Finance strategic outputs

1. Finance strategic outputs Presented byMr Onesmus AyayaChief Financial OfficerDepartment: Water Affairs (DWA)18 August 2009

2. outline • Key functional areas • Overview of the past key achievements • Past challenges facing the branch • Key Performance Areas • Rationale for selecting the KPAs • Funding • WTE • MEA • Monitoring • Departmental expenditure trends • Departmental indicate 2010 MTEF allocations

3. Key functional areas in the branch • Supply Chain and Asset Management • Revenue and debtors management • Financial Accounting and Reporting • Management Accounting • Budget and Planning (including expenditure management)

4. Overview of past Key achievements • The separation of the Department’s two accounts, namely; Main Account and the Water Trading Entity • The strengthening of the capacity was also realized through the filling of key management position to provide effective leadership in financial management • Verification and valuation of major bulk water supply assets • Creation of an updated asset register • Development of financial management processes and policies • Implementation of Enterprise Resource Planning systems for WTE • Verification and valuation of biological assets

5. Past Challenges facing finance • Clean audit (financial management and skills) • Non-integrated financial systems for MEA • Minimal transformation in terms of organisational systems and processes • Financial governance: relationship between regions and head office

6. Past Challenges facing finance (cont) • Systems that requires proper implementation and post implementation refinements– long term, user requirements (SAP, LOGIS etc) • Inadequate capacity (lack of skilled resources) • Improperly linked staff to either Main Account or Trading Entity • Extensive infrastructure assets –magnitude, spatial distribution/location: Auditable assets plans needed

7. Wte specific challengesextent of infrastructure • 240 schemes • 334 dams (34 billion cum storage) • 6929 km canals • 171 km tunnels • 990 km pipelines • 56 pump stations – 211 MW • Other infrastructure • 28 wastewater treatment works • 34 water treatment works • 2581 buildings • 3006 measuring facilities (1070 hydro, 1724 geohydro,212 meteorological stations) • Land – 795,563 Ha plus 137,264 Ha servitudes

8. WTE CHALLENGES • Escalating risk of service failure • renewal backlogs are R10 billion and growing • infrastructure maintenance is insufficient • insufficient funding - price capping and exemptions reduce potential income from R4.4 billion pa (adequate) to actual of R1.8 billion pa (completely inadequate) • Customer complaints over raw water tariff increases • Ineffective and inefficient structure of the sector as a whole • Multiple WTE roles – regulator, custodian, planner, constructor • Organisation’s technical capacity eroded (even if additional funding made available, the WTE will need commensurate increase in skills and capacity, and improved systems) • Less than satisfactory processes for billing, collection, budgeting, expenditure control, and reporting • Less than satisfactory financial and asset management systems • Negative cash-flow

9. Key Performance Areas

10. Rationale for selecting the KPAs • Qualified audit reports and opinions of the previous financial years • Financial management is crucial to the successful functioning the org since it relates to how resources available to the organisation are used.

11. Main Account: Funding specific to financial Management

12. Monitoring • Review of milestones achieved in the action plan formulated to address financial weaknesses identified by AG • Bi-weekly review of specific projects supported by external service providers at dedicated steering Committee meetings. • In Year monitoring (financial and non financial reports) • Quarterly reports • Financial statements as at 30 September • Inputs to the Annual Report

13. DEPARTMENTAL EXPENDITURE TRENDS

14. 2008-09:BUDGET VS Actual Expenditure

15. MAIN ACCOUNT: REASON FOR UNDERSPENDING The unspent budget allocation of R505,047 million is mainly due to the under expenditures on the De Hoop Dam project. • The Department requested the National Treasury to utilise the funds that could not be spent on this project for other projects (Nandoni and Inyaka water treatment works and the Hluhluwe regional water scheme), but the request was not approved- R265m • Unpaid invoices as at 31 March 2009: R227m Action taken by the department: • The Department requested the National Treasury to roll-over R272,3 million of the underspending to the 2009/10 financial year for the continuation of the De Hoop Dam project.

16. Explanation • Disbursements of the funds i.r.o De Hoop was not made as a result of the delays in the conclusion of the negotiations to finalise a memorandum of agreement with the 23 different mines. • The memorandum records the principles for the sharing of the project cost and was essential to conclude the negotiations prior to the commencements with preparations for project implementation. • Against this situation, the DWA requested the NT for approval to utilised the unspent funds for the benefit of other bulk water supply infrastructure projects that were nearing completion. • The necessary approval was not received from the National Treasury and consequently these funds remained unspent within the Vote while WTE continued to implement the relevant bulk water services projects using funds meant for recurrent expenditure items. • Had the approval from NT been received R262,67 million would have been paid out to the WTE to augment the Capex on other bulk water infrastructure projects.

17. Challenges identified

18. 2009/10: Earmarked Vs Un- earmarked

19. Exchequer funding earmarked in 2009/10 • Thus the total amount earmarked for the 2009/10 financial year for the Department amounts to R3 170 163 000 for the following purposes: • Rent of buildings 138 331 000 • Working for Water 455 724 000 • Working on Fire 123 608 000 • Refurbishment of water scheme 30 000 000 • De Hoop Dam (Phases 2B to 2G) 600 000 000 • Additional capacity: Internal Audit and Finance 6 000 000 • Sanitation at school and clinics 350 000 000 • Regional Bulk infrastructure 611 500 000 • Operating subsidy (Water Services) 855 000 000 • Total earmarked funding 3 170 163 000

20. Changes on 2009 MTEF Baseline

21. Office of the DG2009/10

22. Branch: Corporate Services 2009/10

23. Branch: Finance2009/10

24. Branch: Policy and Regulation 2009/10

25. Branch: National Water Resource Infrastructure 2009/10

26. Branch: Operations Regions (WRM)EXPENDITURE TO DATE: 31 JULY 2009

27. Branch: Operations Regions (Cont)2009/10

28. Branch: Operations Regions (WS)EXPENDITURE TO DATE: 31 JULY 2009

29. Branch: Operations Regions (WS)EXPENDITURE TO DATE: 31 JULY 2009

30. MAIN ACCOUNT: 2009 MTEF ALLOCATIONS-

31. 2010-MTEF Allocation New Programme Stricture

32. Donor funding (R’000’)

33. WTE: Revenue Vs Expenditure

34. MTEF allocation - WTE

35. MTEF allocation – WTE (cont..)

36. MTEF- allocation – WTE (cont)

37. MTEF allocation – WTE (cont…)

38. MTEFallocation – WTE (cont)

39. I thank you