THE INSTITUTE OF INTERNAL AUDITORS Notes to the Financial Accounts for the Period ended October 2017

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THE INSTITUTE OF INTERNAL AUDITORS Notes to the Financial Accounts for the Period ended October 2017 Principles and Assumptions Reporting principles This financial year runs from 01 st June 2017 to

1 THE INSTITUTE OF INTERNAL AUDITORS Notes to the Financial Accounts for the Period ended October 2017 Principles and Assumptions Reporting principles This financial year runs from 01 st June 2017 to 31 st May The prior year figures are based on same period accounting months i.e. October 2016 The institute has started to accrue on a monthly basis. Trading principles As a non-profit organisation, the Institute is not profit driven, but service orientated. In order to retain its tax exempt status, the Institute cannot show huge amounts of profits and therefore needs to be conservative in its pricing strategies as well as ensure that the bottom-line is defendable - both to the Receiver as well as members. In order retain its tax exempt status the Institute must be able to demonstrate the need for building reserves as well as the continuous ploughing back of profits to the benefit of its members. It is necessary for the Institute to ring-fence enough in the reserves to cater for periods of crises to keep the Institute afloat. The core overheads of an Institute must be covered by the membership fees collected from members. Currently the membership fees are too low to adhere to this principle. Where the Institute is trading with the IIA Inc. it has to pay its debt in US Dollars. As a result fluctuations in the exchange rate, budgeted amounts do change. In particular, the certification fees are set based on an estimate of the average exchange rate for the year. Revenue streams Renewal fees: The membership year now runs in sync with the financial year. The membership year runs from June to May. Certification fees: The IIA Inc. has taken over the administration of the exams and IIA SA is now a promotional country. IIA SA will get a portion of the fees as a contribution from IIA Inc. Courses: Revenue is transferred to the Academy. Conferences: The Annual conference is the Institute s flagship event. The Corporate Governance conference is only run every second year in partnership with the IoD, SAICA and IRMSA. Internal Auditor Magazine: Some of the magazines are given for free as an incentive for group membership. There would therefore always be a misalignment between the revenue and the expenses. The Adviser Magazine: The Adviser had been converted to an electronic version during Thus the printing and posting expenses had fallen away. Advertising income also dropped as fees charged had to be lowered for the online version. 1

2 Book Sales: The majority of the books are important and enslaved to the US Dollar/Rand exchange rates. The books are relatively expensive as a result of the weaker Rand. Learnerships: Learnerships have been transferred to the Academy Executive Leadership Network (ELN): Exclusive platform for Chief Audit Executives (CAE) including events, networking and additional services for CAE s above IIA SA membership. Assessments: As the AQP the Institute claims revenue for the IAT/PIA programmes. This also includes revenue for prior learning assessments as part of the recognition criteria. 2

3 Statement of Comprehensive Income Revenue 1. Renewal Fees. The budget figure is based on the total number of members to be invoiced for the next year, the invoice process is still ongoing and not all renewals have been completed. The renewal process starting in May 2017 was well received therefore the deferred income from the 2017 financial year was higher than budgeted. The effective systems are ensuring that the renewal process is beneficial for the Institute as well as the member. Costs. The costs is the affiliation fee for IIA Global. 2. New Member. Lapsed or expired members have opted to become new members 3. Application Fees. Lapsed or expired members have opted to become new members. 4. A) Course Revenue. Has been transferred to the Academy wef 1 June B) Video broadcasting: No broadcasts have been done YTD. C) E-Learning: Has been transferred to the Academy wef 1 June Quality Assurance Reviews. Has been transferred to the Academy wef 1 June In-House training Courses. Has been transferred to the Academy wef 1 June ELN. 1 silver and 1 gold subscription processed against budget of 1 silver and 4 gold. Costs. CGF content providers and events are charged in house as part of the subscribers benefits. 8. Assessments exams. 174 IAT assessments and 31 PIA assessments were invoiced YTD. 9. Conferences. National Conference budgeted delegates was 995, actual delegates was Costs. Overall savings on cost to add to the profitability of the conference. The Corporate Governance conference the next conference should be in The Public Sector conference the R2750 was a backdated invoice for Feb 2017 attendance. The Leaders forum scheduled for October Subs Internal Auditor Magazine. The deferred income from May 2017 was higher than budgeted. Costs. The import costs of the magazines from global, this is standard at 600 magazines per quarter. 11. Advertising No advertising income for YTD 12. Certification. CIA and specialities have been taken over by IIA Global from 1 October 2015, the revenue processed is credit passed on from Global for exams. Costs Forex variance on the funds received for exam credits, in addition an awards function was held as part of the graduation ceremony. 13. Book Sales. We were waiting for new version of the Gleim CIA books from the USA, in the meantime we sold on-line versions of the books. The books only arrived late June The sales are anticipated to increase during July/August Professional Training Programmes. Learnerships has been transferred to the Leadership Academy from 1 December 2015, Assessments and Prior learning is with the IIASA AQP/QCTO. This section of learnership will be separated in order to track the spending of the qualification development. 15. Webinars. Transferred to the Academy 16. Seminars. Transferred to the Academy. 3

