PROGRAMME 1: ADMINISTRATION

1
PROGRAMME 1 ADMINISTRATION

• FINANCE

2
Annual Financial Statements

• Expenditure 2005/06 financial year
• Total Expenditure R9 010 077 000
• Exchequer R3 889 150 000 (Including FDA of R172
  062 000)
• Trading Accounts R5 292 989 000
• Spending
• Head Office and 9 Regional Offices in 4
  programmes
• Administration R278 378 000
• Water Resource Management R1 613 594 000
• Water Services R1 524 895 000
• Forestry R420 919 000
• Trading Accounts
• Equipment Account R78 148 000
• Water Trading Account R5 214 841 000
• Spending level
• 2004/05 99 spending level
• 2005/06 94.5 spending level

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Reports of Auditor General on Financial Statements

• Vote 34 Exchequer Account
• Qualification (a) Asset management, (b)
  Independent checks and reconciliation (c) BAS and
  PERSAL reconciliation (d) Commitments.
• Emphasis of Matter (a) Monitoring, (b)
  Performance information.
• Water Trading account
• Disclaimer of audit opinion
• Qualifications in respect of (a) Financial
  statements, and (b) Non adherence to accounting
  framework.
• Emphasis of matter in respect of (a) Lack of
  Policy framework, (b) Performance information.

4
Reports of Auditor General on Financial Statements

• Equipment Trading account
• Disclaimer of audit opinion
• Qualifications in respect of (a) Financial
  statements, (b) inadequate monitoring, (c) Fixed
  assets.
• Emphasis of matter in respect of (a) General
  Computer controls for CEMS, (b) Performance
  information, (c) Inadequate monitoring.
• National Forest Recreation and Access Trust
• Unqualified audit
• Emphasis of matter in respect of operation of
  National Forest Recreation Trust.

5
Finance Management Improvement Plan

• on-going engagement with Office of Accountant
  General (OAG) to implement programme of support
• national accounting firm contracted to provide
  temporary resources in DWAF to improve financial
  management while recruiting suitable staff
• implementation of SAP as preferred Enterprise
  Resource Planning (ERP) system to support trading
  activities.
• system went live on 4 October 2006
• implement accrual accounting for trading
  activities and comply with section 40(1) of PFMA
• extensive training programme for staff
• computer literacy,
• accrual accounting
• application of SAP in DWAF
• Implementing asset management strategy
• Compliance with National Treasurys requirements,
  including Generally Accepted Accounting Practice
  (GAAP).
• include re-valuation of DWAFs fixed assets
• Build on successes achieved by Audit Steering
  Committee
• members from DWAF and Office of Auditor-General,
• will oversee and monitor progress on 2006/07 audit

6
Restructuring

• Finance being restructured in national and
  regional offices
• Cash accounting unit with dedicated resources and
  independent processes and
• Accrual accounting unit with dedicated resources
  and independent processes
• new finance structure populated with resources
  and operationalised.
• Includes physical relocation strategy (relocation
  of people, equipment and technology) and phased
  resource implementation plan
• Key reasons for restructuring
• PFMA, Regulations and National Treasury
  directives require split between main account
  and trading activities
• Elimination of fragmentation of finance
  activities (consolidation of supply chain
  management, revenue management and budget
  activities)
• Ensure working environment conducive to
  implementation of SAP.
• High level structure approved
• Recruitment of key resources commenced
• Fast track approach adopted to finalise
  structures for Regional Finance components

7
Supply Chain Management

• Non-compliance with Supply Chain Management (SCM)
  Framework due to lack of capacity and skills
• Actions taken
• Senior Manager appointed in August 2005 to put
  programmes and interventions in place to improve
  SCM
• Professional Service Provider contracted/appointed
  to assist with training and capacitating DWAF
  with daily management of assets including the
  review and updating of policy
• Professional Service Provider contracted/appointed
  to assist with verification of assets
• Capacitating staff through on the job training,
  workshops, skills transfer and long term courses
  for staff
• Appropriate structures being implemented in
  national and regional offices
• Basic Asset Policies, policies and procedures in
  place and being updated for the Trading account
• Comprehensive asset register and verification
  underway
• Progress reports provided to National Treasury on
  their implementation requirements
• Departmental Control Committee (Bid Committee)
  meets once a week and Bid Committees are in place
  in all Regions.

