaba responded that it was for expenditure for capital assets, in respect of the Air Quality Monitoring Station, where there delays in procurement and delivery, resulting in the need to roll it over.

Ms Malcan highlighted the decrease in foreign aid assistance and donor funding, which was coming to an end and the Department was in the process of finalising the closure reports. There was no projection for this type of funding in the next financial year.

Ms Malcan summarised that many challenges experienced by the Department in the 2010/11 financial year lay with the agencies, who experienced shortfalls as well as slow own-revenue generation. She noted that SANBI had an annual deficit of between R12 and 15 million, and pointed out that it had to have proper funding because it was labour-intensive. I-Simangaliso was marginalised and never received adequate funding.

The Chairperson thought that in fact SANBI was over-paid and was doing things that were not in its mandate, which was why it had a deficit. He hoped that the same would not apply in the following year as the Committee would show little sympathy.

Ms Veronica Steyn, Director: Budgeting, Department of Environmental Affairs said that funding was requested in four broad areas, namely, for improved service delivery, job creation, infrastructure investment, and the compliance environmental framework and climate development. She outlined the requests (see attached presentation for details) and explained them to the Committee.

Audit Outcomes of Department of Environmental Affairs: Auditor General SA briefing
The Business Executive responsible for Environmental Affairs, Auditor-General South Africa (AGSA), gave an overview of the audit outcomes for the Department. She noted that this was an introduction to the general report as some stakeholders were still required to submit documentation to AGSA.

She noted that the National Department had regressed in respect of the findings, because there were  findings on predetermined objectives or compliance with laws and regulations. A schedule of comparison between the previous and current year’s findings, for each entity, was set out.

There was a 50% finding in relation to areas of material misstatements in financial statements, but these were corrected during the audit. Corrections of material misstatements identified by auditors was rated at 60% for the Department and entities. AGSA was still busy finalising the report on the predetermined objectives and could not currently express an audit opinion on that. There were some findings about inconsistency between Estimates of National Expenditure (ENE) and the strategic planning, as well as findings that the annual performance was misstated, there was underperformance in relation to set targets, and reasons for variance were not included in the performance report. There was regression insofar as non-compliance with laws and regulations was concerned. There was no unauthorised, irregular, fruitless and wasteful expenditure, apart from that identified during the audit relating to SANParks in the amount of R2.1 million.

In relation to the sustainability of public entities, AGSA noted that SANBI  had had a deficit since 2008 of about R40 million annually and government grants were simply insufficient to fund that entity. This also resulted in the entity not paying its creditors on time, although it was slow to collect debt, which increased the deficit. There was some doubt in the minds of AGSA whether SANBI could continue as a going concern, unless additional sources of funding could be obtained.

The AGSA also summarised four points based on prior audit, risk assessment; procurement and supply chain management, human resource (HR) management and information technology management, and on predetermined objectives. High risk areas reporting did not yield any significant concerns. However, there were adverse findings in respect of cooperation in processes or unfair procurement processes. It also identified some inadequate controls at both the national Department and entities. However, there was progress in implementing key controls, IT control focus areas and the assessment of monitoring capacity and effectiveness at the time of the audit.

Department’s Summary of key achievements and challenges
Representatives of the Department outlined the key progress and achievements in this financial year. It was noted that the Department had four public entities, namely, SANBI, the South African Weather Service (SAWS), SANParks an iSimangaliso. The Department had extended public works and international programmes in the sector, had increased environmental awareness and international relations.

In the Administrative Programme, it was summarised that the main achievements were the meeting of the targets for turnover, and the exceeding of targets for procurement on Black Economic Empowerment (BEE) enterprises, getting a share in the voice of the media and achieving an unqualified audit. Key challenges include the delays around the construction of new DEA building, because of outstanding issues with the bidder, but this had been resolved and the work would be reprioritised in 2011/12 financial year. The target for 2% employment of disabilities remained a challenge and the Department would build partnerships with recruitment agencies.

