PRESENTATION TITLE Presented by: Name Surname Directorate Date Annual report for the 2014/15 financial year Presented by: Overberg Water

Definitions Abbreviation / Acronym Description AFSAnnual Financial Statements AOPOAudit of Predetermined Objective DWSDepartment of Water and Sanitation EREconomic regulation OWBOverberg Water Board PPPFAPreferential Procurement Policy Framework Act 2

Annual report for the 2014/15 financial year Part 1: Overview of non-financial performance Part 2: Overview of financial performance CONTENTS 3

PART 1: OVERVIEW OF NON- FINANCIAL PERFORMANCE 4

Performance indicators NoPerformance indicator Planned annual output Actual output achieved 1 Bulk potable water quality compliance ≥92.50%99.48% 2 Manage avoidable water losses (non-revenue water) ≤10%9.80% 3Reliability of supply ≤2%0% 4 Financial reporting compliance Unqualified 5 Staff levels / Staff turnover ≤10%8.33%

Performance indicators - Continued NoPerformance indicator Planned annual output Actual output achieved 6 Board Effectiveness / Board member attendance 85%97.53% 7 Effective Controls and Risk Management number of repeats ≤5n/a number of unresolved ≤10n/a 8 Bulk supply agreements concluded with municipalities / other customers 50%0%

Performance indicators - Continued NoPerformance indicator Planned annual output Actual output achieved 9Improve key financial ratios Liquidity≥7.722 Gross profit margin % ≥74%37% Gross profit margin % (SA) n/a Net profit margin % ≥5%10% Net profit margin % (SA) n/a Debt Equity ratio ≤4%n/a Return on assets % ≥8%4% Debtors days # 6348

Performance indicators - Continued NoPerformance indicator Planned annual output Actual output achieved 10 Increase BBBEE expenditure in relation to operational projects % increase≥5%96.97% # new entrants≥ Manage costs within the approved budget ±10%-0.50% 12Capital expenditure programme Overall project expenditure within R target ±10%n/a Overall project completion dates within targets ±10%n/a 13Increased access to services ≥R5mR2m 14Engagement in secondary activities % of total turnover ≥1%0.23%

Performance indicators - Continued NoPerformance indicator Planned annual output Actual output achieved 15 Achieve statutory reporting compliance 100% 16Jobs Created Permanent and contract (direct) 337 Temporary (indirect) Corporate social reponsibility initiatives Number of initiatives 23 18Training and skills development Training courses, learner-ships, bursaries Good governance Breaches of materiality and significance framework 00

Explanatory notes PPI no Milestones that were not achieved Comments on deviations 8Bulk supply agreements concluded with municipalities SALGA requested to assist 9LiquidityReclassification of long term cash to investments Gross profit margin %The gross profit margin target did not include all the costs associated with the purification and distribution of potable water. The percentage achieved is within the norms of the sector Net profit margin higher that targetKey vacancies not filled Return on assetsForecasted target unrealistic based on history and size of the business Debtors daysImproved management of debtors reduced debtors days significantly 12Capital expenditure programmesDid not commence by year end 13Increased access to servicesCapital expenditure programmes did not commence by the year end 14Engagement in secondary activitiesOW not involved with secondary activities 16Temp job createdTarget not met 10

PART 2: OVERVIEW OF FINANCIAL PERFORMANCE FINANCIAL PERFORMANCE REVIEW FINANCIAL POSITION REVIEW OVERVIEW OF THE AUDIT REPORT AND ACTION PLAN 11

12 FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2015 Audited Outcome 2014/15 Audited Outcome 2013/14Variance R'000 % Revenue Revenue from exchange transactions Sundry and interest income Expenditure Employee benefit costs Operating expenditure Impairment of financial assets Finance cost Depreciation, amortisation and impairment Loss on disposal/scrapping of fixed assets Surplus/(deficit)from operating activities

