Department of Water and Sanitation on its 2015/16 Annual Report, with Minister present

Meeting report

Briefing by Department of Water and Sanitation
Ms Nomvula Mokonyane, Minister of Water and Sanitation, greeted the Committee and said she was present with a delegation from the Department headed by the Acting Director General, Mr Sifiso Mkhize, who was also the Department’s fully appointed permanent Chief Financial Officer (CFO). Over the past two months, the Director General (DG) had resigned out of her own accord and the Department had then appointed the CFO as Acting DG. Last year this time the Department had an acting CFO. The Department had also since the DG’s resignation advertised the post and hoped to conclude the appointment process by the end of November 2016. Already shortlisting had been done and an interview panel had been put together constituted by the Minister and the Deputy Minister. She hoped that by December 2016 the post of DG would be filled.

The Minister acknowledged the work done by the previous DG and the current CFO, who had to complete the process. The information being presented did not only come from the Auditor General South Africa (AGSA) but also from the different parliamentary processes. The service delivery environment in which the 2015/16 budget had to operate was one with below normal rainfalls that led to socioeconomic problems and agricultural drought which was not something that was included in the Departments’ Annual Performance Plan (APP).

Minister Mokonyane said that the water sector across the value chain was affected negatively by a number of situations and amongst others saw districts and municipalities across eight of the nine provinces having drought declarations. In the middle of the 2015/16 financial year, the Department had to put together mitigating factors and interventions to implement numerous measures, which to a certain extent affected the achievement of the Strategic Outcome Oriented Goals (SOOGs). Given the fact that there was never a budget put aside for the drought, the Department had to take action regardless. It was at such a critical point now, that even Gauteng was affected by the drought and these issues were never in the APP. The budget was approved by Parliament for that period yet the Department had to bring in interventions to deal with situations. She explained there was also a process of dealing with regulatory functions that had to be incorporated into the regulations budget. The Department had to ring-fence catchment management agency functions within the Water Trading entity responsible for water resource management.  

The Minister highlighted that under the Administration programme, the budget had to be reprioritised. Looking at the challenges the Department had dealt with, a total of R20 million was reprioritised in Emergency Services to fund the Local Area Networking (LAN) equipment in Mpumalanga, Limpopo, Western Cape and the Pretoria offices. Another amount of R276 million was also reprioritised and allocated to strengthening community awareness programmes and capacity building in communities so that the Department was able to do interventions that limited possible waterborne diseases and any other outbreak that might have happened in South Africa. There was still value for money and the country had not yet reached a calamity where people and livestock were lost to proportions beyond the Department’s control.

On Water Infrastructure Development, reprioritisation amounted to R30 million that had to be reallocated to Tswaing in the North West for drought interventions and pollution control. That was one of the high areas affected by water contamination and weaknesses in Local Government that required government to intervene after the Provincial Government and municipalities there had presented them before the National Department. An amount of R800 million from the main account and R500 million from the Water Trading account was reallocated to the Giyani intervention which was an emergency. When the Department started, there was a problem with the Giyani Water Scheme project and the Department had to deal with it as an emergency. The Department was now busy with a close out report indicating work done thus far which determined what remained out of the scope of work that still needed to be done.

The Minister explained that the Department also made interventions to the amount of R197 million in the province of Kwazulu Natal.

In the 2014/15 financial year, National Treasury did not approve a rollover for the Department for an amount of R1.6 billion and as a result the Department absorbed its tasks and responsibilities into the current budget through a reprioritisation exercise. The Department indicated in the 2014/15 financial year’s Annual Report that it would not abandon tasks but go back and complete work that needed to be done.

The Minister highlighted that one of the issues that came out of the AGSA’s report, was the irregular expenditure on the work in the Mopani district. It was work done through the Lepelle Northern Water Board which was the Department’s own implementing agency that was issued with a directive in 2014. All administrative processes were carried out by the implementing agent and the DG was working closely with the Acting CEO to address the issues that has been raised by the AGSA. The Department had a team working with Lepelle attending to these particular issues.

On the role of implementing agencies, one of the things raised by the AGSA was that the Department had implementing agencies carrying out its duties such as the Water Boards and local authorities. Sometimes these implementing agents did not follow processes as prescribed by National Treasury and whatever wrongdoing from their side then became declared as irregular expenditure in the Department. The Department had also revised its Supply Chain Management (SCM) policies to ensure that implementing agents followed procurement processes when implementing departmental projects. Where there were allegations of irregularity or corruption, the Department would put together, as the PFMA required, a team to deal with all those allegations which the Department had since done.

