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1 ANNUAL REPORT

2 MEC s Hon Mandla Makupula (Education) and Hon Pemmy Majodina (Social Development) and ECGBB CFO Trevor Harper at the launch of Sunduza JSS Computer Laboratory sponsored by the ECGBB. Sunduza JSS pupils touching ECGBB sponsored computers for the first time in their lives.

3 Contents 1. Board of Directors and Management Board of Directors Management 5 2. Vision and Mission Vision Mission Objectives & Functions of the Board 7 3. Accounting Authority s Responsibilities and Approval 9 4. CHAIRPERSON S REPORT Overview of Strategic Direction Performance Delivery Community Development Projects Marketing Activities Organisational Alignment and Balanced Score Card Litigation Corporate Governance Related-Party Transactions International/Continental Travel Attendance Register for Board and Committee Meetings Organisational Review Attracting Investments Employment Irregular Expenditure Responsible Gambling Operational Performance Expenditure Relating to Soccer World Cup GAMING PERFORMANCE Revenue and Tax Statistics Distribution of Gambling and Betting Takings AUDIT COMMITTEE REPORT THE AUDITOR GENERAL S REPORT OPERATIONAL PERFORMANCE Introduction Definitions Performance Against Operational Plan Performance Report Annexure HR OVERSIGHT STATISTICS ECGBB Organogram Audited Financial Statements Statement of Financial Position Statement of Financial Performance Statement of Changes in Net Assets Cash Flow Statement Accounting Policies Notes to the Annual Financial Statements 60 3

4 Thumbs Up! CEO Mabutho Zwane and ECGBB staff.

5 1. Board of Directors and Management 1.1 Board of Directors 1.2 Management Board of Directors & Senior management 5

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7 2. Vision and Mission 2.1 VISION Eastern Cape: The Best, Most Efficient, Empowering Gaming Regulator! 2.2 MISSION In support of the Best Gaming Destination, our mission is to ensure that the EC Gaming Industry is conducted honestly and competitively with maximum contribution to society. We are therefore committed to protecting the public interest through regulation, licensing and appropriate enforcement. We will achieve this through providing excellent service to our stakeholders and through facilitating socio-economic benefits to communities within which we operate. 2.3 OBJECTIVES & FUNCTIONS OF THE BOARD The Board oversees all gambling and betting activities in the province and matters incidental thereto, as contemplated in the Act and advises the responsible Member of the Executive Council of the Province for Economic Development, Environmental Affairs & Tourism on gambling matters and to exercise certain further powers contemplated in the Act. The functions of the Board include, among others: ~ ~ Licensing of the gaming industry. ~ ~ Ensuring compliance with the Act by all licensees. ~ ~ Collection of gambling taxes on behalf of the province. ~ ~ Combating illegal gambling. ~ ~ Undertaking licensing investigations. ~ ~ Issuing and revocation of licences. ~ ~ Determining licence conditions. It is the responsibility of the Board to ensure that an accountable and credible legal gaming industry exists in the province and that internationally recognised standards in the industry are complied with. Vision & Mission 7

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9 3. Accounting Authority s Responsibilities and Approval The directors are 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 directors to ensure the annual financial statements fairly represent the state of affairs of the entity at the end of the financial year and the results of its operations and cash flows for that period. The external auditors are engaged to express an independent opinion on the annual financial statements and were 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 on appropriate accounting policies consistently applied and supported by reasonable and prudent judgments and estimates. The directors 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 directors 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 directors are 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. The directors have reviewed the entity s cash flow forecast for the year to 31 March 2012 and, in the light of this review and the current financial position, they are satisfied that the entity has or has access to adequate resources to continue in operational existence for the foreseeable future. Although the accounting authority is primarily responsible for the financial affairs of the entity, they are supported 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 pages 25 to 27. The annual financial statements set out on pages 55 to 76, which have been prepared on the going concern basis, were approved by the accounting authority on 31 May 2011 and were signed on its behalf by R M ZWane adv A MAYOSI Chief Executive Officer chairperson Accounting Authorities Responsibilities & Approval 9

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11 4. CHAIRPERSON S REPORT 4.1 OVERVIEW OF STRATEGIC DIRECTION The Eastern Cape Gambling and Betting Board s Board of Directors approved a revision of its Mission, arising from the Board s commitment of running an efficient organisation that ensures the Eastern Cape gambling industry is conducted competitively. In turn, the Board wants to position the ECGBB, not only as an efficient regulator, but also one that empowers the operators and communities within which the licensees operate. A full report on this exercise is presented in paragraph 5. The ECGBB currently has 8 Operating Divisions. However, part of the strategic review necessitated a thorough work organisation review to support the new strategy. It is anticipated this will change the ECGBB s structure in future to reflect fewer Operating Divisions. Furthermore, the Board launched a new logo in line with its stated strategic goals. The Board also has undertaken to fund community development projects to contribute to socio-economic development in the province. The Board is assisting in the building or renovations of schools, crèches, sport (athletics and boxing) promotions, funding of orphanages, old age homes and feeding schemes. 4.2 PERFORMANCE DELIVERY Global economic recession Like most industries, the economic recession in the past two years has affected the gaming industry negatively. For two years the revenue collected has been around R90-million and the gross gaming revenue stabilising around the R1-billion mark Industry performance The gambling industry continues to create jobs, promote tourism and facilitates and contributes to significant infrastructural development and investments. In the financial year 2010/11, the industry employed people and contributed to local economic development through concessions to local companies. There were more than four million visitors to the casinos, making them key facilitators of tourism Review of ECGBB Act The Board is currently reviewing our enabling legislation to ensure that it creates an efficient environment for the collection of revenue and all matters incidental to its mandate Organisational environment The ECGBB has undertaken a comprehensive process of organisational development, aligning the organisation to the new strategy. This will result in a new structure and completion of a Balanced Scorecard that will be easy to use as a tool to measure the attainment of our strategic goals. The organisation identified a weakness in its planning, monitoring and evaluation and has created a position in its structure that will strengthen this weakness strategic services. The re-focusing of the organisation has resource implications more staff will need to be hired to achieve its strategic goals from the current 27 to 41 staff members. The environment in which ECGBB operates is largely subservient to the gaming environment that prevails in the country and world-wide, and that can be summarised as follows: ~ ~ A highly litigious environment that emanates from the high stakes in this lucrative business with good returns. ~ ~ Consequent contestations that tend to lead to drawn out cases. ~ ~ A highly and strictly regulated industry. Chairperson's Report 11

12 12 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT ~ ~ Technology driven, necessitating constant sharing of latest developments, practices and attending international gaming regulators conferences. ~ ~ Global economic recession. ~ ~ Land claim issues that tend to delay projects eg casino development projects. ~ ~ Economic and structural constraints that hamper the broadening of ownership to new entrants or potential entrants. 4.3 COMMUNITY DEVELOPMENT PROJECTS The Eastern Cape Gambling and Betting Board (ECGBB) funded a number of community projects during the financial year under review. These were: BENEFICIARY VALUE (R) DESCRIPTION AREA Sunduza Junior Secondary 100,000 Computers and computers lab Sterkspruit Ethembeni Old Age Home 20,000 Food parcels Mdantsane Nceduluntu Support Group 20,000 Food parcels and toys Reeston Abonwabisi Community Home 20,000 Food parcels and toys Ziphunzana Nqadu Great Place 162,000 Mobile gym Willowvale Sinempendulo Offender Rehabilitation Programme 90,000 Sponsorship Port Elizabeth The projects were varied in nature, covering different needs of specific communities. The projects covered early childhood development support, old age home support and education. 4.4 MARKETING ACTIVITIES The ECGBB restructured its Research and Communication Unit to focus on marketing. This has resulted in an improved footprint and presence in the public eye. The Board launched its new corporate image and strategy in East London on 23 November As a marketing strategy the Board identified boxing as a critical sport that could be used as a platform to disseminate its responsible gambling messages, brand development as well as supporting the sport in its quest to become professional. The Board also supported Mr Amos Zingo, a runner for Real Gijimas, who participated in the Comrades Marathon and was a bronze medallist.

13 4.5 ORGANISATIONAL ALIGNMENT AND BALANCE SCORE CARD BACKGROUND The ECGBB Board approved the 5-year Strategic and Performance Plan on the 11 September During the review process the Vision was amended to read EASTERN CAPE: THE BEST GAMING DESTINATION! In support of this, the mission developed and approved was: ~ ~ To ensure that the Eastern Cape gaming industry is conducted honestly and competitively with maximum contribution to society; is free from corruption and inspires public trust and confidence. ~ ~ To protect the public interest through regulation, licensing and appropriate enforcement in the gaming industry. ~ ~ To maintain and regulate a successful gaming industry which creates jobs, generates revenue and extends socio-economic benefits to communities in the province. ~ ~ To ensure that the Eastern Cape gaming industry provides and maintains world class facilities and services to customers. During the strategic review process it was also agreed that an exercise would be conducted to align the structure to the strategy and implement the Balanced Scorecard as part of an Integrated Performance Management System. An essential part of the score carding process was to translate the strategy into something meaningful to all stakeholders which could be actioned, measured and reviewed at all levels. During this process it became evident that the Vision and Mission needed to be amended so that the strategy of the ECGBB could be translated to all levels and implemented effectively. The reason for this thinking can be gleaned from the motivation below MOTIVATION The ECGBB Act stipulates that the core business of the ECGBB is to regulate the industry as depicted in the Mission above, however the Vision tells a different story. The way it is currently worded suggests that the core business of the ECGBB is to attract potential gaming tourists to the Eastern Cape. The decision to visit the Eastern Cape for the best gaming experience will not be made based on the fact that the ECGBB is an efficient regulator, but rather by the unforgettable gaming experience the gaming operators offer their customers and whether they fulfil this expectation which will ensure repeat visits. The ECGBB has a very limited role to play in how the gaming operators run their organisations which in turn make them attractive to potential tourists this is the sole responsibility of the gaming operators with legislative support from the ECGBB. The ECGBB cannot be held accountable for a future they cannot influence. This would make the stakeholders in the organisation demotivated and make for a difficult organisation to lead. The role of the ECGBB is to rather provide services within a legislative framework as captured in the above Mission. The current Vision is therefore more applicable to licensees in the Eastern Cape who are the accountable parties to attract potential tourists to their casinos rather than the ECGBB. It was resolved that the Vision be amended to capture where the ECGBB sees itself in the future, a future they can be held accountable for, a future they can impact a future all stakeholders can lead and follow. It was therefore proposed that the current Vision be amended to read: Eastern Cape: The Best, Most Efficient, Empowering Gaming Regulator! The efficiency talks to the fact that the ECGBB wants to be seen to be running an efficient organisation which ensures that the EC gaming industry is in turn conducted competitively. The empowering component talks to the fact that the ECGBB wishes to position itself in the market not only as an efficient regulator but also one which empowers the operators but more importantly the communities within which licensees operate in the Eastern Cape. This is an important leg of the strategy which is currently under discussion in terms of the implementation of an SED entity and critical in terms of the new image the ECGBB wants to promote and brand. Chairperson's Report 13

14 14 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT The Mission has also been slightly amended to capture the essence of the ECGBB and more importantly why the ECGBB exists in a shorter more concise paragraph. It was therefore resolved that the current Mission be amended to read: In support of the Best Gaming Destination, our mission is to ensure that the EC Gaming Industry is conducted honestly and competitively with maximum contribution to society. We are therefore committed to protecting the public interest through regulation, licensing and appropriate enforcement. We will achieve this through providing excellent service to our stakeholders and through facilitating socio-economic benefits to communities within which we operate. The current Vision is therefore more applicable to licensees in the Eastern Cape who are the accountable parties to attract potential tourists to their casinos rather than the ECGBB. Therefore the proposed amendment to the Vision captures where the ECGBB sees itself in the future where it is held accountable, a future it can impact and where all stakeholders can lead and follow. It must be noted that the amended Mission captures most of what was in the previous Mission, but is more concise and focuses on three main features namely: ~ ~ Why the ECGBB exists. ~ ~ The ECGBB core business. ~ ~ How the ECGBB intends to deliver on its Vision. Finally, all three of the above tell a story and provide a logical business case for the ECGBB stakeholders to both live, lead and deliver against BALANCED SCORE CARD PROGESS TO DATE 1. Vision amended. 2. Mission amended. 3. Strategic Scorecard completed Operational Scorecard completed. 5. Performance centre workshops completed. 6. IPA s developed ORGANISATIONAL DESIGN The Organisational Design work was done simultaneously as the Balanced Score Card process. The following has been developed: ~ ~ Job descriptions. ~ ~ Service level model. ~ ~ Functional structure. 4.6 LITIGATION The gaming environment is litigious because of the high stakes in the business. A few of our licensees took us to court. The table below give a summary of the litigations: LITIGATIONS SUMMARY OF THE CASE STATUS ECGBB VS ELONWABENI RESORTS (PTY) LTD Losing bidder (Elonwabeni) for Zone 4 casino licensing launched a high court application against the Board challenging the awarding of the licence to the competitor (preferred bidder) and the court ruled in the applicant s favour. Board is appealing the court judgment to the Supreme Court of Appeal. ECGBB VS VUKANI GAMING CORPORATION EASTERN CAPE (PTY) LTD Vukani Gaming Corporation Eastern Cape (Pty) Ltd launched an urgent court application at the High Court of Grahamstown demanding a takeover of LPM sites that were licensed under the liquidated Route Operator (Luck At It Eastern Cape (Pty) Ltd). The court ruled in favour of Vukani.

