Department of Water & Sanitation, Water Research Commission & Trans Caledon Tunnel Authority on their 2013/14 Annual reports

Water and Sanitation

15 October 2014
Chairperson: Mr M Johnson (ANC)
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Meeting Summary

The Department of Water and Sanitation, together with the Water Research Commission and Trans Caledon Tunnel Authority, appeared before the Portfolio Committee to present their annual reports for the 2013/14financial year.

The Department reported it had received a qualified audit for 2013/14, just like in the last two financial years. Audit findings had uncovered irregular expenditure, fruitless and wasteful expenditure and non-compliance with supply chain management practices.

The audit findings pointed out the Department did not have adequate systems in place to maintain records of additions to the buildings and other fixed structures for the current and previous years due to the status of the accounting records, which had resulted in additions being misstated by R204 million.  The National Treasury had recommended that an amount of R3.782 million in unauthorised expenditure be condoned, and that it be provided for in a finance bill as a direct charge against the National Revenue Fund.

Concerning the non-financial performance of the six programmes, the vacancy rate for scarce, critical, technical and professional skills had been reduced to 12%. 72 graduate trainees had been added to the trainee development programme. More graduate trainees had obtained professional registration and more opportunities had been made available, with line functions.

The construction of the Spring Grove Dam wall was complete and had been inaugurated by the President in 2013. The construction of the 15 km pipeline and pump station of the Water Transfer System, including Umgeni Water pipe, commenced on 21 October 2013. The refurbishment of the Mearns pipeline had been completed. 967 waste water treatment collector systems were assessed for compliance with effluent standards. The Green Drop Report was completed. 913 water treatment supply systems were assessed for compliance with drinking water quality standards.

The Trans Caledon Tunnel Authority stated that the Acid Mine Drainage Project had been delivered on time to ensure the Department fulfilled its objective of improving the protection of water resources and ensure their sustainability. All bulk water projects had been delivered when required to ensure the Department fulfilled its strategic objective of ensuring access to water supply for environmental and socio-economic use.

The entity had achieved an unqualified audit, without emphasis of matter. There were no instances of material non-compliance with specific matters in key applicable laws and regulations. On all projects it had carried out during the period of 2013/14, it had created a total of 2 777 jobs in all categories. The entity assists the Mangaung local municipality and Bloemwater, Sedibeng Water and Sisonke District Municipality.

The Water Research Commission indicated in its presentation that in this financial year, it had two main audit issues. The first was a matter of emphasis on the “smartness” of the performance indicators. The second was a qualification on trade and receivables. The entity was reported to have a strong balance sheet with no unfunded liabilities. The Water Research Levy was the main source of revenue for the entity and constituted 87% of its total revenue. The investment property was the major item on the balance sheet. It achieved an unqualified audit.

The Commission had achieved 87 new research projects addressing water management. It had also managed to develop and implement its international strategy. It had produced 80 technical briefs per completed project. It had supported 484 students, of which 401 were from the designated groups who were pursuing water research projects.

Members wanted to know if the Department was happy with its qualified audit opinion; asked for clarity on the employment of foreigners within the Department; enquired about money spent on consultants and why the Department was outsourcing IT services; wanted to find out about the effectiveness of the HIV/Aids programme of the Department; and asked for an explanation on frozen vacancies and the roles of senior managers within the Department.
 

Meeting report

Department of Water and Sanitation Presentation

Mr Trevor Balzer, Acting Director-General: Department of Water and Sanitation, focused his presentation on the non-financial performance of the six programmes of the Department. These covered administration, water sector management, water infrastructure management, regional implementation and support, water sector regulation, and international water cooperation.

Programme 1: Administration

The vacancy rate for scarce, critical, technical and professional skills had been reduced to 12%. 72 graduate trainees were added to the trainee development programme against a target of 50. Another 72 were placed into candidate positions or permanent positions. More graduate trainees obtained professional registration and more opportunities were made available, with line functions.