The Minister highlighted some of the mega projects such as the raising of the Clanwilliams Dam.  There were constraints such as the delayed delivery of material and labour and contractual matters. Initially the project was supposed to be completed by the Construction Unit within the Department but in the process of creating capacity within the state and making sure there was value for money; the Department removed the Construction unit. There was a perception that capacity rested within that unit but that unit would also have gone out and sourced capacity which would have caused delays. She explained that it was best to go directly and get a service provider to do the work. It has been found that bringing in professionals created value for money because the cost associated tended to be lesser. It was such initiatives that the Department was trying to implement.

The Department focused on its control environment and the results were starting to show. Since 2009, this was the first time the Department had produced an unqualified audit opinion yet there were still things to be dealt with. Firstly, the Department started dealing with the Public Service Commission and the capacity and competency within the Department. Secondly, the Department reviewed its SCM policy on how it deals with implementing agencies and what was required by law when the Department transferred monies to municipalities. The Department was working together with the Commission led by the Presidency together with the Minister of Public Enterprises to review the SOE’s and SOOGs; the Water Boards were also part of this process. The institutional realignment process helped the Department to revisit all these kind of functions. To deal with irregularities, a review of the Water Act and Water Services Act was in process and once the Department was done with it by the first term 2017, all the issues of what was required by the Water Act against what the Water Services Act dictated would be clear. The Department had started talks with National Treasury on funding the value chain of the supply of water and sanitation because that was where the roles and responsibilities became a problem. In the 2016/17 financial year one of the things the Department would be focusing on strongly was the transformation of the water sector especially since water was a cross cutting issue and a catalyst towards inclusive growth through the implementation and maintenance of infrastructure, in growing the economy and broadening participation. The drought had been coming for the past two years, and some international experts said that South Africa had good interventions that made sure there was little to do with loss of life and waterborne diseases but what the Department was focusing now on issues of adaptation. South Africa also become high level member of a United Nations panel to show the world some of the interventions South Africa made as a country in the financial year, through the course of the drought as one of the ten member countries head of state who advised the world on how to deal with the drought.

Mr Mkhize presented the Departments’ non-financial information to the Committee. He explained that the Department had five programmes:

(1) Administration: 18 indicators set (11 fully achieved, 3 partially achieved, 4 not achieved)
(2) Water Planning and Information Management: 12 indicators set (4 fully achieved, 2 partially achieved, 6 not achieved)
(3)  Water Infrastructure Development:  21 indicators set (4 fully achieved, 7 partially achieved, 10 not achieved)
(4) Water and Sanitation Services: 5 indicators set (2 fully achieved, 1 partially achieved, 2 not achieved)
(5) Water Sector Regulation: 10 indicators set (4 fully achieved, 2 partially achieved, 4 not achieved)

Looking at financial information, on the statement of financial performance, he wanted to highlight three things. The first was the under-spending of R189 million in the 2015/16 financial year. In the previous financial year, the Department had R2 billion underspent. Of the R189 million, an amount of R107 million underspent was for the Compensation of Employees due to the moratorium that was implemented while the Department was reviewing its structure after having Sanitation incorporated as part of the Department. R77 million was not approved for the infrastructure project and sanitation services. With regards to fruitless and wasteful expenditure, the amount had increased from R28 million in 2014/15 to R87 million in 2015/16 due to identified possible duplicate payments made through the implementing agents. When the Department asked for all the supporting documents from implementing agents, it identified this and launched an investigation into this. An amount of R4.8 million was found to be for fraudulent payments of which R4.5 million was due by Department officials. The Department revised the delegations of authority and introduced the control over payments to prevent fraudulent expenditure. Disciplinary action had been taken against the officials involved.

