LOOKING AFTER THE PUBLIC INTEREST ANNUAL REPORT

Transcription

1 LOOKING AFTER THE PUBLIC INTEREST ANNUAL REPORT 2014/2015

2

3 Quality Council for Trades and Occupations Annual Report 2014/15 Financial Year

4 ANNUAL REPORT 2014/2015

5 01 Table of contents PART A: GENERAL INFORMATION 1. Public Entity s General Information 2. List of Abbreviations/Acronyms 3. Foreword by the Chairperson 4. Chief Executive Officer s overview 5. Statement of Responsibility and Confirmation of accuracy for the Annual Report 6. Strategic Overview 6.1. Vision Code of conduct 13. Health safety and environmental issues 14. Secretary 15. Social responsibility 16. Audit and Risk Committee report PART D: HUMAN RESOURCE MANAGEMENT 1. Introduction 2. Human resource oversight statistics Mission 6.3. Values 7. Legislative and other mandates 7.1. Constitutional Mandate 7.2. Legislative Mandate 8. Organisational structure PART e: Financial information Accounting Authority s Responsibilities and Approval Report of the external auditor Report of the Audit and Risk Committee Report of the Council PART B: Performance Information 1. Auditor s Report: Predetermined Objectives 2. Situation Analysis 2.1. Service delivery environment 2.2. Organisational environment 2.3. Key policy developments and legislative changes 2.4. Strategic outcome oriented goals 3. Performance Information by Programme 3.1. Programme 1: Occupational Qualifications 3.2. Programme 2: Quality Assurance ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2014 Statement of Financial Position Statement of Financial Performance Statement of Changes in Net Assets Cash Flow Statement Statement of Comparison of Budget and Actual Amounts Accounting Policies Notes to the Annual Financial Statements Programme 3: Administration Revenue Collection 38 PART C: GOVERNANCE 1. Introduction 2. Portfolio committees 3. Executive authority 4. The accounting authority 5. Risk management 6. Internal control unit 7. Internal audit and audit committees 8. Compliance with laws and regulations 9. Unsolicited proposal 10. Fraud and corruption 11. Minimising conflict of interest

6 02 Part A General Information

7 03 1. PUBLIC ENTITY S GENERAL INFORMATION REGISTERED NAME: REGISTRATION NUMBER (if applicable): PHYSICAL ADDRESS: Quality Council for Trades and Occupations Not applicable 256 Glyn Street Hatfield Pretoria 0083 PART a: general information POSTAL ADDRESS: Private Bag X278 Pretoria 0001 TELEPHONE NUMBER/S: ADDRESS: WEBSITE ADDRESS: EXTERNAL AUDITORS: BANKERS: SECRETARY: info@qcto.org.za Auditor-General of South Africa PO Box 446 Pretoria 0001 ABSA, 2nd Floor, Lourie Place Hillcrest Office Park 177 Dyer Street Hillcrest 0083 Ms Adri H Solomon, Director: Governance and Secretariat

8 04 2. LIST OF ABBREVIATIONS / ACRONYMS AGSA APP AQP BBBEE CAT CEO CD CFO CHE COIDA DBE DG DHET DoL EISA ETQA FET IT ITC HR INDLELA MHET MOA MoL MSP MTEF N/A NAMB NATED NCV NLRD Auditor-General of South Africa Annual Performance Plan Assessment Quality Partner Broad Based Black Economic Empowerment Credit Accumulation Transfer Chief Executive Officer Chief Directorate Chief Financial Officer Council on Higher Education Compensation for Occupational Injuries and Diseases Act Department of Basic Education Director General Department of Higher Education and Training Department of Labour External Integrated Summative Assessment Education and Training Quality Assurance Body Further Education and Training Information Technology Information Technology and Communication Human Resources Institute for the Development of Learnerships, Employment Skills and Labour Assessments Minister of Higher Education and Training Memorandum of Agreement Minister of Labour Master Systems Plan Medium Term Expenditure Framework Not applicable National Artisan Moderating Body National Education Report 191 (Part 2) N4 to N6 National Certificate Vocational National Learner Records Database NQF Act National Qualifications Framework Act (No. 67 of 2008) NSA OQA OQM OQSF PAYE PFMA National Skills Authority Occupational Quality Assurance Occupational Qualifications Management Occupational Qualifications Sub-Framework Pay As You Earn Public Finance Management Act

9 05 2. LIST OF ABBREVIATIONS / ACRONYMS (CONTINUED) PPPFA Preferential Procurement Policy Framework Act QA Quality Assurance QAP Quality Assessment Partner QC Quality Council QCTO Quality Council for Trades and Occupations SAQA South African Qualifications Authority SARS South African Revenue Services SCM Supply Chain Management SDA Skills Development Act (No. 97 of 1998) SDP Skills Development Provider SETA Sector Education and Training Authority SLA Service Level Agreement SOP Standard Operating Procedure TVET Technical Vocational Education and Training UIF Unemployment Insurance Fund Umalusi Council for Quality Assurance in General and Further Education and Training WIL Work Integrated Learning PART a: general information

10 06 3. Foreword by the Chairperson 31 March 2015 marked the end of the term for the first Quality Council for Trades and Occupations (QCTO). I have been honoured and privileged to be a part of this august group. Together we have driven a mission to Look After the Public Interest. With this theme as our guiding light the Council has spearheaded the following QCTO accomplishments: 44 occupational qualifications registered with the South African Qualifications Authority (SAQA) where more than 50% have been developed for the trades 28 Assessment Quality Partners (AQPs) approved for the occupational qualifications registered on the OQSF (Occupational Qualifications Sub-framework) (NB: AQPs are responsible for such things as developing and administering assessments) providers) and industry remains a goal for which the QCTO must strive. This critical component of occupational qualifications must be achieved. Yours sincerely, Prof Peliwe P Lolwana Chairperson of the Council Quality Council for Trades and Occupations Date: 29 July 2015 Issuance of a single trade certificate in terms of the Skills Development Act (SDA) Introduction of a more stringent service provider accreditation system Conducting a focused advocacy campaign at all public Technical Vocational and Training (TVET) college campuses Relocation to new premises located at 256 Glyn Street in Hatfield, Pretoria Website, with a variety of information, open to the public Publishing of the Occupational Qualification Sub- Framework (OQSF) The White Paper for Post-School Education and Training remains a critical guidepost for the QCTO. Strong relations between educational institutions (including service

11 07 4. overview by the chief executive PART a: general information The 2014/2015 financial year was the first full year that all senior managers (save the Director of Information Technology) were in place. This situation has made a significant difference in the QCTO s performance. Another important contributor to the QCTO s success has been the vast improvement in its Strategic Plan and the processes associated with its development. This year s Strategic Plan focused on the core business operations where all four core elements of the QCTO s operations: them in 2015/16 in order to make greater strides in the education and training sector. Lastly, to the staff- Ke a leboga kudu kudu. Yours sincerely, 1. Qualifications development and review; 2. Skills development provider accreditation; 3. The provision of assessments, with its two key points - appropriately developed and implemented assessment tools and accreditation of assessment centres; and 4. A reliable certification system. Ms G Joyce Mashabela Chief Executive Officer Quality Council for Trades and Occupations Date: 29 July 2015 that received dedicated attention. At this time I wish to extend my sincerest gratitude to the outgoing Council without the support and dedication of which, the QCTO could never have achieved the many successes reported over the years. While we will miss this highly motivated group of individuals, we are certain that the new Council will be no less dedicated. In closing, as is my custom, I take this opportunity to thank all our partners whose support and interactions are so very vital to the QCTO. We look forward to working with

12 08 5. STATEMENT OF RESPONSIBILITY AND CONFIRMATION OF ACCURACY FOR THE ANNUAL REPORT The Accounting Authority is responsible for the preparation of the public entity s annual financial statements (AFS) and for the judgements made in this information. The Accounting Authority is responsible for establishing, and implementing a system of internal control designed to provide reasonable assurance as to the integrity and reliability of the annual financial statements. In my opinion, the financial statements fairly reflect the operations of the public entity for the financial year ended 31 March The external auditors are engaged to express an independent opinion on the AFS of the public entity. The QCTO Annual Financial Statements for the year ended 31 March 2015 have been audited by the external auditors and their report is presented on page 65. The Annual Financial Statements of the public entity set out on page 71 to page 103 have been approved. Ms G Joyce Mashabela CHIEF EXECUTIVE OFFICER Quality Council for Trades and Occupations Date: 29 July 2015 Prof Peliwe P Lolwana CHAIRPERSON OF THE COUNCIL Quality Council for Trades and Occupations Date: 29 July 2015

13 09 6. strategic overview The Quality Council for Trades and Occupations (QCTO) reviewed its Strategic Plan 2012/13 to 2016/17 substantially as the first version was found to be too operational. This also impacted on the layout of the Annual Performance Plan (APP). Changes includes the revision of the vision, mission, strategic outcome oriented goals, programmes, strategic objectives, performance indicators and targets. The Minister approved the revised Strategic Plan and Annual Performance Plan 2014/15. In view of the total revision of the Strategic Plan, alignment between 2013/14 and 2014/15 strategic objectives and performance indicators are not possible. Programme 1: Qualifications Management for 2013/14 APP has been split into two programmes for the 2014/15 APP so numbering does also not align between the two financial years. Ethics and Integrity We embrace and practice a moral code of trustworthiness, honesty and truthfulness in everything we say and do, and we honour our promises and commitments Ownership and Accountability We take ownership of our responsibilities and we answer for our decisions and actions Authenticity We protect the public by issuing authentic, quality qualifications PART a: general information 6.1 Vision The QCTO s vision is to qualify a skilled and capable workforce. 7. LEGISLATIVE AND OTHER MANDATES 6.2 Mission The QCTO s mission is to effectively and efficiently manage the occupational qualifications sub-framework in order to set standards, develop and quality assure national occupational qualifications for all who want a trade or occupation and, where appropriate, professions. 6.3 Values Innovation and Excellence We rise to opportunities and challenges, we continuously learn, we are innovative and we consistently produce work of distinction and fine quality, on time, and in line with our clients needs Empowerment and Recognition We enable people to make things happen, we encourage and support one another when and where needed, and we celebrate successful accomplishment of work Respect and Dignity We value and show consideration for all the people we work with, treat one another with kindness and thoughtfulness, and embrace inclusivity On 31 December 2010 the QCTO was listed as a Schedule 3A Public Entity under the Public Finance Management Act (PFMA), effective retrospectively from 1 April 2010 (Gazette Notice 33900), as per section 26(G)(1) of the Skills Development Act (SDA). 7.1 Constitutional mandate The QCTO is not directly referenced in the Constitution. However there are two sections in the Bill of Rights to which its functions relate: 22. Freedom of trade, occupation and profession Every citizen has the right to choose their trade, occupation or profession freely. The practice of a trade, occupation or profession may be regulated by law. 29. Education Everyone has the right a) to a basic education, including adult basic education; and b) to further education, which the state, through reasonable measures, must make progressively available and accessible.

14 10 In ensuring the quality of occupational qualifications, which include qualifications leading to trades, other occupations and professions, the QCTO contributes to Section 22. In developing and quality assuring occupational qualifications that augment the menu of qualifications in the various sub-frameworks of the National Qualifications Framework, it also contributes to Section 29(1)(b). And in so far as its Foundational Learning programmes contribute to adult basic education, the QCTO also contributes to Section 29(1)(a). 7.2 Legislative mandate National Qualifications Framework Act and the Skills Development Act The QCTO has been established in order to accommodate the unique learning requirements for building occupational competence. The QCTO is responsible for Occupational Qualifications development and monitoring. Both the National Qualifications Framework (NQF) Act, No 67 of 2008 and the Skills Development Act (SDA), No 97 as amended in 2008 outline the functions of the QCTO. The NQF Act specifies that the QCTO should: Develop and manage its sub-framework, make recommendations and advise the Minister on matters relating to its sub-framework Consider and agree level descriptors ensuring that they remain current and appropriate Develop and recommend qualifications to SAQA for registration Develop and implement quality assurance policy for registered qualifications Maintain a database of learner achievements and submit learners achievement data to SAQA for recording on the National Learner Records Database (NLRD) Conduct or commission and publish research Inform the public about its sub-framework The Skills Development Act, in Chapter 6C (Sections 26F J), stipulates that the QCTO must: Advise the Minister on all matters of policy concerning occupational standards and qualifications. Perform its functions in terms of the Skills Development Act and the National Qualifications Framework Act Subject to any policy issued by the Minister in terms of Section 26F: - Design and develop occupational standards and qualifications and submit them to the South African Qualifications Authority for registration on the National Qualifications Framework; - Establish and maintain occupational standards and qualifications; - Ensure the quality of occupational standards and qualifications and learning in and for the workplace; - Promote the objectives of the National Qualifications Framework; - Liaise with the National Skills Authority (NSA) on the suitability and adequacy of occupational standards and qualifications and on the quality of learning in and for the workplace; and - Perform any other prescribed function. Memorandum of Agreement (MOA) between the QCTO and Department of Higher Education and Training (DHET) The QCTO and the DHET entered into a Memorandum of Agreement (MOA) during the 2011/12 financial year with the understanding that for the transition, the QCTO will use the DHET s infrastructure and systems to support it while becoming fully operational. Towards the end of the financial year under reporting the QCTO was able to completely wean itself from DHET in terms of Finance, SCM, IT, Administration, and the HR functions including payroll. Public Finance Management Act The QCTO also ensures compliance to the Public Finance Management Act, Treasury Regulations, Preferential Procurement Policy Framework Act (PPPFA) and the Framework for Supply Chain Management.

