Quarterly Report briefing by Department

WATER AFFAIRS AND FORESTRY PORTFOLIO COMMITTEE
13 June 2007
QUARTERLY REPORT BRIEFING BY DEPARTMENT

Chairperson: Ms C September (ANC)

Documents handed out:
Department presentation on Human Resources Quarterly Progress Report: January 2007 to March 2007
Department Quarterly Report on Budget Vote34

Audio Recording of the Meeting

SUMMARY
The Department of Water Affairs and Forestry, briefed the Committee on the Department’s Human Resources Quarterly Progress Report and financial report for the period January 2007 to March 2007. The Department described the training, creation of posts, identification of staffing needs, and employee relations audit. It also conducted a bursary administration audit. A number of officials were trained in the provisions of the Public Finance Management Act. Several posts were in the process of being filled. The plans for April to September 2007 were tabled, and the areas of attention were summarised and explained. filing systems were updated, job profiles were prepared and the human resource staffing requirements for finance were identified. Extensive training was given on a number of aspects. Members asked questions on the high number of staff vacancies and the reasons why these remained unfilled, the staff retention strategy, extension of services to the rural areas, staff training and the time allowed for staff training, the number of women staff, the use of consultants, questions around bursaries and study leave, possible collaboration with the Portfolio Committee on Public Service and Administration on these matters, the qualified Auditor-General’s report, and under-spending.

The financial quarterly report noted that the Department had spent 92.5% of its adjusted budget of R4.6 million, and the under expenditure  was ascribed to the under-expenditure on the De Hoop Dam project and the programme for the restoration of dams. There had been a request to National Treasury to carry forward 6.7% of the unspent funds to continue these projects, complete the transfer of staff to municipalities and pay one-off staff costs. The Department’s interim audit had been completed. The Audit Steering Committee, which had been established to monitor and oversee the audit, continued to meet weekly. Full details were presented of the steps taken by the Department to address issues raised in the qualified 2005/06 audit report. Details were also given on the transfer to the new SAP accounting system, which was coupled with a full take over and reconciliation process. This would be compliant to local standards and would provide the information that the old system could not. There had been extensive training of officials on these systems. The purpose and division of the water resource management account was set out in detail, and the sources of funding were described as water resource management charges levied on all water users, and collection of revenue from bulk sales. Revised tariff structures had been put in place in some areas. Asset management was also receiving attention and the processes were fully described. Forestry was being worked on by the Committee on Forest Access, which would be making recommendations to the Minister on the use of the trust fund, primarily to educate and create better participation. Questions from Members addressed the spending of funds, the provision of water to schools, use of the National Treasury template, and the one off staff costs. The Committee expressed appreciation of the Department's efforts but noted that asset register, staff training and eradication of the bucket system must all remain on the agenda for further updates.

The Committee adopted the minutes of its meetings of 23 May and 30 May but stood over final approval of the Committee Report on the Departmental budget and strategic plan.
MINUTES
Department of Water Affairs and Forestry (DWAF) Human Resources Quarterly Progress Report January 2007 to March 2007
Ms Nombuyiselo Ngele, Deputy Director-General for Corporate Services, Department of Water Affairs and Forestry, briefed the Committee on the quarterly progress of the Department's human resources. Forty-five technical and finance officials (ten women and 35 men) had been trained in asset management. Training sessions of two days had been scheduled for deputy Directors-general.

Line management had identified critical staffing requirements, and 15 posts had been created in the regions, and four in forestry. The Department was progressing with the identification of staffing needs for the finance branch. An employee relations audit had been completed and the findings were being used to inform process redesign, policy and procedures.

The Department recognised the need to manage talent. A bursary administration audit had been completed and findings were being implemented.

In regard to building capacity, 73 officials had been trained in the provisions of the Public Finance Management Act (PFMA), project management, negotiation and conflict management. Legal compliance had been achieved. Thirty-five Senior Management Service (SMS) members had undergone coaching.

The Department had completed the selection process for the posts of chief financial officer, chief director of finance, chief director of internal audit, two chief directors for the infrastructure branch, project manager for the agency, and heads of regions/chief directors for the Free State, the Northern Cape, the North West, Mpumalanga, and the Eastern Cape. It had reviewed and streamlined its recruitment and selection process. It had implemented its conditions of service, and reduced pensions from 188 to 31 cases in Limpopo, 140 to 111 cases in the Eastern Cape, and from 29 to 23 in KwaZulu-Natal.