15 LITIGATIONS SUMMARY OF THE CASE STATUS ECGBB VS MBIZANA DEVELOPMENT TRUST The Board launched a court application against the Mbizana The Court ruled in favour of the Board. Development Trust trustees that they be removed as trustees for lack of proper management. LUCK AT IT EASTERN CAPE (PTY) LTD VS ECGBB A claim for R 1,182,953 including corporate social investment commitments outstanding levies/ taxes and lost taxes as a consequence of Luck-At-It being liquidated has been lodged with the liquidators, Progressive Administration (Cape) (Pty) Ltd. Court awarded in favour of the Board. 4.7 CORPORATE GOVERNANCE The Board of Directors The Honourable MEC for Economic Development, Environmental Affairs & Tourism appointed a new Board of Directors who commenced their duties on 1 April The new Board members are: ~ ~ Adv N Mayosi (Chairperson) ~ ~ Mr O Mtati (Deputy Chairperson) ~ ~ Ms Y Makhasi ~ ~ Mr P Voges ~ ~ Mr Z Nomafu ~ ~ Mr M Vena ~ ~ Mr V Tshangana ~ ~ Ms P Nqakula ~ ~ Mr RM Zwane (CEO, ex officio) The Board is established as a public entity in terms of the Gambling and Betting Act, 1997 (Act No. 5 of 1997)(Eastern Cape) and is listed as a provincial public entity in Schedule 3C of the Public Finance Management Act, 1999 (Act No. 1 of 1999). The Board members act as the accounting authority in terms of the PFMA. The accounting authority is responsible for determining strategic direction and policy, and for the monitoring of operational performance and management. The Board meets regularly. The Board subscribes to good corporate governance and to this end all the board members as well as senior management are members of the Institute of Directors and underwent training to familiarise themselves with the latest King report on corporate governance. The Board was fully constituted during the year under review. The Board members are: 1. A legal practitioner of at least five years standing. 2. A chartered accountant of at least five years standing. 3. An individual who has knowledge of and involvement in the tourism industry. 4. A person who has knowledge of and experience in the field of welfare or community or socioeconomic development. 5. One member to represent the Department of Safety & Security in the Provincial Government. 6. One member to represent the Department of Economic Development, Environmental Affairs & Tourism in the Provincial Government. 7. One member to represent the Department of Finance in the Provincial Government. 8. A person to represent the community in general. 9. The Chief Executive Officer, who is not entitled to vote Board Committees During the year under review, the Board instituted various committees to effectively discharge its duties. The governance structure of the Board is shown in the figure below: Chairperson's Report 15

16 16 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT Corporate Governance Committees of the Board ECG&BB Board of Directors Audit & Risk Committee Compliance & Licensing Committee Finance Committee Legislative Review Committee HR & Remuneration Committee Special Projects Committee 4.8 RELATED-PARTY TRANSACTIONS Related party transactions occurred during the financial year under review (see detail on page 70). 4.9 International/CONTINENTAL TRAVEL Conference Dates Nature Of Conference/Trip Attendees June 2010 Asia Global Gaming Expo (G2E) SL Majombozi, A Ntsonkota September 2010 Australian Expo M Vanda, D Mzonke September th European Conference on Gambling Studies & Policy Issues: Vienna, Austria RM Zwane, K Canca, CTS Cossie, A Bomvu 9 13 October 2010 International Association of Gaming Regulators (IAGR) Conference: Washington DC SL Majombozi, RM Zwane, P White January 2011 ICE Totally Gaming Conference: London SL Majombozi, M Vanda, B Mnqokoyi

17 4.10 ATTENDANCE REGISTER FOR BOARD AND COMMITTEE MEETINGS 2010/2011 FINANCIAL YEAR Board Meetings (11) Audit and Risk Committee Meetings (5) Finance Committee Meetings (2) Legislation Review Committee Meetings (4) Compliance and Licencing Committee MeetingS (2) Remuneration Committee MeetingS (4) Name C A C A C A C A C A C A S L Majombozi Chair 11 Invited 3 Invited Invited 2 Invited 1 Invited 3 4 K Canca Member 10 Member 2 Member 4 Member 4 4 A Ntsonkota Member 8 Chair 4 4 N Tom Member 5 Chair 2 Chair 2 2 N Mtakati Member 5 Member 1 Member 1 3 CTS Cossie Member 5 Chair 4 Member 2 3 P White Member 9 Chair 5 4 A Mabizela Member 10 Member 2 2 S Whitfield Member 4 R Hill Member 5 1 Key: C = Capacity A = Attendance Other = Special Board Meetings Other 4.11 ORGANISATIONAL REVIEW In the year under review, all senior management positions were filled. This includes the critical position of the Chief Financial Officer and Manager: Compliance and Licensing. The ECGBB has taken the opportunity afforded by the need to re-align the organisation with the requirements of the strategy and socio-economic realities of the province, to undertake a radical review of the structure. This has resulted in a more streamlined structure and supporting job descriptions which will be more responsive to the needs of the Gaming Industry and Strategic Intent of the 2010/ /15 Strategic Plan. A detailed organogram is contained on page 53 of the annual report. In addition, this process has resulted in the translation of the ECGBB Strategy into an Integrated Performance System with meaningful Strategic and Operational Scorecards at all levels of the organisation, Individual Performance Agreements and Development Plans. This coupled with the new structure will allow the organisation to be more responsive to the needs of the gaming industry in the Eastern Cape as well as the complex socio-economic needs of the province. This will be actioned through carefully designed sets of measures which will hold all stakeholders accountable for specific deliverables including license holders in terms of meeting their corporate social and environmental responsibility commitments, as required in the casino license conditions. Chairperson's Report 17

18 18 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT ATTRACTING INVESTMENTS The Board secured close to R1,4-billion reinvestment through the casino re-licensing process in the following casino zones of the province: Zone 1 R1-billion re-investment in the Boardwalk Casino in Port Elizabeth Zone 2 R400-million re-investment in the relicensing of Hemingways Casino. Zone 5 R340-million re-investment in the relicensing of Wild Coast Sun Casino EMPLOYMENT The gaming industry has created much needed employment opportunities in the province, as depicted below: Contributions to direct jobs Eastern Cape FY2007 FY2008 FY2009 FY2010 ECGBB Casinos 4,961 4, Limited Payout Machines Hourseracing industry TOTAL 5,507 4, In the year under review and in 2011/2012 the re-investments in Zone 1, Zone 2 and Zone 5 will create more than new jobs during the construction phase combined, as well as more than 500 permanent jobs IRREGULAR EXPENDITURE As descibed in note 32 and 33 of the financial statements, the Board incured irregular expenditure of R The Auditor General regards the expenditure exceeding the budget as irregular. The board is of the oppinion that this is not irregular as it was approved by the board by approving the monthly management accounts. These monthly management accounts were however not signed by the Board. The internal Auditors concur with the Board that this is not irregular expenditure. The Audit fees were part of this over expendiure by R The other major over expenditure was incurrred in Risk management and Bussiness Development costs.

19 4.15 RESPONSIBLE GAMBLING The gambling industry, including gambling regulators, in South Africa established and funded the National Responsible Gambling Programme (NRGP) to promote responsible gambling. The NRGP conducts responsible gambling campaigns and public education about gambling. The NRGP conducted TV, radio and print media public awareness campaigns on gambling with specific emphasis during the festive season. In further pursuit of responsible gambling, the Board received and processed 324 self exclusion applications. To ensure compliance with requirements of the legislation, all advertising by licence holders in the province is vetted by the Board. All adverts are required to carry slogans relating to responsible gambling and must contain the contact details of the National Responsible Gambling Programme OPERATIONAL PERFORMANCE The Board received R23-million annual grant funding from the Department Economic Development, Environmental Affairs & Tourism (DEDEAT). Gambling and betting taxes, fees and interest collected during the financial year under review totalled R90.1- million (2009/10: R89,7-million). The recession had a negative impact in revenue collection resulting in revenue levels equivalent to the previous financial year. The financial performance of the Board is fully disclosed in the accompanying annual financial statements. The total Gross Gaming Revenues (GGR) generated in the financial year under review was R1.1-billion. Full details are contained in the annual financial statements. The Board has reported a deficit of R4,3-million which was funded through the Board s own cash reserves. A detailed analysis on the causes of a deficit is presented in paragraph 4.14 above EXPENDITURE RELATING TO SOCCER WORLD CUP The Board did not incur expenditure as a result of the soccer World Cup for clothing, tickets, accommodation or transport. Adv N Mayosi CHAIRPERSON Chairperson's Report 19

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21 5. GAMING PERFORMANCE 5.1 Revenue and Tax Statistics Financial Year vs CASINOS Gross Gaming Revenue RACING Gross Gaming Revenue LPM INDUSTRY Gross Gaming Revenue TOTAL INDUSTRY Gross Gaming Revenue Gambling Taxes Gambling Taxes Gambling Taxes Gambling Taxes R R R R R R R R Distribution of Gambling and Betting Takings: 2010/2011 Financial Year DISTRIBUTION OF TAKINGS FROM GAMING MACHINES DISTRIBUTION OF TAKINGS FROM GAMING TABLES 4.45% 0.68% 2.31% 0.42% DISTRIBUTION OF TAKINGS FROM THE RACING INDUSTRY DISTRIBUTION OF TAKINGS FROM THE LPM INDUSTRY 1.34% 1.09% 1.82% 14.69% 2.37% 35.96% 8.50% 5.37% 94.45% 81.18% 56.30% 89.07% Return to Public VAT Casino Revenue Gambling Taxes Gaming Performance 21

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23 6. AUDIT COMMITTEE REPORT We are pleased to present our report for the financial year ended 31 March Audit Committee Members and Attendance The audit committee consists of the members listed hereunder and should meet at least four times a year as per its approved terms of reference. During the current year 5 meetings were held. Name of Member Number of Meetings Attended P White (Chairperson) 5 S Whitfield 4 R Hill 5 The Board of Directors appointed a new committee who commenced their duties effective 1 April The new audit committee consists of: ~ ~ L Smith (Chairperson) ~ ~ H Marsberg ~ ~ P White ~ ~ Z Nomafu (Director and Audit Committee member) The new audit committee is considered to have the correct experience, qualifications and skills to carry out their responsibilities effectively. Audit Committee Responsibility We report that we have adopted appropriate formal terms of reference in our charter in line with the requirements of Section 38(1)(a) of the Public Finance Management Act, No. 1 of 1999 and Treasury Regulation 3.1. We further report that we conducted our affairs in compliance with this charter. The effectiveness of internal control The system of internal control was not entirely effective for the year under review. During the year several deficiencies in the system of internal control were reported by the internal auditors. Evaluation of Financial Statements We have: ~ ~ Reviewed and discussed the annual financial statements which have been recommended to the Accounting Authority to be submitted to the Auditor General for audit purposes at 31 May ~ ~ Reviewed the Auditor-General South Africa s management report and management s response thereto. ~ ~ Reviewed the entity s compliance with legal and regulatory provisions. ~ ~ Reviewed the performance information to be approved by the Accounting Authority. ~ ~ Reviewed significant adjustments resulting from the audit. Internal Audit The Internal Audit function was outsourced to a service provider from 1st April A risk assessment was performed and an internal audit plan prepared. The internal audit has met their plan for the year as adjusted where necessary with the approval of the audit committee. Due to insufficient time lapsing between the internal audit reports and the date of this report, the audit committee has not been able to assess whether the risks identified by the risk assessment and internal audit reports have been adequately addressed. We are satisfied that the internal audit function is operating effectively. However, we express our concern that a review of the predetermined objectives of the Board had not been carried out prior to the compilation of the annual financial statements. Auditor-General South Africa We concur with and accept the Auditor-General South Africa s report on the annual financial statements, and are of the opinion that the audited annual financial statements should be accepted read together with the report of the Auditor-General South Africa. The audit committee is however concerned with the irregular expenditure highlighted in paragraph 10 of said report and this matter will be investigated in the year ending 31 March Furthermore, the Committee is concerned with the outcome of the audit of pre-determined objectives and have requested that this matter be audited by internal audit during the first and second quarters as well as third and forth quarters for the year ending 31 March Loren Smith Chairperson of the Audit Committee (Current) 31 May 2011 Audit Committee Report 23

