Water department to finally table overdue budget

The department of human settlements, water & sanitation has committed to tabling its 2018/2019 annual report in parliament next Friday, about seven months after the legislated deadline.

The delay was required to avoid a disclaimer audit opinion of the financial statements of the Trans Caledon Tunnel Authority (TCTA), which feed into the department’s annual report.

A disclaimer would have had a disastrous affect on the TCTA and would have triggered a cross default.

The TCTA, which raises bonds on the capital markets through the JSE, has debt of about R22bn.

It is a special-purpose vehicle that plays a significant role in the financing and implementation of major bulk water infrastructure projects on behalf of the government, including the Lesotho Highlands Water Project.

In terms of the Public Finance Management Act, the deadline for government departments and entities to table their annual reports is August 31.

Department of human settlements, water & sanitation acting director-general Mbulelo Tshangana told parliament’s standing committee on public accounts (Scopa) on Wednesday that significant differences in interpretation had emerged between the auditor-general and the TCTA over the nature of the supporting documentation required to substantiate payments made by the TCTA to the Lesotho Highlands Development Authority and the Lesotho Highlands Water Commission, on behalf of the SA government.

These matters had subsequently been resolved, opening the way for the finalisation of the department’s annual financial statements.

“The difference in interpretation led to an initial ‘limitation of scope’ audit finding, which would have resulted in a disclaimer audit opinion,” Tshangana told MPs, noting that if the TCTA’s finances were not in order, then its cost of borrowing would have been very high.

The change in the method of the TCTA’s audit happened because the auditor-general only took over its books from the 2018/2019 financial year. Previously the audit was conducted by EY.

Tshangana explained that it was necessary to finalise the TCTA’s financial accounts before those of the department’s Water Trading Entity and those of the department itself were concluded as they were interdependent.

The auditor-general had submitted a signed audit report on the TCTA financials on December 20 2019 and this was submitted to the department on December 24.

The TCTA annual report with a qualified audit opinion was submitted to human settlements, water & sanitation minister Lindiwe Sisulu on February 13 and tabled in parliament on February 27, paving the way for the department’s annual report to be tabled on March 20.

Tshangana said the department was determined not to have a repeat of the same delay for the 2019/2020 annual report and had been drawing lessons with the auditor-general from 2019’s experience.

One question under consideration was whether to continue having two institutions — the TCTA and the Water Trading Entity that collects water tariffs — or to have one consolidated entity that would create a water infrastructure management agency.

Sisulu has instructed Tshangana and TCTA CEO Percy Sechemane to come up with a proposed new model within the next five months.

Scopa chair Mkhuleko Hlengwa was emphatic that the committee was not going to allow the nonsubmission by due date of annual reports. “Non submission is noncompliance. It is unacceptable,” he said.

He also raised concern about submission being delayed simply to avoid a negative audit outcome.

Hlengwa also said it was unacceptable that the department had had an acting CFO for nearly two years as this created a climate of instability.