Department of Water Affairs on its 2013 Annual Report & input from Auditor-General; Budgetary Review and Recommendations Report

Meeting report

Ms Nthabiseng Fundakubi, DWA Acting Director General, on behalf of Mr Trevor Balzer, introduced the Department’s delegation. She was happy to announce all the Deputy Directors General were no longer acting but were fully appointed. The Chairperson commented that the entities were supposed to be present. He requested the Department provide the Committee with a report on why the entities were not present by the end of the day. Ms Fundakubi said she would provide the report but noted, as per he invitation, the Department was not required to bring the entities along.

Department Inputs to the Budgetary Review and Recommendations Review
Ms Fundakubi presented this in three parts – Main Account, Water Trading Entity and the entities. Beginning with an overview of the 2012/13 financial and non-financial performance of the Main Account, she looked at the alignment of the 2012/13 priority areas to government programmes and outcomes (see document).

The overview of Departmental non-financial performance showed that the Department had achieved 53% of its targets, had partially achieved 35% and not achieved 12%. This performance was fairly better than under the 2011/12 financial year overall.

The Chairperson wanted to know if these achievements were for the whole year. Ms Fundakubi replied that it was for the whole year of 2012/13.

Continuing with the presentation, an overview of the Department’s financial performance showed that, out of a budget of R8.9 billion, the Department managed to spend R8.6 billion which was 96%. The reasons for under-spending would be discussed. For the compensation of employees, there was under spending. For goods and services, of a budget of R1.3 billion, 98% was spent which amounted to a variance of R25 million. For the interest and rent on land, of a budget of R3.6, 96% was spent. For transfers and subsidies to municipalities, 100% of the allocation was spent. For the allocations not spent the Department had requested a roll-over from Treasury which they were allocated. The bulk of the roll-over was made out to Acid Mine Drainage (AMD) to the amount of R108 million.

She looked at the performance indicators for each programme:
Programme One: Administration: Achievements were that 82% of employee training interventions were conducted in line with the Work Place Skills Plan (6829 of 8329 employees), there was a reduction of the annual vacancy rate from 24.88% in 2011/12 to 10.7% in 2012/13, 61 graduate trainees were admitted to trainee development programmes and 66 graduate trainees of a targeted 35 were placed into candidate or permanent positions.

Challenges and interventions for this programme: The main challenge was in diversity management and that only 38% of the targeted 50% of women were employed and only 0.85% of the targeted 2% of people with disabilities were employed. The Department had embarked on a campaign intervention to encourage qualifying women to apply for specialist positions.

Programme Two: Water Sector Management: The achievements of these programmes were the finalisation of the National Water Resources Strategy Two, the completion of four reconciliation strategies in three towns and the Olifants River and strides were made in the development of operating rules for 25 of a targeted 12 stand alone schemes. Challenges during the year were that additional specialist studies were required thus delaying the completion of feasibility plans, labour unrests delayed the completion of resource quality objectives in the area of De Doorns and the lack of technical expertise delayed the maintenance of the Olifants River system. Interventions were made in these areas of challenge. The overall financial performance of this programme showed the Department had really improved in the spending where last year under spending amounted to R340 544 while this year it was only R1 067.

Programme Four: Regional Implementation and Support: The achievements made were the intergovernmental relationship with the departments of Cooperative Governance and Traditional Affairs and Human Settlements to accelerate service delivery on water issues, the rapid response unit was decentralised to all nine regions, three wastewater treatment works were completed in the North West, Northern Cape and the Western Cape and three regional bulk infrastructure projects were completed in the Eastern Cape, Free State and Kwazulu-Natal.

Challenges related to delays in completing some Regional Bulk Infrastructure Grant (RBIG) projects as technical problems were encountered that required additions to the exiting scope, the Sedibeng District Municipality wastewater bulk infrastructure amounted to R3, 856 billion which was split into three projects and was still underway and the OR Tambo District Municipality registered two projects at an estimated cost of R2.058 billion and the OR Tambo-Mthatha-King Sabata Dalidyebo Municipality sanitation project was to be completed by February 2018. Interventions were being made into these challenges.

The Chairperson asked her to clearly explain the waste water bulk infrastructure amounts on the Sedibeng District Municipality as this was too scientific for him to understand. Ms Fundakubi said these related to the three different projects listed. The manager in charge of Programme Four would be able to explain further on these challenges. The Chairperson asked if this money was spent or was still going to be spent. Ms Fundakubi noted it was still going to be spent.