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25 7. THE AUDITOR GENERAL S REPORT REPORT OF THE AUDITOR GENERAL TO THE EASTERN CAPE PROVINCIAL LEGISLATURE ON THE EASTERN CAPE GAMBLING AND BETTING BOARD FOR THE YEAR ENDED 31 MARCH 2011 A. REPORT ON THE FINANCIAL STATEMENTS Introduction 1. I have audited the accompanying financial statements of the Eastern Cape Gambling and Betting Board, which comprise the statement of financial position as at 31 March 2010, the statement of financial performance, statement of changes in net assets and statement of cash flows for the year then ended, a summary of significant accounting policies and other explanatory information, as set out on pages 55 to 76. 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 in the manner required by the Public Finance Management Act of South Africa (PFMA). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor-General s responsibility 3. As required by section 188 of the Constitution of the Republic of South Africa, 1996 (Act No. 108 of 1996) and section 4 of the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA), my responsibility is to express an opinion on these financial statements based on my audit, 4. I conducted my audit in accordance with International Standards on Auditing and General Notice 1111 of 2010 issued in Government Gazette of 15 December 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. 5. 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. 6. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Opinion 7. In my opinion, the financial statements present fairly, in all material respects, the financial position of the Eastern Cape Gambling and Betting Board as at 31 March 2011 and its financial performance and cash flows for the year then ended, in accordance with SA Standards of CRAP and in the manner required by the PFMA. Emphasis of matters 8. I draw attention to the matters below. My opinion is not modified in respect of these matters: Restatement of corresponding figures 9. As disclosed in note 26 to the annual financial statements certain comparative figures for 31 March 2010 have been reclassified to separately disclose these amounts in the statement of financial performance. Irregular expenditure 10. As disclosed in note 31 to the annual financial statements the current year approved budget was overspent by R This has been disclosed as irregular expenditure. At year end, this expenditure was still under investigation. Auditor General's Report 25

26 26 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT Material overspending of the budget 11. I draw attention to note 33 to the annual financial statements detailing the under and overspending of the budget for the current year resulting in a net overspending of R which has been disclosed as irregular expenditure. B. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS reported targets were not: ~ ~ Specific in clearly identifying the nature and required level of performance; ~ ~ Measurable in identifying the required performance; ~ ~ Time-bound in specifying the time period or deadline for delivery. 15. There was no logical link between the objectives, indicators and targets for 62% of the objectives tested. requirements of TR 16A6.3(c). Adequate responses to the advertisement were however received for the bid. 19. Sufficient appropriate audit evidence could not be obtained that awards were made to suppliers who provided written proof from the South African Revenue Service that their tax matters are in order as per the requirements of Preferential Procurement Regulations 16 and TR 16A9.1(d). 12. In accordance with the PAA and in terms of General notice1111 of 2010, issued in Government Gazette33872 of 15 December 2010, I include below my findings on the annual performance report as set out on pages 29 to 37 and material non-compliance with laws and regulations applicable to the Eastern Cape Gambling and Betting Board. Predetermined objectives Usefulness of information 13. The following criteria are relevant to the finding below: ~ ~ Consistency: Objectives, indicators and targets are consistent between planning and reporting documents ~ ~ Relevance: A clear and logical link exists between the objectives, outcomes, outputs, indicators and performance targets ~ ~ Measurability: Indicators are well-defined and/ or verifiable, and targets are specific, and/or measurable and/or time-bound. Audit findings: Planned and reported targets are not measurable 14. For the selected objectives, 91% of the planned and Reliability of Information 16. The following criteria are relevant to the finding below: Validity: Actual reported performance has occurred and pertains to the entity ~ ~ Accuracy; Amounts, numbers, and other data relating to reported actual performance have been recorded and reported appropriately ~ ~ Completeness: All actual results and events that should have been recorded have been included in the annual performance report Audit finding: Reasons for major variances between planned and actual reported targets were not supported by sufficient appropriate evidence 17. Sufficient appropriate evidence to support the reasons for 82% of the major variances between the planned and the actual reported targets could not be obtained. Compliance with laws and regulations Procurement of goods and services 18. Certain invitations for competitive bidding were not advertised for a minimum period of 21 days as per the 20. Awards were made to bidders who did not submit an SBD 4 declaring whether the bidder or any person connect with the bidder is employed by the state or if the bidder is a legal person, whether the bidder has a relationship with persons/ a person involved in the evaluation and/or adjudication of the bids as per the requirements of Practice Note 7 of 2009/10. Expenditure management 21. The Accounting Authority did not ensure that the expenditure for the year is in accordance with the approved budget as required by to section 53(4) of the PFMA. Strategic planning and performance management 22. The accounting authority did not ensure that the public entity has and maintains an effective, efficient and transparent system of internal control regarding performance management, which described and represented how the entity s processes of performance planning, monitoring, measurement, review and reporting as conducted, organised and managed as required by section 51(1)(a)(i) of the PFMA.

27 Internal controls and internal audit 23. In terms of Treasury Regulation 27,2,1, a risk management strategy, which must include a fraud prevention plan, must be used to direct internal audits effort and priority. Management did not comply with this regulation as the fraud prevention plan had not been updated or approved for implementation. In addition, there was no risk management policy in place during the year. Annual financial statements, performance and annual reports 24. The accounting authority submitted financial statements for auditing that were not prepared in all material aspects in accordance with generally accepted accounting practice as required by section 55(1) ((a) and) (b) of the PFMA, The material misstatements identified by the AGSA with regards to current assets, liabilities, expenditure and disclosure items were subsequently corrected. C. INTERNAL CONTROL 25. In accordance with the PAA and in terms of General notice 1111 of 2010, issued in Government Gazette of 15 December 2010, I considered internal control relevant to my audit, but not for the purpose of expressing an opinion on the effectiveness of internal control. The matters reported below are limited to the significant deficiencies that resulted in the correction of material misstatements in the financial statements, the findings on the annual performance report and the findings on compliance with laws and regulations included in this report. Leadership 26. Management did not take adequate steps to ensure that controls were in place for the correct and accurate reporting on performance information. 27. Internal controls over the preparation of the financial statements are not adequate and management occasionally overrides SCM and compliance policy. 28. Reports on performance information are not adequately reviewed and insufficient evidence exists regarding the actual performance and variances identified. In addition, there is no suitably qualified person dedicated to ensuring that performance objectives are adequately met and correctly reported on. 29. The executive authority did not adequately monitor the expenditure incurred against the approved budget during the year. This resulted in irregular expenditure disclosed in the notes to the financial statements. Financial and performance management 30. Performance information was not correctly and accurately reported on and the information provided was not relevant or useful. 31. Processes and systems implemented by management over financial reporting were not adequately monitored and reviewed during the year as a result the financial statement submitted for audit contained material misstatements that were corrected during the audit. Governance 32. No fraud prevention plan or risk assessment/ management policy existed during the year, In addition the risks to reporting on predetermined objectives were not identified and responded to timeously. D. OTHER REPORTS Investigations 33. During the year, an investigation into the appointment of the CEO was finalised. This investigation took place as a result of suspected misconduct into the CEO s appointment at the request of the MEC of the Department of Economic Development, Environmental Affairs & Tourism. Governance review 34. During the year, a governance review was performed on all board members and employees as well as their entities at the request of the MEC of the Department of Economic Development, Environmental Affairs & Tourism. East London 29 July 2011 Auditor General's Report 27

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29 8. OPERATIONAL PERFORMANCE 8.1 INTRODUCTION This Performance Report has been prepared through the endeavours of management and staff representatives as delegated by the Board. It remains at all times a dynamic and working document that will form the basis of our operations. 8.2 DEFINITIONS Board Eastern Cape Gambling and Betting Board RFP Request For Proposal CEO Chief Executive Officer SAACREG South African Advisory Council for Responsible Gambling LPM Limited Payout Machine Section 40 Applications Acquisition of financial interest as defined in the Act MEC Member of the Council Site A Three to five machines Other licence Bookmakers,manufacturers and Totalizator Site B Twenty to forty machines Other registrations Certificate of suitability WAN Wide Area Network PFMA Public Finance Management Act LOC Letter of Certification 8.3 PERFORMANCE AGAINST OPERATIONAL PLAN MEASURABLE OBJECTIVE PERFORMANCE INDICATOR / MEASURE TARGET Provide effective and efficient strategic leadership and direction to the organisation. ~ ~ Appropriate mechanisms developed to ensure: yinternal controls and audit procedures yindependent external auditors yoversight and management of risk yoversight of financial statements ydetermination of appropriate senior management remuneration arrangements yprocedures for appointing Board members ~ ~ All new systems established and operational ~ ~ Controls and audit arrangements established ~ ~ Appropriate strategic leadership arrangements established ~ ~ Board and senior management communication with ECGBB improved strategic preparations initiated for the next three years APP ACHIEVEMENT/ ACTUAL OUTPUT CHALLENGES / REASONS FOR NON-PERFORMANCE 95% complete Implementation & rollout of BSC commenced late October % complete None None 100% complete None None 100% complete None None PLANS TO ADDRESS CHALLENGES & NON- PERFORMANCE Service Providers appointed for BSC & OD. Operational Performance 29

30 30 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT MEASURABLE OBJECTIVE PERFORMANCE INDICATOR / MEASURE TARGET Provide oversight and all inclusive general administration Formulate, manage and implement ECGBB strategic planning procedures Formulate, manage and monitor SLAs entered into by the ECGBB with various external interests and agencies. Sound internal financial management established SCM procurement systems established Maintain and review adequate and effective internal control and risk management systems. ~ ~ Financial policies, guidelines and procedures developed and implemented ~ ~ Supply Chain Management (SCM) Policies, guidelines and procedures developed and implemented ~ ~ Strategic planning procedures established in terms of PFMA and Treasury specifications ~ ~ All SLAs prepared in accordance with Board-approved specifications ~ ~ All SLAs subjected to rigorous monitoring and evaluation procedures ~ ~ Accurate budgeting, sound cashflow management and the preparation of management accounts in place ~ ~ Annual financial statements prepared in accordance with relevant standards and legislation ~ ~ Unqualified audit reports ~ ~ Appropriate procurement systems and practices designed and implemented Internal controls and risk management reviewed and updated Fraud prevention plan in place Internal audit services in place ~ ~ Policies, guidelines and procedures in place and operational ~ ~ Revised SCM procedures in place and operational ~ ~ All strategic planning systems reviewed and adjusted based on experience ~ ~ Motivations for strategic and performance planning adjustments prepared, where relevant ACHIEVEMENT/ ACTUAL OUTPUT CHALLENGES / REASONS FOR NON-PERFORMANCE 95% complete Critical senior management positions filled late (October 2010) 95% complete Contributory factor was capacity impedements however, SCM procudures revewed by management, but only pending relevant Board subcommittee and thereafter full Board approval. 100% complete None None 100% complete None None ~ ~ Revised documents completed, where 100% complete None None necessary ~ ~ SLAs categorised for review and oversight 100% complete None None ~ ~ SLAs adjusted based on M&E procedures undertaken 100% complete None None ~ ~ Systems reviewed to determine possible 100% complete None None improvements ~ ~ Proper internal financial management 100% complete None None systems in place ~ ~ Unqualified audit opinion received 100% complete None None ~ ~ Adequate systems devised to ensure sustained financial management 100% complete None None ~ ~ PFMA-compliant SCM systems in place 100% complete None None ~ ~ Review systems to determine possible improvements Internal control and risk management systems reviewed and adjusted where necessary 100% complete None None 100% complete (systems reviewed and improved) None PLANS TO ADDRESS CHALLENGES & NON- PERFORMANCE All managers & other critical junior staff positions will be filled and thereby policies, guidelines & procedures will be fully operational. Capacity impedements will be addressed and plans are in place to ensure timeous review. None

