An aerial view of the newly built Dannhauser Community Health Care Center in KwaZulu-Natal

Transcription

1 20 Independent Development Trust Annual Report 2014

2 An aerial view of the newly built Dannhauser Community Health Care Center in KwaZulu-Natal ANNUAL REPORT I 2013/14

3 TABLE OF CONTENTS ACRONYMS...4 PART A 1. GENERAL INFORMATION & OVERVIEW General Information Strategic Overview Vision Mission Values Strategic Outcome Orientated Goals Legislative Arrangements and Mandates Organisational Structure Statement by the Executive Authority Foreword by the Board Chairperson Acting Chief Executive Officer s Overview...17 PART B 2. PERFORMANCE SUMMARY An Overview to IDT S Performance Assessment Overall Performance Overall Performance Level Targets Achieved as Planned or Exceeded Number of Departments Supported Value of Programme Spend Empowerment Work Opportunities Created Entities Supported Youth Empowerment Analysis of Scorecard Alignment and Contribution of the IDT to National and Public Works Priorities Alignment to National Priorities Alignment to National DPW Priorities Impact of IDT S Work Households Impacted Most Signifi cant Change Stories ANNUAL REPORT I 2013/14 1

4 PART C 3. GOVERNANCE Board Functioning Audit and Risk Committee Finance Committee Human Resources and Corporate Services Committee Strategic Planning and Programmes Committee Board Executive Committee Trustees Regional Visits Risk Management Compliance with Laws and Regulations Internal Controls Internal Audit and Audit Committee Fraud and Corruption Minimising Conflict of Interest Code of Conduct Company Secretary Executive Management Compliance Statement Reporting to the Executive Authority and Parliament Risk Assessment and Risk Mitigation PART D 4. HUMAN RESOURCES MANAGEMENT Human Resource Management Human Resource Oversight Statistics Staff Establishment Staff Attrition New Appointments Staff Turnover Employment Equity Organisational Learning and Development Formal Professional Staff Development Planned Training (External Bursaries/Study Assistance) Short Courses Wellness ANNUAL REPORT I 2013/14

5 PART E 5. FINANCIAL INFORMATION Statement of Responsibility for the Annual Financial Statements for the Year ended 31 March Audit Committee Report Audit and Risk Committee Members and Attendance Audit and Risk Committee Responsibility The Effectiveness of Internal Control The Effectiveness of Internal Audit Risk Management Effectiveness The Quality of Management Quarterly Performance Reports Submitted to the Executive Authority Integrity of the Annual Report Auditor s Report Evaluation of Financial Statements Appreciation Acting Chief Executive Officer: Financial Review Report General Financial Overview Expenditure Trends Capacity Constraints and Challenges Facing the Entity Supply Chain Management Audit Report Matters from the Previous Year Audit Report Matters for the Current Year Outlook Events After the Reporting Date Acknowledgments Report of the Auditor-General to Parliament on the Independent Development Trust Annual Financial Statements...74 PART F 6. ANNEXURE Impact Assessment Technical Data (Sources of Norms and Standards) ANNUAL REPORT I 2013/14 3

6 ACRONYMS AA Accounting Authority ABT Alternative Building Technologies ACM Alternative Construction Methodologies AFS Annual Financial Statements AGSA Auditor-General South Africa APP Annual Performance Plan ASIDI Accelerated School Building Infrastructure Initiative BBBEE Broad-Based Black Economic Empowerment CBE Council for the Built Environment cidb Construction Industry Development Board CBO Community-Based Organisation CDP Contractor Development Programme Co-Op Cooperative CSIR Council for Scientifi c and Industrial Research CSU Corporate Services Unit DBE Department of Basic Education DG Director-General DPW Department of Public Works DOE Department of Education DSU Development Services Unit EA Executive Authority EC Eastern Cape ECDC Early Childhood Development Centre EE Employment Equity EPWP Expanded Public Works Programme EU European Union EXCO Executive Committee FS Free State FSU Financial Services Unit GP Gauteng Province IDT Independent Development Trust IPMSA IT King III KZN LP Institute for Project Management South Africa Information Technology The King Report on Corporate Governance (King III Report) KwaZulu-Natal Limpopo MANCO Management Committee M&E MP MTEF NC NW NDP NDPW NGO NPO NSS OCEO PIAs PICC PFMA Monitoring and Evaluation Mpumalanga Medium-Term Expenditure Framework Northern Cape North West National Development Plan National Department of Public Works Non-Governmental Organisation Non-Profi t Organisation Non-State Sector Offi ce of the Chief Executive Offi cer Programme Implementation Agreements Presidential Infrastructure Coordinating Commission Public Finance Management Act (No.1 of 1999 as amended) PPPFA Preferential Procurement Policy Framework Act (No. 5 of 2000) SARS South African Revenue Services SCM Supply Chain Management SEDA Small Enterprises Development Agency SIP Strategic Infrastructure Programmes SMME Small, Medium and Micro Enterprises TAC Tender Adjudication Committee USA United States of America WC Western Cape 4 ANNUAL REPORT I 2013/14

7 Part A General Information & Overview ANNUAL REPORT I 2013/14 5 ANNUAL REPORT 2013/14

8 1. GENERAL INFORMATION & OVERVIEW 1.1 GENERAL INFORMATION REGISTERED NAME: Independent Development Trust REGISTRATION NUMBER: 669/91 (Trust Property Control Act {No. 57 of 1988}) PHYSICAL ADDRESS: Glenwood Offi ce Park Corner Oberon & Sprite Streets Faerie Glen Pretoria 0043 GPS COORDINATES: S E POSTAL ADDRESS: PO Box 73000, Lynnwood Ridge 0040 TELEPHONE NUMBER/S: FAX NUMBER: ADDRESS: info@idt.org.za WEBSITE ADDRESS: EXTERNAL AUDITORS: Auditor-General South Africa BANKERS: ABSA - Corporate, Lourie Place, Hillcrest Offi ce Park, 177 Dyer Road, Hillcrest 0083 COMPANY SECRETARY: Mr Vusi Skosana 6 ANNUAL REPORT I 2013/14

9 1.2 STRATEGIC OVERVIEW Vision A leading public sector programme management agency Mission The IDT manages and delivers integrated social infrastructure programmes on behalf of government Values The values that guide the IDT community are summarised in table 1. Table 1: Values and Operating Principles Values Operating Principles People centred We improve the lives of people. We work together as a team. We put people fi rst. We are focused on our stakeholders. Integrity We are open and honest in all our communications. We believe in the integrity of our data and reports. We treat one another with dignity and respect. We conduct our business in a lawful, honest and ethical manner. Professionalism We approach work in a systematic manner. Our service complies with best practice. We deliver quality results. Accountability We have responsibility to communities, stakeholders and one another for our actions. We are accountable to our clients, stakeholders and one another for our actions. Visionary We approach our work in a creative manner. Our solutions are innovative. We make direct positive impact on communities Strategic Outcome Orientated Goals The Independent Development Trust s (IDT) strategic focus is encapsulated in two interlinked strategic objectives as shown in Table 2. Strategic Objective 1 articulates the IDT s service offering and value add to the national development agenda while Strategic Object 2 focuses on the IDT s commitment to being an effi cient, compliant and effective public entity. ANNUAL REPORT I 2013/14 7

10 Table 2: 2013/14 Strategic Goals and Objectives Strategic Goals Strategic Goal Statement Strategic Objectives Objective Statement Sustainable Development Effective and Efficient Administration The implementation of targeted and people-centred interventions for sustainable development in marginalised and impoverished communities To ensure that the IDT is an effi cient, effective and compliant public entity and development agency Empowered Communities Integrated Social Infrastructure Effective, Efficient And Compliant Administration Transformed IDT To build empowered and cohesive communities through the delivery of people-centred development solutions. To effectively deliver integrated and social infrastructure in marginalised communities. To ensure excellence in delivery. To become a development agency that is selfsustaining and is able to generate funding from alternative sources, besides reliance on the fi scus. Through its multi-sectoral portfolio, the IDT contributes, in varying degrees, to the following national priority outcomes through the delivery of social infrastructure and other job creation programmes: Outcome 1: Quality basic education; Outcome 2: A long and healthy life for all South Africans; Outcome 4: Decent employment through inclusive economic growth; Outcome 7: Comprehensive rural development; Outcome 8: Sustainable human settlements; Outcome 10: Protect and enhance our environmental assets and natural resources; and Outcome 12: An effi cient, effective and development oriented public service. 8 ANNUAL REPORT I 2013/14

11 1.3 LEGISLATIVE ARRANGEMENTS AND MANDATES Founded in 1990 towards the demise of the apartheid government, the IDT has been in existence for the past 24 years. Over this period the organisation has evolved from being a quasi-civil society organisation with a focus on disbursement of funds to Community Based Organisations and Co-operatives to a fully-fl edged Public entity within the Department of Public Works supporting government s efforts towards eradicating poverty, employment creation and social cohesion through delivery of social infrastructure. In March 1997 the IDT was constituted as a development agency and public entity to support all spheres of government when Cabinet endorsed a recommendation of a Cabinet Advisory Committee that, inter alia, The IDT must be transformed into a government development agency that will implement projects which are commissioned by government departments. It must cease to be a civil society organisation, an independent agency or funding agency. 1 The IDT reports to the Minister of Public Works who is also the Shareholder Representative and its Executive Authority. The IDT therefore contributes towards the realisation of the vision of the Department of Public Works of becoming a world class Public Works Department, primarily in two areas of the Department s vision; In its leadership of the Expanded Public Works Programme (EPWP); In the transformation of the construction and property sector. While the focus and status of the IDT has over the years evolved, the funding model of the organisation has remained largely unchanged. The operating environment dictates the need for government to relook at the model of the organisation to ensure that it continues to play an even deeper and more meaningful role in the eradication of social infrastructure backlogs in a developmental and sustainable manner. In this regard there is great appreciation of the Executive Authority s efforts in championing the development of a sustainable funding model for the IDT. The Business Case for the IDT s longterm sustainability seeks among other things to strengthen the positioning of the IDT as a state owned entity focusing on social infrastructure programme management, reporting to the Minister of Public Works and supporting the Department in the delivery of its outcome priority areas, particularly those relating to poverty eradication, job creation, and the eradication of social infrastructure backlogs. 1 Structural Relationships between government and Civil Society Organisations. A Report by the Advisory Committee to the Deputy President, as adopted by Cabinet in March 1997:3. ANNUAL REPORT I 2013/14 9

