The Department of Water Affairs (DWA) Annual Report and financial statements for 2011/12 came under scrutiny, and the Chairperson noted, at the outset, that the same types of qualifications were raised year after year, despite input from the Auditor-General (AG) and this Committee. Although there were fewer qualifications in this year than previously, the DWA still had not addressed certain issues to satisfaction, despite being aware of how to do this. He urged the Committee and the Department to agree that the time had come to move matters on a different path. Water was critical to human existence, and the importance of DWA’s work was emphasised.
Members voiced their displeasure at the absence of both the Minister and the Deputy Minister, saying that whilst they understood that they may not always be available, the invitation for this meeting was sent some time ago, but the Committee was only told of their non-availability on the previous day. The Committee needed to interrogate issues around suspension of senior officials and could not do so in their absence. Members also commented, at the outset, that they were not happy with the presentation of the report and were equally unhappy when told that an incomplete version had been submitted just to meet the deadline, but not withdrawn, which also duplicated costs.
Members questioned DWA extensively on a number of issues. There were problems with qualification on assets, since in previous years, advances were made to implementing agents before the assets were provided, a system of accounting only identified some years later, which necessitated DWA going back and correcting several sets of accounts. Members interrogated the Department as to whether the issue had actually now been resolved, and tried several times to establish who had been responsible for the problem. It was finally noted that a consultant had been appointed, yet later the question was also asked why there was no institutional memory and why the consultants had not isolated other issues. Questions were raised on the irregular expenditure amounting to R1 billion, and how this arose, and questioned whether there was now a proper internal audit function in place. It was reported that there were ongoing attempts to sort out the matter with NT. Members questioned what disciplinary action had been taken, demanding full details and names, and asking for the schedule that was referred to during the meeting. The audit committee also commented that whilst it was pleased that the DWA was now doing something, it would prefer that the processes be less protracted.
Members asked whether money incorrectly paid to suppliers was refunded, and heard that there were instances where VAT had been incorrectly charged and paid over. Members also questioned why the DWA only visited the provinces to try to get documentation after the AG had visited, pointing out that the DWA knew that the audit would take place at a set time each year and should have prepared itself. They asked what action had been taken against regional heads who failed to submit documentation on time, and did not accept the excuse of time constraints. Members said they were struggling with the concept that there appeared to be no institutional memory, and that basic practices such as photocopying documents sent to another division or department were not followed. They questioned the statistic that 94.7% of South Africans had access to water, with three Members commented that their constituencies were without water, and DWA clarified that this figure referred to infrastructure, but not necessarily to supply. Members said this must be explained to the public. Other questions related to write-off of loans, why targets were not met, the noting of targets, disciplinary actions against and suspension of senior management staff, and a full report, and meeting with, was requested with the Business Process Committee, which had incurred huge costs. They also questioned the functioning of the Water Trading Entity (WTE) and the presentation of some of the accounts, which appeared to be duplicated, and sought clarity on what was described as a “surplus” but was actually failure to spend. Members also sought clarity on dams, and noted that much of the responsibility for access to and quality of water lay not with DWA, but with municipalities, and this had to be explained to the public.
Chairperson’s Opening remarks
The Chairperson said the meetings on the use of consultants by departments had diverted the Committee from its normal programme, and today the Committee would return to focusing on the 2011/12 annual report of the Department of Water Affairs (DWA or the Department) as well as the Water Trading Entity (WTE).
He noted that the Minister’s apology was received on the previous day.
The Chairperson added that, when checking the history of meetings with the Committee, it was apparent that DWA had some issues that were persistent at the Department. The numbers of issues on which it was qualified had reduced, but the ultimate objective was for the Department to get matters right, and the correct tools to do this were known. The Auditor-General (AG) and the Committee’s own resolutions had addressed issues that were a challenge to the Department, and yet nothing seemed to change.
The Committee stressed that it could not be forever asking the same questions, on the same issues, and getting the same answers. There had to be a point where the Committee drew a line and determined that from then on, things must move in a different trajectory. He pleaded with the Department to see how it could make the meeting a defining point. However, he also acknowledged the challenge posed by leadership instability at the Department. Water was critical to human existence, and the importance could not be over-emphasised of the job on the Department to ensure, through municipalities, that water of acceptable quality was available to everybody.
Other important issues might not be covered in the Annual Report (AR), but they emanated from the work of the Department. People demonstrated and barricaded roads simply because they wanted water to survive, a cry for basic living needs. The Committee sought to understand the issue of water in a much broader context than just accounting for the rands and cents. This, and not purely mechanical compliance, was the approach the Committee would adopt. Members should seek to find a way to break the cycle of departments who, ever since the enactment of the Public Finance Management Act (PFMA), had never received an unqualified audit opinion.
