Vote 36: Water and Sanitation Presentation to the Portfolio Committee: Water and Sanitation Presenter: Ulrike Britton | Chief Director: Urban Development and Infrastructure | 28 June 2017

Outline PFMA reporting requirements 2016/17 Pre-audited expenditure outcome Compensation of Employees Virements Commitments Accruals and payables Conditional grants Spending performance Indirect grants Water Trading Entity Challenges and recommendations

PFMA reporting requirements Section 40 of PFMA – accounting officer’s reporting responsibilities S40(1)(c): Submit financial statements within 2 months after the end of the financial year to National Treasury and Auditor General S40(1)(d): Submit annual report and audited financial statements within 5 months of the end of the financial year to National Treasury S40(4)(c): Submit revenue and expenditure information to National Treasury within 15 days of the end of each month

2016/17 Pre-Audited Expenditure Outcome   2016/17 2015/16 Rand thousand Adjusted Appropriation Post adjustment shifts Final Appropriation Actual Expenditure Variance Expenditure as % of final appropriation Programme Administration 1 612 951 (65 208) 1 547 743 1 504 930 42 813 97.2% 1 519 753 1 517 867 99.9% Water Planning and Information Management 814 813 (65 157) 749 656 695 603 54 053 92.8% 684 446 668 817 97.7% Water Infrastructure Development 12 012 696 117 622 12 130 318 12 082 463 47 855 99.6% 11 856 540 11 748 847 99.1% Water and Sanitaton Services 738 060 40 428 778 488 1 070 757 (292 269) 137.5% 1 414 674 1 359 575 96.1% Water Sector Regulation 346 077 (27 685) 318 392 281 685 36 707 88.5% 271 117 261 868 96.6% TOTAL 15 524 597 - 15 635 438 (110 841) 100.7% 15 746 530 15 556 974 98.8% Economic classification Current payments 3 202 471 (15 935) 3 186 536 3 139 947 46 589 98.5% 2 976 563 2 902 343 97.5% Compensation of employees 1 540 217 1 439 945 100 272 93.5% 1 400 194 1 360 369 Goods and services 1 662 185 (15 941) 1 646 244 1 699 928 (53 684) 103.3% 1 569 834 1 535 439 97.8% Transfers and subsidies 7 487 642 15 906 7 503 548 7 482 875 20 673 99.7% 5 084 398 5 078 344 Provinces and municipalities 4 695 401 147 4 695 548 4 681 319 14 229 2 305 744 2 305 689 100.0% Departmental agencies and accounts 1 713 664 12 905 1 726 569 1 725 869 700 1 745 893 1 744 838 Higher education institutions 3 400 (2 419) 981 0.0% 2 000 1 000 50.0% Foreign governments and international organisations 188 370 419 188 789 188 250 539 189 267 189 231 Public corporations and private enterprises 844 773 802 000 801 748 Non-profit institutions 2 766 1 297 4 063 3 337 726 82.1% 1 998 681 34.1% Households 39 268 3 557 42 825 39 327 3 498 91.8% 37 496 35 157 93.8% Payments for capital assets 4 834 484 26 4 834 510 5 012 613 (178 103) 103.7% 7 680 719 7 571 438 98.6% Buildings and other fixed structures 4 697 334 25 937 4 723 271 4 926 651 (203 380) 104.3% 7 550 980 7 455 957 98.7% Machinery and equipment 109 258 (22 857) 86 401 62 003 24 398 71.8% 100 543 86 450 86.0% Software and other intangible assets 27 892 (3 054) 24 838 23 959 879 96.5% 29 196 29 031 99.4% Payment for financial assets 3 4 850 4 849

Compensation of Employees 2016/17 Pre-audited outcome Declared R62 million in adjustments budget as unspent Shifted R65 million in adjustments budget

Personnel Source: Vulindlela

Virements Section 43 of the PFMA Accounting officer may utilise the saving in a main division of the vote to defray excess expenditure in another main division of the same vote, unless the relevant treasury directs otherwise. May not exceed 8 per cent of the amount appropriated in the main division Does not authorise utilisation of a saving in: Specifically and exclusively appropriated allocations Transfers to other institutions Capital expenditure to defray current expenditure

