ATC100202: Joint Report Financial Statements and Annual Report for 2008/9
Joint report of the Portfolio Committee on Water and Environmental Affairs and Portfolio Committee on Agriculture, Fisheries and Forestry on the Department of Water Affairs and Forestry Financial Statements and Annual Report for 2008/9 dated 2 February 2010
In fulfilling its mandate of oversight of the Executive, as outlined in Section 42(3) and 55(2) (b) of the Constitution (No 108 of 1996), the Portfolio Committee on Water and Environmental Affairs, in a joint briefing session with the Portfolio Committee on Agriculture, Fisheries and Forestry, interrogated the 2008/09 Annual Report and Financial Statements of the Department of Water Affairs and Forestry (DWAF). The department briefed the committees on 14 October 2009.
The objectives of the briefing were to ascertain the spending trends of the department as reflected in the annual financial statement, report of the auditor-general; statement of accounting policies and related matters. Other components of scrutiny comprised the non-financial performance, including, information on the external and internal challenges faced by the department in the year under review, as well as the performance of the department against its aims, objectives and performance targets over the previous year. The overarching question was the extent to which the current aims, objectives and performance targets sufficiently focused to assist the department improve its performance in the future.
2. Accounting officer’s overview
The Acting-Director General of the Department of Water Affairs and Forestry, Ms N Ngele presented the departmental overview and presented the following achievements for the period under review:
- The department received an unqualified audit report from the Auditor-General on both the Main Entity Account and Trading Entity Account.
- Priority is also being given to the construction of new infrastructure in an attempt to increase water security.
- Twenty-nine (29) dams were rehabilitated and refurbished.
- Cabinet approved the Water for Growth and Development Framework.
- Support provided to local government to improve drinking water quality.
- Introduction of Blue and Green Drops certification programmes, was prioritised.
- Finalisation of the Forestry Broad Black Based Economic Empowerment Charter.
- Through the million trees programme, 1 850 000 million trees were planted.
- The women’s organisation was launched.
- An asset register for moveable and immovable assets was completed.
The department noted the following challenges during the period under review:
· Lack of funding and investments for water resources infrastructure.
· The department reviewed the Trans Caledon Tunnel Authority funding model in order to develop a sustainable model.
· Ageing infrastructure transferred to the municipalities posed a problem. To address this, the department formed part of the committee established by local government.
· Unavailability of funds for refurbishment of Category B and C plantations and forest enterprises development.
· Difficulties in enforcing raw and drinking water quality standards and unlawful water use.
· The shortage of engineering and technical skills affected the water sector.
· The slow pace of transformation in the water sector, especially the implementation of water allocation reform and land reform post settlement to communities, further impeded the work of the water sector.
· The viability of a number of water management institutions required further interrogation.
Despite these challenges, the Director-General presented the following interventions to overcome these challenges. These included, inter alia the implementation of the Water for Growth and Development Framework; the revision of the current funding model, and participation in the discussions by the Department of Cooperative Governance and Traditional Affairs on the amendment of legislation. In addition, the department would ensure the alignment of water, land reform and rural development programmes, improve business-planning processes and develop a response plan on issues raised by the Auditor- General.
3. Overview of financial performance
The Chief Financial Officer, Mr O Ayaya presented the overview of the financial performance. The Department of Water Affairs and Forestry received an allocation of R7 billion for 2008/9 divided amongst its programmes, as follows:
- Programme 1: Administration R 682 088.
- Programme 2: Water Resources R 3 499 812.
- Programme 3: Water Services R 2 348 031.
- Programme 4: Forestry R 506 685.
The department had spent R 6.5 billion and most its programmes had utilised 100% of their allocations as opposed to previous years. This was attributable to the increased expenditure on the provision of sanitation in clinics and schools and implementation of Working for Water and Working for Fire programmes. In order to reduce the reliance of professional service providers, most vacancies were filled and internship programmes were introduced.
Mention was made that due to insufficient funds generated from water users’ charges, the department could not build new infrastructure. Instead, it utilised the voted funds for bulk water infrastructure development. It reported under-expenditure with regard to the completion of the De Hoop Dam. Funds could not be disbursed due to delays in the conclusion of the negotiations to finalise a memorandum of agreement with 23 mines. During the 2008/09 financial year, the department received donor funding for implementation of the Community Water Supply and Sanitation Programme through the Masibambane III programme. The funds were utilised for the following activities: implementation and support of water and sanitation infrastructure projects; local government capacity building and knowledge sharing; and financial management improvement.
Mr O Ayaya also highlighted the transfer of operating subsidies. There was no under-expenditure on Schedule 7. The Rapid Planning Processes (RPPs) and Addendums for all municipalities were approved. The department faced challenges concerning the finalisation of staff transfers, as the allocated budget was insufficient. Some municipalities failed to report on the funds transferred to them. In addition, there were delays in finalising the Relocation Action Plan aimed at compensating communities affected by the construction of the Driekoppies Dam. Furthermore, there was an inability by beneficiaries of land claims to exploit fully the potential properties and to expand their operations by taking up development opportunities offered at the time of receiving compensation. In the 2008/9 financial year, 180 million subsidies were transferred to Komati Basin Water Authorities (KOBWA). Four senior mangers were recently appointed and the presenter suggested that the committee, in future, look at the functioning of this entity.