Programme2: Environmental Quality and Protection, outlined that it had managed to finalise 87% of Environmental Quality and Protection (EQP) related complaints or incidents, against a target of 65%. It had conducted 16 sector based strategic baseline compliance inspections, again exceeding the target of 12. 62 compliance inspections (compared to the target of 20) were conducted. It faced key challenges in human resource capacity,  in processing assessment applications within legal timeframes, and challenges in rolling out the Compliance and Enforcement Information Management system in Provinces. Systems were reviewed to change the focus and deal with implementation.

Programme3\: Oceans Strategy and Coastal Management, had achieved full implementation on the Antarctic Treaty Consultative Meeting (ATCM) decisions, as well as on the Marion Island base. Three expeditions were undertaken, as planned. It was suggested that the Department and Committee may wish to conduct a further inspection in relation to SANBI. The National Oceans Strategy could not be finalised, due to outstanding stakeholder consultations.

The key achievements for Programme 4:Climate Change were the development of four sector adaptation plans (see attached presentation). It had achieved its aims in preparing and negotiating international Climate Change agreements. There were no key challenges for this programme.

Programme 5: Biodiversity and Conservation, noted that it had implemented on the CITIES provisions as planned, and had assessed all 44 applications for Genetically Modified Organisms (GMOs). It had  rehabilitated 24 939 hectares of land and 94 hectares of wetland, exceeding the latter targets. However, it had not managed to achieve the 8% target for Transfrontier Conservation Area projects financed by investors, as this was dependent on private financing. The guidelines on negotiating benefit sharing were not yet finalised.

Programme6: Sector Services had created a total of 18 493 new work opportunities through environmental EPWP, short of the target of 33 637. 459 youth benefited from the DEA component of the National Youth Service, in excess of the target of 400. 50 learners were recruited to be environmental educators, and 40 had completed the learnership programme. There still needed to be approval of the Education for Sustainable Development (ESD) strategy, and international benchmarking. The target of mapping all national, provincial and local reserves was not met, due to delays in consultation processes.

Ms H Ndude (COPE) sought clarity on details of current expenditure. She asked the difference between “advertising” and “communication”, and asked which was of greater benefit to communities. She requested the breakdowns of figures on accommodation and on photocopying. She asked what “other expenses” were. She asked for the reasons why foreign exchange aid had dropped.

Ms Malcam noted that accommodation and photocopying were put together because they were both “lease” expenses, and they had to be shown separately. She noted that drop in funding was partially due to the fact that some projects were multi-year. Some donors were no longer funding. She noted that R34 million had not been mentioned specifically, but said that the R20 million related to the Air Charter.

The Chairperson noted that a lot of money was allocated to consultants. He asked if the report on travel and subsistence would be presented that day. The Chairperson sought clarity again on bonuses, asking to whom the R100 million was paid. He said that he was not aware of advertising through Government Communication and Information Services (GCIS), as suggested and asked what type of advertising was done.

Ms Ngcaba requested the issue on bonuses should stand over until the Report was presented, but said that the guidelines had been followed. Quarterly reports were submitted, supervisors did an analysis and committees did adjudication to check who would qualify.

The Chairperson then asked if there were any people who were not going to receive bonuses, and, if so, what was the breakdown.

Ms Ngcaba said that there were some people who would not be getting bonuses. The adjudicators were at all levels, so that she and the Deputy Director General, for instance, adjudicated on directors and managers. Of the total of about 1 024 employees, 260 would not get bonuses.  525 (36%) received pay progression,  225 (12%) would receive bonuses and 260 (18%) were not getting bonuses, which included those who were disqualified because they had been in position for less than one year. 449 (31%) would receive merit and pay progressions in category B. This was a fair and transparent process. 76% of people at lower levels would get bonuses.

The Chairperson hoped that the 12% mentioned would be levels 1 to 4, and middle management, not senior managers. He requested a report on consultancy and bonuses by the end of November 2011, including a report on who did not qualify in each category.

The Chairperson also requested a report on additional funding.