The Department’s human resources road map for April 2007 to September 2007 provided for a human resources policy and strategy framework, policies for job evaluation, standardised job descriptions, HIV and AIDS, recruitment and selection, sexual harassment, strike management, special leave, SMS performance management, and attendance at international conferences, and a change management strategy.

Attention had been given to employee relations, and talent management. Grievance and misconduct cases, performance agreements for 2007/08, probations, pensions, and the employee initiated severance package had been finalised. The filing system had been updated, job profiles prepared, and human resource staffing requirements for finance identified.

In order to build capacity, training had been given on policies and procedures, strategy development and analysis, financial management, systems, project management, performance management, monitoring and evaluation, gender main-streaming, protocol, customer service and the Batho Pele principles, which put people first and used local communities as the means of communication.

Discussion
Ms D Van der Walt (DA) asked to what extent the Department had a strategy for retaining its staff.

Ms Ngele said that the Department had tabled a measure to retain its engineers and scientists. The final decisions could be made only by the Department of Public Service and Administration, and not as a unilateral action by one department

Mr B Mosala (ANC) asked to what extent the Department was able to reach the rural areas and if there was available an analysis of the 15 posts created to meet critical staffing requirements.

Ms M Manana (ANC) added that she would like to know to what extent it was possible to reach the rural areas by radio. She also suggested asking local councillors to assist.

Mr M Sibuyana (IFP) said that he wanted to commend the Department on its progress in staff training, but asked if two days was enough to carry out effective in-service training. He suggested that there should be a training section in the Department, and that he had experience of being trained by training officers who had worked together with the Public Service Commission.

Ms Ngele replied that the two-day in-service training had been designed to minimise disruption of service delivery.

Ms T Lishivha (ANC) asked about the proportion of women in the Department’s staff profile and attention to women's issues.

Ms Ngele said that the Department expected that a policy on sexual harassment would be approved this year. The Department hoped to give to the Committee a more detailed report on the staff structure and filling of vacancies in September 2007.

Mr J Arendse (ANC) asked about the Department’s requirements for staff qualifications, which seemed excessive. He noted the expenditure on consultants but said there would always be the need for consultants for various reasons. He asked if the Department had enquired about availability from other agencies. He emphasised that it was always essential to give credit where it was due.

Ms Ngele replied that the Department’s intention was to ensure that individuals were assigned to posts for which they possessed all the necessary competencies and attributes. Whilst the task of filing would not require an individual with a Ph.D., an assignment of checking and correcting filing would require higher competencies than the task of filing itself. If staff were overqualified, that could not be used as a ground for dismissal. The Department was bound by the Labour Relations Act.

The Chairperson said that all government departments complained that their trainee staff were quick to resign and take up new employment, and suggested that legislation was needed to assist departments to retain staff. All Departments were competing for staff with other government departments and the private sector. She asked about the employment package offered to staff receiving training, and to what extent the Department was able to ensure that trainees who had received bursaries would work for the Department for a sufficient time after qualifying to enable the Department to obtain a fair return on its investment. She asked if the Committee should consult the Portfolio Committee on Public Service and Administration on this subject, as suggested by the Chairperson of that Committee.

The Chairperson said further that the Science and Technology Portfolio Committee had had similar discussions on how to retain engineers within departments and within the public sector.

Ms Ngele replied, with regard to employees who subsequently resigned, that the Skills Development Act obliged employers to train employees and moreover the overall good of the country had to be considered. There was nothing wrong in training people to be active citizens of their own country. However, employees who were sent abroad for conferences or training were subject to strict conditions to ensure that the Department benefited from its investment in them before they resigned to take up employment elsewhere. The Department did have some measures to ensure that it obtained at least two years’ service from employees who had received bursaries from the Department, but Ms Ngele admitted that she did not have a perfect answer. Employees receiving financial aid to study for second or further degrees would be assisted with half of their expenses.

The Chairperson asked the Acting Chief Financial Officer specifically to report on progress in fulfilling performance agreements. She asked for comment on the Auditor-General’s qualified audit report for 2005/2006 and how these matters could be corrected. She also asked him to address human resources concern She asked the Department to comment on how citizens, especially those in the rural areas, could be informed and empowered with knowledge about water resources and the consequences of indiscriminate cutting down of trees.

