The Office of the Auditor General South Africa (AGSA) presented a report on the review of the 2017/18 Annual Performance Plan (APP) of the Department of Water and Sanitation (DWS). The report focused mainly on the significant programmes of the Department, and excluded the water boards and Section 4(3) audits.
The key findings showed that the targets were relevant and measurably aligned with the mandate of the Department, with one technical key indicator in Programme 3 which was not clear. This indicator had since been revised in the tabled APP. The budget review showed that 65% of the DWS’s budget went towards the provinces and water trading entities, with the remaining budget left to pay for compensation of employees, goods and services and payments for capital assets.
Members asked about the difference between what a private sector auditor did in comparison to an auditor from AGSA; the reporting format of the water boards, and when the reports would be available. They commented that if 65% of the budget went towards provinces and water boards, it was important to know which projects the money was spent on, to ensure proper accountability.
The way the AGSA reviewed the APP was queried, because it was not a complete picture of what actually happens. Projects were started, but the budget was not sufficient to cover all expenses in a given financial year. This meant that the next financial year’s budget was already spent, which affected that year’s programmes. Was there a difference between the main account and the water trading entity account? If so, who was responsible for both, and who was the accounting officer? It was important that in future, the Department was present to respond to these issues.
The report of the AGSA was quite general, and did not pin-point the specific areas which were ‘red flags’; the AGSA must give detailed reviews instead of just general reports. It was also important for the Committee to know what the assets of the DWS at both the national and provincial levels were. Who managed the water boards and water trading entities, and what were their qualifications? If the AGSA was not able to provide such information, who else should do it? Such reports were expected from the AGSA, because they were mandated to provide such information to ensure the smooth running of government departments
Presentation by Office of Auditor-General South Africa (AGSA)
Mr Stephen Kheleli, Senior Manager, AGSA, said that the annual performance plan (APP) of the Department of Water and Sanitation (DWS) had been reviewed, taking into consideration how it was aligned with the National Development Plan (NDP).
The audit outcomes over three financial years from 2013/14-2015/16 in the DWS portfolio showed that in the 2013/14 financial year, the entire portfolio had been qualified with findings. In both the 2014/15 and 2015/16 financial years, there had been an improvement, with 67% of the portfolio getting an unqualified report, with findings. The remaining 33% that had been qualified with findings was mainly due to lack of budget management processes, supply chain management and irregular and unauthorised expenditure.
The audit outcomes of Section 4(3) audits which were not audited by AGSA, showed that in the 2013/14 financial year, an outcome of 100% unqualified, with no findings, had been received. This had regressed in the 2014/15 and 2015/16 financial years, however. The audit outcomes for the Water Boards showed that Bushbuckridge, Pelladrift, Bloem, Umgeni, Mhlathuzi and Sedibeng had received unqualified audit outcomes, with no findings. Botshelo had audits outstanding and had later been integrated into Magalies Water. In the 2015/16 financial year, only 33% of the water boards had received unqualified audit outcomes, with no findings. The reasons for the regression were poor budget management processes, supply chain management, irregular expenditure and poor management.
The interim review report provided an early warning regarding concerns of measurability and relevance of planned indicators and targets identified. It did not entail the performance of detailed procedures, where underlying systems and supporting documentation were inspected to give assurance on the verifiability of indicators and targets. It was performed on a selection of significant programmes.
The review process involved assessing the process followed by the Department to prepare and submit the strategic plan and APP, and the measurability and relevance of final draft indicators. The findings had been communicated in the 2016/17 interim management report to enable changes to be made. The report showed that Programmes 2, 3 and 4 included indicators which were relevant to the programmes. The report further showed among its key findings that one target was not specific for the Department of Water and Sanitation, and that technical indicator descriptions included a formula which might affect measurability. The target in question in Programme 3 had already been revised in the tabled APP. The review had excluded water boards and Section 4(3) audits.
The budget analysis showed a 2% increase in the administration budget, a 25% decrease in water planning information management, a 4% decrease in water infrastructure development, and a 29% increase in water sector regulation. Transfers and subsidies took up 65.5% of the Department’s budget, which translated into roughly R8.1 billion. This left a remaining budget of R6.9 billion, which was shared among goods and services, compensation of employees and payments for capital assets. Some indirect grants had been moved to direct grants for the financial year, and this affected the accounting reporting processes. Supply Chain Management processes were a focus area within the portfolio, and water boards were now being audited by AGSA to ensure consistency. The AGSA had developed an improved audit methodology to allow engagements with accounting officers to ensure that the strategies put in place were insightful, relevant and had an impact.
The Chairperson asked for clarity on the difference between what a private sector auditor did in comparison to an auditor from AGSA.
Ms T Baker (DA) asked a question about the reporting format for water boards, and wanted to know when the reports would be available. If 65% of the budget went towards provinces and water boards, it was important to know which projects the money was spent on to ensure proper accountability.
Mr L Basson (DA) said that he was concerned about how the AGSA reviewed the APP, because it was not a complete picture of what actually happened. Projects were started but the budget was not sufficient to cover all the expenses in a given financial year. This meant that the next financial year’s budget was already spent, which affected that year’s programmes. Was there a difference between the main account and the Water Trading Entity account? If so, who was responsible for both, and who was the accounting officer?
Mr H Chauke (ANC) said that the issues raised by Mr Basson were relevant, because the Department had not responded sufficiently to these questions. It was important that in future the DWS was present to respond to these issues. The report of the AGSA was quite general, and had not pin-pointed the specific areas which were ‘red flags.’
Mr D Mnguni (ANC) said that it was important for the AGSA to give detailed reviews, instead of giving general reports. It was important for the Committee also to know what the assets of the Department at both the national and provincial level were, who managed the water boards and water trading entities, etc. If the AGSA was not able to provide such information, who else should do so? Such reports were expected from the AGSA because they were mandated to provide it, to ensure the smooth running of government departments.
Mr Kheleli responded by saying that the difference between private sector auditors and the AGSA was that private sector auditors had a choice of which audit system to use when auditing an entity, and they were appointed through a tender process which they had to bid for. The AGSA was mandated to be there, and took a conservative approach to auditing. It was also able to have engagements with experts, to ensure relevant audit outcomes without being threatened with the termination of contracts.
The main account and Water Trading Entity accounts were separate and headed by two different Chief Financial Officers, and the Director-General was the accounting officer for both of them.
The audit reports of the water boards would be available after the audit had been completed, and they would include information on the projects and the budgets allocated to them.
The AGSA had noted the concerns surrounding the Department’s assets, and would engage with the Committee on what exact information was required with respect to this, and for which financial years.
The Chairperson said that the AGSA was not in a position to respond to some of the questions raised by Members, as such information was with the Department. It was important that the Committee convened a meeting with the DWS and the officials responsible for implementing the Department’s programmes, to get clear answers. The water boards must also be invited to this meeting, and the delegates must be the officials who were involved in the day-to-day running of the boards. The Budget Vote Report would be considered after this meeting.
The meeting was adjourned.
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