Briefing on the Audited Financial Statements 2011/12

Department: Water AffairsMain Account

10 to 11 October 2012

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Portfolio Committee: Water & Environmental Affairs

Section Title Slide noPart A Expenditure analysis for the year ending

31st March 20124 - 14

Part B Successes and challenges experienced 15 - 19

Part C Under spending on Acid Mine Drainage 20 - 23

Part D Remedial action plan 24 – 25

Contents of presentation

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PART A – EXPENDITURE ANALYSIS FOR THE YEAR ENDING 31ST MARCH 2012

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Expenditure outcome as at 31 March 2012

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Expenditure per programme as at 31 March 2012

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Programme

Budget 2011/12 YTD Exp Variance%

SPENT

R 000 R 000R 000

Administration 878 379 781 491 96 888 89%Water Sector Management 852 351 511 807 340

544 60%

Water Infrastructure Management 2 384 963 2 384 020 943

100%

Regional Implementation and Support 4 774 145 4 375 501 398 644

92%

Water Sector Regulation 112 370 91 153 21 217 81%International Water Cooperation 26 111 20 934 5

177 80%

Total 9 028 319 8 164 906 863 413

90%

Departmental expenditure per programme

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Economic classification

Budget 2011/12

YTD Exp2011/12

Variance % SPENT

R 000 R 000R 000

Compensation of Employees 1 093 565 922 832 170 733 84%

Goods and Services 1 519 996 1 354 612 165 384 89%

Interest and Rent on Land 4 168 3 955 213 95%

Payment of Financial Assets 25 446

25 446 - 100%

Transfer and Subsidies 3 513 724 3 486 086 27 638 99%

Payment of Capital Assets 2 871 420 2 371 975 499 445 83%

Total 9 028 319 8 164 906 863 413 90%

Departmental expenditure per economic classification

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Reasons for under-spending

• The Department spent R 8 164 906 000 of the total allocation of R 9 028 319 000 which represents 90.4% total spending of the Department.

• The remaining 9.6% of the under expenditure is mainly due to the following:

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Reasons for under-spendingProgramme 1 Final

AppropriationActual

ExpenditureVariance

R’000% Variance

Administration 878 379 781 491 96 888 11.0%1. Allocation of R34 million could not be spent in respect of Business

Process Review (BPR) because the committee was appointed in the middle of the financial year.

2. Unfilled vacant posts R12 million.3. Goods and services R32 million relating to accrual and commitments4. Machinery and equipment R16 million5. Funds in respect of learning academy R2,3 million

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Reasons for under-spendingProgramme 2 Final

AppropriationActual

ExpenditureVariance

R’000% Variance

Water Sector Management 852 351 511 807 340 544 40.0%

1.Allocation of R250 million could not be spent on Acid Mine Drainage (AMD) due to the unforeseen delays in finalising the detailed design/concept of infrastructure.

2.Allocation of R18 million could not be transferred to Bushbuckridge Water Board due to a decision that was taken that the funding should not be transferred. However, after reconsidering the discussions between the Department and Water Boards a resolution was taken that the funding be transferred in order to refurbish the ailing infrastructure. The decision was taken very late in the financial year and funds could therefore not be transferred before the cut-off

3.Unfilled vacant posts including Occupational Specific Dispensation (OSD) posts. – R54 million

4.Goods and services R18 million relating to accrual and commitments

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Reasons for under-spendingProgramme 3 Final

AppropriationActual

ExpenditureVariance

R’000% Variance

Water Infrastructure

Management

2 384 963 2 384 020 943 0.0%

1. The spending on this programme is on acceptable level as the

programme managed to make use of its allocated budget.

Insignificant variance.

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Reasons for under-spendingProgramme 4 Final

AppropriationActual

ExpenditureVariance

R’000% Variance

Regional Implementation and

Support

4 774 145 4 375 501 398 644 8.4%

1. Allocation of R209 million could not be spent on Water Services Projects such as Nandoni

Pipeline, Hluhluwe and Inyaka because approval of service provider took longer than

anticipated.

2. An allocation of R20 million could not be spent in respect of Moutse Bulk Water Supply

because the payment could not be captured before the payment cut-off date.

3. Unfilled vacant posts including OSD posts R88 million.

4. Material ordered for regional bulk infrastructure projects but not delivered at year end:

R81 million

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Reasons for under-spendingProgramme 5 Final

AppropriationActual

ExpenditureVariance

R’000% Variance

Water Sector

Regulation

112 370 91 153 21 217 18.9%

1. Goods and services R5 million relating to accrual and commitments2. Unfilled vacant posts including OSD posts R16 million.