Department of Water Affairs and Forestry Financial Quarterly Report
Mr Trevor Balzer, Acting Chief Financial Officer, DWAF, noted that by the end of the financial year 2006/07 the Department had expended 92.5% of its adjusted budget of R4 660 303, whereas in the previous year, 2005/06, it had expended 94.45% of its adjusted budget of R3 935 636 million. He explained that the Department’s 7.5% under expenditure was mainly as a result of the under-expenditure on the De Hoop Dam project and the programme for the restoration of dams. The Department had requested the National Treasury to carry forward 6.7% of the unexpended funds to the 2007/08 financial year, in order to continue the De Hoop Dam project, continue the restoration of dams, comply with safety standards, and complete the transfer of staff to municipalities and accommodate the “once-off staff costs”.

The Department’s budget had been presented to both the Portfolio Committee on Water Affairs and Forestry and the Select Committee on Land and Environmental Affairs, and was tabled in both houses.

Mr Balzer tabled and explained the Department’s expenditure on its budget as at 1 June 2007, and noted that it had spent 12.3% of its budget of R5 306 347. With nine weeks elapsed, the lag of expenditure on a straight-line basis was 5%.

The Department’s interim audit had been completed. The final audit had commenced on 16 April 2007 and would continue until 31 July 2007 when the Auditor-General would submit the final audit report to the Department. The Annual Financial Statements together with the Performance Report had been submitted to the Auditor-General and the National Treasury on time at the end of May 2007.

The Department’s Audit Steering Committee, which had been established to monitor and oversee the audit, continued to meet weekly. This Steering Committee included officials from the Department and from the Office of the Auditor-General. Sub-committees had also been established in the regions to ensure that the audit ran smoothly. Processes had been put in place and resources secured to ensure that all queries were addressed punctually and responses provided to the Auditor-General.

Mr Balzer gave details of progress in addressing the issues raised in the qualified 2005/06 audit report. The Department had closed its Equipment Trading Account and consolidated it with the Water Trading Account. The Construction Equipment Management System (CEMS) had been discontinued. As from 04 October 2006 all construction equipment had been recorded and managed through the SAP accounting system asset module, and the Department was therefore able to comply with the provisions of Section 40(1) of the Public Finance Management Act (PFMA).

The purpose of the Department’s Water Trading Account was to ensure the efficient, cost effective and sustainable availability of water to key water users in South Africa. It would manage infrastructure planned and built with Departmental and other resources, and would construct new infrastructure to meet evolving requirements for water in terms of national policy.

The water trading account was divided into four components. Integrated Water Resource Management included quality management of water in each water management area, promotion of conservation of water, and included the portion of the Working for Water budget that was derived from revenue from water users. Integrated systems enabled water to be transferred from water-rich areas to poorly watered areas; an example was the Vaal River system where a number of dams and pipelines were operated as one inter-linked system. Bulk water supply comprised a number of dams operated as stand-alone schemes rather than integrated systems, where the supply of water was mostly in bulk to different water-user groups, the largest being the agricultural sector. The Equipment component provided for equipment for the construction and maintenance of Government Water Schemes. This component had been previously reported separately.

Two main sources of funding were currently available for expenditures under the water trading account. Firstly, the revenue stream was generated by a water resource management charge levied on all registered water users, through the integrated water resource management component of the water trading account. Secondly, revenue was collected through the sale of water in bulk to various institutions and individuals through the integrated systems and bulk water supply components. Any shortfall was funded through allocations from Vote 34. The implementation of the revised national water pricing strategy would further improve the financial state of the water trading account. The application of the revised tariff structures in some areas had already resulted in improved revenue.

With regard to water trading account financial reporting systems, the Department had from 04 October 2006 implemented a new ERP system (SAP) to enable reporting in accordance with Generally Accepted Accounting Practices (GAAP), in order to overcome difficulties experienced in the application of transversal systems. However, the Department had used the transversal system of BAS from 01 April 2006 to 03 October 2006. When it transferred to SAP, a comprehensive “SAP Take-on Reconciliation Process” had been implemented. The implementation of SAP would enable the Department to comply fully with the provisions of the PFMA. Furthermore the Department was now able to implement accrual accounting for its trading activities and for the first time comply with the provisions of section 40(1) of the Act. In March 2007 the Department completed reconciliation and conversion of all data from BAS into the SAP for trading activities.