Mr Trevor Balzer, Acting Director General (DG), DWA, apologised on behalf of the Minister and Deputy, explaining that Minister Edna Molewa was only returning today from a trip overseas, while Deputy Minister Rejoice Mabudafhatsi had left the country the previous evening.
Mr R Ainslie (ANC) commented that the invitation for the meeting had been sent out some time ago and the Committee should have been informed earlier about the Minister’s non-attendance. The Committee and Ministers equally benefited from their presence at meetings, and he was very disappointed that DWA did not inform the Committee on time that the Minister was unavailable, so that the Committee could have rescheduled the meeting.
The Chairperson commented that he hoped the displeasure of the Committee would be conveyed. Whilst Members understood and accepted that the ministers would be from time to time be unavailable, it was not helpful to send the apology only on the previous day, as there should be timeous interaction between Parliament and departments.
Ms T Chiloane (ANC) commented that the AR was shabbily presented, which made it very difficult for the Committee to prepare. and it made preparation impossible. She had to turn the copy upside down to make sense of the figures in the AR, and it was a great pity that the correct version was only received that morning. Had it not been for the importance of this Committee’s work, she would have urged that the Department be sent back. She asked DWA for an explanation on this incompetence.
The Chairperson asked if there was a valid reason for the two versions.
Mr Ainslie commented that the Committee’s resolutions were not included on the report, and that he also struggled reading upside down.
Mr Balzer replied Members caught him “on the hop”. He said he was not working from a photocopied version, and that he was informed the incorrect version was only submitted to meet the deadline, but was not withdrawn when the right version was submitted.
The Chairperson asked if there was a compelling reason why the Department was likely to miss the deadline. The PFMA stipulated that when departments were challenged with meeting the deadlines, they could simply write to the Speaker of Parliament and request an extension. Submission of the wrong copy made it difficult to prepare for the meeting, and that did not reflect well on the Department.
Mr Balzer replied there was a logistical issue on DWA’s side in printing the report.
The Chairperson commented that Department now had used double amounts to make the copies and pointed out that it could have been cheaper to write a letter to the Speaker and request an extension, rather than submitting amateurish photocopies. It could be that there were administrative bungles, and as a result officials were afraid to approach the Minister, as she might not have been pleased with writing to Parliament asking for extension. This was not well thought out.
Mr Balzer replied he accepted blame and would thus investigate the matter.
Supply chain management (SCM)
Ms Chiloane reiterated that the Department was key in supplying water to the people. She noted, however, that her constituency in Ermelo (Mpumalanga) had not had water for the past year. DWA had been receiving qualified opinions for a number of years, owing to non-compliance to laws regulating how public finances should be managed, specifically the PFMA. DWA had regressed to an unacceptable extent. The Committee was indeed aware of instability among senior management at the Department, but she wanted specific comment on the regression.
Mr Balzer replied he did not know how to respond, and disputed there was regression in the Department. Despite the leadership instability, DWA itself had stable administration that complied with the laws and delivered on responsibilities. An analysis of the AR would indicate that steps had been taken to address issues on the main account, and those relating to WTE.
Ms Chiloane commented there had not been change in the audit opinion on immovable assets and goods and services. She requested a comment.
The Chairperson clarified that Ms Chiloane’s question sought to establish why these three items could not be corrected.
Mr Balzer replied that issues raised on qualification on assets had been dealt with. A new issue was on how DWA handled management of the regional bulk infrastructure assets, and conditional grants for the construction of infrastructure to provide water to communities.
The Chairperson asked how the new issue arose. There might be plans to deal with the current challenge, but then new ones might occur.
Ms Nthabiseng Fundakubi, Chief Financial Officer, DWA, said all qualifications related to the Regional Infrastructure Grant. The qualification came about as a result of previous years advances being made early to implementing agents. In the books of the Department, the money would be reflected as spent and the services as rendered, whereas they had not in fact been rendered yet. The money would be advanced to buy pipes that were to be installed. However, this method of accounting affected the assets register because when the AG came to verify, the pipes, although purchased, would not be accounted for in the books. The supporting documents would not be found in particular regions.
The situation had been corrected from last year, when the problem became apparent. DWA had gone back to the three financial years when those projects started. The Department collected all invoices and reconciled them with assets completed and those still ongoing.. The last trip taken was to Limpopo, to reconcile the R275 million, for which the AG could not find the supporting documents.
Ms Chiloane commented that the Committee was meeting the Department for the third time and the issue of assets had been a persistent problems. She asked how DWA was implementing the Committee’s resolutions around assets. The Committee had been told before, and was being told again now, that “the matter is being corrected”.
The Chairperson commented that Ms Chiloane was following a specific and correct line of questioning. The Department had indicated that all the other problems on assets management had been solved, except for this one, and that it was in the process of solving it now and assembling all the invoices. He asked if DWA was saying that once that exercise had been completed, then the problems would have been fixed.
