1. PORTFOLIO COMMITTEE FINANCE BRANCH Deputy Chief Financial Officer Ms Olga Hattingh

2. Agenda Background (Main Account & WTE) Management arrangements – progress to date Main Account – AFS for 2007/08 Main Account – progress with action plan Main Account – initiatives for 2008/09 Trading Entity – AFS for 2007/08 Trading Entity – progress with action plan Trading Entity – initiatives for 2008/09 PSP’s Questions

3. DWAF Water Trading Main Account Integrated Water Resource Management Integrated Systems Bulk Water Supply Water Resource Management Lesotho Highlands Komati Basin Water Berg River Water project Olifants River Development TCTA Equipment Account Provision from Independent systems TA1 TA2 TA3 Administration Water Resource Management Water Services Forestry Background Self sufficient Tariffs (ROA, Depr & OM) GAAP Service Delivery Exchequer Funds Modified Cash - Accrual

4. Background Main AccountTrading Entity Funds Exchequer Donor Users Exchequer (capital) Accounting Modified Cash GRAP GAAP Fin System BAS, LOGIS, PERSAL SAP, PERSAL PFMA Chapter 5 Treasury Reg 1 to 24 & 26

5. DWAF Water Trading Entity Main Account Integrated Water Resource Management Integrated Systems Bulk Water Supply TA1TA2TA3 Background (Future) Policy and Regulatory Function Catchment Management Agencies + TCTA = SANWRIA

6. Management Arrangements Proper segregation between Main Account and Water Trading Entity: Reorganization of the finance branch at head office and regional level Policy document to provide guidance on the linking of functions to either the Main Account or Water Trading Entity Designated a staff member as the head of the Trading Entity Appointment of a financial services firm to provide additional capacity to support regions

7. MAIN ACCOUNT

8. Annual Financial Statements 2007/08 Statements were presented to the Audit Committee on 29 May 2008 AFS was submitted to AG on 30 May 2008

9. Appropriation account ProgrammeBudget R’000 Actual R’000 % Administration603 014601 18199.7 Water resource management2 915 5122 462 51484.5 Water Services1 874 0071 886 92699.6 Forestry466 282451 07796.7 Theft and losses3 698 100.0 Total5 862 51392.0 Annual Financial Statements

10. Appropriation account Augmentation (transfer payment) to Water Trading Entity amounting to R452,988m for the construction of the De Hoop Dam (heavy rainfall, environmental impact authorisation) Request roll-over will however reduce in line with cash flow forecast Delay in the approval of the BBBEE Forestry Charter – it delay the roll-out process (R15,205 m) Reasons for 8% under spending:

11. Major Achievements Highlighted in AO report Water & Sanitation to 91 clinics – access to basic supply 110 clinics – sanitation 254 clinics – upgraded infrastructure 69 schools – access basic supply 51 schools – sanitation Develop and implemented an Electronic Water Quality Management system (94% of municipalities complied with standards) R1.2 bn on new water resource infrastructure & R415 m on rehabilitation of existing infrastructure Forestry Charter has been signed – 170 000 people employed

12. Annual Financial Statements Financial Overview Unauthorised expenditure of R14,889 m was approved Decrease in departmental revenue due to a decrease in the selling of forestry products – specially in Mpumulanga and interest recovered Local and foreign aid assistance – EU agreement was only signed in March – no time to request the funds from NT Implementation effective and efficient Revenue, Expenditure, Asset and Liability Management process Interns/Contract workers Revenue

13. Compensation of employees – transfer of staff to municipalities and Water Trading Entity Goods and services – 7% inflation, R100m increase in PSP, S&T problem with Phavis invoices Decrease in debt write offs – included in 2006/07 was R10m for municipalities Foreign aid – more on current expenditure Current Expenditure Annual Financial Statements Financial Overview