Mr Mkhize highlighted that on the statement of financial position, irregular expenditure increased from R781 million to R2.4billion. An amount of R240 million originated from the Department and R2.2 billion from implementing agents. Of the R240 million from the Department, an amount of R160 million was due to a contract with Business Connection that was not advertised on the SETA website but all other procurement processes were followed. This was historical as it happened in the 2013/14 financial year. Irregular expenditure was mainly as a result of implementing agents not following proper procurement processes as prescribed by National Treasury. To curb this from reoccurring, the SCM policy was revised to include a clause requiring the implementing agent to use the Department’s procurement processes. Also a checklist had to be completed before transferring funds to implementing agents. He added that an amount of R3.8 million was for unauthorised expenditure following the processes in line with PFMA and a request for condonation was received favourably. R495 000 overspending occurred in the main division of the vote and R3.3 million was incurred due to expenditure not in accordance with the purpose of the vote.

Mr Mkhize gave an overview of commitments and accruals which caused the qualification in the 2014/15 financial year. Commitments were revised from R35 billion in the 2014/15 financial year to R12 billion in the 2015/16 financial year. The 2015/16 financial commitments were R9.4 billion and all the issues that contributed to the qualification in the last financial year were addressed. Similarly with accruals, the Department picked up a lot of prior errors and agreed with the AGSA to correct it. The amount was revised from R1.3 billion to R1.5 billion and in the current year under review the Department had R500 million in accruals declared. Regarding issues of advances and receivables advances of R38 million was for drought and other interventions, R36 million was for the Sedibeng Water Board and R1.5 million was for Rand Water interventions done on behalf of the Department. On receivables, R10.1 million included the R6.9 million for staff debts and R3 million for interdepartmental claims with other departments. Loans of R8.2 million pertained to loans advanced to irrigation and Water Boards.

There was an increase in the amount of bad debts written off from R59 000 reported in 2014/5 to R289 000 in 2015/16 as a result of writing off salary overpayments debts of deceased officials where all reasonable steps were taken to recover the debts and the recovery would cause undue financial hardship to the debtors dependents. It was not be in the interest of the Department to pursue debts where probabilities of recovery were doubtful. For example if the deceased was the breadwinner of a rural family who had no financial means to repay the debt. There was an increase in theft from zero in 2014/15 to R4.5 million in 2015/16 caused by fraudulent payments. Disciplinary action had been taken against officials involved.

Ms Mbali Manukuza, Acting CEO, Department of Water and Sanitation, gave an analysis of audit report matters per financial year. In the 2012/13 financial year the Department had qualification on eight areas mainly accruals, irregular expenditure and immovable tangible capital assets. In 2013/14 the Department had three qualifications namely on commitments, accruals and immovable tangible assets. In the 2014/15 financial year the number of qualifications dropped to only two with regards to commitments and accruals and in 2015/16 the Department had an unqualified audit opinion with a few findings. On the exact number of findings per financial year there had been a decrease from 176 findings in 2012/13 to 103 in 2015/16.
Other highlights for the Department included an improvement in audit report from qualified to unqualified audit opinion, and also under-spending from R2.2 billion to R189 million. Payment of suppliers within 30 days improved from 86 days in 2014/15 to 23 days in 2015/16. 

Discussion

The Chairperson asked whether it could be an issue of capacity that targets were set and money spent but targets not reached. Only 39% to 40% of targets were reached but all the money spent. At the end of the day the interest was on improving the lives of people for the better.

The Minister replied that the reasons for the Department not reaching its targets were because the Annual Performance Plan (APP) had its specific deliverables and linked to that continued to be multi-year projects and those projects continued to be implemented. Secondly, some projects were new and ready for implementation. Thirdly, some projects could actually be implemented with immediate effect but with some projects that came within the financial year, funds had to be reprioritised within the same programme. This had not been categorised as wasteful expenditure but irregular expenditure based on the need at the time and the intervention required. On the record, it reflected that things were done but not according to what was adopted in the APP. Yes, the reprioritisation of funds made an impact on the lives of people as it mitigated against the realities of drought.

Ms Zandile Mathe, Deputy Director General: Water Resource Infrastructure, Department of Water and Sanitation, added that the Department would not be taking on any new projects for the 2016/17 financial year. For the following financial year the Department would have to make sure that those projects that were delayed were completed. In some areas reticulation went ahead but the Department was lagging behind on bulk and in some areas the Department went ahead on bulk but reticulation was lagging behind. For example in Bizana there was a dam but reticulation estimated it would be done in the next 10 years. The focus was therefore on completing current projects. 

Mr Anil Singh, Deputy Director General: Regulation, Department of Water and Sanitation, added that the Department had to tighten up and ensure targets were reached on the non-financial side of performance.

