BOARD COMMITTEES

The Board Committees are formally constituted and are chaired by non-executive Board members. The Board Committees assist the Board in the performance of duties and enables effective decision-making through providing more detailed attention to matters within the terms of reference. The committees report to the Board on activities at every meeting. In terms of the Water Services Act, the Board is authorised to delegate powers to the Committees established by the Board. The functions and powers delegated to Committees are set out in the written Terms of Reference which are formally approved by the Board.

Audit Committee

The committee consists of seven (7) non-executive Board members and its chairman is Professor Imtiaz Vally.

The Committee is mandated to achieve the highest level of financial management, accounting and reporting to the shareholder and to meet the requirements prescribed in section 51(1)(a)(ii) and 76(4)(d) of the Public Finance Management Act (No 29 of 1999), as well as Treasury Regulations, 2005 (Chapter 27.1). The Audit Committee further performs a critical function of risk management by ensuring the effectiveness, quality, integrity and reliability of Umgeni Water’s risk management processes.

The terms of reference of the Audit Committee takes into account the recommendations in King III, the Companies Act (No 71 of 2008), the Public Finance Management Act (No 29 of 1999) as amended and Treasury Regulations, 2005, to ensure alignment to best practice and legislation.

The Ethics Committee and Corporate Risk Committee also report through the Audit Committee.

Ethics Committee

King III and the Companies Act No 71 of 2008 oblige all state-owned enterprises to establish a Social and Ethics Committee. The Committee has a broad mandate to promote ethical behaviour, which includes preventing incidences of fraud, bribery and other corrupt activities.

The Ethics Committee has an Independent Chairperson - who is neither a member of management nor a member of the Board. The Ethics Committee accounts to the Board, through the Audit Committee.

A new Code of Ethics has been developed which establishes a set of principles to promote and encourage ethical behaviour and decision-making by all employees, Board members and stakeholders.

Umgeni Water continues to provide an external whistle-blowing hotline service managed by an external service provider. This facility provides an anonymous and confidential communication channel for all customers and stakeholders to report perceived misconduct or observed unethical conduct. All hotline calls are investigated and appropriately followed through using a fraud assessment protocol developed for this purpose. Information is further used to improve internal controls to ensure fraud is addressed appropriately and timely.

Corporate Risk Committee

The Corporate Risk Committee, which comprises a member of the Audit Committee, the Chief Executive, the Executive Management, the Company Secretary and the Risk Manager, assists the Audit Committee in discharging its duties relating to implementation of the integrated risk management framework.

Internal Control

The Board is accountable for the system of internal control. Umgeni Water policies, procedures, structures and delegation of authority frameworks clearly define and provide appropriate levels of responsibility.

The internal control systems are designed to provide reasonable assurance that assets are safeguarded and that liabilities and working capital are efficiently managed. Principal features of the organisation’s internal finance controls are:

  • A system of financial planning, budgeting and reporting which allows continuous monitoring of performance,
  • A materiality and significance framework,
  • Clearly-defined delegations of authority,
  • The establishment of a short, medium and long-term funding strategy,
  • The tariff model which determines the financial impact of capital expenditure and the bulk water tariff on Umgeni Water’s debt curve, and
  • Established policies and procedures.

To assist the Board in the discharge of its responsibilities, Internal Audit undertakes an independent assessment of the internal control systems and business risks and reports to the Board through the Audit Committee. The audit plan covers major financial and commercial risks and responds to any changes emanating from Umgeni Water’s integrated risk management process.

Internal Audit

Internal Audit is an independent outsourced assurance function, for which the purpose, authority and responsibility is formally defined in a charter approved by the Board in line with stipulations of the Institute of Internal Auditors. In line with the requirements of the Public Finance Management Act (PFMA) and Good Governance, the internal auditors give the audit Committee and management assurance on the appropriateness and effectiveness of internal controls.

The internal auditor's report regularly to the Audit Committee and have unrestricted access to the Committee chairman. An internal audit charter has been approved by the committee.

External Audit

The Auditor-General South Africa is the external auditor and is responsible for undertaking procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements, the report on predetermined objectives and compliance with laws and regulations applicable to the entity. This is based on, amongst other:

  • Assessment of the risks of material misstatement of the consolidated financial statements, the report on predetermined objectives and material non-compliance with laws and regulations,
  • Considering internal controls relevant to Umgeni Water’s preparation and fair presentation of the financial statements, the report on predetermined objectives and compliance with laws and regulations,
  • Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, and
  • Evaluating the appropriateness of systems and processes that ensure the accuracy and completeness of the financial statements, the report on predetermined objectives and compliance with laws and regulations.

The external auditors express an opinion on the consolidated financial statements and report on findings relating to their audit of the report on predetermined objectives and compliance with material matters in laws and regulations applicable to the entity.

Remuneration and Human Resources Committee

This committee comprises of six (6) non-executive directors and the Chief Executive.

The committee reviews and recommends to the Board all matters relating to:

  1. Human Resources policies, organisational structure and compliance with the Employment Equity Act, (No 55 of 1998) and other labour legislation,
  2. Conditions of employment of executive management,
  3. Appointment of the Chief Executive and members of executive management,
  4. Remuneration packages for the Chief Executive, members of executive management and staff,
  5. Succession planning for executive management,
  6. Policies and practices for Performance Management, and
  7. Special rewards recommended by the Chief Executive.

Capital Projects, Fixed Assets and Procurement Committee

This committee comprises nine (9) non-executive Board members and the Chief Executive.

The Committee assists the Board with capital expenditure programme related decisions, recommends Procurement Policies to the Board for approval and approves the release of capital expenditure above executive management’s delegated authority but within the committee’s delegated authority. It ensures that the organisation’s supply chain policy and procedures are equitable, transparent, competitive and cost effective. Contracts which exceed the committee’s Delegation of Authority are referred to the Board for approval. The committee reviews and recommends amendments to the limits in the delegation of authority, relating to budget approvals for capital projects and procurement, to enable management to expedite the implementation of projects.

Governance Committee

The Governance Committee comprises four (4) non-executive Committee Chairs.

The Committee meets on an ad-hoc basis and assists the Board in monitoring and assessing the performance of executive management to ensure that performance objectives and targets are met. Performance results are considered by the Human Resources and Remuneration Committee in determining the remuneration of the Chief Executive and other executives to be recommended to the Board for approval.

Delegation of Authority

A comprehensive delegation of authority framework governs the authority levels for the Board and management. These are exercised through various Board and management committees. The Board reviews the framework regularly.