8
Engagement with Office of Auditor-General (AG)

• Ongoing engagement with Office of Auditor-General
  to implement comprehensive programme to improve
  quality of audit and to take corrective action
  on issues raised through the audit.
• Established Audit Steering Committee with members
  from DWAF and Office of the Auditor-General to
  oversee and monitor progress on the 2005/06
  annual audit
• Office of the AG have conducted two briefing
  sessions (with Top Management and MANCO) on
  outcome of 2005/06 Audit and made suggestions on
  actions to be taken.
• Workshops will take place during November with
  National and Regional Offices on 2005/06 Audit to
  develop action plan to deal with outcomes of
  audit
• Audit Steering Committee will continue to oversee
  and monitor progress on 2006/07 annual audit
  which will commence in November 2006.

9
Engagement with Office of Accountant General
(OAG)

• Ongoing engagement with Accountant General to
  implement comprehensive programme of support
• Finalising TOR for support to Department
• Target date for implementation is end October.
• The TOR will include aspects which seek to
• Provide full time skilled resources to the
  Department
• Implement a comprehensive skills transfer
  programme
• Advise on and integrate crucial financial
  management projects
• Assist with preparation of management accounts
• Support DWAF in conducting risk assessment
• Support DWAFto enhance its internal audit
  processes.

10
Support from National Accounting Firm

• DWAF has one year contract (concludes April 2007)
  with National Accounting Firm to provide team
  of 11 Financial experts to provide support in
  national and regional offices
• Objectives of support programme are
• Assist with gathering of information and
  compilation of 2005/06 Financial Statements
• Assist with implementation of Accrual Based
  Accounting
• Assist with day to day running of SAP Accounting
  system.
• General financial management support and support
  with annual audit.

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Budget 2005/06
Programme Initial Appropriation Additional Appropriation Final Appropriation Final Expenditure
Admin 272491 87583 369873 278378
Water Resources 1506657 125388 1613594 1503464
Water Services 1405075 122899 1524895 1510998
Forestry 373189 42354 423944 420919
Total 3557412 378224 3935636 3717058
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Budget 2005/06 Expenditure (31 March 2006)
Programme Final Appropriation Expenditure Roll Overs to 2006/07 Utilised (including roll overs)
Admin 369873 278378 82962 97.7
Water Resources 1613594 1503464 90246 98.7
Water Services 1524895 1510998 99.1
Forestry 423944 420919 99.3
Theft and Losses 3330 3329 99.9
Total 3935636 3717058 172208 98.8
Utilised 94.4 4.4 98.8
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Department of Water Affairs and Forestry 2005/06
Exchequer Account per Economic classification
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Expenditure Trends 2003/04 to 2005/06
2003/04 2004/05 Decrease / Increase () 2005/06 Decrease / Increase ()
Administration 262830 272694 3.75 278378 2.08
Water resources Management 1116208 1447049 29.64 1503464 3.90
Water Services 2378530 1561359 (34.36) 1510998 (3.23)
Forestry 411607 466629 13.37 420919 (9.80)
Theft and Losses 12912 29215 126.26 3329 (88.60)
TOTAL 4182087 3776946 3717058
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2005/09 Expenditure Estimates Administration
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Programme 1 Administration Expenditure Trends

• Expenditure
• average annual increase of 15,3
• R292 million in 2002/03
• R278,378 million in 2005/06
• increases in expenditure in 2005/06 result of
  funds rolled over and additional R66,5 million
  to cover costs of transferring water services
  operations to local governments.
• From 1 April 2006, costs for leases and
  accommodation charges devolved from Dept of
  Public Works to individual departments
• DWAF received R98,9 million in 2006/07,
  R109,5 million in 2007/08 and R117,6 million in
  2008/09.