Mr P Chauke (ANC) asked the Minister what was the implication of diverting funds and what was the position of government that there was a drought but no special budget put aside from National Treasury Had the Minister made an appeal to National Treasury? Secondly, with regards to water resource or commodity, current control in the country was that almost 67% of water resource went to irrigation, 27% to general use and 3% to mining. In the Committees last engagement with the mining sector it was very clear that Lonmin on its own had 11 plants in Rustenberg and was using more than 1 million megalitres per day whereas the community in Madibeng was using less than 12 megalitres per day. How did the Department balance this usage and who was in charge of water in South Africa? He wanted more information on the issue of the construction company used by the Department. Was the amount of R1.5 billion diverted as a result of irregular expenditure related to the drought and if it was related how was the Department going to comply with the PFMA?

The Minister replied where there was an emergency or disaster, funding did not come immediately upon proclamation of the disaster. There were legislative and policy matters to be considered first. What happened in the 2015/16 financial year was that the Department received R290 million for dissemination and R50 million for drought relief which was not enough therefore the Department had to go and look for funds within its budget. With regards to who controlled water and balancing it, in terms of the South African constitution, the Minister of Water and Sanitation was the custodian of water in South Africa. However, what had been a challenge in the country was the allocation of water though the issuing of licences. On water use rights, government on its own through legislation had given an impression that once people was given the right to use water, they became the custodians of water. Hence this resulted in the review of the Water Act and the Water Services Act. There were water agencies and water entities that dealt with the regulation and allocation of water and also cleaned the water and charged in terms of the tariffs so that the Department could recover its revenue. With regards to the construction unit, there was an independent process looking at the reorganisation of the Department and part of what it would be doing was to look at what was key for the sector in line with the National Development Plan,hence the restructuring of the Water Boards.

Ms Deborah Mochotlhi, Deputy Director General: Planning and Information, Department of Water and Sanitation, explained that the planning process started with the town studies where the Department assessed where the water levels were and then recon strategies were done. Following that, feasibility plans were done where the Department looked at other measures before infrastructure planning was started.
Infrastructure development consisted of dam construction which included a feasibility plan for the dam to investigate where the dam could be placed for optimal yield. Once the feasibility plan was completed it went to infrastructure development.

Mr Singh wanted to add to the question on who owned water. The 1956 Act dealt with the ownership of water and then the 1998 Act dealt with the custodianship of water which rested with the Minister. Through the water allocation reform programme the Department was trying to make water more accessible to those who lacked water and even people who had never had water before.

Mr LJ Basson (DA) noted that in the 2014/15 financial year, R1.6 billion was not rolled over and the Department had to work that into the new financial year. Despite the shortfall the Department still had R187 million not spent. This was alarming. Why did the Department then agree with National Treasury to cut back R827 million? He wanted the Department to explain how 37.8% of targets were achieved but 98.8% of its budget was spent.

The Minister said the Department had agreed with National Treasury on the issues of the rollover because the Department understood the reasons behind National Treasury’s view and once the Department was out of this unforeseen and poor management of the relations between implementing agents and the emergencies, it had to deal with the AGSA and could come back and see what had been done. The Department was reluctant to demand funds when it knew it was justified decision to do what National Treasury did.

Ms T Baker (DA) did not agree with the Minister that the drought was handled effectively. It should not be measured according to lives lost and lives not lost. When was the Department going to declare the drought as a national disaster? The Departments of Agriculture, of Water and Sanitation and of Health were not speaking to each other so government was not allowed to do what it had to do. She was concerned with the lack of monitoring and it was unacceptable that the amounts for irregular expenditure were so high due to SCM processes and fraud but what type of processes were in place to alert the Department that this was taking place. The Swartruggens Dam had been empty for months and there were monitoring systems on the dam that provided daily reports on dam levels. So when the dam was empty what could be done? How much money did the municipalities owe the Water Boards?

The Minister said that she had no authority to declare a disaster. Once the relevant authorities had collectively agreed, then a declaration could be made but for now measures had been put in place such as in Gauteng. Stringent measures were in place from October 2016 where it would get less 15% of its allocation of water because all municipalities have been unable to demonstrate any water saving. In other provinces the Department was refurbishing boreholes and supplying water containers. The Minister added that a submission had been made to Cabinet from the Department to express that municipalities have to pay the Water Boards because it took money to clean and supply the water therefore just as municipalities have been made to pay for electricity, they also have to pay for water.

