Presentation to the Portfolio Committee: Water & Environmental Affairs

Presentation to the Portfolio Presentation to the Portfolio Committee: Water & Environmental Committee: Water & Environmental

Affairs Affairs

Presentation by

Mr Onesmus AyayaChief Financial Officer

04 August 2010

1

Briefing on Current Expenditure and their Briefing on Current Expenditure and their Performance TrendsPerformance Trends

EXPENDITURE OUTCOME FOR THE FIRST QUARTER ENDED 30 JUNE EXPENDITURE OUTCOME FOR THE FIRST QUARTER ENDED 30 JUNE 20102010

Programme Original budget

2010/11

R’000

Actual Exp

30 June 2010

R’000

% spent

Available budget

R’000

Administration 884 205 123 550 13% 760 655

Water Management 364 749 50 859 14% 313 890

National Water Resource Infrastructure Programme

2 241 418 507 794 22% 1 733 624

Regional Management 4 329 013 575 090 13% 3 753 923

Water Sector Regulations 177 207 17 641 9% 159 566

Total 7 996 592 1 274 934 15.94% 6 721 658

2

Economic classification

Programme Original budget

2010/11

R’000

Actual Exp

30 June 2010

R’000

% spent

Available budget

R’000

Compensation of Employees (CoE)

1 166 543 241 001 20% 925 542

Goods and Services 2 466 220 282 408 11% 2 183 812

Interest and Rent on land - 13 (13)

Transfers and Subsidies 3 238 487 742 036 22% 2 496 451

Payments for Capital Assets 1 125 342 9 509 1% 1 115 833

Total 7 996 592 1 274 967 15.94% 6 721 625

EXPENDITURE OUTCOME FOR THE FIRST QUARTER ENDED 30 JUNE EXPENDITURE OUTCOME FOR THE FIRST QUARTER ENDED 30 JUNE 20102010

3

Monthly Forecast vs. Monthly ActualMonthly Forecast vs. Monthly ActualNational Allocation: R

0Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11

R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000

Month 0 650 804 632 534 645 057 633 608 633 863 648 300 639 397 655 834 677 874 737 775

Cumulative 0 650 804 1 283 338 1 928 395 2 562 003 3 195 866 3 844 166 4 483 563 5 139 397 5 817 271 6 555 046

Month 0 196 490 658 919 419 528 633 608 633 863 648 300 639 397 655 834 677 874 737 775

Cumulative 0 196 490 855 409 1 274 937

Cum % spent 2 11 16

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Summary

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80 000

160 000

240 000

320 000

400 000

480 000

560 000

640 000

720 000

800 000

880 000

960 000

1 040 000

1 120 000

1 200 000

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R'000ForecastExpenditure

Actual (BAS)Expenditure

Regional Distr ibution-R 139.294m

4

Reason for under spendingReason for under spending

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Challenges Interventions

Unfilled vacant posts, however post are being filled and the expenditure on CoE is improving as compared with last year.

The Department has committed to develop a roadmap in filling of all posts up to deputy director level by 31 August 2010.

Backlog with regard to processing of unpaid invoices which emanates from previous financial year because BAS structure was not ready as at 1 April 2010

All invoices prior to 31 March 2010 are to be paid by 15 August 2010.

Late submission of invoices in respect of services already rendered such as Fleet management Services (Phakisa) and IT Services (T-Systems).

There is a process in-place to stream line the receipt of invoices to ensure efficient distribution and timely administration.

The bulk of the budget under payments for Capital Assets is mainly as a result of delays in signing of contracts between DWA and Service providers in Regional Bulk Infrastructure grant and other capital projects were only commissioned in the month under review.

The Department has engaged with all service Providers and 13 Annual contracts have now been signed.

Programme 2010/2011

R’ 000

2011/2012

R’ 000

2012/2013

R’ 000

Administration 884 205 902 119 947 829

Water management 364 749 386 574 405 853

National water resources infrastructure

2 241 418 2 520 177 2 739 959

Regional management

4 329 013 5 077 318 5 320 451

Water sector regulation

177 207 204 019 214 140

Total allocation 7 996 592 9 090 207 9 628 232

MAIN ACCOUNT ALLOCATION (INCLUDING EARMARKED FUNDINGMAIN ACCOUNT ALLOCATION (INCLUDING EARMARKED FUNDING))

