Is growing vegetables and watering them with municipal water without the municipality's knowledge considered theft, even if the amount of water used is small?

Using municipal water without permission is an encroachment upon public funds. Those who do so are obligated to repent and pay for what they have consumed, unless they are pardoned. The questioner's sister's friend should offer advice, and if they do not respond, she should inform the relevant authority, provided no harm befalls her.