The financial performance for Programme Four showed it was allocated the bulk of the budget. Of a budget of R4.9 billion, the programme managed to spend R4.7 billion with an under spending of R398.644 million. The reasons for under spending related to the regional bulk projects indicated earlier. The Department had requested a roll-over for these monies not spent in this programme.

Programme Five: Water Sector Regulations: Achievements were in the institutional options for the establishment of economic regulation, safety evaluations which were completed in 148 dams and there were joint inspections with the Department of Environmental Affairs (DEA) and the Department of Mineral Resources (DMR) which yielded compliance monitoring in 92 mines and 31 investigations for compliance.

Challenges pertained to appeals and objections received which delayed the completion of the compulsory licensing process in the targeted water management areas. Interventions would be done to engage with water users to negotiate an amicable solution.

Finances for this programme showed there was under spending of R13 million which had decreased from the under spending of the previous year of R21 million. Under spending was mainly because of vacant posts and delays in appointing service providers which meant some funding meant for operating expenditure could not be spent.

Programme Six: International Water Cooperation: Achievements were a strategic partnership agreement which was signed with Uganda and two financing agreements signed with the Dutch ORIO for infrastructure for Elundini and uMgungundlovu municipalities in KZN.

Finances for this programme showed there was under spending of R1.5 million which was mainly due to unfilled vacant posts.

Ms Fundakubi outlined some of the problems experienced that led to qualifications in the audit report. For the 2011/12 financial year there were nine qualifications which dropped to two in this financial year. Interventions and plans were put in place to ensure the Department moved out of qualifications. The qualifications related to agri-projects on their committed values in the books. The Department had contacted the municipalities, as the implementing agents, about the lack of documentation which hampered the work of the Auditor-General (AG). The second qualification related to the accrual of the 2011/12 financial year, the amount disclosed and the supporting documents submitted to the AG. The AG was not comfortable with the amount of control put into the accruals. The Department had subsequently strengthened the controls to ensure that reporting was done monthly on the accruals especially for the 30 day pay limit as stipulated in the PFMA. The LOGIS procurement system had also been reviewed. The third qualification related to irregular expenditure found in the different regions which admittedly there had been a lack of control with the irregular in the regions. The Department had since increased the awareness of the importance of irregular expenditure, placed more controls on how to manage procurement and ensuring the financial advisory committee was working and fully implemented. All irregular expenditure incurred had been referred to that committee while some had been condoned. In addition the reporting had been strengthened especially on the SCM requirements. Controls were also put in place to ensure that invoices were centralised in one place to ensure the payments were conducted the correct way by the compliance officers. The last qualification was for removable and tangible assets where the split of assets on the system was done incorrectly within municipalities. This situation had since been corrected.

The Chairperson wanted to know if corrections were made on the irregular expenditure on the Main Account because he did not understand clearly.

Ms Fundakubi explained they had responded to the irregular expenditure incurred. R869 million was the bulk for 2010/11 and related to RBIG. It was classified as irregular because of the misclassification of the schedule. The matter was referred to Treasury to condone the amount because it was in contravention of the Division of Revenue Act (DORA). The matter was still with Treasury for a legal opinion on whether the amount should be condoned by Treasury or Parliament. It was also decided to consult the AG who had classified the amount as irregular. The parties would be meeting. Of the R869 million, R4.2 million was condoned as per the Committee’s recommendation, R8.9 million was considered by the financial advisory committee and R12.6 million related to an over payment had already been recovered from the transfers. The Department was exerting more pressure to reverse the situation of the irregular expenditure.

Auditor-General South Africa (AGSA) input on DWA
Ms Alice Miller, AG Corporate Executive, addressed the comments on the Main Account noting they had seen a concerted effort by the Department to reverse the qualifications. To continue the trend this year would mean improving the monthly discipline to give management assurance first even before informing the AG.
For irregular expenditure, she explained the AG had selected a sample of procurement tenders for audit and would ask the Department to go back and review all their tenders. Once this was done another sample was selected. She noted the irregular expenditure of the Department had been significantly reduced as a result of tightening of controls which needed to be enhanced and tightened even further going forward.

On compliance, the Department had addressed some of the issues but there was some material non-compliance outstanding such as changes to the financial statement, supply-chain management and Human Resources (HR) issues relating to vacancies open for more than ten months and pay slips not certified in the regions. Attention needed to be given to promoting an environment where there was respect for laws and regulations and improving the transparency of the predetermined objectives. The AG had raised a number of findings on performance information as some targets were not specific and therefore not useful. However the AG had reviewed the setting of targets for next year so there should be a significant improvement. Last year the AG had found that 92% of the targets were not achieved and this number had been reduced significantly which spoke to improvement.