15 11 8. ORGANISATIONAL STRUCTURE PART a: general information QCTO Chairperson Prof PP Lolwana CEO Ms GJ Mashabela Chief Director: Occupational Qualifications Management Mr TM Lata Chief Director: Corporate Services and CFO Ms N Madilonga Chief Director: Occupational Quality Assurance Mr V Naidoo Director: Occupational Qualifications Development Mr S Mkhonza Director : Finance and Procurement: Mr I Gumbachoma Director: Information Technology: vacant Director: Governance, Strategy, Secretariat Services and Appeals: Ms A Solomon Director: Quality Assurance: Ms B Mtintsilana Director: Certification: Ms A Janse Van Rensburg

16 12 Part B PERFORMANCE Information

17 13 1. AUDITOR S REPORT: PREDETERMINED OBJECTIVES The AGSA/auditor currently performs the necessary audit procedures on the performance information to provide reasonable assurance in the form of an audit conclusion. The audit conclusion on the performance against predetermined objectives is included in the report to management, with material findings being reported under the Predetermined Objectives heading in the Report on other legal and regulatory requirements section of the auditor s report. Refer to page 65 of the Auditors Report, published as Part E: Financial Information. 2. SITUATIONAL ANALYSIS 2.1 Service Delivery Environment The South African Qualifications Authority (SAQA) Act brought into being the National Qualifications Framework (NQF) and a range of standard setting and quality assurance arrangements, by means of which all South African qualifications were to be registered on a single framework. The Skills Development Act (SDA) brought Sector Education and Training Authorities (SETAs) into being which were legally required to be accredited by SAQA as Education and Training Quality Assurance (ETQA) bodies. ETQAs were responsible for the quality assurance of a specified range of qualifications registered on the NQF. The design and registration of qualifications was, however, seen as the responsibility of SAQA. In 2008 the SAQA Act was repealed and replaced by the NQF Act, No 67 of SAQA was given a broad oversight role. SAQA was no longer required to perform standard setting function, as this had been devolved to three quality councils namely, the Council on Higher Education (CHE), Umalusi and the Quality Council for Trades and Occupations (QCTO) which now perform both standard setting and quality assurance functions. Furthermore, in 2008 the Skills Development Amendment Act, establishing the QCTO, was promulgated. The publication of Proclamation 44 of 2009 led to the creation of the Department of Higher Education and Training (DHET), separate from the Department of Basic Education (DBE), which is exclusively responsible for schooling. The entire skills development function of the Department of Labour (DoL) was incorporated into the DHET-including the SETAs and the QCTO. On 31 March 2015, the QCTO completed its first 5 year Strategic Plan period. During this period the QCTO changed Council Chairpersons only once and since September 2011, Council membership (including the service of the Chairperson), has been stable. The 5 year Strategic Plan period was also characterised by a shortage of funds until the 2013/2014 financial year when the SETA Grant Regulations came into effect. Two other critical issues impacting negatively on the QCTO was the need to develop and implement the necessary policies required of a public entity and the lack of sufficient staff. The most significant challenge facing the QCTO to date, and for quite some time in the foreseeable future, is the transitioning from the former system where a variety of bodies were responsible for occupational qualifications. The QCTO has to now combine the management of these qualifications under the umbrella of its systems which are still quite new. Thus at present the QCTO manages several systems, as each of the various types of qualifications had different quality assurance regimes. Thus under the QCTO s aegis are: Unit standards based qualifications whose development and quality assurance were under the auspices of SAQA and the former ETQAs; National Education Report 191 (part 2) N4 to N6 (NATED) (more commonly known as N-courses) offerings; Provider based qualifications for which SAQA provided oversight; Trades recorded on the National Qualifications Framework; and The newly developed occupational qualifications using the QCTO development model and processes. In conducting its work the QCTO is extremely cognizant of government s initiatives with respect to economic and social development. Thus the organisation pays particular attention to the qualifications it prioritises for development, the strengthening and expansion of offerings of the Technical and Vocational Education and Training (TVET) colleges, improving accreditation and monitoring systems with respect to skills providers and assessment centres. Finally, the QCTO is establishing a vibrant certification system which issues all Trade certificates, conducts verifications of Trade certificates and working diligently to manage the back log of certificates issued by SETAs. All processes related to the QCTO s core business (qualifications development and review, skills development provider accreditation, quality assurance of the provision of assessments and certification) have received enormous attention which has resulted in the setting of standardised practices which is making interaction and engagement with stakeholders more meaningful. PART B: PERFORMANCE information

18 Organisational environment The QCTO finalised an organisational structure in 2011/2012. The Chief Executive Officer of the QCTO assumed duty on 1 April For half of the year the QCTO functioned without any senior staff. Towards the end of the 2012/13 the Chief Director: Corporate Services, Chief Director: Qualifications Management and the Director: Governance were appointed. These appointments propelled the QCTO to positively deliver on its mandate, but showed a significant gap in the structure, that of the need to divide the work of Qualifications Management into two functions, namely management and quality assurance. Thus in February 2014 a Chief Director of Quality Assurance was engaged and later the Director for Certification. These appointments along with that of the Directors IT, Finance, Quality Assurance and Qualifications Development have contributed substantially towards building a stable environment for the QCTO. Moreover, with the recent review of the QCTO Strategic Plan it is clear that there is a need to have an extensive review of the QCTO organogram so that there is better alignment to the QCTO s work. In terms of the governance structure, there existed during the period under review a Council that possessed the necessary experience and expertise, and that functioned on the basis of a number of committees, including the Executive Committee, Finance Committee, the Audit and Risk Committee, the Qualifications Committee and the Quality Assurance Committee. The existence of a functioning Council ensures that the organisation is well governed and that mission-critical decisions for its success are made. The Council s term of Office ended on 31 March A new Council will be appointed from 1 April Excellent progress has been made in relation to the development of systems to support the work of the organisation. The QCTO now has all the required policies and systems in place and thus since September 2014, when the organisation made its own payroll run for the very first time, no longer was there need of the Memorandum of Agreement (MoA) with the DHET. The organisation must acknowledge sincerely its appreciation of the DHET in this respect as the MoA enabled the QCTO to operate as a standalone entity. As stated above, now that the organisation has a better understanding of its mandate and operational activities, there is need to review the organisational structure to ensure such a structure exists that will support and enhance operations. In December 2013 the QCTO moved to its new premises. This move gave staff sufficient space to operate and provided an environment that demonstrates to stakeholders that the QCTO is ready to do business. As the organisation continues to grow, there is a further need to acquire additional office space. This will be considered in the forthcoming year. The marketing and communications unit was established towards the end of the financial year. Since its establishment, it has succeeded building the QCTO brand and has created a platform for communication with QCTO stakeholders. The vigorous roll out of an intense marketing drive is expected to take place during the 2015/16 financial year. In 2014 a revised website was launched where data is regularly updated to inform stakeholders of information vital to their lives. This information includes a total listing of registered qualifications, accredited providers, qualifications in development, etc. The existence of a more vibrant website and engagement of a Deputy Director of Marketing and Communication has addressed concerns about the organisation s ability to handle internal and external communication effectively. It is worth mentioning that for the first time in its history, the QCTO achieved a 100% spending on the allocated 2014/15 budget and this is evidence that the QCTO has established its operations and is reaching an acceptable level of maturity. With the staff complement having been stabilised, performance planning and management aligned to strategy has taken centre stage, facilitated through rigorous operational planning at unit level. Performance planning and management will assist the organisation in its efforts to focus on its mandate. At the same time, the implementation of plans and policies related to staff development will enable all staff to reach the desired level of capability to deliver on the QCTO s strategy. The QCTO has been working with staff to entrench better strategic planning processes as well as risk management, the latter strengthened by the services of the QCTO s Internal Auditors. A new internal auditor was appointed on 1 February An area that still needs serious attention is the development of an appropriate Management Information System. In 2014 the Council approved an Information Technology Master System Plan the implementation of which is being driven by the QCTO IT Steering Committee. 2.3 Key policy developments and legislative changes Outside of the publishing of the Occupational Qualifications Sub-Framework (OQSF) Policy (Government Gazette No ) no new policy developments or legislative changes were experienced this year; however the three initiatives below still have significant impact on the QCTO s operation: The Government Gazette R20 2 (5 which makes provision for SETAs to: monthly from 1 October 2012 transfer as part of its administration costs as contemplated in sub regulation (1) and approved in the annual SETA strategic plan, a maximum of 0,5% of the total levy received by the SETA to QCTO for quality assurance functions as contemplated in section 26H of the Act; Government Gazette published in August 2013

19 15 on Amendments to the Determination of the National Qualifications Framework s Sub-frameworks (Gazette published on 30 August 2013); and White Paper for Post-School Education and Training launched on 16 January 2014 by the Minister. 2.4 Strategic Outcome Oriented Goals The Quality Council for Trades and Occupations (QCTO) reviewed its Strategic Plan 2012/13 to 2016/17 substantially as the first version was found to be too operational. This also impacted on the layout of the Annual Performance Plan (APP). Changes include the revision of the vision, mission, strategic outcome oriented goals, programmes, strategic objectives and performance indicators and targets. The Minister approved the revised Strategic Plan and Annual Performance Plan 2014/15. In view of the total revision of the Strategic Plan, alignment between 2013/14 and 2014/15 strategic objectives and performance indicators are not possible. Programme 1: Qualifications Management for 2013/14 APP has been split into two programmes for the 2014/15 APP so numbering does also not align between the two financial years. The QCTO made the following progress in terms of its Strategic Outcome Oriented Goals: Strategic outcomes oriented Goal 1 Goal Statement Competent people in priority trades and occupations. Competent people in priority trades and occupations for employment opportunities that are available in the labour market. PART B: PERFORMANCE information Indicator Number of certificates issued in priority occupational qualifications (trades and non-trades) after recommendation by Assessment Quality Partner. Progress Occupational Qualifications A notable improvement has been observed in the registration of QCTO qualifications, in this financial year a total of 25 occupational qualifications were registered by SAQA on the Occupational Qualifications Sub Framework. To date 44 qualifications are registered and available to be utilised. For the 2014/2015 financial year, twenty two (22) occupational qualifications were approved by the QCTO for recommendation to SAQA for registration. At the end of the financial year a total of 32 occupational qualifications were receiving attention for registration by SAQA. If the above occupational qualifications were registered, all in all 76 occupational qualifications would be registered on the Occupational Qualifications Sub Framework (OQSF). In July 2014 the Occupational Qualification Sub-framework policy was published via gazette. Each of the three QCs is required to publish a policy statement that describes the character of the sub-framework which contextualizes the sub-framework s purpose, scope and application, qualification types, etc. Accreditation process of Skills Development Providers (SDPs) that want to offer newly registered occupational qualifications is conducted directly by the QCTO. The baseline to accredit SDPs has been established to be 45 working days.

20 16 Strategic outcomes oriented Goal 1 (CONTINUED) Competent people in priority trades and occupations. (CONTINUED) Progress (Continued) If accreditation status is granted, the SDP will commence in enrolling learners and provide necessary support on teaching and learning. The learner will then be entered for writing External Integrated Summative Assessment (EISA) which could be a trade test and or formal assessment. If a learner is affirmed competent then a learner is awarded a national certificate. A total of 143 legacy qualifications were identified for deregistration or deactivation on the OQSF. SAQA has been approached to deregister these qualifications as they are no longer active. All relevant stakeholders have been alerted about this move. More legacy qualifications will be deregistered as new qualifications are registered. As the White Paper made it emphatically clear that Technical and Vocational Education and Training (TVET) Colleges were central to the post school expansion strategy and as the N4 to N6 programmes make up an essential part of the TVET Colleges programme mix, the QCTO immediately assumed the challenge of converting the programmes into occupational qualifications where the Financial Management (N4 to N6) programme conversation to 1 qualification called Bookkeeper (Financial Administration Officer) has been approved by the QCTO Qualifications Committee. In future more N4-N6 programmes will be converted to occupational qualifications and part qualifications. The QCTO visited all public TVET Colleges in order to conduct research on how colleges understand and will add in their programme mix and offering occupational qualifications. The next visits to colleges will focus on the Work Integrated Learning (WIL) strategies of colleges in an effort to remind colleges of opportunities available to partner with industry, SETAs and parastatal organisations in the local college environment. Monitoring and Evaluation Officers visited Provincial Skills Development Forums. These forums are influential in drawing industry, government, NGO and other stakeholders together to discuss a variety of issues (including education and training as well as employment needs). The Forums are hosted by the Premier s office in the relevant province. Quality Assurance The approval of Assessment Quality Partners started slowly with the Criteria and Guidelines for Assessment Quality Partners (AQPs) being approved by Council in In the 2012 reporting period eight AQPs were approved. As at the end of the 2014/15 reporting period there are 28 AQPs approved for registered Occupational Qualifications. This includes the National Artisan Moderating Body (NAMB) as the AQP for trades. The AQP forum has been established and this forum has been instrumental in helping shape the AQP policies and processes. AQPs are at various stages of implementing their processes. The Health

21 17 Strategic outcomes oriented Goal 1 (CONTINUED) Competent people in priority trades and occupations. (CONTINUED) Progress (Continued) and Welfare SETA for example is at an advanced stage with the development of assessments for the Community Health Worker Qualification being rolled out to almost 900 learners across the country during The South African Institute of Tax Practitioners conducted their first external summative assessments at the end of 2014 with successful candidates due to graduate early In 2012, the QCTO inherited the In-Magic trade test certification system from the DHET. This system was fraught with difficulties due to its outdated technology and poor maintenance. Together with this system, the QCTO also inherited the DHET project to migrate the data from the In-Magic system to a new platform. The migration was successfully completed in November The QCTO also began issuing a single trade certificate in terms of the Skills Development Act (SDA) as from October This represented a significant milestone in that the new certificate replaced the previous certificates issued under the Manpower Training Act. In November 2014, the EXCO approved the format for the issue of replacement certificates. The certification processes with NAMB as the AQP is functional and effective. Much of the backlog in the issuing of trade certificates as well as outstanding applications for replacement certificates has been resolved. An upgraded apprentice certification system and template was approved and implemented. The turnaround time for producing certificates is now well within the 21 day period as specified in policy. In addition, the certification unit also conducted a substantial number of verifications. PART B: PERFORMANCE information The Monitoring and Evaluation Unit conducted planned monitoring visits to Quality Assurance Partners (QAPs). Monitoring reports for each of the QAPs were developed and QAPs are being monitored against the Improvement plans submitted. The N4-N6 examinations were monitored for the first time in Examination centres and 14 marking centres were monitored for compliance. The QCTO has been involved in the moderation of the N4-N6 results since 2012.

