1. 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

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

3. 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

4. Auditor-General: Implementing Agents impacting on Adverse OpinionNr
Implementing Agent
Type of
Implementer
Amount Transferred (2016/2017) 1
Working on Fire (Pty) Ltd
Private Enterprise R 2
South African National Parks
Public Entity R 3
Klapmutskop Renosterveld Conservancy
t/a Simonsberg Conservancy R 4
NCC Environmental Services R 5
Triadic Projects (Pty) Ltd R 6
Pravin Amar Development Planners R 7
Impunzi Construction R
Total of sample selection
45% R
Total Population Implementing Agents EPWP
100% R

5. 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

6. 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

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

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

9. Mediator findings & conclusion cont….
Programm e
AG Classification
R’000
Mediator Classification
R ‘ 000
EPWP Capital Projects
Principal Agent R
-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
-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 )
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 (R )
- Refer 2014/15 AFS disclosed as an Annexure as attached page (R )

10. Summary of Mediator re-classification
Programme
From
R’000 To
R ‘ 000
Green Fund
From Transfers R
To Goods & Services R
Eco Furniture
From Transfers R
To Goods & Services R
Total Goods & Services R
Environmental Capital Projects
From Capital Transfers R
To Capital Expenditure R