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STANDING COMMITTEE ON APPROPRIATIONS

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Title: STANDING COMMITTEE ON APPROPRIATIONS


1
STANDING COMMITTEE ON APPROPRIATIONS
Briefing by Department of Water Affairs on the
management of the Internal Construction Unit.
  • Presentation byZandile Mathe
  • Deputy Director General NWRI11 February 2014

1
2
CONTENTS
  • Purpose
  • Background
  • Progress

3
PURPOSE
Briefing by Department of Water Affairs on the
management of the Internal Construction Unit.
3
4
Background
5
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6
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7
Overview branch structure
8
Construction Management Unit
Construction Management The purpose of the
Construction management is to construct new
water resources infrastructure and rehabilitate
existing infrastructure to meet social water
needs and to facilitate economic growth and
development.
DIRECTORATE PURPOSE
Construction Support Is responsible for the construction of new water resources infrastructure . They also supply administrative, Human Resources, Financial Human Relations support and Safety and Security for the 5 Construction Units
Construction Equipment They manufacture and refurbish mechanical equipment. It also ensures the procurement, operation, maintenance, rebuilding and disposal of construction equipment
9
Progress
10
Governance
  • Challenges
  • Progress
  • Construction unit would execute and project
    managed the same project. This affected the
    segregation of duties between construction
    management unit and Infrastructure development
    unit.
  • Construction units were guaranteed internal
    construction jobs without competing with the
    external service providers. This affected the
    total project costs as costs were not benchmarked
    with the market.
  • The construction unit is now employed as a
    contractor by the Infrastructure development unit
    and the independent project managers are
    appointed from infrastructure development unit.
  • Construction unit gets requested to submit the
    proposal to execute the project before the job
    can be awarded to them. The approval to award is
    based on price, quality and ability to deliver.

11
Governance
  • Challenges
  • Progress
  • The progress on the projects were not easily
    available to Top Management. This is due to the
    fact that there were no proper reporting
    structure.
  • There was no proper project methodology in place.
    This impacted on projects monitoring as Gantt
    charts and project plans were not easily
    available.
  • The appointed project managers are expected to
    report the progress on projects on monthly basis
    or as when required.
  • The project methodology is now enforced. The
    project plans and Gantt charts are prepared and
    projects progress are monitored on the regular
    basis.

12
Financial Management
  • Challenges
  • Progress
  • The budget for new infrastructure, Dam Safety
    Rehabilitation Programme (DSRP) and Water
    Services resided within the control of the
    construction units. This model resulted in the
    allocation of budget being done without
    consulting financial expects.
  • The total projects costing were done without
    looking at the activities on bill of quantities
    as the bill of quantities were not easily
    available. This resulted in under/over costing of
    the projects.
  • The allocation of budget is managed from the
    office of the Chief Financial Officer (CFO) and
    the budget reside with the infrastructure unit
    instead of construction unit. Construction unit
    is paid based on the work done.
  • The projects are now being costed at an activity
    level based on the bill of quantities.

13
Financial ManagementCont
  • Challenges
  • Progress
  • The costing unit did not exit within Water
    Trading Entity.
  • The actual project cost were overstated due to
    the fact that construction unit was making profit
    on the internal projects.
  • The was no separation between operational
    expenditure and capital expenditure.
  • The Water Trading Entity is in the process of
    appointing quantity surveyors to assist in
    project costing.
  • The internal profit made by construction is
    identified and adjustment are made to ensure that
    there is compliance with accounting standard.
  • The internal order system was implemented as a
    temporary measure to separate operational
    expenditure and capital expenditure

14
System
  • Challenges
  • Progress
  • There was no system in place to cater for the
    project costing on the ERP system. The monthly
    projects cost are available after 4-6 weeks due
    to delays in projects cost allocation.
  • There was no system of managing the flee that
    construction unit has.
  • There was no proper project management system in
    place.
  • WTE is in the process upgrading the current ERP
    system to include the following modules that will
    cater for construction environment
  • Project system (PS)
  • Fleet management (FM)
  • Portfolio and Project Management (PPM)
  • Plant Maintenance (PM)
  • The implementation of the above modules will
    ensure that project cost are real time.

15
Audit Opinion
  • Challenges
  • Progress
  • In 2011/12 the construction unit obtained a
    disclaimer opinion. The issues raised were as
    follows
  • No policy in place to manage abnormal costs.
  • Lack of proper costing system in place.
  • Lack of segregation of duties.
  • Construction making internal profit.
  • Discrepancies on accounting and costing
    depreciation.
  • Inability to separate operating and capital
    expenditure.
  • In 2012/13 the construction unit was unqualified
    with matters of emphasis. The following were put
    in place
  • Abnormal cost policy.
  • Internal profit were eliminated.
  • The accounting depreciation policy was aligned to
    the construction costing policies.
  • Internal order project was implemented to
    account for capital expenditure.

16
THANK YOU
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