22 18 Strategic outcomes oriented Goal 2 Create a sustainable organisation. Goal Statement Lay the foundation for creating a sustainable organisation. Indicator Management systems developed, implemented and maintained by March 2017 Progress Financial systems were introduced and implemented toward the end of the financial year. The status reached a highlight during 2014/15 when the QCTO was able to fully function independently in terms of all support systems and wean itself from the Department of Higher Education and Training s (DHET) Memorandum of Agreement (MoA) entered into July 2011 to use DHET s systems, policies and procedures. By the end of the 2014/15 financial year Human Resources, ICT, Finance and SCM, and Administration policies and systems were all in place. The QCTO HR Policy Manual with 33 HR Policies and Procedures was developed, approved and implemented. QCTO s own payroll system was implemented with effect from September The achievements with regards to the QCTO HR Policy manual and the implementation of QCTO own payroll as proffered above has enabled the QCTO to fully function independently and be weaned from the DHET in terms of HR matters. HR Strategy has been developed. To date, 18 Finance and SCM policies are in place. The development of a 5 year Master Systems Plan (MSP) was completed and approval was granted during 2014/15. The plan will have yearly determined implementation milestones dependent on business priorities and the availability of funds. The following elements of the MSP were implemented: Establishment of the ICT Steering Committee Disaster Recovery Plan Implementation of the HR Payroll systems Update and optimize bandwidth

23 19 3. PERFORMANCE INFORMATION BY PROGRAMME 3.1 Programme 1: Occupational Qualifications The purpose of Programme 1: To ensure availability of relevant qualifications on the occupational qualifications sub-framework to promote the NQF objectives. The following strategic objective links to Programme 1: Strategic objective 1.1: Prioritised Occupational Qualifications recommended to SAQA for registration on the Occupational Qualification Sub-framework Strategic objectives, performance indicators planned targets and actual achievements Programme 1: Occupational Qualifications in the QCTO performed as follows: PART B: PERFORMANCE information From 2013/14 Annual Performance Plan: Programme / Sub-programme: Performance Indicator (PI) Actual Achievement 2013/14 Planned Target 2014/15 Actual Achievement 2014/15 Deviation from planned target to Actual Achievement for 2014/15 Comment on deviations Programme Name 2: Occupational Qualification Management Sub-programme: Occupational Qualifications Development and Review Strategic objective Policies for occupational qualifications development and review are developed, operationalised and implemented Policies adopted by Council as per agreed list Completion of guidelines for the implementation of processes for each policy Not achieved The two policies are available in draft format and must still be approved by Council Not achieved The two sets of criteria and guidelines are available in draft format and must still be approved Indicator discontinued (See par above) Indicator discontinued (See par above)

24 20 Performance Indicator (PI) Actual Achievement 2013/14 Planned Target 2014/15 Actual Achievement 2014/15 Deviation from planned target to Actual Achievement for 2014/15 Comment on deviations Programme Name 2: Occupational Qualification Management (Continued) Sub-Programme: Occupational Qualifications Development And Review (Continued) Strategic objective A user focused and user-friendly Trades and Occupations sub-framework is finalised and maintained Turnaround time (weeks) from final qualification received by QCTO to submission to SAQA Finalise Occupational Qualifications Sub-framework Not achieved Achieved Council approved the Occupational Qualifications Subframework Indicator discontinued (See par above) Indicator discontinued (See par above) Strategic objective Occupational qualifications are developed, reviewed and recommended for registration Number of new applications for new and improved qualifications in the development process Achieved Target exceeded a total of 165 applications were received Indicator discontinued (See par above)

25 21 Performance Indicator (PI) Actual Achievement 2013/14 Planned Target 2014/15 Actual Achievement 2014/15 Deviation from planned target to Actual Achievement for 2014/15 Comment on deviations Programme Name 2: Occupational Qualification Management (CONTINUED) Sub-programme: Occupational Qualifications Development and Review (CONTINUED) Number of qualifications developed and recommended to SAQA for registration Not achieved The QCTO received an overall total of 82 qualifications for evaluation. Of this overall total 59 qualifications were recommended for registration (52 being the qualifications and 7 being the (N4- N6 re-curriculated subjects) See Indicator below PART B: PERFORMANCE information Two (2) qualifications could not be processed further because of there were no Assessment Quality Partners in place. Twenty one (21) qualifications were sent back to Development Quality Partners for amendments to cover gabs that were identified during the evaluation

26 22 Performance Indicator (PI) Actual Achievement 2013/14 Planned Target 2014/15 Actual Achievement 2014/15 Deviation from planned target to Actual Achievement for 2014/15 Comment on deviations Programme Name 2: Occupational Qualification Management (CONTINUED) Sub-programme: Occupational Qualifications Development and Review (CONTINUED) Strategic objective A system for provider and programme accreditation, including for FLC, is developed and implemented by 2012/ A system for provider and programme accreditation is developed and implemented At least one provider accredited per new occupational qualification registered Achieved Policy for Accreditation of Skills Development Providers approved Processes and systems in place to give effect to below Not achieved 2 providers accredited for new qualifications Indicator discontinued (See par above) Indicator discontinued (See par above) Strategic objective The occupational foundational learning part qualification is implemented by 2012/ Number of learners assessed Number of learners passed the qualification Not achieved (4531 learners assessed) Not achieved (2421 learners passed) Indicator discontinued (See par above) Indicator discontinued (See par above) Strategic objective Historically registered qualifications managed and phased out Number of historically registered qualification managed Achieved 1000 qualifications Indicator discontinued (See par above)

27 23 Performance Indicator (PI) Actual Achievement 2013/14 Planned Target 2014/15 Actual Achievement 2014/15 Deviation from planned target to Actual Achievement for 2014/15 Comment on deviations Strategic objective Historically registered qualifications managed and phased out (continued) Number of reduced historically registered qualifications Not achieved A total of 81 qualifications are replaced by newly developed qualifications, Of this total 33 have been replaced as new qualifications are registered by SAQA From 2014/15 Annual Performance Plan: Indicator discontinued (See par above) PART B: PERFORMANCE information Programme 1: Occupational Qualifications Strategic objective 1.1 Prioritised Occupational Qualifications recommended to SAQA for registration on the Occupational Qualification Sub-framework Number of prioritised occupational qualifications recommended to SAQA for registration on the OQSF See PI above 60 prioritised occupational qualifications Not achieved 22 of 60 prioritised occupational qualifications recommended to SAQA 38 The non-achievement of the target was due to: - External factors that were out of the unit s control. - A moratorium that suspended the submission of new applications. This enabled the unit to understand in-house process and challenges - Qualifications Committee meeting that had to be rescheduled as it clashed with the Council meeting date. Qualifications could not be presented to the Council as the Committee sat after the Council. - An addendum was requested to review the target but no response was received from Minister.

28 24 Performance Indicator (PI) Actual Achievement 2013/14 Planned Target 2014/15 Actual Achievement 2014/15 Deviation from planned target to Actual Achievement for 2014/15 Comment on deviations Programme 1: Occupational Qualifications (CONTINUED) Strategic objective 1.1 Prioritised Occupational Qualifications recommended to SAQA for registration on the Occupational Qualification Sub-framework (CONTINUED) % of registered occupational qualifications with uptake monitored New indicator No target Strategy to overcome areas of under-performance The following strategy will be put in place to address areas of under-performance: A developed and implemented year planner should be strictly adhered to. Activities and reporting to be aligned to the strategic objectives of the organisation. Review the target and set a realistic target Introduce learning field experts that will bring some work performed by quality partners (external) in-house. Reduce the number of steps to register an occupational qualification and part qualification. Improved communication with quality partners and other stakeholders Linking performance with budgets Hereunder is an analysis of the 2014/15 budget for Programme 1: PROGRAMME 1: OCCUPATIONAL QUALIFICATIONS MANAGEMENT (OQM) 2014/15 Adjusted budget Compensation Goods and Services Capital expenditure

29 Programme 2: Quality Assurance The purpose of Programme 2: To ensure currency and quality assurance of relevant qualifications and certificates on the occupational qualifications subframework to promote the NQF objectives. The following strategic objectives link to Programme 2: Strategic objective 2.1: Implementation of registered occupational qualifications quality assured Strategic objective 2.2: Competent learners externally assessed are certificated Strategic objectives, performance indicators planned targets and actual achievements Programme 2: Quality Assurance in the QCTO performed as follows: From 2013/14 Annual Performance Plan: PART B: PERFORMANCE information Programme / Sub-programme: Performance Indicator Actual Achievement 2013/14 Planned Target 2014/15 Actual Achievement 2014/15 Deviation from planned target to Actual Achievement for 2014/15 Comment on deviations Programme Name 2: Occupational Qualification Management Sub-programme: Occupational Qualifications Development and Review Strategic objective A system for the ongoing monitoring, evaluation, quarterly and annual reporting of the development of occupational qualifications is developed and implemented Number of monitoring and evaluation reports Achieved A total of 25 reports as planned is in place Indicator discontinued (See par above) Sub-programme: Occupational Qualifications, Quality assurance (Assessment, Provision, Accreditation, Certification, Foundational Learning, Monitoring and evaluation) Strategic objective Policies for occupational qualification quality assurance are developed, operationalised and implemented by 2012/ Policies adopted by Council as per agreed list Not achieved Assessment Policy approved by Council (19 May 2014) Indicator discontinued (See par above)

30 26 Performance Indicator (PI) Actual Achievement 2013/14 Planned Target 2014/15 Actual Achievement 2014/15 Deviation from planned target to Actual Achievement for 2014/15 Comment on deviations Programme Name 2: Occupational Qualification Management (CONTINUED) Sub-programme: Occupational Qualifications, Quality assurance (Assessment, Provision, Accreditation, Certification, Foundational Learning, Monitoring and evaluation) (CONTINUED) Completion of guidelines for implementation of policies and processes for each policy 0 Indicator discontinued (See par above) Policies for occupational qualification quality assurance are developed, operationalised and implemented Achieved QCTO staff served on SAQA reference groups for the development of the Assessment, RPL and CAT policies. All 3 policies developed Indicator discontinued (See par above) Strategic objective An effective assessment and moderation system is developed and implemented by 2013/ Assessment and moderation system developed and implemented Number of AQPs assessment systems evaluated to be valid, reliable and fair Achieved System for the accreditation of assessment centres in place Not achieved (13 AQP s approved) Indicator discontinued (See par above) Indicator discontinued (See par above) Strategic objective An efficient verification and certification system is developed and implemented by 2013/ Verification and Certification system developed and implemented Not achieved Verification and Certification system implemented for Trade Certificates only Indicator discontinued (See par above)

31 27 Performance Indicator (PI) Actual Achievement 2013/14 Planned Target 2014/15 Actual Achievement 2014/15 Deviation from planned target to Actual Achievement for 2014/15 Comment on deviations Programme Name 2: Occupational Qualification Management (CONTINUED) Sub-programme: Occupational Qualifications, Quality assurance (Assessment, Provision, Accreditation, Certification, Foundational Learning, Monitoring and evaluation) (CONTINUED) Strategic objective Monitoring and Evaluation of Quality Assurance Partners through the establishment of a monitoring and evaluation team Number of Monitors and support staff employed Number of Quality Assurance Partners monitored Not achieved Achieved 15 Quality Assurance Partners monitored Indicator discontinued (See par above) Indicator discontinued (See par above) PART B: PERFORMANCE information From 2014/15 Annual Performance Plan: Programme 2: Quality Assurance Strategic objective 2.1 Implementation of registered occupational qualifications quality assured Turnaround time from date of receipt of recommendation to date of accreditation of skills development providers offering occupational qualifications New Indicator Establish a baseline turnaround time for accrediting skills development providers Achieved An average of 10 working days is the baseline turnaround time from the date of receipt of recommendation to the date of accreditation of skills development providers offering occupational qualifications

32 28 Performance Indicator (PI) Actual Achievement 2013/14 Planned Target 2014/15 Actual Achievement 2014/15 Deviation from planned target to Actual Achievement for 2014/15 Comment on deviations Programme 2: Quality Assurance (CONTINUED) Turnaround time from date of receipt of recommendation to date of accreditation of assessment centres offering external summative assessment for occupational qualifications New Indicator Establish a baseline turnaround time for accreditation of assessment centres Achieved Average turnaround time of 14 days. This confirms the 21 days turnaround as prescribed in the Accreditation Policy is achievable None Percentage of Quality Assurance Partners and Assessment Quality Partners monitored for compliance New Indicator 100% Achieved 100% 28 Assessment Quality Partners and 21 Quality Assessment Partners monitored None Percentage of Quality Assurance Partners (QAPs) and Assessment Quality Partners (AQPs) that have been assisted to achieve compliance standards New Indicator 50% compliance by monitored quality partners (QAPs and AQPs) For AQPs Achieved 100% (12 AQP applications received and approved) For QAPs Achieved 95% (20 QAPs monitored against remediation plans) For AQPs 50% For QAPs 45% 100% (12 out of 12) AQP applications were received and approved and 95% (20 out of 21) QAPs were assisted to achieve compliance standards

33 29 Performance Indicator (PI) Actual Achievement 2013/14 Planned Target 2014/15 Actual Achievement 2014/15 Deviation from planned target to Actual Achievement for 2014/15 Comment on deviations Strategic objective 2.2 Competent learners externally assessed are certificated Turnaround time for issuing certificates after receiving recommendations from Assessment Quality Partners and Quality Assurance Partners (all types of certificates) New Indicator Establish a baseline turnaround time for the four different certification systems Achieved Average turnaround time of 16 days for trade certificates. This confirms the 21 days turnaround as prescribed in the Certification Policy is achievable and will be applicable to all certificates to be issued by the QCTO as and when the Occupational Qualifications are implemented None - PART B: PERFORMANCE information Programme 2: Quality Assurance (CONTINUED) Percentage of learner achievement data submitted to National Learner Records Data base in relation to certificates issued and verified New Indicator 100% learner achievement uploaded and verified Not achieved 0% 100% QCTO has not issued certificates for the newly registered occupational qualifications as these are being implemented this year 2015, hence no data submitted to NLRD. For the legacy qualifications, QCTO has delegated the function to the SETAs who have complied with submission of data to the NLRD as per the NLRD requirements.

34 30 Strategy to overcome areas of under performance The following strategy will be put in place to address areas of under-performance: The 2015/16 APP prioritises the development of the QCTO Quality Assurance and certification system so that the QCTO is in a position to upload learner achievements to the NLRD as the newly registered Occupational Qualifications are implemented. Linking performance with budgets Hereunder is an analysis of the 2014/15 budget for Programme 2: PROGRAMME 2: OCCUPATIONAL QUALITY ASSURANCE (OQA) 2014/15 Classification Adjusted budget Compensation Goods and Services Capital expenditure

35 Programme 3: Administration The purpose of Programme 3: To enable QCTO performance through strategic leadership and reliable delivery of management support services. The following strategic objectives link to Programme 3: Strategic objective 3.1.1: ICT system in place Strategic objective 3.1.2: Two (2) Management support systems in place Strategic objectives, performance indicators planned targets and actual achievements Programme 3: Administration in the QCTO performed as follows: From 2013/14 Annual Performance Plan: Performance Indicator (PI) Actual Achievement 2013/14 Planned Target 2014/15 Actual Achievement 2014/15 Deviation from planned target to Actual Achievement for 2014/15 Comment on deviations PART B: PERFORMANCE information Programme 1: Administration Sub-programme: CEO/Governance, Strategy, Secretariat Services and Appeals Strategic objective QCTO contributes continuously through written submissions, presentations and active participation to the collective efforts of SAQA, CHE and Umalusi towards the achievement of NQF objectives % attendance of SAQA, CHE, Umalusi Council meetings as well as CEO Committee and NQF Forum meetings by the QCTO CEO against agreed meeting schedules of different councils/ committee Not achieved 12 out of 16 meetings were attended Indicator discontinued (See par above) Strategic objective A Strategic Risk Management Strategy is developed, implemented and updated annually to minimise risk for the QCTO Risk Management Strategy developed and implemented Not achieved updating of document, however a Risk Register for 2013/14 has been approved by Council Indicator discontinued (See par above)

36 32 Performance Indicator (PI) Actual Achievement 2013/14 Planned Target 2014/15 Actual Achievement 2014/15 Deviation from planned target to Actual Achievement for 2014/15 Comment on deviations Programme 1: Administration (CONTINUED) Sub-programme: CEO/Governance, Strategy, Secretariat Services and Appeals (CONTINUED) QCTO risks monitored on quarterly basis Achieved Updated and presented to Audit and Risk Committee Indicator discontinued (See par above) Strategic objective A five year strategic plan and annual performance plan (APP) for the QCTO is developed Strategic plan & APP approved by Council and submitted to the Minister by 30 November annually Not achieved Indicator discontinued (See par above) Strategic objective A system to conduct quarterly and annual monitoring and reporting developed and implemented Adhere to Public Entities Calendar (wrt document submission) as the system used for quarterly and annual monitoring and reporting Achieved All due date required on Public Entities Calendar were achieved which includes plans and reports Indicator discontinued (See par above) Strategic objective Support services are effectively and efficiently provided to the Council Number of working days before Council meetings when documents are circulated to all Council Number of Council meetings held during the financial year Achieved Council members received packs as required Achieved 4 meetings and 1 strategic planning workshop was held Indicator discontinued (See par above) Indicator discontinued (See par above)

