COMMENTS ON THE REPORT OF THE AUDITOR-GENERAL ON THE FINANCIAL
STATEMENTS OF DEPARTMENT OF WATER AFFAIRS AND FORESTRY FOR THE
YEAR ENDED 31 MARCH 2002
The same numbering has been used as it appears in the Annual Report of the Department of Water Affairs and Forestry for the year ended 31 March 2002.
3.1 INCLUSION OF TRANSACTIONS AND/OR INFORMATION RELATING TO THE DEPARTMENT'S TRADING ENTITIES IN THE FINANCIAL STATEMENTS AND NOTES TO THE FINANCIAL STATEMENTS OF THE VOTE (PAGE 105)
REPLY: This problem was identified before the audit was done and a process was initiated to create three separate budget structures to run on BAS as well as three additional separate bank accounts for the three trading accounts. During that time, the Department was at an advanced stage of migrating from the Financial Management System (FMS) to the Basic Accounting System (BAS). National Treasury is the custodian of both systems and are in charge of the process of moving all Departments to the new system (BAS).
We immediately approached the Reserve Bank for the creation of the three additional banking accounts in anticipation of the creation of the three structures coupled with a move from FMS to BAS on 1stApril 2002. Accounts no's 8033-268-2, 8033-284-6 and 8033-285-4 were opened (See annexure A). On the 14th March 2002, National Treasury informed us by letter (Annexure B) about the postponement of this move to July 2002, which date was also later postponed to 1st April 2003 (Annexure C).
During this time and because of the uncertainty, the Department could only wait. In the meantime, the bank accounts with the Reserve Bank are standing idle with a minimal interest being charged the Department for maintaining these accounts. Because of Forestry restructuring, the Industrial Plantations Trading Account has been closed as most of its transactions have been transferred.
We hope to be able to separate the accounts as of 1st April 2003 as per processes that are already at an advanced stage now. Because of the delays of moving over to BAS, the Department is in the process of acquiring a separate system to run the Equipment Trading account on accrual basis as a pilot until BAS is fully operational and this will be made to include the Water Trading Account should there be further delays.
3.2 SUPPORTING EVIDENCE NOT SUBMITTED DURING THE AUDIT (PAGE 106)
REPLY: The amount ofR13,6 million mentioned in the report consists of the following:
(a) R3 491 691,20 (Regional Office: North West)
The indicated amounts as per the audit query do not match the amounts on batch number 0244 with distribution 3245. These amounts are still being reconciled.
(b) R28 317,60 (Forestry Head Office)
In this case the Department was not able to submit contract W7466 to the auditors on the due date. Relevant documents in respect of contract W7466 have been obtained and have now been submitted to the auditors.
(c) R1 482 964,87 (Pretoria West Stores)
The audit query mentioned contract W7385as the problematic one but the information within it did not match the questions asked. After a long time, it was discovered that this tender was actually never awarded.
(d) R243 333,83 (Forestry Head Office)
Payment was made to the University of Stellenbosch in terms of an agreement and therefore procurement procedures were followed (See annexure D). The supporting documents were, however, submitted to the auditors after the due date.
(e) R437 459,78 (Nelspruit Forestry)
The auditors queried payment which was done after expiry date of contract W6018C. Although payment was done outside the contract period the work was done within the contract period and this is in order (See annexure F)
(f) Pretoria West Stores: RI 400 562,85:
Same as in (c) above.
(g) Polokwane Regional Office: R6 431 431,35:
The auditors queried payments to Metsico on the basis that no appointment documents could be found. This matter has been followed up and it has been found that an agreement does exist between the Department and Metsico (as the lead company). Payments have correctly been made to Metsico as the lead company. The supporting documents were submitted to the auditors after the cut off date (See annexure F).
(h) King Williams Town: R124 507,93: Supporting documents for the amount of R124 507,93 have now been found and submitted to the auditors.
3.3 RECOVERABLE REVENUE ACCOUNT (PAGE 106)
The relevant documents have now been submitted.
5.1.1 INADEQUATE CONTROL OVER CLEARING OF SUSPENSE ACCOUNTS (PAGE 106)
To date, progress in this regard has been made as follows:
The amounts have now been cleared to the correct accounts.
