Department Financial Turnaround Plan: briefing

Meeting report

WATER AFFAIRS AND FORESTRY PORTFOLIO COMMITTEE
8 June 2005
DEPARTMENT FINANCIAL TURNAROUND PLAN: BRIEFING

Chairperson: Ms C September (ANC)

Documents handed out:
Department briefing on Financial Turnaround Strategy
Department use of consultants

SUMMARY
The Department briefed the Committee on their financial turnaround strategy that encompassed new forms of accounting procedures and financial management. These measures were designed to address shortcomings in the last qualified report of the Auditor-General. The strategy dealt with challenges relating to financial capacity, financial policy and systems, and management related problems.

Members were extremely concerned about the lack of financial capacity. They felt incumbent managers needed to be appropriately qualified and trained before being appointed.

MINUTES

Department briefing
Mr M Muller, Department Director-General, stated that the financial turnaround strategy encompassed new accounting procedures like accrual accounting. This innovation was in keeping with the Public Finance Management Act (PFMA) which governed government financial management.

Mr J Mabala, Department Chief Financial Officer, explained that the strategy dealt with challenges that related to financial capacity, financial policy and systems, and management-related problems.

Discussion
Mr M Masala (ANC) asked whether there had been an asset register to manage and control the assets of the Department. Mr Mabala answered that there had been a register, but that the new auditing system required a new one to determine the depreciation of assets.

Mr M Sibuyana (IFP) and Mr D Maluleke (DA) enquired whether managers had been trained, or only placed in managerial positions without sufficient training, in order to improve Employment Equity statistics.

Mr Muller responded that managers needed to be trained in new accounting systems. The process of transformation had to accommodate the pace and rate of this change.

Mr Sibuyana and Mr Maluleke further enquired whether the Department had consulted with other countries to see how their Water Departments were run. This question was not answered.

Mr J Arendse (ANC) queried why the Department had taken so long to address areas of concern raised in the qualified audit report of the Auditor-General.

Mr Muller responded that, as the fourth largest state department, there had been management challenges regarding oversight and provision of reports.

Mr P Ditshetelo (UCDP) asked whether the Department had learned anything from the Auditor-General’s. Mr Muller answered that four and a half queries had successfully been dealt with out of five. That had thus been progress.

Mr Ditshetelo needed clarity on the Treasury’s requirements of ‘political will to drive the process’ and ‘buy-in…’ Mr Muller explained that transformation of public management required hard work. It was not a routine matter and that difficulties would lie ahead.

Ms C September (ANC) asked whether the Department was adhering to the PFMA. Mr Muller answered that managers needed to commit themselves to comply with the requirements.

Ms September wanted to know whether the Department’s human resource strategy and systems were advancing water provision. Mr Muller responded that they had been coping with the new requirements, but that it had been a systematic process, especially, in terms of training.

Mr S Simmons (NNP) requested reports on a quarterly basis. Mr Muller said that this would require political support and management input, but could be achieved to support the Committee’s oversight function.

Mr D Mabuya-Khulu (ANC) enquired whether internal minor audits had been undertaken to reduce costs. Mr Muller explained that external auditors had executed internal audits and had needed to be paid. The interim audit approach had been too time-consuming because the Department was so large.

Mr Sibuyana was concerned that managers had not been properly qualified and trained. Mr Muller answered that interim appointments had augmented the skills base. The Department had experienced management and communication problems between regional managers and chief financial officers, and had been unable to process documents timeously.

Mr Arendse enquired whether the Department had been able to attract and retain staff. Was turnover hampering delivery? Mr Muller responded that there was a core staff of white professionals with thirty years of experience and institutional knowledge. Black professionals had two to three years of experience. The group had a high turn-over and presented a permanent challenge to government and the economy. It formed a natural part of transformation.

Ms D Van der Walt (DA) raised concern about the depreciation of assets. Mr Muller explained that reporting accounts received and value given had been difficult. The government had not worked on a depreciation basis. A sophisticated accounting system was needed, like accrual accounting in a natural resource department. How were assets like a forests, and water in dams, valued as inputs?

Ms Van der Walt wanted to know whether loans had been written off. Mr Muller answered that such loans had been inherited from the previous government. These loans had been written off after consultations with the National Treasury and the State Attorney. Due process had been followed.

Mr Mabuya-Khulu asked whether newly-appointed managers would start on 1 June or 1 July 2005. Mr Mabala responded that they would start work on 1 July.

Ms Van der Walt was concerned about the separation of accounts. Mr Mabala said that the separation of accounts had appeared in the Auditor-General’s report from 1 April 2004, and had not been part of the current report.

Mr Ditshetelo had proposed that the Committee accept the information and explanation of the Department in good faith. He also requested a list of loans that had been written off. Ms September further proposed that the Department include an account of how the budget had been spent in their Annual Report.

Committee minutes
Adoption of the Clerk’s minutes of 1 June 2005 was moved by Mr Arendse and seconded by Ms Van der Walt, with a minor technical amendment by Ms Van der Walt.

Adoption of the Clerk’s minutes of 3 June 2005 was moved by Mr Masala and seconded by Mr Maluleke. The minutes were adopted unanimously.

The meeting was adjourned.