37 33 Performance Indicator (PI) Actual Achievement 2013/14 Planned Target 2014/15 Actual Achievement 2014/15 Deviation from planned target to Actual Achievement for 2014/15 Comment on deviations Programme 1: Administration (CONTINUED) Sub-programme: Financial Management Strategic objective PFMA and Treasury Regulations compliant financial management policies, procedures and systems are developed and implemented Number of PFMA and Treasury Regulation compliant QCTO financial policies, procedures and systems developed and implemented in line with agreements from Council or QCTO Management Committee Not achieved Indicator discontinued (See par above) PART B: PERFORMANCE information Strategic objective PFMA, Treasury Regulations and PPPFA compliant supply chain management policies, procedures and systems developed and implemented Number of PFMA and Treasury Regulation and PPPFA compliant QCTO supply chain management policies, procedures and systems developed and implemented in line with agreements from Council or QCTO Management Committee Achieved Indicator discontinued (See par above) Strategic objective A sustainable financial model and plan are developed and implemented % of income over and above ENE transfer No target Indicator discontinued (See par above)

38 34 Performance Indicator (PI) Actual Achievement 2013/14 Planned Target 2014/15 Actual Achievement 2014/15 Deviation from planned target to Actual Achievement for 2014/15 Comment on deviations Programme 1: Administration (CONTINUED) Sub-programme: Financial Management (CONTINUED) Strategic objective Internal audit systems are developed and implemented Number of internal audit committee meetings to put systems in place and oversee internal audit Not achieved Two meetings could not take place Indicator discontinued (See par above) Sub-programme: Human Resources Management Strategic objective QCTO human resources management capacities, policies, procedures and systems are developed and implemented Number of planned posts filled Number of QCTO human resources management (HRM) policies, procedures and systems developed and implemented in line with agreements from Council or QCTO Management Committee % of staff undergoing performance assessment Not achieved 34 posts were filled Not achieved Not achieved Indicator discontinued (See par above) Indicator discontinued (See par above) Indicator discontinued (See par above) Strategic objective A mechanism and systems to secure a conducive working environment at the QCTO is developed and maintained % staff attrition rate not to be exceeded Achieved Indicator discontinued (See par above)

39 35 Performance Indicator (PI) Actual Achievement 2013/14 Planned Target 2014/15 Actual Achievement 2014/15 Deviation from planned target to Actual Achievement for 2014/15 Comment on deviations Programme 1: Administration (CONTINUED) Sub-programme: Human Resources Management (CONTINUED) Strategic objective Systems and processes for staff development are designed and implemented % of new staff inducted and oriented % staff attend capacity building sessions Not achieved Achieved Indicator discontinued (See par above) Indicator discontinued (See par above) PART B: PERFORMANCE information Sub-programme: Information Technology Strategic objective Master systems plan and master technical plan developed during 2012/ % completion of the master systems plan and master technical plan Not achieved Indicator discontinued (See par above) Strategic objective QCTO ICT policies, procedures and systems are developed and implemented QCTO Information and Communication Technology(ICT) policies, procedures and systems developed QCTO Information and Communication Technology(ICT) policies, procedures and systems implemented Achieved No target Indicator discontinued (See par above) See below

40 36 Performance Indicator (PI) Actual Achievement 2013/14 Planned Target 2014/15 Actual Achievement 2014/15 Deviation from planned target to Actual Achievement for 2014/15 Comment on deviations Programme 1: Administration (CONTINUED) Sub-programme: Information Technology (CONTINUED) Strategic objective QCTO website developed, implemented and maintained during 2012/ % establishment of the QCTO website Number of visitors per month to the website Achieved Not achieved Indicator discontinued (See par above) Indicator discontinued (See par above) Sub-programme: Marketing and Communication Strategic objective A marketing and communication strategy is developed and implemented Draft marketing and communication strategy developed Not achieved Indicator discontinued (See par above Marketing and communication strategy implemented 0 Indicator discontinued (See par above) Strategic objective A QCTO marketing and communication exhibits and publications developed and used Prepare and print publications Number of events exhibited at Not achieved Achieved Indicator discontinued (See par above) Indicator discontinued (See par above) Sub-programme: Administration Strategic objective Knowledge and records are effectively managed, and easily accessible to all internal and external stakeholders Develop and implement a QCTO document management system Not achieved Indicator discontinued (See par above)

41 37 From 2014/15 Annual Performance Plan: Performance Indicator (PI) Actual Achievement 2013/14 Programme 3: Administration Planned Target 2014/15 Actual Achievement 2014/15 Deviation from planned target to Actual Achievement for 2014/15 Strategic objective 3.1 Institutional capability in place to enable QCTO to deliver its products and services ICT system in place See above 30% of the ICT system implemented as determined by the implementation milestones of the Master Plan) 1 ICT Policy developed Achieved ICT Policy already developed and approved MSP was approved by EXCO in October Implementation has begun. Comment on deviations PART B: PERFORMANCE information The following elements of MSP were implemented: Establishment of the ICT Steering Committee Disaster Recovery Plan (DRP) HR Payroll system Update and optimise bandwidth Two (2) Management support systems in place New indicator 1 HR strategy developed Add 4 HR Policies to the Manual Achieved HR Strategy developed HR Manual with 33 policies and procedures developed and approved 18 Financial Policies implemented Achieved 18 Finance and SCM Policies already approved and in place

42 38 Strategy to overcome areas of under performance Not applicable Linking performance with budgets Hereunder is an analysis of the 2014/15 budget for Programme 3: PROGRAMME 3: ADMINISTRATION 2014/15 Classification Adjusted budget Compensation Goods and Services Capital expenditure REVENUE COLLECTION 2013 / / 2015 SOURCES OF REVENUE ESTIMATE ACTUAL AMOUNT COLLECTED (OVER)/ UNDER COLLECTION ESTIMATE ACTUAL AMOUNT COLLECTED (OVER)/ UNDER COLLECTION Government Grant (23 168) - Finance Income (1 314) 0 (1 375) (1 375) Other Income (18) (18) SETA Grant NSF (500) (500) Total (655) (1 893)

43 39 PART B: PERFORMANCE information

44 40 Part c GOVERNANCE

45 41 1. INTRODUCTION on 29 August 2013 and tabled in Parliament on 23 September Corporate governance embodies processes and systems by which public entities are directed, controlled and held to account. In addition to legislative requirements based on a public entity s enabling legislation, corporate governance with regard to public entities is applied through the precepts of the Public Finance Management Act (PFMA). Parliament, the Executive and the Accounting Authorities of the QCTO are responsible for corporate governance. 2. PORTFOLIO COMMITTEE ON HIGHER EDUCATION AND TRAINING The QCTO has also submitted all four of the QCTO s Quarterly Performance Reports for the 2014/15 financial year to the Minister via the Director-General: Higher Education and Training as required by the Department. Submission dates were as follows: Quarter 1 Performance Report: 30 July 2014 Quarter 2 Performance Report: 24 October 2014 Quarter 3 Performance Report: 28 January 2015 Quarter 4 Performance Report: 28 April 2015 The Executive Authority raised the following concern: Quarter 2 Performance Report: The non-achievement on the target for Qualifications Development. The Quality Council for Trades and Occupations (QCTO) met with the Portfolio Committee on Higher Education and Training on 4 July 2014 and presented its Annual Performance Plan and budget for 2014/15. The QCTO s Chairperson, Prof Peliwe Lolwana, the Chief Executive Officer, Ms G. Joyce Mashabela and the Chief Financial Officer, Ms Ndivhu Madilonga attended the meeting. The same three individuals attended a second meeting with the Portfolio Committee on 17 October 2014 to present the QCTO s Annual Report for the financial year 2013/14. Both meetings with the Portfolio Committee were useful as it gave the QCTO the opportunity to understand the Portfolio Committee s expectations and needs. 3. EXECUTIVE AUTHORITY The QCTO submitted the final 2013/14 Annual Report to the Minister via the Department of Higher Education and Training on 31 July 2014 which was delivered to Parliament 4. THE ACCOUNTING AUTHORITY Introduction The purpose of the QCTO is to establish, maintain and quality assure occupational standards and qualifications and learning in and for the work place as referred to in its mandate and legislative requirements. The QCTO is one of three Quality Councils (QCs) tasked with the role of standards setting and quality assurance. Board Charter The requirements of the QCTO s Constitution are provided for in the Skills Development Act (SDA). The second Constitution was approved by the Minister in The outgoing Council has commenced with a discussion to identify areas which need to be revised and made a recommendation to the new incoming Council to review the Constitution. PART c: governance

46 42 Composition of the council DESIGNATION (IN TERMS OF the BOARD NAME STRUCTURE) DATE APPOINTTED DATE RESIGNED QUALIFICATIONS AREA OF EXPERTISE Prof Peliwe Lolwana Chairperson 26 Sept 2011 N/A Ph.D. Knowledge of education and training Research Policy development Leadership and Management Governance Mr Malesela Maleka Deputy Chairperson Nominated by NEDLAC to represent organisations of community and development interests 20 Jan 2010 N/A Professional Certificate in Public Management BOARD DIRECTORSHIPS (LIST THE ENTITIES) National Research Foundation Human Resources Development of SA Council Metropolitan Momentum Insurance Foundation Hotazel Manganese Mines Education Trust University of Fort Hare Council Member of the Commission on Employment Equity Member of Bank SETA Board OTHER COMMITTEES (E.G: AUDIT COMMITTEE) Executive Committee (Chairperson) Executive Committee Qualifications Committee (Chairperson) NO. OF MEETINGS ATTENDED (4 ORDINARY COUNCIL MEETINGS HELD) 3 present 1 apology received 4 present

47 43 Composition of the council (continued) DESIGNATION (IN TERMS OF the NAME BOARD STRUCTURE) DATE APPOINTTED DATE RESIGNED QUALIFICATIONS AREA OF EXPERTISE BOARD DIRECTORSHIPS (LIST THE ENTITIES) Ms G Joyce Mashabela CEO: QCTO 1 Apr 2012 N/A MA, MS, MBA Teaching Management Administration SAQA Council on Higher Education (CHE) Umalusi National Skills Authority Mr Joe Samuels CEO: SAQA 1 Mar 2012 N/A BSc Hons (Physiology), MPhil (Adult Education) Qualifications framework, policy, adult education CHE Umalusi QCTO SAQA NSA Mr Ahmed Essop CEO: CHE 7 Dec Feb 2015 Honours degree in Sociology Masters in International Development Education Higher Education Umalusi SAQA QCTO Old Mutual Education Trust OTHER COMMITTEES (E.G: AUDIT COMMITTEE) NO. OF MEETINGS ATTENDED (4 ORDINARY COUNCIL MEETINGS HELD) Executive Committee Finance Committee 4 present None 4 present None 2 present 1 apology received The March 2015 meeting was attended by Acting CEO, Dr Denise Webbstock PART c: governance

48 44 Composition of the council (continued) DESIGNATION (IN TERMS OF the NAME BOARD STRUCTURE) DATE APPOINTTED DATE RESIGNED QUALIFICATIONS AREA OF EXPERTISE Dr Mafu Rakometsi CEO: Umalusi 20 Jan 2010 N/A Ph.D History of education Curriculum, examinations and assessment Vacant Executive Officer: NSA Vacant since 1 Apr DHET to appoint Executive Officer: NSA N/A Ms Malebo Mogopodi Nominated by NEDLAC to represent organised labour 12 Oct 2010 N/A ABET Certificate UNISA ETP Practitioner NQF 5 Adult learning and teaching Skills development and training practices Community development Project Management BOARD DIRECTORSHIPS (LIST THE ENTITIES) SAQA QCTO CHE Member of Helderberg College Council Merseta Board Basadi Badiri Primary Cooperative OTHER COMMITTEES (E.G: AUDIT COMMITTEE) NO. OF MEETINGS ATTENDED (4 ORDINARY COUNCIL MEETINGS HELD) None 3 present 1 apology received 3 present 1 apology received

49 45 PART c: governance Composition of the council (continued) DESIGNATION (IN TERMS OF the BOARD NAME STRUCTURE) Ms Stella Carthy Nominated by NEDLAC to represent organised business Mr Willy Eduard Matthiae Nominated by NEDLAC to represent organised business DATE APPOINTTED DATE RESIGNED QUALIFICATIONS AREA OF EXPERTISE 20 Jan 2010 N/A Qualified teacher - primary school Skills Development IPM Diploma - HR Labour Relations Training 20 Jan 2010 N/A National Technical Diploma Mechanical Engineering B Com. (Business management & Industrial Psychology) Engineering, Management, Project management, Training and Development Management Development Diploma BOARD DIRECTORSHIPS (LIST THE ENTITIES) OTHER COMMITTEES (E.G: AUDIT COMMITTEE) NSA Executive Committee Occupational Quality Assurance Committee (Chairperson) None Executive Committee Finance Committee (Chairperson) Qualifications Committee Audit and Risk Committee NO. OF MEETINGS ATTENDED (4 ORDINARY COUNCIL MEETINGS HELD) 4 present 3 present 1 apology

50 46 Composition of the council (continued) DESIGNATION (IN TERMS OF the BOARD NAME STRUCTURE) Mr. Thulane Mabuza Nominated by NEDLAC to represent organisations of community and development interests Dr Bheki Mahlobo Appointed by the Minister to represent the interests of public education and training providers Dr Marina le Grange Member nominated by the private providers of education and training to represent the interests of private education and training providers which providers are accredited providers in terms of the SDA DATE APPOINTTED DATE RESIGNED QUALIFICATIONS AREA OF EXPERTISE 20 Jan 2010 N/A Not available at time of printing Not available at time of printing 20 Jan 2010 N/A Ph.D Curriculum Planning 20 Jan 2010 N/A BA Education NHOD B(ed) Management and Leadership M(ed) D(ed) BOARD DIRECTORSHIPS (LIST THE ENTITIES) OTHER COMMITTEES (E.G: AUDIT COMMITTEE) NO. OF MEETINGS ATTENDED (4 ORDINARY COUNCIL MEETINGS HELD) Not available at time of printing 4 absent None 4 apologies received APPETD Board member Director: Experiential Technologies Qualifications Committee, then moved to Assessment and Accreditation Committee 4 present

