Department of Water Affairs on its Annual Report for the 2013/14 financial year briefing
NCOP Health and Social Services
25 November 2014
Chairperson: Ms L Dlamini (ANC, Mpumalanga)
The Department of Water and Sanitation appeared before the Select Committee to present its annual report for the 2013/14 financial year.
The Department had received a qualified audit for 2013/14, just as 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 findings pointed out that the Department did not have adequate systems in place to maintain records of additions to buildings and other fixed structures for the current and previous years, due to the status of the accounting records. 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 Department’s 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 the Umgeni Water pipe, had commenced in October 2013. The refurbishment of the Mearns pipeline had been completed. 967 waste water treatment collector systems had been assessed for compliance with effluent standards. The Green Drop Report had been completed. 913 water treatment supply systems had been assessed for compliance with drinking water quality standards.
Members were not impressed with the absence from the meeting of all senior political officials from the Department -- the Minister, Deputy Minister and the Director General. Members felt that the Department was undermining the Committee. A proposal was made that a letter of grievance be sent to the Ministry and that another date be set up for a follow up meeting, with the political leaders within the Department present.
Members asked whether the managers in the department of finance were actually qualified to do the work they were doing. How long had they been serving in the department? Given the situation in the Department, how was the Department able to give guidance to municipalities? With regard to the international agreements the Department had entered into, how did they assist the people on the ground? To what extent did the Department make use of consultants, and how much did this cost? Where exactly were the three regional bulk infrastructure projects at OR Tambo? The Department had had a target of supporting 71 municipalities, but had managed to support only 61 -- what approach was the Department using to ensure that funds allocated were spent for the intended purposes?
Chairperson’s opening remarks
The Chairperson welcomed Members to the meeting, together with representatives from the Department of Water Affairs, who would be presenting the department’s Annual Report for the 2013/14 financial year. Members were asked to introduce themselves. She asked whether there was any official present who would be representing the Director-General.
Ms Nthabiseng Fundakubi, Chief Financial Officer, Department of Water and Sanitation, apologised for the absence of the Director General. A written apology had been forwarded to the Committee. The Director General could not attend due to other departmental commitments she had to attend to.
The Chairperson said Members were politicians and it was expected that the Minister, Deputy Minister or the Director General would be at the meeting. The Department was not doing well. For the past five years, the Department had been receiving qualifications from the Auditor General. Without the Minister, the Deputy Minister or the Director General, how valuable would the meeting be? Members were asked to advise.
Ms L Zwane (ANC, KwaZulu-Natal) said the Chairperson had every right to express concern around the absence of the political leadership from the Department. As much as the Director General had other departmental commitments, it would have been appropriate to give attention to appearing before the Committee, especially in the absence of the Minister and Deputy Minister. This was not acceptable. The impression given as a result was that the Select Committee was not being taken seriously. The Department knew about the Committee meeting well ahead of time and proper arrangements should have been made to ensure that the Director General was present at the meeting. As representatives of the people, Members should be accorded the respect they deserved. However, she suggested that the meeting continue regardless, because there were no more days for engagement, and the Committee would fall behind in its schedule. A letter should be written to the Minister to express Members’ discontent about honoring the appointment with the Select Committee.
Ms P Mququ (ANC, Eastern Cape) asked whether the Committee Secretary had received a letter from the Department stating who would be leading the delegation in the absence of the Director General. Had the Minister and Deputy Minister forwarded their apologies in writing?
The Chairperson asked how many Deputy Director Generals (DDGs) there were in the Department.
Ms Fundakubi said there were eight DDGs throughout the Department. However, some of the DDGs were attending another Committee meeting in Parliament, which was taking place at the same time as that of the Select Committee meeting.
The Chairperson asked how many DDGs were present at the meeting.
Ms Fundakubi said two DDGs were present and two were at the other Committee meeting, while one DDG was representing the Department in international affairs.
