PORTFOLIO COMMITTEE

FINANCE BRANCH

Deputy Chief Financial OfficerMs Olga Hattingh

Agenda

• Background (Main Account & WTE)• Management arrangements – progress to date• Main Account – AFS for 2007/08• Main Account – progress with action plan• Main Account – initiatives for 2008/09• Trading Entity – AFS for 2007/08• Trading Entity – progress with action plan• Trading Entity – initiatives for 2008/09• PSP’s • Questions

DWAF

Water Trading

Main Account

Integrated WaterResource

Management

IntegratedSystems

Bulk WaterSupply

Water ResourceManagement

•Lesotho Highlands•Komati Basin Water• Berg River Water project• Olifants River Development•TCTA• Equipment Account

Provision from Independent

systems

TA1 TA2 TA3

AdministrationWater Resource Management

Water ServicesForestry

BackgroundSelf sufficient

Tariffs (ROA, Depr & OM)GAAP

Service DeliveryExchequer Funds

Modified Cash - Accrual

Background

Main Account Trading Entity

Funds ExchequerDonor

UsersExchequer (capital)

Accounting Modified CashGRAP

GAAP

Fin System BAS, LOGIS, PERSAL

SAP, PERSAL

PFMA Chapter 5 Chapter 5

Treasury Reg 1 to 24 & 26 1 to 24 & 26

DWAF

Water TradingEntity

Main Account

Integrated WaterResource

Management

IntegratedSystems

Bulk WaterSupply

TA1 TA2 TA3

Background (Future)

Policy and Regulatory Function

CatchmentManagement

Agencies + TCTA = SANWRIA

Management Arrangements

Proper segregation between Main Account and Water Trading Entity:

• Reorganization of the finance branch at head office and regional level

• Policy document to provide guidance on the linking of functions to either the Main Account or Water Trading Entity

• Designated a staff member as the head of the Trading Entity

• Appointment of a financial services firm to provide additional capacity to support regions

MAIN ACCOUNT

Annual Financial Statements2007/08

• Statements were presented to the Audit Committee on 29 May 2008

• AFS was submitted to AG on 30 May 2008

Appropriation account

Programme Budget

R’000

Actual

R’000

%

Administration 603 014 601 181 99.7

Water resource management 2 915 512 2 462 514 84.5

Water Services 1 874 007 1 886 926 99.6

Forestry 466 282 451 077 96.7

Theft and losses 3 698 3 698 100.0

Total 5 862 513 92.0

Annual Financial Statements

Appropriation account

• Augmentation (transfer payment) to Water Trading Entity amounting to R452,988m for the construction of the De Hoop Dam (heavy rainfall, environmental impact authorisation)

• Request roll-over will however reduce in line with cash flow forecast

• Delay in the approval of the BBBEE Forestry Charter – it delay the roll-out process (R15,205 m)

Reasons for 8% under spending:

Major AchievementsHighlighted in AO report

• Water & Sanitation to 91 clinics – access to basic supply 110 clinics – sanitation 254 clinics – upgraded infrastructure 69 schools – access basic supply 51 schools – sanitation • Develop and implemented an Electronic Water Quality

Management system (94% of municipalities complied with standards)

• R1.2 bn on new water resource infrastructure & R415 m on rehabilitation of existing infrastructure

• Forestry Charter has been signed – 170 000 people employed

Annual Financial StatementsFinancial Overview

• Unauthorised expenditure of R14,889 m was approved• Decrease in departmental revenue due to a decrease in the

selling of forestry products – specially in Mpumulanga and interest recovered

• Local and foreign aid assistance – EU agreement was only signed in March – no time to request the funds from NT

• Implementation effective and efficient Revenue, Expenditure, Asset and Liability Management process• Interns/Contract workers

Revenue

• Compensation of employees – transfer of staff to municipalities and Water Trading Entity

• Goods and services – 7% inflation, R100m increase in PSP, S&T problem with Phavis invoices

• Decrease in debt write offs – included in 2006/07 was R10m for municipalities

• Foreign aid – more on current expenditure

Current Expenditure

Annual Financial StatementsFinancial Overview

• Buildings and other fixed structures – more water services infrastructure (pump stations and water supply reticulation equipment)

• Decrease in procurement of moveable assets• Increase in intangible assets – SAP licensing