12 1.4 ORGANISATIONAL STRUCTURE 10 ANNUAL REPORT I 2013/14

13 IDT National Office in Pretoria ANNUAL REPORT I 2013/14 11

14 ii) The operationalisation of PMTE (Property Management Trading Entity) and the transformation of the core property business (including construction management); iii) The operationalisation of the Governance, Risk and Compliance Branch to drive anti-corruption and to spearhead the second phase of the Turnaround, i.e. effi ciency enhancement; iv) Undertaking a policy review culminating in a Public Works Act in consultation with all stakeholders particularly the wider Public Works family in the provinces; and v) A renewed and sustained programme of action to transform the Built Environment the construction and property sectors. Hon. Mr Thembelani W. Nxesi (MP); Minister of Public Works 1.5 STATEMENT BY THE EXECUTIVE AUTHORITY Development Agencies are an integral part of government s delivery vehicles and effort. The IDT is one of the four public entities within the Department of Public Works. As the Executive Authority I am happy to note that over the past two years, the organisation has consciously realigned its strategic thrust to the mandate and strategic goals of the Department of Public Works. The 16th July Public Works Budget Vote Speech reconfi rms the Department s Strategic Vision for , as encapsulating fi ve key priority areas for the next fi ve years: i) The creation of 6 million work opportunities for poor and unemployed people through the labour-intensive delivery of public services and infrastructure; The IDT is conscious of aligning to and meaningfully supporting the realisation of the Department s vision. The IDT, as an organisation undergoing major transformation, is expected to mirror and contribute to the cited priority areas. It is acknowledged that the entity is fast becoming a premier construction programme management agency for the public sector. The remarkable performance of the organisation bears testimony to non-relenting efforts of IDT s leadership, amidst the plethora of challenges. For the past 5 years, the organisation has increasingly faced fi nancial viability challenges largely arising out of a non-sustainable funding model. The issuing of Instruction Note 4 of 2014/15 by National Treasury is welcome and comes as a relief. The Instruction Note is an enabling instrument towards fi nancial sustainability as it empowers the IDT to negotiate for, contract on, bill and collect economic-optimal management fees from client departments. Honourable Mr Thembelani W. Nxesi (MP) Minister of Public Works 12 ANNUAL REPORT I 2013/14

15 Major renovations at Addington Hospital in KwaZulu-Natal ANNUAL REPORT I 2013/14 13

16 of engagements, National Treasury issued, subsequent to yearend, an Instruction Note on the IDT Management Fees. With an annual portfolio of over R7 billion and R6.6 billion having been expended during the year, the IDT had a 5.5% effi ciency ratio. This indicates extra-ordinary effi ciency, value for money and the potential for high social return on investment. The allocation of R50m a year for the MTEF three year period incorporating the 2013/14 to 2015/16 fi nancial years gave the organisation a respite and together with the Treasury Instruction Note issued in July 2014 should go a long way in propelling the organisation to a self-sustaining position. Prof. Somadoda Fikeni; Chairperson: Board of Trustees 1.6 FOREWORD BY THE BOARD CHAIRPERSON The long-term sustainability of the IDT was, during the reporting period, the most critical issue on the cards. Various engagements had occurred and efforts expended to fi nd a long-lasting concrete solution. This state of affairs came at a time when the IDT projects a substantial value of programme portfolio in excess of R20 billion over the MTEF. The IDT has a total staff establishment of 441 of which 375 positions were occupied. Of those 375 positions 267 (71%) are programme based staff, with a functional organisational infrastructure across the country. Treasury allocated R50 million per annum to the IDT over the 2013/ /16 MTEF period (R150m). An additional allocation of R50m was made in the 2013/14 fi nancial year bringing total allocation for the 2013/ /16 MTEF to R200m against the requested R430m. On the brighter side and after a series The IDT Restructuring Plan was developed and submitted to both National Treasury and NDPW based on the current mandate as the process by NDPW to review the mandate is still underway. The IDT Restructuring Plan fi rmly indicates and communicates that it is possible for the IDT to review its business model, rightsize and capacitate certain areas of its operations and become substantially self-sustaining. DPW is driving the review of the IDT s mandate and is developing a Business Case for the long-term sustainability of the IDT which process will address the organisation s mandate, funding model, governance arrangements, corporate form and PFMA scheduling. The Minister has made it clear that the IDT of the future will be brought much closer to the Department and hence shall no longer retain the term Independent in its name. The transformation of the IDT to a focused social infrastructure delivery management agency augmenting the capacity of the Department is but one of the turn-around interventions of Public Works. The considered re-scheduling of the IDT will enable better synergy with the mandate and work of Public Works. The auditor s qualifi cation of specifi c areas of the IDT s fi nancial results has perhaps refl ected the concentration of the organisation on its funding needs and a lapse of focus on certain internal control elements. The Board Chair engaged with the Auditor-General s offi ce to get an in-depth understanding of the issues leading to the qualifi cation. Subsequently management 14 ANNUAL REPORT I 2013/14

17 has committed to identifying all areas of control that require strengthening and to prepare a detailed action plan to ensure that controls are implemented with immediate effect. The Board will continue to provide oversight on the implementation of the audit action plan and other measures to safeguard the performance and accountability culture which has seen the organisation amassing eleven unqualifi ed audits in the past eleven years. Prof. Somadoda Fikeni Chairperson: Board of Trustees Members of the Board of Trustees accompanied by IDT personnel on an oversight visit to one of the IDT projects ANNUAL REPORT I 2013/14 15

18 An aerial view of the construction of the Mpumalanga High Court in Nelspruit 16 ANNUAL REPORT I 2013/14

19 Signifi cant progress was made under the leadership of the Executive Authority and the Board, in fi nalising the business case for the long term sustainability of the IDT with a road map agreed upon on the milestones that should be concluded in 2014/15 and the subsequent MTEF years. In this regard it is also important to recognise with gratitude the Minister s efforts in securing a R50m capital injection in March 2014 to ensure that the IDT s going concern status going forward is not compromised. The Organisation however still remains in that environment where long term planning is still compromised. Dr. Stanley Makhosi Bhebhe; Acting Chief Executive Offi cer 1.7 ACTING CHIEF EXECUTIVE OFFICER S OVERVIEW The operating environment for the financial year under review was in many respects a challenging year. The tight fiscal conditions were felt in every Province in which we operate. Late transfer of programme funds to the IDT from a number of our clients was a major impediment throughout the year. The transformation and re-capitalisation of the IDT that has stagnated over the last two years created its own challenges in terms of skills fl ight and general staff motivation. The year also marked the end of the term of offi ce of the former CEO who had diligently served the Organisation for the past ten years. It is under her watch that the Organisation grew from an annual programme spend of about R600 million to an annual spend of R6.63 billion in 2013/14. Despite the adverse operating conditions the Independent Development Trust was able to maintain signifi cant growth both in terms of its order book as well as its annual programmme portfolio spend. Because of the growth in programme spend the IDT also experienced a signifi cant growth in its management fee revenue. The total management fees raised for the year amounted to R402.8 million. The continued focus on cost effi cient and effective, quality delivery and the improved management fee collection in 2013/14 means the IDT can go into 2014/15 fi nancial year in a slightly improved fi nancial position. During the period under review the organisation attained 20 out of a total of 22 annual corporate performance targets, which constitutes a 94% achievement rate. The organisation operates within an environment fraught with uncertainties especially relating to the programmes it manages on behalf of government departments. Shortages of funds at some of our clients led to reduced expenditure, thus negatively affecting some of the targets and ability of the IDT to fully deliver its APP. As a programme management agency, the IDT s ability to deliver quality programmes within scope, budget and time remains a top priority for the organisation. The IDT always strives to leverage from the managed programmes contribution to national priority outcome areas infrastructure development, job creation, skills development, and environmental conservation thus enabling the IDT to undertake integrated development in pursuit of the overall objective of bringing a better life to communities. IDT s work impacted on over 2.9 million households during the 2013/14 Financial Year. ANNUAL REPORT I 2013/14 17

20 Performance reporting is closely linked to corporate integrity, hence maximum effort was exerted in enhancing the performance information management area. The effort that has been put into developing the Performance Information management systems has been recognised in the Auditor-General South Africa s (AGSA) 2013/14 Audit Report, which has acknowledged the fact that there were signifi cant improvements in the management of nonfi nancial performance information. This follows extensive work undertaken in refi ning the Performance Information Management Guidelines, and in the development of a Systems Description in line with the National Treasury s Performance Information Management Guidelines. The disappointment of the year is that the Organisation received a qualifi cation in its fi nancial audit. The focus on the fi nancial sustainability has seen the Organisation shed positions which in turn led to a lapse of focus on certain internal control elements. This temporary lapse will be addressed with urgency in 2014/15 so that the Organisation quickly returns to its full compliance status. To this end an Audit Action Plan has already been developed together with a tracking register which is being monitored by the Internal Audit sub-unit as part of ensuring that the strong system of control within the Organisation is restored. In terms of the year ahead the organisation developed a Corporate Strategic Plan for the 2014/15 to 2018/19 planning cycle linked to an approved budget for the 2014/ /17 MTEF cycle. The Strategic Framework approved by the Board in November 2013, forms the basis for the Strategic Plan. In conclusion, I wish to express my gratitude to the Ministry and the offi ce of the Director- General for the critical support and leadership during this reporting period. I herewith present the 2013/14 Annual Report of the Independent Development Trust. Stanley Makhosi Bhebhe, PhD Acting Chief Executive Offi cer 18 ANNUAL REPORT I 2013/14