14. Buildings and other fixed structures – more water services infrastructure (pump stations and water supply reticulation equipment) Decrease in procurement of moveable assets Increase in intangible assets – SAP licensing Capital Expenditure Annual Financial Statements Financial Overview

15. Decrease in advance as a result of better financial controls Berg Water was transferred to WTE (R7m) Loans – more a due in the next year – increase in current Staff debtors – an increase various initiatives to improve Current Assets Annual Financial Statements Financial Overview

16. Progress in terms of action plan Proper segregation between Main Account and WTE Strategic planning alignment initiatives Bank exception account cleared Better disclosure (accruals, commitments & related parties) Assets – Asset registers improved Staff debtors – an increase various initiatives to improve

17. Financial Improvement Projects for 2008/09 Establishment of a risk management unit within the Office of the CFO Reduction in staff debt Maintenance of asset management register Filling of vacancies Update and development of financial policies and procedures

18. WATER TRADING ENTITY

19. Annual Financial Statements 2007/08 Presented to Audit Committee on 29 May 2008 Submitted to Auditor-general on 30 May 2008

20. Annual Financial Statements Overview Reduction in revenue (allocation of third party transactions Increase in infrastructure assets (result of the re- evaluation of assets (R63bn) Increase in depreciation

21. Progress in terms of action plan Project Sakhile (Infrastructure assets) – have been able to verify and value infrastructure assets. Captured on interim asset register. Account for land of R15m. The servitudes for Eskom, Sasol and Tugela Vaal schemes are accounted for. (was R39bn now R63bn) Moveable assets – All asset register have been compiled and are being loaded on BAUD Lease and intangible register has been compiled. Accounting policies and processes have been developed and will be implemented during 2008/09.

22. Progress in terms of action plan (continue) Siyanqoba – Unallocated deposits have been reduced SAP refinement – the process of refining the SAP system is an ongoing process within the department.

23. Financial Improvement Projects for 2008/09 Development of asset management plans (Sakhile) Maintenance of asset management register Filling of vacancies Implementation of financial policies and process (Siyanqoba)

24. Financial Improvement Projects for 2008/09 Development of asset management plans (Sakhile) Maintenance of asset management register Filling of vacancies Implementation of financial policies and process (Siyanqoba)

25. Use of PSP’s Branch2005/062006/072007/08 #Amount# # Corporate Services129 063 0921053 526 491917 133 057 Finance831 893 4551172 344 929738 211 815 Policy & Regulation8388 336 967109213 207 50160125 891 033 Regions4683 883 25649187 919 44932378 117 963 NWRIA971 139 47216127 392 28615123 321 797 Forestry102 502 982177 039 699127 202 511 Director-general82 051 838 168286 819 224212661 430 355143691 930 014

26. Core functions of PSP’s BranchCore functions Corporate ServicesImplementation of turnaround strategy IT Services Technical support for building maintenance Technical support for legal services Employee wellness project Finance SAP training Moveable assets Project Sakhile Project Siyanqoba Provision of financial resources

27. Core functions of PSP’s BranchCore functions RegionsBucket Eradication Sanitation (schools & clinics) Working for Water Working of Fire Technical support – regions and local government Policy and Regulation Establishment of CMA’s Water Quality Management Regulatory framework Water Services Provisions Feasibility studies

28. Core functions of PSP’s BranchCore functions NWRIADam Safety projects Risk assessments Construction Forestry Lease contracts Development of BBBEE charter

29. Reason for increase in use of PSP’s Branch2005/062006/072007/08 #Amount# # Total168286 819 224212661 430 355143691 930 014 % Increase26.1130.6(32.5)4.6 Lack of skills and capacity Nature of assignments – complex and technical Requires specialist and experts – high cost Short term projects Process to appoint a PSP is less complex than recruitment

30. Steps to reduce usage of PSP’s Finalisation of structures Filling of vacancies with suitable candidates Empowering and capacitating staff Retention strategy Implementation of computerised systems

31. Questions ????