The Department was compiling policies, procedures and business processes to ensure the proper initiation, approval, recording and disclosure of all financial transactions. The Department was undertaking a full verification of its assets and preparing asset registers compliant with GAAP and maintained on SAP. It was expected that the new accounting records would lead to progressively improved reporting and disclosures with effect from the 2006/07 Annual Financial Statements.

All officials operating on the SAP system were required to undergo ongoing training to upgrade their skills in the application of the system. The Department had appointed a professional service provider (PSP) to assist with training on the daily management of assets and the review and updating of policies. Fourteen asset management practitioners were sourced through the PSP and deployed at the National and Regional Offices to assist with training. An asset management forum had also been established and monthly meetings had been held to review progress, share information and address issues related to assets.  About 120 asset management staff had already undergone the training offered by the National Treasury in 2006.

The Department had implemented a rigorous verification process during 2006/07 to ensure full verification of the Department’s assets (both trading account and main account). All known assets, with the exception of the construction equipment scheduled for completion in July 2007, had been verified and recorded electronically in the trading account (SAP) and the main account through the BAUD system, which was reconciled to LOGIS and BAS. All assets verified had been allocated a unique bar code to enable tracking and identification. Relevant asset staff had also been trained on the SAP asset module and the BAUD system. A reform of asset management had taken place in the last financial year and asset strategies had been developed and approved. This process would continue in 2007/08 by focusing on infrastructure (immovable) assets in response to both business and legislative requirements for the Department’s improved management of water resources infrastructure, which would also address accounting compliance issues and inform the setting of water tariffs.

An open tender process was held to appoint a professional service provider to assist with the identification, verification and valuation of all of the Department’s major infrastructure assets. This project was due for completion in December 2008 and would make it possible for more accurate determination of water tariffs and compliance with accounting systems and legislation.

In respect of forestry, Mr Balzac reported that the National Forest Recreation and Access Trust Fund had been established on 01 April 1999 in terms of National Forest Act, 84 of 1998. The Minister was the sole Trustee of the Trust. The Trust was for the benefit of the general public with the objective of promoting access and use of forests for recreation, education, culture and spiritual fulfilment. When the Trust Fund was set up it took over an amount of R1 669 293 collected by its predecessor in hiking levies, which was invested and which was accruing interest at about R250 000 per year. The Committee on Forest Access was considering ways to use the Trust Fund in a sustainable manner and would be reporting to the Minister. Options could include creating awareness on forest access issues and forest governance, skills development, access to funding and licensing issues; promoting the forestry sector broad based black economic empowerment Charter to ensure a broader base of participation. The Committee was concentrating on strengthening emerging forest enterprise organisations that, through poor organisation were currently vulnerable to unfair treatment. 

Discussion
Mr M Moonsamy (ANC) asked Mr Balzer if he could assure the Committee that the next audit report would not be qualified.

Mr Balzer replied that he could not pre-empt the Auditor-General’s future reports, but was confident that the Department was making every effort to avoid adverse findings,

Mr J Arendse (ANC) said that it was clear that the Department had made progress but he was concerned about unspent funds. He asked why the spending of funds had decreased.

Mr Balzer replied that there had been some justification for under-spending, as indicated earlier.

Ms M Manana (ANC) asked about the provision of water to schools.

Mr Balzer said that the Department co-operated with the Departments of Education, Public Works, Health, and local municipalities in the provision of water to schools. Delivery to different schools depended on circumstances.

Mrs J Semple (DA) commended Mr Balzer on his report and asked if the Department followed the National Treasury Template. She also asked about the status of the National Forest Recreation and Access Trust Fund.

Mr Balzer replied that it the Department did follow the National Treasury Template. With regard to the National Forest Recreation and Access Trust Fund, SCOPA had raised questions that had been taken up by the National Treasury.

Mr Balzer explained that once-off staff costs occurred when the Department moved staff from one place of employment to another. There was an audit component in the structure of the Department, but the person to whom the post had been offered had accepted a counter-offer from another organisation.

The Chairperson commended the Department on progress in financial matters, but noted that the Assets Register and staff training must be reported on also in the next report. The Committee accepted the Department's explanations on the audit report.

Other business
The Committee adopted the minutes of the meetings of 23 May. The Minutes of 30 May 2007 were adopted with amendments. It agreed to defer final approval of the Committee Report on the Departmental budget and strategic plan to a later meeting. Members noted the continuing concern of the need to eradicate the bucket system of sanitation.