4 17. YM Suspense account. Prior year adjustments as a result of the YM implementation in Regional Functions. Regional functions have been scheduled and are in the process of being hosted. The costs incurred are for events that are still in the process of been hosted. Venue deposits and fees payable upfront result in over expenditure on budget, this will be aligned by year end or once the event has been finalized. Summary of total revenue: Actual Budget Variance Prior year (M on M) Budget F2018 F/cast 2018 R R (R ) R R R Other Income Admin fees This is the charge from IIA SA to the Academy for administration work done for support services. This is a year to date charge based on revenue contribution and time allocation as well as salary portion costs for key personnel doing a dual role within the IIASA and the Academy example the CEO. Interest received Surplus cash invested at better and higher interest rates. Profit loss on sale of assets Assets disposed due to the burglary in July. Expenditure 19. AGM Cost Catering costs saved at Academy building. 20. Bad Debts. None provided for in 2017 as current provision will be revalued at year end. 21. Bank Charges. Operational bank charges have been increased due to increased volumes of transactions from membership renewals. 22. Consulting accrual for salary benchmarking reversed in 2018, waiting for actual invoices. 23. Disciplinary Hearings. Legal opinion sort on an open case that CvE is dealing with. 24. Depreciation. System driven based on fixed assets module. 25. Entertainment. Informal off site interviews held by CvE with interviewees. 26. Insurance. Fire and allied insurance together with Officers liability insurance. The increase shown is due to additional cover taken out that was not part of the budget. Sum insureds and additional office equipment. 27. Internet Charges. Monthly internet services, YM hosting costs, system maintenance to Pastel. There was a credit of R200k reversed due to 2017 accrual. The actual invoices are still to be received. 28. Leave Pay Provision VIP system setup to account month on month for leave movements. The cost is as a result of change in process and actual leave records for the period. 29. Library Costs. Due to EBSCO host on-line library we made available to members, we are not going to spend on our current paper based library for Maintenance & Repairs. Monthly maintenance costs, including monthly SLA with computer network maintenance. Costs under budget due to effective controls. 31. Marketing. Banners, advertising, brochures purchased YTD. 4

5 32. Office Expenses. Consumables, hygiene services, refreshments and security charges. 33. Postage. Registered mail and postage of certificates and supplier registration documents. 34. Printing & Stationery. General stationery, copy charges. 35. Recruitment. 6 x Psychometric testing done for office of CEO. Agent costs for governance officer. 36. Facility costs. All facility costs incl. electricity, rates & taxes relating to Bedfordview. 37. Staffing costs. The budget is based on filling the vacant positions from the start of the financial year, some of which are still to be filled. Costs based on actual payroll. 38. Skills Development Levy/UIF. This expense moves in tandem with gross salaries as they occur. 39. Compensation Fund. This is based on the provision for the actual assessment from Dept. of Labour. 40. Sundry Expenses. Ad-hoc non describable expenses. 41. Public Relations Retainer for the Public Relations Company not yet appointed. 42. Telephone & Fax. Costs for Bedfordview. 43. Temps. Use of temporary staff in certification, administration and membership departments. 44. Training - Staff. Fees/books paid for staff studies and training in 2018 as per the training budget. 45. Travel Local. Nazlie Regional travel for functions and CVE travel to regions for speaker events. 46. Travel Overseas. CvE costs for New York, Kenya, Australia. 47. Travel: Committee members. R Newsome travel to NY and Australia, R De Bryn to NY. 48. Travel Directors and Regional Governors. Costs for various committee sittings including travel and accommodation as well as refreshments. 49. Audit fees External Audit fees for 2018 accrued monthly. 50. Legal fees General statutory fees. 51. Prizes Prizes for students and awards for national conference. 52. Staff Bonus Bonuses paid as per board approval. 53. Exchange rate differences - This relates to the revaluation of US dollars held as cash on hand. 54. BBBEE funds to be paid to development fund and socio economic fund in order to boost BBBEE certificate status. Not yet incurred. 55. Salary recoveries This relates to the charge back to the Academy for CPD/QAR staff on IIA SA payroll that is administered. 5

