Department briefing on Quarterly Report & Financial and Fiscal Commission Report

WATER AFFAIRS AND FORESTRY PORTFOLIO COMMITTEE
12 September 2007
DEPARTMENT BRIEFING ON QUARTERLY REPORT & FINANCIAL AND FISCAL COMMISSION REPORT
 
Chairpersons: Ms C September (ANC) and Mr J Arendse (ANC)

Documents handed out:
Financial and Fiscal Commission: Submission for the Division of Revenue 2008/09
Portfolio Committee on Water Affairs and Forestry Quarterly Finance Report
Enterprise Wide Asset Management Systems (EWAM): Project Overview
Portfolio Committee: Report Presentation by Nobubele Ngele
Re-Engineering and Re-Organisation of the Revenue Management Function: Project Overview

 
Audio recording of meeting

SUMMARY
The Financial and Fiscal Commission reported to the Committee on its recommendations for Performance of Provincial Government. These included recommendations that there should be stable and predictable growth paths; prioritised programmes to show above average growth, policy alignment; entrenchment of best practices for infrastructure and budget; reporting of service delivery programmes, and a measurement for determining socio-economic impact. The amended Act required the Commission to make recommendations on function shifts, to ensure proper allocations and use of funding. A function should be assigned to a particular entity based on what was appropriate for the whole country. The because if this did not occur then the Government Departments in need of funds would either go unfunded or under-funded. This component also emphasised co-operative government, which was set out in Chapter 3 of the Constitution.  Mr Josie explained that this meant that the decision to assign a function should be appropriate for the whole country, not only a particular sphere or organ of state.  The Constitutionally Mandated Basic Service Model was described, and this aimed to solve three policy issues by posing different questions and considerations. Questions by Members addressed how the Commission monitored departments, the shifts of function, the appropriateness of the model to South Africa, the disbursement of funds when there was a shift in government, and the methods of research.

The quarterly finance report by the Department of Water Affairs and Forestry looked at some of the problems the Department had faced, and which had been commented upon in the audit report. These included being unable to complete compiling a fixed asset register, inability to comply with the requirements of the South African Generally Accepted Accounting Principles, inadequate business processes and procedures resulting in unallocated cash deposits, poor debtor management practices and unaccounted-for leave days.  The Department had instituted several improvements, including the development of a Project Charter, relating to creation of asset registers. Members expressed their concern that they had heard of these problems before, and requested when the Asset register would be completed, clarity on water related services and the charges levied.

The Department’s second presentation examined its successes in the field of human resources, and addressed how backlogs and new employment opportunities had been handled, and discussed also its new schemes, including a new programme for the training of senior managers. Members were generally impressed by the achievements in HR, especially the meeting of goals as promised at the last presentation. However, it was pointed out that the efforts would have to consider. Questions addressed the cases of fraud and corruption, and finalisation of pensions.

MINUTES
Financial and Fiscal Commission (FFC): Report briefing
Mr Conrad Van Gass, Programme Manager, Budget Analysis: FFC, divided his presentation into components dealing with Performance of Provincial Government, Framework for Assessing Function Shifts, Transfer of Water Services and FFC Constitutionally Mandated Basic Services (CMBS) Model.

FFC’s recommendations for Performance of Provincial Government were that there should be stable and predictable growth paths; prioritised programmes to show above average growth, which ensured policy alignment; entrenchment of best practices(which relates to infrastructure planning and budget); reporting of service delivery programmes that related to non financial indicators; and a measure for determining socio-economic impact.

Mr Jaya Josie, Deputy Chairperson: FFC, examined the Framework for Assessing Function Shifts. It was stated that the amended FFC Act required the Commission to assess and make recommendations on function shifts, because if this did not occur then the Government Departments in need of funds would either go unfunded or under-funded. This component also emphasised co-operative government, which was set out in Chapter 3 of the Constitution.  Mr Josie explained that this meant that the decision to assign a function should be appropriate for the whole country, not only a particular sphere or organ of state.  The enhancement of the principle of subsidiarity was also mentioned, and this was explained as ensuring that a function should, where possible, be delivered by a sphere of Government closest to the people, such as a municipality.

Mr Denver Kallis, Senior Researcher: Macro Economics and Public Finance, FFC,  presented on the FFC CMBS Model, whose aim was to solve three policy issues.  These included how to balance the need to provide Constitutionally mandated basic services with macroeconomic constraints that limited the available resources; how to objectively determine the equitable sharing of available revenue among the three spheres of governments; and consideration of what resources needed to be allocated to capital spending in a way that was consistent with the answers to the first two questions.  Mr Josie commented that a similar model had been successful in Australia.

Discussion
Mr J Arendse (ANC) asked how the FCC monitored government departments so that they could make recommendations. In particular, he aside if the departments would come to the Commission, and whether the CMBS model was appropriate.

Mr Josie replied that countries such as India and Brazil were interested in the Model.  The South African constitution allowed for this model to be developed and mandated these services.  It was generally an FFC model, but government was welcome to use it.  The model was a South African brainchild.

Mr M Swathe (DA) asked for more clarity on the function shifts. He noted that the Department of Water Affairs and Forestry ( DWAF) has taken away some functions from their department and shifted them to district municipalities.  He asked how, in these cases, the FFC would intend to disburse the funds, and whether the people allocated to the distribution of funds were capable of doing their jobs.