The Committee Secretary, Mr Pilate Gwebu said that an apology had been received from the Director General which indicated that there would be two senior officials leading the delegation from the Department in her absence. An apology had also been received from the Deputy Minister.
Ms Mququ asked that the Committee Secretary read out the letter from the Director General.
Mr Gwebu read out the written apology from the Director General.
Ms Mququ indicated that she had seen both the Director General and the Deputy Minister on television, as they had attended the breakfast briefing hosted by New Age. It was therefore clear that the most important commitment was attending the breakfast briefing, rather than attending the Committee meeting. The letters did not clearly indicate who would be leading the meeting from the delegation. She reiterated that the Department was undermining the Select Committee, and Members were not happy about this.
Ms T Mpambo-Sibhukwana (ANC, Western Cape) also expressed her dissatisfaction with the Department. She reiterated that the Minister and the Deputy Minister were indeed on Morning Live this morning. They had known about their commitment to attend the meeting with the Select Committee, but had chosen to attend the breakfast briefing instead. She asked whether the officials sent by the Department would be able to respond to all the questions posed by Members. She said there was clear undermining from the Department.
She asked where the Director General was. Was she also with the Minister and the Deputy Minister at the breakfast briefing?
Ms Fundakubi said she would not be able to answer that question, because she had not seen the Director General on television.
The Chairperson said Members needed to trust the officials on the information they would be presenting to the Committee, but that would be impossible if officials were hiding such minor details, as where the Director General was.
Ms Fundakubi said she would assume that the Director General was also at the New Age breakfast briefing, because no mention had been made to her about the DG’s whereabouts.
The Chairperson shared the same sentiments -- that the Committee was being undermined.
Ms T Mampuru (ANC, Limpopo) indicated that Members had left their constituencies the previous day in order to attend the briefing by the Department. Members wanted to see the Department execute its responsibilities to the Committee before the end of the current year. She suggested that the meeting be cancelled until such time that senior officials met with the Committee in Pretoria, before Christmas.
Ms Zwane said the situation was very difficult, because the Committee was now “attacking the messenger,” as the people who needed to feel the heat were not at the meeting. She had no problem with the meeting being postponed, but the question of time was one to be considered, given the tight schedule of the National Council of Provinces.
The Chairperson thanked Members for their contributions. She said the Department was a very important one, because people could not live without water. The majority of the protests which had taken place in the country -- about 90% of them -- were water-related. She acknowledged that attending the breakfast briefing was an important part of the work of the Department, because it was an opportunity for officials to engage the public. However, she questioned the value of the Committee meeting seeing that the senior political leadership in the Department was not present. The person who accounted to Parliament was the Minister. The qualifications the Department had been receiving from the Auditor General were worrisome, and inputs from the Minister and/or all of the DDGs were crucial. She suggested that the meeting proceed. She asked whether the officials from the Department who were present would be up to the task of responding to all Members’ questions.
Ms Fundakubi said she supported the proposal that the meeting be postponed, so that all relevant parties were present at the meeting.
Mr Mpho Mofokeng, Chief Financial Officer: Water Trading Entity, Department of Water and Sanitation said the meeting should proceed, and that all officials present would be able to respond to questions from Members. He acknowledged that it would have been nice to have had all senior officials present at the meeting.
The Chairperson said it was not a question of “being nice,” but the Minister was mandated to appear before Parliament. She suggested that the Committee accept the presentation from the Department. At the end of the presentation, the Committee might recommend meeting with the Department again. The Director General had been newly appointed and had started on the wrong foot by not attending the Committee’s first meeting with her.
Briefing by Department of Water Affairs on its Annual Report
Ms Babalwa Manyakanyaka, Chief Director: Corporate Planning, Department of Water and Sanitation, said the presentation would focus on the non-financial performance of the six programmes of the Department, as well as the financial performance. The Department’s six programmes 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 had been added to the trainee development programme against a target of 50. Another 72 had been placed in candidate positions or permanent positions. More graduate trainees had obtained professional registration and more opportunities had been 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 had been 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 had been 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 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 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 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 was at a project close-out phase. The project had been 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 had been re-advertised. The valuation of affected properties was in progress.
