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PROGRAMME 1: ADMINISTRATION. FINANCE. Annual Financial Statements. Expenditure 2005/06 financial year Total Expenditure : R9 010 077 000 Exchequer : R3 889 150 000 (Including FDA of R172 062 000) Trading Accounts : R5 292 989 000 Spending
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PROGRAMME 1: ADMINISTRATION FINANCE
Annual Financial Statements • Expenditure 2005/06 financial year • Total Expenditure : R9 010 077 000 • Exchequer : R3 889 150 000 (Including FDA of R172 062 000) • Trading Accounts : R5 292 989 000 • Spending • Head Office and 9 Regional Offices in 4 programmes • Administration: R278 378 000 • Water Resource Management: R1 613 594 000 • Water Services: R1 524 895 000 • Forestry: R420 919 000 • Trading Accounts • Equipment Account: R78 148 000 • Water Trading Account: R5 214 841 000 • Spending level • 2004/05 = 99% spending level • 2005/06 = 94.5% spending level
Reports of Auditor General on Financial Statements • Vote 34 Exchequer Account • Qualification: (a) Asset management, (b) Independent checks and reconciliation (c) BAS and PERSAL reconciliation (d) Commitments. • Emphasis of Matter: (a) Monitoring, (b) Performance information. • Water Trading account • Disclaimer of audit opinion • Qualifications in respect of : (a) Financial statements, and (b) Non adherence to accounting framework. • Emphasis of matter in respect of; (a) Lack of Policy framework, (b) Performance information.
Reports of Auditor General on Financial Statements • Equipment Trading account • Disclaimer of audit opinion • Qualifications in respect of: (a) Financial statements, (b) inadequate monitoring, (c) Fixed assets. • Emphasis of matter in respect of: (a) General Computer controls for CEMS, (b) Performance information, (c) Inadequate monitoring. • National Forest Recreation and Access Trust • Unqualified audit • Emphasis of matter in respect of operation of National Forest Recreation Trust.
Finance Management Improvement Plan • on-going engagement with Office of Accountant General (OAG) to implement programme of support • national accounting firm contracted to provide temporary resources in DWAF to improve financial management while recruiting suitable staff • implementation of SAP as preferred Enterprise Resource Planning (ERP) system to support trading activities. • system went live on 4 October 2006 • implement accrual accounting for trading activities and comply with section 40(1) of PFMA • extensive training programme for staff • computer literacy, • accrual accounting • application of SAP in DWAF • Implementing asset management strategy • Compliance with National Treasury’s requirements, including Generally Accepted Accounting Practice (GAAP). • include re-valuation of DWAF’s fixed assets; • Build on successes achieved by Audit Steering Committee • members from DWAF and Office of Auditor-General, • will oversee and monitor progress on 2006/07 audit
Restructuring • Finance being restructured in national and regional offices: • Cash accounting unit with dedicated resources and independent processes; and • Accrual accounting unit with dedicated resources and independent processes; • new finance structure populated with resources and operationalised. • Includes physical relocation strategy (relocation of people, equipment and technology) and phased resource implementation plan; • Key reasons for restructuring: • PFMA, Regulations and National Treasury directives require split between main account and trading activities • Elimination of fragmentation of finance activities (consolidation of supply chain management, revenue management and budget activities); • Ensure working environment conducive to implementation of SAP. • High level structure approved • Recruitment of key resources commenced • Fast track approach adopted to finalise structures for Regional Finance components
Supply Chain Management • Non-compliance with Supply Chain Management (SCM) Framework due to lack of capacity and skills • Actions taken: • Senior Manager appointed in August 2005 to put programmes and interventions in place to improve SCM • Professional Service Provider contracted/appointed to assist with training and capacitating DWAF with daily management of assets including the review and updating of policy • Professional Service Provider contracted/appointed to assist with verification of assets • Capacitating staff through “on the job” training, workshops, skills transfer and long term courses for staff • Appropriate structures being implemented in national and regional offices • Basic Asset Policies, policies and procedures in place and being updated for the Trading account • Comprehensive asset register and verification underway • Progress reports provided to National Treasury on their implementation requirements • Departmental Control Committee (Bid Committee) meets once a week and Bid Committees are in place in all Regions.