Mr Josie responded that the Commission stated that if there was a shift in functions within government, the FFC must be told.  It was also the role of Parliament to inform the FFC of any shifts that might have taken place without the knowledge of the Commission.

Mr Van Gass added that funds were passed down to all provincial treasuries

Mr K Moonsamy (ANC) asked the Commission to elaborate on the term “stable budget”.  He asked if the FFC believed that the government was making strides in corporate governance.

Mr M Sibuyana (IFP) asked if the model was the result of the meeting with different municipalities. He also asked how would the FFC conduct its research to find out more information about those on the ground?

Mr Josie replied that it was the duty of the Commission to undertake research.  The Commission would conduct interviews and go to rural areas.  Empirical research took place at a local level

Mr Arendse took over as Acting Chairperson

Quarterly Finance Report Presentation by Department of Water Affairs and Forestry (DWAF)
Mr Onesmus Ayaya, Deputy Director General, Finance; DWAF, gave a briefing to the Committee about the audit reports of the Department, focusing on the queries raised in regard to Asset Management, Non-Compliance with Procedures and Policies, Financial Management Practices and Capacity and the Inadequate Documented Business Processes and Procedures. The problems the Department faced with the audit report included its inability to complete the compilation of a fixed asset register.  However the Department’s Project Charter had been approved, and its goal was to implement formal asset management throughout the Department, so it can operate and maintain its assets.  Another problem with the audit report was that the Department was unable to comply with the requirements of the South African Generally Accepted Accounting Principles (GAAP).  The Department also faced other problems, including inadequate business processes and procedures resulting in unallocated cash deposits, poor debtor management practices and unaccounted-for leave days.  There were several improvements in the Department, which Mr Ayaya described in full in his supporting documents. SAP had been implemented to support the trading activities, and this would comply with GAAP. Training had been undertaken for 42 users. The finance function was being restructured to enable fast tracking of corrective measures. The revenue function project was being reorganised, and the water trading accounts which had caused the problems would be re-engineered. This initiative would result in a new debtor policy and recommendations how best to use the debtor collection agents. .

One of the key components was the Asset Management Strategy, which was developed in 2006 to ensure that the Department complied with all the National Treasury’s requirements.  Because of the creation of asset registers, the Department had been able to implement a Project Charter, which was approved for the Enterprise-Wide Asset Management (EWAM).  The goal of the project was to implement formal asset management to enable the Department to understand the scope and value of assets operated and maintained to support service delivery.

Discussion
Mr M Sibuyana (IFP) stated that the presentation had been comprehensive, but he was concerned that he had heard all the same problems before. He expressed his concern that the needs of the people in his constituency were not being met, and noted that people want service delivery.

Mr Swathe asked for further elaboration on the fact that Eskom was using water, and called for a definition for “Water Related Services”.

Mr Ayaya stated that Water Related Services were based on licensing, levied on the basis of the business, such as farming.  Eskom had a legal contract with DWAF; therefore this was a particular agreement for a water scheme

Mr Moonsamy asked if the Department had the personnel for the tasks the Department intended pursuing, and asked in particular what qualifications were held by those in the Department, particularly in regard to management.

Mr Ayaya responded that senior positions, such as Director, needed tertiary qualifications such as BCom with Honours and three years experience, but an MBA was not necessary

The Chairperson asked about the use of consultants, requesting how many consultants were employed, and at what cost.
Mr Ayaya replied that the cost escalation of consultants was about 7%, but the question was whether the Department could do without consultants, especially technical consultants. It was necessary to have consultants, especially with the approach of the 2010 World Cup. 

The Chairperson also enquired when the Asset Register would be completed

Mr Ayaya said that the Asset Register was a journey, but the Department would like to see it completed by 2009.  90% of the projects within the Asset Management should be completed by November 2007.

Human Resources Achievements: Briefing by DWAF
Ms Nobubele Ngele, Deputy Director General: DWAF, presented on the Human Resources achievements of the Department, as well as their future plans. The Department’s achievements included policies reviewed and developed, such as recruitment and selection and the job evaluation grievance policy.  Other departmental successes included the eradication of backlogs, and 14 out of the 21 grievance cases were now finalised.  Talent management achievements included 750 non senior manager work plans being completed, and 121 senior manager performance agreements having been completed. The 2006/07 performance assessment for non-senior managers had been completed. A number of new courses were being offered, and she tabled the courses and the number of attendees. There was an increased number of interns, as well as mentorship training. A recruitment and selection procedure had been developed and 377 posts were filled. 107 further posts were evaluated and the HR systems were being cleaned up. The first draft documents for strategies and policies were due on 30 September 2007. The Department now had a programme called Wam’kelekile, which is targeted at senior managers.

Discussion
The Chairperson congratulated the DDG on her efforts as she had met all the targets that she had promised at an earlier meeting with the Committee.

Mr Sibuyana said that the Department had experienced a lot of problems.  It had been 13 years since the birth of democracy, and some of the completed targets should have been completed a long time ago. He stated that it would be good to see her complete future target.

Ms E Lishiva (ANC) asked how many cases DWAF had finalised in respect of pensions

Ms Ngele said she would e-mail the figures concerning the pensions, as she did not have the numbers with her.

Mr Swathe asked how many probation cases were still outstanding.  He also asked how many fraud and corruption cases the Department as dealing with at the moment.

Ms Ngele replied that 22 cases of fraud existed and five had been finalised

Mr Moonsamy said that the Department had overcome many of its problems

Ms Ngele thanked the Committee for the compliments

The meeting was adjourned