6

DROUGHT RELIEF ALLOCATION – 2010/11DROUGHT RELIEF ALLOCATION – 2010/11

Province Budget Allocation

R’000

Western Cape 141 500

Eastern Cape 86 857

Limpopo 54 000

Total 282 357

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DROUGHT RELIEF ALLOCATION – 2010/11 DROUGHT RELIEF ALLOCATION – 2010/11 Expenditure Report as at 29 July 2010Expenditure Report as at 29 July 2010

Municipalities Budget Allocation(‘000)

Transferred to date

(‘000)

Available Budget

(‘000)

Eastern Cape: 86 857 31 335 55 522

Alfred Nzo Municipality 8 447 5 380 8 447

Amathole Municipality 12 264 12 264 -

Cacadu Municipality 33 505 3 200 30 505

Chris Hani Municipality 9 695 2 242 7 271

Ukhahlamba Municipality 7 756 3 000 4 756

OR Tambo Municipality 15 190 5 067 15 190

Limpopo: 54 00 - 54 000

Vhembe Municipality 54 000 - 54 000

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DROUGHT RELIEF ALLOCATION – 2010/11 DROUGHT RELIEF ALLOCATION – 2010/11 cont..cont..

Municipalities Budget Allocation

(‘000)

Transferred to date

(‘000)

Available Budget

(‘000)

Western Cape: 141 500 74 300 67 200

George Municipality 75 000 50 000 25 000

Knysna Municipality 17 900 10 000 7 900

Bitou Municipality 20 000 - 20 000

Beaufort West Municipality 28 600 14 300 14 300

TOTAL 282 357 105 635 176722

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Notes

The payment of R10 million to Bitou Municipality is in the processes of being transferred.

The transfer to Vhembe is awaiting finalisation of the process on the pipeline to Giyani.

All the transfers above were made against the old payment schedule

According to the new approved payment schedule received from Sello Mashaba of NT, the next transfer date for EC is 29/09/2010, and 01/09/2010 for WC.

EARMARKED FUNDINGEARMARKED FUNDINGDescription of Earmarked Projects 2010/11

R’000

Q1 Expenditure

Learning Academy 20 000 -

Property Management - Rental of Buildings

156 000 1 774

Additional Capacity – Human Resources 7 000 3 097

Working for Water 668 583 54 515

Working on Fire 207 923 73 774

Funding to replace donor funding 200 000 -

Bulk infrastructure 893 000 85 667

Water Services Operating Subsidy 807 682 213 508

Construction of Water Services Scheme 191 942 -

Compliance Monitoring & Enforcement 5 000 -

Total R3 157 130 432 335

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UN-EARMARKED FUNDINGUN-EARMARKED FUNDING

Economic classification 2010/11

(R ’000)

Compensation of Employees 917 528

Goods and Services 1 246 288

Transfers of subsidies 287 008

Payment for Capital 98 863

Total 2 549 687

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12

Water Trading Entity (WTE) Management Accounts

Period ending 3 June 2010

PART BPART B

13

Water Trading Entity (WTE) Management Accounts

Period ending 30 June 2010

PART BPART B

Contents1. Statement of financial performance

2. Statement of Financial position

3. Cash flow statement

4. Expenditure and Revenue per Branch

5. Concluding remarks

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PURPOSEPURPOSE

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INCOME STATEMENT FOR TRADING ACCOUNT: 2010/11

FOR THE PERIOD ENDED 30 JUNE 2010

1ST QUARTER

ACTUAL1st QUARTER

BUDGET BUDGET 2010\11

% UTILISATION

REVENUE R’000 R’000 R’000

NWRI 288,849 410,451 1,706,406 70%

CMA 45,204 54,439 240,832 83%

Augmentation 78,368 109,681 438,722 71%

Other 14,179 46,697 186,865 30%

TOTAL EXPENDITURE 426,600 621,268 2,572,825 69%

Compensation of employees 116,747 155,985 736,261 75%

Goods and services 215,505 322,773 947,775 67%

Depreciation 500,000 0%

TOTAL EXPENDITURE 832,252 478,758 1,684,036 174%

SURPLUS\(DEFICIT) (405,652) 142,510 888,789

FINANCIAL PERFORMANCE ANALYSISFINANCIAL PERFORMANCE ANALYSIS • Revenue is below budget due to the challenges that we have on SAP billing

systems. The challenges are being addressed to ensure that hand billings are automated.

• The operating surplus of R98 million before depreciation is due to the slow spending on salaries and goods and services.