In its effort to contribute to the job creation programme of the government, the Department had created 20 885 job opportunities through the regional bulk infrastructure grant programme. More labour was employed to accelerate projects in Mpumalanga, the Northern Cape, North West and Eastern Cape. 1 759 jobs were created through the construction of water services projects.

Programme 2: Water Sector Management

The Mbombela Reconciliation Strategy had been developed, to ensure water security. Twelve strategies had been updated. 1 458 gauging sites were monitored for effective management of water resources. The training of personnel with rigorous follow-ups had resulted in improved uploading of information in the system.

Programme 3: Water Infrastructure Management

Regarding the project plan of phase 1 of the Mokolo River augmentation, the intermediate milestone of de-bottlenecking the existing pipeline at km 6,6 was achieved on 19 May 2013, and at km 10,3 was achieved on 29 October 2013. Water supply had been increased by 37% and 57% due to the de-bottlenecking. The construction of the Spring Grove Dam wall is complete and was inaugurated by the President in 2013. The construction of the 15 km pipeline and pump station of the Water Transfer System, including the Umgeni Water pipe, commenced on 21 October 2013. The refurbishment of the Mearns pipeline had been completed.

92% of work had been completed on the project plan of the Komati Water Supply Augmentation Project. The project is at a project close-out phase. The project was declared operational on 4 June 2013. 54% of work had been completed on the project plan of Mdloti River Development. The tender for civil works was re-advertised. The valuation of affected properties is in progress.

35 dam safety projects have been completed to meet dam safety regulations. Seasonal climate patterns had resulted in further delays in construction work, due to planning sessions. There has been 90% adherence to the demand as per bulk water supply agreements.

Programme 4: Regional Implementation and Support

40 996 households have been provided with basic water supply in the 24 priority district municipalities. A number of projects were completed during the fourth quarter. 2 204 rain water harvesting tanks were installed for food production. Project implementation could not be completed in Mpumalanga, North West and Limpopo due to the prolonged floods, as some areas were inaccessible for material delivery.

1 589 resource-poor farmers were provided with access to water. Additional applications received in Mpumalanga, Eastern Cape and Western Cape resulted in additional resource-poor farmers being supported.

A partnership agreement has been signed with the Departments of Cooperative Governance and Traditional Affairs and Human Settlements, in order to deal with service delivery challenges. The rapid response unit has been decentralised to all nine regions. Three regional bulk infrastructure projects were completed in the Eastern Cape, Free State and KwaZulu-Natal. Three wastewater treatment works have been completed in the North West, Northern Cape and Western Cape.

Programme 5: Water Sector Regulation

967 waste water treatment collector systems were assessed for compliance with effluent standards. This was due to enhanced internal capacity, as well as buy-in and improved communication with respective institutions. The Green Drop Report is completed. 913 water treatment supply systems were assessed for compliance with drinking water quality standards. This was due to enhanced internal capacity, as well as buy-in and improved communication with respective institutions.

Programme 6: International Water Cooperation

A number of strategic new partnerships have been negotiated with Ethiopia, Zimbabwe, Burundi and Sao Tome and Principe. A Memorandum of Understanding with Ethiopia is ready for signing. A fact-finding mission to Sao Tome and Principe was undertaken, and a declaration of intent on water and health sector interventions was signed.

Strategic partnerships have been signed with Cuba and Netherlands. Two financing agreements have been signed with the Dutch ORIO for an infrastructure grant for Elundini and uMgungundlovu.

Ms Nthabiseng Fundakubi, Chief Financial Officer (Main Account): Department of Water and Sanitation, told the Committee the Department has received a qualified audit for the 2013/14 financial year, just like in the past two financial years. Audit findings had uncovered irregular expenditure, fruitless and wasteful expenditure and non-compliance with supply chain management practices.

The audit findings pointed out the Department did not have adequate systems in place to maintain records of additions to the buildings and other fixed structures for the current and previous years due to the status of the accounting records, which had resulted in additions being misstated by R204 million.

Further, the findings stated the Department did not have adequate systems in place to maintain records of Regional Bulk Infrastructure Project (RBIG) commitments, where the procurement of goods and services have been approved or not contracted, but where no delivery has taken place at year end, which resulted in RBIG commitments being misstated by R576 million.