·
Most of the amounts have been written off The amount of R795 617,14 has been written off already. In a few cases where the amounts have not been written off; the debtors have been located and recovery seems very possible.
·
Internal systems were not adequate enough to enable recovery from pension payouts. This matter is now being addressed.
5.1.2UNAUTHORIZED EXPENDITURE (PAGE 106).
The overspending was due to the restructuring of Forestry which was scheduled to be completed by the end of June 2001. As a result of delays, the following additional costs which were not budgeted for were incurred:
·
Salaries were paid to 1 555 employees for July 2001.
·
Between July and October 2001 salaries were paid to more than 950 employees.
·
From November 2001 to March 2002 salaries were paid to more than 550 employees.
·
Higher leave values and pro-rata bonuses were also paid and this was not anticipated.
5.1.3 RECOVERABILITY OF STATE LOANS TO CERTAIN WATER BOARDS, IRRIGATION BOARDS AND MUNICIPALITIES (PAGE 107)
A Government loan was granted to the Kalahari West Water Board to build a stock watering scheme. Investigations by the Provincial Department of Agriculture were carried out and it was determined that users can not repay their total annual installments. The Department has as an interim measure:-
(a) negotiated affordable levies with the Association provided that the levies are increased annually.
(b) agreed that the difference between actual instalments and annual income for redemption purposes will remain an obligation of the Association until a negotiated solution have been reached.
5.1.4 PAYMENTS MADE IN RESPECT OF GUARANTEED LAND AND AGRICULTURAL DEVELOPMENT BANK LOANS (PAGE 107)
This amount is largely attributed to Kalahari East Water User Association that received a guaranteed loan from the Land Bank. The circumstances of this scheme is similar to that of Kalahari West as explained above and the Department has as an interim measure negotiated similar repayments provided that the difference between actual instalments and annual income will be paid under the guarantee. The Associations will remain responsible for the shortfalls until a final negotiated solution has been reached.
5.1.5 OTHER INTERNAL CONTROL WEAKNESSES (PAGE 107)
·
A fraud prevention plan has now been developed and has also been approved by National Treasury (See annexure I).
·
Some of the cases mentioned here refer to periods before the introduction of the PFMA/ TR where debts originating from no evil intentions were exempted from interest charges. In other cases, interest was omitted but these cases have since been identified and interest re-calculated. Where recoveries could not be effected, amounts have been written off
·
Salary deductions like those indicated are done automatically by the different institutions without any control by the Department. As PERSAL is a transversal system managed and operated by National Treasury, a letter was written to them for intervention (Annexure K) and they have replied to indicate that they are trying to manage the situation (Annexure L).
INFORMATION SYSTEMS AUDIT (PAGE 107)
Comment: Logis runs from SITA equipment. The system belongs to the National Treasury.
Department of Water Affairs and Forestry is only a user and is not responsible for setting-up
the Disaster Recovery Plan, User Accounts Management Standards and procedures. The
Auditor-General has been notified of this situation on numerous occasions.
5.1.7 SUBMISSION OF FINANCIAL STATEMENTS AND SUPPORTING INFORMATION (PAGE 107)
It is true that the Department was not able to provide all the information during the audit. The reason for this is that there was not enough time from when a query was identified and when the response was needed. In other instances, only a day or two was provided. The Department is spread over nine (9) provinces and has over 52 District Offices and Area Offices and it was not easy to get information very quick. There were over 600 queries issued of which a few were not fully dealt with at the end of the audit. In the previous financial year audit (2000/01) the audit queries were less than 60 and in this current audit, the Department was not expecting this sudden increase of inquiries, a lot of which resolved within the audit period.
COMMENTS ON THE REPORT OF THE AUDITOR-GENERAL ON THE FINANCIAL STATEMENTS OF THE WATER TRADING ACCOUNT FOR THE YEAR ENDED 31 MARCH 2002
The same numbering has been used as it appears on the "Report of the Auditor-General to Parliament on the financial statements of the Water Trading Account for the year ended 31 March 2002".