Ms Chiloane asked what the DG was doing to ensure compliance with the PFMA, in the context of the discussion.
Mr Balzer replied that, as required, the Department had now put in place a revised register that was kept up to date, with all of the asset classes. Classification was done on a regular basis and was overseen by the CFO’s office, in the main account. He said he was certain that DWA had put in place controls that would address the shortcomings in asset management.
The Chairperson sought clarity on whether the Department had now received all the documents relating to assets in the regions, that could not be previously made available to the AG.
Ms Fundakubi explained that lack of capacity was a challenge in the Department. A few years ago, there was no structure at all at DWA, in the asset management unit and reports were not done in an acceptable manner. The unit was now being strengthened, and contract workers had been appointed who would do reconciliations in regions. There were monthly reconciled asset registers, that were certified.
Ms Chiloane asked who was responsible for doing reconciliations before the contract workers were appointed, and what happened to that person.
Mr Balzer replied that the ultimate responsibility lay with the DG, but supply chain issues fell within the responsibilities of the CFO. From time to time, when there was an issue as this one, it was not unusual to take on additional staff. DWA was also challenged by the fragmented management and oversight over some of the finance components. The Department had operated with a decentralised management unit, with head office in Pretoria, and each of the province’s finance units were headed by a Chief Director. That line of responsibility and accountability was not as efficient as it ought to have been. That had since been changed, so that now provinces reported directly to the CFO.
Ms Chiloane commented someone else should be doing reconciliation work at DWA. She asked, again, where that person was and if s/he had been disciplined. The Committee would appreciate receiving a name.
Mr Balzer replied there was an issue at the time with the correct organisational structure on finance. Since the issue had been raised, DWA had since appointed a director for assets management.
Ms Fundakubi replied that there was no name that would be provided. She said that, as she had indicated, this related to the previous years before the structure of asset management was put in place. At the time, there were no officials attached to that unit, as asset management was new to the government operations. The structure of asset management only became effective with the appointment of the Chief Director Supply Chain Management (SCM).
The Chairperson wanted to know how assets were managed and accounted for before that unit was established.
Ms Fundakubi replied that a consultant - Kwinana and Associates – performed asset management responsibilities on behalf of the Department.
The Chairperson commented the management approach was fragmented. The consultant did not seem to have done a good job in managing the assets, and yet it was paid.
Ms Chiloane sought clarity on the irregular expenditure of R66 million, which was contrary to PFMA and National Treasury (NT) regulations. The figure had increased from R17 million to R1.1 billion and she sought an explanation for what happened and why it had happened.
Mr Balzer commented that Committee would not again see any irregular expenditure, and assured the Committee that all the necessary controls had been put in place. The functions of the bid adjudication committee, and also the evaluation committee that dealt with procurement, had been changed and were in line
The Chairperson said PFMA stipulated that the DG should ensure the systems and capacities were in place to address these challenges. Throughout this period there were “warm bodies” employed and getting paid. He pointed out that, in relation to the irregular expenditure of R1 billion, 60% was as a result of supply chain irregularities, and 40% arose in compensation of employees. He asked why and how did this happen, why was there no properly functioning internal audit function, and whether this was due to lack of capacity in the internal audit function, or whether management ignored their reports.
Ms Fundakubi replied that irregular expenditure costs increased because of a number of factors. The figure of R1 billion was mainly made up of a R46.9 million amount related to the Department of Public Works (DPW) and leasing. Although DWA was a client to DPW, the money was paid from DWA’s account. When the AG found the transaction to be irregular, the Department then had to declare it.
There was an ongoing investigation at DPW in relation to the leased accommodation.
The second amount related to the regional bulk infrastructure amounting to R869.5 million, as a result of non-compliance to the Division of Revenue Act (DORA). The Department followed a directive from NT, hence it had been referred back to NT and there were discussions to try and resolve the matter. The figure related to prior years, and was the biggest contributing amount to non-compliance and irregular expenditure.
The Chairperson sought clarity on the R66 million reflected as irregular expenditure.
Mr Balzer said details for that irregular expenditure were on page 188 and 189 of the AR.
Breakdown of disciplinary proceedings needed
Mr Ainslie commented the information in the AR was very scanty in relation to disciplinary action. The report should indicate if disciplinary and criminal actions were taken and the nature of sanctions. This was not done, and it was unacceptable. DWA listed 115 incidents as irregular expenditure transgressions, but steps had apparently only been taken in relation to four. This was not how matters should have been handled. DWA should have provided a breakdown of each of the cases and what steps had been taken.
Ms Chiloane asked the Department to state clearly on whether anyone had been disciplined, and, if so, to describe the sanctions.
Mr Balzer replied that, although it was not captured in a detailed manner in the report, he had a schedule with him that indicated the particular actions, showing who the service provider was, the transgression and the action taken. He accepted the point that the information on the report was limited. The schedule would be made available to the Committee.