In previous years, the audit outcomes were outlined on both Main Entity Account and Water Trading Entity from 2005 to 2008. These reflected qualified opinions from the Auditor-General due to various reasons. These included the verification of assets, absence of asset register, and non- adherence to accounting requirements of the South African Statements of Generally Accepted Accounting Practices (GAAP). For the first time, in 2008/9 the department received an unqualified audit opinion. The auditor general’s report noted that financial statements were subject to material amendments resulting from the audit, The internal audit did not fulfil its functions substantially for the year as set out in terms of Treasury Regulations 3.2/27.2. Furthermore, there were significant deficiencies in the implementation of internal control with regards to compliance with applicable laws and regulations. There was no separate strategic plan document and lack of adequate measures to clear suspense account for Water Trading Entity and debtors’ age analysis reflected that debtors were outstanding for longer periods.
In conclusion, the department provided an overview on the activities of the audit committee, which during the period under review, met three times. Its Chairperson Mr JA Boyd resigned in 2008 and Ms S Thomas was appointed as the Chairperson. As far as the audit committee report is concerned, he stated that with regards to internal controls, there were weaknesses identified during the external audit processes. The internal auditing was closely monitoring the management’s actions and supported management to minimise risks within the department. The department developed and approved a risk management strategy.
Observations by the Committee
4. Overview on the performance of programmes
4.1. Policy and Regulation
The policy and regulation presentation focused on the overview performance for the policy and regulation branch during the 2008/9 financial year, future performance and linkages with government aims. The presentation highlighted the following achievements:
· Completion of water reconciliation strategies for the four metros, namely Vaal River, KwaZulu-Natal coastal metros, Algoa System and Crocodile West.
· Development of draft discussion paper on Climate Change.
· Review process of the National Water Resource Strategy.
· Review of water use licence application backlogs was reduced to 12 months.
· One hundred and three (103) water licences were issued.
· National Water Wise campaign implemented in four provinces.
· Twenty seven (27) municipalities were introduced to the school water efficiency programme.
· The draft Water for Growth and Development Framework was approved for consultation
· All water management institutions submitted their financial statements and annual reports for 2007/8.
· The cross border memorandum of understanding with Lesotho and Botswana was signed. Swaziland’s was finalised.
In highlighting the challenges, the presenter noted that water boards faced challenges with regards to operations and sustainability. In particular, reference was made to the Albany Coast Water Board that made a loss of R50 000 a month and an amount of R27 million was needed to recover its operations. The problems were further aggravated as the board did not submit a cash flow. A task team has been established by the minister that would look into the matter.
Concerning the future performance for 2009/10, it was stated that in order to improve water allocation, the department aimed to eradicate 20% of water licence backlogs; and priority would be given to land reform projects, especially in the Eastern Cape and Limpopo. The department, through its River Health Programme, identified critical sources of pollution and implemented Water Conservation and Water Demand Management in the Vaal, Umgeni, Algoa and Berg River Systems.
Furthermore, the department had planned to monitor 60 wastewater treatment works in order to achieve green drop status. In addition, the implementation of cooperation agreements reports in 6-shared river basins was developed and multilateral and bilateral regional cooperation in SADC and Africa was strengthened.
In an attempt to link the department’s current targets with overall aims of the government, the department’s strategic goals encompassed the following:
· Ensuring sustainable and equitable water resources.
· Ensuring universal access to safe and affordable basic water by providing support to local government and achieving water service delivery through policy and regulation.
· The department would ensure alignment and effective institutions by conducting effective oversight over its entities.
· In pursuing African advancement and enhanced international cooperation and development, the department would ensure implementation of cooperation agreements.
In summary, it was reported that in creating awareness and providing a platform for engagement with municipalities, the Municipal Indaba presented a useful forum. The Indaba enabled the department to communicate its policy shift and mandate to the municipalities. Mention was made of the strengthening of compliance monitoring and enforcement through the identification of non-sectors and increasing registration of illegal users. The department installed drinking water quality report systems in Water Service Authorities and water-sampling points were increased. Furthermore, the Blue and Green drop certification heightened awareness and compliance by Water Services Authorities.
The performance overview and achievements for 2008/9 were as follows:
· Twenty two (22) regional bulk projects were implemented and 2 were finalised.
· Forty nine (49) feasibility studies were conducted
· Water services were provided to 132 schools and sanitation was provided to 255 schools.
· Ninety five (95) municipal support plans were developed.
· 94% of water sampling points complied with health aspects on the national standards (SAN241).