Virements Treasury Regulation 6.3.1 (a) Compensation of employees and transfers to other institutions, excluding transfers for levies and taxes imposed by legislation, may not be increased without the approval of the relevant treasury (b) new transfers to other institutions may not be introduced without the approval of the relevant entity; (c) allocations earmarked by the relevant treasury cannot be used for other purposes, except with its approval (d) virement of funds from compensation of employees to transfers and subsidies for the payment of severance packages are excluded from provisions (a) and (b).

2016/17 Virements Virements included in the adjustments budget Virements approved by National Treasury post adjustments budget From To R65 million – CoE R72 million – bucket eradication R37 million – goods and services R21.6 million – office equipment R 12 million – property payments (municipal services) R4.4 million – software licenses R4 million – leave gratuities From To R4 million – various goods and services R4 million – Water Research Commission R2 million – transfers to higher education institutions R2 million – Transfers to the Strategic Water Partners Network R119 000 – transfers to higher education institutions R119 000 – Transfers to Limpopo Watercourse Commission R400 000 – goods and services R400 000 – Transfers to households

Commitments (pre-audited)

Accruals and payables (pre-audited)

Conditional Grants

Regional Bulk Infrastructure Grant – variability in indirect grants

Indirect Grants and the Constitution Constitutional provisions on concurrent functions Water and sanitation services in Schedule 4 Part B of the Constitution S139(1) – If a municipality cannot or does not fulfil an executive obligation in terms of the Constitution or legislation, the relevant provincial executive may intervene by taking the appropriate steps to ensure the fulfilment of that obligation… Issue a directive to the municipality Assume responsibility for the relevant obligation Dissolve the municipal council S154 – National and provincial government must, by legislative or other means, support and strengthen the capacity of municipalities to manage their own affairs, to exercise the powers and to perform their functions

Bucket Eradication Programme Background DCoG request for funding in the adjustments budget of R1.7 billion in 2013 DHS, DCoG and DWS (then DWA) set up inter-ministerial committee on bucket eradication Programme approved at the Presidential Coordinating Council in October 2013 Scope To eradicate 88 127 bucket systems across SA by 31 March 2014 Water-borne: top structure, erf connections, main sewer lines, excluding bulk water supply and upgrading of waste water treatment works Dry sanitation: Ventilated Improved Pit Latrine or Urine Diversion, top structure, digging and lining of pit

Bucket Eradication Programme Cost Waterborne sanitation – R20 000/unit Dry on site sanitation – R12 000/unit Total cost – R1.76 billion 88 127 X R20 000 Budget allocation R899 million in 2014/15 and R975.4 million in 2015/16 allocated from the Human Settlements Development Grant 2014 National Macro-Organisation of the State Establishment of the DWS Sanitation function shift from DHS to DWS Budget shifted in 2014/15 adjustments budget

Bucket Eradication Programme

Water Trading Entity

Water Trading Entity

Water Trading Entity – key issues About 45 per cent of total budget to TCTA Undertaking projects with no funding/revenue source Undertaking water services projects Weak alignment between expenditure and expected revenue Budget reductions on transfers from the DWS Debtors book

Challenges Variability in planning and budget AG 2015/16 report highlights that: “department did not have documented policies and procedures to guide the operations with regard to the Regional Bulk Infrastructure Grant and the Municipal Water Infrastructure Grant (now Water Services Infrastructure Grant). A manual/policy did not exist to support payments in having a proper reconciliation system per project in place to ensure that all information pertaining to the project are reconciled on a monthly basis.” Expansion of scope of the bucket eradication programme Supporting municipalities to execute their functions Aligning programmes and projects to government’s fiscal consolidation programme

Recommendations Implement policies and procedures on programme and project management, as highlighted by the Auditor General Reconvene the Inter-Ministerial Task Team (with Human Settlements and Cooperative Governance) on bucket eradication Recommendations to the Presidential Coordinating Council

Thank you