RAND WATER ANNUAL REPORT 2023

Consolidated Annual Financial Statements for the year ended 30 June 2023

Board Report 3. Compliance with legislation and corporate governance

The Board is committed to ensure compliance with all applicable legislations, in particular the Water Services Act, as the enabling legislation of Rand Water, the PFMA and the Companies Act No 71 of 2008, which is applicable to the subsidiaries of Rand Water. Rand Water and its subsidiaries comply in all material respects with all applicable legislation and regulations. The Board acknowledges that compliance with legislative, regulatory and corporate governance requirements is paramount in all transactions and business dealings of the entity. The Board has adopted the King Report on Corporate Governance for South Africa, 2016 (King IV) and encourages the entity to uphold the governance principles and recommended practices contained therein and to align its practices, policies and procedures thereto. To this end, all employees are expected to play a role in ensuring conformance to all applicable laws, standards, codes, rules and regulations. In addition, for effective management and monitoring of this process, regular compliance reports are tabled to all relevant structures including the Board to update members on all compliance matters within the Group. 4. Compliance to the Public Finance Management Act (PFMA) The Board supports the notion that good governance is about effective leadership and sustainability as key moral and economic imperatives for business operations.

The PFMA is the overarching piece of legislation and supersedes all other applicable legislation in the business. PFMA compliance is one of the fundamental business regulatory imperatives.

The Group continues to ensure that compliance to the PFMA and all other relevant legislation are efficiently managed in its daily operational activities.

The Board has entrenched the culture of ensuring good governance by adopting policies that ensure adherence thereto. The Group has embedded a combined assurance model that is evidenced by coordinated assurance efforts towards mitigating risks and ensuring that strategic objectives are met. The model is underpinned by a Combined Assurance Framework, Charter, Maturity Framework and a Combined Assurance Forum in line with the requirements of King IV report to ensure seamless integration of assurance activities.

The combined assurance model provides the Group Audit and Risk Committee with an overview of significant risks, as well as, the critical controls to mitigate the identified risks.

The combined assurance framework has principles that governs the assurance provided by the assurance providers.

It further focuses on collaborative methods to enhance and improve business operations through better governance, ethical behaviour and performance.

The Board through the Group Audit and Risk Committee provides oversight and ensures that a system of internal control is effective and adequately reported on, for auditing and regulatory purposes.

The Board has reaffirmed its unwavering commitment to entrench continued compliance through the development and implementation of policies and frameworks to detect and prevent non‑compliances, irregular, fruitless and wasteful expenditure.

Irregular expenditure is defined as expenditure incurred in contravention of, or that is not in accordance with, any legislative requirements notwithstanding the value that was received. The Group recorded irregular expenditure amounting to R513 million (2022: R636 million) as at 30 June 2023 and fruitless & wasteful expenditure of R155 thousands (2022: R45 thousands).

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