overview of financial performance annual financial statements 2009/10
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Presentation to the Portfolio Committee: Water & Environmental Affairs. Overview of Financial Performance Annual Financial Statements 2009/10 Presentation to Portfolio Committee , 13 October 2010 Parliament of the Republic Of South Africa. Presentation by Mr. Onesmus Ayaya - PowerPoint PPT PresentationTRANSCRIPT
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Overview of Financial PerformanceAnnual Financial Statements 2009/10
Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Presentation to the Portfolio Committee: Presentation to the Portfolio Committee: Water & Environmental AffairsWater & Environmental Affairs
Presentation byMr. Onesmus Ayaya
Chief Financial Officer19 October 2010
1
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Presentation Outline1. Purpose of the presentation 2. PART A- Main Account
• Departmental Expenditure• Reasons for under-spending• Rollover of Funds• Final virements• Reason for virement• Earmarked Funding• Official Development Assistance –donor funds• Transfer of function
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Presentation Outline1. PART B- Water Trading Entity
• Objective of the presentation2. Overview of the Annual Financial Statements (AFS)
• Improvements in relation to previous years• Presentation on Financial Performance• Presentation of Financial Position• Presentation on Cash Flow Position• Recommendations for improvements going forward
3. Recommendations
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Purpose of the presentation
1. Report to the Portfolio Committee on the financial performance for the year ended 31 March 2010 as embodied in the Annual Financial Statements (AFS)
2. Highlight improvements made by the WTE in relation to the previous year’s AFS
3. To highlight challenges shown by the financial results 4. Provide recommendations on improvements going forward
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
PART AMain Account
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Overview of spending trends per programme MEA (2008/09 vs 2009/10)
Programme 2008/09 BudgetR’mil
2008/09ExpendR’mil
% Spent 2009/10 BudgetR’mil
2009/10ExpendR’mil
% Spent
Programme 1: Administration 682 088
681 758 99.95847 255
846 185 100
Programme 2: Water Resource Management
3 499 812 3 001 348 85.80 4 112 603 4 072 090 99
Programme 3: Water Services
2 348 031 2 341 817 99.70 2 814 144 2 668 556 95
Programme 4: Forestry 506 685 506 648 100 - - -
TOTAL 7 036 616 6 531 571 92.80 7 774 002 7 586 831 98
MA
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Departmental Actual Expenditure Fourth Quarter Ending – 31 March 2010 after transfer of functions
Economic classification Adjusted Budget
2009/10
2009/10 ActualR’000
% spent Available Budget
Compensation of Employees 916,832 910,572 99 6,260
Goods and Services 2,219,406 2,095,506 94 123,900
Interest and Rent on land 1,133 1,133 100 -
Theft and Losses 50,277 50,277 100 -
Transfers and Subsidies 4,099,658 4,045,738 99 53,920
Payments for Capital Assets 486,696 483,605 99 3,091
Total 7,774,002 7,586,831 98 187,171
MA
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Reason for under disbursementThe department failed to disburse the entire allocated budget due to:• The fact that Accelerated Community Infrastructure Project has
under spent it’s budget. This was as a result of the fact that the projects are linked to municipal financial year which ended in June 2010. The funding of this project is committed and work has started in MP, LP, EC, KZN and NC.
• Water Service Grant to Mopani District Municipality was withheld as they had failed to finalise their business plan and failed to submit 2008/09 close out report on how the 2008/09 funds were spent.
• De-Hoop: Unspent funds on Social Component of Downstream Project. This was as a result of delays by commercial users (mining) to commit to the commercial components of the project during the recessionary conditions prevailing throughout the global market.
