Budgetary review and

recommendations
report (BRRR)
Portfolio Committee on
Water and Sanitation

8 October 2024

PFMA 2023-24
Mission and vision 2

MISSION

The Auditor-General of South Africa has a constitutional mandate and,

as the supreme audit institution of South Africa, exists to strengthen our
country’s democracy by enabling oversight, accountability and
governance in the public sector through auditing, thereby building
public confidence

VISION

To be recognised by all our stakeholders as a relevant supreme audit

institution that enhances public sector accountability
All have a role to play in accountability ecosystem 3

TREASURIES COOPERATIVE GOVERNANCE

INTERNAL
AUDIT UNIT PUBLIC SERVICE PRESIDENCY/ PLANNING,
AND PREMIER’S MONITORING AND
ADMINISTRATION OFFICE EVALUATION
PARLIAMENT/ PROVINCIAL
EXECUTIVE LEGISLATURES and OVERSIGHT
AUTHORITY COMMITTEES
AUDIT ACCOUNTING
COMMITTEE OFFICER/
AUTHORITY COORDINATING
SENIOR
INSTITUTIONS
MANAGEMENT
EXECUTIVE
LEADERSHIP
OFFICIALS

INFLUENCE

ENFORCEMENT
INSIGHT

Leadership and Support and oversight

decision makers

Active
citizenry
 Water value chain 4

National Regional Local

Resource development,
Resource management and bulk infrastructure and Bulk infrastructure and distribution Distribution,
development distribution Waste removal, treatment and reuse

Intergovernmental
arrangements Water boards (WBs) Municipalities (WSA’s)
Komati Basin Water Authority − KOBWA Customer facing services
Lesotho Highlands Water Project (LHWP) Trans-Caledon Tunnel Authority (TCTA)
Collection
Distribution
Orange − Senqu River Commission (ORASECOM) Reservoir Reticulation
Reservoir

Catchment management Abstraction Storage and treatment Distribution

agencies Dam

Water Pump Bulk water MUNICIPAL WATER

treatment works station pipeline SUPPLY VALUE CHAIN
Customer facing services
**Orange arrows = upstream competition
** Green arrows = retail competition

Mining
Manufacturing Disposal Treatment Collection
The Water Trading Entity ( WTE)
Water user associations
Strategic Customers

Sewerage
Reservoir

Reservoir Agriculture Sewerage Waste Water

Strategic Customer Pump Treatment works
station

Impacts on aquatic Impacts on aquatic

environment and down- environment and down-
stream water users stream water users
Performance
 Reflection on key MTSF targets 6

Key targets in the medium-term strategic framework for portfolio

• 12 221 bucket sanitation systems eradicated in formal areas • 53 bulk water infrastructure projects completed
• Number of water treatment works assessed - 1 010 every 2 years – alternating with Green • An approved National Sanitation Integrated Plan implemented - 2
1
Drop assessments implementation reports per annum
• Number of wastewater treatment works assessed - 963 every 2 years alternating with Blue • Number of dam safety rehabilitation projects completed - 9 dams’
rehabilitation projects
Drop assessments
• 27 District Municipalities with five-year reliability implementation plans

1 Key targets not met Root causes

2
DWS and WTE (MTSF)
• Number of existing bucket sanitation backlog systems in formal settlements replaced – 1 284 completed The root causes for non-achievement of these indicators
over the MTSF period vs target of 12 221 primarily relate to poor project planning, inadequate
• Number of dam safety rehabilitation projects completed – 1 completed over MTSF period vs target of 9 project management, and inadequate coordination
• 27 District Municipalities with five-year reliability implementation plans - 24 completed over MTSF period amongst relevant role players.
vs target of 27

3 Impact of targets not achieved 4 Recommendations

DWS and WTE (MTSF) Leadership must conduct a full root cause analysis
• The delays in replacing existing bucket sanitation in formal settlements denies affected citizens of their of the drivers of project management challenges
constitutional rights. and those must be adequately addressed
• Delays in completing dam safety rehabilitation projects expose surrounding communities to loss of life and through an appropriate action plan.
property. There must be effective coordination between
• Implementation plans not implemented at 3 identified district municipalities affects the reliability of supply the department and all water service authorities
of water to the users in the district.
 Annual performance against targets 7

