Water affairs bid to fix finances ‘has collapsed’

The Department of Water and Sanitation’s intervention aimed at cleaning up its shambolic financial state has fallen apart and is inadequate to pull it into a clean audit, says Kimi Makwetu, the Auditor-General.

He gave the department a qualified audit opinion for its 2016-17 financial year. In the previous year, it incurred the highest irregular as well as fruitless and wasteful expenditure finding of any department.

In his 2015-16 audit report, Makwetu noted fruitless and wasteful expenditure of R87.2m and irregular expenditure amounting to R2.5bn.

In defence, Water and Sanitation Minister Nomvula Mokonyane said legislation placed the burden of providing water services on the department but did not give it adequate authority for oversight on municipalities as stewards of water services.

In his report for 2016-17, Makwetu said that despite budgeting and accounting for reclassified payments and transfers for subsidies, the flawed nature of transactions had not been changed and transfers to provinces and municipalities had been overstated by R1.8bn.

“A system of control, that includes proper project management and costing techniques in line with construction norms and standards were inadequate to ensure that value for money was received. To this extent, the department’s processes to ensure that all fruitless and wasteful expenditure is identified and disclosed were inadequate,” Makwetu wrote.

He said R406m in unauthorised expenditure was incurred, due mainly to overspending in the main division.

On irregular expenditure, he noted R715m in payments in contravention of the Public Finance Management Act and Treasury regulations.

“Accruals and payables which exceed the term of 30 days as required in the Treasury regulation amount to R552m. This amount, in turn, would increase the incurred unauthorised expenditure due to overspending of the vote of R11m as per the appropriation statement,” he wrote.

Mokonyane said in the report the audit outcomes highlighted the need to improve internal controls and oversight in allocating funds to implementing agents delivering services on behalf of the department.

“The regress from our achievement of an unqualified audit opinion in 2015-16 … is cause for concern and we will spare no effort in ensuring that the necessary systems are put in place,” said Mokonyane.

A legislative review would help to strengthen the ability of implementing agents to deliver water infrastructure and services and diversify the supplier pool, she said.