Mr Singh addressed the question on how much money was owed to the Water Boards. He said it was currently at R3.1 billion with Sedibeng Water being owned R2 billion by Matjhabeng municipality. It was a cyclical problem that was entrenched in the principal of user pay. If the consumer paid the municipality the municipality could then pay the Water Boards.

Ms Mathe said with regard to the Swartruggens dam, the implementing agent tasked there was the Magalies Water and it admitted that it did not take the instruction as given by the Department. She had personally since acted on that and the plan was to connect to the Groot Marico dam. When asked why it was not done it was found that they had re-equipped the boreholes in the area. In particular areas the water table was too low so reinvesting in boreholes was a futile exercise. Therefore the Department was trying to resuscitate the project of the Groot Marico dam but the dam levels were also low. The Department had since identified a pipeline that was owned by a mine and was negotiating with that mine to join the pipeline that could then go to Swartruggens Water Treatment plant as a temporary measure because there were no prospect of rain and the water tables remained low. 

Ms M Khawula (EFF) expressed that oversight was not being done on the money spent as it was spent irregularly. She wanted to know why money was being sent back to National Treasury when there were people on the ground suffering. She wanted to know whether the officials involved with the fraudulent expenditure were charged or not and if they were they still employed. She then spoke about the oversight visit that was done by the Committee to Madibeng. In Madibeng there was no water and promises were made before the elections yet after the elections nothing happened. Another area visited by the Committee was Brits in the North West. There was a white gentleman who owned a butchery and he wasted water and pumped animal hide into the water system so what was the Department going to do about that? Also there were two water storage tanks for drought relief so that his business didn’t stop when the taps ran dry. She wanted to know whether he paid for this water. There were MEC’s who did not want to work with municipalities and this was affecting service delivery.

The Minister requested an oversight report from the Chairperson for the North West in order for her to raise the issue with the Premier and the MEC’s. It was the responsibility of the municipality involved to enforce the relevant by-laws.

Mr T Makondo (ANC) thanked the Department for its presentation. It was a very high level presentation. Certain recommendations were made by the AGSA on the Committee since there was a lack of oversight over the Department in respect of leadership issues therefore he was happy that the Minister had set timeframes for the appointment of the DG. Another issue related to the irregular expenditure was Lepalle Northern Water but the finding goes back to the Department. There were a number of departmental projects being implemented by Water Boards but how much was being spent by the Department on these implementing agents for emergency interventions? He felt it was important for the Committee to know the progress on projects implemented.

The Minister felt that even with the main contributor, which was Lepelle, the reason why the Department was awaiting a close out report and there had been independent assessment of those projects was because it wanted to close out the emergency component but there was more to be done in Giyani. With the irregular expenditure in Giyani the social impact on the quality of life on people could not be contested. There were some services rendered for the first time to communities which had not been rendered before. There had also been a creation of work opportunities and infrastructure supplied. What had not been done was compliance therefore the Department was dealing with Lepelle in that regard. She said that very little had been spent by Water Boards on emergencies other than on drought relief. She suggested that the Department supply the Committee with a full report on the interventions done as a result of the drought.

The Chairperson said he took a keen interest in the Department’s 2012/13 and 2013/14 budget specifically in the area of immovable tangible capital assets. His understanding of immovable was a building or structure and 2012/13 and 2013/14 related to a lack of supporting documents, overstatement and lack of systems to record additions. What could have been the issues and details relating to this and how has it been resolved in 2014/15 and 2015/16? Another concern was the irregular expenditure with implementing agents; when will this come to a stop as it was increasing. At a later stage perhaps a meeting could be scheduled with the irrigation boards as a lot of money was being dispersed that way.

The Minister replied that part of the reason why the Department had to look at the construction unit was as a result of the immovable assets. Part of the historical problem was the yellow fleet that the construction unit had bought as well as materials and other items but it could not be supported by any documentation. The Department then had to go out and trace these items that had to do with infrastructure that belonged to government. With regards to the question on when the irregular expenditure would end, the Minister felt that it was within the PFMA what it should be categorised as irregular. Therefore the Department was also reviewing its SCM policy so that it could subject its Water Boards to the SCM policy. However, irregularity was not across all areas but only in certain areas. She suggested that the Committee get together with COGTA and the Department of Finance and deal with some of these issues in a coordinated manner so this Committee could inform the Committee that exercised oversight on municipalities as well as the Committee that dealt with finances to have a view of how these issues were being dealt with.