Ms Miller said that what came out in the management report were deficiencies in the IT controls which needed to be paid attention to ensure the general control environment was effective.

Concluding comments by the AGSA on DWA were concerns about vacancies especially at DDG level, which had been subsequently filled which they were happy about. However, other issues were capacity and skills especially in the regions. It was noted the Department had a skills development plan in place to up the skills but the AG would like to see a tightening of oversight to ensure that every person employed by DWA was skilled especially in financial matters and held accountable for non-compliance. Even though a disciplinary committee had been set up, it was found that consequences needed to be tightened up to see some action. The AG was cautiously optimistic that DWA would improve this year as they had already seen positive steps.

Discussion
The Chairperson asked the Office of the Auditor-General if it thought the Department would obtain a clean audit.

Ms Miller said it would definitely be unqualified next year if they kept up the energy but to get to a clean audit would take a number of years to change the culture of compliance in the Department- something which was not fixed over night but through monthly controls and consequences for people who did not adhere.

Mr F Rogers (DA) thought that some of the figures in the presentation were inaccurate specifically anomalies between the figures in the overall view of the Department and the actual programme breakdown. He noted that Water Infrastructure Management was missing from the programmes discussed. He agreed with the AG's comments on the need for SMART targets which ended up being a bad reflection on the Department. For technical posts, he wanted to know where the vacancies existed and where the under-expenditure existed. He questioned what would happen to the money not rolled-over - was his lost? He could not understand how the delay in the Department receiving invoices would lead to under expenditure as was explained in the water services project. He asked DWA to supply the Committee with a report of what the rapid response units hade done, where they were called out and what had been achieved because in his province they were useless and had done nothing to alleviate challenges in KZN.

Ms C Zikalala (IFP) sought clarity on the Department’s disciplinary committee as she would love to know how the committee was formed and the reason for it.

Mr S Huang (ANC) asked how the Department could improve on its financial issues in the future. He asked for the figures for bulk water infrastructure for 2011/12. He particularly wanted to know figures for the last financial year to compare them to the present year. He wanted to check what the Department had spent on bonuses. He was concerned the performance targets were not being achieved.

Ms B Dlomo (ANC) saw there was a challenge of lack of technical and specialist skills in the DWA but she did not hear what was being done to improve this. She asked what the DWA was doing to employ more disabled people.

Ms P Bhengu (ANC) agreed with the AG but she was very concerned about irregular expenditure and the reasons for this. She asked why certain posts remained vacant and what programmes would be put in place to encourage the employment of disabled people.

The Chairperson hoped the Department officials would help each other because this was a collective report.

Ms Fundakubi said unspent funds not approved for roll-over would be submitted to the National Revenue Fund. The analysts had found that irregular expenditure was mainly caused by non-compliance to supply chain management (SCM), in cases where procurement was done without proper delegation and in cases where payments were made outside the list agreement after expiration. The financial misconduct advisory committee was set up to strengthen controls and to ensure that steps were taken against all misconduct incurred by the officials.

Mr Mpho Mofokeng, CFO: Water Trading Entity (WTE), added the financial misconduct advisory committee was set up to bring discipline to the workplace and to deal with any financial misconduct or transgression. The committee set up mainly to ensure the transgressor was identified and the reasons for the transgression were outlined. The committee then established whether a formal or informal hearing should be done. A formal hearing meant the transgressor would face disciplinary charges while an informal hearing would mean a first warning. Since the committee was established, DWA had seen its fruits and it served as a deterrent.

Ms Teleni Ntabeni, DWA Director: R&S, explained the DWA had many vacancies in the core mostly relating to OSD. The DWA had sought the help of agencies but in some instances the people were just not there or the private sector was providing better salary options. The DWA was using the learning academy to groom young employees to fill the technical posts but this took time. DWA bursaries were awarded in the areas where the skills were needed. For the year under review the DWA did not have a proper plan for the employment of women in terms of targeted posts or an approved employment equity plan/policy. These documents were subsequently approved. The regions had committees looking at the issue and the DWA was working with the Department of Labour and other NGOs to make progress.

Posts which had been vacant for more than six months were abolished but in some instances the post could not be abolished because it was advertised. These were mostly with the OSD technical posts that the DWA struggled to fit.

Ms Fundakubi said Programme Three would be dealt with specifically under the presentation on the entities.

