DEPARTMENT: WATER AFFAIRS AND FORESTRY
PORTFOLIO COMMITTEE ON WATER AFFAIRS AND FORESTRY
QUARTERLY REPORT TO THE PORTFOLIO
COMMITTEE MEETING:
1. Vote 34 : Expenditure 2006/07
The expenditure
at the end of the 2006/07 financial year was 92,5% of the adjusted budget of
R4 660,303 million in comparison with the expenditure at the end of the
2005/06 financial year the Department had spent 94,45% of its adjusted budget
of R3 935,636 million as shown in the expenditure comparison below:
|
2005/06 Financial Year |
2006/07
Financial Year |
|||||
|
Programme |
Adjusted Allocation R’000 |
Actual Expenditure R’000 |
Percentage Spent % |
Adjusted Allocation R’000 |
Actual Expenditure R’000 |
Percentage Spent % |
|
Administration |
369 873 |
278 379 |
75.26% |
559 670 |
527 780 |
99.85% |
|
Water Resources
Management |
1 616 924 |
1 503 463 |
92.98% |
2 237 267 |
1 871 723 |
86.07 |
|
Water Services |
1 524 895 |
1 510 998 |
99.09% |
1 464 966 |
1 459 035 |
96.25% |
|
Forestry |
423 944 |
420 920 |
99.29% |
448 400 |
441 192 |
100% |
|
Theft and Losses |
|
|
|
|
|
|
|
Suspense Account |
|
|
|
|
|
|
|
Total |
3
935 636 |
3 146 996 |
94.45% |
4
660 303 |
4 310 179 |
92.5% |
The
under-expenditure of 7,5% is mainly as a result of the under-expenditure on the
De Hoop Dam project and the programme for the rehabilitation of dams. A request
has been submitted to National Treasury for the following roll-overs to the
2007/08 financial year which represents 6,7% of the un-expended budget:
Ø R260 million to
continue the implementation of De Hoop Dam;
Ø R40 million to
continue with the rehabilitation of dams to comply with safety standards; and
Ø R14 million to
finalise the transfer of staff to municipalities and cater for the “once off
staff” costs.
2. Vote 34 : Estimates of National Expenditure 2007
The Department’s
budget was presented to the following committees of Parliament:
Ø Portfolio
Committee on Water Affairs and Forestry on 3 May 2007;
Ø Select Committee
on Land and Environmental Affairs on 8 May. 2007.
The budget was
then subsequently tabled in the National Assembly on
|
|
|
2007/08 |
2008/09 |
2009/10 |
||||
|
R thousand |
To be appropriated |
|
|
|
||||
|
MTEF allocations |
|
|
|
|
||||
|
Administration |
502 110 |
524 384 |
565 995 |
|
||||
|
Water Resources Management |
2 430 032 |
3 221 192 |
4 313 760 |
|
||||
|
Water Services |
1 913 660 |
2 419 150 |
2 527 591 |
|
||||
|
Forestry |
460 545 |
440 258 |
463 962 |
|
||||
|
Total |
5 306 347 |
6 604 984 |
7 871 308 |
|
||||
|
Direct charges against the National Revenue Fund |
–
|
– |
– |
|
||||
|
Total expenditure estimates |
5 306 347 |
6 604 984 |
7 871 308 |
|
||||
|
Economic classification |
|
|
|
|
||||
|
Current payments |
3 175 667 |
3 656 545 |
4 114 803 |
|
||||
|
Transfers and subsidies |
2 030 204 |
2 733 132 |
3 532 538 |
|
||||
|
Payments for capital assets |
100 476 |
215 307 |
223 967 |
|
||||
|
Total expenditure estimates |
5 306 347 |
6 604 984 |
7 871 308 |
|
||||
The 2007 MTEF
allocations include amounts already in the baseline and new allocations of R505
million for 2007/08, R975 million for 2008/09 and R1 690 million for
2009/10, for spending on the following new policy priorities:
Ø Upgrading and
expansion of the National surface water gauging network (R10 million for
2007/08, R20 million for 2008/09 and R30 million for 2009/10);
Ø Working on Fire
(R10 million for 2007/08, R20 million for 2008/09 and R30 million for 2009/10);
Ø Refurbishment of
infrastructure (water schemes) (R20 million for 2007/08, R25 million for
2008/09 and R30 million for 2009/10);
Ø Bulk
infrastructure (conditional grant to Local Government) (R300 million for
2007/08, R450 million for 2008/09 and R650 million for 2009/10); and
Ø An increase in
the allocation for the social component of the De Hoop Dam downstream projects
(phases 2B to 2G) (R50 million for 2007/08, R250 million for 2008/09 and R600
million for 2009/10).