21 Part B Performance Summary ANNUAL REPORT I 2013/14 19 ANNUAL REPORT 2013/14

22 EXECUTIVE COMMITTEE Dr. S Bhebhe Acting Chief Executive Offi cer Mr M Sidambe Acting Executive Head: Offi ce of the CEO Mr A Wakaba Interim Chief Operations Offi cer Mr I Ellis Chief Financial Offi cer Dr. S Bhebhe Acting Executive Head: CSU Mr S Ntsandeni Acting Executive Head: Development Services Unit Dr. N Gumede Acting Executive: Regional Operations Ms K Mashego Deputy Chief Financial Offi cer 20 ANNUAL REPORT I 2013/14

23 2. PERFORMANCE SUMMARY 2.1 AN OVERVIEW TO IDT S PERFORMANCE ASSESSMENT The IDT s business is geared to a make long-lasting and meaningful impact on communities whilst delivering value for money to its clients. The development agency s focus is twofold contribute to the national development agenda, and secondly be a well governed, effi cient, accountable and fi nancially viable corporate entity. IDT s performance, therefore addresses two (2) Strategic Goals and two (2) Strategic Objectives as depicted in Table 3. Table 3: 2013/14 Strategic Goals and Objectives Programme Strategic Goals/Outcomes Strategic Objectives Programme 1: Integrated Service Delivery Programme 2: Administration The IDT Enhances the State s delivery capacity Goal Statement The IDT provides integrated development programmes in a cost effective manner within time, scope and to the required quality. The IDT is an effective, efficient and sustainable organisation Goal Statement IDT is an effective, effi cient and development orientated organisation. Strategic Objective 1: Deliver quality social infrastructure on time, within budget and scope. Objective Statement 1: IDT s distinctive developmental approach to social infrastructure delivery empowers communities to initiate, receive, own, manage and sustain their own development. Strategic Objective 2: A compliant, results-based, effi cient and focused organisation. Objective Statement 2: Maintaining a clean administration which is committed to the effi cient application of resources, compliance with regulations and legislation and which is accountable. The organisation s performance by the end of 2013/14, interpreted against the predetermined targets in each of the strategic goals refl ected in the 2013/14 APP, is discussed in the Performance Summary matrix. The Performance Summary refl ects both annual targets and year-end actual performance, variance (in absolute and percentage terms) and the reasons for the variances. Performance is measured and ranked in terms of the organisation s performance scoring Matrix (Table 4). ANNUAL REPORT I 2013/14 21

24 Table 4: Performance Scoring Matrix DEFINITION RATING EXPLANATION Extremely effective (well above performance requirements) 5 Targets substantially exceeded: Performance range 131% and above. Very effective (above performance requirements) 4 Targets exceeded: Performance range 116% to 130%. Effective (meets performance requirements) 3 Target achieved: Performance range 86% to 115%. Partially effective (below performance requirements) 2 Target partially achieved: Performance range 51% to 85%. Ineffective ( well below performance requirements) 1 Target not achieved: Performance range 0% to 50%. 22 ANNUAL REPORT I 2013/14

25 A view of the old and newly constructed Mnxekazi J.S. School in the Eastern Cape, built using Alternative Building Technologies ANNUAL REPORT I 2013/14 23

26 2.2 OVERALL PERFORMANCE Overall Performance Level The organisation has maintained a steady performance level at 90% level - given the plethora of challenges, many of which are attributable to the as-yet unresolved long-term sustainability challenge faced by the IDT for the past 5 years. The achievements, in a summary are as follows (Table 5 and Table 7): Table 5: Summary of Achievements as Informed by Performance Scoring Matrix Score Frequency Total Strategic Objective 1 Strategic Objective Total out of a total of 22 corporate targets (50%) were delivered as targeted; 41% (i.e. 9) targets were over-achieved; 2 targets (i.e. 9%) were under-achieved. Low levels of programme funding by clients contributed to gross underachievement in terms of the 2 targets and marginal achievement with respect to 4 service-delivery related targets falling under Strategic Goal 1. The above-mentioned achievements have been recorded against what is probably the most challenging period in the history of the IDT. The organisation is faced with solvency challenges. As a result of the sustainability challenge, staff attrition has reached an all-time high; the vacancy rate stands at 17%. Voluntary resignations constitute 52% of all terminations; the most affected area relates to the core business due to resignations of direct programme management personnel. The remaining staff complement is overburdened. However this has not stopped the IDT team from striving for improvement. The entity has improved its effi ciency ratio (based on the ratio of operating expenditure expressed as a percentage of programme delivery) to 5.5% from 6.6% in the previous fi nancial year Targets Achieved as Planned or Exceeded The above notwithstanding, the organisation is proud of its achievements, i.e. targets delivered as planned or exceeded. Highlights include: Number of Departments Supported A total of 41 departments against an annual target of 32 appointed the IDT as their programme implementation agent Value of Programme Spend A total of R6.633 billion of programmes spend was attained, representing a 95% level of achievement against the predetermined target of R7.0 billion. The R6.633 billion spend was attained within a very diffi cult operating environment. Performance was heavily infl uenced by cuts in programme funding by various clients. This could be linked to the macro-level fi scal austerity measures and the fact that 2013/14 marks the end of 5-year mandate of the current government administration. Notwithstanding the challenges, the IDT is maintaining an upward trend in terms of expenditure performance as shown on the graph below. The upward trend (Figure 1) is in keeping with two interlinked key priorities of government that is, the need to eliminate the social infrastructure backlogs and, to increase accessibility to public services. Social infrastructure also presents a viable opportunity to leverage other development priorities such as job creation, skilling of the labour force and equitable income and wealth redistribution. In this regard, it is also worth noting the regional contributions to the expenditure performance. KwaZulu-Natal, Eastern Cape, North West and Mpumalanga provinces are the largest contributors, respectively (Table 6). 24 ANNUAL REPORT I 2013/14

27 Figure 1: Expenditure Performance Trends: 2010/ /14 6,633,141,407 5,418,955,066 4,763,216,259 4,812,185,438 4,050,208,000 3,451,505, ,135, ,179,654 1,340,650,932 1,768,447,406 2,367,055,482 2,875,466,720 Table 6: Regional Expenditure Performance: 2013/14 Region Expenditure Target Expenditure % Contribution To Total Exp. Variance % Achieved Eastern Cape % % Free State % ( ) 34.96% Gauteng % ( ) 30.47% KwaZulu-Natal % % Limpopo % % Mpumalanga % ( ) 94.55% Northern Cape % ( ) 68.94% North West % ( ) 87.32% Western Cape % % National % TOTAL R R % R % ANNUAL REPORT I 2013/14 25

28 Empowerment In its commitment to promoting and supporting an engendered and inclusive development approach, the IDT targeted a minimum 60% programme spend on BBBEE designated business entities. Actual spend amounted to R5.27 billion, 33% above the target of R3.98 billion Work Opportunities Created The IDT contributed job opportunities against a target of This represents a 90% achievement job opportunities were created in the EPWP NSS programme, against a target of Entities Supported The IDT managed to contract and work with 330 NPOs, CBOs and Co-operatives, against a target of 270 for the year. This demonstrates IDT s commitment to foster integrated and inclusive development by partnering, capacitating and working with grassroots structures Youth Empowerment Empowering youth to participate in the mainstream economy is one of the critical focus areas of the IDT. The target of 12% of programme spend for youth owned or controlled entities was surpassed as 15% (R993 million) of total programme spend was awarded to youth contractors and service providers. 2.3 ANALYSIS OF SCORECARD Table 7: Performance Summary for the 2013/14 Financial Year STRATEGIC OUTCOME ORIENTED GOAL 1 GOAL STATEMENT 1 The IDT Enhances the State s delivery capacity (Weight: 70%) The IDT provides integrated development programmes in a cost effective manner within time, scope and to the required quality PROGRAMME NAME: INTEGRATED SERVICE DELIVERY STRATEGIC OBJECTIVE 1 Deliver quality social infrastructure on time, within budget and scope BUDGET: 70% of Total Operating Budget OBJECTIVE STATEMENT 1 IDT distinctive developmental approach to social infrastructure delivery empowers communities to receive, own, manage and sustain their own development ALIGNMENT TO NATIONAL DEVELOPMENT OUTCOMES OUTCOME AREAS Improved quality of basic education A long and healthy life for all South Africans IDT CONTRIBUTION Enhancing the quality of life by creating assets and improving access to functional school infrastructure Enhancing the quality of life by creating assets and improving access to health infrastructure Decent employment through inclusive economic growth Enabling economic inclusion and job creation through IDT s integrated service delivery model 26 ANNUAL REPORT I 2013/14

29 KEY PERFORMANCE AREA PERFORMANCE INDICATORS YEAR END TARGETS YEAR-END ACHIEVEMENTS PERFORMANCE: ACHIEVEMENTS YTD TARGETS VARIANCE % VARIANCE REASONS FOR VARIANCES No of government departments supported IDT s business portfolio increased substantially this fi nancial year as a number of provincial departments contracted with the IDT to expedite service delivery. No of programme implementation agreements concluded PIA s and addenda have been signed with the departments reported above as well as other clients (e.g. SOEs). Enhancing government s delivery capacity Value of programme spend R7 billion R6.63 billion (R0.37 billion) 95 The 95% level of achievement is due to the agreements that were initiated and programmes whose implementation commenced in the previous fi nancial year. However most client departments experienced shortages of funds thereby causing delays in transferring funds to the IDT and subsequently contributing to the slowing of expenditure. % Value of weighted BBBEE spend 60% R3.98 billion 79% R5.27 billion (R1.29 billion) 33 The majority of the service providers contracted to the IDT are BBBEE compliant, hence an achievement of the BBBEE spend in spite of the 5% variance in programme expenditure. No. of new/ replacement schools completed (28) 44 The majority of the 50 schools, particularly 30, are linked to ASIDI programme. The programme commenced later than initially planned as the IDT was only appointed at the fi rst quarter. The delays had negative effect, as many of the schools under this programme will be completed during the 2014/15 fi nancial year. ANNUAL REPORT I 2013/14 27

