DEPT OF ENERGYANNUAL REPORT 2011/12

SECTION 3 : ANNUAL FINANCIAL STATEMENTS FOR THE

NATIONAL DEPARTMENT OF ENERGY Vote 29 for the year ended 31 March 2012

Prof Ernst UkenEnergy Institute

OVERVIEW• Reports by the Audit Committee; Accounting

Officer; and Auditor General• Statements of Appropriation with Notes;

Financial Performance; and Financial Position; Changes in Net Assets; Cash Flow

• Accounting Policies• Notes to Annual Financial Statements;

Disclosures; and Annexure (Unaudited Supplementary Schedules)

REPORT BY ACCOUNTING OFFICERThe Internal Audit Committee referred to concerns expressed

in various reports referring to Risk Management; Internal Controls; and Reporting.

• The Accounting Officer mentioned that the challenges of Free Basic Services Policy was being addressed by NT, COGTA and munics.

• Security of supply and universal access to sustainable energy are explained, as are job creation and poverty alleviation.

• The impact of the IRP 2010-2030 and the IEP will be financed largely by tariff increases allowed by NERSA

• Investors, Developers and the public are concerned about the delays from REFIT to 3 Bidding Processes, PPAs, etc before IPPs may feed energy into the grid. Are mini-grids being considered to promote sustainable energy?

Acc Off Report (cont)• Main events include the Ren.Energy IPP Bidding

Programme for 3 725 MW, attracting possible foreign investment of R100 bn over 12 months and the Energy Efficiency campaign during COP-17.

• Pleasing to note that Cabinet approved establish-ment of National Nuclear Energy Executive Coordination Committee (NNEECC) to oversee and upscale nuclear capacity by 9,6GW by 2030

• Electrification increased to 107 000 new grid connections

• 15 educational Public Participation Programme (PPP) interactions in KZN, E.Cape, Limpopo and N.Cape

• >1000 delegates attended IPP Conf. on 3725 MW bids.

Acc Off Report (cont)• 95% of DoE Budget (R6,2bn) went to Transfers: INEP

(R3,2bn); Transnet’s NMPP (R1,5bn); NECSA (R586m); EEDSM (R398m), Bal. to SOEs, etc.

• DoE spent 99,6% of allocated budget of R305m• Spending trends: Approved Rollovers (R57m for non-

grid SWHs; R18m for CEF Upington Solar Park; R2m for CEF Vaal Dam Hydro project; etc)

• Relative to Program Budget, spending was for Admin (95,9%); Energy policy/planning (100%); Energy Regulation (97,7%); INEP (100%); Nuclear (99,2%).

• Under-spending due to timing of overseas fees and procurement of computer software/hardware, late invoices, etc

Acc Off Report (cont)• No unauthorised expenditure was incurred by the DoE

in year under review. Condonation is still awaited for ‘inherited’ errors.

• No PPPs in 2011/12

Report by the Auditor-General• In his opinion, “the Financial Statements presented to

him, present fairly, in all material respects, the financial position of the DoE as at 31 March 2012, and its financial performance and cash flows for the year…as prescribed by the NT and the requirements of PFMA and DoRa”

A-G Report (cont)Note: Pages 186-206 are NOT part of Financial

Statements, but are Supplementary Info.• Only 96 (57%) of Planned Targets were achieved.

Underperformance since indicators and targets were NOT suitably developed during the Strategic Planning process.

• Gave ‘Unqualified audit opinion’ since Financial Statements submitted were not prepared in accordance with section 40(1)(b) of the PFMA. [Subsequently corrected]

• Annual Report does NOT mention extent of monitoring compliance of munics with the DoRA grant conditions/framework [Section13(2) of DoRA]

A-G Report (cont)• Accounting Officer did NOT take effective steps to

prevent irregular expenditure [section 38(1)(c)(ii) of the PFMA and Treasury Regs 9.1.1

• Employees performed remunerative work outside Dept without written permission [section 30 of Public Service Act]

• Quotations were awarded to bidders, who did not submit a declaration on whether they are employed by the State or connected to a person employed by the State [Treasury Reg 16A8.3

• Quotations were awarded to suppliers whose tax matters had NOT been declared by SARS to be in order [Treasury Regs 16A9.1(d) and Pref.Proc.Regs]

A-G Report (cont)• Dept did NOT sign MoAs for Integrated National

Electrification Programme (Munics) grant with all munics before beginning of financial year [sect10(1)(e) of Div of Revenue Act

• Internal Control: Ineffective when dealing with transfer payments and procurement through quotations

• Dept plus Special Investigation unit are investigating allegations that State employees are involved in the procurement processes.

