Financial Report: DRDLR s Annual Report ending 31 March Presentation to the Portfolio Committee on Rural Development and Land Reform

Transcription

1 Financial Report: DRDLR s Annual Report ending 31 March 2015 Presentation to the Portfolio Committee on Rural Development and Land Reform 14 October 2015

2 Table of Contents 1. Executive Summary-Financial Performance 2. Annual Financial Statements Statement of Financial Position Statement of Financial Performance Statement of Changes in Net Assets Cash Flow Statement 3. Report of the Auditor General 4. Summary of Audit Findings 2

3 Executive Summary-Financial Performance The Department s total spending for the financial year amounted to R9.4 billion, representing 99.4% of the Appropriation of R9.4 billion, leaving unspent funds of R59.5 million. The greatest contributor to the unspent funds was Rural Development s Goods and services (R35.7 million). The second greatest contributor was the unspent funds of R10 million under Households Transfers, for projects that could not be finalized within the financial year. These funds could not be utilised elsewhere in the Department due to the PFMA 8% limit on virements after the AENE. Expenditure on goods and services decreased by R833 million or 38.2% from R2.1 billion to R1.3 billion in 2014/15. This is due to SCOA reclassification of NARYSEC expenditure to Households and cost containment measures that were implemented following the cost containment circular issued by National Treasury 3

4 Executive Summary-Financial Performance 4

5 Programme Expenditure 2014/ /2014 Programme Name Final Appropriation Actual Expenditure (Over)/Under Expenditure Final Appropriation Actual Expenditure (Over)/Under Expenditure R 000 R 000 R 000 R 000 R 000 R 000 Administration 1,384,430 1,382,197 2,233 1,267,553 1,267,482 1,071 National Geomatics Management Services 734, ,537 2, , ,869 1,244 Rural Development 1,850,932 1,800,988 49,944 1,704,840 1,701,643 3,197 Restitution 2,998,742 2,997, ,836,851 2,836, Land Reform 2,486,386 2,482,096 4,290 2,862,383 2,862, Total 9,455,305 9,395,755 59,550 9,459,740 9,454,056 5,684 5

6 Statement of Financial Position as at 31 March / /14 R'000 R'000 ASSETS Current assets Cash and cash equivalents Prepayments and advances Receivables 420, , , ,443 49,224 23,447 7,464 12,711 Non-current assets 33,923 26,422 Investments 16,112 16,112 Receivables 17,811 10,310 TOTAL ASSETS 453, ,023 6

7 Statement of Financial Position as at 31 March / /14 R'000 R'000 LIABILITIES Current liabilities 429, ,729 Voted funds to be surrendered to the Revenue Fund Departmental revenue and NRF Receipts to be surrendered to the Revenue Fund Payables Aid assistance repayable TOTAL LIABILITIES 59,550 5,684 25,949 40, , ,542 18,412 4, , ,729 NET ASSETS 24,694 22,294 7

8 ..Statement of Financial Position as at 31 March / /14 R'000 R'000 Represented by: Capitalisation reserve 16,112 16,112 Recoverable revenue 8,582 6,182 Retained funds - - Revaluation reserves - - TOTAL 24,694 22,294 8

9 Statement of Financial Performance for the year ended 31 March / /14 R'000 R'000 REVENUE Annual appropriation 9,455,305 9,459,740 Departmental revenue 87, ,622 Aid assistance 30,316 7,909 TOTAL REVENUE 9,573,060 9,572,271 EXPENDITURE Current expenditure Compensation of employees 1,791,559 1,541,261 Goods and services 1,342,464 2,175,153 Interest and rent on land 5,674 5,759 Aid assistance 11,605 3,346 Total current expenditure 3,151,302 3,725,519 9

10 ..Statement of Financial Performance for the year ended 31 March / /14 R'000 R'000 Transfers and subsidies Transfers and subsidies 5,458,275 5,470,892 Total transfers and subsidies 5,458,275 5,470,892 Expenditure for capital assets Tangible assets 793, ,463 Total expenditure for capital assets 793, ,463 Payments for financial assets 4,361 6,528 TOTAL EXPENDITURE 9,407,659 9,457,402 SURPLUS/(DEFICIT) FOR THE YEAR 165, ,869 10

