Finance strategic outputs

1
Finance strategic outputs

• Presented byMr Onesmus AyayaChief Financial
  OfficerDepartment Water Affairs (DWA)18 August
  2009

2
outline

• Key functional areas
• Overview of the past key achievements
• Past challenges facing the branch
• Key Performance Areas
• Rationale for selecting the KPAs
• Funding
• WTE
• MEA
• Monitoring
• Departmental expenditure trends
• Departmental indicate 2010 MTEF allocations

3
Key functional areas in the branch

• Supply Chain and Asset Management
• Revenue and debtors management
• Financial Accounting and Reporting
• Management Accounting
• Budget and Planning (including expenditure
  management)

4
Overview of past Key achievements

• The separation of the Departments two accounts,
  namely Main Account and the Water Trading Entity
• The strengthening of the capacity was also
  realized through the filling of key management
  position to provide effective leadership in
  financial management
• Verification and valuation of major bulk water
  supply assets
• Creation of an updated asset register
• Development of financial management processes and
  policies
• Implementation of Enterprise Resource Planning
  systems for WTE
• Verification and valuation of biological assets

5
Past Challenges facing finance

• Clean audit (financial management and skills)
• Non-integrated financial systems for MEA
• Minimal transformation in terms of organisational
  systems and processes
• Financial governance relationship between
  regions and head office

6
Past Challenges facing finance (cont)

• Systems that requires proper implementation and
  post implementation refinements long term, user
  requirements (SAP, LOGIS etc)
• Inadequate capacity (lack of skilled resources)
• Improperly linked staff to either Main Account or
  Trading Entity
• Extensive infrastructure assets magnitude,
  spatial distribution/location Auditable assets
  plans needed

7
Wte specific challengesextent of infrastructure

• 240 schemes
• 334 dams (34 billion cum storage)
• 6929 km canals
• 171 km tunnels
• 990 km pipelines
• 56 pump stations 211 MW
• Other infrastructure
• 28 wastewater treatment works
• 34 water treatment works
• 2581 buildings
• 3006 measuring facilities (1070 hydro, 1724
  geohydro,212 meteorological stations)
• Land 795,563 Ha plus 137,264 Ha servitudes

8
WTE CHALLENGES

• Escalating risk of service failure
• renewal backlogs are R10 billion and growing
• infrastructure maintenance is insufficient
• insufficient funding - price capping and
  exemptions reduce potential income from R4.4
  billion pa (adequate) to actual of R1.8 billion
  pa (completely inadequate)
• Customer complaints over raw water tariff
  increases
• Ineffective and inefficient structure of the
  sector as a whole
• Multiple WTE roles regulator, custodian,
  planner, constructor
• Organisations technical capacity eroded (even
  if additional funding made available, the WTE
  will need commensurate increase in skills and
  capacity, and improved systems)
• Less than satisfactory processes for billing,
  collection, budgeting, expenditure control, and
  reporting
• Less than satisfactory financial and asset
  management systems
• Negative cash-flow

9
Key Performance Areas
Strategic Goal Strategic objectives
Create a value driven, effective and responsive department Improve financial management
Create a value driven, effective and responsive department Organisational growth and development
10
Rationale for selecting the KPAs

• Qualified audit reports and opinions of the
  previous financial years
• Financial management is crucial to the successful
  functioning the org since it relates to how
  resources available to the organisation are used.

11
Main Account Funding specific to financial
Management
Cost element Amount 2009/10 Amount 2010/2011 Amount 2011/2012 Amount 2012/2013
Compensation to employees 63,741 65,783 69,965 73,463
Goods and services 30,714 48,199 53,380 56,049
Payments for capital assets 5,181 7,297 9,095 9,550
Total 99,636 121,278 132,441 139,063
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Monitoring

• Review of milestones achieved in the action plan
  formulated to address financial weaknesses
  identified by AG
• Bi-weekly review of specific projects supported
  by external service providers at dedicated
  steering Committee meetings.
• In Year monitoring (financial and non financial
  reports)
• Quarterly reports
• Financial statements as at 30 September
• Inputs to the Annual Report

13
DEPARTMENTAL EXPENDITURE TRENDS
Year Actual R000 Budget R000
2004/05 3,776,946 3,823,112
2005/06 3,717,088 3,935,636
2006/07 4,305,650 4,660,303
2007/08 5,385,461 5,862,513
2008/09 6,511,300 7,036,616
Expend
99
94
92
92
93
14
2008-09BUDGET VS Actual Expenditure
Programme 2008/09 Budget R000 2008/09 Actual R000 Under-spending
Administration 682 088 681 758 330
Water resource management 3 499 812 3 001 347 498 465
Water Services 2 348 031 2 341 816 6 215
Forestry 506 685 506 648 37
Total 7 036 616 6 531 569 505 047
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MAIN ACCOUNT REASON FOR UNDERSPENDING