Capital Expenditure

Annual Financial StatementsFinancial Overview

• Decrease in advance as a result of better financial controls• Berg Water was transferred to WTE (R7m)• Loans – more a due in the next year – increase in current• Staff debtors – an increase various initiatives to improve

Current Assets

Annual Financial StatementsFinancial Overview

Progress in terms of action plan

• Proper segregation between Main Account and WTE

• Strategic planning alignment initiatives

• Bank exception account cleared

• Better disclosure (accruals, commitments & related parties)

• Assets – Asset registers improved

• Staff debtors – an increase various initiatives to improve

Financial Improvement Projects for 2008/09

• Establishment of a risk management unit within the Office

of the CFO

• Reduction in staff debt

• Maintenance of asset management register

• Filling of vacancies

• Update and development of financial policies and procedures

WATERTRADING

ENTITY

Annual Financial Statements2007/08

• Presented to Audit Committee on 29 May 2008

• Submitted to Auditor-general on 30 May 2008

Annual Financial StatementsOverview

• Reduction in revenue (allocation of third party transactions

• Increase in infrastructure assets (result of the re-evaluation of assets (R63bn)

• Increase in depreciation

Progress in terms of action plan

• Project Sakhile (Infrastructure assets) – have been able to verify and value infrastructure assets. Captured on interim asset register. Account for land of R15m. The servitudes for Eskom, Sasol and Tugela Vaal schemes are accounted for. (was R39bn now R63bn)

• Moveable assets – All asset register have been compiled and are being loaded on BAUD

• Lease and intangible register has been compiled.

• Accounting policies and processes have been developed and will be implemented during 2008/09.

Progress in terms of action plan (continue)

• Siyanqoba – Unallocated deposits have been reduced

• SAP refinement – the process of refining the SAP system is an ongoing process within the department.

Financial Improvement Projects for 2008/09

• Development of asset management plans (Sakhile)

• Maintenance of asset management register

• Filling of vacancies

• Implementation of financial policies and process (Siyanqoba)

Financial Improvement Projects for 2008/09

• Development of asset management plans (Sakhile)

• Maintenance of asset management register

• Filling of vacancies

• Implementation of financial policies and process (Siyanqoba)

Use of PSP’s

Branch 2005/06 2006/07 2007/08

# Amount # Amount # Amount

Corporate Services 12 9 063 092 10 53 526 491 9 17 133 057

Finance 8 31 893 455 11 72 344 929 7 38 211 815

Policy & Regulation 83 88 336 967 109 213 207 501 60 125 891 033

Regions 46 83 883 256 49 187 919 449 32 378 117 963

NWRIA 9 71 139 472 16 127 392 286 15 123 321 797

Forestry 10 2 502 982 17 7 039 699 12 7 202 511

Director-general 8 2 051 838

168 286 819 224 212 661 430 355 143 691 930 014

Core functions of PSP’s

Branch Core functionsCorporate Services • Implementation of turnaround strategy

• IT Services• Technical support for building

maintenance• Technical support for legal services• Employee wellness project

Finance • SAP training• Moveable assets• Project Sakhile• Project Siyanqoba• Provision of financial resources

Core functions of PSP’s Branch Core functionsRegions • Bucket Eradication

• Sanitation (schools & clinics)• Working for Water• Working of Fire• Technical support – regions and local

government

Policy and Regulation • Establishment of CMA’s• Water Quality Management• Regulatory framework• Water Services Provisions• Feasibility studies

Core functions of PSP’s

Branch Core functions

NWRIA • Dam Safety projects• Risk assessments• Construction

Forestry • Lease contracts• Development of BBBEE charter

Reason for increase in use of PSP’s

Branch 2005/06 2006/07 2007/08

# Amount # Amount # Amount

Total 168 286 819 224 212 661 430 355 143 691 930 014

% Increase 26.1 130.6 (32.5) 4.6

• Lack of skills and capacity• Nature of assignments – complex and technical• Requires specialist and experts – high cost• Short term projects• Process to appoint a PSP is less complex than recruitment

Steps to reduce usage of PSP’s

• Finalisation of structures• Filling of vacancies with suitable candidates• Empowering and capacitating staff• Retention strategy• Implementation of computerised systems

Questions ????