31 MEASURABLE OBJECTIVE PERFORMANCE INDICATOR / MEASURE TARGET Legal support systems established State of the art Information and Communications Technology (ICT) systems established Ensure that all gambling fees and taxes are collected efficiently. Participate in on going investigations into options for increasing income from gaming. ~ ~ Legal service needs identified and documented ~ ~ Comprehensive ICT systems established ~ ~ Electronic Document Management System (EDMS) designed ~ ~ Gambling fee collection mechanisms in place and fully operational ~ ~ Gambling tax collection mechanisms in place and fully operational ~ ~ Co-operative investigations established with relevant ECGBB divisions ~ ~ Potential for increased gaming-related income identified ~ ~ Legal support register revised and updated ACHIEVEMENT/ ACTUAL OUTPUT 90% complete (systems reviewed and improved). CHALLENGES / REASONS FOR NON-PERFORMANCE Capacity related impedements ~ ~ ICT systems reviewed and updated 100% complete None None PLANS TO ADDRESS CHALLENGES & NON- PERFORMANCE Plans to address capacity impedements have been put in place and Legal Services Manager position advertised. ~ ~ EDMS installation completed 40% complete Project ongoing EDMS will be fully developed by the year 2011/12. ~ ~ Collection mechanisms for gambling fees 100% complete None None and taxes reviewed and adjusted where required ~ ~ lnternal co-operative procedures established for implementing initiatives to increase gaming revenue 100% complete None None Effective regulatory and advisory frameworks to ensure that gaming licences are properly allocated License and regulate casinos, horseracing, route and site and bingo operations. ~ ~ Appropriate licence regulatory systems in place ~ ~ Advisory procedures in place ~ ~ Licence allocation procedures reviewed and updated ~ ~ Licensing procedures established for: ycasinos yhorseracing yroute and Site Operations ybingo operations ~ ~ Regulatory procedures established for: ycasinos yhorseracing yroute and Site operations ybingo operations ~ ~ All systems reviewed, updated and strengthened ~ ~ Status of licences confirmed: yboardwalk Casino (Zone 1) yhemingways Casino (Zone 2) yqueens Casino (Zone 3) ywild Coast Sun Casino (Zone 5) yzone 4 Mthatha Casino licence awarded ~ ~ Route and Site operator: yvukani Gambling EC 100% complete None None 100% complete 100% complete 100% complete 100% complete 0% complete None None None None Pending the Supreme Court of Appeal 100% complete None None None None None None The Board has appealed against the high court decision in the Supreme Court of Appeal Operational Performance 31

32 32 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT MEASURABLE OBJECTIVE PERFORMANCE INDICATOR / MEASURE TARGET ~ ~ Phumelela Gaming & Leisure Ltd yfairview Racecourse yarlington Racecourse ytotalisator Licence ~ ~ Gaming equipment manufacturers and suppliers ~ ~ Advance notice provided to Board regarding licence renewal dates and procedures Ensure that licence conditions are complied with Investigate and regulate objectively and fairly. Develop and maintain accurate records concerning gaming personnel registered as key persons in terms of Ch.12 s.68 of the ECGBB Act ~ ~ Detailed record of all licence conditions compiled and updated regularly ~ ~ Key measurement indicators established to verify licence condition compliance ~ ~ Appropriate probity requirements established for all inspection personnel ~ ~ Inspection reports subjected to random review and verification ~ ~ All Key Persons defined for registration: ymanagers. ysupervisors. ypit bosses. yin-house inspectors. ysurveillance personnel. ~ ~ Other categories. ~ ~ Certificates of registration issued to all Key Persons in terms of s.115 of the ECGBB Regulations. ~ ~ Monitoring procedures established ~ ~ Registration renewal procedures established ~ ~ Compliance register compiled for each licence category ~ ~ Conditions reviewed with licencees to include SED project (in association with the EC PGT) ~ ~ On-going compliance with licence conditions secured ~ ~ Revised investigation and regulatory procedures in place and operational ACHIEVEMENT/ ACTUAL OUTPUT CHALLENGES / REASONS FOR NON-PERFORMANCE 100% complete None None 100% complete None None 100% complete 80% complete Capacity problem due to the casino re licensing process for Zones 1 & 2. 80% complete Capacity problem due to the casino re licensing process for Zones 1 & 2. But SED & EC PGT project not yet in place. 80% complete Capacity problem due to the casino re licensing process for Zones 1 & 2 90% complete Review of legislation is underway ~ ~ Key Persons Register updated 95% complete GIMS implemented during the period under review. It has minor discrepancies that are being attended to. ~ ~ Key Persons definitions reviewed and adjusted where required ~ ~ New Certificates of Registration issued where required ~ ~ Certificates of Registration renewed where appropriate 95% complete GIMS implemented. Minor discrepancies are being attended to 95% complete GIMS implemented. Minor discrepancies are being attended to 95% complete GIMS implemented. Minor discrepancies are being attended to PLANS TO ADDRESS CHALLENGES & NON- PERFORMANCE Plans are in place to enhance capacity capacity to address the problem Plans are in place to enhance capacity to address the problem Plans are in place to enhance capacity capacity to address the problem Process is pending the going through all legal stages but it is well monitired. Dedicated personnel to attend to the GIMS discrepancies Dedicated personnel to attend to the GIMS discrepancies Dedicated personnel to attend to the GIMS discrepancies Dedicated personnel to attend to the GIMS discrepancies

33 MEASURABLE OBJECTIVE PERFORMANCE INDICATOR / MEASURE TARGET Institutionalise the ECGBB Shareholder s Compact Provide timeous, quality legal services to divisions and the Board Provide timeous, quality legal services to Provincial Gaming Trust Compliance with contracts between the ECGBB and DEDEAT, licensees and Provincial Gaming Trust ~ ~ ECGBB-DEDEAT Shareholder s Compact concluded and signed off ~ ~ Train all Board members and senior management on the Shareholder s Compact ~ ~ Provision made for the Compact to be reviewed annually ~ ~ Prepare Compact document for wider distribution to indicate the partnership relationship with DEDEAT ~ ~ Compact marketed as facilitating rather than coercive ACHIEVEMENT/ ACTUAL OUTPUT CHALLENGES / REASONS FOR NON-PERFORMANCE 100% complete None None 100% complete None None ~ ~ % Customer Satisfaction Index ~ ~ 76% 0% complete Capacity related impedements. Legal Services Manager position vacant ~ ~ % compliance with Service Level Agreement ~ ~ Compliance Audit reported to Board on a quarterly basis ~ ~ 76% 0% complete Provincial Gaming Trust not ysset in place ~ ~ 80% 100% complete None None Reduce costs of litigation ~ ~ % Reduction in litigation costs ~ ~ 10% reduction 0% complete Litigations were unavoidable Ensure that all Board members and Trustees are adequately trained to carry out their legal mandates Review human resources policies to ensure sound human resource practices. Develop and implement staff training and development programmes ~ ~ % of Board members trained ~ ~ 100% compliance with skills training plan ~ ~ HR policies and practices comply with established best practice systems ~ ~ HR manuals and resource documents prepared to ensure standardised implementation ~ ~ Comprehensive Personnel Development Plan compiled and in place ~ ~ Detailed training requirements specified for all categories of personnel ~ ~ Strategic initiatives developed and implemented to ensure appropriate filling of organogram posts 100% complete None None 70% complete Implementation & rollout of BSC commenced late October 2010 ~ ~ Focus on leadership qualities 100% complete None None ~ ~ Personnel Development Plan approved by Board ~ ~ Personnel Development Plan implementation strategies developed 100% PDP plans development 80% training plan for all levels ~ ~ Systems established for quarterly reviews 80% HR policies developed and reviewed None PLANS TO ADDRESS CHALLENGES & NON- PERFORMANCE Plans to address capacity impedements has been put in place and Legal Services Manager position advertised. Report for PGT has been submitted to the Board for approval Once legal manager is appointed it will reduce litigation costs Plan for Implementation & rollout of BSC commenced None Operational Performance 33

34 34 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT MEASURABLE OBJECTIVE PERFORMANCE INDICATOR / MEASURE TARGET Develop and maintain ~ ~ IPMS defined and installed Integrated Performance ~ ~ Management IPMS linked to strategic Management Systems plan goals and objectives (IPMS). Strategic planning systems established Establish relevant socio economic data requirements Establish ECGBB role and responsibilities regarding the PGDP ~ ~ Basic templates for all key documents established: yfive-year Strategic and Performance Plan ythree-year MTEF-related Annual Performance Plan (APP) yone-year Operational Plan (budget) yrelevant data sources identified, established and updated regularly ~ ~ Comprehensive and accessible data base established ~ ~ PGDP components relevant to the ECGBB identified and defined ~ ~ IPMS procedures adopted by all divisions as a basis for management assessment ACHIEVEMENT/ ACTUAL OUTPUT 100% Alignment of IPA s to Organisational and Divisional strategy ~ ~ IPMS aligned to the BSC system 100% Approval of Balance Scorecard and organisational design plans CHALLENGES / REASONS FOR NON-PERFORMANCE None None PLANS TO ADDRESS CHALLENGES & NON- PERFORMANCE None ~ ~ IPMS-specific training provided 90% complete Pending completion of BSC process Pending completion of BSC process ~ ~ Quarterly performance review programme 100% complete None None established ~ ~ Ongoing implementation 100% complete None None ~ ~ Review the ECGBB Strategic Plan based 100% None None on 2009/10 experience ~ ~ Revise and update where necessary 100% complete None None ~ ~ Formulate a new APP for the next MTEF 100% complete None None period ~ ~ Formulate a One-Year Operational plan 100% complete None None (budget) for the next year (2011/12) ~ ~ Submit all documents to the Board for approval by the due date(s) 100% complete None None ~ ~ Board approvals secured 100% complete None None ~ ~ Skilled data base team assembled 100% complete None None ~ ~ Relevant and cost-effective IT hardware and software acquired and installed ~ ~ Data storage and retrieval procedures established ~ ~ Develop and maintain close working relationships with PGDP management ~ ~ Ensure alignment of PGT interests with PGDP principles and goals ~ ~ Develop a proactive, participatory PGDP role for the ECGBB None 100% complete None None 90% complete Document management system is ongoing 0% Capacity problem as Strategic Services Manager position not filled yet. 0% PGT not approved by the Board 0% Capacity problem as Strategic Services Manager position not filled yet. Strategic Services Manager position will be filled: relationships with PGDP will be enhanced Report for PGT has been submitted to the Board for approval Strategic Services Manager position will be filled: relationships with PGDP will be enhanced