Ms Thandeka Mbassa, DWA DDG: Regions, gave background to the rapid response units (RRUs) noting they were meant to be a support mechanism for the municipalities mainly for the purpose of dealing with service delivery interruptions at municipal level. The RRUs were a core team of specialists in various aspects of the water sector. Initially the model for these units were centralised with the team based at the headquarters and when they were needed they were dispatched to the provinces. The model was reviewed to come up with a decentralised approach with specialists in each area. The aim was to include the water boards which had the needed expertise. The decentralised model had some problems in that some provinces were doing better than others because their water boards had capacity with this capacity which varied from province. In some cases there were potential conflict of interest between the water boards and RRUs. In a nutshell the model could work but the main challenge as to why the RRUs were not effective was lack of funding. In the last financial year the provinces had about R1.5 million which was hardly enough when looking at all the hotspots. The RRU was meant to go into a province, diagnose what the problem was and come up with a solution in order for the problem to be solved. Funding for refurbishment from other sources like the RBIG or MIG needed to be considered. She would provide reports as to what had happened up to date, what was the impact and what were the challenges faced by the current RRU.

Ms Babalwa Manyakanyaka, DWA Acting DG, responded about performance targets. She noted that for the year under review the DWA did not have SMART indicators as the AG had indicated and they did not have a technical indicator description to calculate how to get to a certain result. For the current 2013/14 financial year the DWA had conducted a smart analysis, included the technical indicator description to outline how to get to the desired results. It was implementing a monitoring and evaluation system which would calculate the indicators and most importantly outline the performance information with the financial aspects. The DWA was anticipating improving from the current 38% to a much higher figure of alignment and achievement of targets.

Mr Huang reiterated his request for a financial comparison of the DWA between the two financial years. How the DWA would improve their poor performance and, lastly, he was interested in the DWA’s performance bonus system for this financial year.

Ms Fundakubi outlined the page of the Annual Report which discussed the performance bonuses paid for the year 2012/13 was R14 million for all officials in the DWA. On the financial comparison between the two financial years and she would give this analysis later in the meeting.

On the accruals, when they were disclosed initially, an amount of R208 was disclosed by the DWA but the auditors found there were a number of accrual figures not disclosed which the DWA then updated by going back and checking all the payments not paid but due to be paid in that financial year. An amount of R336 was found to be misstated.

On improving the 38%, the DWA had strengthened their controls as a lack thereof was a big part of underperformance. They had already tightened oversight at the regional level by linking the financial and support staff of the regions directly to the competencies of head office. Filling of all the vacant posts and improving financial management were key areas to improve performance.

Mr Rogers wanted clarity on the anomalies between figures where budget and spending under Subprogramme 4 Regional Management and Support were not adding up. He had a follow up question on the value of the savings of the technical posts.

Ms Fundakubi apologised for the discrepancies noting the figure in the Annual Report was correct and what was in the presentation was an error.

Ms Ntabeni did not have that information on the savings of the technical vacancies. She only had the number of posts not the value.

The Chairperson wanted her to submit this information in writing by next week. He was concerned about under-spending because it delayed progress in service delivery and led to roll-overs. He wanted DWA to address the irregularities. They were not going to hide behind acting positions because they were permanent now for which he congratulated them but they were not new to the field.

Water Trading Entity Performance
Ms Zandile Mathe, DWA DDG: National Water Resources Infrastructure Branch (NWRIB), began with an overview of the WTE’s non-financial performance noting 61% of targets were achieved, 25% partially achieved and 14% not achieved.

Programme Three: Water Infrastructure Management: Achievements were that both the Duvha and Matla pipelines were successfully commissioned in February 2013 and seven projects on the rehabilitation of conveyance systems were completed.

Challenges and interventions of the entities: The De Hoop Dam industrial action led to delays but the DWA was addressing the labour issue through a long review of the conditions of construction workers. This would not be an easy task as these conditions had not been reviewed in ten years and there were many stakeholders to consult including the Department of Labour. Other challenges were the lack of maintenance contracts in clusters and delays in appointing professional service provider (PSP) for the Dam Safety Rehabilitation Programme (DSRP), the scope challenges in Hazelmere where the dam design was being challenged by engineers leading to delays in the process and there were challenges with the finalisation of the record of implementation decisions in Clanwilliam which was almost 80% complete.

The Chairperson asked about the progress of the Nandoni and Jozini Dams because Ms Zikalala was waiting very patiently to hear the progress of this dam.

Ms Zikalala added it was unfortunate that she heard nothing and had to tell the people in the community that nothing was happening.

