Budgeting and financial management in the Department of Water and Sanitation and the Water Trading Entity Joint meeting of the Portfolio Committee on Water and Sanitation and the Standing Committee on Public Accounts Ulrike Britton | Chief Director: Urban Development and Infrastructure, Public Finance | 27 March 2018

Outline Vote 36: Water and Sanitation Water Trading Entity Budget growth: 2012/13 – 2020/21 Budget performance: 2012/13 – 2016/17 Monthly distribution of key expenditure items Buildings and other fixed structures Goods and services Budget outcome 2016/17 Budget risks Expenditure performance 2017/18 Water Trading Entity Cash balances 2012/13 – 2016/17 PMG account balances

Vote 36: Water and Sanitation

Budget Growth 2012/13 – 2020/21 Expected to growth at average annual rate of 3.7% over 2018 MTEF 20% average annual growth in budget 2012/13 and 2015/16

Budget Performance 2012/13 – 2016/17

Monthly spending distribution – last 3 FY

Monthly spending distribution – last 3 FY

Budget Performance 2016/17

Budget risks (As per 2017 annual report) Expenditure management Unauthorised expenditure R110.8 million on vote R292.3 million on main division of the vote Irregular expenditure of R1.3 billion Fruitless and wasteful expenditure – R14 million Accruals and payables

Budget risks (As per 2017 annual report) Conditional grant oversight Grant evaluations not undertaken as required by the Division of Revenue Act Expenditure and non-financial information not monitored in accordance with the framework for the grant Internal control No system to discuss major decisions taken by one division that impacts on another division before final decision is taken Policies and procedures to guide RBIG and WSIG not sufficiently implemented. Reconciliation system per project to ensure all information pertaining to the project are reconciled on a monthly basis is insufficiently monitored and implemented. No internal control system to monitor tender process of implementation agents A system of control that includes proper project management and costing techniques in line with construction norms and standards was inadequate

Budget risks (As per 2017 annual report) Procurement and contract management Goods and services with a transaction value above R500 000 were procured without inviting competitive bids Bid adjudication was not always done by committees which was composed in accordance with the policies of the Department Some construction contracts were awarded to contractors that were not registered with the Construction Industry Development Board Commitments Multi-year contractual arrangements where payments are made over several years

Expenditure performance 2017/18 Spending as at 28 February 2018

Expenditure performance 2017/18

Water Trading Entity

Cash balances 2012/13 – 2016/17 Ave. annual growth of 11%

Operating expenditure growth

PMG monthly balances

Budget risks (as per 2017 annual report) Understated financial liabilities to the TCTA Uncertainty of financial sustainability – net loss of R3.6 billion No proper system to support information on carrying value of assets under construction Inadequate review of financial models which form bases of liabilities accounted for Inadequate controls to prevent and detect non-compliance with laws and regulations

Thank-you