11 Statement of Changes in Net Assets for the year ended 31 March / /14 R'000 R'000 Capitalisation Reserves Opening balance 16,112 16,112 Closing balance 16,112 16,112 Recoverable revenue Opening balance 6,182 4,262 Transfers: 2,400 1,920 Debts recovered (included in departmental receipts) (3,450) (2,371) Debts raised 5,850 4,291 Closing balance 8,582 6,182 TOTAL 24,694 22,294 11

12 Cash Flow Statement for the year ended 31 March / /14 R'000 R 000 CASH FLOWS FROM OPERATING ACTIVITIES Receipts 9,572,537 9,572,124 Annual appropriated funds received 9,455,305 9,459,740 Departmental revenue received 74,873 85,613 Interest received 12,043 18,862 Aid assistance received 30,316 7,909 Net (increase)/decrease in working capital 113,801 (134,207) Surrendered to Revenue Fund (108,114) (120,353) Surrendered to RDP Fund/Donor (4,563) (2,841) Current payments (3,145,812) (3,720,102) Interest paid (5,490) (5,417) Payments for financial assets (4,361) (6,528) Transfers and subsidies paid (5,458,275) (5,470,892) Net cash flow available from operating activities 959, ,784 12

13 ..Cash Flow Statement for the year ended 31 March / /14 R'000 R 000 CASH FLOWS FROM INVESTING ACTIVITIES Payments for capital assets (793,721) (254,463 Proceeds from sale of capital assets Net cash flows from investing activities (793,198) (254,316 CASH FLOWS FROM FINANCING ACTIVITIES Increase/(decrease) in net assets 2,400 1,920 Net cash flows from financing activities 2,400 1,920 Net increase/(decrease) in cash and cash equivalents 168,925 (140,612 Cash and cash equivalents at beginning of period 194, ,055 Cash and cash equivalents at end of period 363, ,443 13

14 Public Entities and Trading Accounts Name of Public Entity Services rendered by the public entity Amount transferre d to the public entity Achievements of the public entity Ingonyama Trust Board Registration of Deeds Trading Account The trust manages land for the material benefit and social wellbeing of the individual members of the tribes. Registration of title deeds in order to ensure the security of tenure 17,294 The funds transferred to the entity were utilised to augment the entity s operational expenditure 113,194 The funds transferred to the entity were utilised to augment the entity s operational expenditure. It further funded work towards the development of the E-Cadastre 14

15 Public Entities (Cont.) Name of Public Entity Services rendered by the public entity Amount transferred to the public entity Achievements of the public entity Agricultural Land Holding Account The Agricultural Land Holding Account was established in terms of the Provision of Land and Assistance Act, Act No. 126 of Section 10(1) (a) gives legal effect to the proactive acquisition of land, where the Minister may, from money appropriated by Parliament for this purpose, acquire land for the purposes of this Act. Therefore the State will proactively target land and match this with the demand or need for land. 1,613,529 The funds transferred to the entity funded the pro-active acquisition of the strategically located agricultural land 15

16 Programme Expenditure (cont.) The department s expenditure for the financial year 2014/15 amounted to R9,396 billion or 99.4% of the budget allocation of R9,455 billion. This resulted in an under-spend of R59 million Transfer payments, excluding public entities Name of transferee Purpose for which the funds were used Compliance with s 38 (1) (j) of the PFMA Amount transferred (R 000) Amount spent by the entity (R 000) Reasons for the funds unspent by the entity Independent Development Trust Food security programme Complied 7,321 6,178 Project was still in progress at financial year end 16

17 Transfer Expenditure (cont.) Transfer payments, excluding public entities (cont.) Name of transferee Purpose for which the funds were used Complian ce with s 38 (1) (j) of the PFMA Amount transferr ed (R 000) Amoun t spent by the entity (R 000) Reasons for the funds unspent by the entity Enterprise development sweet potato vine nurseries and farming enterprise Reconnaissance survey visit in nine provinces for the establishment of a production support mechanisation centre for the commodity value chain. Agri park concept development which entailed conducting of situational analysis in 14 district municipalities in Mpumalanga, Limpopo, Eastern Cape and KwaZulu-Natal. 17