MA
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Reconciliation of Unspent Budget
Programme Unspent budgetR’000
Unpaid invoices Total unpaid invoices
Phakisa Arrivia Other
Administration 1, 070 11, 417 26, 074 16, 511 54, 002
Water Resource Management
40, 513 5, 825 - 40, 770 46, 595
Water Services 145, 588 2, 876 - 5,735 8, 611
Total 187, 171 20, 118 26, 074 63,016 109, 208
MA
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Rollover requests from 2009/10 - 2010/11Description of Service Amount
New office space in Limpopo 3,547
Water Allocation ReformClaim against the Department
7,8304,127
Water Service Operating Subsidy Grant 10,000
National Youth Service 3,200
Hartbeespoort Dam Remediation Project 9,500
Revision of National Water Resource Strategy (NWRS) 4,100
Rain Water Harvesting Tanks in EC and NC 6,368
Accelerated Community Infrastructure Programme (ACIP) 74,964
Total 123,636
MA
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Rollover requests approved
Description of Service Amount
Water Allocation Reform 7,830
Water Service Operating Subsidy Grant 10,000
Claim against the Department 4,127
Hartbeespoort Dam Remediation Project 9,500
Revision of National Water Resource Strategy (NWRS) 4,100
Accelerated Community Infrastructure Programme (ACIP) 43,444
Total 79,001
MA
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Final Virement (Shifting of Funds in terms of Section 43 of PFMA)
Programmes Virement
Administration 34,714
Water Resource Management (8,400)
Water Services (26,314)
Net Effect 0
Reasons for virement
• Programme 1 (ADMINISTRATION) has overspent it’s allocated budget by R33 million on IT services, write offs and office accommodation, hence funds were shifted to the programme.
• A total of R8,400 and R26,314 were shifted from Programme 2: Water Resource Management and Programme 3: Water Services respectively as a result of savings that was realised under personnel budget due to departmental restructuring and high staff turn-over.
MA
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Earmarked FundingEarmarked funding are allocations earmarked by National Treasury for a specific purpose and may not be used for other purposes. Below are earmarked allocations for 2009/10 financial year. Total of earmarked funds amount to R2 698 166 000
Rent of buildings 138 331 000
Working for Water 477 851 000
Working on Fire 123 608 000
Refurbishment of water scheme 30 000 000
De Hoop Dam (Phases 2B to 2G) 98 000 000
Additional capacity: Internal Audit and Finance 6 000 000
Sanitation at school and clinics 350 000 000
Regional Bulk infrastructure 616 753 000
Operating subsidy (Water Services) 857 623 000
Total earmarked funding 2,698,166,000
MA
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Official Development Assistance –Donor funds
Opening balanceR’000
RevenueR’000
ExpenditureR’000
Closing balanceR’000
Received in cash (242 010) 454 387 316 478 (104 101)
Received in kind
TOTAL (242 010) 454 387 316 478 (104 101)
MA
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Transfer of functions
• The President of Republic of South Africa announced during his state of the nation address that functions of Sanitation services and Forestry will reside with the Dept. of Human Settlement and the Dept. of Agriculture, Fisheries and Forestry (DAFF), respectively.
• A total budget of R 579.104 million was shifted to DAFF as a result of shifting of forestry function during the financial year.
• The expenditure to the amount of R554.076 million was claimed from the DAFF as a result of the expenditure that the Department of Water Affairs has incurred on their behalf.
MA
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
PART BWater Trading Entity (WTE)
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Overview of the Annual Financial Statements
• AFS were prepared in accordance with principles of GAAP• Preparation framework has not changed from previous years• AFS include the following:
Statement of Comprehensive IncomeStatement of Financial PositionStatement of Changes in Net Assets
Statement of Cash FlowsNotes to the Financial Statements
• There were no changes in accounting policies when comparing current year with previous year’s accounting policies.
• There were further refinements made by the WTE which necessitated a restatement of prior year’s amounts
WTE
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Improvements in relation to previous years
• Vendor reconciliations have been performed and are all up-to-date
• Interest has been charged to long-outstanding debtors• Deferred income has been split into current and non-
current portions• The entity did not have bank overdraft in the current
year
WTE
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Financial Performance
2008/09 R’million
2009/10R’million
% Change
Revenue 1,537,082 2,057,585 34%
Other income 491,435 514,555 5%
Income before expenses 2,028,517 2,572,140 27%
Expenses (3,475,452) (3,787,718) 9%
Deficit for the year (1,446,935) (1,215,578) -16%
WTE
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Financial Performance cont…
• Increase in revenue (34% increase as compared to prior year) resulted partly from the increase in the tariff and also from the increase in number of billed customers as a result of the process of identification of all water customers undertaken by the WTE.
• Other income is up from the prior year by approximately R23 million (or 5 %).
WTE
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Financial Performance cont…• The increase is mainly due to an increase in other
income as compared to prior year, which relates to sundry income received from the water users.
• There was an increase in expenses of 9 % (312 million) partly as a result of an increase of approximately 30% (R196 million) in employee costs in the current year as compared to prior year.
WTE
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Financial Performance cont…
• The increase in revenue and the increase in expenses resulted in an overall decrease of 16 % (R 231 million) in the deficit recorded in the current financial year as compared to the prior financial year.
