PROGRAMME 1: ADMINISTRATION

FINANCE

• 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

Annual 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.

Reports of Auditor General on Financial

Statements

Reports of Auditor General on Financial Statements

Equipment Trading accountDisclaimer of audit opinionQualifications 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 TrustUnqualified auditEmphasis of matter in respect of operation of

National Forest Recreation Trust.

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 Treasury’s requirements, including

Generally Accepted Accounting Practice (GAAP). – include re-valuation of DWAF’s 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

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

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. •

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.

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.

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.

Budget 2005/06Programme Initial

AppropriationAdditional

AppropriationFinal

Appropriation

Final Expenditure

Admin 272491 87583 369873 278378Water Resources

1506657 125388 1613594 1503464

Water Services

1405075 122899 1524895 1510998

Forestry 373189 42354 423944 420919Total 3557412 378224 3935636 371705

8

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%

Department of Water Affairs and Forestry 2005/06 Exchequer

Account per Economic classification

R'000

CURRENT PAYMENTS 1,539,263

Compensation of employees 681,111

Goods and services 854,665

Interest and Rent on land 158

Financial transaction in assets & liabilities 3,329

Unathorised expenditure -

TRANFERS AND SUBSIDIES TO: 1,768,697

Province and Municipalities 1,074,608

Departmental agencies and accounts 670,163

Universities and Technikons -

Foreign Govt. & International Organasations -

Public Corporations & Private enterprises 6,891

Non - Profit Institutions 2

Households 17,033

PAYMENTS FOR CAPITAL ASSETS 409,128

Building & Other fixed structures 363,254

Machinery & Equipment 32,381

Cultivated assets 30

Software & other intangible assets 13,463

Land and subsoil assets

Total Budget Allocation 3,717,088

Expenditure Trends 2003/04 to 2005/062003/04 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

2005/09 Expenditure Estimates: Administration

Minister 923 887 934 981 Management 27 559 16 192 16 999 17 820 Corporate Services 174 983 213 018 223 660 234 349 Information Services 74 913 107 632 77 314 81 021 Property Management - 98 979 109 501 117 605 Total Allocation 278 378 436 708 428 408 451 776

Programme 1 : Administration:

Expenditure TrendsExpenditure

• 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.

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.

Programme 1 : Administration :

Expenditure Trend

Expenditure Estimates: Water Resource

Management 2005/09 Exchequer Expenditure Trends per Sub-programme

Water Resources Management 2005/06 R'000 2006/07 R'000 2007/08 R'000 2008/09 R'000

Equitable Supply 129,417 166,578 174,697 190,420Sustainable Supply 315,891 1,227,580 1,324,109 1,770,003Protection Polices 34,310 37,156 57,561 62,741Protection Measures 2,149 3,408 3,524 3,841Intitutional Regulation 12,300 28,700 26,661 29,060Institutional Development 12,725 7,529 4,101 4,473Strategic Alignment 95,115 126,158 137,325 149,684Stakeholder Empowerment 120,192 134,458 130,945 143,201African Co-operations 10,626 9,099 10,499 11,444Water Resource Admin 21,613 23,356 26,145 28,498Water Resource Support 95,948 112,504 112,077 122,164Operation of Water Resources 635,428 302,660 408,644 446,102

17750Total Allocation 1,503,464 2,179,186 2,416,288 2,961,631

Medium-term ExpenditureExpenditure Outcome

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

2005/09 Expenditure Estimates: Water Services

2007/08 R'000

3,209 3,369 45,811 48,104 10,845 11,387

- - 206 216

9,642 10,125 25,494 26,757 46,997 49,186 33,166 34,855 8,917 10,101

765 803 165,039 175,446 993,500 1,043,175

1,343,591 1,413,524

Department of Water Affairs and ForestryExchequer Expenditure Trends per Sub-programme

Medium-term Expenditure

Expenditure Outcome

Water Services2005/06 R'000

2006/07 R'000 2007/08 R'000 2008/09 R'000

Provisioning Policies 3,335 2,999 2,999 3,209 Water and Sanitation Services 200,450 18,132 19,830 21,218 Water Sector Policies 41,421 44,586 48,037 51,417 Water Sector Support 68,336 75,324 78,585 84,086 Institutional Policies 6,595 10,845 11,387 12,184 Institutional Support 44,994 46,264 48,705 52,114 Transfers Policies - - - - Transfer of Functions 14,411 15,480 16,255 17,392 African Initiative 195 100 100 107 African Participation - 300 803 859 Water Service Admin 7,867 10,183 10,678 11,408 Water Service Support 55,061 105,913 117,942 126,283 Operations of Water Services 1,068,333 1,132,125 1,188,782 1,392,042

Total Allocation 1,510,998 1,462,251 1,544,103 1,772,319

Medium -term Expenditure

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.

2005/09 Expenditure Estimates : Forestry

Expenditure Outcome

Forestry 2005/06 R'000 2006/07 R'000 2007/08 R'000 2008/09 R'000Sub-programmesForest Oversight 15,440 18,192 20,643 21,366Forestry Governance 1,295 2,102 2,207 2,313Forestry Development 9,002 10,153 12,677 13,285Community Empowerment 20,052 21,552 22,892 23,991Fire Regulation & Oversight 2,757 3,015 6,983 7,318Fire Governance 1,576 2,191 2,301 2,412State Forest Trans and Regulation 3,149 8,177 8,206 8,629State Forest Admin & Oversight 22,615 23,293 24,720 25,907State Forest Management 1,570 2,113 1,938 2,031Sustainable Forest Management 308,172 268,366 285,149 298,444Forest Management and Support 1,343 1,682 1,787 1,873Forestry Support Services 33,948 37,564 31,042 32,689

Total Allocation 420,919 398,400 420,545 440,258

Medium-term Expenditure

Department of Water Affairs and ForestryExchequer Expenditure Trends per Sub-programme

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.

Water Trading Account Income Statement Analysis2006 2005 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

Equipment Trading Account Income Statement Analysis2006 2005 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