Ø Schools and
clinics water supply and sanitation (R105 million 2007/08, R210 million 2008/09
and R350 million 2009/10).
3. Vote 34 : Expenditure Report
The expenditure on Vote 34
as at
|
|
Appropriated |
Expenditure YTD |
Available |
Utilised |
|
SUMMARY : |
R’000 |
R’000 |
R’000 |
|
|
Minister and Personnel |
8,990 |
1,381 |
7,609 |
15% |
|
Main Management |
69,593 |
9,883 |
59,710 |
14% |
|
Branch: Corporate Services |
359,927 |
50,900 |
309,027 |
14% |
|
Branch: Finance |
63,600 |
8,833 |
54,767 |
14% |
|
Branch: Policy and Regulations |
597,801 |
43,707 |
554,094 |
7% |
|
Branch: National Water Resource
Infrastructure |
1,038,049 |
173,111 |
864,938 |
17% |
|
Branch: Operation Regions |
3,168,387 |
364,318 |
2,804,069 |
11% |
|
Theft and Losses |
|
347 |
(347) |
0% |
|
Total |
5,306,347 |
652,480 |
4,653,867 |
12% |
|
Economic Classification |
|
|
|
|
|
CURRENTS PAYMENTS |
|
|
|
|
|
Compensation of employees |
1,098,896 |
191,180 |
907,716 |
17% |
|
Goods and services |
2,098,053 |
148,543 |
1,949,510 |
7% |
|
Interest and Rent on land |
718 |
276 |
442 |
38% |
|
Financial transaction in assets
& liabilities |
- |
347 |
(347) |
0% |
|
Unauthorised expenditure |
- |
- |
0 |
0% |
|
TRANSFER AND SUBSIDIES TO: |
|
|
|
|
|
Province and Municipalities |
550,000 |
83,866 |
466,134 |
15% |
|
Departmental agencies and accounts |
1,325,839 |
220,267 |
1,105,572 |
17% |
|
Universities and Technikons |
|
|
0 |
0% |
|
Foreign Govt & International
Organisations |
525 |
|
525 |
0% |
|
Public Co operations & Private
Enterprises |
103,632 |
17 |
103,615 |
0% |
|
Non-Profit Institutions |
340 |
|
340 |
0% |
|
Households |
27,868 |
3,786 |
24,082 |
14% |
|
PAYMENTS FOR CAPITAL ASSETS |
|
|
|
|
|
Building & Other fixed
structures |
23,625 |
1,113 |
22,512 |
5% |
|
Machinery &Equipment |
74,352 |
2,861 |
71,491 |
4% |
|
Cultivated assets |
|
|
0 |
0% |
|
Software & and other intangible
assets |
2,499 |
224 |
2,275 |
9% |
|
Land and subsoil assets |
|
|
0 |
0% |
|
Total: |
5,306,347 |
652,480 |
4,653,867 |
12% |
The Department
has spent 12,3%( R 652,480 million) of its budget of R5 306,347 million.
With nine weeks of time elapsed (17,3%, week 9 of 52), the lag in expenditure
on a straight line basis is 5% which represents an approximate 2,5 week time
lag.