Ms Mathe said the dams were commissioned a while ago with Jozini being the older of the two and what was remaining was the bulk distribution system which was being handled by RBIG so she could not answer on that. There were challenges with non-performance of contactors.

Ms Mbassa was no longer responsible for this programme and part of this branch so she could not answer on this.

The Chairperson wanted them to compile a written report on this and provide it next week.

Mr Mofokeng went through the statement of financial performance for the WTEs as at 31 March 2013 noting there had been an improvement of 11% from 2012 with regards to billing and 30% for expenditure. The big increases from 2012 were the impairment of financial assets and depreciation, amortisation and impairment.

The increase of 15% on the revenue from exchange transactions was because of improvement in the efficiency and accuracy of billing while the decrease of 6% on the revenue from non-exchange transactions was because of savings enforced by Treasury which led to the reduction on augmentation allocation of R117 million. The surplus for the financial year reflected a decline from R2.1 billion to R536 million due to increases in the impairment of financial assets affected by bad debts, increases in interest paid, management and facility fees in relation to Trans-Caledon Tunnel Authority  (TCTA) loans and increases in depreciation due to the review of useful life.

Looking at the revenue funded infrastructure development projects as at 31 March 2013, there was improvement on refurbishment

Mr Mofokeng said the cash collection report indicated improvement on cash in the bank due to efforts made in ensuring that long outstanding debts were cleared and collected. The WTE managed to collect R6.7 billion which was over what was billed by R100 million.

He skipped ahead to the audit outcomes and audit action plan noting the qualified audit with four issues. The biggest problems the AG had picked up were lack of control in tracking applications, long outstanding debtors and measurement of customers in terms of metering. The DWA had looked at this, engaged internally and with the AG to find means to resolve these problems. For tracking applications, short-term solutions had been put in place to ensure the current system was modified to register licences to pre-number and track the application through the various stages of the process. In the long term, an automated system was needed and a research analysis of gaps had already been done. The current debt collection service provider was in the process of conducting the relevant data purification, validation and verification of customer information by validating and verifying customer addresses, existence of the customers and verification of ownership. The WTE had obtained settlement agreements and debtor’s balances with all the categories of customers. Meetings were held with various customers and water boards had confirmed their debtors balances.

For the year to date billing, he explained the age analysis at August 2013 was R5.9 billion where private companies were the biggest debtors owing about R1.4 billion which was followed by municipalities owing R1.2 billion and the water boards owing about R1.5 billion. Where the DWA was now, there was a slight reduction in the amounts owed to the WTE and in the number of days in which they were paid. A lot of money had been recovered from bulk payers and individuals but the DWA was not doing well with municipalities where their debt was still growing as with water boards. In the past, irrigation and water user associations were not paying but now they were.

The age analysis had increased by 02%, company balances had decreased by 12%, individual's balances had decreased by 4%, water boards balances had increased by 5% and municipalities were an area of challenge.

Mr Mofokeng looked at debt management noting that there were improved cash collections for the year to date. Cash collected amounted to R2.9 billion - an increase of R607.3 million compared to the same period last year. There was improved customer response and the DWA was inundated with customer queries in terms of the top five companies including Eskom and Sasol. Summonses were in the process of being issued some of which he felt should be going to the municipalities.

Auditor-General South Africa (AGSA) input on WTE
Ms Miller said the qualified audit outcome was known by the DWA before it was announced especially that the issue of revenue management had not been fully addressed. She could not comment on the progress to date but noted it would be part of the AG's interim audit. She emphasised a clean audit could only be achieved once all three areas had been met: unqualified financial management, no non-compliance issues and no findings on performance information. There were a number of areas of non-compliance with the WTE: material adjustment to the financial statement; same internal audit team was used between the Main Account and the Water Trading Entity; disclosed irregular expenditure. She highlighted that irregular expenditure had increased from R43 million last year to R53 million this year. There were issues with HR in relation to vacancies and overtime because of the vacancies. The AG picked up that in the WTE a number of consultants were used to support the entity in the financial management sector but the controls on the matter overall had been tightened even though there were some questions around the monitoring of the end service. The AG was happy the WTE had reduced the use of consultants from the previous financial year.
On the non-financial performance of the WTE, she did not think a worse audit report could be obtained. The targets were not measurable or well defined but she was hopeful the issues would be resolved by next year. She cautioned against the 'over-recovery' as it might be due to deficiencies in the system unless it was old debt being recovered. It was dubious that companies would pay more than they needed to so this would need to be looked into to understand exactly what was driving that behaviour. In terms of timelines, she did not think the WTE would get an unqualified audit next year but they could the year after.