18 Transfer Expenditure (cont.) Transfer payments, excluding public entities (cont.) Name of transferee Purpose for which the funds were used Complianc e with s 38 (1) (j) of the PFMA Amount transferr ed (R 000) Amount spent by the entity (R 000) Reasons for the funds unspent by the entity Development Bank Of Southern Africa Assist the department with the Sustainable Development Plan for five Years in Muyexe. Assist the department to conduct a full due diligence study that aims to rationalise 658 cooperatives to 110 trading enterprises. Complied 29,646 28,738 18

19 Transfer Expenditure (cont.) Name of transferee South African Council of Planners Purpose for which the funds were used To pay for the department s membership in the council Complianc e with s 38 (1) (j) of the PFMA Amount transferr ed (R 000) Amount spent by the entity (R 000) Complied 3,020 3,020 n/a Reasons for the funds unspent by the entity 19

20 Transfer Expenditure (cont.) Name of transferee Purpose for which the funds were used Compliance with s 38 (1) (j) of the PFMA Amount transfer red (R 000) Amount spent by the entity (R 000) Reasons for the funds unspent by the entity National Agri Marketing Council Development of red meat production centres through the National red meat development Complied 16,670 14,162 Some of the funds were transferred towards the end of the financial year, thus could not be spent. 20

21 Transfer Expenditure (cont.) Name of transferee National Wool Growers Association of SA Purpose for which the funds were used Genetic improvement of wool sheep farming in the communal areas of the Eastern Cape. Compliance with s 38 (1) (j) of the PFMA Amount transferre d (R 000) Amount spent by the entity (R 000) Reasons for the funds unspent by the entity Complied 19,548 14,884 Some of the funds were transferre the financial could not be spent. 21

22 Transfer Expenditure (cont.) Name of transferee Purpose for which the funds were used Compliance with s 38 (1) (j) of the PFMA Amount transferre d (R 000) Amount spent by the entity (R 000) Reasons for the funds unspent by the entity Agribusiness in sustainable natural plant (ASNAPP) Implementation of a hydroponics project in the CRDP site in the Sokhulumi Tshwane municipality, Tshwaraganang phase one project and for the Ndluli Ceres phase one project in the Western Cape. Complied 9,915 9,915 n/a 22

23 Transfer Expenditure (cont.) Name of transferee Purpose for which the funds were used Compliance with s 38 (1) (j) of the PFMA Amount transferre d (R 000) Amount spent by the entity (R 000) Reasons for the funds unspent by the entity Agricultural Research Council Training of the Agricultural Para Professionals. Training of small holder livestock producers. Establishment of fruit and vegetables enterprises in different provinces in SA. To breed fifty Bonsmara beef cattle and two Bonsmara bulls and also train and mentor beneficiaries of Segogoane s Valley Trust in Thaba Phachoa within Mantsopa Local Municipality in Free State. Complied 127, ,996 n/a 23

24 Transfer Expenditure (cont.) Name of transferee CSIR Purpose for which the funds were used Design and deployment of new digital doorways, upgrading 15 container digital doorways and upgrading connectivity in the 18 schools running the I-school Africa Programme. 60 x Schools roll out kit submitted to core computer business (PTY) Ltd for I-school Africa Programme. Complian ce with s 38 (1) (j) of the PFMA Amount transferre d (R 000) Amount spent by the entity (R 000) Reasons for the funds unspent by the entity Complied 24,447 21,502 Some of the funds were transferre the financial year, thus could not be spent. 24

25 Transfer Expenditure (cont.) Transfer payments, excluding public entities (cont.) Name of transferee Purpose for which the funds were used Complianc e with s 38 (1) (j) of the PFMA Amount transferre d (R 000) Amount spent by the entity (R 000) Reasons for the funds unspent by the entity Feasibility studies for DRDLR Project ideas by facilitating skills development, training, mentoring, technology transfer, technical support, productivity enhancement, rural industries development. Cofimvaba Nciba district infrastructure costs (school infrastructure). Establishing an essential oil and Moringa agro processing business at Temotua farm in Driekop. 25