Achievement of annual targets as reported in annual performance report

Achievement of targets for audited programmes 2023-24
Key targets not achieved include:
12% DWS (including WTE indicators) targets not met
29% • Number of existing bucket sanitation backlog systems in formal settlements replaced (0 achieved
vs 10798 planned target)
• Number of small, large and mega regional bulk infrastructure project phases completed (15
achieved vs 31 planned target)
• Number of dam safety rehabilitation projects completed (0 achieved vs 2 planned target)
100% • Percentage scheduled maintenance projects completed as a proportion of planned
88%
maintenance projects (39% achieved vs 70% planned)
71%
TCTA (Presidential Projects)
• MCWAP – 2A: Award of main construction contract
• BRVAS: Award of design and build tender
• Umkhomazi – Approval of project borrowing limit
• LHWP Delivery Tunnel North – Construction tender for outage in October 2024 in evaluation
DWS TCTA WRC
Achieved Not achieved Impact of targets not achieved
Impact of targets not achieved
DWS, WTE and TCTA
• The delays in replacing existing bucket sanitation systems in formal settlements deny the intended beneficiaries to a basic constitutional right.
• The delays in the finalisation of projects is likely to cause significant harm or undue hardships to the communities intended to benefit from these projects.
• Delays in completing dam safety rehabilitation projects expose surrounding communities to possible loss of life and property
• Delays in infrastructure maintenance is likely to cause quick deterioration of infrastructure which may need to be replaced before the end of its useful life. This may
also contribute to the excessive water losses experienced by the sector.
Performance planning and reporting has impact on service delivery 8

Quality of performance reports

Poor quality performance indicators and targets Good performance reporting
before and after audit
• We commend TCTA and WRC who did
DWS not have any performance planning
Material errors were identified in the annual performance report and reporting in the administration
submitted for auditing by the department. As management term.
DWS corrected the audit findings, no material matters were included in
• The culture of these organisations has
TCTA the audit report.
TCTA enabled credible reporting on their
WRC WRC
AoPO, which allows for transparency
and accountability.
Overall root causes
Material errors mainly resulted from a lack of adequate internal
Before audit After audit
controls to ensure that performance reported is adequately
adjustments adjustments
supported and that performance is completely reported.

With no findings With findings

Impact
Impactresults in incorrect decisions taken based on this information. It is therefore important that management should improve
Material errors in in-year reporting
internal controls to ensure reliable information is prepared throughout the year.

Transparent and credible performance reporting enables the department and its entities to take corrective actions and therefore positively impact
service delivery.
Service
delivery
 Infrastructure – delayed projects – DWS 10

Status of schedule 6B projects under the department’s control – current year Overall reflection on delayed projects
assessment
• Delayed projects have a significant impact on costs as budgets are revised due to inflation.
• Lack of adequate supervision of contractors by the implementing agent, resulting in late
identification of poor performance by contractors. This has an adverse impact on the
timelines for project completion. No actions taken against poor performance by
implementing agents.
• Inadequate oversight by the department to address identified challenges early in the
process to unblock the project delays.
• Due diligence not performed by the department and/or the implementing agent to
determine whether contractors appointed have the financial resources and capacity to
complete the projects. Contractors appointed do not always have the necessary capacity
to complete the contract to the required quality or take on more projects than they are able
to manage.
• Protracted supply chain management processes at DWS, WTE and implementing agents
contribute to delays in the completion of projects.
• Late payments to contractors by the implementing agent contributed to delays in certain
instances.
• Projects are planned in consultation with provincial departments of Cogta; however, these
departments are not actively involved in monitoring the progress of projects to ensure
achievement of service delivery objectives.
• Inadequate monitoring of internal processes thereby taking longer to finalise project planning
activities such as budgeting and obtaining necessary approvals.
• Inadequate management of social issues (community participation) resulting in access
restrictions by communities

Recommendation
Action plans developed and implemented by the department should focus on key areas of
ethical leadership, professionalisation of the sector, project management and contract
management. Action plans must be monitored regularly by leadership, the executive authority
and the portfolio committee to drive changes in the environment.
 Delayed projects 11

WTE TCTA
Mokolo Crocodile Water Project (MCWAP 2A) – Limpopo
Percentage of significantly delayed projects on projects

70% Project timelines

59%
60% Planned start Actual start Initial Revised Delay
date date Planned completion
50% 45%
completion date
40% 33% date
30% 20 March 07 April 2019 20 April 2025 18 April 2029 4 years
2017
20%
10% uMkhomazi Water Project – (uMWP – 1) KwaZulu-Natal
0%
2021-22 2022-23 2023-24
Project timelines

The value of significantly delayed projects disclosed in the financial statement amounted to R2,995 billion in the Planned Actual Initial Planned Revised Delay
2023-24 financial year, while the carrying amount of assets under construction amount to R6,6 billion, 45% of start date planned completion completion
projects are delayed. This is a significant decrease compared to 59% in the prior year. The decrease is due to date date date
implementation of raising of Clanwilliam dam project where the contractor is on site, and the project resumed in
25 Feb 25 Feb 20 April 2025 March 2032 7 years
the current year. However, there is still major concern about the number of the project delayed.
2019 2019