6 Statement of Financial Position B1 Special Reserve. The Special Reserve is to accommodate Special Projects identified to enhance the image of the Institute and the profession of Internal Auditing with an anticipated value of R3, 5 million plus R8 million for the purchase of new premises for the Institute which now includes capacity building, per Board Resolution. All expenses incurred are charged against this reserve as they occur. In addition we have added an income reserve of R6, 3m against the revaluation of the building done in May B2 Provision for Doubtful Debts. This provision was created to cover delinquent membership fees, which will be adjusted annually as a general reserve. B3 Salaries Clearing. Provision for all salary related statutory payments i.e. PAYE etc. payable the next month. B4 Unidentified deposits- Reconciled. B5 Leave pay Provisions Staff leave pay liability as per the payroll system. B6 VAT Control - For SARS VAT201 monthly liability submissions (Based on accounting transactions), year on year comparison increase is due to the national conference invoicing processed. B7 Fees in Advance. None YTD. B8 IIA Inc. Royalty. This represents royalties due to IIA Inc. (Global) based on revenue derived from QAR courses. To date no invoices have been submitted to IIA SA for payment from Global. B9 Accruals. This is due to the PO GRV process whereby we have not yet received supplier invoices. B10 Debtors Credit Balances. This is the year end adjustment reclassified for debtors that have a credit balance due. B11 Outstanding cheques. This is a reclassification of payments processed that have not been actioned through our bankers as at year end. B12 External Audit. This is the provision for external audit fees for the current financial year. B13 Credit Card control. Expenses paid by the Institute credit card where the payment will be processed in the next financial period. B14 Deferred revenue. Revenue applicable for the next financial year is deferred for accounting purposes B15 Loan Account. This is the intercompany loan account between the IIA SA and the Academy. Due to the transition this is the customer invoices processed by IIA SA that is due to the Academy. B16 Creditors Control This is as per the age analysis for trade payables. B17 Fixed Assets: The rates of depreciation are: a. Computer Hardware and Software: 33.33% b. Office Furniture & Equipment: 20% c. Intangible Assets: 33.33% The increase in nett value of fixed assets (compared to last year) is as a result of the R6, 3m adjustment For the building revaluation that was done in May

7 B18 Bank balances & Investments: The following is an analysis of investments in terms of the type, term and interest rate: Type Maturity Date % Interest Rate Nedbank Ltd Fixed Deposit Nov % Investec Private Bank Fixed Deposit Nov % Nedbank Ltd Daily Call Daily 6.50% B19 Sundry Debtors 2017 National Governance conference fees outstanding. B20 Prepayments. Mpumalanga event pre-paid for November B21 Suspense Account. Account reconciled, should be zero at all times. B22 Deposits paid. This is for payments made for the telephone system. B23 Expenses paid in advance Regional events deposit costs for F2018. B24 Institute stock. All inventory relating to the book store i.e. text books B25 Inter Bank transfer. Internal control to move funds from the book store to the accounting system. B26 Loan account Swaziland. B27 Loan account Academy. All costs/expenses paid on behalf of the Academy from the IIASA that must be recovered from the Academy after the transition period. The main reason for this is the Academy do not have sufficient cash reserves as yet to cover the cash outflows. B28 Debtors Control. This is the total debtors that are to be collected. An improvement has been made in debt collecting and effort made to clear prior year s outstanding amounts. In terms of the Board directive Debtors with credit balances which have prescribed are to be written back to income before year-end. GLOSSARY IIA SA Institute of Internal Auditors South Africa IIA Inc Global office of Internal Auditors ELN Executive Leadership Network QCTO Qualifications Council for Trades and Occupations AQP Assessment Quality Provider KZN Kwazulu Natal PO GRV Purchase order Goods Received Voucher YTD Year to date NY New York 7

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