• There is a marked improvement in the ratio of the deficit for the year as a percentage of revenue earned, which improved from 94% in the prior year to 59% in the current year.
WTE
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Financial Performance cont…
• One of the main contributors to this improvement can be attributed to the efficiencies in the revenue and costs management systems that are beginning to bear fruit within the WTE.
WTE
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Financial Performance cont…
• Taking out the effect of depreciation, the ratio of expenses as compared to total income is as follows:
• 2008/09 = 1.02 which means that 102% of total income earned was consumed by operating expenses if we exclude depreciation
• 2009/10 = 0.93 which shows that there is huge improvements in the current year. The ratio shows that the WTE has generated enough income to cover its operating expenses, excluding depreciation.
WTE
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Financial Position2008/09R’million
2009/10R’million
% Change
Non current assets 65 613 747 64 971 931 -1%
Trade and other receivables 2 142 035 1 912 706 -11%
Other current assets 23 930 445 379 1 761%
Total assets 67 779 712 67 330 016 -1%
Capital and reserves 64 699 981 62 995 380 -3%
Non-current liabilities 1 530 669 2 604 299 70%
Trade and other payables 1 307 527 1 319 577 1%
Other current liabilities 241 534 410 760 70%
Total equity and liabilities 67 779 712 67 330 016 -1%
WTE
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Financial Performance cont…• Continuing refinements to the infrastructure asset values on
the reported figures for the 2007/08 and 2008/09 financial year were made, resulting in a restatement of prior year figures
• Trade and other receivables decreased by 11% year on year, further giving testament to the improvements being made by the WTE in its revenue management efforts.
• This is one of the factors that contributed to an increase in cash and cash equivalents in the current year.
• Other current liabilities increased by 70 % as compared to the prior year mainly as a result of an increase of 71% (R 1 076 billion) increase in deferred income
WTE
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Statement of Changes in Net Assets
Accumulated deficitR’ million
Revaluation ReserveR’million
Total
R‘million
Balance as at 1 April 2008 1,458,224 86,309,495 87,767,719
Restated balance at 1 April 2008 1,460,354 64,740,661 66,201,015
Deficit for the year (1,446,935) - (1,446,935)
Restated balance as at 31 March 2009 1,343,553 63,356,428 64,699,381
Deficit for the year 113,135 (1,817,737) (1,704,602)
Balance as at 31 March 2010
1,456,688 61,538,692 62,994,780
WTE
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Statement of Changes in Net Assets cont
• The statement shows the impact that a change wherein the increase in depreciation as a result of revaluation of infrastructure assets is now released to accumulated surplus each year.
• This assists in limiting the impact on the accumulated deficit for the year.
• As a result the revaluation reserve has decreased from R 86 billion on 1 April 2008 to R 61 billion at 31 March 2010
WTE
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Cash Flow Position
2008/09R’million
2009/10R’million
% Change
Cash inflows from operations 1,273,801 1,688,924 33%
Cash flow from investing activities (1,372,530) (1,264,758) -8%
Cash flow from financing activities
(11,817) (3,406) -71%
Net cash flow at end of year 9,910 430,670 4 146%
WTE
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Cash Flow Position
The cash position of the WTE has improved by 4 146%year on year as a result of the following:
• Decrease in the deficit for the period as a result of efficiencies achieved by the WTE through its operational improvement projects
• Decrease in trade receivables balance• Increase in trade and other payables
WTE
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Recommendations – Main Account
1. Monthly Trial balance meetings2. Fill all vacancies3. Audit action plan to be compiled to address
reported matters4. Report to be compiled regarding problems
experienced during compilation of AFS5. Workshops to address governance and policy
matters6. Regional visits to address specific needs
MA
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Recommendations – Main Account
7. Regional Heads and responsible CD’s to sign off inputs (AFS & Audit queries)
8. Training staff on how to respond to audit findings9. A-G’s (strategic plan) Engagement Letter will be fine
combed regarding budget vs. outcome10. All Managers to be more involved11. Top Management to be briefed frequently
MA
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
Recommendations -WTE
A radical turn-around that would comprise of • Getting external technical expertise• Reassessing the risks• Developing a medium-term to long-term strategy
to sustain sound financial management
Overview of Financial Performance: Annual Financial Statements 2009/10Presentation to Portfolio Committee , 13 October 2010
Parliament of the Republic Of South Africa
THANK YOUTHANK YOU
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