4. Audit 2006/07
The 2006/07
Audit commenced in November 2006 albeit that the Audit Strategy was only
approved by the Audit Committee on the
The audit is
progressing and the interim audit has been completed and all interim management
letters have been received. The final audit commenced on
The Audit
Steering Committee, which was established to monitor and oversee the audit, meets
on a weekly basis. This committee includes officials from both the Department
and the Office of the Auditor-General. Sub-Committees have also been
established in the Regions to ensure that the audit runs smoothly. Processes
have been put in place and resources secured to ensure that all queries are
followed up timeously and responses provided to the Office of the
Auditor-General.
5. Progress made in dealing with the Outcome of the 2005/06
Audit
5.1
Equipment Trading Account
The Equipment
Trading Account has been closed and consolidated with the Water Trading
Account.
Construction Equipment
Management System:
As a result of
the closure of the Equipment Trading Account, the Construction Equipment Management
System (CEMS) has been discontinued and all construction equipment is now recorded
and managed through the SAP asset module. This transition took place on
5.2
Water Trading Account
The purpose of
the Water Trading Account of the Department of Water Affairs and Forestry is to
ensure the availability of water to key water users in
The water
trading account is divided into four components. These are designed to reflect
the type of service provided and also the probable future institutional homes
of the activity concerned. The four sub-accounts are:
Ø
Component
1: Integrated Water Resource Management: This component
funds the implementation of water resources management activities in each water
management area, including resource quality management, control and
authorisation of water use, and promotion of water conservation measures. It
also includes the portion of the Working for Water budget that is derived from
revenue from water users.
Ø
Component
2: Integrated Systems: Where locally available water
resources in a particular area cannot meet the demand, water is transferred
from water-rich areas. The management, operation and maintenance of these
schemes as integrated systems, as well as the revenue collected from water
users, are reflected in this component. One example of this is the
Ø Component 3: Bulk Water Supply: A number of water resources
schemes (dams) are operated as stand-alone schemes and do not form part of an
integrated system. The supply of water is mostly in bulk to different
water-user groups, but the agricultural sector is by far the largest consumer.
Expenditure in this component covers operations and maintenance as well as
management costs, and revenue is earned through the sales of water, mostly in
bulk.
Ø Component 4:
Equipment: This provides for equipment for the construction and
maintenance of Government Water Schemes. This component was previously reported
separately as the Equipment Trading Account which was closed and consolidated
with the Water Trading Account.
Two main sources of funding are
currently available to cover spending under the water trading account;
Ø
Revenue stream generated by a water resource management
charge levied on all registered water users (component 1).
Ø
Revenue collected through the sale of water in bulk to
various institutions and individuals (components
2 and 3).
Any shortfall is funded
through allocations from the Vote 34.
The implementation of the revised
national water pricing strategy will further improve the financial state of the
water trading account. The application of the revised tariff structures in some
areas has already resulted in improved revenue.
Water Trading Account
financial reporting systems:
In order to overcome the difficulties that have been
experienced in the application of the transversal systems for the specific
business needs of the Department with regard to the Trading Entity, the
Department has, with effect from 4 October 2006, implemented a new ERP system
(SAP) for the Trading Entity to enable reporting in accordance with GAAP. It
must be noted that while the Department has “cut over” to SAP, the Department
used the transversal system of BAS from
The implementation of SAP will enable the Department to fully comply
with the provisions of the Public Finance Management Act and prepare the
financial statements in accordance with the Generally Accepted Accounting
Practice. Furthermore the Department is now able to fully implement accrual
accounting for the trading activities and for the first time be able to comply
with the provisions of section 40(1) of the Public Finance Management Act,1999
(Act 1 of 1999) (PFMA).
While SAP has been fully implemented in the Department, all
officials operating on the system are required to undergo ongoing training to
upgrade their skills in the application of the system.
Policies and procedures and business processes are being compiled to
ensure the proper initiation, approval, recording and disclosure of all
financial transactions. A full verification of the Department’s assets is being
undertaken and the preparation of asset registers which comply with GAAP will
be maintained on SAP.