Ms Chiloane asked if the Department’s intended to discipline or recover the money. When people had illegally spent government money, it should be possible to recover. She asked about the progress on those ongoing cases.
Ms Fundakubi said the report of 2011/12 would not indicate any action, as the cases had only been reported in that year. In the next financial year, 2012/13, the information would be reported. She indicated that in one case of non-compliance by an official in KwaZulu Natal (KZN), the official had been dismissed but was appealing the decision, and the Public Sector Bargaining Council would give a ruling this week. Another case was in the North West where the implicated officials were ordered to repay the Department. In another case in Mpumalanga, investigations were still ongoing. The delays in this case resulted from the fact that the implicated official died during the investigations, but the enquiry would still continue. She noted that the Department had established a Financial Misconduct Committee (FMC) to deal with irregularity cases. Some cases would be tabled to that committee for consideration, although it had sat on others. Some of those recommended by the Financial Misconduct Board (FMB) had been recommended for condonation, by the DG.
Mr Justice Motha, DWA Audit Committee member, added that the Audit Committee had demanded that corrective measures be taken to discipline, and recover where possible. The Audit Committee was partially satisfied that the Department was looking into doing something. Whilst overall investigations were necessary, some cases did not have to be investigated in detail, and rather warranted swift disciplinary steps rather than long drawn-out processes.
The Audit Committee had encouraged the Department to make a ruling that action when people acted beyond their delegated authority. Some of the things could be easily avoided. He reiterated that although the audit committee had received reports on actions taken, it would prefer shorter investigations, and expedited disciplinary processes.
Ms Chiloane requested that the report given by the CFO be availed to the Committee. She said she hoped that the company mentioned in the report, owned by a spouse of an official, was not Madonoro Trading. There had to be a clear report on this matter. It was important that officials started behaving in a proper manner before they could deal with suspect service providers. The Audit Committee had raised an issue that IT controls were not as effective as they were supposed to be, and also it indicated it was not entirely happy with some issues at the Department. She asked for comment on those points.
Mr Balzer replied that DWA had covered some of the issues that the Audit Committee had raised in terms of the control environment. The establishment of the specifications committee, and the reconfiguration of the bids adjudication committee, and FMC were all meant to address the control environment. This was meant to improve accountability and deal with officials when they transgressed.
Ms Fundakubi also said that said the issue of inadequate internal controls had been addressed. As part of improving its governance, DWA had implemented a unit that would deal specifically with internal controls, to curb the recurring deficiencies. Progress had been made and the Department had advertised for the Director who would head that unit. Recruitment and appointment was in progress.
Ms M Mashiane (COPE) commented that not much had been said about other provinces in relation to the issue of supply chain management transgressions. She therefore asked what discoveries or conclusions the Department had arrived on, on asset management in other provinces.
Ms Mashiane also noted that her village in the North West (NW) currently did not have water, and that when opening this year, NW Legislature also did not have water. This was a serious matter, as she pointed out that people could die as a result of water scarcity.
The Chairperson requested that the question be dealt with at the end of the engagement. The issue of water had its own serious challenges and ramifications.
Suppliers failing to return DWA’s money
Ms S Mangena (ANC) sought clarity on whether the substantial money had been recovered from suppliers, as stated on page 194 of the AR.
Ms Fundakubi replied that the Department had the details noted as irregular expenditure. Some funds, especially those VAT related, had been recovered from suppliers. There were others where DWA struggled to get the money, but letters of demand had been issued. The Department was also looking at directing all the cases to the South African Revenue Services (SARS) so it could make demands on DWA’s behalf.
The Chairperson requested a written progress report on those cases.
Ms Fundakubi indicated that the delegation had the information ready and that it would be left with the Committee.
The Chairperson wanted to know the challenges with calculating VAT for the suppliers.
Ms Fundakubi replied when the suppliers issued invoices, they did not include VAT in their total cost.
The Chairperson asked how the item was captured in the report.
Ms Fundakubi explained this was a challenge, because suppliers claimed to be VAT-registered vendors when they were not, and rendered invoices that included VAT that they were in fact not entitled to receive. This meant the Department would overpay these suppliers, as they were not entitled to the VAT portion of the amount.
Time constraints and lack of punctuality
Kgoshi S Thobejane (ANC) asked why the Department had decided to visit provinces only after failing to submit the required information to the AG. The regulatory exercise of accounting was predictable and DWA was required to obtain the information from provinces prior the auditing process. He asked who, in the provinces, withheld the information and what had been done with them.
Mr Balzer replied that the CFO’s unit had been doing the visits. The visits related to the new issue raised by the AG, where DWA had to go and verify documents not only at DWA’s own offices, but also accounts held by municipalities implementing projects on the Department’s behalf.