35 MEASURABLE OBJECTIVE PERFORMANCE INDICATOR / MEASURE TARGET Establish ECGBB role and responsibilities regarding municipal IDPs Develop appropriate systems for maintaining intranet and website facilities Ensure that IT policies and practices are updated regularly Develop and implement a Balanced Scorecard System (BSC) system ~ ~ IDP components relevant to the ECGBB identified and defined ~ ~ Reliable ECGBB intranet system established and operational ~ ~ Reliable and accurate ECGBB website established and operational ~ ~ Comprehensive Master Systems Plan (MSP) developed and regularly updated ~ ~ Nature and intent of the BSC system defined and promoted among all personnel ~ ~ Regular internal BSC system workshops arranged to ensure maximum staff participation and commitment ~ ~ Extend and widen the interest base of ECGBB relationships with all municipalities ~ ~ Ensure that ECGBB skills and data sources are made available to municipalities for planning purposes ~ ~ Assist municipalities, wherever possible, in the formulation and revision of IDPs and GDSs ~ ~ Comprehensive system upgrade plan formulated to address existing and new needs ~ ~ Board approval secured for systems and costs ~ ~ Procedures and mechanisms planned to ensure improved internal access to systems and data [intranet] and to external data and information [Web] ACHIEVEMENT/ ACTUAL OUTPUT CHALLENGES / REASONS FOR NON-PERFORMANCE 0% complete Capacity problem as Strategic Services Manager position not filled 0% complete Capacity problem as Strategic Services Manager position not filled 0% complete Capacity problem as Strategic Services Manager position not filled 100% complete None None 100% complete None None 100% complete None None ~ ~ Revised and updated MSP completed 0% complete Not done yet but internal IT audit conducted and recommendations are being implemented ~ ~ Hardware and software implications 100% complete None None approved by Board ~ ~ Implementation systems established 100% complete None None ~ ~ Monitoring and maintenance procedures established 100% complete None None ~ ~ BSC application implemented 100% complete None None ~ ~ BSC output report prepared for management ~ ~ Annual BSC output report prepared for Board ~ ~ BSC application implemented ~ ~ BSC output report prepared for management 80% complete BSC process not complete yet PLANS TO ADDRESS CHALLENGES & NON- PERFORMANCE Strategic Services Manager position will be filled: relationships with municipalities for planning purposes will be enhanced Strategic Services Manager position will be filled and thereby skills and data sources are made available to municipalities for planning purposes. Plan has been put in place to attend to MPS BSC process will be completed Operational Performance 35

36 36 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT MEASURABLE OBJECTIVE PERFORMANCE INDICATOR / MEASURE TARGET Identify relevant customer services Establish an appropriate marketing oriented personnel component ~ ~ Appropriate Service Delivery Plan developed ~ ~ Internal ECGBB Marketing Unit established ~ ~ Finalised Service Delivery Plan approved by Board ~ ~ Quality customer oriented service delivered to the public, licensees and other stakeholders ~ ~ Adequately trained and resourced staff structure available to deliver quality services ~ ~ Marketing oriented personnel component established ~ ~ ECGBB promotional initiatives planned and implemented ACHIEVEMENT/ ACTUAL OUTPUT CHALLENGES / REASONS FOR NON-PERFORMANCE 0% complete Marketing & advertising consultant appointed late (October 2010) 100% complete None None 80% complete Awaited BSC & OD for re alignment of positions to the strategy 100% complete None None 50% Complete Marketing & Advertising consultant appointed October 2010 ~ ~ Prepare and print ECGBB annual report 100% complete None None PLANS TO ADDRESS CHALLENGES & NON- PERFORMANCE OD implementation developed and approved Complete BSC & OD for re alignment of positions to the strategy OD implementation developed and approved Develop relevant advisory services for stakeholders Develop marketing strategies to improve the external image of the ECGBB Establish an effective and professional internal research competency. ~ ~ Relevant advisory services established through stakeholder engagement ~ ~ Advisory service procedures and practices established ~ ~ Clear improvement in ECGBB external image ~ ~ Key marketing-related research functions internalised ~ ~ Advisory Services Directory adjusted based on experience 0% complete Marketing & Adv. Consult. apptd. 10/2010 ~ ~ Revised advisory service made available 0% Complete Marketing & Adv. Consult. apptd. 10/2010 ~ ~ Outcomes reviewed 0% Marketing & Adv. Consult. apptd. 10/2010 ~ ~ Initiate comprehensive implementation of the image marketing Plan ~ ~ Measure changes through Focus-Group market research 0% Complete Marketing & Adv. Consult. apptd. 10/2010 0% Complete Marketing & Adv. Consult. apptd. 10/2010 ~ ~ Report outcomes to Board 0% Complete Marketing & Adv. Consult. apptd. 10/2010 ~ ~ Extend marketing process 0% Complete Marketing & Adv. Consult. apptd. 10/2010 ~ ~ ECGBB market research function 100% complete None None established ~ ~ Review all previous ECGBB market research commissioned ~ ~ Undertake implementation where feasible 0% complete Marketing & Adv. Consult. apptd. 10/2010 0% complete Marketing & Adv. Consult. apptd. 10/2010 ~ ~ Plan own market research procedures 0% complete Marketing & Adv. Consult. apptd. 10/2010 OD implementation developed and approved OD implementation developed and approved OD implementation developed and approved OD implementation developed and approved OD implementation developed and approved OD implementation developed and approved OD implementation developed and approved OD implementation developed and approved OD implementation developed and approved OD implementation developed and approved

37 8.4 PERFORMANCE REPORT ANNEXURE TAX AND FEE COLLECTIONS FIVE YEAR REVIEW OF THE BOARD PROVINCIAL REVENUE 2006/ / / / /2011 TOTAL R R R R R R Casino Bookmakers Taxes Totalisator Taxes LPM Fees OWN REVENUE Exclusivity Fee Application Fee Administration Fee TOTAL REVENUE GRANT FUNDING Voted Less: Repaid Nett Utilised On behalf of the Board we wish to express our sincere gratitude to the Provincial Government for the support afforded to us during the course of the financial year and to management and staff for their performance in achieving the goals of the Board. R M ZWANE Chief Executive Officer Operational Performance 37

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39 9. HR OVERSIGHT STATISTICS FOR THE PERIOD APRIL 2010 TO MARCH 2011 Table 1.1: Main Service For Service Delivery Improvement And Standards Main Services Actual Customers Potential Customers Standard of Service Actual Achievement against Standards Gambling Regulation Casino, Horse Racing Industry and Route Operators High High Table 2.1: Personnel Costs by Programme Programme Total Expenditure Personnel Expenditure Training Expenditure Professional & Special Services Personnel costs as % of Total Expenditure Average Personnel Costs per Employee Employment Eastern Cape Gambling & Betting Board Table 2.2: Personnel Costs by Salary Band Salary Bands Personnel Expenditure % of Total Personnel Costs Average Personnel Cost per Employee Total Personnel Expenditure Number of Employees Lower skilled (Band B1 B2) Skilled (Band B3 B5) Highly skilled production (Band C1 C5) Highly skilled supervision (Band D1 D3) Senior management (Band D4 E1) TOTAL Table 2.3: Salaries, Overtime, Home Owners Allowance & Medical Aid by Programme Programme Salaries Salaries as % of Personnel Costs Overtime Overtime as % of Personnel Costs HOA HOA as % of Personnel Costs Medical Ass. Medical Ass. as % of Personnel Costs Total Personnel Coat Eastern Cape Gambling & Betting Board TOTAL HR Oversight Statistics 39

40 40 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT Table 2.4: Salaries, Overtime, Home Owners Allowance & Medical Aid by Salary Band Salary Bands Salaries Salaries as % of Personnel Costs Overtime Overtime as % of Personnel Costs HOA HOA as % of Personnel Costs Medical Ass. Medical Ass. as % of Personnel Costs Total Personnel CoSt Lower skilled (Band B1 B2) Skilled (Band B3 B5) Highly skilled production (Band C1 C5) Highly skilled supervision (Band D1 D3) Senior management (Band D4 E1) TOTAL Table 3.1: Employment and Vacancies by Programme at end of period Programme Number of Posts Number of Posts Filled Vacancy Rate Number of Posts Filled Additional to the Establishment Eastern Cape Gambling & Betting Board TOTAL Table 3.2: Employment and Vacancies by Salary Band at end of period Salary Band Number of Posts Number of Posts Filled Vacancy Rate Number of Posts Filled Additional to the Establishment Lower skilled (Band B1 B2) Skilled (Band B3 B5) Highly skilled production (Band C1 C5) Highly skilled supervision (Band D1 D3) Senior management (Band D4 E1) TOTAL

41 Table 4.1: Job Evaluation Salary Band Number of Posts Number of Jobs Evaluated % of Posts Evaluated Number of Posts Upgraded % of Upgraded Posts Evaluated Number of Posts Downgraded % Of Downgraded Posts Evaluated Lower skilled (Band B1 B2) Skilled (Band B3 B5) Highly skilled production (Band C1 C5) Highly skilled supervision (Band D1 D3) Senior management (Band D4 D5) Senior management Services (Band E1 E2) TOTAL Table 4.2: Profile of employees whose positions were upgraded following upgrading of their posts Beneficiaries African Asian Coloured White Total Female Male TOTAL Employees with Disabilities Table 4.3: Employees whose salary level exceed the grade determined by Job Evaluation [i.t.o. PSR 1.V.C.3] Occupation Number of Employees Manager: Legal Services 0 System Analyst 0 TOTAL 0 % of TOTAL Employment 0 Job Evaluation Level Remuneration Level Reason for Deviation No of Employees in Dept Table 4.4: Profile of employees whose salary level exceeded the grade determined by Job Evaluation [i.t.o. PSR 1.V.C.3] Beneficiaries African Asian Coloured White Total Female Male TOTAL Employees with Disabilities 0 HR Oversight Statistics 41

42 42 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT Table 5.1: Annual Turnover Rates by Salary Band Salary band Employment at Beginning of Period Appointments Terminations Turnover Rate Lower skilled (Band B1 B2) Skilled (Band B3 B5) Highly skilled production (Band C1 C5) Highly skilled supervision (Band D1 D3) Senior management Service Band D4 D5 Permanent Senior management Service Band E1 E2 Permanent TOTAL Table 5.2: Annual Turnover Rates by Critical Occupation Occupation Employment at Beginning of Period Appointments Terminations Turnover Rate NO CRITICAL POSTS IDENTIFIED Table 5.3: Reasons why staff are leaving the Board Termination Type Number % of Total Resignations % of Total Employment Total Total Employment Death, Permanent Resignation, Permanent Dismissal operational changes, Permanent Discharge due to ill health, Permanent Dismissal misconduct, Permanent Retirement, Permanent TOTAL Resignations as % of Employment 7.40% Table 5.4: Promotions by Critical Occupation Occupation Employment at Beginning of Period Promotions to another Salary Level Salary Level Promotions as a % of Employment NO CRITICAL POSTS IDENTIFIED Progressions to another Notch within Salary Level Notch progressions as a % of Employment

43 Table 5.5: Promotions by Salary Band Salary Band Employment at Beginning of Period Promotions to another Salary Level Salary Level Promotions as a % of Employment Progressions to another Notch within Salary Level Notch progressions as a % of Employment Lower skilled (Band B1 B2) Skilled (Band B3 B5) Highly skilled production (Band C1 C5) Highly skilled supervision (Band D1 D3) Senior management (Band D4 E1) TOTAL Table 6.1: Total number of Employees (incl. Employees with disabilities) per Occupational Category (SASCO) Occupational Category African Coloured Indian Total Blacks White African Coloured Senior officials & managers, Permanent Professionals, Permanent Clerks, Permanent Service & sales workers, Permanent Craft & related trade workers, Permanent Plant & machine operators & assemblers, Permanent Elementary occupations, Permanent TOTAL Employees with Disabilities Indian Total Blacks White TOTAL Table 6.2: Total number of Employees (incl. Employees with disabilities) per Occupational Bands Occupational Bands African Coloured Indian Total Blacks White African Coloured Top Management, Permanent Senior Management, Permanent Professionally qualified and experienced specialists and mid management, Permanent Indian Total Blacks White TOTAL HR Oversight Statistics 43

44 44 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT Occupational Bands Skilled technical and academically qualified workers, junior management, supervisors, foremen, Permanent African Coloured Indian Total Blacks White African Coloured Indian Total Blacks White TOTAL Semi skilled & discretionary decision making, Permanent Unskilled & defined decision making, Permanent TOTAL Table 6.3:Recruitment Total Blacks Occupational Bands African Coloured Indian White African Coloured Indian White TOTAL Senior Management, Permanent Professionally qualified and experienced specialists and mid management, Permanent Skilled technical and academically qualified workers, junior management, supervisors, foremen, Permanent TOTAL Total Blacks Table 6.4: Promotions Total Blacks Occupational Bands African Coloured Indian White African Coloured Indian White Total Senior Management, Managers, Permanent Skilled technical and academically qualified workers Professionally qualified and experienced specialists TOTAL Total Blacks Table 6.5: Terminations Total Blacks Occupational Bands African Coloured Indian White African Coloured Indian White TOTAL Senior Management, Permanent Professionally qualified and experienced specialists and mid management, Permanent Skilled technical and academically qualified workers, junior management, supervisors, foremen, Permanent Total Blacks