· The Water Services Strategy was concluded and awaited the finalisation of Integrated Regulatory Framework.
· Two hundred and thirty one (231) notices of intent to issue directive were issued and 27 directives were issued to the agricultural sector, mining and organs of state respectively.
· Draft strategy on HIV and Aids was developed and piloted in Orange Farm.
· 1 million people were provided with access to water and 326, 477 household had access to sanitation.
· 14 039 buckets were eradicated.
· 35% of transferred schemes were refurbished.
· Through the Working for Water Programme, 197 002 hectares of alien species were cleared.
· 30,064 jobs were created through Working for Water programme, 16 022 were women, 8 857 Youth and 576 disabled people.
The regions faced the following challenges,
· Slow pace in the implementation of school water and sanitation programme due to rising building costs, shortage of construction material and heavy rainfall which caused work stoppages.
· Inability to meet bucket eradication target due to water reticulation.
· Lack of infrastructure maintenance by municipalities.
· Delays in signing Human Resources Agreement in Mpumalanga resulted in delays to staff transfer.
In resolving these challenges, the department had adopted planned interventions, which include: guiding procurement processes; rendering support to local government with expertise and funding; engagements to advise and monitor refurbishment programme and secure agreements on human resources matters.
4.3. National Water Resource Strategy
The National Water Resource Strategy presentation outlined 2008/9 performance highlights, future performance, project information and challenges facing the sector. The key achievements for 2008/9 comprised: the Inyaka Water Treatment Works Phase 1 was completed and Phase 2 was commissioned. The Vaal River Eastern Sub-system Augmentation Project (VRESAP) was completed. The Nandoni Treatment Works was 99% complete.
President K Motlante launched the Berg River Project in 2009. Refurbishment and rehabilitation project of 29 dams was completed. The Social and Economic Development Charter for promoting BBBEE objectives, was adopted. In reporting on the 2008/9 performance vis a vis the targets, it was stated that the National Water Resource Agency Bill was in the parliamentary process, but not tabled. This needed further consultation.
Linkages were made on the current national water resources targets with the overall aims of government. The aim was to fulfil the objectives of government in relation to the implementation of national infrastructure for economic growth and development, as well as ensuring that previously marginalised areas were beneficiaries of basic services in order for those communities to prosper.
In relation to the challenges facing the sector, the presenter highlighted the following concerns: ageing infrastructure; shortage of skills resulted in reliance on consultants and the construction costs were high.
The Deputy Director-General, Dr M Rampedi mentioned the following highlights during the 2008/9 financial period:
· Cabinet approved the re-commissioning of 22 400 hectares forestry plantations in the Western Cape.
· Cabinet also approved the formalisation of the human settlement in Dukuduku and Minister Sonjica de-proclaimed the area for the establishment of a residential area.
· Draft Forestry 2030 Roadmap for sustainable development of all forestry resources was developed.
· 185 000 trees were planted nationally.
· Head lease agreement was signed between Minister Sonjica and KwaMbonambi community to enable rental money to be paid to beneficiaries.
· Forest Governance and Decentralisation in Africa Workshop in support of United Nations Forum was held with the Swiss Government.
The National Forest Programme was developed and it focused on the forestry Small Micro Medium Enterprise development and Integrated Forest Protection. The National Industrial Policy Forestry Action Plan was implemented. To date, the Eastern Cape and Kwazulu-Natal developed grower maps. The Forestry Broad Based Black Economic Empowerment Charter Council was established and Chief Executive Officer and Programme Manager for Forest Charter Implementation Unit appointed. DWAF concluded a memorandum of understanding with the Departments of Agriculture, Land Affairs and Environment and Tourism for streamlining of licenses, and these were finalised. The national list of champion trees was revised and gazetted. The Minister of Water Affairs signed the National Forest Act final regulations.
In addition, 38 Fire Protection Associations were registered in terms of National Veld and Forest Fire Act of 1998. Nine audits (9) on plantations and indigenous forests were finalised. The department hosted various events namely, Eduplant Workshops, Arbour Week and Arbour City Awards to promote effective communication and positive stakeholder relationships. Four hundred and ninety (490) ABET learners enrolled for the Forestry branch. One hundred and twenty (120) forestry officials participated in the skills programmes and MOUs were concluded between Forestry institutions through the Water and Forestry Learning Academy.
Dr M Rampedi mentioned that the department, in the future, was committed to promoting sustainable resource management for all natural forests, woodlands and plantations through the implementation of the National Forest Act, 1998. The department was also focusing on the development of skills in the forest sector to address the development and growth of the sector. The department has accelerated the transformation of the forestry sector in line with the Forestry Broad Based Black Economic Empowerment Charter to enhance awareness and information sharing to raise the profile of the forestry sector. Lastly, Africa advancement and enhanced international co-operation through the strengthening of regional integration of forestry issues with neighbouring countries, was also prioritised.
Observations by the committee
Report to be considered.
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