Ms Fundakubi added that the particular projects related to previous financial years. It would have been an oversight for the Department to fail to submit the documentation. However, this was also linked to earlier comment about the fragmentation of functions. At that time, the CFO office did not have all accountability on issues like regional bulk infrastructure. That had since changed, and it was having an impact on the financial statements.
Mr Thobejane interjected and asked why the information was not made available, at the required time, to the AG. This Department got a qualification because of the failure to honour the AG’s request. He asked if there was a reason to conduct information verification after the auditing process. He repeated his query as to what action was taken against the regional heads who failed to submit on time. These people were appointed to assist the DG in his work, and the Committee could not be told to wait for when another report was submitted, as that would be a matter for the Portfolio Committee.
Ms Fundakubi replied the reason was mainly time constraints.
Mr Thobejane said this response was unacceptable. Departments were expected to annually honour these audit requirements. Time constraints was not a good enough excuse, since the audits were, as stated before, regulatory and predictable. Departments were expected to perform their functions in twelve months, and he asked if there was any better reason than time constraints.
Mr Balzer replied that he conceded that DWA had failed to act correctly here. At the time, DWA was of the opinion that it had handled matters correctly, but the AG did not agree with how the Department handled the payments on the regional bulk. The investigation had to go back over the past eight financial years, and reconciliations were needed for a few years. This was quite an extensive exercise. He accepted that the issue was not dealt with adequately.
Mr Motha said the issue was not just the lack of documents, as they were there, but there was a problem when the accounts assumed that when payments were made on projects, the assets were also in place. There was a need to verify if indeed assets were acquired for payments effected.
The Chairperson interjected and wanted to know if the Department just dispensed money and looked the other way.
Mr Motha replied it was more a question of the cut-off times, because delivery was delayed and did not happen at the same time as payment. This issue was apparent since 2007 but the AG did not pick it up at that point, and, when it was finally picked up, the reconciliations had to be backdated.
Ms Mashiane commented that she was struggling to make sense of all the issues; it seemed that DWA did not have good institutional memory. She argued that asset management was not a new thing in government. She noted that the consultants, Kwinana and Associates, were paid from taxpayers’ money, and would have thought it left documents. Government work was ongoing, and it was unacceptable to claim that when one person or body left, the work had to start afresh.
Mr Balzer replied that he had addressed the issue of assets broadly in the previous responses. He said that the assets questions raised in relation to the audit of the regional bulk infrastructure programme spanned a number of years. DWA used municipalities to implement the projects and this was where the AG picked up on the issue. DWA then had to reconcile over a number of years. He assured the Committee that, according to the reports from the regions, there was no loss to the state, because the documentation extracted did confirm that the assets and expenditure matched, but it was up to the AG to confirm that.
Mr Ainslie commented that two weeks ago, the Committee requested an update on expenditure on consultants, in respect to a circular issued by the Accountant General (AccG). This information had not been received. He requested that the Department compare the Committee’s recommendations to what the AR contained. The Committee was also interested in some of the Special Investigations Unit (SIU) investigations that were ongoing. He called for the report.
Mr Ainslie commented that attendance of meetings by Audit Committee members should be clearly indicated in the report. He said he was concerned that the Audit Committee report on the main account contained the same information as in WTE account. This appeared to be a cut and paste exercise, and Members were aware it was one Department made up of two separate entities.
Mr Ainslie commented that the statistic of 94.7% South Africans having access to basic water was questionable. He asked how that figure was arrived at, and pointed out that in his constituency of Ndwedwe there was still a challenge around consumable water.
Mr Balzer replied that he would check the Committee’s resolutions. In relation to the SIU report, three senior officials from the Department had been dealt with, including a DG, a Deputy Director General and a CFO. Details on the progress would be handed to the Committee at the conclusion of the meeting.
Mr Motha added that Audit Committee attendance would also be reported. In relation to the question of the same information on both accounts, he noted that the Audit Committee had discussed this point and was considering setting up separate Audit Committees for each of the accounts. The Audit Committee would elaborate on issues specific to each, but he reminded Members that the governance structure of the entities was the same.
Liabilities and compliance
Dr P Rabie (DA) sought clarity on the claim by the AG that this office was not provided with adequate documentation on an issue involving expenditure of R66 million on liabilities.
Ms Fundakubi replied there were contingency liability documents that could not be found, because they had been submitted to the State Attorney. DWA had tried to find the documents but it was discovered that some of the recorded cases recorded as contingency liabilities were no longer applicable. DWA had reviewed the figures submitted for 2012/13. Some of the figures related to WTE and were forwarded to that entity, and old cases were reviewed.
The Chairperson said when state institutions exchanged information, the norm was to have copies available.
Ms Fundakubi replied that the Finance unit struggled to get documents from DWA’s Legal unit, and the unfortunate part was that latter failed to make copies.
The Chairperson commented this was worse than unfortunate, and indeed unacceptable, that a department sat with a query because such a simple thing as making copies was not done.