45 Occupational Bands African Coloured Indian Total Blacks White African Coloured Semi skilled & discretionary decision making, Permanent Unskilled & defined decision making, Permanent TOTAL Indian Total Blacks White TOTAL Table 6.6: Disciplinary Action Disciplinary Action African Coloured Indian Total Blacks White African Coloured TOTAL Indian Total Blacks White TOTAL Table 6.7: Skills Development Occupational Categories African Coloured Indian Total Blacks White African Coloured Legislators, Senior Officials and Managers Professionals Technicians and Associate Professionals Clerks Service and Sales Workers TOTAL Employees with disabilities Indian Total Blacks White Total Table 7.1: Performance Rewards by Race, Gender & Disability Number of Beneficiaries Total Employment % of Total Employment Cost Average Cost per Beneficiary African, Female African, Male White, Male White, Female Indian, Female Employee with a disability TOTAL HR Oversight Statistics 45

46 46 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT Table 7.2: Performance Rewards by Salary Band for Personnel below Senior Management Service Salary Band Number of Beneficiaries Total Employment % of Total Employment Cost Average Cost per Beneficiary Lower skilled (Band B1 B2) Skilled (Band B3 B5) Highly skilled production (Band C1 C5) Highly skilled supervision (Band D1 D3) TOTAL Table 7.3: Performance Rewards by Critical Occupation Critical Occupations Number of Beneficiaries Total Employment Percentage of Total Employment NO CRITICAL OCCUPATIONS IDENTIFIED Cost Average Cost per Beneficiary Table 7.4: Performance Related Rewards (Cash Bonus) by Salary Band for Senior management Service SMS Band Number of Beneficiaries Total Employment % of Total Employment Cost Average Cost per Beneficiary % Of SMS Wage Bill Level D Level D Level E TOTAL Personnel Cost SMS Table 8.1: Foreign Workers by Salary Band Salary band Lower skilled (Level 1 2) Employment at Beginning period % Of Total Employment at End of Period % of Total Change in Employment % of Total Total Employment at Beginning of Period Total Employment at End of Period Total Change in Employment Skilled (Level 3 5) Highly skilled production (Level 6 8) Highly skilled supervision (Level 9 12) NO FOREIGN WORKERS EMPLOYED Senior management (Level 13 16) TOTAL

47 Table 8.2: Foreign Workers by Major Occupation Major Occupation Employment at Beginning period % Of Total Employment at End of Period % of Total Change in Employment % of Total Total Employment at Beginning of Period Total Employment at End of Period Total Change in Employment NO FOREIGN WORKERS EMPLOYED Table 9.1: Sick Leave for Jan2010 to Dec 2010 Salary Band Total Days %Days with Medical Certificate Number of Employees using sick leave % of total Employees using sick leave Average Days per Employee Estimated Cost (R 000) Total number of Employees using sick leave Lower skilled (Band B1 B2) Skilled (Band B3 B5) Highly skilled production (Band C1 C5) Highly skilled supervision (Band D1 D3) Senior management (Band D4 E1) Total number of days with medical certification Table 9.2: Disability Leave for Jan2010 to Dec 2010 Salary Band Total Days %Days with Medical Certificate Number of Employees using Disability Leave % of total Employees using Disability Leave Average Days per Employee Estimated Cost (R 000) Total number of Employees using Disability Leave N/A TOTAL Total number of days with medical certification Table 9.3: Annual Leave for Jan 2010 to Dec 2010 Salary Band Total Days Taken Average per Employee Lower skilled (Band B1 B2) Skilled (Band B3 B5) Highly skilled production (Band C1 C5) Highly skilled supervision (Band D1 D3) Senior management (Band D4 E1) TOTAL Employment HR Oversight Statistics 47

48 48 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT Table 9.4: Capped Leave for Jan 2010 to Dec 2010 Total days of capped leave taken Average number of days taken per employee Average capped leave per employee as at 31 December 2003 Number of Employees Total number of capped leave available at 31 December 2003 Number of Employees as at 31 December 2003 Lower skilled (Levels B1 B2) 0 0 Skilled (Levels B3 B5) 0 0 Highly skilled production (Levels C1 C5) NO CAPPED LEAVE TO BOARD EMPLOYEES 0 0 Highly skilled supervision (Levels D1 D3) 0 0 Senior management (Levels D4 E1) 0 0 TOTAL 0 0 Table 9.5: Leave Payouts Reason Capped leave payouts on termination of service for 2010/11 Total Amount Number of Employees NO CAPPED LEAVE Average Payment per Employee Current leave payout on termination of service for 2010/ TOTAL Table 10.1: Steps taken to reduce the risk of occupational exposure Units/categories of employees identified to be at high risk of contracting HIV & related diseases (if any) Key steps taken to reduce the risk N / A Table 10.2: Details of Health Promotion & HIV/AIDS Programmes [tick YES/NO and provide required information] Question YES NO Details, if any 1. Has the department designated a member of the SMS to implement the provisions contained in Part VI E of Chapter 1 of the Public Service M Tokota H R Manager Regulations, 2001? If so, provide her/his name and position. 2. Does the department have a dedicated unit or have you designated specific staff members to promote health and well being of your M Mame, S Renga, W Smit, H D Alton employees? If so, indicate the number of employees who are involved in this task and the annual budget that is available for this purpose. 3. Has the department introduced an Employee Assistance or Health Promotion Programme for your employees? If so, indicate the key elements/services of the programme. 4. Has the department established (a) committee(s) as contemplated in Part VI E.5 (e) of Chapter 1 of the Public Service Regulations, 2001? M Mame, S Renga, W Smit, H D Alton If so, please provide the names of the members of the committee and the stakeholder(s) that they represent. 5. Has the department reviewed the employment policies and practices of your department to ensure that these do not unfairly discriminate against employees on the basis of their HIV status? If so, list the employment policies/practices so reviewed. H R Manual, Recruitment

49 Table 11.1: Collective Agreements Subject Matter Date N / A Table 11.2: Misconduct & Disciplinary Hearings Finalized Outcomes of disciplinary hearings Number % of Total Total TOTAL Table 11.3: Type of Misconduct Addressed & Disciplinary Hearings Type of Misconduct Number % of Total MISCONDUCT 0 0 TOTAL 0 0 Table 11.4: Grievances Lodged Number of grievances addressed Number % of total Resolved Not resolved NO GRIEVANCES TOTAL Table 11.5: Disputes Lodged Number of disputes addressed Number % of total Upheld Dismissed N / A TOTAL HR Oversight Statistics 49

50 50 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT Table 11.6: Strike Actions Strike Actions TOTAL number of person working days lost TOTAL cost(r'000) of working days lost Amount (R'000) recovered as a result of no work no pay NONE Table 11.7: Precautionary Suspensions Precautionary Suspensions Number of people suspended 0 Number of people whose suspension exceeded 30 days 0 Average number of days suspended 0 Cost (R'000) of suspensions 0 Table 12.1:Training Needs identified Skills Programmes Occupational Categories Gender Employment Learnerships & other short courses Other forms of training Total Legislators, senior officials and managers Female Male Professionals Female Male Technicians and associate professionals Female Male Clerks Female Male TOTAL Table 12.2: Training Provided Skills Programmes Occupational Categories Gender Employment Learnerships & other short courses Other forms of training Total Legislators, senior officials and managers Female Male Professionals Female Male

51 Occupational Categories Gender Employment Learnerships Skills Programmes & other short courses Other forms of training Technicians and associate professionals Female Male Clerks Female Male TOTAL Total Table 13.1: Injury on Duty Nature of injury on duty Number % of total Required basic medical attention only Temporary TOTAL Disablement Permanent Disablement NO IOD CASES Fatal TOTAL Table 14.1: Report on consultant appointments using appropriated funds Project Title Total number of consultants that worked on the project Duration: Work days Contract value in Rand PWC Internal Audit Softline VIP STBB Consulting Lumoko Strat Kettle Consulting Maseng Viljoen Balanced Scorecard & OD Quantity Surveyors TOTAL number of projects HR Oversight Statistics 51

52 52 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT Table Analysis of consultant appointments using appropriated funds, i.t.o. HDIs Project Title Percentage ownership by HDI groups Percentage management by HDI groups Number of Consultants from HDI groups that work on the project PWC Internal Audit TOTAL 2 Table 14.3: Report on consultant appointments using Donor funds Project Title Total number of consultants that worked on the project Duration: Work days NO CONSULTANTS USED Donor and Contract value in Rand Total number of projects Total individual consultants Total duration: Work days NO CONSULTANTS USED Total contract value in Rand Table 14.4: Analysis of consultant appointments using Donor funds, i.t.o. HDIs Project Title Percentage ownership by HDI groups Percentage management by HDI groups NO CONSULTANTS USED Number of Consultants from HDI groups that work on the project

53 9.1 ECGBB ORGANOGRAM CHIEF EXECUTIVE OFFICER OFFICE MANAGER (v) PERSONAL ASSISTANT to the CEO INTERNAL AUDIT SERVICES Outsourced CHIEF FINANCIAL OFFICER COMPLIANCE & LICENSING MANAGER PERSONAL ASSISTANT to the CFO PERSONAL ASSISTANT to the C&LM (v) STRATEGIC SERVICES MANAGER (v) LEGAL SERVICES MANAGER (v) ACCOUNTANT HUMAN RESOURCES MANAGER INFORMATION TECHNOLOGY MANAGER (v) SNR AUDITOR Audit & Compliance (v) SNR INVESTIGATOR Investigations & Licensing (v) SNR INSPECTOR Law Enforcement & Gaming Control (v) PERSONAL ASSISTANT to the SSM (v) PROCUREMENT OFFICER (v) HR ADMINISTRATOR (v) SYSTEMS ANALYST AUDITOR INVESTIGATOR INSPECTOR ASSISTANT ACCOUNTANT RECEPTIONIST AUDITOR INVESTIGATOR (v) INSPECTOR MARKETING SPECIALIST SED COORDINATOR (v) REVENUE ADMINISTRATOR DRIVER AUDITOR INVESTIGATOR (v) INSPECTOR ACCOUNTS ADMINISTRATOR GENERAL ASSISTANT (v) AUDITOR (v) INVESTIGATOR (v) INSPECTOR GENERAL ASSISTANT (v) LICENSING OFFICER INSPECTOR LEGEND: GENERAL ASSISTANT (v) LICENSING OFFICER CURRENTLY OCCUPIED CURRENT VACANCY HR Oversight Statistics 53

54

55 10. Audited Financial Statements for the Year Ended 31 March Statement of Financial Position Figures in Rand Note(s) Assets Current Assets Trade and other receivables from exchange transactions Receivable on collection for distribution from non exchange transactions Prepayments Cash and cash equivalents Non Current Assets Property, plant and equipment Total Assets Liabilities Current Liabilities Trade and other payables from exchange transactions Collections for distributions from non exchange transactions Total Liabilities Net Assets Net Assets Accumulated surplus Total Net Assets Audited Financial Statements 55

56 56 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT Statement of Financial Performance Figures in Rand Note(s) Revenue Revenue from Exchange Transactions Revenue from non Exchange Transactions Total Revenue Expenditure Employee costs 11 ( ) ( ) Depreciation and amortisation 7 ( ) ( ) Impairment loss/ Reversal of impairments 3 ( ) ( ) Other Operating Expenses 12 ( ) ( ) Administrative expenditure 13 ( ) ( ) Statutory audit fees 14 ( ) ( ) Gifts, sponsorships and donations paid 15 ( ) ( ) Marketing cost 16 ( ) ( ) Total Expenditure ( ) ( ) (Loss) gain on disposal of property, plant and equipment (26 608) Finance income Deficit for the year ( ) ( )

57 10.3 Statement of Changes in Net Assets Figures in Rand Accumulated surplus Total net assets Opening balance as previously reported Adjustments Change in accounting policy (note 23) Prior year adjustments Balance at 01 April 2009 as restated Changes in net assets Deficit for the year ( ) ( ) Total changes ( ) ( ) Opening balance as previously reported Adjustments Change in accounting policy (note 23) (18 453) (18 453) Balance at 01 April 2010 as restated Changes in net assets Deficit for the year ( ) ( ) Total changes ( ) ( ) Balance at 31 March Audited Financial Statements 57

