STANDING COMMITTEE ON APPROPRIATIONS

1. STANDING COMMITTEE ON APPROPRIATIONS Presented byMr Onesmus AyayaChief Financial OfficerDepartment: Water Affairs (DWA)21 October 2009

2. Presentation Outline • Expenditure Trends • Quarterly expenditure: 2009/10 financial year (FY) • Reasons for under expenditure • Allocation before and after transfer of functions • Rollover of funds • Virement (Shifting of Funds): 2009/10 FY • Unforeseeable and unavoidable expenditure: 2009/10 FY • Earmarked funding • Transfer of functions • Re-allocation of funds earmarked 2

3. Expenditure Trends 3

4. Quarter 1 actual expenditure: ending in 30 June 2009 4

5. Quarter 1 actual expenditure: ending in 30 June 2009 5

6. Quarter 2 actual expenditure ending in 30 Sept 2009 (Before transfer of functions) 6

7. Quarter 2 actual expenditure ending in 30 Sept 2009 (Before transfer of functions) 7

8. Reason for under spending • Late submission of invoices in respect of services already rendered. • Projects (e.g. sanitation backlogs in schools and clinics and Regional Bulk Infrastructure) are still at tender phase; the expenditure is anticipated to increase in the third quarter of this financial year • Non-payment of general wage increase, it was anticipated (as projected) that the expenditure will kick in July 2009. These increases are now anticipated to be paid in October as per DPSA directive • Protracted delays in reaching agreements with municipalities to transferring staff and water schemes. 8

9. Allocation: after transfer of functions 9

10. Allocation: after transfer of functions 10

11. Rollover of funds from 2008/09 FY Def: Funds appropriated but not spent in a particular financial year may be rolled over to a subsequent year subject to approval of the National Treasury 11

12. Reason why funds were not spent:Rollover of funds • Delays in the conclusion of the negotiations to finalise the memorandum of agreement with the 23 different mines. • Exceptional high rainfall prevented contractors from making anticipated progress • Late submission of invoice in respect of Regional Bulk Infrastructure with multiple errors on calculation of bill of quantities 11

13. Virement (Shifting funds in terms of Section 43 of PFMA) • During a financial year, some deviations between actual expenditure and the allocated budget for that specific financial year may occur. • Unforeseen circumstances may require the revision and subsequent adjustment of the original planned projects and/or estimated costs involved in the execution of activities. • Virement is subject to the following • Shifting between programmes may not exceed eight percent (8%) • Virement may not be applied to amount appropriated for transfer to institution • Virement may not be applied to amount appropriated for capital expenditure to defray current expenditure • Virement may not be applied to earmarked funds 13

14. Virement (Shifting funds in terms of Section 43 of PFMA) 14

15. Reason for Virement • Programme1: Administration 1.1 Budget of R 14.086 million was shifted to Water Services due to reallocation of inflationary adjustment that was initially allocated during Estimate of National Expenditure process in this programme. • Programme2: Water Resource management 2.1 Budget of R65.386 million was shifted to Water Services and Forestry due to the following reasons: 2.1.1 Unfilled positions as a result of newly created structures; 2.1.2 Re-allocation of water use conservation and water demand management to the respective regions. 2.1.3 Funds were incorrectly allocated under goods and services in this programme for the purchase of machinery and equipment 3 Programme3: Water Services 3.1 Budget of R77.466 million was shifted to this programme as result of re-allocation of inflationary adjustment that was initially allocated in programme 1: Administration as well as re-allocation of water use and conservation and water demand management 15

16. Unforeseeable and Unavoidable Expenditure • Section 30(2)(b) of the PFMA and Treasury Regulations 6.6, provides for the allocation of additional funds through an adjustment budget to finance unforeseeable and unavoidable expenditure • Unforeseeable and Unavoidable expenditure relates to expenditure that could not be anticipated at the time of finalising the budget (ENE) • National Treasury has recommended an amount of R124,144 million to Cabinet for approvals. Below are the details 16

17. Unforeseeable and Unavoidable Expenditure The difference means that the department must reprioritise the budget and shift budget (virement) to fund the shortfall 17

18. Earmarked funding

19. 2009/10: Earmarked Vs Un-earmarkedbefore adjustments 19

20. Transfer of functions • The president of Republic of South Africa has announced during his 2009 State of the Nation Address that Sanitation services and Forestry functions will reside with the Dept. of Human Settlement and the Dept. of Agriculture, Forestry and Fisheries respectively. • Where a function is to be transferred between votes during a financial year, National Treasury must be consulted in advance to facilitate any request for the resulting transfer of funds voted for that function in terms of section 33 of the PFMA. In the absence of an agreement between the affected departments on the amount of funds to be transferred, National Treasury will determine the funds to be shifted. • Transfer of functions: National Treasury approval must be obtained before seeking approval from the Minister of Public Service Administration for a transfer of a function to another sphere of government 20

21. Transfer of functions • Budget of R944,449 million will be surrendered to the Department of Human Settlement and the Dept. of Agriculture, Forestry and Fisheries respectively. 1.1 Department of Human Settlement 1.1.1 Provision of sanitation in schools and clinics R350.000 million 1.1.2 Acceleration of access to sanitation projects R43.870 million 1.1.3 Operational budget of sanitation unit R31.393 million TOTAL 425.263 million 21

22. Transfer of functions • Budget of R944,449 million will be surrendered to the Department of Human Settlement and the Dept. of Agriculture, Forestry and Fisheries respectively. 1.2 Department of Agriculture and Fisheries 1.2.1 Operational budget in the Office of DDG: Forestry R3.934 million 1.2.2 Forestry Budget (as per ENE) R485.641 million 1.2.3 Compensation of employees in respect of support services R27.605 million 1.2.4 Forest land management R2.006 million TOTAL 519.186 million 22

23. Re-scheduling of funds earmarked for infrastructure projects (De Hoop Dam) for other purpose • National Treasury has granted the Department to reschedule earmarked funds of R502 million owing to. 1.1 Delays in signing Memorandum of Agreement with the mining sector 1.2 Delays in reaching Water Supply agreements with individual mines due to the global economic crisis • As result of this, the Department will only be able to spend R98 million of R600 million • The Department therefore requested the National Treasury to utilise R502 million as follows 23

24. Re-scheduling of funds earmarked for infrastructure projects (De Hoop Dam) for other purpose • DWA requested the National Treasury to reschedule R502 million as follows 2.1 To further the following infrastructure projects - R297 million 2.1.1 Nandoni Water Treatment Works 2.1.2 Inyaka Water Treatment Works 2.1.3 Hluhluwe Regional Water Scheme 2.2 Augmentation to the Water Trading Entity – R205 million is a result of infrastructure projects undertaken by WTE in 2008/09 financial year 24

25. I thank you 25