DWAF Quarterly Financial Report & HR Turnaround Strategy: briefing

Meeting report

WATER AFFAIRS AND FORESTRY PORTFOLIO COMMITTEE
13 May 2006
DEPARTMENT QUARTERLY FINANCIAL REPORT / HUMAN RESOURCES TURNAROUND STRATEGY: BRIEFING

Chairperson:

Ms C September (ANC)

Documents handed out:
Quarterly Financial Report of Department of Water Affairs and Forestry: Part

one & two
Human Resources Turnaround Strategy: Part one & two
Office of the Accountant General website

SUMMARY

 

The Department of Water Affairs and Forestry presented its quarterly finance report to the Committee, which highlighted its steps to ensure that its financial management would be placed on a firmer footing. The presenters highlighted their Financial Management Improvement Plan, their budget and financial statements. Members asked questions on DWAF’s involvement as a pilot site for the Office of the Accountant General, the costs of using retired accountants and consultants, under-expenditure and funding. Clarity was sought on the main and trading accounts and the accounting system used, the changeover to the SAP system and implementation of it. Questions were also raised on the interim audit reports and the steps taken to improve the situation in various provinces.

The Department delivered a presentation of their reviewed turnaround strategy for Human Resources, which included a service delivery model, and dealt with organisational architecture, organisational capabilities and organisational culture. There had, since 1994, been a concerted effort to build a new department with improved ability to deal with targets. Members questioned the retention strategy for bursary recipients, the monitoring of the bursary scheme and its provincial allocation. Questions were raised about the training agreements with Cuba and other countries.

MINUTES
Quarterly Financial Report by Department of Water Affairs and Forestry (DWAF)
Mr Trevor Balzer (Acting Chief Financial Officer (CFO), DWAF) presented DWAF’s Quarterly Finance Report to the Committee. This highlighted the steps proposed to ensure that the financial management of DWAF was placed on a firmer footing. The Financial Management Improvement Plan (FMIP) included restructuring of the finance branch, the implementation of SAP accounting system, implementing an asset management strategy, establishing an Audit Steering Committee and contracting an accounting firm to improve financial management
The presenters tabled and discussed their budget, trading account and expenditure accounts.

Discussion
Mr J Arendse (ANC) questioned when the skills audit referred to in the report had been conducted. He noted Mr Balzer’s statement that DWAF would become a pilot site of the Office of the Accountant General (OAG), but pointed out that this had already occurred in 1999. He enquired whether the people trained at that time had been optimally used and their services retained, and whether a further pilot project had produced the desired outcome, which had not resulted from the first pilot.

Mr Balzer confirmed that the Department had previously been identified as a pilot site, but that regrettably nothing substantive had been put in place to activate that status. This had been identified in the earlier audit reports. He acknowledged that DWAF had not pursued the matter until it was reactivated in October 2005 under the leadership of the current Director-General.

Mr Arendse asked why there had been a need to use retired accountants as consultants.

Mr Balzer explained that the offer to use retired consultants had come from OAG. He stressed that they had still not finalised the terms of reference for this project. OAG currently ran a similar program to support municipalities’ financial management, by mobilising resources that would include retired accountants. There was a possibility that DWAF could tap into that project. The cost involved would be borne by the Department, as although initial discussions with OAG had indicated that it might cover some of the costs, it later transpired that OAG’s budget could not be extended beyond supporting local government. OAG could, however, support DWAF in acquiring resources.

Ms J Semple (DA) enquired as to the difference in cost between using consultants and utilising retired chartered accountants .

Mr Balzer stated that he could not give costs of using retired accountants at this stage.

Ms D Van der Walt (DA) sought clarity on figures relating to the earmarked allocations. The presenter had stated the figure as R1 669 million, but she read it as R1.6 billion.

Mr Balzer explained that there were many ways of representing the figures in a presentation, but confirmed it as R1.669 million.

Mr K Moonsamy (ANC) felt the report was somewhat grim. He questioned to what extent DWAF was complying with labour relations legislation, the numbers of women, youth, and disabled people, how exactly transformation had been promoted, and whether its full staff complement matched the sector requirements.

Mr Moonsamy asked if the 5.5 % under-expenditure referred to in the presentation could be translated into a figure, and asked how expenditure would be monitored more closely.

Mr Balzer explained that the 5.5% under-expenditure represented R217 million. This figure had been broken down, by programme, in the report, but he could if needed provide a further breakdown by sub-programmes. The estimates of national expenditure were reflected in sub-programmes, but he had provided summary information only.

Ms Semple understood that the under-expenditure had mainly been caused by water resources, but enquired why this had happened.

Mr Moonsamy found it disturbing that the asset register had still not been completed, although he appreciated it was a huge task.

Mr Balzer agreed that this would be a large undertaking, although not on the same scale as the Department of Public Works. DWAF’s assets were confined to South Africa, and all the locations were known, and it was merely a question of final evaluation.

Mr Moonsamy noted that DWAF had secured R94.9 million through foreign donor agencies, and asked for the identity of the donors and how the funds would be utilised.

Mr Moonsamy commented that the presentation had indicated that the Department needed to create an environment that would ensure compliance with the Public Finance Management Act (PFMA). He asked for comment on the working environment.

Mr Balzer clarified that he had not referred to the environment in terms of inter staff relations and it was not hostile in that regard. He had meant that DWAF must ensure that the right tools and systems were in place to comply with the PFMA. The present system did not allow compliance because it was a cash-based, and not an accrual, system.