30 KEY PERFORMANCE AREA PERFORMANCE INDICATORS YEAR END TARGETS YEAR-END ACHIEVEMENTS PERFORMANCE: ACHIEVEMENTS YTD TARGETS VARIANCE % VARIANCE REASONS FOR VARIANCES Integrated social infrastructure development No. of integrated social infrastructure development projects No. of work opportunities created through IDT portfolio No. of EPWP-NSS work opportunities created No. of EPWP cooperatives, NPO s and CBO s supported Percentage of women contractors participating in the Contractor Development Programme (CDP) The projects entail the piloting of the IDT integrated community development model which integrates project outputs with key development imperatives such as job creation, skills development, community participation, etc. Due to the focus on social infrastructure delivery, the IDT s investment in community development has reduced drastically (3 063) 90 The 90% achievement closely correlates with the level of programme spend i.e. spend R6,63 billion of programme spend attained as against a target of R7 billion Further, the growth in mega projects (e.g. Polokwane High Court, the construction of schools using Alternative Building Technologies (ABT)/ Alternative Construction Methodologies (ACM) schools in EC, medical equipment supplies in KZN, etc.) which are inherently capital intensive and have low scope, has had an adverse impact on job opportunities Effective planning, communication and timely transfer of programme funds by NDPW enabled better performance on EPWP NSS The increase in the EPWP NSS job opportunities target enabled the organisation to work with more CBOs and NPOs. 65% 67% 2% 103 The IDT implemented social infrastructure programme delivery in line with the provisions of the CIDP Practice Note No.29 to engender participation in the construction sector. The Practice Note is a useful mechanism for balancing empowerment with other development targets. Approximate value of contracts awarded to women contractors as a percentage of actual programme spend 25% R1.66 billion 17% (R1.15 billion) (R0.51 billion) 68 While participation of women contractors has improved, a time lag exists between participation and actual growth in work allocation thereby resulting in lower than expected programme values. It is envisaged that the benefi ts associated with the implementation of the CIDB Practice Note 29 can only be realised at least after a full year of implementation. Approximate value of contracts awarded to youth contractors as a percentage of actual programme spend 12% R0.79 billion 15% R0.99 billion R0.20 billion 125 Value of contracts awarded to youth has improved largely due to partnerships entered into with youth advocacy organisations. There is an observed increase in entrepreneurship among youth and young adults. 28 ANNUAL REPORT I 2013/14

31 New Matjieskloof Primary School under construction in the Northern Cape ANNUAL REPORT I 2013/14 29

32 STRATEGIC OUTCOME ORIENTED GOAL 2 GOAL STATEMENT An effective and efficient administration (Weight: 30%) IDT is an effective, efficient and development orientated organisation PROGRAMME NAME: ADMINISTRATION STRATEGIC OBJECTIVE 2 A compliant, results-based, effi cient and focused organisation BUDGET: 30% of total operating budget OBJECTIVE STATEMENT 2 ALIGNMENT TO NATIONAL DEVELOPMENT OUTCOMES Maintaining a clean administration which is geared to the effi cient application of resources, compliance with regulations and legislation and which is accountable. OUTCOME AREAS An effi cient, effective and development oriented public service and an empowered, fair and inclusive citizenship IDT CONTRIBUTIONS Encouraging organisational effi ciency, effectiveness and compliance KEY PERFORMANCE AREA PERFORMANCE INDICATORS YEAR END TARGETS YEAR-END ACHIEVEMENTS PERFORMANCE AGAINST YTD TARGETS VARIANCE % VARIANCE REASONS FOR VARIANCES Compliance Compliance with relevant legislation and regulations 2 Compliance with relevant legislation 100% compliance with all relevant legislation N/A Performance planning and Management Effective fi nancial and non-fi nancial performance management Unqualifi ed Audit opinion by AG Qualifi ed fi nancial report with unqualifi ed outcome relating to performance information. (100) (100) Control weaknesses in certain fi nancial areas. Corrective measures formulated and being implemented to address areas of weaknesses. Risk Management Effective risk management Effective Risk Management Approximately 140% achievement against target. i) Risk Assessment conducted; Risk Profi le approved by the Board. ii) Risk Appetite Statement endorsed by the Board. iii) Fraud Prevention Plan implemented Fraud awareness drive across the organisation N/A Corporate Governance Sound governance 3 Effective & Functioning Board and Committees Approximately 140% achievement against target. i) Standard Operating Procedures (SOPs) included with and to bolster Terms of Reference (ToRs) for the Board and Committees N/A 2 Relevant Legislation pertains to the PFMA and all other statutory instruments identifi ed in IDT s Legislative Universe. 3 Sound Governance refers to the effectiveness of the Accounting Authority. 30 ANNUAL REPORT I 2013/14

33 KEY PERFORMANCE AREA PERFORMANCE INDICATORS YEAR END TARGETS YEAR-END ACHIEVEMENTS PERFORMANCE AGAINST YTD TARGETS VARIANCE % VARIANCE REASONS FOR VARIANCES Organisational Culture Effective Human Capital management HR Plan Implemented as planned 100% achievement against target An HR Plan typically takes a 3-5 year perspective. Given the uncertainty around the mandate, future and fi nancial sustainability of the organisation the HR Strategy and Plan cannot be fully operationalised. Notwithstanding the above, the organisation has prioritised and limited recruitment to programme personnel and only for statutory/mandatory functions such as Internal Audit, Compliance, etc. Sustainability IDT s Long-term Sustainability Model confi rmed Support the development and fi nalisation of the Long-Term Sustainability model Approximately 30% achievement against target. Support has been provided as requested by and to DPW for the formulation of the Longterm sustainability of the IDT. (70) (70) The funding base of the IDT remains uncertain. National Treasury which had committed to provide the necessary support for the IDT to reach self-sustainabilty in terms of funding has not played the requisite role. Treasury has subsquent to year end provided IDT with an Instruction Note on Management fees. Operational Efficiency % Effi ciency ratio 4 8% 5.5% The impressive effi ciency ratio is deceptive as it is built on a high vacancy rate. The workload will reach unsustainable levels in the foreseeable future. This has serious operational and reputational risks for the organisation. Average management 4.0% 6.1% fee 5 Target exceeded largely due to drive to enhance sustainability through increased revenue. Communications Effective Communications Strategy Deliver Communications Strategy as planned 100% achievement against target. Communications and Stakeholder Management Strategy has been delivered Despite the delivery as planned, the Communications Unit is depleted of specialist staff due to the moratorium on staff engagement instituted as a result of the fi nancial viability uncertainty. This is likely to impede delivery in future. Monitoring and Evaluation No of comprehensive research reports 3 100% achievement against target. 3 comprehensive research reports completed Despite the achievement, 5 research projects of strategic and operational relevance to the agency were put on hold due to lack of funding. 4 Effi ciency ratio refl ects operational cost as a percentage of programme expenditure; the lower the percentage the higher the level of effi ciency. 5 The average management fee represents the management fees billed as a percentage of programme expenditure. ANNUAL REPORT I 2013/14 31

34 Construction of the Polokwane High Court in Limpopo 32 ANNUAL REPORT I 2013/14

35 2.4 ALIGNMENT AND CONTRIBUTION OF THE IDT TO NATIONAL AND PUBLIC WORKS PRIORITIES Alignment to National Priorities The IDT s 2013/ /18 Strategic Plan and 2013/14 APP contribute in various ways to the achievement of national priorities. The IDT s support is informed by the twelve (12) national priority outcome areas. The IDT s strategic goals, objectives and programmes bolster the efforts of government to tackle poverty, inequality and unemployment through the organisation s service offering. Table 8 refl ects the IDT s contribution towards achieving the national development priorities. Table 8: IDT s Contribution to Government Priority Outcome Areas and to Public Works Mandate Government Development Priority Outcome Areas Indicators 4 (Related to IDT s work) IDT Key Performance Areas/targets 1 Improved quality of basic education The percentage of schools which comply with nationally determined minimum physical infrastructure standards. The percentage of schools which comply with nationally determined optimum physical infrastructure standards. Number of new/ replacement/ upgrade school infrastructure facilities Implementing agent for the DBE ASIDI Programme and Provincial DOEs Lead public sector implementing agent of alternative buildings technologies 2 A long and healthy life for all South Africans Improved health infrastructure availability Number of new/ replacement health infrastructure facilities Value of social infrastructure programme spend % of BBBEE spend Value of contracts awarded to women contractors 4 5 Decent employment through inclusive economic growth. 1 (a) Increased average income and reduced levels of poverty Value of contracts awarded to Contractor Development participants Value of contracts awarded to youth contractors % of women contractors participating in the IDT s Contractor Development Programme No. of work opportunities created through the IDT Portfolio and EPWP NSS No. of EPWP Co-ops, NPOs and CBOs supported 3 Improved rural services to support sustainable livelihoods. 7 Vibrant, equitable and sustainable rural communities with food security for all Improved and fast tracked service delivery through innovative and adapted service delivery models. Increased number of households that access services Enterprise development services supported (including for SMMEs and Cooperatives) Number of new/ replacement/upgraded social infrastructure facilities No. of enterprises (Co-ops, CBOs and NPOs) supported Empowered communities through social mobilisation, economic participation and participation in decision making processes 8 Sustainable human settlements and improved quality of household life. 3.2 Improved access to basic services 6 There is great diversity in the usage and interpretation of outcomes in terms of the service delivery agreements. Some departments use output related indicators, others input-related indicators, while others change or effect related indicators. ANNUAL REPORT I 2013/14 33