Dr Rabie agreed that DWA was a difficult portfolio to run, as it depended largely on agents. He sought clarity on the loans and the acknowledgments of debt from various entities, which the AG could not verify. He was alarmed at this statement and called for comment.
Mr Balzer replied some loans pre-dated the current democracy and were made to municipalities and irrigation boards. It was necessary to try to trace the information from the archives, but the filing of the documents was not always up to scratch.
The Chairperson interjected and asked what the solution was to that challenge.
Mr Balzer replied that the solution would be to raise the matter with NT, to try to write off the loans in the books. He cited the case of Amajuba Municipality, which inherited bulk infrastructure maintenance challenges that pre-existed its establishment. Until the matter was resolved with NT, the loans would always appear in the books.
The Chairperson asked NT to comment on the matter, saying that he believed departments had a right to write off debt. He wondered why this was lingering on.
Mr Beerson Baboojee, Manager, AccG’s Office, NT, replied he was not sure if the most recent developments had come to the attention of NT. He would follow up on this, but agreed with the Chairperson that departments could be permitted to write off certain debts themselves, whereas with others they were required to consult with NT.
The Chairperson noted that the debts pre-dated 1994. DWA had possibly been tardy on this, as the issue surely could have been addressed years back. He requested that the officials investigate and come back to the Committee on the matter.
Mr Balzer commented that he had something of a problem with simply writing off the debts, as that would have required that the money come out from DWA’s budget. The Department did not have the budget to write off. The amount of R60 million was required to off-set those loans.
Dr Rabie said there were several shortcomings at the Department. He asked for a general statement on how DWA would improve procurement procedures.
Mr Balzer replied that a number of issues had been put in place, and they would make a difference. DWA had secured a supplier’s database, which would improve the calibre of suppliers. The Department had also developed a service delivery model for contract management, which was also being strengthened through other changes. Within the DG’s office a project management unit (PMU) would be established. This unit would monitor both the implementation of projects, as well as procurement and management of the professional providers. A high level structure had been signed off by the Minister. Initially, DWA would be re-sourcing individuals within the PMU to take responsibility for certain activities while recruiting for additional staff continued. He was satisfied that the team would be able to address the challenge contract management in the Department going into the future.
Dr Rabie sought clarity on the suspension of the Director General, Mr Maxwell Sirenya, who was under investigation, as also on other senior officials who were also being investigated, and enquired about vacancies at the Department.
Mr Balzer replied that the Department tried to shorten the time it took to recruit, especially among the senior management staff. There still was natural attrition that took place, as, for instance, while appointments were being made, other staffers had resigned and retired. At the second line-management level, four Deputy Director posts, including the CFO for WTE, were vacant. Recruitment processes had been concluded but awaited the Cabinet process.
The Chairperson commented that, in the absence of the Minister, no questions could be asked about the post the Acting DG occupied. He asked, however, for how long the DG would remain suspended. The issue of permanency around the head of the Department needed to be dealt with speedily.
Mr Balzer said that, from the senior management staff, two financial directors were currently suspended and were being investigated. He said he did not have information on the status of the investigations.
Ms Mangena commented that there was particular concern that the DG had only been twelve months in the post. She commented that if the Minister was abroad, the Deputy Minister should have been available, and complained that the Deputy Minister had never been to this Committee.
Mr Ainslie commented that throughout the presentation, not a single word was uttered on the business process review (BPR) committee. He reminded Members that this was the committee established to deal with all the problems, including internal audit and skills development. He wanted to know who sat on this committee, and on what basis these people were paid, and pointed out that the Committee had eventually discovered, on page 196 of the AR, that they were mostly being paid well over R1 million. He asked for specific details of the payments, the work done, and the duration this committee was likely to serve.
Mr Balzer replied he might not have made specific references of the BPR, but initiatives and directives from the Minister. Some of the directives from the Minister emanated from the work of the BPR pertaining to improvements on audit, human resources, organisation structure, establishment of the PMU, and re-alignment of the water boards.
The Chairperson interjected and said the Department was still without a DG.
Mr Balzer said the BPR committee was not permanent, and its line of functioning included producing reports to the Minister. One such report was submitted in November 2012. The report was an analysis of the Department, in which five focus areas were identified.
Mr Ainslie persisted with the question on how the people were paid, and whether the high payments were monthly, annually or project-specific.
Mr Balzer replied that the payments were made on the basis of rates published by the Department of Public Service and Administration (DPSA). A rates schedule, as published by DPSA, could be provided to the Committee. He said the BPR committee was established in June 2011.
Mr Ainslie commented despite this committee’s existence, skill and internal audit at the Department were still problematic. He asked if the Department got any value for money and if the BPR had achieved anything.