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Reasons for under-spendingProgramme 6 Final

AppropriationActual

ExpenditureVariance

R’000% Variance

International Water

Cooperation

26 111 20 934 5 177 19.8%

1. Allocation of R3.7 million could not be spent due to a number of

planned international engagements not taking place. This was due

to political dynamics and postponements in certain countries.

2. Unfilled vacant posts: R 1.4 million

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PART B – SUCCESSES AND CHALLENGES EXPERIENCED

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Successes• Approximately 98% of the AMD decant from the Western Basin is

currently being partially treated at the upgraded Rand Uranium treatment plant. This resulted in a recent increase of the pH leaving the Hippo pool from 3,5 to 6,2.

• The Department completed a total of nine (9) regional bulk schemes comprising of two (2) Waste Water Treatment Works (WWTW), three (3) Water Treatment Works (WTW) and four (4) Bulk Water Supply Schemes (BWSS)

• Development of Reconciliation Strategies for Bloemfontein & Mzimkhulu Catchment were completed. Good progress was made with the development of the All Towns Strategies as well as the Olifants River which are earmarked for finalization in 2012/13 financial year

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Successes• Good progress has been made in ensuring that various systems and stand

alone dams have robust operating rules which are annually updated and implemented. As such, annual system operation runs were done for all systems with the Algoa System, the only one with restrictions on both urban (PE area) and irrigation water use.

• 5 Catchments were optimally monitored (Berg, Breede, Gouritz, Olifants, Mhlathuze and Levhuvu/Letaba)

• The incentive based regulatory approach has succeeded in raising awareness and providing a positive stimulus for gradual and sustainable improvement in both water and waste water treatment works. This is evident in the both 2011 Blue Drop and Green Drop reports. This is shown by the 21% improvement on the Blue Drop scores attained (72.9% in 2011 compared to 51.4% in 2009). The Green Drop scores improved by 8%.

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Successes• In preparation for the 2012 reports, 831 wastewater

and 931 water supply systems were assessed.• The Councillors Induction Programme gained

momentum as 1224 Councillors were inducted far exceeding the 166 that was planned for.

• Water infrastructure status and intervention plans for 22 priority District Municipalities were completed

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Challenges

• Data discrepancies delayed the finalisation of the comprehensive reserves

• The high water levels in the Vaal River delayed the completion of the Klipplaatdrift monitoring station

• The implementation of OSD is impacting the availability of the technical skills required to ensure service delivery within the Branch as critical posts could not be filled

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PART- C UNDEREXPENDITURE ON ACID MINE DRAINAGE

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Reasons for underspending on AMD• Since the Trans Caledon Tunnel Authority (TCTA) has been

appointed by the Minister, a decision was made that prior to implementation of any solution, a due diligence review had to be done first.

• Collaborative efforts between the Department and the TCTA have resulted in interrogation of existing mine water treatment infrastructure in the Western and Central Basin mining areas, as well as potential arrangements with the mining companies still operational in these Basins. Long consultation processes to compile transfer agreements were fruitful but time consuming

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Reasons for under-spending on AMD

• Delay in the implementation of the Immediate Intervention for the Western Basin. The upgrade of the Rand Uranium Treatment plant at a cost of R25 million was only completed in June 2012 compared to originally planned completion date of March 2012. The delay was mainly due to longer than anticipated manufacturing times for the electrical & mechanical equipment.

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Reasons for under-spending on AMD• Delay in the award of the contract for the construction of the short-

term intervention for the three basins. The delay was caused by a longer than expected tender evaluation period. The original planned date of award was February 2012 compared to a date now of August 2012 which date is subject slightly to lower rise of water levels in the Central and Eastern Basins allowed more time. It is extremely important that critical decisions can only be made on good and reliable data. Due to a lack of consistent information, more time was spent in obtaining as much as possible data from various sources subject to sufficient funding being secured to allow TCTA to enter into contractual commitments.

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PART D – REMEDIAL ACTIONS PLAN

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Actions taken or planned to avoid recurrence

• To strengthen the project management and contract management capacity within the department including overseeing

• Improve on the governance structures that will assist with the monitoring of the expenditure on a continuous basis; the department has established Budget Committee that will quarterly review the expenditure against the performance and the service delivery.

• Quarterly review sessions with the National Treasury • The department has also established the CAPEX committee that

will oversee and monitor all projects under work in progress..

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END

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