• COE is 25% below budget due to the unfilled vacant positions. The situation will improve during the year as most of the position are currently being advertised and filled.

• Goods and services is 33% below budget due to the fact that there is a link between unfilled vacancies and traveling costs as well as services to be rendered to WTE. The situation is bound to improve during the next quarter.

• The operating deficit of R405 million is due to the fact that the pricing strategy allows for the capping of tariffs and exemption of ROA to water users and has resulted in ROA not covering the depreciation of R500 million. The exemption of ROA is not covered by revenue generated.

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INCOME AND EXPENDITUREINCOME AND EXPENDITURE

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INCOME AND EXPENDITURE STATEMENT FOR TRADING ACCOUNT: 2010/11


TOTAL FUNCTIONAL SUPPORT

ACTUAL YTD

R’000

1ST QUARTER BUDGET R’000

PLAN R’000 %

ACTUAL

%NORM

INCOME

Augmentation received 48,982 80,725 322,901 61% 100%

EXPENDITURE 47,662 69,349 330,897 69% 100%

Compensation of employees 23,783 34,261 165,884 69% 100%

Goods and services 23,879 35,089 165,013 68% 100%

NET INCOME/EXPENDITURE 1,320 11,376 -7,996

Movable Assets 1,320 3,121 7,004 42% 100%

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DDG: INFRASTRUCTURE OPERATIONS