Mr Singh said regarding the irrigation boards, the Department was focusing on the transformation of the boards by disestablishing some of them and consolidating some of them. In 2013 the Department took the policy decision to disestablish irrigation boards in favour of the associations. The Department would come and present that information to the Committee in the next opportunity. In the same policy of 2013, the Department also called for the establishment of catchment management agencies to deal with the integrated water resource management at local level. The work they were doing was very important with regards to pollution prevention.

Ms Khawula felt that the Minister needed to step in as “the ship was sinking”. The Committee supported her because her failure was a reflection of the Committee.

Ms Baker requested that the drought relief programme report the Minister said she would provide should also include the effectiveness of the water restrictions. When the Committee went to Lonmin it was told that Rand Water had not implemented any water restrictions against them. Also, all international reports suggested that the 2016/17 summer would be hotter than the 2015/16 summer so how was the Department planning to deal with the coming hot and dry weather as dam levels were already lower than what it was last year this time?

The Minister replied that the water restrictions had not been very effective hence the new restrictions in Gauteng. It had been found that bigger and highly urbanised municipalities have not been able to enforce by-laws. The Department would provide the Committee with a drought report.

Mr Basson told the Minister that the Vaal Dam was at 27.8% full. Was there any indication whether the Department was going to release water from the Sterkfontein Dam as it was in the region of 94% at the moment?

The Minister said that a lot of water in the Vaal Dam was wasted through evaporation because of the design of the dam. Scientists had informed her that it was so wide that when it was filled, one would actually lose more than what was poured into it. So it would be better to store water in the Sterkfontein dam. However the Department would make sure that the levels did not go below 25%. There were 14 dams that served the Vaal river system but that did not mean there was water in abundance because even the source in Lesotho had been affected.

Mr Chauke felt that the issue of legislation became very critical and he did not know when the Bill would be coming to the Committee. He wanted the Minister to clarify the relationship between COGTA and the Committee.

The Minister felt that it was needed for the departments to work in a coordinated manner as with the implementation of the Intergovernmental Relations Act which rested with the Department of COGTA. Possibly at some point it was necessary to have joint seatings with COGTA, Water and Sanitation and possibly also Human Settlements and Finance. 

Mr Makondo wanted to know more about the transfer by the Department to the Water Boards. He wanted to know the actual spending by the Department on these Water Boards on the projects it was implementing. The Department could prepare this information in writing and then submit it to the Committee.

Mr Mkhize replied that the Department would provide the Committee with a detailed report.

Mr Chauke highlighted that the point raised was very important as it went back to the Committee’s engagement with the AGSA. If current irregular expenditure was identified, it came because of a transfer to an implementing agent. How much of the amount that had been allocated to the Department had been transferred to other implementing agents? Moving forward the Department had to ensure that the money Water Boards were paying to implementing agents were audited according to the PFMA. According to the AGSA there was not enough capacity in the Environmental Research unit. The Department had to share what it had done to address this. What was the status in sanitation with regards to the bucket system?

Mr Mkhize said that there had been a number of challenges around the Bucket Eradication Programme (BEP). The current issue was a lack of funding. A request was sent to National Treasury to ask if the Department could move funds from another project into BEP and the request was declined because it was quite a significant amount that was needed to complete the project. The money that was initially allocated for this project was spent.

Mr Makondo wanted clarity on the answer Mr Mkhize provided as it showed in the AGSA report that the Department had actually underspent on this programme.

Ms Manukuza explained that on programme four which was Sanitation there was an under-expenditure of R55 million as a whole but the portion that was allocated for the BEP was R998 million and that entire amount was spent. The under spending of R55 million came from the Rural Households Infrastructure Grant and not from the BEP. The required amount to complete the BEP was currently R500 million and a request had been put to National Treasury regarding this.

Ms Baker wanted clarity on whether they were talking about the historical bucket system pre-1994. What was the initial target for this programme with regards to number of years?

Mr Andre Van Der Walt, Chief Director: Sanitation, Department of Water and Sanitation, replied that there were 24 000 buckets outstanding in total. Costing and guidelines have been done already and the Department would send the information to the Committee.

