Vote 27:Environmental Affairs Portfolio Committee Briefing Report on EPWP Mediation Process Financial Management Services Ms Nosipho Ngcaba Director-General Department of Environmental Affairs 21 November 2017 18

Presentation Outline Auditor-General approach & findings Mediator findings & conclusion Summary

Auditor-General approach & findings (Principal Agent) The Auditor-General indicated that: EPWP transfers are Principal-Agent transactions and, therefore to be treated as Goods and Services and (NOT as Transfer Payments) EPWP Projects are rendered on behalf and For the benefit of the department Therefore, Adverse Opinion on EPWP Transfer Payments The Department’s interpretation of the MCS is that: EPWP not Principal-Agent relationship and Non-exchange transactions (therefore Transfers and Subsidies). Department not benefiting from EPWP projects Managed per Treasury Regulation 8.4

Auditor-General: Implementing Agents impacting on Adverse Opinion Nr Implementing Agent Type of Implementer Amount Transferred (2016/2017) 1 Working on Fire (Pty) Ltd Private Enterprise R620 611 000 2 South African National Parks Public Entity R534 462 000 3 Klapmutskop Renosterveld Conservancy t/a Simonsberg Conservancy R417 000 4 NCC Environmental Services R4 549 622 5 Triadic Projects (Pty) Ltd R4 573 383 6 Pravin Amar Development Planners R4 204 742 7 Impunzi Construction R3 698 544 Total of sample selection 45% R1 172 516 291 Total Population Implementing Agents EPWP 100% R2 632 637 000

Mediator findings & conclusion Programme Contracted entity Description Principal – agent? Service Provider? Other Classification of payment from DEA Working on Fire Fire Protection Associations (FFA) FFA provides an Integrated Fire Management (IFM) Service to government. No Yes, deemed associate of DEA Transfers to private enterprises Working for Ecosystems Working on Wetlands SANParks Clearing of invasive species on SANParks, communal and adjacent land. Yes, primarily funding activities of SANParks Transfers to departmental agencies and accounts Working for Water Joe Gqabi District Municipality Clearing and control of invasive and non-invasive species and restoration of degraded land Yes, the district provides services to the local municipalities - Transfers to municipalities IDT Clearing of invasive plants and restoration of degraded land Yes, provides services to pvt land owners and DOD Transfers to households and DOD Working for Forests Gamtoos Irrigation Board Clearing of invasive plants and restoration of degraded land. Also includes development and management of new aforestation, transformed invading alien plant stands and degraded STATE forests. Yes, services for local munics, pvt owners

Mediator’s findings & conclusion cont…. Programme Contracted entity Description Principal – agent? Service Provider? Other Classification of payment from DEA Working for Waste Siza Waste Management CC Placing Landfill Site Assistants, Waste Collection Administrators and Environmental Awareness Educators. Erection of landfill site offices, ablution facilities, as well as weigh pad platforms at landfill sites across the country No Yes, services for local municipalitie s - Transfers to private enterprises EPIP SANParks Funding of infrastructure assets for SANParks on its own land Yes, costs to finance own assets Transfers to departmental agencies and accounts

Mediator findings & conclusion cont…. Programme AG Classification R ‘ 000 Mediator Classification Greenfund Goods & Services R 180 000 Goods & Services (Managment and operational Fees) 26 450* Transfer Payments R 153 550 Total : R 180 000 Add to balance sheet as audited: *Green Fund Financial Assets R 420 000 *Less: Green Fund Liabilities (R 420 000) Reason: deemed “subsidiary” of Department (*source green fund Annual Financial Statements pages 8 & 9)

Mediator findings & conclusion cont…. Programme AG Classification R ‘ 000 Mediator Classification Eco Furniture Goods & Services R 534 462 Goods & Services * R 169 724 Transfers R 364 738 Total : R 534 462 *Reason: DEA is for paying for creation of inventory by Eco Furniture Project SANParks as contractor must account for project activities One line transaction

Mediator findings & conclusion cont…. Programm e AG Classification R’000 Mediator Classification R ‘ 000 EPWP Capital Projects Principal Agent R 352 973 -Expenditure made on behalf of the Department -To be recognised as current or capital expenditure -To be recorded in the asset register of the Department -Account for work in progress - WIP -Completed capital assets to be Transferred per PFMA Section 42 Capital Expenditure R 352 973 -Account for work in progress – WIP while constructing -Transfer the asset to the beneficiary once completed - All Capital (No split between current and capital expenditure) Notes: 1)As done in previous years, the Department did account for WIP of R352,973 million in DEA AFS submitted of 31 May 2017, Ref 2016/17 AFS page 63 note 29 as attached (R 352 973) 2) AG advised the Department to remove WIP of R352,973 and re-submit the AFS in June 2017. 3) For previous years accounting for WIP: - Refer 2015/16 AFS page 231 note as attached (R224 481) - Refer 2014/15 AFS disclosed as an Annexure as attached page 247 (R305 640)

Summary of Mediator re-classification Programme From R’000 To R ‘ 000 Green Fund From Transfers R 26 450 To Goods & Services R 26 450 Eco Furniture From Transfers R 169 724 To Goods & Services R 169 724 Total Goods & Services R 196 174 Environmental Capital Projects From Capital Transfers R 352 973 To Capital Expenditure R 352 973