Statements• Admin: Under-spending of R8,3m (4,1%) is due mainly

to procurement of goods and services (see p137 and Reports by Acc Off and A-G).

• Elec., Nuclear & Clean Energy: Under-spending of R12,3m (2,3%) is due to closure of EDIH (p138). DoE has Strategic Plan to address elec.distr.infr. Maintenance backlog of R27,4bn to R15bn by 2015 and initiating ADAM.

• Will DoE extend the KES partnership with the French EDF from the completed 10 000 solar home systems to 50 000 SHSs in KZN ?

• Progress in the E.Cape with €16m German KfW subsidy for 7 300 SHS waiting for additional 23 000 SHSs?

DEPT OF ENERGYANNUAL REPORT 2011/12

Prof Ernst UkenEnergy Institute

SECTION 4 : HUMAN RESOURCE MANAGEMENT

OVERVIEW

4.1 Service Delivery4.2 Expenditure4.3 Employment and Vacancies4.4 Job Evaluation4.5 Employment Changes4.6 Employment Equity4.7 Performance Management4.8 Foreign Workers

OVERVIEW (cont)

4.9 Leave utilisation4.10 HIV and AIDS4.11 Labour relations4.12 Skills development4.13 Injury on duty4.14 Utilisation of Consultants

5. Other Information - Acronyms

4.1 Service Delivery (p208)

• All Depts have to develop a Service Delivery Improvement (SDI) Plan

• Progress of each is measured under: Main Service; actual and potential Customers; Service delivery facet; Std of Service; and Actual Achievement vs Std Progress.

ADMINISTRATION: CORPORATE SERVICES (P208)1.Security Risk Mangmt: Plan drafted, ongoing meetings with

NIA & SAPS’, Security is standing item on ExCo agenda, Budget constraints ?

2. Special Projects: Redress in KZN, N.Cape, Gauteng, Limpopo & Mpumalanga have Learners Focus Week, Info W/shops, Take Girl child to work, Men’s Forum in Energy, Youth Devpmt Strategy. Budget constraints. Outstanding: W & E.Cape, F.S & N.W. Ensure info is disseminated to vulnerable grps (w/shops), Business/Career opportunities

Service Delivery(cont)3.Communications: External & internal through 9

new publications, 10 campaigns, Exhibits, ads, Sustainable Energy Handbook, Sawubona, BBQ. Budget insufficient?. Want desk-pad calendars, pop-up banners, mugs, booklets on nuclear and careers, also oil & gas, etc. Filled 10 vacancies. Conducted 47 Public Participation Programmes. Resolved queries on Presidential Hotline & Internet

4. Expenditure Mngmt: Procedures appear sound, preventing payment to fraudulent beneficiaries.

5. Fin.Planning & Mngmt Accounting: Receipts issued on target.

Service Delivery(cont)6. Supply Chain Mngmt: Screened and captured

details of 1162 service providers. Cashiers from 07:30 until 16:00. Process bids <6 weeks of closure. 15% (>R22M) spent on BEE goods & services.

7. IT: Optimal bandwidth utilisation. 8. Systems Devpmt & Mngmt: Parliamentary

question tracking is in pilot phase.9. Transport & Records Mngmt: Electronic access.

6000 Letters are processed pa.HYDROCARBONS & ENERGY PLANNING (p 224)

10.Petroleum controller: Issued 1200 new licences, <60 days, others <90 days.

Service Delivery(cont)ELECTRICITY, NUCLEAR & CLEAN ENERGY (P226)11. Integrated Nat.Electrification Programme: To alleviate poverty,

connected 141 390 homes to grid (target 150 000) and 10 000 homes off-grid? “Due to Financial constraints, <10% were audited instead of 30% of projects [Check the required sample size statistically?] Underspent, but 32% to be spent March-June 2012”.?