35 dam safety projects had been completed to meet dam safety regulations. Seasonal climate patterns had resulted in further delays in construction work, due to planning sessions. There had been 90% adherence to the demand, as per bulk water supply agreements.
Programme 4: Regional Implementation and Support
40 996 households had been provided with basic water supply in the 24 priority district municipalities. A number of projects had been completed during the fourth quarter. 2 204 rain water harvesting tanks had been 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 had been provided with access to water. Additional applications received in Mpumalanga, the Eastern Cape and Western Cape had resulted in additional resource-poor farmers being supported.
A partnership agreement had 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 had been decentralised to all nine regions. Three regional bulk infrastructure projects had been completed in the Eastern Cape, Free State and KwaZulu-Natal. Three wastewater treatment works had been completed in the North West, Northern Cape and Western Cape provinces.
Programme 5: Water Sector Regulation
967 waste water treatment collector systems had been 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 had been completed. 913 water treatment supply systems had been 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 had been negotiated with Ethiopia, Zimbabwe, Burundi and Sao Tome and Principe. A Memorandum of Understanding with Ethiopia was ready for signing. A fact-finding mission to Sao Tome and Principe had been undertaken, and a declaration of intent on water and health sector interventions had been signed.
Strategic partnerships had been signed with Cuba and Netherlands. Two financing agreements had been signed with the Dutch ORIO for an infrastructure grant for Elundini and uMgungundlovu.
Ms Fundakubi told the Committee the Department had received a qualified audit for the 2013/14 financial year, just as 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 had pointed out the Department did not have adequate systems in place to maintain records of additions to 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 had stated that 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 had been approved or not contracted, but where no delivery had taken place at year end, which had resulted in RBIG commitments being misstated by R576 million.
The findings had also indicated that there were inadequate systems of control in place to maintain records of accruals relating to RBIG, which had resulted in limited assurance that all outstanding invoices for RBIG had been included in accruals.
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.
The under-spending of 25% on the 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).
In order to rectify some of the concerns of the audit, an action plan had been developed. Among other things, the plan looked at issues around the reporting system; it ensured that inputs into interim and annual financial statements were accompanied by supporting project reconciliations; it demanded that municipalities submit all documents on awards to the Department on a monthly basis; and looked at the review of the current business processes, where supporting documents had to be attached when processing payments and addressed the situation where projects were abandoned by service providers.
The Chairperson thanked the Department for the presentation.
Ms Zwane said she hoped that the Department would commit itself to addressing the issues highlighted in the presentation, given the fact that the vacancy rates within top management had been attended to. In the Department’s financial report, the Auditor General had spoken to the audit outcomes, which were shocking. Were the managers in the department of finance actually qualified to do the work they were doing? How long had they been serving in the department? Given the situation in the Department, how was the Department able to give guidance to municipalities? She said there was a tendency within the Department to issue a tender and then retract it, before redesigning it and issuing it again. How did this come about, under what circumstances? With regard to the international agreements the Department had entered into, how did they assist the people on the ground?
Ms M Tlake (ANC, Free State) apologised for arriving late to the meeting. She reiterated the question around whether the Department was being run by qualified individuals because according to the Auditor General, all was not well within the Department. How much did the Department make use of consultants, and how much did this cost?
Ms Mpambo-Sibhukwana asked what had been some of the challenges experienced by the Department since merging the water and sanitation portfolios. She asked about the irrecoverable debt incurred by staff who had moved from the Department into the private sector. How would this money be recovered? With the emergence of the Department of Water and Sanitation, more monitoring was needed. What had the Department done to address the recent protests throughout the country as a result of the country’s water crisis? What progress had been made in linking the Department’s work with that of the Department of Health, an initiative which had come from the Committee recently?
