1. STANDING COMMITTEE ON APPROPRIATIONS
Presented by Mr Onesmus Ayaya Chief Financial Officer Department: Water Affairs (DWA) 21 October 2009

2. Presentation Outline Expenditure Trends
Quarterly expenditure: 2009/10 financial year (FY)
Reasons for under expenditure
Allocation before and after transfer of functions
Rollover of funds
Virement (Shifting of Funds): 2009/10 FY
Unforeseeable and unavoidable expenditure: 2009/10 FY
Earmarked funding
Transfer of functions
Re-allocation of funds earmarked 2

3. Expenditure Trends Year Actual R‘000 Budget 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 93 3

4. Quarter 1 actual expenditure: ending in 30 June 2009
Programme
2009/10 Original Budget
R’000
2009/10 Actual
% spent
Available Budget
Administration
795,353
120,982
15%
674,371
Water resource management
3,895,794
848,258
22%
3,047,536
Water Services
2,717,039
452,022
17%
2,265,017
Forestry
485,641
123,175
26%
362,466
Total
7,893,827
1,544,977
20%
6,348,850 4

5. Quarter 1 actual expenditure: ending in 30 June 2009
Economic classification
Programme
Adjusted Budget
2009/10
2009/10 Actual
R’000
% spent
Available Budget
Compensation of Employees
1,327,863
287,816
22%
1,040,047
Goods and Services
2,113,255
393,295
20%
1,719,960
Interest and Rent on land
782 5 1%
777
Transfers and Subsidies
3,337,704
891,240
27%
2,446,464
Payments for Capital Assets
1,114,223
(27,379) 0%
1,141,602
Total
7,893,827
1,544,977
6,348,850 5

6. Quarter 2 actual expenditure ending in 30 Sept 2009 (Before transfer of functions)
Programme
2009/10 Original Budget
R’000
Adjust-
ments
Adjusted Budget
2009/10
2009/10 Actual
% spent
Available Budget
Administration
795,353
47,231
841,809
329,320
39%
512,489
Water resource management
3,895,794
183,741
4,076,631
1,586,809
40%
2,489,822
Water Services
2,717,039
123,419
2,842,452
922,770
33%
1,919,682
Forestry
485,641
2,006
489,653
261,955
53%
227,698
Total
7,893,827
356,397
8,250,224
3,100,854
38%
5,149,691 6

7. Quarter 2 actual expenditure ending in 30 Sept 2009 (Before transfer of functions)
Economic classification
Programme
Adjusted Budget
2009/10
2009/10 Actual
R’000
% spent
Available Budget
Compensation of Employees
1,408,746
601,836
43%
806,910
Goods and Services
2,355,097
874,252
37%
1,480,845
Interest and Rent on land
782 69 9%
713
Transfers and Subsidies
4,393,951
1,550,832
35%
2,843,119
Payments for Capital Assets
91,648
73,865
81%
17,783
Total
8,250,224
3,100,854
38%
5,149,370 7

8. Reason for under spending
Late submission of invoices in respect of services already rendered.
Projects (e.g. sanitation backlogs in schools and clinics and Regional Bulk Infrastructure) are still at tender phase; the expenditure is anticipated to increase in the third quarter of this financial year
Non-payment of general wage increase, it was anticipated (as projected) that the expenditure will kick in July These increases are now anticipated to be paid in October as per DPSA directive
Protracted delays in reaching agreements with municipalities to transferring staff and water schemes. 8

9. Allocation: after transfer of functions
Programme
2009/10 Original Budget
R’000
Virement
Rollover and Additional Funding
Shifting of Functions
Adjusted Budget
2009/10
Administration
795,353
(14,086)
61,317
(3,934)
838,650
Water resource management
3,895,794
(65,386)
249,127
(27,605)
4,051,930
Water Services
2,717,039
77,466
45,953
(425,263)
2,415,195
Forestry
485,641
2,006
(487,647)
Total
7,893,827
356,397
(944,449)
7,305,775 9

10. Allocation: after transfer of functions
Economic classification
Programme
Original Budget
2009/10
Virement
Rollover & additional funding
Shifting of Functions
Adjusted Budget
Compensation of Employees
1,327,863
21,366
59,517
(358,582)
1,050,164
Goods and Services
2,115,255
171,962
69,880
(219,231)
2,135,866
Transfers and Subsidies
3,337,704
479,247
227,000
(6,683)
4,037,268
Interest and Rent on land
782
(782)
Payments for Capital Assets
1,114,223
(672,575)
(359,171)
82,477
Total
7,893,827
356,397
(944,449)
7,305,775 10

11. Rollover of funds from 2008/09 FY
Description of Services
Amount Requested
R’000
Amount
Approved
Continuation of the construction of De Hoop Dam
232,253
Implementation of Regional Bulk Infrastructure
5,253
Cholera Outbreak in the Limpopo and Mpumalanga Provinces
40,000
TOTAL
277,506
237,506
Def: Funds appropriated but not spent in a particular financial year may be rolled over to a subsequent year subject to approval of the National Treasury 11

12. Reason why funds were not spent: Rollover of funds
Delays in the conclusion of the negotiations to finalise the memorandum of agreement with the 23 different mines.
Exceptional high rainfall prevented contractors from making anticipated progress
Late submission of invoice in respect of Regional Bulk Infrastructure with multiple errors on calculation of bill of quantities 11