51 47 PART c: governance Composition of the council (continued) DESIGNATION (IN TERMS OF the BOARD NAME STRUCTURE) DHET: Vacant Member to represent the interests of the state Ms Pulane Masebe Member to represent the interests of the state Co-opted Mr Thabo Mashongoane Co-opted from NSA Ms Gerda Magnus Co-opted from Vocational Branch (Curriculum and Programmes Support to FET Colleges) Mr Maliviwe Lumka Co-opted from Skills Development Branch DATE APPOINTTED DATE RESIGNED QUALIFICATIONS AREA OF EXPERTISE BOARD DIRECTORSHIPS (LIST THE ENTITIES) OTHER COMMITTEES (E.G: AUDIT COMMITTEE) NO. OF MEETINGS ATTENDED (4 ORDINARY COUNCIL MEETINGS HELD) Vacant: Jan Aug 2011 N/A B.Admin Honours degree (Industrial Psychology) Human Resource Development Board Member in the Aerospace Centre of Excellence, University of Witwatersrand Qualifications Committee 3 present 1 apology received 16 Nov 2011 N/A M Tech Business Administration Skills Development None N/A 3 present 1 apology received 25 April 2013 N/A BA Honours Human resource Development Skills Development HR None None 2 present 2 apologies received Education and Training 25 April 2013 N/A 2 present 2 apologies

52 48 QCTO Council From left to right: Ms Stella Carthy, Dr Mafu Rakometsi, Ms Malebo Mogopodi (Lebona), Mr Malesela Maleka, Ms Pulane Masebe, Ms G Joyce Mashabela, Dr Denyse Webbstock, Mr Joe Samuels, Prof Peliwe Lolwana, Mr Willy Eduard Matthiae, Dr Marina le Grange Absent members: Mr Thulani Mabuza, Mr Ecliff Tantsi, Dr Bheki Mahlobo Absent co-opted members: Mr Thabo Mashongoane, Ms Gerda Magnus, Mr Maliviwe Lumka

53 49 Committees The Council had appointed the following Committees below. Quarterly reports from the Committees are presented to Council. COMMITTEE NO. OF MEETINGS HELD NO. OF MEMBERS NAMEs OF MEMBERS NO. OF MEETINGS ATTENDED NO. OF APOLOGIES RECEIVED Executive Committee 4 6 members (5 members plus 1 vacant) Prof Peliwe Lolwana (Chairperson) Mr Malesela Maleka (Deputy Chairperson of QCTO) 4 3 N/A 1 Mr Willy Matthiae as Chairperson of FINCOM, was appointed as a member of EXCO on 8 May 2014 Ms Joyce Mashabela CEO) Ms Stella Carthy Mr Zwelitsha (Ecliff) Tantsi Mr Willy Matthiae N/A N/A 3 absent and declined 1 1 Finance Committee Qualifications Committee 2 5 members (3 members plus two vacancies) Mr Willy Matthiae (Chairperson) Mr Gitesh Mistry Ms Joyce Mashabela 5 9 members Mr Malesela Maleka (Chairperson) Mr Willy Matthiae Mr Louis Schutte Ms Nomathemba Kubheka N/A N/A N/A N/A N/A N/A 1 PART c: governance Dr Allyson Lawless 4 1 Prof Paul Nicholas German Beard 2 3 Mrs Kalawathie Bella Sattar 4 1 Ms Pulane Masebe 4 1 Mr Louis Coetzer 2 3 Occupational Quality Assurance Committee (previously called Assessment and Accreditation Committee) 4 10 members (8 members plus two vacancies) Ms Stella Carthy (Chairperson) Dr Tholsia Naiker (Naidoo) Mr Phineas Sibanyoni Mr Bogoshi Tshehla Ms Margaret Machaba Ms Mary Pieters Mr Rod Harker N/A N/A 1 2 Dr Marina le Grange 2 2 *The data of the Audit and Risk Committee appears later.

54 50 Remuneration of Council members The QCTO Council members are remunerated as per National Treasury rates. Reimbursement is in accordance to the Subsistence and Traveling Policy of the DHET. Members from the public sector do not receive remuneration. NAME REMUNERATION R OTHER ALLOWANCE R OTHER RE-IMBURSEMENT R TOTAL R Dr Peliwe Lolwana (Chairperson) Mr Malesela Maleka (Deputy Chairperson) Ms Malebo Mogopodi Mr Ecliff (Zwelitsha) Tantsi Ms Stella Carthy Mr Willy Eduard Matthiae Mr Thulane Mabuza Dr Marina le Grange Ms Pulane Masebe N/A N/A N/A N/A Dr Bheki Mahlobo N/A N/A N/A N/A Ms Joyce Mashabela (CEO) N/A N/A N/A N/A Mr. Joe Samuels N/A N/A N/A N/A Mr Ahmed Essop N/A N/A N/A N/A Dr Mafu S Rakometsi N/A N/A N/A N/A Total * The above amounts constitute of remuneration, subsistence and travelling of Council meetings.

55 51 5. RISK MANAGEMENT The Council approved the QCTO s Risk Management Policy in May The agreed Risk Management Framework and Strategy was available in the QCTO but due to limited staff could not be fully implemented, however progress has been made. A Risk Manager has also been appointed to drive the process in the QCTO. A risk assessment workshop was conducted which resulted in an updated Risk Register against the 2014/15 Annual Performance Plan. This Risk Register was approved by Council and is updated on a quarterly basis where progress is reported to the Audit and Risk Committee. The systems established to ensure compliance with those policies, plans, procedures, laws and regulations that could have a significant impact on operations and reports; The means of safeguarding assets and, where appropriate, verification of the existence of such assets; The economic and efficient management of the company s financial, human and other resources, and the effective conduct of its operations; and Operations or programs to ascertain whether or not results are consistent with established objectives and goals and whether or not the operations are being carried out as planned. Planning workshops were held at the directorate levels to ensure operational alignment with strategic objectives. During this process teams were encouraged to list risks against operational plans and capture actions that will mitigate these risks which are to become part of individual s performance agreements. Detailed financial risks that could affect the organisation have been disclosed in the Annual Financial Statements. 6. INTERNAL CONTROL UNIT Continued progress was made to improve internal controls. Audit Action Plans with findings raised by the Auditor General of South Africa (AGSA) as well as Internal Audit are in place and are being closely monitored by the Audit and Risk Committee. These findings are also followed up by Internal Audit on a regular basis and reported to the Audit and Risk Committee. 7. INTERNAL AUDIT AND AUDIT COMMITTEES Key activities and objectives of Internal Audit The objective of the internal audit function is to provide independent, objective assurance designed to add value and improve the QCTO operations. It helps the QCTO accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. The scope of the Internal Audit function includes, but is not limited to an evaluation of: The reliability and integrity of financial and operating information and the means used to identify, measure, classify and report such information; The Internal Audit function objectives, defined in terms of audit focus areas, are: Financial auditing: which aims to ensure that reliable information is produced for both management purposes and external publication and that adequate controls exist to safeguard assets; Operational auditing: which focuses on the effectiveness and efficiency of the substructure s operations; Compliance auditing: which addresses compliance with relevant national laws and regulations, best practice and the QCTO s established policies and procedures; IT Auditing: which reviews the controls over information technology and whether IT supports the QCTO s objectives and Performance Auditing: to evaluate measures instituted by management to ensure economic acquisition of resources and efficient and effective utilization of resources. Audit work The following activities as per audit plan were completed during 2014/15 financial year: Performance and Compliance Monitoring Review (Q1, Q2 and Q3) Review of draft Annual Performance Information 2013/14 Review of unaudited Annual Financial Statements 2013/14 Review of draft 2015/16 Strategic and Annual Performance Plans Review on Critical Financial Controls Information Technology General Controls Review PART c: governance

56 52 Supply Chain Management Review Pastel Post Implementation Review Fraud Maturity Assessment, drafting of Fraud Prevention Implementation plan and review of the QCTO Fraud Prevention Plan Follow up review on previous raised findings from Internal audit and Auditor-General Enterprise Risk Management Facilitation Facilitation of completion of Auditor General Quarterly Dashboard Development of a Performance Information Policy and Standard Operating Procedures (SOP) Root cause analysis workshops Development of draft Compliance Policy Objectives of the Audit and Risk Committee 1.1 The objective of the Audit and Risk Committee is to assist the QCTO in the discharge of its responsibilities for financial and management reporting, corporate governance and corporate control including the review of internal controls and the management and mitigation of risks. 1.2 It should also review the QCTO s procedures in complying with relevant laws, regulations and ethics. 1.3 The Committee has an advisory role to the Council. Key activities of the Audit and Risk Committee The Audit and Risk Committee should assist the Council in carrying out its responsibilities as they relate to the QCTO s: a) financial, management and other reporting practices; b) internal controls and management of risks; c) compliance with laws, regulations, and ethics; d) should report to the Council any matter identified during the course of carrying out its duties that it considers significant; and e) perform or undertake on behalf of the Council any such other tasks or actions as the Council may from time to time authorise. Other main activities are: Consider the effectiveness of the internal control and risk management system Understand the scope of internal and external auditor review of internal control over financial reporting, and obtain reports on significant findings and recommendations together with management s responses Review the QCTO risk profile on an annual basis and ensure management is effectively managing the risks Review the Materiality and Significance Framework and Fraud Prevention Plan of the QCTO Review the effectiveness of the system for monitoring compliance with laws and regulations and the results of management investigation and follow-up (including disciplinary action) of any instances of non-compliance Review the adequacy, reliability and accuracy of the financial information provided to management and other users of such information and annually review the Annual Financial Statements

57 53 7. INTERNAL AUDIT AND AUDIT COMMITTEES (CONTINUED) The table below discloses relevant information on the QCTO Audit and Risk Committee members: NAME QUALIFICATIONS INTERNAL OR EXTERNAL DATE APPOINTED DATE RESIGNED NO. OF MEETINGS ATTENDED (4 MEETINGS HELD) Mr Paul Slack (Chairperson) CA (SA) 1981 B.Com (Hons) (Financial Management External 8 June 2012 NA 4 Mr Theuns Tredoux BCom (Hons)Acc MBL (Unisa) External 8 June 2012 NA 1 3 apologies Mr Velile Kweyama Senior Secondary Teachers Diploma (SSTD) External 31 January 2013 NA 4 Bachelor of Accounting Sciences (BCompt) CIA and CCSA Ms Thobeka Njozela B. Com B. Compt (Hons) MBA Executive Development Programme External 15 April 2014 NA 3 1 apology PART c: governance CIA, CCSA, CRMA Certificate in Management Practice Mr Willy Matthiae National Technical Diploma Mechanical Engineering External 8 May 2014 NA 4 B Com ( Business management & Industrial Psychology) Management Development Diploma From left: Mr Willy Eduard Matthiae, Ms Thobeka Njozela, Mr Paul Slack Absent: Mr Theuns Tresoux, Mr Velile Kweyama

58 54 8. COMPLIANCE WITH LAWS AND REGULATIONS 11. MINIMISING CONFLICT OF INTEREST To date the QCTO has ensured that it complied with all required documentation in terms of the PFMA and Treasury Regulations, as required by the DHET s Compliance Calendar. The QCTO also attends various other Council and committee meetings to keep abreast of laws and regulations that need to be complied with. The QCTO works closely with the Department to ensure it is continuously updated with latest laws and regulations The QCTO s Assessment and Accreditation Committee has taken on a strategic role to ensure the proposed draft Trade Test Regulations meet the needs of the QCTO and promote the development of competent artisans. The Chief Financial Officer (CFO) also attends the CFO Forum and meetings arranged by National Treasury to keep abreast with new developments. 9. UNSOLICITED PROPOSAL There was no unsolicited proposal engaged during the 2014/15 financial year. 10. FRAUD AND CORRUPTION The QCTO has its own fraud prevention plan which has been developed and agreed to by the Audit and Risk Committee. To start implementing the fraud prevention plan the following activities were undertaken: A Fraud Maturity Assessment A Fraud Prevention Campaign The development of a draft implementation plan The QCTO and public may use the Public Service Anti- Corruption Hotline to report fraud. No cases of fraud have become known to the QCTO during the last year. In the past year no conflict of interest was declared. 12. CODE OF CONDUCT The QCTO has its own approved Code of Conduct for employees which every employee signed. 13. HEALTH SAFETY AND ENVIRONMENTAL ISSUES The QCTO moved to own office space mid - December The building is generally compliant to health and safety imperatives as assessed by the landlord and therefore there are no major issues of concern identified thus far. 14. SECRETARY The QCTO does not fall under the Companies Act and therefore this section is not applicable to the QCTO (no Company Secretary). The QCTO does have a Director: Governance and Secretariat and staff that form the secretariat to Council and most of its Committees 15. SOCIAL RESPONSIBILITY Not applicable to the QCTO for the 2014/15 financial year 16. AUDIT AND RISK COMMITTEE REPORT We are pleased to present our report for the financial year ended 31 March 2015 on page 67.

59 55 PART c: governance

60 56 Part d HUMAN RESOURCE MANAGEMENT

61 57 1. INTRODUCTION Overview of HR matters at the public entity Quality Councils for Trades and Occupations (QCTO) approved structure provides for 47 permanent positions. Of the 47 permanent post 42 were filled during 2014/15. Additional 40 contract posts were filled during the year under review. Also with the drive to review the QCTO structure, a decision was taken that not all permanent posts should be filled pending the review of the QCTO structure that will align with the revised strategy. This process of structure review has kicked off in 2014/15 and is expected to conclude by not later than February The result of the structure review will to a greater extent minimise the need for the filling of contract posts. Policies, procedures and systems used for the year under review were those of the Department of Higher Education and Training (DHET) up until August From September 2014, the QCTO made use and implemented its own HR policies, procedures and payroll systems. Set HR priorities for the year under review and the impact of these priorities The main HR focus was to capacitate the entity by filling of positions and the development of own HR policies and systems. This has enabled the QCTO to fully function independently from the DHET. Workforce planning framework and key strategies to attract and recruit a skilled and capable workforce The QCTO s own HR Policies, procedures, and systems were implemented as from 1 September These approved HR policies and procedures include elements of staff retention, such as training and development, and bursaries for staff. Employee performance management framework In the beginning of the financial year under reporting, QCTO did not have its own Performance Management Policy, however the framework of DHET was utilized to guide planning and management of performance up until the approval of the QCTO s own Performance Management Policy in November Implementation of the QCTO Performance Management commenced during the third quarter of the financial year. Employee wellness programmes Employee wellness day was held in December This remarked the initial phase of the employee wellness programmes. More programmes are planned for 2015/16. Achievements The QCTO s approved Human Resource Policies and Procedures Manual is in place as from September The QCTO was registered as an employer with the South African Revenue Service (SARS) for pay as you earn (PAYE), Compensation of Occupational Injuries and Disease Act (COIDA) and Unemployment Insurance Fund (UIF) A separate pension fund from the DHET was established and approved by the Government Pension Fund QCTO implemented its own payroll system (VIP) separate from the DHET with effect from September The QCTO as an employer is registered with SARS for PAYE, COIDA and UIF etc. QCTO has been fully weaned from the DHET in-terms of all Human Resources functions. A substantial increase of staff appointments (permanent posts), from 28 to 42. Challenges faced by the public entity More than 50% of positions are filled on contract basis. This situation has adverse implications on the stability of the organisation. These posts are funded mainly from the Sector Education and Training (SETA) grant, however as these funds are allocated annually, based on a submission made to the DHET, the amount received (if any) can vary considerably. The uncertainty this creates has negative consequences for the QCTO, since a large number of employees can only be employed on contract basis as opposed to permanent contracts. Future HR plans /goals The QCTO s structure review process is in progress and scheduled for completion approximately by February With the finalisation of the structure review process, this will allow for the phasing out the engagement of contract posts. PART d: HUMAN RESOURCE MANAGEMENT

62 58 2. HUMAN RESOURCE OVERSIGHT STATISTICS Personnel Cost by programme PROGRAMME TOTAL EXPENDITURE FOR THE ENTITY () PERSONNEL EXPENDITURE () PERSONNEL EXP. AS A % OF TOTAL EXP. () NO. OF EMPLOYEES AVERAGE PERSONNEL COST PER EMPLOYEE () QCTO % Note: The total number of 82 employees includes 40 contract employees Personnel cost by salary band LEVEL PERSONNEL EXPENDITURE () % OF PERSONNEL EXP. TO TOTAL PERSONNEL COST () NO. OF EMPLOYEES AVERAGE PERSONNEL COST PER EMPLOYEE () Top Management % Senior Management Professional qualified % % Skilled % Semi-skilled % Unskilled 300 1% TOTAL % Note: The total number of 82 employees includes 40 contract employees. Performance Rewards Finalisation of the long outstanding 2013/14 appraisals was done and completed during 2014/15. No performance bonuses were paid for the year under review since the appraisals were yet to be finalized by year end. A provision has been raised in the financials for the estimated costs of performance rewards to be paid.

