water trading entity finance presentation to portfolio committee 17/18 april 2012

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WATER TRADING ENTITY FINANCE PRESENTATION TO PORTFOLIO COMMITTEE 17/18 APRIL 2012. 1. Mr. F Ismail aCFO: WTE. CONTENTS. WTE Operations overview WTE Finance Branch Objective WTE Proposed Finance Structure WTE Finance Key Goals WTE Turnaround plan progress update - PowerPoint PPT Presentation

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  • 1WATER TRADING ENTITY

    FINANCE PRESENTATION TO PORTFOLIO COMMITTEE 17/18 APRIL 2012Mr. F IsmailaCFO: WTE

  • CONTENTSWTE Operations overviewWTE Finance Branch ObjectiveWTE Proposed Finance StructureWTE Finance Key GoalsWTE Turnaround plan progress updateAudit Action Plans HighlightsAFS preparation and Audit Plan2011/12

  • *WTE OPERATIONS OVERVIEW

  • *WTE OPERATIONS OVERVIEW

    Asset ClassExtentReplacement Value (R bn)Buildings2 572Number2 301Canals8 036km29 073Dams and weirs359Number72 002Measuring Facilities3011Number7 381Pipelines1 063km8 044Pump stations57Number1 673Reservoirs51Number631Treatment works62Number69Tunnels171km18 354Other77Number85State owned land 343 237Ha6 792Servitudes51 849Ha769TOTAL147 174

  • *WTE OPERATIONS OVERVIEW

  • WTE FINANCE BRANCH OBJECTIVEThe WTE Finance Branch is part of the Administration Programme of the Department and its purpose is to support NWRI Branch and WRM (Proto CMAs) with regard to ensuring sound financial management practices based on the implementation of accountability and governance framework underpinning the Public Finance Management Act, (Act No. 1 of 1999) for Water Trading Entity.

    *

  • OVERVIEW: PROPOSED WTE FINANCE BRANCH STRUCTURE *The WTE finance structure including job descriptions, job evaluations, associated skills requirements and recruitment plans are in the process of being finalised for implementationGREEN = ACTING , RED = UNFILLED part of revised proposals, BLUE = FILLED

  • WTE FINANCE KEY GOALS Financial year 2013/14 Unqualified Audit Opinion WTE Turnaround PlanAudit Remedial Action Plans

  • WTE TURNAROUND PLAN PROGRESS UPDATE

  • WTE Turnaround plan progress Critical Elements of plan include-Strategy financially viable & sustainable whilst focused on excellence in service delivery (pricing strategy, operating efficiencies, culture) Focusing on business fundamentals, project management, analysing results & assigning accountability, Governance Undefined Operating model WTE Finance and NWRI Branch (construction, engineering, O&M, Infrastructure development) own finance and support components - started creating mechanisms and structures that ensure close working relationship between WTE Finance & NWRI branch focus on core competencies

  • WTE Turnaround plan progress Critical Elements of plan include-People Inadequate skills, competencies and experience in house key focus to acquire in-house capacity supported by Minister and working closely with BPRC progress will start to show greater momentum during 2012/13 [skills in all areas engineering, financial management and project management] Processes - Policies, procedures and business processes across all areas of the WTE operations require attention Being focused on in all areas finance and operations and its ongoing

  • WTE Turnaround plan progress Critical Elements of plan include-Systems IT Systems and automation of processes across the value chain is an imperative. SAP full ERP functionality ECC6 version has been acquired in process of formulating and sourcing implementation structure (Project Manager, SAP max attention & Integration Partner, ) aim is June / July 2012 implementation and governance structure fully in place. ASAP methodology will be followed underpinned by principle of minimum level of customisation thus using SAP standard as far as possible cost effective. Phased approach realise quick wins, building own SAP competency [super-users, business analysts]

  • REMEDIAL AUDIT ACTION PLANS HIGHLIGHTS

  • Remedial Action PlansPlans developed for audit findings 2010/11:Supply Chain ManagementRevenue ManagementAsset ManagementManagement AccountingFinancial AccountingUpdate for interim audit findings 2011/12

  • Supply Chain ManagementID & disclose Fruitless and Wasteful and Irregular Expenditure ID & disclosure of related parties and related party transactions and balancesProcesses to support the aboveSuppliers recons and age analysisInventory warehouse & construction

  • Revenue ManagementReconciliations between sub-systems and SAPAccurate age analysisDiscounting of debtors with >30day payment periodProvision for impairment on different classesClearing of Suspense accounts

  • Asset ManagementCompleteness of Fixed Asset RegisterReview of useful lives, residual values supporting schedules for thoseFixed Asset Register reconciliationsRehabilitation provisionCAPEX CommitmentsCapitalisation of expenses

  • Management AccountingReconciliation between approved budget and final budgetAnalysis between final budget and actuals reasons for deviationsPerformance information?

  • Financial ManagementAFS preparation and disclosuresAccounting policies reviewCoordination of audit process and audit filesReconciliations of general ledger account balancesLeave and other staff related Provisions

  • AFS PREPARATION AND AUDIT PLAN 2011/12

  • Summary Project Plan**********************Audit CommitteeQuality reviewDraft AFSPerformance info & budgetRecons & Supporting schedulesSystem ClosurePilot AFS*AFS submissionAudit Commences*

  • AFS PREPARATION PROCESSMapping accounts and accounting policiesSupporting schedules for each B/S accountRequests for informationWorking papersSystem closure Year-end journals and approval

  • Technical Accounting IssuesAccounting Framework: GRAP applicabilityTechnical opinion accounting treatment of assets financed off budget by TCTA Changes in accounting policies: Revaluation and Deferred revenueMeasurement of water services revenue and expensesRehabilitation provisionCompleteness of revenueWork-in-progress and InventoryImpairment of assets and Review of useful lives

  • EARLY ADOPTION OF GRAPDirective 9Issued by the Accounting Standards BoardGRAP is effective: 1 April 2013 for all Public Entities Early adoption is allowed

  • REASONS FOR EARLY ADOPTIONFocus on public sector accounting issues e.g. the recognition of non-exchange revenueFocus on accountability and transparency not on max profit for shareholders Save costs and effort Due to current review of policies and plansExpert knowledge available

  • REASONS FOR EARLY ADOPTIONGRAP more simpler than IFRS in some respectsAssist with recognition of deferred revenueDiscounting is simpler (rules based)Recognition of revenue simplerLess disclosure requirements (PPE, Intangibles, Financial Instruments)

  • CHALLENGES

    Budget information to be disclosedChanges in accounting policiesRetrospective applicationLimited knowledge on GRAP by officials

  • AUDIT PROCESS

    Preparation of audit fileAll WP to be send through to AFS prep teamCommunication with auditors > one message

  • AUDIT COMMUNICATION

    Highlight vacancies and action plansHighlight in relevant slide as weel

    Add name onto organogram**

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