3.1 BASIS OF PREPARING ANNUAL FINANCIAL STATEMENTS (PAGE 139)
REPLY: Unfortunately the computerised Financial Management System (FMS), which the Department has been using to manage the Water Trading Account is cash based. Our preparations to move over to Basic Accounting System (BAS) are at a very advance stage as the Department will move over to BAS on 1 April 2003. It is hoped that BAS will enable the Department to manage the Water Trading Account in terms of accrual accounting principles.
3.2 SEPARATE RECORDS FOR THE VOTE AND WATER TRADING ACCOUNT (PAGE
139)
REPLY: This problem was identified before the audit was done and a process was initiated to create three separate budget structures to run on BAS as well as three additional separate bank accounts for the three trading accounts. During that time, the Department was at an advanced stage of migrating from the Financial Management System (FMS) to the Basic Accounting System (BSS). National Treasury is the custodian of both systems and are in charge of the process of moving all Departments to the new system (BAS).
We immediately approached the Reserve Bank for the creation of the three additional banking accounts in anticipation of the creation of the three structures coupled with a move from FMS to BAS on 1 April 2002. Bank accounts no's 8033-286-2, 8033-284-6, and 8033-285-4 were opened. On the l4~ March 2002, National Treasury informed us by letter about the postponement of this move to July 2002, which date was also later postponed to ~ April 2003 (Annexure C).
During this time and because of the uncertainty, the Department could only wait. In the meantime, the bank accounts with the Reserve Bank are standing idle with a minimal interest being charged the Department for maintaining these accounts. Because of Forestry restructuring, the Industrial Plantations Trading Account has been closed as most of its transactions have been transferred.
We hope to be able to separate the accounts as of 1stApril 2003 as per processes that are already at an advanced stage now. Because of the delays of moving over to BAS, the Department is in the process of acquiring a separate system to run the Equipment Trading account on accrual basis as a pilot until BAS is fully operational and this will be made to include the Water Trading Account should there be further delays.
3.3 SUPPORTING EVIDENCE NOT SUBMITTED DURING THE AUDIT (PAGE 139)
REPLY: The amount of R12,5 million mentioned in the report consists of the following:
The service provider, namely BKS Consuitburo, is registered on the Department's Professional Services Provider (PSP) database and for amounts of less than R30 000, the Departmental policy allows appointments of PSP's from the database without going out on quotations. This information has been submitted to the auditors after the cut off date (See annexure M).
(b) Limpopo (Thohoyandou): R44 132,00:
According to the Department's records from batch 0760 at distribution 3239, there is no voucher with an amount of R44 132,00 paid as noted in the query. The amount could, thus, not be successfully followed up (See Annexure U).
(c) Limpopo (Thohoyandou): R435 316,00:
The officials that authorised these payments were Acting District Managers at that time and were duly appointed and authorised to perform those duties and as such, their actions were not irregular. This information has been submitted to the auditors after the cut off date.
(d) Limpopo (Tzaneen): R373 990,00:
The payments were done under the delegation for flood damages. Approval for the appointment of a Professional Service Provider (PSP) has also been obtained from the PSP committee and thus is not irregular expenditure. This information has been submitted to the auditors after the cut off date.
(e) Western Cape Region: R11 636 279:
There is an agreement between the Department and the Western Cape Conservation Board as an implementing agent on the Working for Water program, which was approved before expenditure took place. The payments identified by the auditors are thus not irregular. This information has been submitted to the auditors after the Cut off date (See annexure N).
5.1.1 REVENUE AND DEBTOR'S MANAGEMENT SYSTEM (PAGE 140)
The Department did not have a uniform billing system and was operating different manual systems. The development of the WARMS was intended to ensure uniformity. Although WARMS is currently only used for Water Resources functions the Department is looking at extending it to other Department functions to cater for a wide range of revenue and debtors management.
5.1.2 RECOVERABILITY OF DEBTS LIMPOPO REGION (1)AGE 140)
Despite all the invoices that were sent to the municipalities, the region has not managed to collect adequate revenue. In its attempt to recover the outstanding debts the regions has taken the following steps;
Letters of demand have been sent to all 11 municipalities according to Water Services
Act.
