The Portfolio Committee on Human Settlements, Water and Sanitation on 15 May 2020, welcomed the improvement in the audit outcomes of the Department of Water and Sanitation’s main account for the 2018/19 financial year, which resulted in the department receiving an unqualified audit opinion with findings. This is an improvement from the qualified opinions over the two previous financial years.
“This improvement is but a first step towards correcting wrongdoings that occurred in the previous two financial years. While the improvement is welcomed, we must insist that areas identified by the Auditor-General, such as preparation of financial statements, must receive focus going forward to ensure a clean audit,” said Ms Machwene Semenya, the Chairperson of the committee.
The committee highlighted its concerns regarding R754 million in fruitless and wasteful expenditure in the 2018/19 financial year in the main account. What is more worrying to the committee is the information that the wasteful expenditure was caused by contractor invoices not being paid, resulting in interest and standing time being incurred, as well as excessive management fees being charged.
“Accruals have in the past been a major thorn in the department impacting on future projects. Furthermore, the impact of non-payment of services on small businesses is enormous and leads to direct loss of employment. The timely payment of services is a standing government policy and must be adhered to at all times,” Ms Semenya said.
The determination by the department to enforce consequence management against those who participated in the fruitless and wasteful expenditure is welcomed and will go a long way in rectifying wrongs committed in the past. To this end, the committee has noted the appointment by the Minister of Advocate Terry Motau to lead a team of lawyers to investigate and review all fraud, corruption and irregular expenditure reports at the Department of Water and Sanitation and to ensure that all recommendations are fully implemented.
“While we welcome the announcement of the Motau investigation, we must emphasize that appropriate consequence management must be implemented at the end. Consequence management is the only deterrent to wrongdoing in the future,” Ms Semenya emphasized.
Regarding achievement of performance targets, the committee is concerned that the department had expended almost all its financial resources, but had achieved only 55% of set targets. This disproportionate spending vis-à-vis targets achieved should also be investigated to establish the causes
Linked to performance, the committee is concerned by the leadership vacuum caused by continuous acting appointments in leadership positions, especially at the Director-General (DG) level. The high turnover of acting appointments and inability to permanently fill the DG and Chief Financial Officer position will impact on the ability to effectively turn the department around.
“Having permanent management in place will ensure that the department will be able to implement the requisite controls, implement the necessary consequence management and drive strategy necessary to make the department functional again,” Ms Semenya said.
Meanwhile, the committee has raised concerns about the regression in audit outcome by the Water Research Commission, which went from a clean audit to unqualified with findings. While the regression is not excessively worrying, it cautioned against further regression.
The committee appreciates the overall commendable improvements in water boards over the past four years. “The committee acknowledges an improvement at both Lepelle and Mhlathuze water boards, which both received financially unqualified audit outcomes, with significant findings on other matters of compliance and/or predetermined objectives. This improvement must be strengthened further to deal with remaining concerns around material adjustments of annual financial statements,” Ms Semenya said.
Regarding the Water Trading Entity, the committee is concerned that the Water Trading Entity (WTE) continues to operate an overdrawn account of R1 451 140 000, which is against the legislation, as the entity is prohibited from borrowing funds. The previous Portfolio Committee, in their legacy report, highlighted this matter and the need to reinforce governance, compliance and an internal control culture, including consequence management, in the WTE. The committee will monitor the implementation of the intended turnaround of the entity.
Regarding the Trans-Caledon Tunnel Authority (TCTA), the committee highlighted its concerns about the regression in audit findings from an unqualified with findings on compliance to a qualified audit opinion. The impact on this is the increased risk factor when the entity goes to the market to borrow money and might lead to increased interest rates. The committee has instructed the entity to provide a detailed plan on how they will rectify the issues raised by the Auditor-General.
Regarding the performance of grants, the committee is concerned that both the Regional Bulk Infrastructure Grant (RBIG) and Water Services Infrastructure Grant were not spent in accordance with the applicable legal framework, as required by section 17(1) of the Division of Revenue Act (Act 1 of 2018). Furthermore, the underspending of the RBIG is an indictment of the department, as this undermines the goal of ensuring water provision to every South African.
Despite all these concerns, the committee welcomes the intentions and timeframes by the department to deal with raised challenges. Furthermore, the intention to implement consequence management against those in the wrong is welcomed and will be monitored quarterly.