58 58 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT Cash Flow Statement Figures in Rand Note(s) Cash flows from operating activities Receipts Receipts from customers Grants Gambling fees and taxes Payments Payment to Suppliers and Employees ( ) ( ) Gambling fees and taxes ( ) ( ) ( ) ( ) Net cash flows from operating activities ( ) Cash flows from investing activities Purchase of property, plant and equipment 7 ( ) ( ) Proceeds from sale of property, plant and equipment Interest Income Net cash flows from investing activities Net increase/(decrease) in cash and cash equivalents ( ) Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year

59 10.5 Accounting Policies 1. Basis of Preparations The annual financial statements have been prepared in accordance with the effective Standards of Generally Recognised Accounting Practice (GRAP) for the Accrual Basis of Accounting including any interpretations, guidelines and directives issued by the Accounting Standards Board. The financial statements have been prepared on a going concern basis and the accounting policies have been applied consistently throughout the period. Whilst GRAP 24 on Presentation of Budget Information in Financial Statements is not effective, in order to enhance the usefulness of the financial statements, Paragraph of GRAP 1 has been implemented by inclusion of a note on Reconciliation of budget surplus/deficit with the surplus/deficit in the statement of financial performance in the financial statements until the implementation of GRAP 24 becomes effective. Accounting Standards which have been approved and are effective: GRAP 1 Presentation of Financial Statements GRAP 19 Provisions, Contingent Liabilities and Contingent Assets GRAP 2 Cash flow Statements GRAP 102 Intangible Assets GRAP 3 Accounting Policies, Changes in Accounting Estimates and Errors Directive 5 Determining the GRAP reporting framework GRAP 9 Revenue from Exchange Transactions IGRAP 1 Applying the Probability Test on Initial Recognition of Exchange Revenue was formulated to conform with GRAP23 GRAP 12 Inventories IPSAS 20 Related parties disclosure GRAP 13 Leases IFRS 7 Financial instruments: Disclosures GRAP 14 Events After the Reporting date IAS19 (AC116) Employee benefits GRAP 16 Investment Property IAS32 (AC125) Financial instruments: Presentation GRAP 17 Property, Plant and Equipment IAS39 (AC133) Financial instruments: Recognition and measurements A summary of the significant accounting policies, which have been consistently applied, are disclosed below. For the 2010/11 reporting period, the following Standards of GRAP have been issued but are not yet effective. The effective date for all the below standards are from 01 April 2011: No. Title of Standard Impact on GRAP Reporting Framework GRAP 18 Segment Reporting No segment reporting required for the 2010/11 reporting period No effect on the Board for the next financial year. GRAP 21 Impairment of Non cash generating Full compliance to GRAP 21 not required. Entities may use Assets GRAP 21 to formulate an accounting policy for the impairment of non cash generating assets. The accounting policy is in line with GRAP21 therefore no effect on the next financial year. GRAP 23 Revenue from Non Exchange Transactions (Taxes and Transfers) Full compliance to GRAP 23 not required. Accounting policy was formulated to conform with GRAP 23. GRAP 24 Presentation of Budget Information Full compliance to GRAP 24 not required. Disclosure was made for budget against actual in the financial statements. GRAP 25 Employee Benefits Full compliance with GRAP 25 not required. The accounting policy of the Board was followed. Audited Financial Statements 59

60 60 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT No. Title of Standard Impact on GRAP Reporting Framework GRAP 26 Impairment of Cash generating assets Full compliance to GRAP 26 not required. Entities may use GRAP 26 to formulate an accounting policy for the impairment cash generating assets. Accounting policy were compiled to conform with GRAP26. No effect on comings year. GRAP 103 Heritage Assets Entities may use GRAP 103 to formulate an accounting policy for heritage assets. The Board does not have any heritage assets, therefore no effect on the coming year. GRAP 104 Financial Instruments Full compliance with GRAP 104 not required Significant judgments and sources of estimation uncertainty In preparing the annual financial statements, management is required to make estimates and assumptions that affect the amounts represented in the annual financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the annual financial statements. Significant judgements include: Provisions Provisions were raised and management determined an estimate based on the information available. Additional disclosure of these estimates of provisions are included in provisions. Allowance for doubtful debts On debtors an impairment loss is recognised in surplus and deficit when there is objective evidence that it is impaired. The impairment is measured as the difference between the debtors carrying amount and the objective evidence. Residual value on Property, plant and equipment Property, plant and equipment: Motor vehicles - management has estimated that the residual value for motor vehicles is 25% of the original cost price. No other assets carry any residual value Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation. Depreciation is calculated on the straight-line method to write off the cost of assets to their residual values over their anticipated useful lives as follows: The useful lives of items of property, plant and equipment have been assessed as follows: Item Average useful life Buildings 50 years Fixtures and fittings 10 years Motor vehicles 5 years Furniture and equipment 4-10 years Computer equipment 3-4 years Other Cell phone 2 years Library books 3 years Land is not depreciated as it is deemed to have an indefinite life. The useful life as well as residual values are reviewed annually. Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the sales proceeds and the carrying amount of the assets and are recognised in the statement of financial performance as realised. Property, plant and equipment are reviewed for impairment losses whenever events indicate that the carrying amount may not be recoverable. An impairment loss is recognised in respect of the amount by which the carrying amount of the asset exceed its recoverable amount, which is the higher of an asset's net selling price and value in use. An impairment loss or reversal of an impairment loss is recognised as an expense/income in the statement of financial performance as incurred.

61 1.3. Financial instruments Financial assets Financial assets are recognised when the board has a right or other access to economic benefits. Receivables and cash are recognised as financial assets when the entity is party to a contract and as a consequence, has a right to receive cash. Financial liabilities Financial liabilities are recognised when there is a contractual obligation to transfer benefits. Impairment of financial assets The Entity assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred 'loss event') and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Trade and other receivables Trade and other receivables are initially measured at transaction costs and thereafter are re-measured at fair value using objective evidence for assessment of impairment. Trade and other payables Trade payables are recognised as financial liabilities when the entity is party to a contract and as a consequence, has a right to pay cash. Payables are initially measured at transaction cost and carried at fair value of the consideration to be paid in future for goods or services that have been received or supplied and invoiced or formally contracted for with the supplier and are derecognized when the liability is extinguished. Cash and cash equivalents Cash and cash equivalents are carried at cost. For purposes of the cash flow statement, cash and cash equivalents comprise cash in hand and deposits held on call with the bank Inventories Inventories are fully expensed in the year any purchases were made Retirement benefits The policy of the Board is to provide retirement benefits through an established fund governed by the Pension Fund Act. The provident fund is a defined contribution fund which does not require an actuarial valuation. Contributions to the provident fund are charged to the Statement of Financial Performance in the year to which they relate. The Board has no obligations to fund post-retirement medical benefits 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 ~ ~ 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. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Provisions are reversed if it is no longer probable that an outflow of resources embodying economic benefits or service potential will be required, to settle the obligation. Leave provision The employees of the Board are entitled to 22 working days per annum as leave gratuity. The policy adopted by the Board is that all its employees should take leave during the year, failing which they will forfeit their leave days on the 30th of June each year. The leave days are recognised as they accrue to employees. The liability is based on the total amount of leave days due to each employee at year end Audited Financial Statements 61

62 62 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT multiplied by each employee's respective daily rate of remuneration which is calculated from the respective employee's gross annual remuneration package. 13th Cheque The employees of the Board can structure their salary package to have a bonus portion (13th cheque) which is paid on the 15th of January each year. The bonus is recognised as it accrues to employees who have elected to structure their salary packages to have a bonus portion. Contingent assets and contingent liabilities Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note Revenue Revenue comprises principally of: Revenue from Exchange Transactions: ~ ~ Fees charged for services rendered (i.e. Annual admin fees); ~ ~ Recoveries of expenses incurred in the production of revenue; ~ ~ Sundry income Revenue from Non-Exchange Transactions (Taxes and Transfers) ~ ~ Grant funding received from Provincial Government Revenue from Exchange Transaction is recognised on accrual basis using the following methods to determine stage of completion: ~ ~ Fees charged for services rendered are recognised when they become due in terms of the Eastern Cape Gambling and Betting Act No 5 of ~ ~ Recoveries of expenses incurred in the production of revenue are accrued on completion of service rendered. Revenue from Exchange Transaction is measured at fair value on the date it accrues. Revenue from Non Exchange Transaction: Revenue relating to operational expenditure is recognised in the period in which the transfer agreement becomes binding and is measured at fair value as at the date of recognition. Gambling taxes and fees to the fiscus The gambling taxes and part of the fees collected are paid over to the Provincial Revenue Fund at the end of each month as prescribed by the Gambling and Betting Act. These gambling taxes and fees are not recognised as revenue as they are collected on behalf of the state, however an asset and liability is recognised when taxes and fees become receivable from licensee and payable to the state. Receivable and payables for collection and distribution to the state are initially measured at cost and carried at fair value Accruals Performance bonus Accrual for performance bonus is raised at year end and paid in the following financial year Operating leases Leases where the lessor retains the risk and reward of ownership of the underlying asset are classified as operating leases. Payments made under operating leases are charged to the statement of financial performance on a straight line basis over the period of the lease Comparatives Where necessary, comparative figures have been reclassified to conform to changes in presentation in the current year 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 Irregular expenditure 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

63 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 expenditure item, be disclosed as such in the note to the financial statements and updated accordingly in the irregular expenditure register Notes to the Annual Financial Statements 2. Inventories Figures in Rand Stationery Crockery Change in accounting policy (18 453) During the financial year, the Board change its policy to expense stationery and crockery in the year it was purchased. 3. Trade and other receivables from exchange transactions Figures in Rand Trade debtors Staff loans Deposits Sundry debtors Fair value of trade and other receivables Trade receivables Age analysis 120 days days days days Current Total Audited Financial Statements 63

64 64 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT Figures in Rand Trade and other receivables impaired The amount of the impairment was R ( ) as of 31 March 2011 (2010: R ). Reconciliation of provision for impairment of trade and other receivables Opening balance Provision for impairment Utilisation of impairment ( ) Receivable on collection for distribution from non-exchange transactions Figures in Rand Government taxes and levies from non exchange transactions Prepayments Figures in Rand Other prepaid expenditure Insurance expenditure Business licenses Cash and cash equivalents Figures in Rand Cash and cash equivalents consist of: Bank balances Cash on hand

65 7. Property, plant and equipment Figures in Rand Cost/Valuation Accumulated depreciation and accumulated impairment Carrying value Cost/Valuation Accumulated depreciation and accumulated impairment Carrying value Land Buildings ( ) ( ) Fixtures and fittings ( ) (88 436) Motor vehicles ( ) ( ) Furniture and equipment ( ) ( ) Computer equipment ( ) ( ) Library books ( ) ( ) Cell phones (86 204) ( ) Total ( ) ( ) Reconciliation of property, plant and equipment Figures in Rand Opening balance Additions Disposals Depreciation Depreciation Adjustment Land Buildings ( ) Fixtures and fittings (20 208) Motor vehicles ( ) Furniture and equipment (26 511) ( ) Computer equipment (8 814) ( ) Library books (69 212) Cell phones (66) (53 307) (6 174) Total (35 391) ( ) (6 174) Total Reconciliation of property, plant and equipment Figures in Rand Opening balance Additions Disposals Prior Period Errors Depreciation Total Land Buildings ( ) Fixtures and fittings (17 386) Motor vehicles (28 786) (58 786) ( ) Furniture and equipment (5 484) ( ) Audited Financial Statements 65

66 66 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT Figures in Rand Opening balance Additions Disposals Prior Period Errors Depreciation Total Computer equipment (1 000) ( ) Library books (69 213) Cell phones (2 644) (52 943) Total (37 914) (58 786) ( ) Land and buildings, comprise a sub-division of Erf 2863, Beacon Bay measuring 2371 m2, purchased 2002, together with an office building. 8. Trade and other payables from exchange transactions Figures in Rand Trade payables Accruals Collections for distributions from non-exchange transactions Figures in Rand Taxes and levies Exclusivity fee Exclusivity fee collected from Zone 1 and paid to the Provincial Revenue Fund on 26 May Revenue Figures in Rand Revenue from Exchange transactions: The amounts included in revenue arising from exchanges of goods or services are as follows: Fees Recoveries Sundry income Allowances for credit losses

