AGSA consolidated report on work of water boards

Meeting report

The Chairperson said the Committee would receive a presentation on the audited findings of all nine Water Boards in the country. Water Boards were established in terms of the Water Services Act 108 of 1997.

Prior to the presentation by the Auditor-General of South Africa (AGSA), the Committee adopted its minutes of 1 November without amendment.

AGSA consolidated report on Water Boards

Mr Andries Sekgetho, Business Unit Leader, AGSA, responsible for the water and sanitation portfolio, presented a review of the water boards’ performance against key service delivery objectives to understand better the challenges experienced in delivering on their service mandates. He reported on the boards' compliance with water quality standards; management of avoidable water losses; reliability of supply; increased access to services; and asset management.

He said that the overall financial health of the water boards had improved slightly. Concerns were noted on the time it took to collect money owed and also the time it took to pay creditors. The inability to collect money owed directly impacted the funds needed for future investments in infrastructure and also funds needed to operate effectively and efficiently.

Irregular expenditure had decreased by 41%, from R3.2 billion in 2019/20, to R1.9 billion in 2020-21. The top three contributors to the irregular expenditure incurred during the year were:

• Umgeni Water –R511million (39% of total expenditure, excluding employees cost)
• Rand Water –R301million (32% of total expenditure, excluding employees cost)
• Sedibeng Water –R272million (15% of total expenditure, excluding employees cost)

Fruitless and wasteful expenditure had increased by 12%, from R264 million (2019/20) to R296 million (2020-21). Seven of the nine water boards had reported fruitless and wasteful expenditure for 2020/21, with Sedibeng Water, Amatola Water, Umgeni Water and Lepelle Northern Water responsible for 99.6% (R295 million) of this amount. The individual breakdown was:

• Sedibeng Water – R268.34 million (interest and penalties)
• Amatola Water – R14.56 million (interest and penalties)
• Umgeni Water – R7.44million (interest of R1.1million, and overpayment for goods and services of R6.3million)
• Lepelle Northern Water – R4.37 million (interest and penalties).

AGSA had evaluated the root causes for internal control deficiencies identified in its audits for seven of the water boards (excluding Magalies Water and Overberg Water, which had received clean audits) and had reported the following  deficiencies in the water boards’ management reports:

• Inadequate preventative controls to prevent non-compliance with procurement legislation;
• Inadequate review and monitoring controls over the preparation and review of financial statements;
• Ineffective development, implementation and monitoring of audit action plans;
• Inadequate record management practices to ensure that information supporting the financial statements was readily available

Overall, the audit outcomes for 2020-21 remained unchanged from 2019-20.

 (Please consult attached document for details)

Discussion

Ms N Sihlwayi (ANC) asked about the root causes of the performance management problems. What was the view of the AG on this, and was this perhaps based on incorrect indicators and targets presented by the individual water boards? If this was the case, they would continue to have poor performance. Was such an assessment done, as some water boards had consecutive years of non-achievement, based on their targets? The Department should discuss this in its action plan and ensure the country did not have chlorine in its water.

The Overberg needed to relook at its microbiological risk within its action plan and look at how best to reduce this risk. Municipalities were the main customers of water boards, and asked if their supplies were reliable. What were the root causes of the asset management challenges? The intervention fund needed to be used, and pre-planning must be done. The lack of achievement on social issues which were still outstanding, had caused a lack of performance, and had to be included in the action plans. She had heard that there was an AG official working with the Department of Water and Sanitation (DWS), which excited her as everyone should work towards a better action plan. The payment of creditors seemed to be a challenge -- was it 34 or 341 days? -- and this needed to be discussed, as it was a policy decision affecting all levels of government. The Amathole Water Board's audit outcomes and action plans needed to be improved, as they had consistently not improved.

Mr Sekgetho responded that when reflecting on water losses, the AGSA was reflecting only on the reliability of the supply, in line with the water board’s responsibilities, and did not focus on the reticulation work at the municipal level.

