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

2. 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

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

4. PART 1: OVERVIEW OF NON- FINANCIAL PERFORMANCE 4

5. 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%

6. 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%

7. 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

8. 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≥512 11 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%

9. 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) 32 17 Corporate social reponsibility initiatives Number of initiatives 23 18Training and skills development Training courses, learner-ships, bursaries 511 19Good governance Breaches of materiality and significance framework 00

10. 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

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

12. 12 FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2015 Audited Outcome 2014/15 Audited Outcome 2013/14Variance R'000 % Revenue43 49337 853 15 Revenue from exchange transactions40 53235 126 15 Sundry and interest income2 9612 727 9 Expenditure39 55536 580 7 Employee benefit costs15 84614 763 7 Operating expenditure20 00818 757 7 Impairment of financial assets240951 -75 Finance cost70 100 Depreciation, amortisation and impairment3 1201 896 65 Loss on disposal/scrapping of fixed assets334213 57 Surplus/(deficit)from operating activities3 9381 273 209

13. 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. 14 STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 30 JUNE 2015 20152014VARIANCE R'000 % ASSETS Current Assets12 25829 499-58 Cash and cash equivalents3 95024 069-84 Trade and other receivables7 0525 23635 Inventory1 256194547 Non-Current Assets80 32856 01843 Property, Plant and Equipment54 44056 018-3 Investments25 8880100 Total assets92 58685 5178 LIABILITIES Current Liabilities7 3824 25174 Trade, other payables and provisions6 1853 14597 Employee benefits1 1971 1068 Finance lease liability Financial liabilities: TCTA Non-Current Liabilities000 Finance lease liability Financial liabilities: TCTA Total liabilities7 3824 25174 Total net assets85 20481 2665 NET ASSETS Reserves Accumulated surplus60 20481 266-26 Capital expenditure fund and Emergency fund25 0000100 Net assets85 20481 2665

15. 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.

16. 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

17. 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.

18. Irregular expenditure Analysis: 18 2015 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 396 2 651 Expenditure where the points system in respect of the PPPFA was not used. - 586 396 3 485

19. 2014/152014/13Variance R'000 % Contingent liabilities Total1,898 – 3,7650100 Contingent assets Total000 Notes: Overberg Water entered into a contract during 2010 - 2012 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

20. OVERVIEW OF AUDIT REPORT 20

21. 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

22. 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

23. 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

24. 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

25. 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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