Summarised overall root causes leading to delays on projects

• A significant number of projects were delayed due to delays in the appointments of contractors, professional service providers, late/non-payments to contractors, procurement delays, legal disputes with
contractors, community unrest, shortage of skills (e.g. insufficient number of approved professional persons) and a lack of maintenance contracts. While these projects are delayed, unavoidable costs
continue will be incurred by the entity, and some will result in fruitless and wasteful expenditure. Delayed projects result in delayed delivery of water to the water users.
• Delays in obtaining environmental authorisation (EA).
• Delay in finalising agreements with water users, for the uMkhomazi project agreements were only finalised in January 2024. eThekwini agreement took longer to conclude agreements due to extended
public participation process required in terms of section 33 of the municipal finance, stemming from affordability concerns.
 Maintenance 12

WTE TCTA
Repairs and maintenance Water delivery - 2023
1400 90.00
1200 80.00
1224 70.00
1000 60.00
1046 50.00
800
795 40.00
600 30.00
400 20.00
473 474 10.00
200 351
0.00
0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2021/22 2022/23 2023/24 Planned Water Transfer 59.75 56.79 63.59 64.00 69.44 81.73 83.59 79.58 55.26 54.13 53.59 58.56
Ngoajana Meter - Actual 64.23 56.11 70.31 64.41 69.40 81.64 78.49 75.09 55.25 54.36 52.62 57.12
Planned maintenance projects Maintenance projects performed
Planned Water Transfer Ngoajana Meter - Actual

The trading entity has not achieved its planned maintenance activities in the past Linear (Ngoajana Meter - Actual)
three years. In the current year, only 474 of 1224 (39%) planned projects were
achieved. The non-achievements of maintenance targets resulted in an increased The entity is responsible for operations and maintenance LHWP DTN as
maintenance backlog and dilapidated infrastructure assets. required by the Treaty, as well the operation and maintenance of the AMD
To demonstrate the impact of the lack of maintenance, water treatment basins. In the 2023-24 year, the entity implemented 100 % of
the Mtata dam outlet pipes were not maintained as the scheduled annual operation and maintenance planned activities as part
required by the dam safety inspection performed in 2011. of the routine maintenance carried out at the LHWP DTN.
Over the years, the dam outlet pipes burst, resulting in a
shutdown of water to the residents, businesses, hospitals The annual operation and maintenance of the LHWP DTN contributed
and other key institutions within the King Sabata positively to ensuring sustained water deliveries from Lesotho to RSA. The DTN
Dyalindebo municipality. of the LHWP was available to receive 99,9% (779,04 million m3) of the annual
scheduled volumes during the calendar year.
The trading entity is currently using 4 High Density
Polyethylene (HDPE) pipes to extract water from Mthatha
dam to Thornhill WTW. The supply from these pipes is The entity’s major maintenance of the tunnel is anticipated to take place
minimal and they tear regularly (see image). This result is from October 2024 to March 2025.
water supply not meeting the needs of users.

A material irregularity on harm to the general public was

issued.
 Infrastructure – Bucket eradication programme 13

Existing bucket sanitation backlog systems in formal settlements replaced by adequate Overall reflection on bucket eradication programme
sanitation systems over the MTEF period
• The Bucket Eradication Programme has been significantly delayed, and
MTEF period Annual target Achievement Budgeted Expenditure % of budget there has been minimal spending on the programme.
reported amount incurred spent • From 2020-21 to 2022-23, the department has spent less than 10% of its
allocated budget.
R R
• 16% of the allocated budget over the 5 MTEF period(s) has been spent
and none of the BEP projects in FS and NC have been completed to
date.
• This pattern of spending is indicative of poor planning and impacts
2019-20 12 221 692 R318 484 000 R201 815 069 63%
service delivery of basic sanitation.
• The department has been targeting to replace 10 798 existing bucket
sanitation backlog systems in formal settlements since 2020-21. This target
has never been met since 2019-20.

2020-21 10798 592 (this was R190 292 000 R1 661 730 1% • Management have indicated that this project was not properly planned
to begin with, as there are no sewage pipelines to connect these toilets to
backlog from
and hence the current spending is intended to address the lack of
2019-20) infrastructure.