The Chairperson asked who was responsible for capacitating the internal auditors in terms of skills - was it the DWA themselves or the Office of the AG or was it outsourced?

Ms Miller answered that it was internal capacity which needed to be created and definitely not from the AG's Office. It could be outsourced or co-sourced and the responsibility rested with the accounting officer. The audit committee was there to guide the internal audit but AGSA could not appoint the internal audit.

The Chairperson understood that but was concerned about the skills. He asked if the DWA was outsourcing these skills.

Ms Fundakubi said it was the responsibility of the DWA. It had been a challenge in the past that the internal unit was servicing the Main Account and WTE. This had been addressed by havinh separate audit teams to deal with the WTE and the Main Account.

Discussion
Mr Huang appreciated the AGs input. He asked about the debt collecting company and asked for a list of all the municipalities paying over the time frame. Regarding the use of consultants, this was the first time he had heard the WTE was using consultants. He could not understand how the WTE’s operating costs could exceed its income and he asked how this relationship could be improved.

Ms Zikalala congratulated the DWA for dealing with the water boards as this issue was worrying her but the DWA could do more about the use of consultants. She was concerned about municipalities not paying and the fact that there were taps and pipes in the Eastern Cape, but with no water coming out. She noted many townships misused water- a matter which needed to be dealt with. She would love to hear about the pace of the mining water licences as she could not comprehend how people could use the water without applying for a licence. There were many terms which the DWA used which she did not understand like refurbishment, accrual accounting and non-compliance- she sought elaboration on the particular term “refurbishment” which was something the Members needed to know when engaging with the DWA and to comprehend.

Ms Wenger asked about the change of design of the Hazeldene dam - why did the design change, was the previous design inadequate and if so, at what cost did this change come? She asked where the additional funding came from in order to change the design. She was concerned about non-compliance in the internal audit, what consequences had been instituted and what would be done to rectify this. She asked if it was deliberate that huge amounts of overtime were paid given the large number of vacancies. This was compounded by high unemployment in SA, many graduates were sitting without jobs and the skills were there. She felt attention needed to be paid to this instead of paying out overtime or hiring consultants. She was not excited about the reduction of debt because it was absolutely minimal, although necessary, but not good enough. She was concerned that national government owed money –who was “national government” and what was this money for. She was concerned that the debt owed by district municipalities had increased and felt more intervention was needed in this area. She was not happy with the performance of the WTE.

Mr Rogers noted that a lot of what the Committee heard now was heard six months ago when they met with the WTE. He told the department that a product could not be charged for if it was not metered to know how much was being sold. This needed time frames to allow for monitoring. Then there were the licences. He he liked that DWA was looking at gazetting legislation with a view to charging illegal users. On the licensing, time frames were needed as was data cleansing for debtors to be put onto some sort of plan. He thought 6% reduction over six months for debtors was a good start but some sort of measurable target with time frames was needed going forward as a goal to work towards. He believed the WTE could be turned around if they focused on debtors, metering and licences. However he was concerned a lot of the data was incorrect as people could not be asked to reapply for licences if the data was not correct.

Ms Bhengu asked what the DWA was doing to ensure that people were getting water especially in the municipalities who were struggling with water service delivery. She wanted a written report on what the DWA was being done to address the municipalities which faced water service delivery protests.

Mr Huang questioned why there was an increase in overtime of 30% if people were working the same hours per day.

The Chairperson said the local municipalities were responsible for reticulation while the DWA was responsible for bulk water. He asked how the municipalities where using the equitable share grant in relation to water delivery with conditions.

Ms Fundakubi said there were conditions placed when funds were transferred to the municipalities. If the DWA was not satisfied the money would be withheld until the report was satisfactory. These conditions ensured the funds were used with the correct intentions.

Mr Mofokeng explained the service provider was charging them 12% for the work done but this 12% was only charged for debtors above 60 days.

The majority of summonses would, unfortunately, be issued to the municipalities. The summonses themselves would be issued through the DWA’s own attorneys.

Mr Mofokeng said it was true that people had applied for licences but already accessed water.

The money owed by national government needed to be sorted out between Mr Mofokeng (as the WTE) and Ms Fundakubi (as the Main Account) as this was actually from the national Water DWA.

He said there were time lines but they were not presented today. There was a tender process which was now closed and being evaluated and they believed they would get the company to begin installing meters in areas where they were supposed to be installed. There was a strategy in place to ensure there was measurement.