ACTUAL YTD

R’000


PLAN R’000 % ACTUAL %NORM

INCOME

Augmentation Receivables 1,180 3,679 14,716 32% 100%

EXPENDITURE 1,135 3,457 14,683 33% 100%

Compensation of employees 803 876 4,356 92% 100%

Goods and services 332 2,581 10,327 13% 100%

EXCESS INCOME/EXPENDITURE 45 222 33

Movable Asset 45 8 33 563%

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CD: OPERATIONS

ACTUAL YTD

R’000


PLAN R’000% ACTUAL

%NOR

M

INCOME

Augmentation receivable 8,494 9,035 36,139 94% 100%

Other income 3,750 3,750 15,000 100% 100%

EXPENDITURE 8,494 12,782 51,129 66% 100%



NET INCOME/EXPENDITURE 3,750 3 10

Movable Asset 731 138 10 530% 100%

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CD:BUSINESS DEVELOPMENT

ACTUAL YTD

R’000



%NORM

INCOME


EXPENDITURE 3,230 3,188 19,318 101% 100%


Goods and services 680 577 4,527 118% 100%

NET INCOME/EXPENDITURE 175 1,854 850

Movable Asset 175 147 850 119% 100%

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CD: ENGINEERING SERVICES

ACTUAL YTD

R’000



%NORM

INCOME


EXPENDITURE 9,146 10,082 58,173 91% 100%



NET INCOME/EXPENDITURE 105 4,973 2,045

Movable Asset 105 352 2,045 30% 100%

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CD: CONSTRUCTION MANAGEMENT

ACTUAL YTD

R’000



%NORM

INCOME


EXPENDITURE 2,433 3,824 14,114 64% 100%



NET INCOME/EXPENDITURE 109 -75 881

Movable Asset 109 137 881 80% 100%

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INFRASTRUCTURE DEVELOPMENT

ACTUAL YTD

R’000


PLAN R’000 % ACTUAL

%NORM

INCOME

Augmentation receivable 288,193 340,634 1,362,535 85% 100%

Other income 14,179 46,697 186,865 30% 100%

EXPENDITURE 294,569 420,416 1,447,341 70% 100%



Movable Asset 26,618 2,794 10,248 953% 100%

Design 84 71,652 286,609 0% 100%

NET INCOME/EXPENDITURE 7,803 -33,085 102,059

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CD: FINANCIAL MANAGEMENT

ACTUAL YTD

R’000


PLAN R’000 % ACTUAL

%NORM

INCOME


EXPENDITURE 23,224 36,016 173,480 64% 100%



NET INCOME/EXPENDITURE 155 8,150 3,185

Movable Asset 155 2,339 3,185 7% 100%

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TOTAL OPERATIONAL CLUSTERS

ACTUAL YTD1ST QUARTER

BUDGET PLAN % ACTUAL

%NORM

INCOME 288,849 410,451 1,706,406 70% 100%

EXPENDITURE 251,385 266,670 1,049,301 94% 100%



NET INCOME/EXPENDITURE 37,464 143,781 657,105

Movable Asset 2,350 7,420 20,586 32% 100%

Refurbishment 0 159,130 636,519 0%

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TOTAL CMAS

ACTUAL YTD1ST QUARTER

BUDGET PLAN % ACTUAL

%NORM

INCOME 75,909 85,145 363,327 89% 100%

Water Resource Management 45,203 54,439 240,502 83% 100%

Augmentation 30,706 30,706 122,825 100% 100%

EXPENDITURE 51,666 81,496 336,645 63% 100%



NET INCOME/EXPENDITURE 24,243 3,649 26,682

Movable Asset 499 8,006 14,212 6% 100%

Analysis

• No expenditure on refurbishment and betterment due to the fact that SAP internal order system not implemented, spending is currently happening on OPEX, cost will be moved to CAPEX once the internal order system is fully implemented.

• Under expenditure on cost of employee on all Chief Directorate is attributable to vacant positions. The situation will improve during the financial year as posts are filled via the Departmental Roadmap.

ANALYSIS

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STATEMENT OF FINANCIAL POSITION

FOR THE PERIOD 1 APRIL 2010 TO 30 JUNE 2010

67195090 JUNE ‘10 MARCH ‘10

ASSETS R’000 R’000

Non current assets 64,491,300 64,628,584

Current assets 2,673,786 2,339,733

TOTAL 67,165,086 66,968,316

EQUITY & LIABILITIES

Capital & reserves 62,827,846 62,827,846

Non current liabilities 25,664 25,664

Current liabilities 4,341,580 4,114,810

TOTAL 67,195,090 66,968,316

Debts situation

Challenges• The huge debt book (R3,7billion) is affecting our cash flow and is

due to slow payments by major customers ie Municipalities (Owing R1,12billion) and Water Boards.

• There was an impairment of R1.1 billion which reduces our debtors to R2.5 billion.

• WTE has R1.2 billion debtors more than 120 days and R2.5 billion less that 120 days.

• We have an obligation to pay TCTA whether we have collected or not from their customers and this is also affecting cash flow.

• The cash collection is very low due to the delay in sending out April and May invoices, we had system problems and as results billing did not take place as scheduled.

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DEBTS SITUATIONDEBTS SITUATION

Action Plan to address the challenges

• Identify / Implement efficient debt collection methods.

• Reconciliation on individual debtors are done to confirm outstanding balance in accordance with our policy.

• The review of funding model and pricing strategy to be prioritised.

• An exercise is underway to clean the debtors book.

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ACTION PLAN TO ADDRESS THE ACTION PLAN TO ADDRESS THE CHALLENGESCHALLENGES

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STATEMENT OF CASH FLOWS

FOR THE PERIOD 1 APRIL 2009 TO 31 MARCH 2010

ACTUAL

JUNE ‘10 ACTUAL

MARCH ‘10

R’000 R’000

Operating activities (127,867) 1,767,227

Investing activities (323,090) (1,307,003)

Financing activities (0) (1,055)

Decrease in cash (450,957) 459,169

Opening cash & cash equivalent 400,859 (58,309)

Closing cash & cash equivalent (50,088) 400,859

CASH FLOW POSITIONCASH FLOW POSITION Challenges

• Net cash position is a negative balance of R50million.• WTE has the budget but no cash in bank due to long

outstanding debts.• However, WTE conversion cycle of Debts into cash

takes us 178 days instead of 60 days. • The spending on refurbishment and betterment will be

restricted to cash collected by WTE.

33

Cash Flow Position ..cont

Solutions• The review of pricing strategy and funding model should be

a priority of the department. This will assist in addressing the financing gaps we have between the pricing strategy and the funding model.

• System of budget monitoring is already in place to make sure that no unauthorised expenditure is incurred this financial year.

• Strategy to improve debtors collections should be implemented.

• Revisit the agreement between TCTA and DWA. More questions that beg answers from policy makers.

CASH FLOW POSITION (CONT…)CASH FLOW POSITION (CONT…)

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Concluding remarks

• The backlog on maintenance and refurbishment of infrastructure of assets is estimated at R13billion.

• Cash generated from operating activities is not enough to fund refurbishment and betterment of infrastructure assets and this is arising from capping provisions in the Pricing Strategy.

• Revision of Pricing Strategy is the long term solution to financial stability within the Water Trading Entity to enable it to clear the above backlog.

CONCLUDING REMARKSCONCLUDING REMARKS

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THANK YOUTHANK YOU

Documents

Presentation to the Portfolio Committee: Water & Environmental Affairs