26 Transfer Expenditure (cont.) Transfer payments, excluding public entities (cont.) Name of transferee Human Sciences Research Council (HSRC) Purpose for which the funds were used Complianc e with s 38 (1) (j) of the PFMA Amount transferred (R 000) Amount spent by the entity (R 000) Policy research 1913 centenary research. Complied 1,903 1,903 n/a Reaso ns for the funds unspe nt by the entity Witzenberg Local Municipality Mpumalanga Regional Training Trust Implementation of the integrated development plans for community upliftment. Joint venture with Department of Human Settlements to build houses in Donkerhoek and Jabulani in the Mkhondo Municipality, Mpumalanga Province. Complied 4,577 4,577 n/a Complied n/a 26

27 Irregular, Fruitless and Wasteful expenditure Fruitless and wasteful expenditure increased by 12% ( R 5,417 million to R 6,073 million) from previous year. This is due to the extension on the NARYSEC training program from 2 to 4 years due to the unavailability of accredited work place sites, unavailability of space at accredited colleges for further education and training and interest paid as compelled by the courts on Restitution matters. The Department has also seen an increase in Irregular expenditure (R 12,647 million to R25,286 million:2014/15). This is due to non-compliance with Supply Chain prescripts. These case are still in the process of being investigated by the Financial Compliance Committee. 27

28 Irregular, Fruitless and Wasteful expenditure On all the finalized cases of fruitless and irregular expenditure, warning letters were issued and disciplinary actions are underway for the officials who were found guilty. The Department remains committed to eradicating non-compliance with the laws and regulations applicable to it. The internal control environment is continuously being monitored for its effectiveness and weaknesses identified are addressed in order to improve financial management and the overall efficiency in the operations of the department In addition the department has improved its standard operating procedures to identify fruitless and wasteful expenditure before it occurs 28

29 Report of Auditor General 1. The audit report was issued by AGSA on 31 of July 2015 and the Department has obtained an unqualified audit opinion. 2. The audit report contains emphasis of matter regarding significant uncertainties. These matters were not as a result of audit findings but as disclosed upfront by the department in the notes to the AFS. The AG deemed it necessary to bring these matters to the attention of the users of the AFS. The emphasis was on: Claims instituted against the Department amounting to R2 123 million. These claims are subject to the outcome of legal proceeding. As a result, no provision for any liability that may result has been made in the Department s financial statements. The Department has a possible liability towards the claimants in terms of the Restitution of Lands Rights Act, 1994 (Act No. 22 of 1994). The total amount of claims verified and on route for approval in terms of section 42D of this Act amounts to approximately R113 million, for which once approved by the Minister it will increase the commitment amount disclosed in Note 19 to the AFS. 29

30 Report of Auditor General-cont Provision has been made for the impairment amounting to R16 million. This relates to Inala Farms(Pty) Ltd which is in the process of being liquidated and the investment might not be recovered. Provision amounting to R 99 million has also been made, of which R43 million relates to non-recovery of lease debtors and R28 million relates to provision for doubtful debts. 4. Other important matters were reported by the AG and the department has already developed Management Action Plans in order to address these matters. The action plans are monitored monthly by management and progress is reported to the Audit Committee & Senior Management Committee for oversight. 5. The Department remains committed to maintaining the unqualified audit opinion that it received and will continue to implement measures to attain this ideal. 30

31 Summary of Audit Findings Executive Summary Number of total findings In progress Closed/N/A DRDLR ALHA DEEDS

32 AGRICULTURAL LAND HOLDING ACCOUNT

33 Contents 2014/15 unaudited financial results 1. Executive summary 2. Statement of Financial Position 3. Statement of Financial Performance 4. Statement of Changes in Net Assets 5. Cash Flow Statement 6. Other Financial Matters/Disclosures 33

34 Statement of Financial Position as at 31 March 2015 Assets AFS Notes 2014/ /14 Movement Movement R 000 R 000 R 000 % Restated Expl Notes Non-current assets Property, plant and equipment % 1 Intangible Assets % 2 Other Financial assets % % Current assets Trade and other receivables - exchange transaction (3 072) (7%) 4 Receivables and other receivables - Non exchange transaction (37 641) (25%) 5 Cash and cash equivalents % % TOTAL % 34