36 Government Development Priority Outcome Areas 10 Environmental assets and natural resources that are well protected and continually enhanced 12 An effi cient, effective and development oriented public service and an empowered, fair and inclusive citizenship. Indicators 4 (Related to IDT s work) Protected and enhanced environmental assets and natural resources 1 The degree to which women, the poor and the disabled have access to and are able to effectively participate in forums and processes 1 Institutional design to maximise participation IDT Key Performance Areas/targets Alien Vegetation Clearing -Working for Water Programme Refuse management and food security- Food for Waste Programme Community based natural resource management - Working for Woodlands Programme No of government departments supported Effective fi nancial and non-fi nancial performance management Effective human capital development through Internship Programme (Approx. 30 interns per annum) Effi ciency ratio The IDT therefore is mindful and directs its development efforts and interventions towards those outcomes that are critical to the Department s mandate and the Minister s performance agreement. Moreover, the IDT supports the DPW contribution to the priorities of the National Development Plan. Reducing Unemployment: DPW is the lead Department responsible for the coordination of EPWP. The Programme is government s primary mechanism to create jobs for a large number of unskilled and unemployed citizens. The programme serves as a bridge between the mainstream economy and the unemployed people in the country. IDT supports DPW with the coordination and reporting on EPWP and is the implementing agency for EPWP: NSS. To this end, the IDT has intensifi ed its efforts with respect to job creation and skills development across the entire country. (12%). The IDT s model and delivery creates entrepreneurial opportunities to emerging contractors, targeting women and youth in particular, creates jobs for the unemployed, trains and builds skills for the construction sector. In 2009, the IDT launched a CDP to develop historically disadvantaged emerging contractors into sustainable construction companies. One of the sub-programmes of the contractor development programme was to create an enabling environment that targets women-owned companies registered between grades one (1) and fi ve (5) on the Construction Industry Development Board (CIDB) register of contractors. The current CDP intake stands at 110 participants. Table 9 provides a picture of participation in the Programme by women and youth contractors, against the annual total target of 75 CDP participants. Inclusive Economic Growth: The IDT s business model deliberately and successfully pursues and delivers empowerments targets. As such it seeks to advantage BBBEE certifi ed contractors (60%), women (25%) and youth 34 ANNUAL REPORT I 2013/14

37 Table 9: Women and Youth Participation (by Province) in the CDP Province No of emerging contractors recruited under CDP No. of women contractors participating in the CDP No. of youth contractors participating in the CDP Eastern Cape Free State Gauteng KwaZulu-Natal Mpumalanga Northern Cape Northwest Limpopo Total 110 (147%) 74 (67%) 44 (40%) Crumbling Infrastructure: By year-end, 85% (i.e. R5.83 billion out of R6.633 billion total programme spend) of the IDT s portfolio has been directed at social infrastructure development and the greatest share of this delivery is in rural and marginalised areas of the country. (Figure 2) Figure 2: Social Infrastructure Programme Expenditure by Sector; 2013/14 financial year Welfare Support and Facilities, 7.1% Water & Sanitation, 1.6% Sports, Arts and Culture, 1.1% Criminal Justice Systems Facilities, 9.8% Environmental Intervention, 3.0% Food Security, 1.7% Health Care & Facilities, 15.4% School Building, 51.6% Poverty Relief & EPWP, 8.7% Educational Outcomes: Quality education is the highest national strategic priority. Vision for Schooling 2025 states as one of its outcomes School buildings and facilities that are spacious, functional, safe and well-maintained. Learners and teachers who look after their buildings and facilities because they take pride in their school. Output Goal 24 aims to Ensure that the physical infrastructure and environment of every school inspires learners to want to come to school and learn, and teachers to teach. 51.6% of the IDT s portfolio is directed at school infrastructure development and thus directly advances this goal. ANNUAL REPORT I 2013/14 35

38 Fighting Corruption: By its diligent focus on fraud prevention and detection and incisive disciplinary action; and by improving the internal controls and the supply chain management processes during the tender and selection process of service providers, the IDT seeks to fi ght corruption which has become an endemic challenge in our society Alignment to National DPW Priorities The DPW Strategic Plan for maps out the key policy priorities that the Department has to focus on to deliver on its mandate. The 2013/14 APP, which draws heavily on the fi ve-year Strategic Plan, outlines its key policy priorities and programmes informed by the new strategic direction of the Department. The aim of the NDPW Strategic Plan and APP is to create a sustainable Department able to use the allocated resources under the MTEF to deliver effectively and effi ciently on its mandate and programmes. The 2013/14 IDT Annual Performance Plan aligns with the 2013/14 DPW s Annual Performance Plan through support of the following Programmes 1, 2 and 3 in the DPW Strategic Plan PROGRAMME 1: ADMINISTRATION (Sub-programme: Monitoring and Evaluation with particular reference to effective Corporate Governance and Sound Resource Management-strategic objective 6). In terms of the Shareholder Compact and the organisation s mandate and Strategic Plan, the IDT is committed to compliance with relevant legislation and regulations including improvements in corporate governance. The IDT s Strategic Goal 2 on Effective and Effi cient Administration is aligned to Programme 1. This programme serves to provide public entities with strategic leadership and support services. As part of Programme 1, the DPW oversees and coordinates oversight of performance information of all public entities reporting to the Minister. Through this oversight, the DPW ensures that entities are compliant with the PFMA, and other applicable legislation, National Treasury Regulations, the Protocol on Corporate Governance in Public Sector as well as with King III. PROGRAMME 2: IMMOVABLE ASSET MANAGEMENT Programme 2 is the largest programme for the DPW and is allocated the largest percentage of the Department s budget. The Programme provides and manages government s immovable property in support of social, economic, functional and political objectives. In support of Programme 2, the IDT provides integrated development programmes in a cost-effective manner within time, scope and to the required quality. The IDT enhances the State s delivery capacity by delivering quality social infrastructure as refl ected in its value of programmes spend, number of government departments supported and number of integrated social infrastructure development projects undertaken. PROGRAMME 3: EXPANDED PUBLIC WORKS PROGRAMME (EPWP) Programme 3 promotes an enabling environment for the creation of both short and sustainable work opportunities. The Programme also supports the provision of training for unskilled, marginalised and unemployed people of South Africa. The IDT s involvement in this Programme greatly contributes to the national goals of job creation and poverty eradication. The IDT has been effective and an asset to the Department in its programme and project management of the broader EPWP and the EPWP: Non State Sector. For instance, in its Annual Performance Plan, under Strategic Objective 2 the IDT targets to create jobs and support NPOs, CBOs and cooperatives under the EPWP-NSS. In addition, through Strategic Objective which focuses on integrated social infrastructure development, the IDT helps improve the quality of life by ensuring that communities and citizens get access to social services, community facilities and economic infrastructure. These interventions create access to job opportunities and emerging business enterprises. The IDT supports women contractor development and emerging contractors throughout the country. Moreover, it has also enrolled interns to acquire skills in the built environment profession. 36 ANNUAL REPORT I 2013/14

39 Other DPW priorities for the 2013/14 fi nancial year which are supported by the IDT include: SIP 13. This is a national development programme designed to deliver more than 200 schools in the country. The IDT is contracted to deliver 52 school under the Accelerated Schools Infrastructure Delivery Initiative (ASIDI) programme. Due to the existing shortage of capacity relating to built environment professions in the public sector, DPW sees the IDT as a crucial and important strategic partner in the delivery of integrated social infrastructure development in the country. Notwithstanding its current long-term sustainability challenges, the IDT strategic goals and objectives are adequately aligned to support DPW to achieve its APP priorities and the government on the National Infrastructure Plan and the National Development Plan. 2.5 IMPACT OF IDT S WORK Households Impacted The IDT subscribes to the notion and practice of undertaking work that has benefi cial impact on the country s citizens. It acknowledges that the impact of its work is closely interlinked with the work of other public entities, as well as contributions by the non-state sector, and individual households efforts to extricate themselves from the atrocious clutch of poverty and marginalisation. Using national service delivery threshold standards and acceptable international benchmarks (Annexure 1), the IDT estimates the realistic impact that can be attributed to its portfolio delivery. The tool is sensitive to the fact that an estimated 50% of programmes implemented by the IDT have overlapping project locations, hence the attribution of impact to only 50% of the total number of households in areas of programme implementation. On the basis of the quantum of facilities delivered - irrespective of the scale of the project and whether or not it was a new or replacement or refurbishment project - IDT s 2013/14 APP achievements positively impacted on households (Table 10). A learner at newly built St Johns Primary School in the Northern Cape ANNUAL REPORT I 2013/14 37

40 Table 10: Projected Number of Households Impacted by IDT s Work During 2013/14 Financial Year FACILITY TYPE No. BUILT & DEVELOPED No. of direct users NORMS AND STANDARDS No. of direct employees No. of support personnel Beneficiary households Direct users NO. OF IMPACTED Direct personnel Support Personnel Households 1. Schools ECDC Clinics Hospital Playground Community Libraries Community Halls Multipurpose Community Centres Computer Centres Courts Police Station Prisons Households Toilets Number of Houses Fitted With Solar Unit Water Tanks Installed TOTAL The fi gure 511 is based on the average of the standard of 488 for primary schools and the standard of 534 for secondary schools, respectively. 38 ANNUAL REPORT I 2013/14