Accounting records:
With the implementation
of SAP it is expected that the records which are maintained and produced
through the system will lead to progressively improved reporting and
disclosures from 2006/07 Annual Financial Statements going forward. The
reconciliation and conversion of all data from BAS into the SAP for the
Department’s trading activities was completed in March 2007.
Asset Registers:
In order to
supplement the Department’s own capacity a Professional Service Provider was
appointed and also assisted with training on the daily management of assets and
the review and updating of policies. Fourteen Asset Management Practitioners were
sourced through the PSP and deployed at the National and regional Offices to
assist with training. An asset Management Forum has also been established and
monthly meetings are held to review progress, share information and address
asset related issues. In the order of 120 Asset Management Staff have already
undergone the training offered by National Treasury during 2006.
A very rigorous verification
process was implemented during 2006/07 to ensure full verification of the
Department’s assets (both trading account and main account). All assets (known),
with the exception of the construction equipment (scheduled for completion in
July2007), have now been verified and recorded electronically in the trading
account (SAP) and the main account (through the BAUD system which is reconciled
to LOGIS and BAS). All assets verified have been allocated a unique bar code to
enable tracking and identification. Relevant Asset Staff have also been trained
on the SAP asset module and the BAUD system.
A Professional
Service Provider has been appointed, following an open tender process, to
assist the Department with the identification, verification and valuation of
all of the Department’s major infrastructure assets. This project which is due
for completion in December 2008 will make it possible for more accurate
determination of water tariffs and compliance with GAAP and the GIAMA bill.
Asset Management
The department
has commenced with a number Asset Management Reforms to ensure that it achieves
the PFMA requirements and enhance accountability and transparency.
Ø Movable Assets:
During 2006/07
the department embarked on the first phase of Asset Management Reform country
wide, which involved the process of policy development, physical verification,
bar coding, and recording of assets on the asset register and loading them on
the ERP system (SAP) for the trading entity to able report in accordance to SA
GAAP and to achieve accountability and transparency. Asset strategies were
developed and approved. These deal with repairs and maintenance, disposal,
acquisition and funding. There is still some work still to be done to improve
the status of the movable asset register.
Ø Infrastructure
(Immovable) Assets:
For the year
2007/08 the department will continue with the second phase of the asset
management project by focusing on the Infrastructure Asset Management reform
country wide, in responding to both business and legislative needs that call
for the improved management of water resources infrastructure by DWAF. The
project will establish a system of Infrastructure Asset Management that
addresses accounting compliance issues and informs the setting of water tariffs,
but also, through specific interventions will achieve significant and
sustainable improvement in asset management practice across the entire
organization.
6.
Forestry
(National Forest Recreation and Access Trust)
The National
Forest Recreation and Access Trust Fund was established in terms of section
41(1) of the National Forest Act, of 1998 (Act 84 of 1998). The Minister is the
sole Trustee of the Trust. The Trust which is for the benefit of the general
public has the objective to promote access and use of forests for recreation,
education, culture or spiritual fulfillment.
The Trust was
established with effect from
The
Committee on Forest Access (a sub-committee to the NFAC) is responsible for giving
advice to the Minister on all access related matters. They have deliberated and
are considering ways in which the Trust Fund could be used in a sustainable
manner and will be submitting a report to the Minister in this regard.
Options being considered for
funding by the Trust could, inter alia,
include the following:
Ø Awareness
creation on forest access issues through workshops (with stakeholders) dealing
with forest governance, skills development, access to funding and licensing
issues;
Ø
Promotion of the Forestry Sector BBBEE Charter
outputs to ensure that a broader base of stakeholders understand and are able
to participate in Charter related programmes.; and
Ø Strengthening of
emerging Forest Enterprise organizations which at present are not very well
organized and could therefore be exploited (treated unfairly).
Report prepared by : T I Balzer,
Pr.Eng.
Acting Chief
Financial Officer