35 Statement of Financial Position as at 31 March continued AFS Notes 2014/ /14 Variance Variance Expl EQUITY AND LIABILITIES R'000 R'000 R'000 % Note Restated Current Liabilities Trade and other payables exchange transaction % 7 Trade and Other Payables non exchange transaction % 8 Total current liabilities % Net assets Accumulated surplus % TOTAL EQUITY AND LIABILITIES % 35

36 Statement of Financial Performance as at 31 March 2015 AFS Notes 2014/ /14 Variance Variance Expl R'000 R'000 R'000 % Note Restated REVENUE Exchange transactions (34 562) (52%) Rental income (60 840) 0% 9 Interest lease receivable % 10 Other operating income % 11 Interest received bank % 12 Non exchange transaction ( ) (6%) Grant income Non exchange (83 590) (5%) 13 Donation received (20 268) (13%) 14 TOTAL REVENUE ( ) (8%) 36

37 Statement of Financial Performance as at 31 March 2015-continued AFS Notes 2013/ /15 Variance Variance Expl R'000 R'000 R'000 % Note Restated EXPENDITURE Depreciation (40 498) (35 066) (5 432) 13% 15 Impairment 16 (65 044) ( ) ( ) (397%) 16 Finance costs 15 - (35) (35) 0% Operating expenditure farmers/strategic partners 14 ( ) ( ) ( ) (153%) 17 Other operating expenditure 14 (25 124) (42 366) (17 242) (69%) 18 Loss on disposal of asset - (128) (128) 0% ( ) ( ) ( ) (171%) 37

38 Statement of Changes in Net Assets as at 31 March 2015 AFS Note Accumulated surplus Total Net Asset Expl note Balance at 01 April Correction of prior period error 26 (5 593) (5 593) 19 Restated balance 01 April Surplus for the year Balance at 01 April Surplus for the year Balance at 31 March

39 Statement of Cash Flows as at 31 March 2015 CASH FLOWS FROM OPERATING ACTIVITIES AFS Notes 2014/ /14 Variance Variance R'000 R'000 R'000 % Cash receipts ( ) (78% Sale of goods and services (3 212) (45% Grants income (83 590) (5% Interest income % Other operating revenue (15 691) (91% Cash paid to suppliers and employees ( ) ( ) ( ) 69% Suppliers and other payables ( ) ( ) ( ) 69% Finance costs - (35) (35) 0% Net cash flows from operating activities (20% 39

40 Statement of Cash Flows as at 31 March continued CASH FLOWS FROM INVESTING ACTIVITIES AFS Notes Note Variance Variance R'000 R'000 R'000 % 6 months 12 months Restated Purchases from Property, Plant and Equipment 3 ( ) ( ) ( ) 11% CASH FLOWS FROM FINANCING ACTIVITIES Other financial assets (13 489) (11 387) (2 102) 16% Net (decrease)/ increase in cash and cash ( ) (39 754) (21% Cash at beginning of the year ( ) (247% Total cash at end of the year % 40

41 DEEDS REGISTRATION TRADING ACCOUNT

42 Contents 1. Executive summary 2. Statement of Financial Position 3. Statement of Financial Performance 4. Statement of Changes in Net Assets 5. Cash Flow Statement 6. Other Financial Matters/Disclosures 42

43 Executive Summary The Deeds generated revenue from the registration of deeds and sale of information amounting to R 522 million for the 2014/15 financial year, this is an increase of R7 million compared to prior year. Total revenue amounted to R722 million, this grew from R603 million in 2013/14 or a 19.7% increase. Surplus for the year amounted to R110 million showing an increase R5 million compared to prior year. This indicates an increase of 4.9%. The closing balance on the current bank account as at 31/03/2015 was R290 million 43

44 Statement of Financial Position for the year ended 31 March 2015 Restated R'000 R'00 Assets Current Assets Inventories Prepayments Receivables from exchange transactions Cash and cash equivalents Non-current Assets Property, Plant and Equipment Intangible Assets TOTAL ASSETS

45 Statement of Financial Position as at 31 March 2015 (cont) Restated R'000 R'00 Liabilities Current Liabilities Finance Lease Obligations Payables from exchange transactions Unspent conditional grants and receipts Provisions - Non-current Liabilities Finance Lease Obligations Provisions Total Liabilities Net Assets Accumulated surplus