Ms Mququ also spoke to the issue of consultants. She argued that in the OR Tambo municipality, there were contracts which were being awarded by the Department, but which did not work, and the majority of the work was being done by municipal workers who were being seriously underpaid. She said the Department was not hands-on in ensuring that the funds allocated were used for the work they were meant for. Where exactly were the three regional bulk infrastructure projects at OR Tambo? The procurement of pipes at OR Tambo municipality was another concern -- instead of replacing the old pipes with new ones, municipal officials had attempted to repair the old pipes at a cheaper cost.
Mr D Stock (ANC; Northern Cape) commended the Department for its high representation of women at senior management level throughout the Department, on both the political and administrative sides. With regard to support for the municipalities, the Department had a target of supporting 71 municipalities, but had managed to support only 61. What approach was the Department using to ensure that monies allocated were spent for the right purposes?
Ms Tlake asked about the Nandoni Dam. What was the progress at the dam seeing that there was a shortage of pipe networks to take water from the dam into the communities? She had visited the dam in 2009, and wanted to know what progress had been made since.
The Chairperson thanked Members for their inputs. The Auditor General had indicated that there were inadequate management systems within the Department and this had resulted in poor record-keeping involving billions of rands. This had earned the Department its qualification. She repeated the question of whether there was enough capacity within the Department. Did the Department have a master plan for resolving the issues around water in the country, both in the provision and in addressing the backlogs around water supply? What progress had the Department made with regard to water leakages? With regard to expenditure, the presentation had indicated that the Department had spent 99% of its budget, but there were still a number of outstanding projects. Did this mean that if the Department had implemented all its projects, this would have resulted in over-expenditure? The presentation had also indicated that the Department had over-achieved on its targets -- where had the money come from? Did the Department have a monitoring and evaluation unit? Did the Department have an internal audit unit? What were some of the things which the Department was doing differently from the previous years? To what extend were the Department’s entities monitored?
Ms Fundakubi thanked Members for their interaction with the presentation. She clarified that the sanitation report was still with the Department of Human Settlements. Task teams had been established jointly between the two departments in order to bring the function of sanitation back to Water Affairs. The process had been finalised and it had gone well. Sanitation had been allocated a budget of R1.1 billion, and this was now being transferred into the Department of Water and Sanitation.
With regard to the concerns which had been raised about financial staff within the Department, she said the report which the officials were presenting on, was a report for the entire Department. The Department did not have provincial status, and had only regional offices which were under the national Department. The regional offices were the implementing arms of the national office. Therefore, with regard to finance, she agreed that capacity within the Department was a challenge. The officials at the regional offices were performing functions which were dual -- one for the main account, and one for the Water Trading Entity (WTE). This meant that the Department was using two different systems. This had resulted in the issue of poor management, because in the regional offices there had been one person responsible for both functions. However, this had been addressed because the officials had been split -- those dedicated to the main account function, and those who were dedicated to the WTE. The process was ongoing.
With regard to the Department providing guidance to municipalities, she said that municipalities did not receive guidance from the Department of Water and Sanitation, but rather from the Department of Cooperative Governance and Traditional Affairs (Cogta). However, with the inter-governmental relations between national departments, the Department worked with Cogta in ensuring that support was given to municipalities. Municipalities were supported through the Municipal Water Infrastructure Grant, which had been started in 2012/2013. The grant was to address the backlog in dealing with water shortages in the villages. The grant was also responsible for reticulation in the areas where it was required. The Department also transferred funds through the water services’ operating subsidies, to address the infrastructure backlogs within municipalities.
With regard to the Department transferring funds and not monitoring, she said funds transferred from the Department were being monitored. As a result, where municipalities did not comply with the requirements, funds were withheld until the requirements were met.
On the question on how international agreements assisted people on the ground, she indicated that one of the Memorandums of Understanding (MoU) which had been signed was between the Department and Cuba. The Cubans had been recruited to address some of the technical shortages within the Department. On the ground, this translated to their resources and skills being put to use, especially in terms of engineering skills.