The problem was also elevated to the level of the MEC for Local Government in the
region.
Municipalities are raising the following excuses as reasons for non-payment:
·
Due to the delay on the demarcation of powers and functions by the minister of Provincial and Local government, municipalities were not authorized to be water services authorities, as a result of that Municipalities have been reluctant to sign Water Service Provider agreements with the Department of Water Affairs and Forestry.
·
Limpopo is predominantly rural, municipalities do not collect any revenue due to resistance by the communities to pay for services.
Municipalities have questioned the authenticity of the invoices since there were no meters.
Initially the department reported that municipalities were refusing to sign the service provider agreements with the department. The regional office has actually managed to sign the service provider agreements with all of the municipalities with the exception of Waterberg. Regarding the issue of outstanding debts, the matter has been raised with the Department of Provincial and Local Government and National Treasury to find a solution to this problem. DWAF is hoping that in the spirit of co-operative governance the three departments involved should be able to resolve the matter.
The position of the department of water Affairs in the matter is that:
·
Municipalities have been collecting revenue, but the money has not been paid to the Department of Water Affairs and Forestry.
·
Due to the fact that the equitable share is an unconditional grant, this has actually assisted the municipalities to escape some of their responsibilities.
COMMENTS ON THE REPORT OF THE AUDITOR-GENERAL ON THE FINANCIAL STATEMENTS OF THE INDUSTRIAL PLANTATIONS TRADING ACCOUNT FOR THE YEAR ENDED 31 MARCH 2002
The same numbering has been used as it appears on the Report of the Auditor-General to parliament on the financial statements of the Industrial Plantations Trading Account for the year ended 31 March
2002".
3.1 BASIS OF PREPARING ANNUAL FINANCIAL STATEMENTS (?AGE 143)
REPLY: This problem was identified before the audit was done and a process was initiated to create three separate budget structures to run on BAS as well as three additional separate bank accounts for the three trading accounts. During that time, the Department was at an advanced stage of migrating from the Financial Management System (FMS) to the Basic Accounting System (13AS). National Treasury is the custodian of both systems and are in charge of the process of moving all Departments to the new system (BAS).
We immediately approached the Reserve Bank for the creation of the three additional banking accounts in anticipation of the creation of the three structures coupled with a move from FMS to BAS on 1st April 2002. Bank accounts no's 8033-286-2, 8033-284-6 and 8033-2854 were opened. On the 14thMarch 2002, National Treasury informed us by letter (Annexure B) about the postponement of this move to July 2002, which date was also later postponed to 1st April 2003 (Annexure C).
During this time and because of the uncertainty, the Department could only wait. In the meantime, the bank accounts with the Reserve Bank are standing idle with a minimal interest being charged the Department for maintaining these accounts. Because of Forestry restructuring, the Industrial Plantations Trading Account has been closed as most of its transactions have been transferred.
We hope to be able to separate the accounts as of 1st April 2003 as per processes that are already at an advanced stage now. Because of the delays of moving over to BAS, the Department is in the process of acquiring a separate system to run the Equipment Trading account on accrual basis as a pilot until BAS is fully operational and this will be made to include the Water Trading Account should there be further delays.
3.2 SEPARATE RECORDS FOR THE VOTE AND INDUSTRIAL PLANTATIONS TRADING ACCOUNT PAGE 143)
REPLY: This problem was identified before the audit was done and a process was initiated to create three separate budget structures to run on BAS as well as three additional separate bank accounts for the three trading accounts. During that time, the Department was at an advanced stage of migrating from the Financial Management System (FMS) to the Basic Accounting System (BAS). National Treasury is the custodian of both systems and are in charge of the process of moving all Departments to the new system (BAS).
We immediately approached the Reserve Bank for the creation of the three additional banking accounts in anticipation of the creation of the three structures coupled with a move from FMS to BAS on 1st April 2002. The following three bank accounts were opened. On the 14th March 2002, National Treasury informed us by letter (Annexure A) about the postponement of this move to July 2002 (Annexure D), which date was also later postponed to 15t April 2003 (Annexure E). During this time and because of the uncertainty, the Department could only wait. In the meantime, the bank accounts with the Reserve Bank are standing idle with a minimal interest being charged the Department for maintaining these accounts. Because of Forestry restructuring, the Industrial Plantations Trading Account has been closed as most of its transactions have been transferred.