Mr Mofokeng said they were doing part of the data cleansing themselves. Some of the information was correct while in other cases there could be problems of communication in receiving messages which was why data cleansing was needed.

He knew for a fact that WTE had spent on overtime last year because of the unfilled posts. He noted there were many WTE posts advertised in the newspaper to fill the vacancies so there was less reliance on consultants and personnel working overtime.

Ms Mathe explained that Hazeldene was a very old dam and as a result the ground was no longer stable so the original design would not work or be continued. This was confirmed by a review panel who said the design was risky so another should be chosen.

It was true that taps were not running but the troika initiative with the Ministers of Water, CoGTA and Human Settlements had signed three MoUs with the Offices of the Premiers of Limpopo, Mpumalanga and the Free State to target certain areas to eradicate the bucket system and to deal with other important water issues. Although the WTE’s mandate was for bulk water infrastructure they were going beyond to work together to ensure that taps were running with water.

Ms Deborah Mochotlhi, DWA DDG: Planning and Information, said the DWA had a programme called Water Conservation and Demand Management which related to water use efficiency. Here they were assisting the municipalities with non-revenue water. There was the No Drop Programme which was similar to the Green and Blue Drop programmes to step up education and awareness through, for instance, pamphlets with tips on how to save water. This Friday the Deputy Minister would be awarding sector awards on water conservation and demand management where those who had done something special in this field would be given an award.

On licences, she said the National Water Act had five areas of useful water use and if one was using water outside of any of these five, one was automatically unlawful. The DWA was aware of unlawful water users but they were unable to deal with them decisively and quickly because of the delay in capacitating the regulation function of the DWA. This had recently been raised from Chief Director level to DDG level. There was a huge backlog for water use licences and there was improvement even though it was not entirely quashed. The issue of data hampered the issuing of licences which was being dealt with at the moment.

Ms Zikalala thanked the DWA for the list of abbreviations circulated.

Entities’ Non-Financial and Financial Performance
Ms Thoko Sigwaza, DWA Chief Director: Institutions, said she would only be briefing the Committee on the four entities which financial year coincided with the DWA. The financial year of the water boards only began on 1 July and their annual reports would only be submitted in December.

Trans Caledon Tunnel Authority (TCTA): It had received an unqualified audit. The main challenge was that the TCTA realised a deficit of R698 million. This was purely a function of a change in accounting entries. For the TCTA progress against directives, for the Lesotho Highlands Water Project (LHWP) Phase One, the debt was being repaid which was planned for completion in 2023. A critical project was Mooi Mgeni which was almost completed and by November water should be flowing in Mooi Mgeni. With the Acid Mine Drainage (AMD) the support of constructors had already been procured. She added TCTA did not work on any project unless a directive was issued by the Minister.

For the annual financial statement, this should be looked at in conjunction with the WTE's presentation on the financial performance in terms of the tariffs charged.

Water Research Commission (WRC): Achievements were that the entity received an unqualified audit, it received R164.8 million in water research levies and generated R19.7 million in leverage income and managed 242 active research projects. Further achievements were that the WRC published 151 research reports and products, 494 students were supported by the WRC funded projects of whom 207 were female and 293 students were from previously disadvantaged groups. 201 students were working towards a master’s degree and 142 toward PhD degrees. It initiated and supported a number of national capacity building initiatives including support to national and local government as well as the development of new training material for different levels of learners and for academic institutions.

Catchment Management Agencies (CMAs): The Breede-Overberg achievements were in the catchment management strategy where the draft strategy was gazetted for public comment, under the water resources planning processes, 257 land use planning and rezoning applications were assessed and the registration of water users had gained access to DWA’s WARMS system. For the Inkomati achievements, the monitoring of sites for water resource quality had increased, there were 18 reported incidents of pollution and a total of 14 notices were issued for non-compliance.

The reduction of the CMAs had been gazetted to nine. The water management areas of the exiting two CMAs would be aligned into larger CMAs. The Breede-Overberg would be realigned and incorporated with the Gouritz water management area into a larger Breede-Gouritz CMA. The Inkomati would be re-aligned and incorporated with the Usuthu water management area into a larger Inkomati-Usuthu CMA in KZN. There had been positive impact from this gazetted reduction and they were busy consolidating the comments on both CMAs.