63 59 Training Costs DIRECTORATE/ BUSINESS UNIT PERSONNEL EXPENDITURE () TRAINING EXPENDITURE () TRAINING EXPENDITURE AS A % OF PERSONNEL COST. NO. OF EMPLOYEES TRAINED AVERAGE TRAINING COST PER EMPLOYEE () QCTO % Employment and vacancies PROGRAMME 2013/2014 NO. OF EMPLOYEES 2013/2014 APPROVED POSTS 2014/2015 NO. OF EMPLOYEES 2014/2015 APPROVED POSTS % OF VACANCIES QCTO % Notes: 1. The total number of 82 employees includes 40 contract employees which are not on the formal approved structure for permanent posts. 2. An additional post of IT technician was created and approved during the year. This increased the total establishment from 46 to Of the 47 approved permanent posts, 42 posts were filled. PROGRAMME 2013/2014 NO. OF EMPLOYEES 2014/2015 APPROVED POSTS 2014/2015 VACANCIES % OF VACANCIES Top Management 1 1-0% Senior Management Professional qualified % % Skilled % Semi-skilled % PART d: HUMAN RESOURCE MANAGEMENT Unskilled 1 1-0% TOTAL % All approved positions and contract posts have been budgeted accordingly throughout the MTEF period.

64 60 Employment changes The table below provides information on changes in employment over the financial year. Turnover rates provide an indication of trends in employment profile of the QCTO. SALARY BAND EMPLOYMENT AT BEGINNING OF PERIOD APPOINTMENTS PROMOTIONS OF EXISTING EMPLOYEES TERMINATIONS EMPLOYMENT AT END OF THE PERIOD Top Management Senior Management (1) 9 Professional qualified (2) (4) 29 Skilled (2) 16 Semi-skilled (8) 27 Unskilled Total (2) (15) 82 Reasons for staff leaving REASON NUMBER % OF TOTAL NUMBER OF STAFF TURNOVER OUT OF 82 STAFF ESTABLISHMENT Death % Resignation % Dismissal - - Retirement - - Ill health - - Expiry of contract % Other - - TOTAL % Labour Relations: Misconduct and disciplinary action There were no misconduct cases nor disciplinary actions for the year under reporting. Equity Target and Employment Equity Status The Employment Equity Policy had just been approved together with other Human Resources policies. The policy will provide a framework and then inform the development of the plan in 2015/16.

65 61 PART d: HUMAN RESOURCE MANAGEMENT

66 62 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 Part e financial information

67 63 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 Index The reports and statements set out below comprise the Annual Financial Statements presented to the parliament: Accounting Authority s Responsibilities and Approval 64 Report of the external auditor 65 Audit and Risk Committee Report 67 Report of the Council Statement of Financial Position 71 Statement of Financial Performance 72 Statement of Changes in Net Assets 73 Cash Flow Statement 74 Statement of Comparison of Budget and Actual Amounts Accounting Policies Notes to the Annual Financial Statements 87 PART E: FINANcial statements

68 64 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 Accounting Authority s Responsibilities and Approval The Council is required by the Public Finance Management Act (Act 1 of 1999), to maintain adequate accounting records and are responsible for the content and integrity of the Annual Financial Statements and related financial information included in this report. It is the responsibility of the Council to ensure that the Annual Financial Statements fairly present the state of affairs of the entity as at the end of the financial year and the results of its operations and cash flows for the period then ended. The external auditors are engaged to express an independent opinion on the Annual Financial Statements and was given unrestricted access to all financial records and related data. The Annual Financial Statements have been prepared in accordance with Standards of Generally Recognised Accounting Practice (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board. The Annual Financial Statements are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates. The Council acknowledge that they are ultimately responsible for the system of internal financial control established by the entity and place considerable importance on maintaining a strong control environment. To enable the Council to meet these responsibilities, the accounting authority sets standards for internal control aimed at reducing the risk of error or deficit in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the entity and all employees are required to maintain the highest ethical standards in ensuring the entity s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the entity is on identifying, assessing, managing and monitoring all known forms of risk across the entity. While operating risk cannot be fully eliminated, the entity endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. The Council is of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the Annual Financial Statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or deficit. Although the Accounting Authority is primarily responsible for the financial affairs of the entity, they are audited by the entity s external auditors. The external auditors are responsible for independently reviewing and reporting on the entity s Annual Financial Statements. The Annual Financial Statements have been examined by the entity s external auditors and their report is presented on page 65. The Annual Financial Statements set out on pages 71 to 103, which have been prepared on the going concern basis, were approved by the accounting authority on 29 July 2015 and were signed on its behalf by: Ms Joyce Mashabela (Chief Executive Officer) 29 July 2015 Prof Peliwe Lolwana (Chairperson) 29 July 2015

69 65 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 Report of the auditor-general to parliament on the Quality Council for Trades and Occupations Report on the financial statements Introduction 1. I have audited the financial statements of the Quality Council for Trades and Occupations set out on pages 71 to 103, which comprise the statement of financial position as at 31 March 2015, the statement of financial performance, statement of changes in net assets, cash flow statement and the statement of comparison of budget information with actual information for the year then ended, as well as the notes, comprising a summary of significant accounting policies and other explanatory information. Accounting authority s responsibility for the financial statements 2. The accounting authority is responsible for the preparation and fair presentation of these financial statements in accordance with South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) and the requirements of the Public Management Finance Act of South Africa, 1999 (Act No. 1 of 1999) (PFMA) and the Skills Development Act, 1998 (Act No 97 of 1998) (SDA), and for such internal control as the accounting authority determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor-general s responsibility 3. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with International Standards on Auditing. Those standards require that I comply with ethical requirements, and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Opinion 6. In my opinion, the financial statements present fairly, in all material respects, the financial position of the Quality Council for Trades and Occupations as at 31 March 2015 and its financial performance and cash flows for the year then ended, in accordance with the SA Standards of GRAP and the requirements of the PFMA and SDA. Report on other legal and regulatory requirements 7. In accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA) and the general notice issued in terms thereof, I have a responsibility to report findings on the reported performance information against predetermined objectives for selected programmes presented in the annual performance report, non-compliance with legislation and internal control. The objective of my tests was to identify reportable findings as described under each subheading but not to gather evidence to express assurance on these matters. Accordingly, I do not express an opinion or conclusion on these matters. PART E: FINANcial statements

70 66 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 Report of the auditor-general to parliament on the Quality Council for Trades and Occupations (CONTINUED) Predetermined objectives I performed procedures to obtain evidence about the usefulness and reliability of the reported performance information for the following selected programmes presented in the annual performance report of the public entity for the year ended 31 March 2015: Programme 1: Occupational Qualifications on pages 23 to 24 Programme 2: Quality Assurance on pages 27 to 29 I evaluated the reported performance information against the overall criteria of usefulness and reliability. I evaluated the usefulness of the reported performance information to determine whether it was presented in accordance with the National Treasury s annual reporting principles and whether the reported performance was consistent with the planned programmes. I further performed tests to determine whether indicators and targets were well defined, verifiable, specific, measurable, time bound and relevant, as required by the National Treasury s Framework for managing programme performance information (FMPPI). Internal control 14. I considered internal control relevant to my audit of the financial statements, annual performance report and compliance with legislation. I did not identify any significant deficiencies in internal control. Pretoria Date: 29 July I assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete. 12. I did not identify any material findings on the usefulness and reliability of the reported performance information for the following programmes: Programme 1: Occupational Qualifications Programme 2: Quality Assurance Compliance with legislation 13. I performed procedures to obtain evidence that the public entity had complied with applicable legislation regarding financial matters, financial management and other related matters. I did not identify any instances of material non-compliance with specific matters in key legislation, as set out in the general notice issued in terms of the PAA.

71 67 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 Audit and Risk Committee Report We are pleased to present our report for the financial year ended 31 March Audit and Risk Committee Responsibility The Audit and Risk Committee reports that it has complied with its responsibilities arising from Section 51(1)(a)(ii) of the Public Finance Management Act (PFMA) and Treasury Regulation The Audit and Risk Committee also reports that it has adopted appropriate formal terms of reference as its Audit and Risk Committee Charter, has regulated its affairs in compliance with this charter and has discharged all its responsibilities as contained therein. Internal Audit identified some weaknesses through the year and these were reported to the Audit and Risk Committee. These items were added to the Audit Action Plan for continuous follow up by Internal Audit as they conduct their regular fieldwork. Given the pervasive nature of the IT System in the QCTO and the inherent risks regarding data in these systems, the IT function requires urgent and continual attention. Future Audit and Risk Committees should ensure that this remains on their agenda. The Effectiveness of Internal Control The Director-General (DG) of the DHET approved that the QCTO could share in the competitive tender through which DHET had appointed an Internal Audit service provider. The Internal Auditor (Ernst and Young) made good progress during 2014/15. However their contract expired on 15 December A tender was published and the new Internal Auditor, O.M.A Chartered Accountants commenced in Quarter 4. The following internal audit work was completed during the year under review: Performance and Compliance Monitoring Review (Q1, Q2 and Q3) Review of draft Annual Performance Information 2013/14 Review of unaudited Annual Financial Statements 2013/14 Review of draft 2015/16 Strategic and Annual Performance Plans Review on Critical Financial Controls Information Technology General Controls Review Supply Chain Management Review Pastel Post Implementation Review Fraud Maturity Assessment, drafting of Fraud Prevention Implementation plan and review of the QCTO Fraud Prevention Plan Follow up review on previous raised findings from Internal audit and Auditor-General Enterprise Risk Management Facilitation Facilitation of completion of Auditor-General Quarterly Dashboard Development of a Performance Information Policy and Standard Operating Procedures (SOP) Root cause analysis workshops Development of draft Compliance Policy In-Year Management and Quarterly Report The QCTO has reported quarterly to the DHET as is required by the PFMA. The Audit and Risk Committee is satisfied with the content and quality of quarterly reports prepared and issued by the Chief Executive Officer of the QCTO. The Committee considered the risk register and ensured that this informed the Internal Audit Plan. On-going monitoring of the progress against the risk register was conducted quarterly Evaluation of Financial Statements We have reviewed the annual financial statements prepared by the QCTO and have recommended them to Council for approval. Auditor s Report We have reviewed the QCTO s Audit Action Plans for audit issues raised in the prior year and report that the majority of items had been cleared to audit satisfaction in the year. This will be addressed by the audit committee going forward The Audit and Risk Committee concurs and accepts the conclusions of the external auditor on the annual financial statements and is of the opinion that the audited annual financial statements be accepted and read together with the report of the auditor. Mr Paul Slack Chairperson of the Audit and Risk Committee Quality Council for Trades and Occupations Date: 29 July 2015 PART E: FINANcial statements

72 68 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 Report of the Council The Council submit their report for the year ended 31 March Incorporation On 31 December 2010, the QCTO was listed as a Schedule 3A Public Entity under the Public Finance Management Act, effective retrospectively from 01 April 2010 (Gazette Notice 33900), as per section 26 (G) (1) of the Skills Development Act. 2. Review of activities Main business and operations The QCTO has been established in order to accommodate the unique learning requirements for building occupational competence. The QCTO is responsible for Occupational Qualifications development and monitoring. Both the National Qualifications Framework Act, No 67 of 2008 and the Skills Development Act, No 97 as amended in 2008 outline the functions of the QCTO. Net deficit of the entity was R (2014: surplus of R ). The deficit was mainly as a result of non cash items i,e Depreciation and amortisation expenses R and Provisions additions for R and approved surplus of R in the prior year which was utilised to amend the initial budget. The overall spending is normal and that can be attributed to the compensation of employees as most posts were only filled at the begining of the financial year and also due to increased operating expenses after the QCTO relocated to new office premises. 3. Subsequent events The Council is not aware of any matter or circumstance arising since the end of the financial year that would require an adjustment of the financial statements. 4. Council members interest There were no conflict of interest declared for the year under review. 5. Accounting Authority The Council of the entity during the year and to the date of this report was as follows: Name Prof Peliwe Lolwana (Chairperson) Mr Malesela Maleka (Deputy Chairperson) Ms Joyce Mashabela (Chief Executive Officer) Mr Ahmed Essop Mr Joe Samuels Dr Mafu S Rakometsi Ms Stella Ruth Carthy Mr Zwelitsa Ecliff Tantsi Mr Willy Eduard Matthiae Dr Malvina Johanna Le Grange Ms Malebo Mogopodi Mr Thulane Mabuza Dr Bheki Mahlobo Ms Pulane Masebe Mr Thabo Mashongoane Mr Maliviwe Lumka Ms Gerda Magnus 6. Secretary The secretary of the entity is Ms. Adri H Solomon: Business address 256 Glyn Street Hatfield Pretoria 0083 Postal address Private Bag X278 Pretoria 0001

73 69 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 Report of the Council (continued) 7. Member and executive managers emoluments Economic entity Total fees 2015 Total fees 2014 Council Members Prof Peliwe Lolwana (Chairperson) Mr Malesela Maleka (Deputy Chairperson) Ms SR Carthy Dr MJ Le Grange Ms S Mogopodi Mr WE Matthiae PART E: FINANcial statements

74 70 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 Report of the Council (continued) EXECUTIVE MANAGEMENT DESIGNATION EFFECTIVE DATE BASIC SALARY MEDICAL CONTRIBUTIONS SERVICE/ PERFORMANCE BONUSES PENSION TOTAL PACKAGE 2015 TOTAL PACKAGE 2014 Ms J Mashabela Chief Executive Officer 1-Apr Mr TM Lata Chief Director: OQM 1-Apr Mr VD Naidoo Chief Director: OQA 1-Apr Ms N Madilonga Chief Financial Officer 1-Apr Ms A Solomon Director: Governance 1-Apr Mr I Gumbochuma Director: Finance and Procurement 1-Apr Mr S Siwundla Director: Information Technology 1-Apr Mr S Mkhonza Director: OQM 1-Apr Ms B Langa Mtintsilana Director: OQA 1-Apr Ms AJ Van Rensburg Director: Certification 1-Oct