The findings also indicated there were inadequate systems of control in place to maintain records of accruals relating to RBIG, which resulted in limited assurance that all outstanding invoices for RBIG had been included in accruals.

The National Treasury recommended that the amount of R3.782 million in unauthorised expenditure be condoned and that it be provided for in a Finance Bill as a direct charge against the National Revenue Fund.

The under-spending of 25% on compensation of employees was attributed to the high vacancy rate. Municipalities were identified as owing the Department a lot of money. The Water Boards were not paying, because they were still owed by the municipalities. (Graphs and tables were shown to illustrate financial matters)

Lastly, in order to rectify some of the concerns of the audit, she said an action plan has been developed. Among other things, the plan looks at issues around the reporting system; it ensures that inputs into interim and annual financial statements are accompanied by supporting project reconciliations; it demands that municipalities submit all documents on awards to the Department on a monthly basis; and looks at the review of the current business processes, where supporting documents have to be attached when processing payments and address a situation where projects are abandoned by service providers.

Trans Caledon Tunnel Authority Presentation

Mr James Ndlovu, Chief Executive Officer: Trans Caledon Tunnel Authority, stated that the Acid Mine Drainage Project was delivered on time to ensure the Department fulfilled its objective of improving the protection of water resources and ensure their sustainability. All bulk water projects had been delivered when required to ensure the Department fulfils its strategic objective of ensuring access to water supply for environmental and socio-economic use.

The entity funded the following infrastructure projects:

  • Olifants River Water Resource Development Project (Phase 2C)
  • Metsi Bophelo Borehole Project
  • Mooi-Mgeni Transfer Scheme (Phases 1 & 2)
  • Mokolo Crocodile Water Augmentation Project (Phase 1)
  • Komati Water Supply Augmentation Project
  • Vaal River Eastern Sub-System Augmentation Project
  • Berg Water Project

Other entities and components with which it is in partnership include PetroSA (Mthombo Refinery), Transnet (Ngqurha Transhipment Hub and Manganese Rail upgrade), Kalagadi Mnganese (Manganese Mine & Sinter Plant), Eskom (electricity generation and transmission) and DWS & Eskom (Mzimvubu water project and linked hydropower).

It was noted that the Trans Caledon Tunnel Authority:

  • provides advisory work on the Water Trading Entity;
  • supports the Department in managing and implementing a solution for the treatment of Acid Mine Drainage;
  • assists the Mangaung Local Municipality and Bloemwater;
  • assists Sedibeng Water;
  • assists Sisonke District Municipality; and
  • assists the Presidential Coordinating Commission SIP-3 and SIP-18.

The entity has achieved an unqualified audit, without emphasis of matter. There were no instances of material non-compliance with specific matters in key applicable laws and regulations, as set out in the General Notice issued in terms of the Public Audit Act.

During the 2013/14 financial year the expenditure on transformation was as follows:

  • Enterprise development: R197 million;
  • Skills development: R12 million;
  • Preferential procurement: R447 million.

On all the projects it carried out during the 2013/14 period, it has created a total of 2 777 jobs in all categories. (Graphs and tables were shown to illustrate finances and gender breakdown)

Water Research Commission Presentation

Mr Dhesigan Naidoo, Chief Executive Officer: Water Research Commission, told the Committee that in this financial year his entity had two main audit issues. The first was a matter of emphasis on the “smartness” of the performance indicators. The second was a qualification on trade and receivables.

The entity was reported to have a strong balance sheet, with no unfunded liabilities. The Water Research Levy is the main source of revenue for the entity and constitutes 87% of its total revenue.  Leverage income constitutes 10% of total revenue. The investment property is the major item on the balance sheet. It achieved an unqualified audit. Operating expenses increased by 4% year on year. Research expenditure was standing at 73%. (Graphs and tables were shown to illustrate breakdown of finances)

The Water Research Commission has achieved 87 new research projects addressing water management. It has also managed to develop and implement its international strategy. It produced 80 technical briefs per completed project. It supported 484 students, of which 401 were from the designated groups who were pursuing water research projects.