For the CMAs financial performance, the Inkomati had a budget of R22 million of which R35 million was spent due to money that was kept in the account from the previous year. The Breede-Overberg had a budget of R19 million of which R23 million was spent. Both CMAs received unqualified audits with no matters of emphasis although there were concerns about the Breede-Overberg being in the “amber” zone. However both CMAs were in a positive cash situation.

Auditor-General South Africa (AGSA) input on TCTA, WRC, CMA
Ms Miller said the WRC had an unqualified audit with findings mainly relating to non-compliance and supply chain irregularities amounting to R1.7 million from using the incorrect point system. Although this was not much, it did cost the WRC a clean audit.
 
Mr Tshepo Shabangu, AG Senior Audit Manager, explained the major item which caused the regression was related to the research. The WRC reported approx. 400 students researching at the institutions but when the AG looked at the report it only included the names of the students and what they were studying so they could not obtain more information to verify if the target was achieved. This was discussed with the executive authorities at the WRC who had said they would work on it in the coming year.

Ms Miller spoke to the TCTA and Inkomati CMA noting they both had clean audits with no material findings on the financial and non-financial performance objectives. This did not mean there was nothing wrong but that the way it was reported was very transparent. Unfortunately the Breede-Overberg CMA had regressed - they were clean last year but had achieved an unqualified audit this year with findings because of supply chain management and irregular expenditure. This CMA had accepted certified copies of tax certificates when the regulation was an original tax certificate (and not a certified copy) needed to be obtained from vendors. The irregular expenditure must have been significant for the auditors to justify the regression for this CMA from a clean to unqualified audit.

On consultants, she clarified that in 2010/11 the amount spent on consultants was R1.2 billion while for this financial year it was R441 000 for both the DWA and the WTE which was a third of what was spent three years ago.

Discussion
Ms Wenger asked about the status quo on the Acid Mine Drainage (AMD) as there were alarming reports in the past week especially in the central basin. The Chairperson added that this was a very good question.

Ms Wenger asked about the reduction of the CMAs and if the amalgamation of Breede-Overberg had led to the regression where they had a clean audit before - was this a correct link to make?

Ms Sigwaza, DWA Chief Director: Institutions, replied that there was a long term intervention for AMD. However the contractors were on site and there was pumping of water for decanting in the central basin. They had received environmental approval for the standard of the water.

She did not think this was a correct assumption in the case of the Breede-Overberg CMA because it had not been merged yet. They would only see the impact of the amalgamation in the next financial year.

Ms Mochotlhi said they would come back or send a report on AMD as she did not want to say anything off the cuff. However what was going on there was with the involvement of TCTA. The last report was that water may not be discharged without treatment. It might not be meeting all the requirements but it was better than it used to be.

Ms Fundakubi said the written report on the Acid Mine Drainage would be sent along with the other information next week on 23 October.

Water Affairs Budgetary Review and Recommendations Report (BRRR)
The Chairperson read through the Report page by page and grammatical errors were corrected by the Members. Once this was complete, the Chairperson asked for a mover for the adoption of the Report.

Mr Rogers said he had concerns about immediate adoption. There were a number of fundamental changes to the Report and he was not in a position to adopt a Report when a number of changes still to be made to it. Secondly, he had an issue that this Report for adoption was printed long before they had had a chance to engage on it. He believed that he had raised pertinent issues today such as on under-expenditure, the targets that had not been achieved and the lack of financial controls yet these issues were being glossed over. He felt that what was discussed today should be included in the recommendations of the Committee otherwise the Report had been drafted for him to rubber stamp which he was uncomfortable with. He felt there was vast difference between DEA and DWA.

The Chairperson agreed with the Member’s points. He proposed the Report be adopted with the suggested amendments and with the additional information which Mr Rogers felt was left out. Mr Rogers could check before it was adopted by National Assembly. This was just a proposal so that no Members were oppressed.

Mr Rogers said he would raise all the points he had just made and pass them onto the Committee secretary so that it became part of the conclusion and resolutions because it had been raised in the Committee. He would then be happy to adopt the Report.

The Chairperson said if there were any other burning issues he could consult the Committee secretary and the Chairperson (Mr J De Lange).

Ms Fundakubi was happy with this.

Mr Rogers moved for adoption with amendments and Ms Zikalala seconded the motion. The BRRR Report was adopted with amendments.

The Chairperson thanked everyone including the DWA, the input from the Auditor-General which was very important for the work of the Committee and the secretary for all her work.

Mr Rogers thanked the Chairperson on behalf of the Committee for way in which the meeting was chaired.

Ms Fundakubi said the DWA would take up all the comments made at the meeting.

The meeting was adjourned.