Mr G Morgan (DA) asked if the adjustments on tourism and fisheries were done at the end of the tenure.

Mr Morgan asked about the criteria for funding projects or entities. He asked about the transfers to non-profit organisations like Buyisa-e-Bag, including what business cases had been presented. He asked under which programme Indaloyethu fell. He suggested that the Department should ask Isidingo to run advertising on climate change.

Ms Malcam answered the questions on advertising by saying that money was indeed transferred for advertising through GCIS. Marketing was done on Conference of Parties (COP17). There had been radio advertising in June. Other media advertising was too expensive to fund, but some newspaper marketing was done.

Ms Malcam noted that the tourism and fisheries functions had now ended, and there would be variances in the next financial year. She noted that the transfers to Buyisa-e-Bag were based on the business plan and salary structures. A draft of the financial statements was received but it was not yet audited by KPMG. Indaloyethu had a kind of non-governmental organisation (NGO) structure, and there were other NGOs who were part of the board. WESA was the holding body for the campaign and fulfilled some functions for the Department.

Dr. S Huang (ANC) said that there needed to be a better breakdown of figures in the Annual Report. He said that the figure of 1.6 million social beneficiaries had not been highlighted in the presentation. He thought the font was difficult to read, and said Members had had too little time to engage on the document. He did not think that the closing and opening balances on page 112 corresponded. He asked about the World Bank funding, which seemed to reflect negatively in the Annual Report, but positively in the presentation.

Ms Steyn noted that the figures for donor funding reflected actual money spent, and not balances for the years, so the figures should not be compared with each other.

The Chairperson pointed out that the Annual Report had in fact been presented to Parliament on 30 September.

The Chairperson asked how much was spent on consultants and asked if it had ever hired former Departmental employees as consultants.

Mr Sekwati Rakhoho, Director: Supply Management, DEA, stated that the Department had spent R185 million on consultancy fees. However, there were no previous government officials who were hired as consultants. Although the Department had not done so yet, it had been mandated by National Treasury to check the names of all shareholders and directors of companies with whom the DEA did business. The DEA did use the dti and Human Resource structures to check whether those submitting tenders were employees or linked to employees at DEA.

The Chairperson wanted clarity as to the kinds of services outsourced and the reasons for this outsourcing.

Mr Rakhoho explained that those outsourced were mostly specialised services, and there were always struggles to try to source those skills internally. If these services were not outsourced, then there would have to be skills transfer plans put in place and staff would have to be trained.

The Chairperson questioned the legal costs. He asked why one advocate had received R360 000 and commented that the fact that R185 million was paid for legal services showed laziness on the part of the internal legal services, who had apparently failed to draft their own appeal documents.

Ms Ngcaba clarified that of that amount, R60 million related to maintenance of vessels. Another R80 million was set aside for issues relating to maintenance.

The Chairperson said that one of the names sounded suspiciously like a former employee-turned-consultant. He was still concerned that DEA was hiring outside people to do work well within the scope and expertise of the Department. He wanted a report on what steps would be put in place to avoid using consultants in the following year, and said she should not try to justify things that were obviously not necessary, like debt collection and drafting of appeals.

Mr J Skosana (ANC) said that the 2% disability employment should be increased. He thought that whilst BEE might exist in name, he wondered if salaries were compatible.

Ms Ndude commended the DEA on much of its work, but thought that it was failing in not employing more disabled people. She asked for demographics on the learners being assisted.

Ms Ngcaba said that the DEA had noted and would improve on disability employment.

Dr Huang asked about the work targets, and the fact that they were not achieved, under programme 6, and asked on what basis people were employed.

Ms Ngcaba noted that in fact the targets were incorrectly stated, and should be just over 20 000. These were temporary, not permanent jobs.

The Chairperson wanted to know the difference between the strategic report and the financial report as they appeared to be similar.

Ms Ngcaba said that the financial year ran from April to March, and the reports were submitted to the AGSA in May. All departments and entities were to submit financial reports quarterly.

The meeting was

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