46 Statement of Financial Performance for the year ended 31 March 2015 Revenue Restated R'000 R'00 Revenue from exchange transactions Registration of Deeds and Sale of Information Other Income Interest received - investment Transfer revenue Government grants Public contributions and donations 2 82 Total revenue

47 Statement of Financial Performance for the year ended 31 March 2015 Restated R'000 R'00 Expenditure ( ) ( Employee costs ( ) ( Depreciation and amortisation (20 490) ( Impairment of prepayment (23 937) Impairment loss (2 298) (1 558 Finance costs (177) (130 Impairment of receivables (586) (41 Repairs and maintenance (44 730) ( General expenses ( ) ( Total revenue Total expenditure ( ) ( Operating surplus Loss on disposal of assets and liabilities (549) (754 Surplus for the year

48 Cash Flow Statement for the year ended 31 March 2015 Restated R'000 R'00 ASH FLOWS FROM OPERATING ACTIVITIES eceipts egistration of Deeds and sale of information rants nterest income ayments ( ) ( mployee costs ( ) ( uppliers ( ) ( et cash flows from operating activities

49 Cash Flow Statement for the year ended 31 March 2015 (cont) CASH FLOWS FROM INVESTING ACTIVITIES Restated R'000 R'00 Purchase of Property, Plant and Equipment ( ) (6 594 Proceeds from sale of property, plant and equipment 70 4 Intangible Assets - ( NET CASH FLOWS FROM INVESTING ACTIVITIES ( ) ( CASH FLOWS FROM FINANCING ACTIVITIES Finance lease payments 288 (366 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

50 Conditional grants received 2014/2015 The Deeds Registration Trading Account received the following grants in 2014/2015 from the Department Rural Development and Land Reform: E-cadastre project R98, 3m Annual salary increases R14, 9m 50

51 Irregular expenditure The Trading Account had an opening balance of R39, 8m Movement during the 2014/2015 financial year: Irregular expenditure recovered: R1 m Condoned relating to 2011/2012: R2m Condoned relating to 2012/2013: R4m Condoned relating to 2013/2014: R827 thousand During 2014/2015 irregular expenditure to the value of R6, 9m was condoned with the following steps taken: condoned, condoned with warning letters and disciplinary letters 51

52 Fruitless and Wasteful expenditure The Trading Account had an opening balance of R20 thousand Movement during the 2014/2015 financial year: Additional cases added: R7 thousand Condoned: R20 thousand The R20 thousand was condoned with the following steps taken: recovery from officials and warning letters 52

53 Services in kind Administrative services in kind: The Deeds Registration Trading Account falls under the administration of the Department of Rural Development and Land Reform. The executive of the department spend some of their time on the affairs of the Trading Account. Furthermore, the department provides the services of information technology, office accommodation and staff training. There is no cost charged by the department in this regard Other services in kind: The Department of Public Works provides office accommodation for some of the Deeds Registries 53

54 Report of Auditor General 1. The audit report was issued by AGSA on 31 of July 2015 and the Deeds Registration Trading Account has obtained an unqualified audit opinion. 2. The audit report contains emphasis of matter regarding significant uncertainties. The AG deemed it necessary to bring these matters to the attention of the users of the AFS. 3. The emphasis was on: 3.1 Restatement of corresponding (2013/2014) figures Prior period errors Useful life of assets with R1 value were not re-assessed R6,99m Donated assets at R1 book value were not re-assessed R2, 8m Provision of R5m for Datacentrix to be removed as a provision and disclosed as a note under contingent liabilities 54

55 Report of Auditor General (cont) 3.2 Material losses/impairments Impairment provision for R23m relating to prepayment Provision for doubtful debts R3,5m 3.3 Significant uncertainties Contingent liabilities raised relating to a dispute of whether services were rendered R12.9m 4. Other important matters were reported by the AG and the Deeds Registration Trading Account has already developed Management Action Plans in order to address these matters. The action plans are monitored monthly by management and progress is reported to the Audit Committee for oversight. 5. The Deeds Registration Trading Account remains committed to maintaining the unqualified audit opinion that it received and will continue to implement measures to attain this ideal. 55

56 Thank You 56