On the usage of consultants, she responded that the Department did make use of consultants to provide technical and specialised skills. The Department made use of the Business Process re-engineering Committee which had been appointed by the Minister, and the cost of the consultants for the 2013/14 financial year had been R501 million, the bulk of which was due to the Information Technology (IT) services, which were outsourced.
With regard to irrecoverable debt from staff, she indicated that those who had left the public sector had been traced and monies owed to the Department had been recovered. Fraudulent activities had not been uncovered by the Auditor-General, but by the Department’s finance staff. Disciplinary processes were currently underway, so no information could be provided on these yet.
The Department had taken up the recommendation to work with the Department of Health, and all stakeholders participated in monthly meetings.
With regard to the questions around OR Tambo and Alfred Nzo municipalities, she said the Department could not respond at this stage, but the Members’ concerns had been noted and would be taken into consideration. The Department had taken on the approach of having monthly meetings with municipalities and matters such as those raised by the Members would be picked up and addressed. The Department would send through the list of all the projects running at all municipalities throughout the country to the Committee.
With regard to inadequate management systems and poor record keeping within the Department, the Department had put in place internal controls to address some of the deficiencies which had been identified. The Department had since established an internal control unit, and the incumbent of the post had started in April 2014. The Department was therefore confident that internal control would improve, because this had been the main issue raised by the Auditor General.
Mr Mofokeng said the Department did not have enough skills in the past, but this had since been addressed. In his division, the Department had appointed two chartered accountants -- one was the Chief Director in Financial Accounting, while the other was the Chief Director in Management Accounting. The challenge the Department was experiencing was that there were serious skills shortages in the regions. Accrual accounting required a lot of training, and the Department was already embarking on this.
Ms Zwane asked about the alignment between the national department and the regions. Were they demarcated provincially, or where they aligned to the municipal districts?
Mr Mofokeng responded that the regions were aligned to the provinces. Each province had a regional office. Over and above this, there were clusters grouping different provinces.
On the re-tendering and the cancellation of tenders, he said tenders were cancelled when services were no longer needed or when the budget was insufficient, or when no people had responded to the bid. One immediate example of a tender which was cancelled was the Hazelmere Dam, where the tender had been canceled because of the budget had been exceeded. After consulting with the National Treasury, the Department had re-advertised the tender.
He agreed that the Department needed to “beef up” monitoring within the Department, especially in supporting municipalities financially. On the question of whether the Department had a master plan, he said the Department had various plans, not specifically a master plan, but this was something the Department was working on. He acknowledged that the Department was not strong enough in monitoring its public entities, and the Minister was working to ensure that the Department was addressing this.
Ms Manyakanyaka responded to the question on internal audits and monitoring and evaluation, and said this function was under-capacitated because it was undertaken by one unit. A dedicated monitoring and evaluation unit had since been established, but it was still in its infancy. The Director General was committed to capacitate and augment the unit so that all concerns could be addressed. The Department of Monitoring and Evaluation still needed to verify the unit, its plans and targets. With regard to over and under-achievement, she said this was another area which the Department was focusing on. Issues of under planning and diverting resources would also be addressed.
Ms Fundakubi said the Department had established an Institutional Oversight Unit which conducted the oversight over the Department’s entities. The unit was being strengthened.
The Chairperson thanked Members for their interaction with the presentation and the officials from the Department for the presentation. She said that the Committee would still write a letter to the Minister to indicate Members’ grievances with the Department, and to set up a date for another meeting where the Minister, Deputy Minister and/or the Director General would be present, hopefully before the end of the year.
The meeting was adjourned.
Dlamini, Ms L
Mampuru, Ms T
Mpambo-Sibhukwana, Ms T
Samka, Ms P
Stock, Mr D
Tlake, Ms MF
Zwane, Ms L
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