2021-22 - - R367 285 000 R15 178 979 4%

2022-23 10798 0 R504 302 000 R12 774 018 3%

2023-24 10798 0 R130 399 000 R22 745 390 17%

Total R254 175 186

Reflection on messaging on water quality 14

Water quality Reflection progress

The March 2022 Blue Drop watch report identified 267 (23%)critical water
The department issued non-compliance notices to 90 WSAs with critical
systems for the 144 WSA and 1186 water supply systems. Upon release of the
wastewater systems, requesting the municipalities to submit corrective action
Blue Drop report on 5 December 2023, it identified 277 (29%) critical water
plans to address the shortcomings identified in the Green Drop report.
supply systems belonging to 61 (42%) WSAs, representing a deterioration of
The department had received corrective action plans from municipalities for 168
10 in critical water supply systems The deterioration was noted on mainly on
of the 334 wastewater systems (i.e. a 50% response rate). 43 of the 90
the Northern Cape (from 39 in 2022 to 123 )and can be attributed to many
(47%)municipalities requested support from the department to develop
factors, including a lack of monitoring, availability of supporting information
corrective action plans. For those municipalities that did not submit corrective
as proof of implementation to BD assessors and a lack of qualified staff
action plans, DWS has issued directives in terms of the National Water Act
including, engineers, process controllers, scientists and skilled maintenance
compelling them to submit such plans
staff.

Blue Drop action plans submitted Green drop enforcement action by the department
Number of WSAs with critical systems who did not submit Actions taken against WSAs
action plans

25
22
48
45
20
41

15
10
9
10 8 8 8
7
6
5 5
4 4 4
5 3 3
2
9
0
4

No Enforcement National Water Act National Water Act National Water Act National Water Act
Action Taken Yet Notice issued Notice and Notice and Notice and
Directive Issued Directive Issued, Directive Issued,
Criminal Case Criminal Case
Number of WSAs with critical Systems Opened Opened, Court
Number of WSAs that have provided action plans Interdict
Financial
reporting and
compliance
 No change over administration term 16

Unqualified Unqualified Qualified Adverse Disclaimed Outstanding

with no findings with findings with findings with findings with findings audits
(clean)

2019-20 first year of

administration 0 4 0 0 0 0 4

2022-23
1 3 0 0 0 0 4

2023-24
0 4 0 0 0 0 4
DWS Submission of financial
Movement from
previous year None WTE None None None statements by legislated
date for portfolio remained
0 1 WRC stagnant at 100%
TCTA
Movement from first year of
administration

0 0
 Portfolio overall message on overall outcomes 17

Overall audit outcome

The overall audit outcomes in the portfolio has regressed when compared to the prior year with WRC moving from a clean audit to unqualified with findings. WRC had
findings on compliance with legislation as the annual financial statements submitted for auditing had material errors. These errors were corrected, resulting in an unqualified
audit opinion.

DWS audit outcomes remained stagnant at unqualified with findings; there was an improvement on annual performance report as no material findings were reported;
however, material errors in the submitted financial statements resulted in a finding on compliance with legislation. These errors were eventually corrected to result in the
unqualified audit opinion.

WTE audit outcomes remained stagnant at unqualified with findings; they continue to have compliance with legislation findings in the following areas: annual financial
statements, expenditure management and revenue management.

TCTA audit outcomes remained stagnant at unqualified with findings; they continue to have compliance with legislation findings in the following areas: annual financial
statements and consequence management

Current culture

The executive authority has set the right tone at the top and has instilled a culture of accountability; irregular and fruitless expenditure is being investigated and
consequence management is taking place. DWS, WTE and WRC had favourable outcomes on consequence management however TCTA had unfavourable outcomes on
consequence management. This related to historical matters of fruitless and wasteful expenditure where, at the date of our audit report, TCTA could not locate the invoices
concerned to commence with consequence management processes. WTE continued to incur fruitless and wasteful expenditures mostly relating to abnormal costs on
external projects.

Root causes

Management did not adequately review the annual financial statements before submission for auditing to ensure that they were prepared in accordance with the
standards of MCS/GRAP/IFRS and the requirements of the PFMA at all entities. We further noted inadequate internal controls to prevent irregular expenditure at WTE and
investigations not undertaken at TCTA, due to absence of historical documents. These matters resulted in the findings on compliance with legislation.