In order to enhance its relevance locally and globally by coordinating strategic partnerships, the entity had signed two Memoranda of Understanding. It supported 24 small, medium and micro enterprises (SMMEs). In order to facilitate positive relationship with communities, it had completed 20 new projects, plus 20 existing ones.

In its effort to promote the uptake and communication of its research, the organisation had produced 25 manuals/guidelines and supporting material. It produced 12 policy and ministerial briefs, and conducted 46 knowledge-sharing events through public dialogues and workshops.

He concluded that the Commission had good results for the 2013/14 financial year and would continue to play an important role in the water sector by stimulating and funding research and enhancing knowledge and capacity building.

Discussion

Mr L Basson (DA) wanted clarity on issues the Office of the Auditor-General had raised regarding the roles of senior managers within the Department and the lack of experience because of people retiring, and vacancies being frozen by the Minister.

Mr Balzer explained that the issue around senior managers required the intervention of the Minister and Director-General. At this stage, the Department had an acting Director-General. Such issues would be given attention when a permanent Director-General had been appointed. On the issue of vacancies, he said the Department had committed itself to reduce the vacancies to an acceptable level. He indicated that the rest of the senior managers in the Department were new and there was a need to review the structure of the Department.

Mr D Mnguni (ANC) asked if the Department was happy with the qualified opinion.

Mr Balzer said they were not happy with the qualified audit. The Chief Financial Officer had indicated an action plan does exist to deal with the issues raised in the audit. The current senior managers had made a commitment to stick to plans they have made.

Mr M Galo (AIC) wanted clarity on the 71 water interventions that were made in North West, and asked if the Department had an internal audit committee so that it could implement its recommendations.

Mr Balzer, with regard to the 71 interventions in North West, indicated the details would be sent to the Committee because the Department was still working on the outcomes of these interventions. Concerning the internal audit committee, he said the Department had plans to establish the Internal Audit Control Unit within it.

Mr Mnguni asked for clarity on the issue of foreigners employed by the Department.

Mr Balzer said that the Department had 20 foreigners. They possess rare technical skills and some of them have become naturalised citizens. When non-South Africans are hired, there has to be a justification. 72 South Africans were in the process of being trained to take over those positions, and those of old engineers who are about to retire.

Mr T Makondo (ANC) expressed concern that there were 600 graduates in the field of accounting and engineering who were not getting internships or experiential training, yet 20 foreigners were getting work in a government department.

The Chairperson commented that the issue of foreign employees must be thoroughly understood. If the country does not have the required skills, foreigners must be employed. The Department should ensure people are trained on those areas so that they take over when the foreigners leave.

Mr Makondo wanted to know why the Department was using consultants for IT services to the tune of R2 billion, and what the costs were for other consultants.

Mr Balzer said that the Department was now looking at in-sourcing IT services and that a new Chief Information Officer would be looking into the matter. Unfortunately, the internal system could not meet the demands of the Department. It was not easy to attract specialists because they made more money in the private sector and outside of the country. As a result, the Department was thinking of getting engineers from Cuba to come do the work here. He further indicated that consultants are needed when there is no capacity internally, and the money spent on them during the 2013/14 financial year totalled R137 million.

Ms N Bilankulu (ANC) wanted to establish of the effectiveness of the HIV/Aids programme of the Department, and why it had not mentioned disability in its presentation.

Mr Balzer said that details of both the HIV/Aids programme and disability would be forwarded to the Committee. Disability was not omitted but was grouped with other issues only when equity details were compiled.

Mr Makondo asked the Water Research Commission about its regression to a qualified opinion on trade and receivables. The concerns were around non-compliance and not sticking to the 30-day payment terms.

Mr Naidoo told the Committee he was unhappy about the audit opinion. There was just not enough time to sit down with the Office of the Auditor-General to thrash out issues. The 30-day payment matter came mostly from universities, because they submitted their invoices with their research documents. Because the work of the entity goes through a peer review first, the invoices get sent back to them when they have to correct or re-work their documents.

The meeting was adjourned.

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