Mr Moonsamy expressed his concern that various auditors from outside the Department were going to be used as consultants, as he believed the state was currently spending excessive sums of money on consultancy, and that all national departments should ensure they had qualified staff at every level to perform the work.

Ms Semple noted that there had been a transport payment account of R14.27 million, arising from the service provider contract with Imperial, but asked what exactly it represented as it seemed high.

Mr Balzer explained that the Department no longer owned a vehicle fleet, but participated in the contract with Imperial via the Department of Transport. Imperial Fleet Services provided all DWAF’s vehicles, except the large vehicles that operated on DWAF’s construction sites. Consolidated accounts were presented to the Department each month. Because Imperial offered an early settlement discount, DFAW had taken advantage of these discounts, which then catered for re-allocation of resources.

Ms Semple noted that the final audit of the main account had been completed in May. She appreciated that DWAF would not be fully ready to discuss the audit but requested that the report be forwarded to the Committee later

Mr Balzer confirmed that he would provide the Committee with the report relating to the Western Cape and North West provinces, as these had been dealt with.

Mr T Ramphele (ANC) sought clarity on the Department’s two accounts, asking which operated an accrual system and which a cash system.

Mr Balzer confirmed that the main account operated on a cash system and the trading account on an accrual system.

Mr Ramphele asked for confirmation that the Department was trying to implement a common accrual system for both accounts, and that the training referred to in the presentation would apply to those who needed to learn the accrual system.

Mr Balzer confirmed that this was correct.

Mr Ramphele sought assurance that the 1July date for "go live" implementation of the SAP accounting system could be implemented, as it seemed to depend on a number of stakeholders.

Mr Balzer stated that this date was based on an internal assessment. The package had been purchased outright from SAP, who was no longer involved in the process. DWAF had modified the programme and was obtaining the customising SAP resources in preparation for implementation. It had been agreed that SAP Africa would conduct a quality assurance to determine if DWAF was indeed ready. SAP had taken a pragmatic approach analysing what DWAF had done, identifying areas of achievement, concern, and the risks faced. It had suggested a strategy for mitigating the risks. Individuals in each of the region had been identified to act as the SAP champions, and would be held accountable for ensuring that the programmes put in place would be carried through.

Mr I Mogase (ANC) noted that 518 staff had been assessed on their level of computer literacy, but only 490 had gone through training. He questioned the standard of education of those staff and asked if the presenters were able to provide pass and fail rates.

Mr Balzer explained that the difference in the figures arose since 28 of those assessed were found to have adequate skills already. Mr Balzer undertook to provide the Committee with the pass and fail rate, which he could not recall.

Mr D Mabuyakhulu (ANC) raised concern about the continual presence of new faces in the Department, and questioned if this would have a negative impact on DWAF’s targets.

Mr Balzer explained that the new staff in the Department had been the result of a concerted effort, since 1994, to build a New Department. He hoped that the new skills would improve the ability to deal with targets.

Mr Mabuyakhulu questioned why DWAF had not anticipated the problems identified by the Auditor-General.
Mr Balzer reported that Ms N Ngele would deal with this question in her report on human resources.

The Chairperson asked when the process would be dealt with.

Mr Balzer replied that the strategic planning was planned for 26 and 27 June and a budget planning committee would be constituted, to deliver an action plan by end June.

Mr Moonsamy noted that Free State, North West and Gauteng had failed to respond to DWAF‘s management letter for the interim audit, and enquired what steps had been being taken to rectify the position.

Mr Balzer clarified that these three provinces were those in which the interim audit had found no material items. Aspects were found in the remaining provinces that could materially affect the audit but these were being dealt with.

Mr Moonsamy asked what steps were being taken about the anomalies identified in Western Cape and North West in regard to the disposal of assets.

Mr Balzer explained that he had been provided with the preliminary reports for North West and Western Cape only on the previous day. DWAF was currently studying the conclusions and would decide what actions needed to be taken. He assured Members that DWAF would be able to make the findings known but would require time to review the reports.

Human Resources Turnaround Strategy of DWAF
Ms N Ngele (Deputy Director General, DWAF) made a presentation on DWAF’s human resources turnaround strategy, which included a service delivery model. She outlined the organisational architecture, organisational capabilities and organisational culture of DWAF and described what the strategy hoped to achieve.

Discussion
Ms Van der Walt asked what DWAF was doing to ensure that people given bursaries must work for a guaranteed number of years in DWAF. She further queried whether any retention strategy was in place as it seemed that bursaries were given freely with no benefit accruing back to the Department.

The Chairperson agreed that the Department should not permit recipients to receive funding and disappear.

Mr Arendse was concerned about the financial management of DWAF as three bursaries had been awarded, between 2004 and 2006, to people not involved in DWAF at that time. One had discontinued his studies and two were a year behind on their courses. He enquired what mechanisms were in place to ensure benefit from the bursaries to DWAF.

Ms Ngele explained that there was a sound policy on the bursaries. Students were required to sign an agreement compelling them to work for the Department on completion of their studies, but unfortunately there was no capacity to enforce the contracts.

Mr Mabuyakhulu noted that not all provinces had been represented in the bursary allocations. He believed the allocation should be re-discussed and administered at local municipal level.

Ms Ngele clarified that bursaries had represented money allocated to DWAF, which had not been intended for use by local government.

Mr Mabuyakhulu requested clarity when the training agreement with Cuba had been made.

Ms Ngele explained that the Department was looking at different bi-lateral agreements with different countries, to see how it could expand that program to send students to other locations for training purposes.

The meeting adjourned