Recommendations
Management should perform adequate reviews and enhance daily and monthly controls in place to ensure that financial statements and performance reports submitted
for auditing are credible and free from material misstatements. Internal controls must be strengthened at WTE to ensure that procurement legislation is complied with and
TCTA must ensure that investigations are undertaken in a timely manner.
 Quality of financial reporting 18

Impact on quality of financial statements

Financial management controls
submitted for auditing
Proper record DWS TCTA DWS
keeping WRC
WTE
Inadequate internal controls over reporting on
DWS DWS disclosure notes (commitments and contingent assets)
Daily and monthly DWS TCTA WTE WTE resulted in material corrections.
controls
WRC
WTE
TCTA TCTA
WRC WRC
In-year and year-
DWS TCTA WRC WTE
end reporting
WRC
Review and monitor DWS TCTA
WTE
Before audit After audit WRC audit outcomes regressed due to inadequate
compliance WRC adjustments adjustments reviews of the financial statements which resulted in
material corrections to various disclosure items.
Unmodified Modified
Good Concerning Intervention required

TCTA WTE
Management has made notable efforts to ensure the accuracy and completeness of the submitted Controls on financial reporting at the WTE remained stagnant, which
annual financial statements (AFS). Management has changed from rounding off to the nearest R1 resulted in repeat material misstatements on intangible assets, statement of
million to the nearest R1 000, which resulted in a significant reduction of rounding off errors previously budget comparison and cash flow statement. The trading entity continues
noted. to struggle to timeously obtain information supporting the LHWP2 project,
executed in the Kingdom of Lesotho. This results in an incorrect figure
Despite the above improvements, we still noted material misstatements in the AFS. The persistence of disclosed on the enduring benefit (intangible asset) from this project.
material misstatements identified during the audit process points to ongoing internal control
deficiencies and financial recording processes. There is still significant manual intervention in the
preparation of AFS, which results in human errors, such as casting errors and differences between
amounts as per financial statements not agreeing to amounts per supporting schedules.

Rigorous reviews should be performed on the financial statements and processing of accounting
entries.
 Compliance with key legislation 19

Movement from Movement from first year of

previous year administration
2023-24 DWS, WTE, TCTA and WRC
0 1 0 0

No material findings Material findings

Most common
Most common areas
areas of
of
DWS WTE TCTA WRC
non-compliance
non-compliance

Revenue management X

Quality of financial statements X X X X

Prevention of irregular, unauthorised,

and fruitless and wasteful expenditure X

Effecting consequences X
 Irregular expenditure 20

Annual irregular expenditure Top contributors

R363 m WTE

R0.175 m TCTA
R1,208 m
R452 m R506 m
R106 m R363 m
R0x m DWS
2019-20 2020-21 2021-22 2022-23 2023-24

R0 m WRC

Overall observation
There has been an overall increase by R257 million of irregular expenditure incurred in the current year
What is the culture?
We identified that the BEC does not apply evaluation criteria as per the bid documents, which results in non-compliance which has irregular expenditure impact
What are the contributing root causes to the culture?
Consequence management procedures were not adequately implemented, as investigations were not started in a timely manner. Inadequate consequence
management contributes to inadequate discipline by staff towards adhering to procurement legislation
Who should do what and when to change the culture?
The executive authority and the accounting officer/authority must set the right tone at the top by implementing appropriate guidelines to enforce compliance,
training responsible staff members and ensuring that all instances of irregular expenditure are investigated in a timely manner to allow for effective consequence
management processes.
 Fruitless and wasteful expenditure 21

Annual fruitless and wasteful expenditure Top contributor

R100 m WTE

Other: WTE: R100 m R0.01 m DWS

R0m TCTA
R566 m
R0 m WRC
R158,9 m R140,7 m R70,3 m R100 m
2019-20 2020-21 2021-22 2022-23 2023-24

Overall observation
Nature
There has been an overall increase by R29,7 million of fruitless and wasteful expenditure incurred in the
Losses incurred related to external projects and internal
current year. projects. These include breeakdowns as a result of a lack
What is the culture? of maintenance on plant on the projects, transportation
of materials not done in time. Standing of labour as no
We identified a lack of adequate internal controls to prevent fruitless and wasteful expenditure at the WTE.
diesel on site and officials could not travel to site, standing
The fruitless expenditures incurred mostly related to procurement and project management controls on of plant and labour while projects are on hold waiting for
internal and external projects. proper certification by engineers.
What are the contributing root causes to the culture?
Linked to MI process
The previous procurement policy was not adequate for the procurement of infrastructure related goods R39 million incurred in 2019-20 financial year linked to the
and services, which resulted in protracted procurement processes and subsequent standing time costs standing time payments and site re-establishment MI on
and site overheads which can not be linked to any construction work. Hazelmere dam project.
R15 657 109 incurred in 2020-21 financial year is linked to
Who should do what and when to change the culture?
the payments for repairs not performed at various pump
The accounting officer should ensure that the WTE's infrastructure procurement strategy is fully stations MI.
implemented to prevent protracted procurement processes. Furthermore, accounting officer and project R22 750 000 incurred between 2019-20 to 2021-22 is linked
managers should ensure that plant is appropriately maintained to prevent any breakdowns. to the inadequate procurement processes in Clanwilliam
dam project MI.
Consequence management – dealing with irregular expenditure 22