• The unspent budget allocation of R505,047 million
  is mainly due to the under expenditures on the De
  Hoop Dam project.
• The Department requested the National Treasury to
  utilise the funds that could not be spent on this
  project for other projects (Nandoni and Inyaka
  water treatment works and the Hluhluwe regional
  water scheme), but the request was not approved-
  R265m
• Unpaid invoices as at 31 March 2009 R227m
• Action taken by the department
• The Department requested the National Treasury to
  roll-over R272,3 million of the underspending to
  the 2009/10 financial year for the continuation
  of the De Hoop Dam project.

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Explanation

• Disbursements of the funds i.r.o De Hoop was not
  made as a result of the delays in the conclusion
  of the negotiations to finalise a memorandum of
  agreement with the 23 different mines.
• The memorandum records the principles for the
  sharing of the project cost and was essential to
  conclude the negotiations prior to the
  commencements with preparations for project
  implementation.
• Against this situation, the DWA requested the NT
  for approval to utilised the unspent funds for
  the benefit of other bulk water supply
  infrastructure projects that were nearing
  completion.
• The necessary approval was not received from the
  National Treasury and consequently these funds
  remained unspent within the Vote while WTE
  continued to implement the relevant bulk water
  services projects using funds meant for recurrent
  expenditure items.
• Had the approval from NT been received R262,67
  million would have been paid out to the WTE to
  augment the Capex on other bulk water
  infrastructure projects.

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Challenges identified
95 expenditure trends Possible decline in donor funding Significant portion of the budget that is earmarked
Funding of new programs, projects and structure changes Possible establishment short funding and capacity constraints
Opex and CAPex plans Inflation costs and possible implementation delays Office accommodation costs to be provided for regions
Internal and external coordination of projects Multi-sector programme risks Specialised service delivery consultants possible budget shortfalls
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2009/10 Earmarked Vs Un- earmarked
19
Exchequer funding earmarked in 2009/10

• Thus the total amount earmarked for the 2009/10
  financial year for the Department amounts to R3
  170 163 000 for the following purposes
• Rent of buildings 138 331 000
• Working for Water 455 724 000
• Working on Fire 123 608 000
• Refurbishment of water scheme 30 000 000
• De Hoop Dam (Phases 2B to 2G) 600 000 000
• Additional capacity Internal Audit and Finance
  6 000 000
• Sanitation at school and clinics 350 000 000
• Regional Bulk infrastructure 611 500 000
• Operating subsidy (Water Services) 855 000
  000
• Total earmarked funding 3 170 163 000