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Programme 1 Administration Expenditure Trend

• Additional allocations for critical posts in
  corporate services over 2006 MTEF
• 4,9 increase in compensation of employees.
• Increase in Information Services subprogramme
  between 2005/06 and 2006/07 once-off payment of
  R38 million for upgrading IT infrastructure
• After slight decrease between 2005/06 and
  2006/07, expenditure expected to increase from
  R428,4 million in 2007/08 to R451,8 million in
  2008/09, an average increase of 5,5 per cent.

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Expenditure Estimates Water Resource Management
2005/09
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Programme 2 Water Resource Management
Expenditure Trends

• Increase from 2003/04 mainly due to
• drought relief expenditure (R103 million)
• R33 million rolled over from 2003/04 to 2004/05
  to repay loan to Land Bank w.r.t Kalahari Water
  User Association (DWAF provided State
  Guarantee)
• 2005/06 financial year R76 million paid to
  Water Trading Account to enable the Trading
  Account to pay the amount on augmentation

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2005/09 Expenditure Estimates Water Services
21
Programme 3 Water Services Expenditure Trend

• Decrease from 2003/04 to 2004/05 mainly due to
  transfer of expenditure on new water and
  sanitation projects to municipal infrastructure
  grant (MIG).
• During 2004/05
• R44 million (once off payment) spent on drought
  related activities
• R131 million made to DWAF for VAT requirements.

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2005/09 Expenditure Estimates Forestry
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Programme 4 Forestry Expenditure Trend
Increase from 2003/04 to 2004/05 mainly due to
rollover of R38 million to pay claim to Yorcor
in terms of court judgement on cancellation of
long-term timber supply contract.
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Water Trading Account Income Statement Analysis
2006 2006 2005 2005 2004 2004
Actual Budget Actual Budget Actual Budget

Revenue
Non-Tax revenue 3,067,879 2,538,000 2,469,012 2,491,408 2,372,769 1,947,361
Sale of goods and services 3,066,456 2,536,608 2,464,319 2,488,645 2,370,138 1,947,361
Interest 1,423 1,392 4,693 2,763 2,631  

Transfers received 1,608,065 628,777 1,356,017 1,544,612 1,360,928 1,825,573
Total revenue 4,675,944 3,166,777 3,825,029 4,036,020 3,733,697 3,772,934


Expenses
Current Expenses 4,802,118 3,050,117 6,905,602 5,233,389 4,558,366 3,357,213
Compensation of Employees 701,240 300,463 727,409 730,635 695,843 626,387
Goods and Services 2,877,094 2,225,101 4,932,929 3,504,040 2,911,368 2,423,685
Depreciation 1,223,753 524,522 1,245,235 713,385 679,414  
Other Expenditure   285,255 271,671 307,141
Interest and dividends 31 31 29 74 70  
Transfers and subsidies 412,754 419,755 436,225 425,813 147,343
Total expenses 5,214,872 3,469,872 7,341,827 5,233,389 4,984,179 3,504,556
Surplus / (Deficit) -538,928 -303,095 -3,516,798 -1,197,369 -1,250,482 268,378
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Equipment Trading Account Income Statement
Analysis
2006 2006 2005 2005 2004 2004
Actual Budget Actual Budget Actual Budget
Revenue
Non-Tax revenue 77,526 55,798 67,170 53,506 50,958 48,384
Sale of goods and services 77,502 55,798 67,158 53,477 50,930 48,384
Interest 24   12 29 28  

Transfers received 3,034 2,660 2,535 2,535 2,500
Total revenue 80,560 58,458 69,705 56,041 53,458 48,384
Expenses
Current Expenses 78,148 52,825 37,321 48,070 45,781 8,203
Compensation of Employees 0 0 0 0 0  
Goods and Services 70,865 43,869 29,827 14,793 14,089 8,203
Depreciation 7,283 8,956 7,494 33,277 31,692  
Other Expenditure   0 0  
Interest and dividends 0 0   0 0  
Transfers and subsidies 0 0
Total expenses 78,148 52,825 37,321 48,070 45,781 8,203
Surplus / (Deficit) 2,412 5,633 32,384 7,971 7,677 40,181