Closing balance of irregular expenditure continues to decrease Top 3 contributors (R10.9 billion)

R18.618 b R17.906 b R5,797 b WTE

R17.363 b R16.425 b
R10.991 b R5,132 b DWS

R62 m TCTA
2019-20 2020-21 2021-22 2022-23 2023-24

R0 m WRC
Overall observation
Progress on IE balance
The department and its entities have investigated and removed irregular expenditure from the closing
)
balance to the extent possible. We commend leadership of the portfolio for work done to date and we
1. Investigation in progress
recommend they continue to ensure that the culture continues to improve.
• WTE - R5,434 bn
What is the culture? • DWS - R5,132 bn
• TCTA - R62 m
We noted significant progress in investigations undertaken and court action taken to reduce the balance
of irregular expenditure. The new culture implemented in the department is that of thorough process and The cases are currently under
holding people accountable. investigation and are at various stages
of completion. Some have been
What are the contributing root cause to the culture?
referred to the South African Police
The tone set by the leadership contributed significantly to the new culture noted in the portfolio. Service and the Special Investigating
Unit, and some cases are under-going
Who should do what and when to change the culture?
court proceedings.
This culture of effective and timely investigations must be continuously implemented to clear all historical
irregular expenditure and prevent re-occurrence.
 Consequence management – dealing with fruitless and wasteful expenditure 23

Top 3 contributors (R354 million) to

Closing balance of fruitless and wasteful expenditure continues to increase fruitless and wasteful expenditure

R935 m R 340 m WTE

R10.8 m DWS
R291,4 m R228,4 m R258,9 m R354,3 m

R3.5 m TCTA
2019-20 2020-21 2021-22 2022-23 2023-24

R0 m WRC
Overall observation Reliability of FWE balance
The department and trading entity investigated and removed a significant balance of historic fruitless and wasteful
expenditure. Although TCTA is committed to resolving the balance of fruitless and wasteful expenditure, they could No material inconsistencies were
identified
not locate documents relating to their historic fruitless and wasteful expenditure and, as such, no investigations could
be performed. Progress with FWE balance
What is the culture?
1. Investigation in progress
We noted significant progress in investigations undertaken and court action taken to reduce the balance of fruitless • WTE - R 240 m
and wasteful expenditure. The new culture implemented in the department is that of a thorough process and holding • DWS - R 10.8 m
• TCTA - R 3.5 m
people accountable.
What are the contributing root cause to the culture? The cases under assessment and
investigation are at the various stages
The tone set by the leadership contributed significantly to the new culture noted in the portfolio.
by the department, trading entity
Who should do what and when to change the culture? and TCTA
TCTA management should intensify efforts to locate documents relating to their historic fruitless and wasteful
expenditure and perform the appropriate consequence management processes.
 MI process implemented and MIs identified 24

Material irregularities Actions taken by auditees Observations from MI process

• Department of Water and Sanitation has strengthened
internal controls, reported the matter to SAPS, completed
Prevented financial loss disciplinary actions and awaits the conclusion of the
R0 m court case in progress.
from taking place
2 • The outcome was noted from the MIs raised at the WTE:
2
o Receivables amounting to R346 million has since
Financial loss in process of
R41 m been billed to water users (resolved)
recovery
o Summonses were issued for recovery of losses relating
8 MIs to interest as result of delayed payments and for
R346 m Financial loss recovered losses where repair services were not performed.
1
o Consequence management (disciplinary processes)
2 is taking place against officials who did not comply
1 Responsible officials identified and with the applicable legislation
9 disciplinary process completed or
o Contractors and sub-contractors were appointed for
in process the construction of the raising of Clanwilliam dam
and are currently onsite
Procurement and payment 7 Investigations finalised o Plans / programmes for the construction of a
Resource management temporary bypass siphon to extract water from
Mthatha dam to the treatment plant have been
Revenue management developed
Interest and penalties
1 Resolved MI
Harm to general public Recommendations for portfolio committee:
• Continue with its oversight role and ensure that the water
Internal controls and processes portfolio address the root causes resulting in the material
6 improved to prevent recurrence irregularity

Refer to annexure for detailed MIs

Overall
message to
portfolio
committee
 Portfolio culture reflection 26

Definition:
Doing good behaviour
Implement and maintain institutionalised Definition:
controls to ensure leadership and officials
behave ethically, comply with legislation Demonstrate commitment to improving lived realities of
and act in best interest of the institution, South Africans by delivering on legislated mandate and
avoiding conflicts of interest. strategic objectives aligned to people’s needs, being
financially sustainable and avoiding harm to public and
Reflection: public sector institutions.