Engagement with Office of Auditor-General (AG) • Ongoing engagement with Office of Auditor-General to implement comprehensive programme to improve quality of audit and to take corrective action on issues raised through the audit. • Established Audit Steering Committee with members from DWAF and Office of the Auditor-General to oversee and monitor progress on the 2005/06 annual audit; • Office of the AG have conducted two briefing sessions (with Top Management and MANCO) on outcome of 2005/06 Audit and made suggestions on actions to be taken. • Workshops will take place during November with National and Regional Offices on 2005/06 Audit to develop action plan to deal with outcomes of audit • Audit Steering Committee will continue to oversee and monitor progress on 2006/07 annual audit which will commence in November 2006.
Engagement with Office of Accountant General (OAG) • Ongoing engagement with Accountant General to implement comprehensive programme of support • Finalising TOR for support to Department • Target date for implementation is end October. • The TOR will include aspects which seek to; • Provide full time skilled resources to the Department • Implement a comprehensive skills transfer programme; • Advise on and integrate crucial financial management projects; • Assist with preparation of management accounts • Support DWAF in conducting risk assessment; • Support DWAFto enhance its internal audit processes.
Support from National Accounting Firm • DWAF has one year contract (concludes April 2007) with National Accounting Firm to provide team of 11 “Financial experts” to provide support in national and regional offices • Objectives of support programme are: • Assist with gathering of information and compilation of 2005/06 Financial Statements: • Assist with implementation of Accrual Based Accounting • Assist with day to day running of SAP Accounting system. • General financial management support and support with annual audit.
Department of Water Affairs and Forestry 2005/06 Exchequer Account per Economic classification
Programme 1 : Administration: Expenditure Trends • Expenditure • average annual increase of 15,3% • R292 million in 2002/03 • R278,378 million in 2005/06 • increases in expenditure in 2005/06 result of funds rolled over and additional R66,5 million to cover costs of transferring water services operations to local governments. • From 1 April 2006, costs for leases and accommodation charges devolved from Dept of Public Works to individual departments • DWAF received: R98,9 million in 2006/07, R109,5 million in 2007/08 and R117,6 million in 2008/09.
Programme 1 : Administration : Expenditure Trend • Additional allocations for critical posts in corporate services over 2006 MTEF • 4,9% increase in compensation of employees. • Increase in Information Services subprogramme between 2005/06 and 2006/07 = once-off payment of R38 million for upgrading IT infrastructure • After slight decrease between 2005/06 and 2006/07, expenditure expected to increase from R428,4 million in 2007/08 to R451,8 million in 2008/09, an average increase of 5,5 per cent.
Programme 2 : Water Resource Management : Expenditure Trends • Increase from 2003/04 mainly due to: • drought relief expenditure (R103 million) • R33 million rolled over from 2003/04 to 2004/05 to repay loan to Land Bank w.r.t Kalahari Water User Association (DWAF provided State Guarantee) • 2005/06 financial year: R76 million paid to Water Trading Account to enable the Trading Account to pay the amount on augmentation
Programme 3 : Water Services : Expenditure Trend • Decrease from 2003/04 to 2004/05 mainly due to transfer of expenditure on new water and sanitation projects to municipal infrastructure grant (MIG). • During 2004/05 • R44 million (once off payment) spent on drought related activities • R131 million made to DWAF for VAT requirements.
Programme 4 : Forestry : Expenditure Trend Increase from 2003/04 to 2004/05 mainly due to rollover of R38 million to pay claim to Yorcor in terms of court judgement on cancellation of long-term timber supply contract.