A member of the AGSA delegation told the Committee that the average time to settle creditors' invoices was 341 days.

Mr G Hendricks (Al Jama-ah) said the AGSA reports got better year after year, and it was very encouraging to see how they highlighted areas for improvement and how they tried to save taxpayers' money. The Committee was aware that while the AG's reports got better, corruption increased year after year. Looting increased year after year, and they were aware that Minister Sisulu had sent nearly 100 cases to the National Prosecuting Authority (NPA) for prosecution. He was not sure what the present Minister would do, but was sure he could see that corruption and looting had continued. The corruption and looting involved the person who did the water testing, right up to the most senior persons in the DWS. The consultants for the water boards were also a part of this.

He asked if it was not time for the AG to put more bite into its reports, and report back to the Portfolio Committee on the anomalies, corruption and looting. He would have expected tremendous progress from the leaders of the presidency to end corruption, and that the Auditor General would give more hope to the country. He expected that there would be more oversight and vigilance on the money provided by the fiscus for water. If there was no corruption and looting, one would be able to assist more and more people to have access to water. He emphasised that he was not impressed with the work of the AG. Professionally it could not be faulted, but if it did not make an impact and provide more people with water, then the mandate was not being carried out. How would the AG ensure that what they brought to the nation benefited the country? Parliament paid a lot of money to run an AG office, and it was time they got value for their money.

Ms M Mohlala (EFF) said, in most instances, municipalities were blamed for the water quality and water losses. She asked if the water board did not have a responsibility to report remedial challenges to the DWS who were ultimately responsible for the entire water chain, more specifically as a sector leader and regulator. Did they not think more concerned citizens would go to court to take over infrastructure operations for water supply? In the North West, in Swartruggens and Koster, there had been an improvement when the community took over. When Magalies took over in Koster, water supply had fallen short. Sedibeng had set a target not to have any interrupted water supply, so it should look at why this was happening. They were always saying it was due to ageing infrastructure. They knew this was the issue, so why set a target of zero interruption? Theft and burst water pipes were unforeseen. It seemed as if targets were just set without evaluating whether the system could handle this.

Mr Sekgetho said he was pleased that the Committee understood what the presentation was meant to convey. He said if infrastructure composition was understood, then zero interruptions would take place. Risk management processes must be done at the beginning of the year to understand the strategic risks that need to be mitigated.

On the takeover of water supply, there were specific role players, and one really needed to look at roles and responsibilities as well as the signed performance contracts. One should start there before one considers legal action and the takeover of processes. The Department also had a role to play in assisting concerning water quality and water losses. The information on what implementers were grappling with was not always received by the Department, which hindered their ability to implement appropriate action plans. There had not been a Green Drop report when they started talking to the new Minister. They needed to understand which water boards were not complying to assist them.

Mr A Tseki (ANC) said at the beginning of the presentation, the presenter had identified serial incidents or repetitive incidents, and the Committee was struggling to identify this. Could the AG provide some clarity on how the Committee could be strengthened to force the Department to implement consequence management?

Mr Sekgetho said the Committee should continue its engagements with the water boards so that they themselves could account to Parliament. The report should serve as a basis to highlight the challenges in the various areas. The Committee should ask what the real root causes of the issues were.

With consequence management, it was found that entities must look at how to reconcile according to each transgression. At some stage, the DWS dealt with copious amounts of consequence management. It then went to the Standing Committee on Public Accounts (SCOPA) to issue letters to those who had transgressed. SCOPA said that the same letters had been given to those who had incurred R5 000 or R5 billion worth of irregular expenditure, which showed that it had not applied itself as the Accounting Authority to properly investigate the root causes to remedy the situation and implement proper remedial action. Senior management and the institutional culture should be changed through this. The Committee must be relentless in its pursuit of oversight and must call the entities back to account.