41 2.5.2 Most Significant Change Stories The following cases provide insight into how IDT s work impacts communities. Case 1: Orefile Primary School in Olivenhoutbosch, Gauteng The IDT built and completed the Orefi le Primary School using Alternative Building Technologies (ABTs) on behalf of the Gauteng Provincial Department of Education. The school is one of many schools built by the IDT since 2011 using ABTs in the Gauteng, North West and Eastern Cape Provinces. The ABTs are known to speed-up delivery of schools infrastructure and reduce costs in comparison to brick and mortar structures. Feedback from community testimonies and lessons learned suggest fi ndings consistent with the certifi cation specifi cations set by Agrément South Africa, especially in terms of thermal properties and comfort of the structures. The original school was old and dilapidated with a general lack of appropriate classrooms, paved walkways and sanitation and other essential facilities. Containers were used for the school tuckshop and nutrition facilities. Security was also a major concern. The reconstruction of the school has amongst other improvements been complemented by the provision of new furniture. Every learner has a desk and a chair of their own. With the completion of the new school, educators feel more motivated. One educator remarked that being inside the new school creates the impression that one is not in Olivenhoutbosch. The school principal indicated that the new school has rejuvenated the teachers leading to a strong work ethic and focus. Previously the teachers used to fi ght for offi ce space and furniture. Sometimes the school had to make do with donations even if some of them consisted of second hand equipment and material. The new school is fully equipped with space for visitors, a fully equipped laboratory, sick bays, computer centre and library. The teaching and learning environment has vastly improved. The availability of adequate space makes it easier to reduce bullying and is conducive for the effective management of the school in general. It is now easier to separate learners on the basis of their grades, learning tasks and other needs such as extra classes. The behaviour of the children has markedly improved. Learners are encouraged to look after the school by emphasising that the school should not only benefi t them but also the next generation. The school has been open only for a year yet enrolment fi gures have gone up and the community closely relate to the new school. The surrounding communities feel that they own the school and are very pleased with the open multipurpose facilities which can be used for public events, including tennis courts and other sporting facilities. The communities have been invited to, and have participated in, major events held at the school. It is now not uncommon for some parents to volunteer to support the school in terms of cleaning and even in the running of the school library. The community at large acknowledges that there is a big difference between the old school and the new one. The reconstruction is seen as an investment which has had a positive impact on the community of Olivenhoutbosch. Case 2: Working for Water (Operation Vuselela) Programme The Working for Water programme is one of the environmental management or social programmes that the IDT has been implementing on behalf of government for the last 14 years. Over the years, the programme has provided ordinary or poor community members and war veterans with jobs and training in different areas of environmental management such as alien vegetation control. Besides creating greater environmental awareness and short-term employment, the programme has changed the lives of benefi ciaries for the better. For many other benefi ciaries, the programme provided much needed skills and a bridge towards full time permanent employment in the City of Tshwane. Despite its successes, such as creating entrepreneurship opportunities for contractors, the IDT s own experience shows that not all benefi ciaries are able to exit the programme and secure employment elsewhere. There is a need to create more jobs through more training, skills development and benefi ciation through recycling of alien vegetation into various commercial products such as furniture. ANNUAL REPORT I 2013/14 39

42 More than 150 participants are involved in the Apies River site close to the Voortrekker Monument, Klapperkop and Fountains in Pretoria. The project started at the site in 2000 with about 10 teams working with City of Tshwane Municipality. The Programme assisted the city to maintain its parks and public facilities such as Fort Klapperkop, Voortrekker Monument and Fountains. Since the start of the programme, about 60 employees have been employed by the Tshwane Metro on a permanent basis as chainsaw operators, brush cutter operators, herbicide applicators and as security guards due to the training they had received from the programme. Other previous programme participants managed to get jobs and now work for the South African National Parks. Other previous participants have ventured into the world of business registering and running businesses linked to the management of alien vegetation as well as other forms of environmental conservation. The Programme Manager who has been working for this programme for the past 14 years indicated that his involvement with the intervention has allowed him to buy a decent house and for his children to attend school in Lotus Gardens. Coincidentally the school was built by the IDT on behalf of the Department of Basic Education. There is still room for improvement to make the programme more effective. Some of the participants have highlighted the following as areas for improvement: The need to enhance training; A revisit to the reward system to ensure that compensation takes cognisance of differentiated competencies and performance; Elimination of delays in payments; and Appropriate and timely provision of equipment. The programme has positively impacted across different spheres that is socially, economically and environmentally - of the community. Working for Water Programme has changed lives for the better enhancing individual skills, creating jobs, enhancing household livelihoods and reducing their dependency on social grants and/or remittances from family members and other wellwishers. The reduction of crime in the area has been attributed to the programme as youth and young adults are kept fully engaged in productive economic activities. The programme has created greater awareness on the need and importance of environmental conservation. Case 3: Ikhwezi Development Project, cooperative supported as part of the Expanded Public Works Programme (EPWP2) Non-State Sector Programme The Ikhwezi Development Project is one of many cooperatives supported by amongst others government departments and other development role players, including IDT s part of the Expanded Public Works Programme (EPWP2) Non-State Sector. The Programme started in The Ikhwezi project is an anti-poverty food security intervention located in Boschkop, in the East of Pretoria. When the project started, it supported between 50 and 150 benefi ciaries from the surrounding informal settlements. The project, which has won many national and provincial awards, uses innovation such as covered tunnels (green houses), rainwater harvesting and green methods of pest control using natural plants such as marigold fl owers to produce export quality vegetables for sale locally and for export to the European Union (EU). The Ikhwezi project provides seed for food gardens to the local community and has even adopted the local Boschkop Primary School where a school garden provides food for school children. Four enterprising community members registered a cooperative in 2009, and started the Ikhwezi Development Project on an 8.5 hectare plot located in Boschkop, East of Pretoria. Without having planted a seed, they approached Woolworths and, after two years, managed to secure a contract. Ikhwezi now produces for Woolworths and for export, and has received support from a number of agencies of government such as the IDT, a local farmer and a local diamond mine. The project employs 14 people permanently, who all have vegetable gardens at the back of their houses. An additional seven workers are employed on a seasonal basis. Besides marketing its own production, Ikhwezi also sources produce from four local growers it has mentored over the years to produce quality vegetables which meet the required standards. The nearby Boschkop Primary School also benefi ts from donations of fresh produce from the Project. Using seed donated by Ikhwezi, 40 ANNUAL REPORT I 2013/14

43 the school now grows its own vegetables, and often makes use of Ikhwezi s state-funded tractor when needed. Part of the school s produce is for its own consumption, while the excess is sold to generate an income to meet other needs of the school. Key to the success of the Co-operative are the following elements: Honouring commitments and ensuring customer satisfaction through fast, accurate, fl exible and reliable service; Maintaining quality standards that meet customer and industry specifi cations; Provision of prompt, friendly and effi cient response to enquiries and complaints; Empowerment of workers through training and skills development; Sound customer and supplier relationships; Ensuring that Service Level Agreements are met and exceeded; Delivering on time, all the time, every time ; Deliver impact on society through corporate citizenship; Treating employees, customers, suppliers and communities fairly; and Employing and retaining well experienced management team who understand the industry and operating environment well. The Project Manager indicates that although the project can afford to pay salaries for the workers, rates and electricity which form part of its largest operational costs, there is little left over for expanding production. Despite the many operational challenges Ikhwezi has achieved the following: Supplying Woolworths with quality vegetables for 4 years; Offering hands-on practical learning and experience to 8 interns every year on the farm since 2009; Secured technical advice from the Embassy of Israel through SEDA; Appointed as SEDA s fl agship project; Created fourteen (14) full-time and seven (7) part-time jobs; Received an invite to the United States of America (USA) for training on organic methods of farming; Received letters of intent from Malaysia; Identifi ed by Hygrotech to be their Commercial Trial base for both undercover and open space farming; Won the Agribusiness Awards for 2011 and 2013, respectively; Started to export products to the European Union (EU) though on a small basis; Hosted a delegation from all nine provinces of South Africa from Agriculture Department, including a visit by Gauteng MEC for Agriculture, Nandi Mayatula-Khoza in 2014 and three agriculture study groups from Metsweding Municipality; and Represented South African emerging small enterprises in a number of forums. Producing in large quantities is seen as the most practical strategy for expanding the project, creating more jobs and guaranteeing fi nancial viability and profi tability. Ikhwezi has already identifi ed nearby plots that it intends to secure through the Department of Rural Development and Land Reform. The need for funding support prompted the Co-operative to take part in the Non-State Sector Programme implemented by the IDT. The Cooperative has a long-term goal to become a centre of excellence for emerging farmers across Gauteng. To this end, the Co-operative has embarked on an intensive drive to mobilise fi nancial resources to support the establishment of training facilities, expansion of production and to construct a bigger pack house to support production and packaging of vegetables for the market. On the whole, the project has changed people s lives in the area. The local communities see the project as an important source of income for their families and a contributor to food security. Some of the benefi ciaries got their fi rst job, bank accounts and regular income through Ikhwezi. Through the project, benefi ciaries have replicated what they have learnt and set up backyard gardens. The project is very labour intensive thereby creating opportunities to employ many people on a more permanent basis. The farm can easily offer sustainable employment to over 70 people. The long-term success of Ikhwezi depends on its ability to grow the market and securing of comprehensive long-term business support. ANNUAL REPORT I 2013/14 41

44 Beneficiaries of EPWP Non-State Sector Programme, working in a garden in the Northern Cape 42 ANNUAL REPORT I 2013/14

45 Part C Governance ANNUAL REPORT I 2013/14 43 ANNUAL REPORT 2013/14

46 BOARD OF TRUSTEES Prof. S Fikeni Chairperson of the Board Mr T Motswaledi Dr. G Zulu-Kabanyane Ms Z Mdhladhla Mr Z Zitha Deputy Chairperson of the Board Mr R Patel Ms Mpumlwana Ms P Nkomo Mr B Matutle Mr M Mlengana 44 ANNUAL REPORT I 2013/14