Mr Makondo asked with regards to the irregular expenditure in the report, did the Department disclose this amount or was it discovered by the AGSA?

Mr Mkhize said that the previous year the Department said it would look at the SCM processes, accruals and commitments as well as the irregular, fruitless and wasteful expenditure. These were issues that were identified by the Department itself so when the AGSA came, the Department rose these issues, some dating back five years as well as current contracts. The Department had identified how much had been paid on each contract and how much was still classified as a commitment and out of that how much was irregular expenditure.

Mr I Cebekhulu (IFP) wanted to know if there was coordination between the Department and the Department of Agriculture on the implementation of boreholes in order to prevent duplication because in some areas there were already boreholes whereas in others there were none.

The Chairperson felt that the amount of R2 billion which was owed by Matjhabeng to Sedibeng Water Board was a huge amount. Perhaps it could form part of the discussions on the vision 2030 focusing on unemployment, poverty and inequality. With regards to employment opportunities, government also formed part of the sector in the economy that employed people. It was a misconception that only the private sector employed people.

Mr Chauke asked for the internal audit committee from the Department to outline its interventions and operations.

Mr Jappie Du Plessis, Chairperson: Audit Committee, Department of Water and Sanitation, said the audit committee was approved on 1 April 2016 and had three members. The previous audit committee had seven members. The committee audit charter had since been reviewed and approved by the Minister. Included in the charter was the attendance of the audit committee. If an external member of the audit committee did not attend two consecutive meetings without a valid reason, the Minister could end the contract with that member. From the Department, four members were compulsory attendees. All members who did not attend as per the report included in the Departments annual report, were members from the previous group of seven members.

He explained one of the risks being audited by the committee was the implementation of projects. After each quarterly meeting a report was written to the Minister and a meeting was held at least twice a year with her. In the beginning the cooperation from management was tough until they got used to the new audit committee and the cooperation improved.  The challenge now was to sustain the unqualified audit opinion and move towards a “clean audit”. This depended on two issues which was the non-compliance of laws and regulation and no findings on predetermined objectives. With regards to the non-compliance on laws and regulations, the issue was on the quality of the quarterly financial statements and the final financial statements that was submitted to the AGSA where material misstatements were found. Therefore it would be monitored on a quarterly basis. Then on SCM irregular expenditure, there was no excuse why it could not amount to zero. As mentioned, predetermined objectives were also a problem at the Department and the audit committee would look at it now because it could impact on a clean audit. First was the APP; the AGSA also assisted the Department to ensure that the targets were smart. The problems were usefulness; targets had to be well-defined, verifiable, specific, measurable, time bound and relevant. The reliability of performance information had to be valid, accurate and complete.  The accuracy of performance reports were also a problem as well as the achievement of targets and material misstatements on the performance reports.

The focus for 2016/17 from the audit committee was to investigate the irregular expenditure especially at the implementing agents. For any findings of irregular expenditure the audit committee would ensure that it was investigated independently. In the public sector it was time examples were made of people who do not adhere to laws and regulation because the PFMA was very clear on misconduct. After irregular expenditure was investigated the Department had to condone that expenditure as it could not carry it forward for many years to come; financial statements had to be cleared. Investigate, write off, condone or recover were the options available to the Department. The audit committee would also look at repeat findings such as why the Department had the same occurrences of irregular expenditure year after year. Another concern for the audit committee was the vacancy of the DG post because it impacted the CFO since he was now the Acting DG.     

Ms Baker asked for regular interaction with the audit committee perhaps on a quarterly basis as part of risk management as well as progress reports. Monitoring and oversight had been lacking.

The Chairperson highlighted that in October 2015 the Department had said definitely by March 2016 all buckets would have been eradicated in the informal settlements and the Committee then suggested the date to be June 2016. It was now October 2016, a year later, and the same issue still existed. What new deadlines could the Department give the Committee for the eradication of the bucket system?

Mr van der Walt said that the Department could not give the Committee any new deadlines until the issue of funding was resolved.

Mr Chauke felt that the presentation from the internal audit committee was very encouraging and the issues highlighted related to those asked to the DG. The MoU between the Department and the implementing agencies should also be sent to the Committee. 

Mr Basson requested that the internal audit committee present its report and quarterly report to the Committee as well.

The Chairperson agreed and thanked the Department for its presentation.

The meeting was adjourned.