75 71 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 Statement of Financial Position as at 31 March 2015 NOTE(s) 2015 R R 000 Assets Current Assets Cash and cash equivalents Receivables from exchange transactions Receivables from non-exchange transactions Non-Current Assets Infrastructure, plant and equipment Intangible assets Total Assets Liabilities Current Liabilities Payables from exchange transactions Provisions Operating lease liability Unspent conditional grants and receipts Total Liabilities Net Assets PART E: FINANcial statements

76 72 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 Statement of Financial Performance Revenue NOTE(s) 2015 R R 000 R 000 Revenue from exchange transactions Other income - Insurance claim 18 - Interest received - investment Total revenue from exchange transactions Revenue from non-exchange transactions Government grants & subsidies Transfer from other government entities Total revenue from non-exchange transactions Total revenue Expenses Personnel 19 (30 840) (17 440) Administrative 18 (27 037) (18 215) Transfer payments (500) (82) Depreciation and amortisation expenses (2 573) (951) Total expenses (60 950) (36 688) (Deficit) surplus for the period 23 (7 389) 1 883

77 73 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 Statement of Changes in Net Assets Accumulated surplus R 000 Total net assets R 000 Balance at 31 March Surplus for the period Total changes Balance at 31 March Surplus for the period (7 389) (7 389) Total changes (7 389) (7 389) Balance at 31 March PART E: FINANcial statements

78 74 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 Cash Flow Statement NOTE(s) 2015 R R 000 R 000 Cash flows from operating activities Receipts Grants Interest received Other receipts - Insurance claim Payments Employee costs (28 628) (16 929) Suppliers (42 672) (6 595) (71 300) (23 524) Net cash flows from operating activities 10 (18 239) Cash flows from investing activities Purchase of plant and equipment 6 (1 273) (9 491) Purchase of intangible assets 7 (40) (104) Net cash flows from investing activities (1 313) (9 595) Net increase/(decrease) in cash and cash equivalents (19 552) Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period

79 75 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 Statement of Comparison of Budget and Actual Amounts DIFFERENCE BETWEEN FINAL APPROVED BUDGET AND ACTUAL REFERENCE ACTUAL AMOUNTS ON COMPARABLE BASIS ADJUSTMENT TO COMPARABLE BASIS ACTUAL AMOUNTS ON ACCRUAL BASIS FINAL APPROVED BUDGET ADJUSTMENTS APPROVED BUDGET Budget on Cash Basis Statement of Financial Performance Revenue Revenue from exchange transactions Other income - Insurance claim Interest received - investment Total revenue from exchange transactions Transfer from other government entities Government grants & subsidies Transfer revenue Conditional grant (500) (500) Total transfer from other government entities Total revenue (500) Expenses Personnel (32 695) (28 895) (30 840) (28 628) Administrative (15 700) (10 300) (26 000) (30 110) (12 562) (42 672) (16 672) 4 Total expenses (48 395) (6 500) (54 895) (60 950) (10 350) (71 300) (16 405) Surplus/ (Deficit) for the period (1 147) (7 389) (10 850) (18 239) (9 659) PART E: FINANcial statements

80 76 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 Statement of Comparison of Budget and Actual Amounts (continued) Budget on Cash Basis APPROVED BUDGET ADJUSTMENTS FINAL APPROVED BUDGET ACTUAL AMOUNTS ON ACCRUAL BASIS ADJUSTMENT TO COMPARABLE BASIS ACTUAL AMOUNTS ON COMPARABLE BASIS DIFFERENCE BETWEEN FINAL APPROVED BUDGET AND ACTUAL REFERENCE Statement of Financial Position Assets Non-Current Assets Infrastructure, plant and equipment (3 173) (2 026) (1 273) - (1 273) Intangible assets (100) - (100) (40) - (40) (8 702) (10 850) (19 552) (8 846) 1) The majority of interest was earned from Investment with SARB. Initially QCTO did not anticipate the excess funds during the year. 2) The difference is due to approved rollovers of accumulated surplus that formed part of the 2014 approved budget. 3) The personel expenditure budget was under spent due to resignations during the year which will be filled in the new financial year. 4) The bulk of the general expenses were paid immediately after year end, they were however accounted for correctly under accrual basis in the prior year. 5) The capital expenditure budget was under-spent because the majority of the assets where purchased in the prior year when QCTO moved to it s new premises.

81 77 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 Accounting Policies 1. Presentation of Annual Financial Statements The Annual Financial Statements have been prepared in accordance with the Standards of Generally Recognised Accounting Practice (GRAP), issued by the Accounting Standards Board in accordance with Section 91(1) of the Public Finance Management Act (Act 1 of 1999). These Annual Financial Statements have been prepared on an accrual basis of accounting and are in accordance with historical cost convention as the basis of measurement, unless specified otherwise. They are presented in South African Rand. A summary of the significant accounting policies, which have been consistently applied in the preparation of these Annual Financial Statements, are disclosed below. on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Impairment testing Due to the nature of the QCTO, management considers property, plant and equipment and intangible assets to be non-cash generating assets and therefore impairment of cash-generating assets are not applicable. Provisions Provisions were raised and management determined an estimate based on the information available. Additional disclosure of these estimates of provisions are included in note 9 - Provisions. 1.1 Presentation currency These financial statements are presented in South African rand which is the functional currency of the entity. Figures have been rounded off to the nearest thousand Rand (). 1.2 Going concern assumption These financial statements have been prepared on the going concern basis. In assessing whether the QCTO is a going concern, the Accounting Authority has considered the fact that the QCTO receives State Contributions (Voted Funds) which is sufficient to classify the QCTO as a going concern for at least the next twelve months and has also conducted a comprehensive going concern assessment. 1.3 Offsetting Assets, liabilities, revenues and expenses have not been offset except when offsetting is required or permitted by a standard of GRAP. 1.4 Significant judgements and sources of estimation uncertainty In the application of the QCTO accounting policies, management is required to make judgements, estimations and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on past experience and other factors that are considered to be relevant.actual results may differ from these estimates. The estimates and underlying assumptions are reviewed Property, plant and equipment The useful lives of assets are based on management s estimation. Management considers the following factors to determine the optimum useful life expectation for each of the individual items of property, plant and equipment. Expected usage of the asset. Usage is assessed by reference to the assets expected capacity or physical output, Expected physical wear and tear, which depends on operational factors such as the number of shifts for which the asset is to be used, the repair and maintenance programme, and the care and maintenance of the asset while idle; Technical or commercial obsolescence arising from changes or improvement in production or from a change in the market demand for the product or service output of the asset; and Exit policy of the entity. 1.5 Infrastructure, plant and equipment Infrastructure, plant and equipment are tangible noncurrent assets (including infrastructure assets) that are held for use in the production or supply of goods or services, rental to others, or for administrative purposes, and are expected to be used during more than one reporting period. The cost of an item of infrastructure, plant and equipment is recognised as an asset when: it is probable that future economic benefits or service potential associated with the item will flow to the entity; and PART E: FINANcial statements

82 78 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 Accounting Policies (CONTINUED) the cost or fair value of the item can be measured reliably. Infrastructure, plant and equipment is initially measured at cost. The cost of an item of infrastructure, plant and equipment is the purchase price and other costs attributable to bring the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Trade discounts and rebates are deducted in arriving at the cost. Where an asset is acquired through a non-exchange transaction, its cost is its fair value as at the date of acquisition. Where an item of infrastructure, plant and equipment is acquired in exchange for a non-monetary asset or assets, or a combination of assets and non-monetary assets, the asset acquired is initially measured at fair value (the cost). If the acquired item s fair value was not determinable, it s deemed cost is the carrying amount of the asset(s) given up. Recognition of costs in the carrying amount of an item of infrastructure, plant and equipment ceases when the item is in the location and condition necessary for it to be capable of operating in the manner intended by management. Major spare parts and stand by equipment which are expected to be used for more than one period are included in infrastructure, plant and equipment. In addition, spare parts and stand by equipment which can only be used in connection with an item of infrastructure, plant and equipment are accounted for as infrastructure, plant and equipment. Major inspection costs which are a condition of continuing use of an item of infrastructure, plant and equipment and which meet the recognition criteria above are included as a replacement in the cost of the item of infrastructure, plant and equipment. Any remaining inspection costs from the previous inspection are derecognised. Infrastructure, plant and equipment is carried at cost less accumulated depreciation and any impairment losses. Infrastructure, plant and equipment are depreciated on the straight line basis over their expected useful lives. The useful lives of items of infrastructure, plant and equipment have been assessed as follows: The QCTO does not review the useful life, depreciation method or residual value if the expectations of previous years did not change. Each part of an item of infrastructure, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. The depreciation charge for each period is recognised in surplus or deficit unless it is included in the carrying amount of another asset. Items of infrastructure, plant and equipment are derecognised when the asset is disposed of or when there are no further economic benefits or service potential expected from the use or disposal of the asset. The gain or loss arising from the derecognition of an item of infrastructure, plant and equipment is included in surplus or deficit when the item is derecognised. The gain or loss arising from the derecognition of an item of infrastructure, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item. 1.6 Intangible assets An Intangible asset is identifiable if it either: is separable, i.e. is capable of being separated or divided from an entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, identifiable assets or liability, regardless of whether the entity intends to do so; or arises from binding arrangements (including rights from contracts), regardless of whether those rights are transferable or separable from the entity or from other rights and obligations. A binding arrangement describes an arrangement that confers similar rights and obligations on the parties to it as if it were in the form of a contract. An intangible asset is recognised when: it is probable that the expected future economic benefits or service potential that are attributable to the asset will flow to the entity; and the cost or fair value of the asset can be measured reliably. Item Leasehold improvements Furniture and fittings Motor vehicles Office equipment Computer equipment Average useful life 5 years 5-10 years 5 years 3 years 3 years The entity assesses the probability of expected future economic benefits or service potential using reasonable and supportable assumptions that represent management s best estimate of the set of economic conditions that will exist over the useful life of the asset. Where an intangible asset is acquired through a non-

83 79 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 Accounting Policies (CONTINUED) exchange transaction, its initial cost at the date of acquisition is measured at its fair value as at that date. Intangible assets are carried at cost less any accumulated amortisation and any impairment losses. An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows or service potential. Amortisation is not provided for these intangible assets, but they are tested for impairment annually and whenever there is an indication that the asset may be impaired. For all other intangible assets amortisation is provided on a straight line basis over their useful life. The amortisation period and the amortisation method for intangible assets are reviewed at each reporting date. Reassessing the useful life of an intangible asset with a finite useful life after it was classified as indefinite is an indicator that the asset may be impaired. As a result the asset is tested for impairment and the remaining carrying amount is amortised over its useful life. Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are not recognised as intangible assets. Internally generated goodwill is not recognised as an intangible asset. Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows: repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) for impairment or uncollectibility. Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Derecognition is the removal of a previously recognised financial asset or financial liability from an entity s statement of financial position. A derivative is a financial instrument or other contract with all three of the following characteristics: Its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract (sometimes called the underlying ). It requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors. It is settled at a future date. Item Computer software Intangible assets are derecognised: on disposal; or Useful life 2 years when no future economic benefits or service potential are expected from its use or disposal. The gain or loss is the difference between the net disposal proceeds, if any, and the carrying amount. It is recognised in surplus or deficit when the asset is derecognised. 1.7 Financial instruments A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or a residual interest of another entity. The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition minus principal The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability (or group of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, an entity shall estimate cash flows considering all contractual terms of the financial instrument (for example, prepayment, call and similar options) but shall not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate (see the Standard of GRAP on Revenue from Exchange Transactions), transaction costs, and all other premiums or discounts. There is a presumption that the cash flows and the expected life of a group of similar financial instruments can be estimated reliably. However, in those rare cases when it is not possible to reliably estimate the cash flows or the expected life of a PART E: FINANcial statements

84 80 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 Accounting Policies (CONTINUED) financial instrument (or group of financial instruments), the entity shall use the contractual cash flows over the full contractual term of the financial instrument (or group of financial instruments). Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm s length transaction. A financial asset is: cash; a residual interest of another entity; or a contractual right to: - receive cash or another financial asset from another entity; or - exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity. A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. A financial liability is any liability that is a contractual obligation to: deliver cash or another financial asset to another entity; or exchange financial assets or financial liabilities under conditions that are potentially unfavourable to the entity. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Liquidity risk is the risk encountered by an entity in the event of difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk. Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. A financial asset is past due when a counterparty has failed to make a payment when contractually due. A residual interest is any contract that manifests an interest in the assets of an entity after deducting all of its liabilities. A residual interest includes contributions from owners, which may be shown as: equity instruments or similar forms of unitised capital; a formal designation of a transfer of resources (or a class of such transfers) by the parties to the transaction as forming part of an entity s net assets, either before the contribution occurs or at the time of the contribution; or a formal agreement, in relation to the contribution, establishing or increasing an existing financial interest in the net assets of an entity. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability. An incremental cost is one that would not have been incurred if the entity had not acquired, issued or disposed of the financial instrument. Initial recognition The entity recognises a financial asset or a financial liability in its statement of financial position when the entity becomes a party to the contractual provisions of the instrument. The entity recognises financial assets using trade date accounting. Initial measurement of financial assets and financial liabilities The entity measures a financial asset and financial liability initially at its fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. The entity first assesses whether the substance of a concessionary loan is in fact a loan. On initial recognition, the entity analyses a concessionary loan into its component parts and accounts for each component separately. The entity accounts for that part of a concessionary loan that is: a social benefit in accordance with the Framework for the Preparation and Presentation of Financial Statements, where it is the issuer of the loan; or non-exchange revenue, in accordance with the Standard of GRAP on Revenue from Non-exchange Transactions (Taxes and Transfers), where it is the recipient of the loan.