Variances – Financial Performance Revenue increased by 15% for the year due to a combination of water volume (5%) and tariff increases Operating expenditure remained in line with inflation

14 STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 30 JUNE VARIANCE R'000 % ASSETS Current Assets Cash and cash equivalents Trade and other receivables Inventory Non-Current Assets Property, Plant and Equipment Investments Total assets LIABILITIES Current Liabilities Trade, other payables and provisions Employee benefits Finance lease liability Financial liabilities: TCTA Non-Current Liabilities000 Finance lease liability Financial liabilities: TCTA Total liabilities Total net assets NET ASSETS Reserves Accumulated surplus Capital expenditure fund and Emergency fund Net assets

Variances - Financial Position Cash (& equivalents) and Investments moved proportionately as the non working capital portion of cash investments were reclassified as long term assets. Investments also increased from interest capitalised Trade and other debtors increased by 35 % due to the 15% increase in revenue and an increase in 139% for the DWS Clanwilliam Project Inventory increased substantially due to the reclassification of maintenance and emergency spares from PPE to inventory to better reflect the nature and use of the items. Trade payables increased by 97% due to a creditor with an annual invoice that was received late from the supplier. Also, amounts received in advance increased substantially as the capital levies has been included as “Receipts in advance” until it is used in the capital expenditure programme.

Ratios –Liquidity The current ratio is 1.7 : 1 –Cash flow from operations The cash and cash equivalent at the end of the year amounted to R 4 million –Return on assets The ratio on return on assets is 4%. –Debtor days in sales The debtors days are 48 days. –Creditors days The creditors days are 50 days. This is due to a large creditor with an annual invoice that was not yet paid at year end due to the invoice received late from the supplier. 16

NOTES TO THE FINANCIAL STATEMENTS 17 The financial statements have been prepared in accordance with International Financial Reporting Standards and relevant guidelines specified / issued by the National Treasury.

Irregular expenditure Analysis: FY2014 FY Construction contracts awarded to contractors not registered with the CIDB -248 Goods, works or service were not procured through a procurement process which is fair, equitable, transparent and competitive Expenditure where the points system in respect of the PPPFA was not used

2014/152014/13Variance R'000 % Contingent liabilities Total1,898 – 3, Contingent assets Total000 Notes: Overberg Water entered into a contract during with the then Department of Water Affairs pertaining to the Masibambane rain water harvesting projects. The projects entailed the implementation and installation of rain water harvesting tanks in Slangrivier, Dysselsdorp, Blikkiesdorp and Bitterfontein areas. Following engagements with the Department of Water and Sanitation, it has come to our attention that several rain water harvesting tanks within the project were poorly constructed due to faulty workmanship and material quality. A comprehensive audit of the affected rain water harvesting tanks have not yet been performed. The preliminary cost estimate is between R1,898,066 and R3,765,195 to rectify the poor workmanship. Contingent liabilities and assets 19

OVERVIEW OF AUDIT REPORT 20

Audit report The audit report of Overberg Water is unqualified. The only emphasis of matter is the basis of preparation which is IFRS and not GRAP

Performance audit matters reported The effectiveness of internal control matters and risk assessment could not be measured because the entity did not establish an internal audit function

Compliance with legislation The audit committee did not review the entity’s compliance with legal & regulatory provisions The accounting authority did not ensure that an internal audit function was established A fair, equitable, transparent and competitive procurement process was not used in all cases. PPPFA was not applied for all quotations

Internal control All processes did not have documented and approved internal policies & procedures to address the risks and regulations The accounting authority did not ensure an effective, efficient and transparent system of internal control Compliance with laws & regulations was not monitored Governance : no internal audit

Action plan Major FindingRoot CauseAction No internal audit  Non existence of the unit  Internal auditor to be appointed as soon as possible Procurement processes to improve  Insufficient capacity to deal with procurement issues  Supply chain manager to be appointed as soon as possible Policies & procedures  Policies not updated  Review of policies 25

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