We hope to be able to separate the accounts as of 1st April 2003 as per processes that are already at an advanced stage now. Because of the delays of moving over to BAS, the Department is in the process of acquiring a separate system to run the Equipment Trading account on accrual basis as a pilot until BAS is fully operational and this will be made to include the Water Trading Account should there be further delays.
3.3 SUPPORTING EVIDENCE NOT SUBMITTED DURING THE AUDIT (PAGE 144)
REPLY: The amount of R4,7 million consists of the following:
(a) Pietermaritzburg Forestry: R71 216,92
After investigation it was found that tender W7466 for the appointment of Lake
Sibayi Community Services CC has been approved by the Departmental Control
Connuittee ([)CC) on 16 October 2000 and thus is not an irregular expenditure. This
information was submitted to the Auditors after the cut off date (See Annexure P).
(b) Pietersburg Forestry: R19 442, 70:
The Department obtained the concerned documents and has handed them over to the auditors after the cut off date.
(c) Nelspruit Forestry: R2 977 173,39:
Proper procurement procedures have been followed. The Department obtained a general approval from National Treasury (Office of the State Tender Board) to make use of the services of SAFCOL as a contractor. The Board authorised the Department to maintain the continued membership of Regional Fire Fighting Association and to provide for flying time for maximum period of 3 years on a year to year basis (See Annexure Q).
(a) Nelspruit Forestry: R1 499 262,52:
The same as (c) above.
(e) Sibasa Forestry: R46 065,00:
Proper procurement procedures have been followed with both payments namely: ~0
850,00 and R25 215,00 as three quotations were obtained and thus are not irregular expenditure (See annexure R).
(f) Kokstad Forestry: R9 120,00:
The Department found that this payment was done within delegation 3.1 of Annexure o of the Procurement delegations and is thus not irregular. This information has been submitted to the auditors after the cut off date.
(g) Forestry: Eastern Cape: R23 730,00:
According to the mentioned batch and distribution in the audit query, it is in fact a payment to SAFCOL and not to Ngubombini as is mentioned in the query and the Department can thus not comment. This information has been submitted to the auditors after the cut off date.
(h) Nelspruit Forestry: R38 876,00:
Proper procurement procedures have been followed as the payments had been done in accordance with delegations 3.1 and 3.2. The payments are thus not irregular. This information has been submitted to the auditors after the cut off date.
(i) Sibasa Forestry: R7 000,00:
Proper procurement procedures have been followed as the amount does not exceed R1O
000,00 and 3 quotations are thus not necessary as per Departmental procurement rules.
This information has been submitted to the auditors after the cut off date (See annexure
S).
(j) Kokstad Forestry: R23 315,00:
Proper procurement procedures were followed as payments were made in accordance with delegation 3.2. Payments are thus not irregular. This information has been submitted to the auditors after the cut off date.
5.1.1 DISPOSAL OF GOVERNMENT FORESTS (PAGE 144)
REPLY: The transfer of category A plantations has been finalised on 31 October 2001.
COMMENTS ON THE REPORT OF THE AUDITOR-GENERAL ON THE FINANCIAL STATEMENTS OF THE EQUIPMENT ACCOUNT FOR THE YEAR ENDED 31 MARCH
2002
The same numbering has been used as it appears on the "Report of the Auditor-General to parliament on the financial statements of the Equipment Account for the year ended 31 March 2002".
3.1 BASIS OF PREPARING ANNUAL FINANCIAL STATEMENTS (PAGE 147)
REPLY: Unfortunately the computerised Financial Management System (FMS), which the Department has been using to manage the Water Trading Account is cash based. Our preparations to move over to Basic Accounting System (BAS) are at a very advance stage as the Department will move over to BAS on 1 April 2003. Once we have moved over to BAS we will investigate the extent to which BAS can enable us to manage the Equipment Account based on the accrual principle.