12. IPPs: By end March 2012, 1000 MW was NOT achieved – awaiting PPA and Implementation Agreement and Transmission Agreement (TA). Awaiting National Treasury decision/approval for issuing guarantees. Consultation with NERSA & Eskom. ???

13. Clean Energy: Funding by Ren.Energy Finance & Subsidy Office (REFSO) stopped after 5 subsidy projects to prevent double dipping by entrepreneurs & BEEs.

14. Energy Efficiency: See above note – targets no longer applicable. See notes on p228.

4.2 Expenditure (p231)

Tables in Report summarise final audited expenditure by programme and personnel costs.Cross-cutter below shows Departmental ‘effort’:

Programme Voted Expenditure R’000(Total: R174 262 )

Compensation of Employees

Administration 3,2% 45,7%

Energy Policy & Planning

25,0% 18,4%

Energy Regulation 8,6% 25,9%

National Electrification 52,9% 7,9%

Nuclear Energy & Regulation

10,3% 2,1%

4.3 Employment & Vacancies (p234)• Posts in Establishment 615• Filled Posts 560 55 Vacancies• Additional Posts filled 87 posts, mostly in

Admin (45), Energy Reg. (17) and Electrification (15). Critical occupations are being monitored.

GENERAL QUESTION: If 1m Solar geysers are installed by end of 2012, most of them will be low-pressure geysers given by munics to households who did not have running hot-water before. What are the deemed energy savings vs actual savings with low and high-pressure geysers by 2012 vs originally planned national savings with high-pressure geysers by Eskom?

4.4 Job EvaluationTables reflect the number of jobs, which were

evaluated in accordance with the Public Service Regulations (1999) and subsequent regulations.

4.5 Employment Changes• The DoE had 39 transfers to the Dept and had

24 tansfers from the Dept.• A Turnover Rate of 19,1 was noted, largely due

to expiry of contracts (74 persons) and 18 resignations.

4.6 Employment Equity• In the Report the format prescribed by the

Employment Equity Act 55 of 1998 were used.• The recruitment attracted 18 female Blacks• 142 professionally qualified/experienced specialists

(middle management) were promoted.• 19 Black males and 13 Black females were subjected

to Disciplinary action.• 395 Skills Development candidates (192 African

females and 188 African males) underwent training for technicians (127), professionals (78) and clerks (59)

4.7 Performance Management• 209 (out of 560 employees) were granted

Performance rewards, averaging R12 096. These are reported on according to race, gender, etc.

• The beneficiaries were mainly 106 African females and 88 African males.

• Critical occupations included natural science related (102) and administration (21).

• Performance cash bonuses were granted to 6 Senior Managers (out of 52) averaging R22 167

4.8 Foreign Workers - only 2

4.9 Leave UtilisationThe Public Service Commission rightly expects that

sick leave be monitored. The Report states that:• 413 Employees (74%)used a total of 2 205 days sick

leave, averaging 7 days per employee. The estimated loss is a staggering R2 751 000.

Are there rewards to combat absenteeism?• Only 10 employees were paid for not taking leave,

the rest received payouts on leaving DoE

4.10 HIV & AIDS• Weekly articles and Peer education programmes

4.11 Labour Relations• 27 Collective agreements with Trade Unions• Disciplinary Hearings include Misconduct of

negligence, misrepresentation, absenteeism, dereliction of duties, non-compliance, insubordination, poor work performance, irregular expenditure and unethical behaviour.

• No strike actions.

4.12 Skills Development Training needs identified and provided for:

Legislators, Professionals, Technicians, Clerks, Services and Sales, Crafts and Interns

4.13 Injury on Duty• 1 only required basic medical attention and• 1 temporary total disablement

4.14 Utilisation of Consultants • 49 Consultants costing R18,3M (appropriated) were

employed for 10 projects mainly for Implementation Models of the IEP (13 consultants); and Auditing Compliance with SA Petroleum and Liquid Fuels Charter by oil companies (11 consultants).

• Donor funds (R0,69M) were used for 3 new projects.