Mr Balzer replied that there was value for money, and the results of the BPR’s work would be evident in the audit that was underway for the current financial year. During the preparation of the audit report the BPR was still busy with the assessment work.
Mr Ainslie voiced reservations abut the concerned individuals’ skills, and commented that, given the money paid, they ought to be highly skilled. He also asked why, if the BPR committee members were so skilled, DWA had also engaged three consulting firms to assist them, as reflected in the report.
Mr Balzer clarified that the firms were not doing consultancy work, but three members of the BPR committee had requested that payments be transferred to their business accounts, and that was why those names were captured in the AR, rather than names of individuals.
Mr Ainslie voiced his dissatisfaction, and said he would not object to the payments if value for money was derived. However, although the committee was established in June 2011, he could not see results.
The Chairperson suggested that at some point there would be a need for a session with the Minister, as that committee was a ministerial project. The Minister had indicated previously that she was ready to engage the Committee on the matter.
It was noted that the BPR committee members who requested that money be transferred to their companies’ accounts were Ms S Naidoo for In-Touch Training, Mr R Mulder for Rocalistep Ltd, and Mr T Modise for Village Leadership.
Ms Mashiane pointed out that Mr T Modise’s name also appeared on the list separately, with a different payment to that of his company.
Mr Balzer commented he would investigate the matter. The BPR committee was made up of thirteen members.
(Note: PMG ascertained, possibly as a result of the possible double-reflection of Mr T Modise, that the list in the report contained 14 names).
Mr N Singh (IFP) commented that it appeared that these members were advisors, as opposed to being BPR committee members. He suggested that a specific audit, with full terms of reference, be undertaken on the committee members.
The Chairperson asked the Committee Section to seek an engagement towards the end of June for the Committee to meet with the BPR committee members.
Mr Singh sought clarity on the claim that 92% of the targets were not completely met, and the kind of training provided for councillors. He asked if the training was provided for in direct payments, and if the kind of training could be clarified. He also wanted to know why records of the councillors trained were not provided to the AG.
Mr Balzer replied that as part of responsibilities under its Programme for Regional Management, DWA provided support to municipalities, and would act when the new councillors had been inducted, to train them on the provision of water services. The Department did not make payments on behalf of individual councillors as the cost of the training was covered by the councillors, and DWA only paid for the venue, and facilitators of the training. He said this was a robust training exercise.
Mr Singh commented that the AG was concerned that there was no evidence provided of people who had attended the course.
Mr Singh asked again on the comment that 92% of the planned targets were not completely achieved.
Mr Balzer replied the Department was continuously engaging the AG’s office on performance management. The AG used a binary system to measure performance so that if a department did not meet the target, even by half a percent, it was recorded as zero performance. DWA used the “traffic light” system, also used in the Presidency, to measure performance and for monitoring the twelve outcomes of government.
The Chairperson noted that the AG organised meeting with departments quarterly so that contentious issues were clarified. This kind of issue, including many others that might arise during the audit period, should be raised during the engagements. It was improper that departments should disagree with the AG when they came to meetings, as that did not assist at this level.
Mr Balzer replied that indeed engagements continually happened with the AG, but this was one of the areas on which DWA disagreed with the AG.
The Chairperson sarcastically commented that many inmates in prisons would also say that they disagreed with the judge.
Mr Motha said there was not much disagreement between management and the AG on performance information. The audit committee had advised that management had to develop the weighted scoring for performance. The AG normally measured people against own standards, but with weighted scoring it was possible to give a more detailed progress report. Currently, it looked as if the DWA had overall failed to meet 92% of targets, which masked the fact that it had in fact had achievements.
The Chairperson said this point would not be belaboured any further, as there would always be debate on what had been achieved and not achieved. The important fact was that departments needed to be realistic when setting targets, and those ought to be easy to define.
Mr Singh sought clarity on the involvement of the Acting CFO with the entity. He said this was important, as he would assist with questions on internal controls that did not make for a good reading. The AG had identified a number of non-compliance issues. He asked what was happening with internal controls, and how the situation at the WTE was being improved.
Mr Mpho Mofokeng, Acting CFO: WTE, DWA, replied that before being appointed as Acting CFO, he had, since November 2011, been Deputy CFO, and prior to that he had been part of the finance management unit. The entity had improved internal controls by putting improved systems in place. People were appointed in various areas of the financial management sphere, and policies and procedures had been developed to ensure there was better compliance.
Training had been conducted for people at the clusters. There had been challenges but there were improvements. DWA was in the process of demarcating the rules very clearly so that people on the main account did not have overlapping roles, and the reverse would also happen with people on the WTE. The intention was to have dedicated personnel focussed on the area of the WTE.
Mr Singh wanted to know if any of this work was outsourced, and whether the Audit Committee was satisfied that steps to improve the situation were in place.
Mr Motha replied that the Audit Committee had noted the steps taken to enhance internal controls system, but this was not yet at the level where the benefits would be realised. The Audit Committee would be monitoring the improvements.