3.2 SEPARATE RECORDS FOR THE VOTE AND EQUIPMENT ACCOUNT (1)AGE 147)
REPLY: This problem was identified before the audit was done and a process was initiated to create three separate budget structures to run on BAS as well as three additional separate bank accounts for the three trading accounts. During that time, the Department was at an advanced stage of migrating from the Financial Management System (FMS) to the Basic Accounting System (BAS). National Treasury is the custodian of both systems and are in charge of the process of moving all Departments to the new system (BAS).
We immediately approached the Reserve Bank for the creation of the three additional banking accounts in anticipation of the creation of the three structures coupled with a move from FMS to BAS on 1stApril 2002. The following three bank accounts were opened. On the l4~ March 2002, National Treasury informed us by letter (Annexure A) about the postponement of this move to July 2002 (Annexure D), which date was also later postponed to 1st April 2003 (Annexure E).
During this time and because of the uncertainty, the Department could only wait. In the meantime, the bank accounts with the Reserve Bank are standing idle with a minimal interest being charged the Department for maintaining these accounts. Because of Forestry restructuring, the Industrial Plantations Trading Account has been closed as most of its transactions have been transferred.
We hope to be able to separate the accounts as of 1st April 2003 as per processes that are already at an advanced stage now. Because of the delays of moving over to BAS, the Department is in the process of acquiring a separate system to run the Equipment Trading account on accrual basis as a pilot until BAS is fully operational and this will be made to include the Water Trading Account should there be further delays.
5.1.1 INFORMATION SYSTEM AUDIT (PAGE 148)
REPLY: Progress in respect of the Construction Equipment Management System (CEMS) is as follows:
(a) Disaster recovery plan:
Data backups are taken weekly on the complete systems and daily incremental backups are taken. The risk of data loss is therefore minimized. The system is fully documented, resources are competent to develop additional requirements and support the system from both a technology and functional point of view. A succession plan exists for the operation of the system. As DWAF outsource its IT services, a programme needs to be established for the transfer of knowledge to the Outsourcing Contractor.
(b) System's availability: No down time was experienced on the system.
(c) Security violations:
The system's enhancement is still in progress. The intention is to have the security violations being logged and the Principal User following up on each violation.
(d) Unique user identifications:
The system's enhancement was attended to and all access control is validated via unique passwords that comply with the standards set by NIA.
(e) Programmers having access to the live environment:
It is a necessity that designated IS staff have access to the live environment, specifically for the purpose of correcting application failures, implementation of enhancements and providing functional support. Their passwords are limited to read only on the production version of the application.
COMMENTS ON THE REPORT OF THE AUDITOR-GENERAL ON THE FINANCIAL STATEMENTS OF THE NATIONAL FOREST RECREATION AND ACCESS TRUST FOR THE YEAR ENDED 31 MARCH 2002
The same numbering has been used as it appears on the "Report of the Auditor-General to parliament on the financial statements of the National Forest Recreation and Access Trust for the year ended 31 March 2002".
4.1.1 OPERATION OF THE NATIONAL FOREST RECREATION AND ACCESS TRUST (PAGE 154)
REPLY: Since June 2002 the Department requested a process in which proper procedures of advising the Minister in the use of the Trust could be followed. Given that at that time the term of office of the Committee on Forest Access had expired, the Department could not take forward the process to its desired completion. What was possible to do though was the development of a policy document that could assist the Committee on Forest Access to finalise its advice to the Minister.
The policy document has been completed and what is left is for it to be adopted as a policy document of the Department and submitted to the Committee on Forest Access when it meets for the first time sometime in April 2003.
It is anticipated that the policy document in question will now fast tract the advice to the Minister on the usage of this Trust for the benefit of all South Africans. It is envisaged as well in the document that this Trust will be able to sustain itself once up and running in terms of the recommendations in the policy document.
Therefore the Department would request further time to put everything in order, bearing in mind that it was completely impossible to finalise this without the advice of the Committee on Forest Access as bound by the National Forest Act, 1998 (Act no.84 of 1998).
4.1.2 LISTING OF NATIONAL FOREST RECREATION AND ACCESS TRUST AS A PUBLIC ENTITY IN TERMS OF THE PUBLIC FINANCE MANAGEMENT ACT (?AGE 155)