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.
This Committee comprises four (4) non-executive directors and Mr Siboniso Shabalala serves as its new chairperson with other members of the Committee being Mrs Linda Ngcobo, Mr Mduduzi Zakwe and Mrs Mbali Ndlovu and had one meeting during the reporting period.
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 (Act 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 IV, the Companies Act (Act 71 of 2008), the Public Finance Management Act (Act 1 of 1999) as amended and Treasury Regulations, 2005, to ensure alignment to best practice and legislation. The Committee has delegated overall oversight responsibility for audit, risk, ethics, ICT governance, combined assurance, legal and compliance portfolio and has to a limited extent delegated some functions to sub-structures of the organisation who are enjoined to report back to the Committee on the work delegated to them.
Umgeni Water has formally adopted best practice principles as contained in King IV with respect to ethics and fraud prevention planning. This enables, amongst other aspects: greater accountability and transparency; an integrated approach to corporate governance in view of economic, social and environmental spheres; and a greater integration between the role and function of the Ethics Committee and other Board committees.
The Board acknowledges its responsibility to ensure that Umgeni Water is a fair, transparent and ethical entity and will continue to exercise oversight through its already fully functional Ethics Committee as prescribed in Section 29.1.1 of the Treasury Regulations in the PFMA as well as in line with the requirements of section 72 (4) of the Companies Act (Act No.71 of 2008).
The Ethics Committee accounts to the Board through the Audit Committee and any high risk areas identified are managed and mitigated at that level. The Committee provides assurance to the Board that there are effective ethics management systems, institutional-wide prevention of fraud and corruption and ensures that complaints are effectively managed, appropriately followed-up and efficiently investigated. The Committee is satisfied that it has fulfilled all its statutory duties and duties assigned to it by the Board, through the Audit Committee, during the reporting period.
The Ethics Committee has an Independent Chairman – who is neither a member of management nor a member of the Board. During the reporting period, the Chairmanship of Mr S Shabalala ended. The Board, through the Audit Committee, appointed Ms Precious Mvulane as the new Chairperson of the Ethics Committee. She is the Managing Director of GAD Consulting Services Inc. Ms Mvulane is a Chartered Accountant (SAICA) and a Registered Auditor (IRBA). She has over 18 years’ experience in different finance roles, i.e. auditor (internal and external) in the private and public sector. She has also been involved with governance structures for the past 11 years and sits on various boards as an audit committee member. One of these boards is the IRBA (her own professional body) and IBASA.
Ethics performance is included in the scope of internal audit and reported on in the company’s integrated annual report. Ethics is imbedded in Umgeni Water’s group corporate culture as all polices, structures, systems and processes are in place to ensure that the various boards, employees and service providers are familiar with, and adhere to, the company’s ethical standards – whereby awareness is made to all staff at staff information session, supplier forms and induction sessions.
Umgeni Water has in place a Fraud Prevention Plan as well as a fraud implementation plan which flags mitigating controls in high risk areas. Management has adopted this approach by putting mechanisms in place, to manage the organisations vulnerability to fraud. These mechanisms are designed to prevent, deter and detect fraud.
The Ethics Committee met three times during the year to execute its role and responsibility as prescribed by applicable legislation and included monitoring the entity’s activities against legal or best practice requirements relating to:
- Social and economic development, including, EE and B-BBEE,
- Good corporate citizenship, including promotion of equality, prevention of unfair discrimination, Corporate Social investment and reduction of corruption, sponsorship, media and advertising,
- Environment, health and public safety, including, impact of the organisation’s activities, products and services, biodiversity management, waste management, energy efficiency and carbon footprint reduction,
- Consumer relationships, including, advertising, public relations and consumer protection,
- Labour and employment, including, the organisation’s standing in terms of the International Labour Organisation Protocol on decent work and working conditions, employment relationships and contribution toward education and development of its employees and disciplinary handling,
- Financial ethics, including, irregular and wasteful and fruitless expenditure, and
- Fraud and hotline call management.
Umgeni Water uses its external whistle-blowing hotline service managed by an external service provider as a means of fraud detection and as a means of encouraging an ethical culture. This 24 hour – 365-day facility provides an anonymous and confidential communication channel for all stakeholders to report suspicions of fraud or otherwise unethical conduct.
All hotline calls are investigated and appropriately followed through using a hotline protocol which ensures that all calls received are dealt with in a transparent and consistent manner. Trends and information of the hotline calls are further used to improve internal controls. Umgeni Water endeavours to create and maintain awareness of this facility and ensures that the phone number is adequately advertised by means of posters, intranet, staff information and induction sessions, supplier forums as well as and other means deemed effective and appropriate.
Internal Audit is an independent assurance function, the purpose, authority and responsibility of which 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 audit reports through the office of the Chief Executive and reports regularly to the Audit Committee. The internal audit team have unrestricted access to the Committee chairperson as prescribed by best practice. During the reporting period, an internal audit charter and planned activities were approved by the Committee and the work of internal audit has been measured against these two documents in the main.
As at 30 June 2019, Umgeni Water did not have any unresolved Internal Audit Findings.
Compliance with Laws and Regulations
Umgeni Water continues to enhance its compliance management system. The entity continued using its Legal Compliance Regulatory Universe, Compliance Checklists and Compliance Monitoring/Assurance Plan for monitoring and reporting Legal Compliance in 2019. During the year, three (3) areas were flagged, relating to wastewater quality compliance, sludge/water treatment residue disposal and one wastewater treatment works operating without a license. All three matters will be resolved in 2019/2020.
The external auditors are responsible for implementing procedures to obtain audit evidence regarding 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.
Human Resources and Remuneration Committee
This Committee comprises five (5) non-executive directors and the Chief Executive and Mr William Mapena serves as its new chairperson with other members of the Committee being Adv Simosenkosi Chamane, Mr Suleman Badat and Mr Visvin Reddy. The Committee reviews and recommends to the Board all matters relating to:
- Human Resources policies, organisational structure and compliance with the Employment Equity Act, (Act 55 of 1998) and other labour legislation,
- Conditions of employment of executive management,
- Appointment of the Chief Executive and members of executive management,
- Remuneration packages of the Chief Executive, members of executive management and staff,
- Succession planning for executive management,
- Policies and practices for Performance Management,
- Strategic Human Resource related matters, and Special rewards recommended by the Chief Executive.