WTE continues to incur irregular and fruitless Reflection:

and wasteful expenditure on infrastructure
projects, which points to the need to Delayed development of new projects, maintenance/
tighten project management and proper rehabilitation/augmentation projects, has resulted in
implementation of infrastructure likely/actual harm to ordinary residents (DWS, WTE).
procurement strategy. Key MTSF and key project targets not achieved by the
TCTA have not completely dealt with all portfolio, which had an impact on lived realities of
their historical fruitless and wasteful citizens.
expenditure.

Definition:

Provide public, oversight, auditors and other stakeholders Definition:

with timely, relevant and reliable information on institution’s
finances, performance, use of resources and compliance Be responsive to public, oversight and other stakeholders through
with legislation reporting and providing answers on mandated responsibilities
fulfilled, actions taken and decisions made; ensure swift
Reflection: consequences for transgressions and poor performance
DWS has developed a project monitoring tool where Reflection:
information on progress of all water projects info is updated
in real time. This tool is publicly available. Slow implementation of consequence management due to
Information on the dam levels (% water in the dam) is disciplinary actions not promptly implemented against officials
updated on a weekly basis on a tool publicly available. who caused these expenditures (TCTA)
Material misstatements were identified in the submitted Significant improvement in consequence management
annual financial statements, which required adjustments by procedures implemented (DWS,WTE)
management. (DWS; WRC; WTE & TCTA)
2022-23 recommendations 27

Overall reflections on implementation of recommendations:

In 2022-23, we recommended the following:
• The department has met with WSAs at the Water Summit to discuss
and elevate concerns around service delivery, including the areas
The department must continue to effectively implement the water
of water losses and water quality; however, interventions at WSA
services improvement programme, with a strong emphasis on
level has been limited due to legislative restrictions. The
collaboration with other responsible government entities, including NT,
department is in the process of amending the Water Services Act
Cogta, MISA and Salga. National action plans must be developed to
to assist. Interactions with other government entities have been
assist the water service authorities (WSAs).
limited with a greater emphasis on action plans being developed
at WSA level for submission to the department.
• WTE approved and started implementing the procurement strategy
A procurement strategy aimed specifically at procurement of for infrastructure assets at WTE.
infrastructure goods and services should be implemented at the WTE. • DWS has developed an action plan to address challenges with
project management and is in the process of implementing this
plan. Overall, there are still challenges in the environment that must
Management should appropriately supervise/monitor implementing
be addressed. We further noted that planned infrastructure repairs
agents and contractors to ensure construction/repair work performed is
at WTE are still not being met timeously.
of the required quality and completed in a timely manner.
• There has been significant improvement at DWS and WTE in
investigating irregular and fruitless and wasteful expenditure and
Continue to monitor implementation of consequence management implementing consequence management procedures. The matter
processes. Financial management controls must be strengthened to is still to be addressed for TCTA.
prevent material errors in the financial statements submitted for
auditing.

Implemented In progress Not implemented

Root causes, recommendations and commitments 28

• Poor project management has resulted in delayed projects and increased costs
• Delayed procurement processes contributed to delayed projects
• The department has limited control over the actions taken by WSAs to address the root causes for
Key root poor service delivery at the WSAs
causes • Inadequate internal controls over financial reporting and compliance with procurement legislation
• Investigations not undertaken in a timely manner to allow for timely consequence management
processes
01 02

• Implement action plans to address the root causes for poor project management
• Implement the procurement strategy to prevent procurement delays
• Continue to engage with NT, Cogta, Salga and WSAs to address poor service delivery concerns
Key 04
• Strengthen internal controls over financial and performance reporting to move to clean audits and to
recommendations
prevent irregular expenditure
01 • Ensure that investigations
02 of irregular, fruitless and wasteful expenditure are undertaken in a timely manner

• Implementation of action plans to address the root causes of delayed projects covering
ethical leadership, professionalisation of the sector, project management and contract
Commitments by management
executive • Implementation of the procurement strategy and adequately capacitating the SCM unit
authority • Implement action plans to address audit findings on the financial statements and compliance
with legislation
• Continue to monitor the investigations undertaken for all instances of irregular, fruitless and
wasteful expenditure
Portfolio committee message – service delivery 29

Overall message

Monitor progress on key projects and request feedback on implementation of action plans to fast track delayed projects and
1 prevent further delays. These plans must include actions to improve ethical leadership, professionalisation of the sector, project
management and contract management.