13. Virement (Shifting funds in terms of Section 43 of PFMA)
During a financial year, some deviations between actual expenditure and the allocated budget for that specific financial year may occur.
Unforeseen circumstances may require the revision and subsequent adjustment of the original planned projects and/or estimated costs involved in the execution of activities.
Virement is subject to the following
Shifting between programmes may not exceed eight percent (8%)
Virement may not be applied to amount appropriated for transfer to institution
Virement may not be applied to amount appropriated for capital expenditure to defray current expenditure
Virement may not be applied to earmarked funds 13

14. Virement (Shifting funds in terms of Section 43 of PFMA)
Virement 2009/ 2010 financial year
Programmes
Virement
1. Administration
(14,086)
2. Water Resource Management
(65,386)
3. Water Services
77,466
4. Forestry
2,006
Net Effect 14

15. Reason for Virement Programme1: Administration
1.1 Budget of R million was shifted to Water Services due to
reallocation of inflationary adjustment that was initially allocated during Estimate of National Expenditure process in this programme.
Programme2: Water Resource management
2.1 Budget of R million was shifted to Water Services and Forestry due to the following reasons:
2.1.1 Unfilled positions as a result of newly created structures;
2.1.2 Re-allocation of water use conservation and water demand management to the respective regions.
2.1.3 Funds were incorrectly allocated under goods and services in this
programme for the purchase of machinery and equipment
3 Programme3: Water Services
3.1 Budget of R million was shifted to this programme as result of
re-allocation of inflationary adjustment that was initially allocated in
programme 1: Administration as well as re-allocation of water use and
conservation and water demand management 15

16. Unforeseeable and Unavoidable Expenditure
Section 30(2)(b) of the PFMA and Treasury Regulations 6.6, provides for the allocation of additional funds through an adjustment budget to finance unforeseeable and unavoidable expenditure
Unforeseeable and Unavoidable expenditure relates to expenditure that could not be anticipated at the time of finalising the budget (ENE)
National Treasury has recommended an amount of R124,144 million to Cabinet for approvals. Below are the details 16

17. Unforeseeable and Unavoidable Expenditure
Description of Services
Amount Requested
R’000
Amount
Approved
Difference
Additional Fund for the new Deputy Minister
8,267
3000
(5,267)
Additional funds for the purchase of packaged plants to prevent Cholera
49,000
40,700
(8,300)
Additional fund for Working for Water
74.700
22,127
(52,573)
General salary adjustments
58,317
TOTAL
131,967
124,144
7,823
The difference means that the department must reprioritise the budget and shift budget (virement) to fund the shortfall 17

18. Earmarked funding Rent of buildings 138 331 000 Working for Water
Allocations by National Treasury for a specific purpose and may not be used for other purposes. Below are earmarked allocations for 2009/10 financial year. Total of earmarked funds amount to R  000
Rent of buildings
138 
Working for Water
455 
Working on Fire
123 
Refurbishment of water scheme
30 
De Hoop Dam (Phases 2B to 2G)
600 
Additional capacity: Internal Audit and Finance 6 
Sanitation at school and clinics
350 
Regional Bulk infrastructure
611 
Operating subsidy (Water Services)
855 
Total earmarked funding

19. 2009/10: Earmarked Vs Un-earmarked before adjustments19

20. Transfer of functions
The president of Republic of South Africa has announced during his 2009 State of the Nation Address that Sanitation services and Forestry functions will reside with the Dept. of Human Settlement and the Dept. of Agriculture, Forestry and Fisheries respectively.
Where a function is to be transferred between votes during a financial year, National Treasury must be consulted in advance to facilitate any request for the resulting transfer of funds voted for that function in terms of section 33 of the PFMA. In the absence of an agreement between the affected departments on the amount of funds to be transferred, National Treasury will determine the funds to be shifted.
Transfer of functions: National Treasury approval must be obtained before seeking approval from the Minister of Public Service Administration for a transfer of a function to another sphere of government 20

21. Transfer of functions 1.1 Department of Human Settlement
Budget of R944,449 million will be surrendered to the Department of Human Settlement and the Dept. of Agriculture, Forestry and Fisheries respectively.
1.1 Department of Human Settlement
1.1.1 Provision of sanitation in schools and clinics R million
1.1.2 Acceleration of access to sanitation projects R million
1.1.3 Operational budget of sanitation unit R million
TOTAL million 21

22. Transfer of functions 1.2 Department of Agriculture and Fisheries
Budget of R944,449 million will be surrendered to the Department of Human Settlement and the Dept. of Agriculture, Forestry and Fisheries respectively.
1.2 Department of Agriculture and Fisheries
1.2.1 Operational budget in the Office of DDG: Forestry R3.934 million
1.2.2 Forestry Budget (as per ENE) R million
1.2.3 Compensation of employees in respect of
support services R million
1.2.4 Forest land management R2.006 million
TOTAL million 22

23. Re-scheduling of funds earmarked for infrastructure projects (De Hoop Dam) for other purpose
National Treasury has granted the Department to reschedule earmarked funds of R502 million owing to.
1.1 Delays in signing Memorandum of Agreement with the mining sector
1.2 Delays in reaching Water Supply agreements with individual mines due to the global economic crisis
As result of this, the Department will only be able to spend R98 million of R600 million
The Department therefore requested the National Treasury to utilise R502 million as follows 23

24. Re-scheduling of funds earmarked for infrastructure projects (De Hoop Dam) for other purpose
DWA requested the National Treasury to reschedule R502 million as follows
2.1 To further the following infrastructure projects - R297 million
Nandoni Water Treatment Works
Inyaka Water Treatment Works
Hluhluwe Regional Water Scheme
2.2 Augmentation to the Water Trading Entity – R205 million is a result of infrastructure projects undertaken by WTE in 2008/09 financial year 24

25. I thank you 25