47 3. GOVERNANCE 3.1 BOARD FUNCTIONING The Board consists of ten (10) Trustees, namely: Prof. Somadoda Fikeni, Board Chairperson Mr Tlhotse Motswaledi, Deputy Chairperson of the Board and Chairperson of the Human Resources and Corporate Services Committee Mr Butcher Matutle, Executive Authority Representative Ms Zandile Mdhladhla Ms Nandisile (Thoko) Mpumlwana, Chairperson of the Strategic Planning and Programmes Committee Mr Rashid Patel Mr Michael Mlengana Ms Phelisa Nkomo Dr. Gcwalisile Zulu-Kabanyane Mr Zakhele Zitha, Chairperson of the Finance Committee Ms Merriam Molala resigned from the Board on 12 August The Board approved the appointment of an Independent Chairperson to the Audit and Risk Committee, Ms Seipati Boulton, effective from September Since its appointment, the Board has actively provided leadership and attempted to steer the IDT through the rough seas. Six key issues dominated the Board s business during the fi nancial year: i) Interfacing with the Department and contributing to the development of the IDT Business Case which will provide the path towards a new mandate for the IDT. ii) Providing leadership towards securing long-term fi nancial sustainability of the organisation. iii) Ensuring effective governance and compliance. iv) Initiation of a recruitment process for a new CEO (and in the interim ensuring a smooth transition from the outgoing to the Acting CEO). v) Securing operational stability of the organisation through: a. providing parameters for recruitment of new staff and extension of contracts of critical staff. b. enhancements of business processes, systems and approaches to ensure programme management effi ciency. vi) In the interim, various alternatives were considered including the refocus and streamlining of the organisation to secure immediate to intermediate organisational sustainability. The Board and its Committees met as planned (Table 11) as per the reports presented in the following sections to dispense of its business and provide strategic leadership to the organisation. The total fees for the retention of the services of Board members amounted to R1.81 million during the 2013/14 fi nancial year. Under the six areas highlighted above, the Board considered and provided leadership on the following key matters: i) Review of Delegation of Authority framework; ii) Approval of internal governance policies; iii) Led the Corporate Strategy development process, considered and approved the 2014/ /19 Strategic Plan and accompanying 2014/ /17 Budget; and iv) Appointment of the Independent Chairperson of the Audit and Risk Committee. The Board Trustees - represented by the Chairperson of the Board, the Deputy Chair accompanied by four Board members - met with the Minister, his Deputy, as well as the Deputy Director-General of the Policy Unit on 15 November The outcome of the meeting provided overtures on the future of the IDT including the roles and responsibilities towards the preparation and tabling of IDT s Business Case. The Board EXCO had a busy schedule during the reporting period, where they considered among others, the CEO s succession planning, the arrangements for fi lling priority positions given the IDT s state of uncertainty, and performance management matters. Appropriate resourcing of the organisation had become a prime focal area during the reporting period. A moratorium on staff recruitment had been implemented following a Board decision, except for expediting ANNUAL REPORT I 2013/14 45

48 the recruitment of programme management staff as well as that of related supply chain management. Inevitably, support functions outside of the programme management area have been affected to various degrees by the moratorium. However, innovative measures targeted at the retention of scarce and critical skills were being explored in order to ensure appropriate human capital resourcing. The previous CEO, Ms Thembi Nwedamutswu, astutely served the IDT for the past decade. During her term of offi ce the IDT has had 11 consecutive unqualifi ed fi nancial audits. The portfolio has grown from R748 million in 2003/04 to R7 billion in 2013/14. Her term of offi ce came to an end during the course of the third quarter on 30 November To facilitate smooth transitioning, avoid loss of institutional memory and foster continuity at the CEO level, the Board extended her term by a further 5 months to 30 April The Board subsequently initiated a process to recruit a new CEO, given the ongoing organisational reform process in which the Board had already given strategic direction to a new IDT with a clear-cut service offering and niche in programme management. The Board appointed Dr. Stanley Makhosi Bhebhe as the Acting CEO until the search for a new CEO is concluded and a substantive appointment made. Members of the Board of Trustees accompanied by IDT personnel on an oversight visit to one of the IDT projects 46 ANNUAL REPORT I 2013/14

49 Table 11: Consolidated Meeting Attendance by the Board, Board Committee and Independent Chairperson of the Audit and Risk Committee; 1 April 2013 to 31 March 2014 Trustee, Meeting Type and Date of Meeting 16 May May 2013 BOARD MEETING 16 August 2013 Strategic Planning W/shop August November March 2013 Executive Authority; 15 November May 2016 BOARD EXECUTIVE COMMITTEE 1 August August September October November January March 2014 Prof. S Fikeni P P P P P P P P P P P P P P P Mr T Motswaledi P P P P P P P P P P P P P P Ms M Molala (3) P A N/A N/A N/A N/A N/A Ms T Mpumlwana P P P P P A A P P P P P A P P Mr B Matutle P A A A A A A Mr M Mlengana P P P P P P A Ms P Nkomo P P P P P A P Mr R Patel P P P P P P P Ms Z Mdhladhla P P P P P P A Dr. G Zulu-Kabanyane P P P P P P P Mr Z Zitha P P A P P P A P P P P P P P P Ms S Boulton (4) P P - P Notes: 1. The Board fees are presented in the Part E Financial Information. 2. A denotes absent with apology. 3. Resigned from 12 August Attended by invitation. ANNUAL REPORT I 2013/14 47

50 3.1.1 Audit and Risk Committee As per the approved schedule of duties, the Audit and Risk Committee met to oversee the compliance imperatives applicable for the 2013/14 fi nancial year. The detailed activities of the Committee and a summary of meeting attendance are detailed in Part E - Financial Information Finance Committee A key deliverable for the Committee during the reporting period was to oversee the review and approval of the Delegation of Authority framework for the IDT. Table 12 provides a summary of the engagement undertaken by the Finance Committee during the reporting period. The said review focused on the functioning of the Tender Adjudication Committee based on a selected sample. Other deliverables of the Committee, including overseeing the performance of the Financial Services Unit, were within the approved terms of reference. Table 12: Finance Committee Meeting Attendance: 1 April 2013 to 31 March 2014 Trustee, Meeting Type and Date of Meeting FINANCE COMMITTEE 15/05/ /07/ /11/ /02/2014 Joint Workshop With the Finance Committee (17/3/2014) Mr Z Zitha (Chairperson) P P P P P Mr B Matutle P P A P A Mr M Mlengana P P P P P Ms P Nkomo A P P A A Human Resources and Corporate Services Committee The key deliverable for the Human Resources and Corporate Services Committee during the reporting period was the consideration and recommendation to the Board of the fi lling of critical and urgent programme positions. The Committee further considered the performance reports of the Corporate Services Unit which was approved. Table 13 provides details of the Human Resources and Corporate Services Committee meetings during the 2013/14 Financial Year. Table 13: Human Resources and Corporate Services Committee Meeting Attendance; 1 April 2013 to 31 March 2014 Trustee, Meeting Type and Date of Meeting HUMAN RESOURCES AND CORPORATE SERVICES COMMITTEE 16/05/ /07/ /11/ /02/2014 Mr T Motswaledi (Chairperson) P P P P Ms T Mpumlwana P A P P Mr R Patel P P P P Dr. G Zulu-Kabanyane P P P P Ms Z Mdhladhla P P P P 48 ANNUAL REPORT I 2013/14

51 3.1.4 Strategic Planning and Programmes Committee Key on the agenda for the reporting period was the consideration and approval of the 2013/14 performance reports of the Development Services Unit (DSU) and the Offi ce of the CEO. Further, the Committee recommended to the Board the approval of the 2014/ /19 Strategic Plan and 2014/15 Annual Performance Plan. Table 14 provides details of the Strategic Planning and Programmes Committee meetings during the 2013/14 Financial Year. Table 14: Strategic Planning and Programmes Committee Meeting Attendance: 1 April 2013 to 31 March 2014 Trustee, Meeting Type and Date of Meeting STRATEGIC PLANNING AND PROGRAMMES COMMITTEE 07/08/ /11/ /02/2014 Ms T Mpumlwana (Chairperson) P P P Ms P Nkomo P P A Mr M Mlengana P P P Dr. G Zulu-Kabanyane P P P Mr B Matutle P A A Ms M Molala P N/A N/A The newly built Tarlton Library in Gauteng ANNUAL REPORT I 2013/14 49

52 3.1.5 Board Executive Committee The Board Executive Committee met fi ve times during the reporting period. The key priority for Board Exco was the succession planning pertaining to, among others, the end of CEO s contract that was due to end in November 2013, recommended the extension of contract by fi ve months and initiated the search process for the new CEO Trustees Regional Visits The Board, as part of their fi duciary oversight duties, conducted regional site visits to the projects the IDT was implementing. Selected projects were visited in Mpumalanga, Free State, Eastern Cape and KwaZulu-Natal. The site visits assisted the Board in gaining a better appreciation of the business of the IDT and to engage with key stakeholders. The invaluable interaction of the Board with the project implementation team and the client departments on the ground assisted in identifying possible gaps in the value chain that needs to be addressed through the process reengineering. 3.2 RISK MANAGEMENT In terms of Section 51(1)(a)(i)of the PFMA, the Accounting Authority of a public entity, in the IDT s case being the Board of Trustees, must ensure that the entity has and maintains an effective, effi cient and transparent systems of, amongst other, Risk Management. The governance of risk is the responsibility of the Board The organisation continued to implement the Enterprise Risk framework ensuring that employees on both strategic and operational sphere own the risk management process. A strategic risk assessment was conducted with the Board and Management at the strategic review workshop held in September 2013 which resulted in four strategic risks being identifi ed. In defi ning the risks, the Board considered the organisational Risk Appetite and Tolerance statement and resolved to empower management to track and monitor risk impacts. Subsequently, the Risk Management Strategy and Plan were developed, presented and approved by Board in November The strategic risk register is maintained by the Compliance and Risk sub-unit on behalf of the organisation. The sub-unit also ensures that units, and regions through the appointed risk champions monitor and report on the implementation of mitigation plans which are then presented to the Risk Management Committee, the Audit and Risk Committee and the Board. 3.3 COMPLIANCE WITH LAWS AND REGULATIONS The organisation reviewed the legislative universe to ensure adherence to all relevant acts and regulations which govern the entity. Fifty-nine (59) pieces of legislations have been identifi ed which inform the development of policies within the organisation INTERNAL CONTROL Management adopts internal controls including policies, procedures and processes to provide reasonable assurance in safeguarding assets, preventing and detecting errors, accuracy and completeness of accounting records and the reliability of fi nancial statements. Internal Audit provides independent objective assurance of the system of internal controls within the organisation, which informs the overall report of the Audit and Risk Committee included in Part E of the Financial Information. 3.4 INTERNAL AUDIT AND AUDIT COMMITTEE The purpose of the Internal Audit unit is to provide independent reasonable assurance on the adequacy and effectiveness of the internal control, risk management and governance processes. During the 2013/14 fi nancial year the unit completed operational, statutory and compliance reviews, the key reviews focussed on Programme Management, Supply Chain Management, Audit of Pre-determined Objectives, Compliance, Fraud & Corruption and Information Technology Governance. The unit also undertook a follow-up review on the previous year s AGSA Management Letter to establish and verify the progress made by management in addressing the matters noted. 50 ANNUAL REPORT I 2013/14