Monitor the drop reports (green; blue and no drop) and request feedback on collaboration with coordinating departments and
2 other actions taken to assist with water service delivery at WSAs
01 02

3 Monitor progress on actions taken to resolve material irregularities

Monitor the implementation of timely consequence management processes

4 04

01Request feedback on progress

02 on audit action plans implemented by the department and entities in the portfolio to improve audit
5 outcomes and to prevent irregular expenditure
 Overall message to portfolio committee 30

Accounting officer to develop and implement action

Monitor the progress of MTSF targets not yet plans that are root cause focused and are assessed for
achieved and ensure that there are adequate plans effectiveness in addressing the findings
in place to fast track the performance of the
department and its entities

Receive feedback on the implementation of the

Encourage auditees to submit annual action plans developed to address audit findings
performance plans on time for proactive
reviews to ensure compliance with the
revised framework for strategic plans and Use information in the general report and
annual performance plans material irregularities report for accountability
and oversight purposes, insisting on timeous
implementation of recommendations
The executive authorities should insist on
timely and credible reporting and
accountability, and should play an oversight Perform regular follow-ups with the
role effectively and with greater impact accounting officer/authorities and monitor the
development and implementation of
preventative controls to deal with compliance
Monitor entities’ progress in resolving with laws and regulations.
active MIs

Obtain commitment and monitor implementation

thereof on the investigation and consequence
management required on IFWE .
THANK YOU
Stay in touch with the AGSA
Annexure A
 Detailed MI status 33
Notified Type MI description Status of MI Status
description
17 July Non- A consulting firm was paid for work Internal controls have been strengthened, the matter was reported to SAPS, disciplinary action against 1 official was Appropriate
2019 compliance that could not be adequately completed with dismissal and the court case to recover these funds from the service provider is in progress. actions taken
(Financial supported (DWS) - R17 900 574
loss)
18 July Non- Payment not made within 30 days, Officials concerned have since resigned from the entity. Summonses for the recovery of the losses suffered by the Appropriate
2019 compliance resulting in additional interest paid trading entity were issued on 26 October 2023. Matter is under court processes. actions taken
(Financial (WTE) – R2 264 737
loss)
8 Non- Amounts paid to contractor for site Disciplinary proceedings against the officials of the entity are still in progress. Appropriate
December compliance re-establishment cost and standing actions taken
2021 (Financial time (WTE) - R39 072 104 A letter of demand delivered to the contractor on 28 June 2023. Legal representatives of the business rescue
loss) practitioners of the contractor responded to the letter of demand for the losses suffered on 6 July 2023. In their response,
they stated that there were no losses suffered and no refund will be made to the trading entity, as the settlement
agreement was agreed to and signed by the accounting officer of the trading entity at the time. A legal opinion was
sought in response to the above letter and as at the date of this report it was still not concluded
2 March Non- Payments made in vain for repair Disciplinary proceedings against the officials of the entity are still in progress. Appropriate
2023 compliance services not/not fully performed at actions taken
(Financial various pump stations (WTE) - The matter relating to recovery of the loss, is currently pending before the High Court (Gauteng division), with a
loss) R15 657 109 supplementary affidavit submitted by the DWS on 13 December 2023 to make available an updated investigation
report where inputs of the service provider were considered, as indicated above
13 July 2023 Non- Delays in the construction of the The contractor and sub-contractors are currently on site and construction work is ongoing. This ensures that site Appropriate
compliance raising of the Clanwilliam dam overhead expenses are directly attributed to construction work on site and prevents the continuance of financial losses. actions taken
(Financial project, resulting in financial loss due
loss) to site overhead costs. (WTE) - The entity has implemented a supply chain management policy for Infrastructure procurement that was approved by
the accounting officer on 19 January 2023. This will assist in preventing delays in procurement and expedite the delivery
R22 750 190
of the projects.
24 July 2023 Non Delays in the construction of the Appropriate actions were taken to appoint the sub-contractors and the project has resumed to prevent the likely harm Appropriate
compliance raising of the Clanwilliam dam, to public. actions taken
(Harm) resulting in likely harm to the public.
(WTE)
22 April 2024 Non Non-maintenance of the Mthatha Accounting officer developed a programme for the construction of the temporary bypass siphon that will deliver water Appropriate
compliance dam two outlet pipes, resulting in to the treatment plant. In terms of the programme developed the construction of the temporary bypass siphon will be actions taken
(Harm) harm to the public. (WTE) finalised on 30 September 2024.