Mr Balzer replied that before the current Acting CFO was appointed, the CFO had overseen both the main account and the WTE account. This was too much work and necessitated that extra hands be hired. DWA hired the people on contract, and they were not consultants. As a result of the daunting tasks, it was then decided that the financial units of the main account and the WTE should be headed by separate CFO with fully established units.
Surplus at WTE
Mr Singh commented it was good that WTE had apparently moved from a deficit to a surplus of over R2 million. However, according to the suspended DG, the surplus resulted from a reduction in operating expenditure and from increased revenue management payments of R753 million. However, he asked if this surplus could be justified, given the fact that many South Africans still went without water. He asked if the Committee could be furnished with a reasonable explanation on this surplus, so Members could explain it in turn to their constituencies.
Mr Mofokeng replied that the surplus resulted from the fact that WTE projects were not moving as fast as anticipated, and were often delayed. The entity now ensured that it was moving at the right pace with the current projects, and capital infrastructure expenditure was now at 92%.
The Chairperson wanted to know if this explanation was effectively admitting that what was described as a surplus was actually under expenditure.
Mr Mofokeng replied that this was so.
Mr Singh commented that it would be interesting to see the next annual report, and how it was reflected there, given what Mr Mofokeng had now conceded in so far as expenditure and the money the entity had were concerned. It would be difficult to explain this surplus to people who lacked water.
Mr Balzer explained that the two accounts were managed in a different way, and the WTE account was handled on accrual basis. He asked the CFO to elaborate.
Mr Mofokeng said that a check on revenue expenditure at WTE would show that depreciation played a major role. If a department did not have too many assets, there would definitely be a problem with issues of supply, because the more assets were procured, the larger was the depreciation figure. The moment that a department started spending money on capital expenditure, however, the surplus would be reduced.
Mr Singh said there was a need for this Committee to get an assurance that DWA was spending the money that NT allocated. In that year, NT had allocated more money, and that was one of the reasons given for the surplus. The Committee had to ensure that the Department spent the money it was allocated and that the money was not kept somewhere else and not used for the purpose it was intended – namely, to provide water to the people.
Mr Balzer commented that the WTE account did not operate fully on money appropriated by Parliament. Much of its operational funding was generated from the sale of water and the use of the assets. The transfers that came from NT would be voted for particular items of infrastructure and when the item was developed it went to the asset base of the WTE. The revenue generated through the sale of water was also used to maintain infrastructure.
Ms G Saal (ANC) commented that the Acting DG appeared to shift responsibilities to the CFOs, although he was, in terms of the PFMA, the accounting officer.
Ms Saal sought clarity on the funded posts that took even longer than twelve months to fill.
Mr Balzer replied he had noted the comment on the approach he adopted in answering questions but he had sought to rely on people who had the technical know-how in the financial field. He said that, unlike in the main account, the budget for funded posts in the WTE was retained as surplus and could be used for future posts, although with the main account, the money was returned to NT.
Ms Chiloane sought clarity on the maintenance of dams and transfer of assets.
Mr Balzer replied that maintenance of dams was, in terms of the Constitution, a local government competency and the budget for that function was with municipalities, through the Municipal Infrastructure Grant (MIG), and not DWA. Municipalities were responsible for water provision at local level. The Department only intervened when there were protests. To that end it had established a rapid response unit, where it used the resources of the Department to pass resources from water boards, and speedily resolved challenges.
Mr Balzer noted that the 94% water-access statistic was extracted from baseline information that came from the previous census. On a continuous basis, the information was updated on the statistics received from municipalities, with the information then being collected and extrapolated. The information related to the infrastructure, but what the statistics had raised was that although there was a 94% coverage of infrastructure, about 20% of that was not functional, either through vandalism or lack of adequate maintenance.
He indicated that NT would, from the next MTEF period, make a new grant available to cover the gap between the 94% and those that had never had services since the dawn of the new democracy. A significant portion of the grant was geared towards repair and maintenance work. The challenge would not be fixed overnight, but there was R600 million in the current year to fix the challenges. He reiterated that not every dam was administered by the Department. There were 5 000 dams in SA, but only half of those were administered by the Department. Some other dams were administered by municipalities.
The Chairperson said the engagement was indeed useful. Two things needed to be noted. Firstly, the devolution of responsibilities to municipalities to supply water meant that the quality of water that citizens got was largely dependent on the capacity of municipalities. There were different citizen-experiences of water access, depending on location, and this matter was worth consideration by the appropriate portfolio committee. The second issue was that the water boards were not educating people on how water got into communities. He said he was surprised that there was no civil education on the cost of processing water. This gap had to be closed, otherwise challenges around water would persist.
The Chairperson reminded the officials to forward all outstanding reports to Parliament in due course.
The meeting was adjourned.
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