85 81 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 Accounting Policies (CONTINUED) Subsequent measurement of financial assets and financial liabilities The entity measures all financial assets and financial liabilities after initial recognition using the following categories: Financial instruments at fair value. Financial instruments at amortised cost. Financial instruments at cost. All financial assets measured at amortised cost, or cost, are subject to an impairment review. Derecognition Financial assets The entity derecognises financial assets using trade date accounting. The entity derecognises a financial asset only when: the contractual rights to the cash flows from the financial asset expire, are settled or waived; the entity transfers to another party substantially all of the risks and rewards of ownership of the financial asset; or the entity, despite having retained some significant risks and rewards of ownership of the financial asset, has transferred control of the asset to another party and the other party has the practical ability to sell the asset in its entirety to an unrelated third party, and is able to exercise that ability unilaterally and without needing to impose additional restrictions on the transfer. In this case, the entity : - derecognise the asset; and - recognise separately any rights and obligations created or retained in the transfer. The carrying amounts of the transferred asset are allocated between the rights or obligations retained and those transferred on the basis of their relative fair values at the transfer date. Newly created rights and obligations are measured at their fair values at that date. Any difference between the consideration received and the amounts recognised and derecognised is recognised in surplus or deficit in the period of the transfer. If the entity transfers a financial asset in a transfer that qualifies for derecognition in its entirety and retains the right to service the financial asset for a fee, it recognise either a servicing asset or a servicing liability for that servicing contract. If the fee to be received is not expected to compensate the entity adequately for performing the servicing, a servicing liability for the servicing obligation is recognised at its fair value. If the fee to be received is expected to be more than adequate compensation for the servicing, a servicing asset is recognised for the servicing right at an amount determined on the basis of an allocation of the carrying amount of the larger financial asset. If, as a result of a transfer, a financial asset is derecognised in its entirety but the transfer results in the entity obtaining a new financial asset or assuming a new financial liability, or a servicing liability, the entity recognise the new financial asset, financial liability or servicing liability at fair value. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received is recognised in surplus or deficit. If the transferred asset is part of a larger financial asset and the part transferred qualifies for derecognition in its entirety, the previous carrying amount of the larger financial asset is allocated between the part that continues to be recognised and the part that is derecognised, based on the relative fair values of those parts, on the date of the transfer. For this purpose, a retained servicing asset is treated as a part that continues to be recognised. The difference between the carrying amount allocated to the part derecognised and the sum of the consideration received for the part derecognised is recognised in surplus or deficit. If a transfer does not result in derecognition because the entity has retained substantially all the risks and rewards of ownership of the transferred asset, the entity continue to recognise the transferred asset in its entirety and recognise a financial liability for the consideration received. In subsequent periods, the entity recognises any revenue on the transferred asset and any expense incurred on the financial liability. Neither the asset, and the associated liability nor the revenue, and the associated expenses are offset. Financial liabilities The entity removes a financial liability (or a part of a financial liability) from its statement of financial position when it is extinguished i.e. when the obligation specified in the contract is discharged, cancelled, expires or waived. The difference between the carrying amount of a financial liability (or part of a financial liability) extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in surplus or deficit. Any liabilities that are waived, forgiven or assumed by another entity by way of a non-exchange transaction are accounted for in accordance with the Standard of GRAP on Revenue from Non-exchange Transactions (Taxes and Transfers). PART E: FINANcial statements

86 82 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March Leases A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership. When a lease includes both land and buildings elements, the entity assesses the classification of each element separately. Operating leases - lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset or liability. 1.9 Impairment of non-cash-generating assets Cash-generating assets are those assets held by the entity with the primary objective of generating a commercial return. When an asset is deployed in a manner consistent with that adopted by a profit-orientated entity, it generates a commercial return. Non-cash-generating assets are assets other than cashgenerating assets. Impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition of the loss of the asset s future economic benefits or service potential through depreciation (amortisation). Carrying amount is the amount at which an asset is recognised in the statement of financial position after deducting any accumulated depreciation and accumulated impairment losses thereon. Costs of disposal are incremental costs directly attributable to the disposal of an asset, excluding finance costs and income tax expense. Depreciation (Amortisation) is the systematic allocation of the depreciable amount of an asset over its useful life. Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm s length transaction between knowledgeable, willing parties, less the costs of disposal. Recoverable service amount is the higher of a non-cashgenerating asset s fair value less costs to sell and its value in use. Useful life is either: (a the period of time over which an asset is expected to be used by the entity; or (b) the number of production or similar units expected to be obtained from the asset by the entity. Recognition and measurement If the recoverable service amount of a non-cash-generating asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable service amount. This reduction is an impairment loss. An impairment loss is recognised immediately in surplus or deficit. Any impairment loss of a revalued non-cash-generating asset is treated as a revaluation decrease. When the amount estimated for an impairment loss is greater than the carrying amount of the non-cashgenerating asset to which it relates, the entity recognises a liability only to the extent that is a requirement in the Standard of GRAP. After the recognition of an impairment loss, the depreciation (amortisation) charge for the non-cashgenerating asset is adjusted in future periods to allocate the non-cash-generating asset s revised carrying amount, less its residual value (if any),on a systematic basis over its remaining useful life Employee benefits Employee benefits are all forms of consideration given by QCTO in exchange for service rendered by employees. Short-term employee benefits Short-term employee benefits are employee benefits (other than termination benefits) that are due to be settled within twelve months after the end of the period in which the employees render the related service. Short-term employee benefits include items such as: wages, salaries and social security contributions; short-term compensated absences (such as paid annual leave and paid sick leave) where the compensation for the absences is due to be settled within twelve months after the end of the reporting period in which the employees render the related employee service; bonus, incentive and performance related payments payable within twelve months after the end of the reporting period in which the employees render the related service; and non-monetary benefits (for example, medical care, and free or subsidised goods or services such as housing, cars and cellphones) for current employees. When an employee has rendered service to the entity during a reporting period, the entity recognises the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service:

87 83 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 as a liability (accrued expense), after deducting any amount already paid. If the amount already paid exceeds the undiscounted amount of the benefits, the entity recognise that excess as an asset (prepaid expense) to the extent that the prepayment will lead to, for example, a reduction in future payments or a cash refund; and as an expense, unless another Standard requires or permits the inclusion of the benefits in the cost of an asset. The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in the case of non-accumulating absences, when the absence occurs. The entity measure the expected cost of accumulating compensated absences as the additional amount that the entity expects to pay as a result of the unused entitlement that has accumulated at the reporting date. The entity recognises the expected cost of bonus, incentive and performance related payments when the entity has a present legal or constructive obligation to make such payments as a result of past events and a reliable estimate of the obligation can be made. A present obligation exists when the entity has no realistic alternative but to make the payments Provisions and contingencies Provisions are recognised when: the entity has a present obligation as a result of a past event; it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation; and if it is no longer probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation. Where discounting is used, the carrying amount of a provision increases in each period to reflect the passage of time. This increase is recognised as an interest expense. A provision is used only for expenditures for which the provision was originally recognised. Provisions are not recognised for future operating deficits. If the entity has a contract that is onerous, the present obligation (net of recoveries) under the contract is recognised and measured as a provision. A constructive obligation to restructure arises only when an entity: has a detailed formal plan for the restructuring, identifying at least: - the activity/operating unit or part of a activity/ operating unit concerned; - the principal locations affected; - the location, function, and approximate number of employees who will be compensated for services being terminated; - the expenditures that will be undertaken; and - when the plan will be implemented; and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it. Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 13. a reliable estimate can be made of the obligation. The amount of a provision is the best estimate of the expenditure expected to be required to settle the present obligation at the reporting date. Where the effect of time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation. Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement is recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement is treated as a separate asset. The amount recognised for the reimbursement does not exceed the amount of the provision. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Provisions are reversed 1.12 Revenue from exchange transactions Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net assets, other than increases relating to contributions from owners. An exchange transaction is one in which the entity receives assets or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of goods, services or use of assets) to the other party in exchange. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm s length transaction. Measurement Revenue is measured at the fair value of the consideration received or receivable. PART E: FINANcial statements

88 84 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 Interest Revenue arising from the use by others of entity assets yielding interest, royalties and dividends or similar distributions is recognised when: It is probable that the economic benefits or service potential associated with the transaction will flow to the entity, and The amount of the revenue can be measured reliably. Interest is recognised, in surplus or deficit, using the effective interest rate method Revenue from non-exchange transactions Revenue comprises gross inflows of economic benefits or service potential received and receivable by an entity, which represents an increase in net assets, other than increases relating to contributions from owners. Conditions on transferred assets are stipulations that specify that the future economic benefits or service potential embodied in the asset is required to be consumed by the recipient as specified or future economic benefits or service potential must be returned to the transferor. Control of an asset arise when the entity can use or otherwise benefit from the asset in pursuit of its objectives and can exclude or otherwise regulate the access of others to that benefit. Exchange transactions are transactions in which one entity receives assets or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of cash, goods, services, or use of assets) to another entity in exchange. Non-exchange transactions are transactions that are not exchange transactions. In a non-exchange transaction, an entity either receives value from another entity without directly giving approximately equal value in exchange, or gives value to another entity without directly receiving approximately equal value in exchange. Restrictions on transferred assets are stipulations that limit or direct the purposes for which a transferred asset may be used, but do not specify that future economic benefits or service potential is required to be returned to the transferor if not deployed as specified. Stipulations on transferred assets are terms in laws or regulation, or a binding arrangement, imposed upon the use of a transferred asset by entities external to the reporting entity. Transfers are inflows of future economic benefits or service potential from non-exchange transactions, other than taxes. Recognition An inflow of resources from a non-exchange transaction recognised as an asset is recognised as revenue, except to the extent that a liability is also recognised in respect of the same inflow. As the entity satisfies a present obligation recognised as a liability in respect of an inflow of resources from a nonexchange transaction recognised as an asset, it reduces the carrying amount of the liability recognised and recognises an amount of revenue equal to that reduction. Transfers Apart from services in kind, which are not recognised, the entity recognises an asset in respect of transfers when the transferred resources meet the definition of an asset and satisfy the criteria for recognition as an asset. The entity recognises an asset in respect of transfers when the transferred resources meet the definition of an asset and satisfy the criteria for recognition as an asset. Transferred assets are measured at their fair value as at the date of acquisition. Gifts and donations, including goods in-kind Gifts and donations, including goods in kind, are recognised as assets and revenue when it is probable that the future economic benefits or service potential will flow to the entity and the fair value of the assets can be measured reliably Comparative figures Budget information in accordance with GRAP 24 has been provided in the Statement of Comparison of Budget Against Actual Amounts for the current financial year only, and forms part of the audited annual financial statements. When the presentation or classification of items in the annual financial statements is amended, prior period comparative amounts are restated. The nature and reason for the reclassification is disclosed. Where accounting errors have been identified in the current year, the correction is made retrospectively as far as is practicable, and the prior year comparatives are restated accordingly. Where there has been a change in accounting policy in the current year, the adjustment is made retrospectively as far as is practicable, and the prior year comparatives are restated accordingly Irregular expenditure Irregular expenditure as defined in section 1 of the PFMA is expenditure other than unauthorised expenditure, incurred in contravention of or that is not in accordance with a requirement of any applicable legislation, including -

89 85 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2015 (a) this Act; or (b the State Tender Board Act, 1968 (Act No. 86 of 1968), or any regulations made in terms of the Act; or (c) any provincial legislation providing for procurement procedures in that provincial government. on the same basis of accounting therefore a reconciliation between the statement of financial performance and the budget have been included in the Annual Financial Statements. Refer to Statement of comparison of budget and actual amounts. National Treasury practice note no. 4 of 2008/2009 which was issued in terms of sections 76(1) to 76(4) of the PFMA requires the following (effective from 1 April 2008): Irregular expenditure that was incurred and identified during the current financial year and which was condoned before year end and/or before finalisation of the financial statements must also be recorded appropriately in the irregular expenditure register. In such an instance, no further action is also required with the exception of updating the note to the financial statements. Irregular expenditure that was incurred and identified during the current financial year and for which condonement is being awaited at year end must be recorded in the irregular expenditure register. No further action is required with the exception of updating the note to the financial statements. Where irregular expenditure was incurred in the previous financial year and is only condoned in the following financial year, the register and the disclosure note to the financial statements must be updated with the amount condoned. Irregular expenditure that was incurred and identified during the current financial year and which was not condoned by the National Treasury or the relevant authority must be recorded appropriately in the irregular expenditure register. If liability for the irregular expenditure can be attributed to a person, a debt account must be created if such a person is liable in law. Immediate steps must thereafter be taken to recover the amount from the person concerned. If recovery is not possible, the accounting officer or accounting authority may write off the amount as debt impairment and disclose such in the relevant note to the financial statements. The irregular expenditure register must also be updated accordingly. If the irregular expenditure has not been condoned and no person is liable in law, the expenditure related thereto must remain against the relevant programme/expenditure item, be disclosed as such in the note to the financial statements and updated accordingly in the irregular expenditure register Budget information The approved budget is prepared on a cash basis and presented by economic classification linked to performance outcome objectives. The approved budget covers the fiscal period from 2014/04/01 to 2015/03/31. The Annual Financial Statements and the budget are not 1.17 Related parties The entity operates in an economic sector currently dominated by entities directly or indirectly owned by the South African Government. As a consequence of the constitutional independence of the three spheres of government in South Africa, only entities within the national sphere of government are considered to be related parties. Management are those persons responsible for planning, directing and controlling the activities of the entity, including those charged with the governance of the entity in accordance with legislation, in instances where they are required to perform such functions. Close members of the family of a person are considered to be those family members who may be expected to influence, or be influenced by, that management in their dealings with the entity. Only transactions with related parties not at arm s length or not in the ordinary course of business are disclosed Investment income Investment income is recognised on a time-proportion basis using the effective interest method Commitments Commitments are disclosed where the QCTO has, in the normal course of its operations, entered into a contractual agreement with entities related to project and other expenses which are not yet due for payment Unauthorised expenditure Unauthorised expenditure means: overspending of a vote or a main division within a vote; and expenditure not in accordance with the purpose of a vote or, in the case of a main division, not in accordance with the purpose of the main division. All expenditure relating to unauthorised expenditure is recognised as an expense in the statement of financial performance in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and where recovered, it is subsequently accounted for as revenue in the statement of financial performance. PART E: FINANcial statements

90 86 ANNUAL FINANCIAL STATEMENTS for the year ended 31 March Fruitless and wasteful expenditure Fruitless expenditure means expenditure which was made in vain and would have been avoided had reasonable care been exercised. All expenditure relating to fruitless and wasteful expenditure is recognised as an expense in the statement of financial performance in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and where recovered, it is subsequently accounted for as revenue in the statement of financial performance Events after reporting date Events after the reporting date are those events, both favourable and unfavourable, that occur between the reporting date and the date when the financial statements are authorised for issue. Events after reporting date that are classified as adjusting events have been accounted for in the annual financial statements. Events after reporting date that have been classified as non-adjusting events have been disclosed in the disclosure notes to the annual financial statements Changes in accounting policies, estimates and errors The accounting policies applied are consistent with those used to present the previous year s financial statements, unless explicitly stated otherwise. The entity changes an accounting policy only if the change: Is required by a standard of GRAP; or Results in the Annual Financial Statements providing reliable and more relevant information about the effects of transactions, other events or conditions, on the performance or cash flow. Changes in accounting policies that are affected by management have been applied retrospectively in accordance with GRAP 3 requirements, except to the extent that it is impracticable to determine the periodspecific effects or the cumulative effect of the change in policy. In such cases the entity shall restate the opening balances of assets, liabilities and net assets for the earliest period for which retrospective restatement is practicable. Changes in accounting estimates are applied prospectively in accordance with GRAP 3 requirements. Details of changes in estimates are disclosed in the notes to the Annual Financial Statements where applicable. Correction of errors is applied retrospectively in the period in which the error has occurred in accordance with GRAP 3 requirements, except to the extent that it is impracticable to determine the period-specific effects or the cumulative effect of the error. In such cases the entity shall restate the opening balances of assets, liabilities and net assets for the earliest period for which retrospective restatement is practicable.