67 Figures in Rand Revenue from Non Exchange transactions: The amount included in revenue arising from non exchange transactions is as follows: Government Funding Operations Employee costs Figures in Rand Basic salary Performance awards Medical aid company contributions Unemployment Insurance Fund Insurance (5 511) Casual labour Reversal of leave ( ) Leave payments Pension Other non pensionable allowances Other salary related costs Senior Management Remuneration: Remuneration of Chief Executive Officer Salary Allowances Fund Contributions Bonus Audited Financial Statements 67

68 68 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT Figures in Rand The Chief Executive officer was appointed 01/12/2009. Remuneration of Chief Finance Officer * Salary Allowances Fund Contribution Bonus The Chief Financial officer was appointed 01/10/2010. * Included in the remuneration of the Chief Financial Officer is an amount of R paid to Mr. D Mzonke who was the Acting Chief Financial Officer for a period of six months before the appointment of the permanent Chief Financial Officer. Compliance & Licensing Manager Salary Allowance Fund Contribution Bonus The Compliance and Licensing Manager was appointed 01/01/2011. Total Senior Management Remuneration Other Operating expenses Figures in Rand Other operating expenses are made up of the following line items: Sundry expenses Fuel & oil Security services Software annual license fees Photocopier usage License fees software packages Canteen & catering Losses on disposal of assets (667) Insurance premiums Maintenance and repairs: Property and buildings

69 Figures in Rand Maintenance and repairs: Machinery and equipment Maintenance and repairs: Other Bi lateral Relations Stores / consumables Municipal services Courier and delivery charges Communication costs Rentals in respect of operating leases Plant, machinery and equipment Staff wellness and team building Year end function Administrative expenses Figures in Rand Evaluation and hearing Inspection and investigation Travelling and subsistence Consultation fees Board of Directors' fees Legal fees Stationary and printing Bad debts Bank charges Training and staff development Statutory audit fees Figures in Rand Statutory Audits Audited Financial Statements 69

70 70 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT Gifts, sponsorships and donations Figures in Rand Gifts Sponsorships Donations As part of its corporate social responsibility, the Board has donated computers to Sunduza Primary School in Sterkspruit. and the costs incurred related to the setting up of the computer laboratory. Furthermore, the Board engaged a construction company for the construction of a boxing ring in Idutywa. 16. Marketing cost Figures in Rand The costs for research and public education include the following: Promotional advertising 500 Research and public education Films and photography Advertising Subscription and Publications Operating lease commitments Figures in Rand Minimum lease payments due within one year in second to third year inclusive Present value of minimum lease payments The Board reached an agreement with the lessor for the cancellation of the lease in respect of the old photocopying machines which was for a period of 60 months, and entered into a new lease for a period of 36 months. The information disclosed in comparative figures is in respect of the old photocopying machines. This is due to the fact that the lease agreement in respect of the new photocopying machines was signed after year-end. The ECG&BB entered into an operational lease agreement with the following terms: - Four photocopy machines for a period of 36 months with the minimum monthly charge of R The machines will be returned to the hirer at the end of the period. - The lessor is required to provide a maintenance for the equipment during the period of the agreement.

71 18. Training and Development Costs Figures in Rand Overseas Travel Travel and Accommodation Car Hire Other (registration daily allowances) Local Travel Travel and Accommodation Car Hire Other (registration daily allowances) Included in the training costs is travel and accommodation that relates to overseas conferences attended by the Board members and Senior management during the year under review. The costs for this line item has always been budgeted under training as well as under research and development and reported as such in the annual financial statements. 19. Finance income Figures in Rand Interest Revenue Bank Taxation The income of the Board is exempt from taxation in terms of section 10(1) (ca) of the Income Tax Act no 58 of Cash generated from (used in) operations Figures in Rand Deficit ( ) ( ) Adjustments for: Depreciation Gain (loss) on sale of assets and liabilities (74 435) Interest income ( ) ( ) Allowance for losses Loss on disposal of assets (1 001) Audited Financial Statements 71

72 72 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT Figures in Rand Changes in working capital: Trade and other receivables from exchange transactions ( ) Trade and other payables from exchange transactions ( ) ( ) 22. Contingencies The contingent liability is composed of possible legal costs relating to litigation. The case refers to the unsuccessful Zone 4 (Mthatha) casino license applicant who is contesting the final decision of the Board issuing the license to the competing applicant. The entity s lawyers estimated the legal costs to be R1,5 million. 23. Related parties Relationships Administrator of Mbizana Development Trust Trustee of Amatola Trust Members of key management RM Zwane (Chief Executive Officer) SL Majombozi (Chairperson) RM Zwane (Chief Executive Offocer) JT Harper (Chief Financial Officer) BL Jaxa (Compliance and Licensing Manager) The Chief Executive Officer was appointed by the High Court as the administrator of the Mbizana Development Trust on 19th of August The former Chairperson was appointed a trustee of Amatola Trust. This resulted in the trusts being related parties to the Eastern Cape Gambling Board due to significant roles the Chief Executive Officer and the former Chairperson assumed in the operations of the trusts. There were no transactions between the Eastern Cape Gambling & Betting Board and those members of the key management personnel and companies in which key management personnel have an interest in during the year under review. Figures in Rand Salaries for Key Management Personnel are disclosed in note 11. During the year under review, the following related party transactions occurred: Related party transactions included in exchange transactions Additional amounts paid on behalf of: Amatola Trust Mbizana Development Trust

73 Reimbursement amounts paid by: Amatola Trust Mbizana Development Trust Outstanding amounts at year end Amatola Trust Mbizana Development Trust The costs were incurred by the entity while the trusts were experiencing operational challenges and in instances where there were amounts outstanding at year end, these were included in receivable and in some instances were paid post year end by the trusts. 24. Board Members emoluments Figures in Rand Fees Expense Allowances Sub Committees Other Total 2011 For services as directors For services as directors A new Board of Directors was appointed 01/04/2011. Detailed Board members emoluments: Board Members Fees Expense allowances Other K. Canca 68, , , ,491 A. Ntsonkota 59,500 5, , , ,949 N. Mqakama 28,364 C.T.S. Cossie 34,000 1, , , ,602 N. Mtakati 42,500 30,135 99, , ,866 N. Tom 8, ,000 52, ,400 M. Sibam 156,250 S.L. Majombozi 120,000 30, , ,418 1,440,911 P. White 68, , , ,100 A. Mabizela 76,500 93, , ,800 S. Whitfield 19,000 19,000 22,500 R. Hill 26,600 26,600 19, ,000 68,806 1,814,675 2,360,481 4,937,334 Audited Financial Statements 73

74 74 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT Detailed Board members emoluments - Included in the amounts under Other: are the following items: Board Members Overseas Travel Reading Documents Special Projects Other Total K. Canca 76,500 34, , ,000 A. Ntsonkota 59,000 34, , ,100 C.T.S. Cossie 76,500 34,000 90, ,200 N. Mtakati 34,000 64,750 99,750 N. Tom 34,000 9,000 43,000 S.L. Majombozi 336,000 48, , ,525 S. Whitfield 19,000 19,000 R. Hill 26,600 26,600 P. White 76,500 34, , ,750 A. Mabizela 34,000 59,750 93, , , ,175 1,814, Change in accounting policy Inventory The Board change its accounting policy during the financial year relating to accounting treatment of inventory. Inventory previously carried as the lower of cost or net-realisable value has been changed to expensing these type of expenses in the year it has been incurred. Figures in Rand Decrease in inventory (18 453) (34 809) Decrease in retained income (18 453) (34 809) The reason for the change in treatment of inventory is due to the fact that inventory was previously disclosed in the annual financial statements is mainly made up of stationery and crockery purchased for internal ause and not for trading purposes. 26. Comparative figures Certain comparative figures have been reclassified to show depreciation & amortisation and impairments separately in the statement of financial performance. The effects of the reclassification are as follows: Figures in Rand Statement of Financial Performance Increase in Depreciation and amortisation

75 Decrease in Other Operating expenses ( ) Increase in Impairment loss / Reversal of impairments Decrease in Administrative expenses ( ) 27. Risk management Liquidity risk The Board manages liquidity risk through an ongoing review of the future commitments. Cash flow forecasts are prepared and monitored. Interest rate risk The Board policy is to manage interest rate risk so that fluctuations in variable rates do not have material impact on surplus / (deficit). The following table illustrates the sensitivity of the entity s and equity to interest rate changes should interest rates increase or decrease with 2% during the next financial year: Figures in Rand % 2% Decrease in net deficit for the year ( ) ( ) +2% +2% Increase in net deficit for the year Credit risk Credit risk consists mainly of cash deposits and cash equivalents. The Board only deposits cash with major banks with high credit standards. The Board has therefore no concentration of credit risks. The board s maximum exposure to credit risk is equal to the cost amount of the financial assets at balance sheet date and is summarised as below: Figures in Rand Trade and other receivables from exchange Receivable on collection for distribution Cash and cash equivalents As of 31 March 2011, trade and other receivables was impaired with an amount of R The age analysis of financial assets are indicated in note Financial instruments The table below indicates the difference classes of financial instruments. The carrying value approximate their fair value as well. Loans and receivables are non-derivative financial assets and financial liabilities with fixed or determinable payments that are not quoted in an active market other than those that the entity intends to sell, those that the entity upon initial recognition, designates as available for sale; or those for which the holder may not recover substantially all of its initial investment. Audited Financial Statements 75

76 76 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT Available for sale financial instruments are those non-derivate financial assets that are designated as available for sale or are not classified loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. Figures in Rand Receivables/Loans Available for sale 2011 Financial assets Trade and other receivables from exchange Receivable on collection for distribution Prepayments Financial liabilities Trade and other payables from exchange ( ) Payable on collections for distributions ( ) 2010 Financial assets Trade and other receivables from exchange Receivable on collection for distribution Prepayments Financial liabilities Trade and other payables from exchange ( ) Payable on collections for distributions ( ) 29. Going concern The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. 30. Events after the reporting date A new board and audit committee was appointed after the reporting date on 01/04/2011. There were no further events after the reporting date that require disclosure in the financial statements.

77 31. Fruitless and wasteful expenditure Figures in Rand Opening balance Fruitless and wasteful expenditure Prior year 870 Fruitless and wasteful expenditure recovered from debtor (870) Fruitless and wasteful expenditure condoned (19 986) No fruitless and wasteful expenditure was incurred during the year under review. 2010: Interest of R870 was charged by a service provider on late payments of an invoice. An official has since paid the interest. 32. Irregular expenditure Figures in Rand Opening balance Irregular expenditure prior year Irregular expenditure current year Irregular expenditure approved by the board ( ) Irregular expenditure condoned ( ) Description of irregular expenditure Disciplinary steps taken/criminal proceedings Details of irregular expenditure prior year The MEC approved the retrospective adjustment of Board Members fees Due to the casino licensing process for zone one and litigation relating to zone four, the Board incurred unexpected expenditure for legal costs. The travelling and subsistence expenditure and training costs increased due to overseas travel for study tours. The Board utilised services of consultants in the licensing process and the CFO support. The Board has condoned and considers expenditure to be valid and therefore no disciplinary steps were taken. Details of Irregular expenditure current year Over expenditure of the current year budget None taken, under investigation 33. Criminal or disciplinary steps taken as a consequence of material losses None. Audited Financial Statements 77

78 78 EASTERN CAPE GAMBLING AND BETTING BOARD ANNUAL REPORT Budget versus actual The below indicate the over- or under on income and expenditure as per the approved budget to comply with GRAP01: Figures in Rand Under expenditure in Labour Cost Under expenditure in Transport Cost Under expenditure in Facility Cost 741 Under / (over) expenditure in Communication and System Costs ( ) (Over) expenditure in Risk Management Costs ( ) (Over) expenditure in Business Development Costs ( ) ( ) (Over) expenditure in Other Costs ( ) ( ) (Over) expenditure in Corporate Governance Costs ( ) ( ) Under expenditure on CAPEX Less: Over expenditure of direct expenditure in relation to hearings and investigations to be recovered Net deficit per approved budget ( ) ( ) 35. Soccer World Cup 2010 Expenditure No expenditure has been incurred for the 31 March 2011 and 31 March 2010 which relates to the Soccer World Cup 2010.

79 Reviving local rivalry in boxing! Thabo Sonjica (Duncan Village) and Mcbute Sinyabi (Mdantsane) facing each other in an ECGBB-sponsored boxing tournament. Crowds at the Orient Theatre in East London enjoying the boxing!