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Changes on 2009 MTEF Baseline
21
Office of the DG2009/10
Chief Directorate Main Appropriated Adjusted Appropriated
Director-General and Personnel 104,235 104,235
Chief Operating Officer 5,032 5,032
Director Corporate Planning 3,878 3,878
CD Internal Auditing 15,649 15,649
Director Transformation 5,679 5,679
DDG Special Programmes 3,000 3,000
DDG Regulations 3,000 3,000
CD Nat Water Resource Infrastructure 4,703 4,703
Total Office of the DG 145,176 145,176
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Branch Corporate Services 2009/10
Chief Directorate Descriptions Main Appropriation Adjusted appropriation
Office of DDG Corporate Services 5,868 5,868
Chief Information Officer 86,336 86,336
Director Administration 231,256 231,256
Director Legal Services 12,213 12,213
CD Human Capital Solutions 98,416 98,416
Director Gender and Disability 8,747 8,747
CD Communication Services 26,550 26,550
Total Branch Corporate Services 500,518 500,518
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Branch Finance 2009/10
Chief Directorate Descriptions Main Appropriation Adjusted appropriation
Office of Chief Financial Officer 22,042 22,042
CD Pers Finance 99,636 99,636
Total Branch Finance 121,678 121,678
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Branch Policy and Regulation 2009/10
Chief Directorate Descriptions Main Appropriation Adjusted appropriation
Office of DDG Policy and Regulation 3,515 3,515
CD Resource Directed Measures 23,000 23,000
CD Institutional Oversight 94,000 94,000
CD Intergrated WR Planning 90,000 90,000
CD Policy and Strategic Coordination 18,822 18,822
CD International Relations 21,178 21,178
CD Information Management 165,000 165,000
CD Water Use and Conversation 248,706 248,706
Total Summary Policy and Regulation 664,221 664,221
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Branch National Water Resource Infrastructure
2009/10
 Chief Directorate Descriptions  Main Appropriation  Adjusted appropriation
Infrastructure Development and Rehabilitation - Augmentation to WTE 1,989,201 1,989,201
Infrastructure-KOMATI BASIN WATER AUTHORITY (KOBWA) 180,000 180,000
Total 2,169,201 2,169,201
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Branch Operations Regions (WRM) EXPENDITURE TO
DATE 31 JULY 2009
Chief Directorate Descriptions Main Appropriation  Adjusted appropriation
Office of DDG Operations Regions 8,267 8,267
Eastern Cape Region 137,923 137,923
Western Cape Region 101,906 101,906
KwaZulu Natal Region 72,763 72,763
Mpumalanga Region 63,271 63,271
Gauteng Region 44,173 44,173
North West Region 41,275 41,275
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Branch Operations Regions (Cont) 2009/10
Free State Region 35,911 35,911
Northern Cape Region 52,293 52,293
Limpopo Region 91,835 91,835
Working For Water - Cape Town Office 272,851 272,851
Regional Support and Co-ordinations 32,275 32,275
Augmentation to WTE - Proto CMA's 107,835 107,835
Total Summary operations regions 1,062,578 1,062,578
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Branch Operations Regions (WS) EXPENDITURE TO
DATE 31 JULY 2009
Chief Directorate Descriptions Main Appropriation  Adjusted appropriation
Eastern Cape Region 334,110 334,110
Western Cape Region 32,557 32,557
KwaZulu Natal Region 200,737 200,737
Mpumalanga Region 288,943 288,943
Gauteng Region 67,817 67,817
North West Region 156,045 156,045
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Branch Operations Regions (WS) EXPENDITURE TO
DATE 31 JULY 2009
Free State Region 95,125 95,125
Northern Cape Region 103,792 103,792
Limpopo Region 959,906 959,906
Manager National Transfer 15,990 15,990
Manager Sanitation 86,393 86,393
CD Regional Support and Co-ordination 315,758 315,758
Total Summary operations regions 2,657,173 2,657,173
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MAIN ACCOUNT 2009 MTEF ALLOCATIONS-
Economic Classification MTEF Estimate MTEF Estimate MTEF Estimate
2009/10 R000 2010/11 R000 2011/12 R000
CoE 1 327 863 1 314 086 1 399 588
Goods and Services 2 113 255 2 902 964 3 318 860
Capital assets 1 114 223 972 685 1 623 420
Total 7 893 827 8 292 925 9 463 127
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2010-MTEF Allocation New Programme Stricture
2009/10 R000 2010/11 R000 2011/12 R000 2012/13 R000
Administration 805,095 863,798 900,728 945,766
Water Management 345,0777 365,782 387,729 407,115
National W.R. Infrastructure 2,277,036 2,433,360 2,618,057 2,739,959
Regional Management 3,360,935 3,858,721 4,693,521 4,936,092
Water Services 184,716 213,818 241,188 253,247
TOTAL 6,972,859 7,735,479 8,841,223 9,282,179
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Donor funding (R000)
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WTE Revenue Vs Expenditure
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MTEF allocation - WTE
Operational activities Operational activities 2009/10 2010/11 2011/12
Revenue 1,599,784 1,599,784 1,798,403 2,074,410
Raw Water 1,563,784 1,563,784 1,762,403 2,038,410
Sundry Income 36,000 36,000 36,000 36,000
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MTEF allocation WTE (cont..)
Operation Maintenance costs 1,206,811 1,265,944 1,336,040
Compensation of Employees 340,506 357,191 373,264
Goods Services 588,256 617,081 644,850
Support services 278,048 291,672 317,926
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MTEF- allocation WTE (cont)
Operating surplus/deficit from core business 392,973 532,458 738,370

CAPEX FUNDED FROM OPERATIONS 392,973 532,458 738,370
Movable assets   - -
Refurbishment 392,973 436,986 485,928
Betterment - 95,472 252,441
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MTEF allocation WTE (cont)
INFRASTRUCTURE DEVELOPMENT 1,744,913 1,853,806 1,992,036
Support services (Schedule) 416,453 465,934 508,633
Movable assets 104,570 13,480 106,327
Less allocated to operations (278,048) (291,672) (317,926)
Projects direct side support 1,501,938 1,666,064 1,695,001
Funded by Augmentation 1,744,913 1,853,806 1,992,036
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MTEFallocation WTE (cont)
SUBSIDISED ACTIVITIES
CMA (Proto)
Revenue 184,740 193,792 202,513
Raw Water 184,740 193,792 202,513
Operational Costs 279,332 316,617 349,124
Compensation of Employees 165,455 181,244 194,489
Goods Services 113,877 135,373 154,636
Capital Expenditure - - -
Movable assets   - -
Operating surplus/deficit (94,592) (122,825) (146,611)
Funds by Augumentation 94,592 122,825 146,611
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• I thank you