The AG’s office had committed to ensuring that its work reflected the lived realities of the citizens on the ground. It would elevate key issues and work on getting role players in the accountability ecosystem to play their part. Amendments to the Public Audit Act (PAA) were enacted a few years ago. A material irregularity had been identified at one of the water boards. They investigated and assessed it to ensure that they met the material irregularity principle, and in this way, they could enforce the closing of the gaps identified. This was a legal process, so they had to get the facts right. Unfortunately, they were not police officers and could not arrest people. If they found from their mandated work that there were irregularities, they would refer this to the Public Protector, the Directorate for Priority Crime Investigation (HAWKS), or the Special Investigating Unit (SIU).

Even though the targets and indicators were SMART (Specific, Measurable, Achievable, Relevant and Time-bound) according to the National Treasury, entities must look at whether they contribute to achieving their mandate and strategic plan. The Rand Water Board had said they had had zero planned interruptions, but whether they were planned or not, the impact on the citizen was the same.

The Chairperson said the Committee should note that it was 2022 and the Minister had committed some time during the year to review the water boards and ensure that they were functioning optimally. Sedibeng had issues of financial viability, and the presentation confirmed this. So far, the Magalies and Overberg Water Boards were doing well. She said the Committee should continue its oversight on the struggling water boards.

Mr Sekgetho said that part of the consultation involved in delivering the report, was to request high level feedback from the Committee. The Committee had made commitments, and these had been duly received, but at the time of tabling the report, this could not be reflected. A comprehensive action plan had been received from the Accounting Officer, Dr Sean Phillips, on the identified weaknesses and planned interventions. The Minister and Director-General (DG) had remained very accessible in preparing the report, and there had been a lot of engagement on the outcomes with various stakeholders.

He said this was a landmark report, in the sense that there had never been a situation where a dedicated reflection on the water boards had been given. Sometimes, it could be included in the Local Government General Report, which also referred to the Municipal Finance Management Act (MFMA), which was why there would always be the conundrum of the missing middle. There were value chains and various positions which needed to be checked. A high level report would be provided sometime in the near future to consolidate all of these reports.

Follow-up questions

The Chairperson asked if Members had any follow-up questions.

She asked about the scarcity of chlorine in the country.

Mr Sekgetho replied that this question should be directed to the DWS.

Ms Thoko Sigwaza, Chief Director: Institutional Oversight, DWS, said interventions had been made where water boards had shared their chlorine supplies. At the time, there had been a huge demand for chlorine, leading to the shortage. The DWS encouraged water boards to collaborate and share their resources.

The Chairperson asked where the chlorine was manufactured.

Ms Sigwaza said a large portion was manufactured outside of the country, and at some point, the water boards had wanted to build manufacturing capacity, but this would have required specialised skills and collaboration with small manufacturers and companies, and was still being discussed.

Ms Sihlwayi asked about the procedure following the inputs made by the Committee.

The Chairperson said the interaction was only to interact with the AG, but she would allow Ms Sigwaza to respond. The Committee should, at a later stage, still raise the issues with the Department and the water boards.

Ms Sigwaza said she could respond generally, and welcomed the report of the AG, as it was an independent analysis. The report raised critical issues and confirmed the Department's concerns regarding the water boards. Their cash flows had to be closely monitored. Their indicators with the water boards had grown to 26, and quarterly reporting was critical for this. If municipal business did not go well, it affected the entire value chain. The Committee’s support was requested to emphasise the importance of making payments timeously.

Ms Sihlwayi thanked Ms Sigwaza for her inputs, and said the Department must monitor the boards, even in the initial stages of their programme planning. The DWS must not take on more than it had the capacity for. There was a need to get to the crux of matters where consecutive non-achievement and underperformance existed.

The Chairperson said the Committee must interact with the boards themselves, and then call the Department to account. The Committee’s oversight should not be subdued.

She asked whether the 2021/22 audit findings were complete.

Mr Sekgetho said they had been completed only at the end of October, and they were now being consolidated and would be presented to the Committee in a few months.

The Chairperson made brief closing remarks, and said the Committee should commit to its oversight responsibilities, as water was life and sanitation was dignity.

The meeting was adjourned.