53 The reports from all reviews were timeously discussed with Executive Management to ensure appropriate action was taken to address the matters noted. Quarterly Internal Audit Progress Reports were also presented to the Audit & Risk Committee. 3.5 FRAUD AND CORRUPTION The organisation continues to implement a fraud prevention strategy and plan to ensure that the culture of zero tolerance to fraud and corruption is inculcated. A fraud risk assessment was conducted which resulted in the development of the fraud risk register. The implementation of the mitigation plans are being monitored to ensure that the fraud risks are minimized. The IDT operates an independent fraud hotline which allows employees, service providers and the public to report any suspected fraud and corruption and /or improper conduct within our operations. The organisation continuously conducts awareness of fraud prevention via the CEO s Dialogue to the staff. The Risk and Compliance sub-unit receives the fraud hotline reports from the appointed service provider and reports the details to the Audit and Risk Committee. The sub-unit together with internal audit ensures that investigations are conducted independently and reports are submitted to the Audit and Risk Committee. 3.6 MINIMISING CONFLICT OF INTEREST Declaration of interest is a standard agenda item at Board, Board Committees and at management structures such as EXCO, MANCO, and the tender adjudication committee. Employees and the Board of Trustees are expected annually to complete declaration of interest forms; employees who fail to declare are subjected to disciplinary measures. During the reporting period, all employees submitted their completed declaration of interest forms. 3.7 CODE OF CONDUCT The code of conduct was reviewed to ensure that the organisation adheres to relevant legislations and regulations. This was then submitted to the Board of Trustees for approval. Popularisation and awareness on this policy will be conducted in the new fi nancial year. The Compliance and Risk sub-unit will continue presenting the code of conduct to new IDT employees at each induction session. 3.8 COMPANY SECRETARY The Board has access to the advice and services of the Company Secretary. The Company Secretary is responsible to the Board for ensuring compliance with procedures, applicable statutes and regulations. For the Board to function effectively, all Trustees have full and timely access to information that helps them fulfi l their duties properly. The Board recognizes that there may be occasions where Trustees consider it necessary to take independent professional advice. This is conducted according to agreed procedures. 3.9 EXECUTIVE MANAGEMENT Management is responsible for developing organisational strategy and policy for consideration by the Board, for implementation of this strategy and policy and for the dayto-day operations of the organisation. Management also ensures that legislation and regulations are adhered to and that appropriate internal fi nancial controls are developed, implemented and maintained. A Special Extended EXCO Workshop was held on 5 September 2013 to interpret the strategic direction determined by the Board such that it could be distilled into IDT s Strategic Goals, Strategic Objectives, Outcomes, Performance Indicators, Targets and Resources required; for cascading the same to Unit Business Plans, Sub-Unit Work Plans and individual Performance Agreements. This culminated in confi rming the draft proposals for the Strategic Plan for fi nal approval by the Board, incorporating the APP, and the budget such that it could be submitted to the Executive Authority and the Portfolio Committee on Public Works in line with compliance deadlines. ANNUAL REPORT I 2013/14 51

54 3.10 COMPLIANCE STATEMENT Reporting to the Executive Authority and Parliament The IDT, as a public entity, is committed to sound governance and compliance with the legislative requirements of the country. The organisation complied with all the relevant provisions of the PFMA and the Shareholder Compact by timeously lodging the documents listed in Table 15. Table 15: Compliance Record for 2013/14 Financial Year Dates Document Submitted/Presentation to 5 November /13 Annual Report Report presented to the Portfolio Committee on Public Works. 31 October 2013 Mid-term Executive Report to the Executive Authority Report submitted and later presented to the DG DPW. 31 July /13 IDT-signed Audited Annual Financial Statements Auditor-General South Africa, National Treasury and Department of Public Works. 31 August /13 Annual Report Submitted to the Department of Public Works (DPW) for approval. Subsequently approved on 16 September Submitted to National Treasury and Auditor-General South Africa. 30 September /13 Annual Report Tabled in Parliament by DWP. 30 January 2014 Third Quarter Executive Authority Report The report submitted to DPW included a Presentation to the DG and DPW Technical EXCO. 28 February / /19 Strategic Plan, incorporating the 2014/15 Annual Performance Plan and the 2014/ /17 Budget Formal request for review of targets - 6 in total- made to DPW, providing rationale for the request. Submitted to Department of Public Works (DPW) for Minister s approval. 12 March / /19 Strategic Plan Submission to the Minister DPW. Report tabled in Parliament on 13 March The Compliance Policy and the Compliance Framework were approved during the third quarter. The legislative universe was reviewed to ensure that the organisation is fully compliant with all applicable legislation Risk Assessment and Risk Mitigation The organisation developed and implemented the Enterprise Risk framework to ensure that employees on both the strategic and operational spheres owned the process. In pursuit of a compliant organisation a strategic risk assessment was conducted with the Board and Management. In order to map the Board resolution into key risks, an EXCO Strategic review workshop was held with management in September 2013 to refi ne and quantify the risks which then resulted in the 2013/ /15 strategic risk register. In defi ning the risks, the Board considered the organisational risk appetite and tolerance statement and resolved to empower management to track and monitor risk impacts. This resulted in the IDT Risk Appetite and Tolerance Framework being adopted. Furthermore, the Risk Management Strategy and Plan were developed, presented and approved by Board in November Risk champions and relevant unit heads were engaged to ensure that there is continuity in mitigating the risks and also developing operational risk registers. Since the risk register is a living document, the risks are continuously identifi ed as they emerge. The implementation of mitigation plans commenced and the reports on progress were presented to the Audit and Risk Committee and the Board each quarter for noting and approval. The risk registers informed the Annual Audit plans. 52 ANNUAL REPORT I 2013/14

55 Construction of the Polokwane High Court in Limpopo ANNUAL REPORT I 2013/14 53

56 An aerial view of Khulani Special School in KwaZulu-Natal 54 ANNUAL REPORT I 2013/14

57 Part D Human Resource Management ANNUAL REPORT I 2013/14 55 ANNUAL REPORT 2013/14

58 4. HUMAN RESOURCES MANAGEMENT 4.1 INTRODUCTION The focus of the Human Resources function is to become an effective strategic partner to all the other Business Units through attraction of the best available talent in all areas of our business operations. The attraction of the best available talent will then be complemented by creative retention strategies to ensure that the IDT becomes an employer of choice for high performance professionals. While signifi cant progress in pursuit of these priorities was made throughout the year, the outstanding conclusion of the transformation and re-capitalisation of the IDT has been a critical inhibitor to the progress that could have been made. 4.2 HUMAN RESOURCE OVERSIGHT STATISTICS Staff Establishment The approved staff establishment of the IDT for 2013/14 is 441. As at the 31st of March 2014, 375 positions were occupied and eighteen (18) of these positions were fi lled by holders of short-term contracts. The occupancy rate trend for 2013/14 shows a growing shift in the distribution of staff from the National Offi ce Support Units to Programme Operations and Regional Offi ces, as well as a rapid shift in the profi le of staff from a social development focus to a social infrastructure focus. The Overall occupancy rate which remained above 15% throughout the year refl ects an effective vacancy rate of about 13% and a managed natural attrition rate of 3-4%. 8 Figure 3: Occupancy (Including 18 personnel on short-term contracts) Staff Attrition Figure 4 shows the reduction in permanent staff from 374 in the beginning of the fi nancial year to 357 at the end of the 2013/14 fi nancial year. 8 The IDT has four Business Units; namely, Offi ce of the CEO (OCEO); Corporate Services Unit (CSU); Development Services Unit (DSU) and Financial Services Unit (FSU) 56 ANNUAL REPORT I 2013/14

59 Figure 4: IDT Staff Complement (Excluding Staff on Short-term Contracts) in 2013/ New Appointments Table 16 refl ects appointments from April 2013 to March 2014 per business unit. All new appointments made during 2013/14 are linked to programmes and are all fi xed term contracts. Table 16: New Staff Appointments during 2013/14 Financial Year Business Unit Q1 Q2 Q3 Q4 Annualised Total Development Services Offi ce of the CEO Corporate Services Financial Services Total Staff Turnover As already indicated the staff vacancies represent both actual vacancies and planned natural attrition which constitutes 3-4% of the total vacancy rate. It must be noted however that, there was loss of critical capacity especially, in instances where people voluntarily resigned from the IDT for reasons beyond the IDT s control. Table 17 shows all employees whose services terminated in 2013/14 and the reasons for the terminations. ANNUAL REPORT I 2013/14 57

60 Table 17: Terminations by Reason during 2013/14 Financial Year Termination reason Q1 Q2 Q3 Q4 Annualised Total Contract expired Death Dismissed Resignation Retirement Total Table 18: Terminations per Grade during 2013/14 Financial Year Grade Functions Q1 Q2 Q3 Q4 TOTAL PG02 Executive PG04 General Managers PG05 Senior Managers, Portfolio Managers PG06 Programmeme Managers, Legal Advisers, Managers PG07 Compliance Offi cer, and a Costing Engineer PG08 Personal Assistants, Researchers PG09 Programmeme Implementation Managers PG10 Programmeme employees (e.g. administrators) PG11 Administrators e.g. Programmeme Implementation Assistants; Admin Assistants PG13 Receptionists, Filing clerks, Data Capturers PG12 Admin Assistants PG18 Offi ce Attendants, Cleaners Total ANNUAL REPORT I 2013/14

61 4.2.5 Employment Equity Table19 shows the current EE Status at the IDT. Table 19: The IDT Employment Equity status as at 31 March 2014 Male Female A C I W Total A C I W Total Total Occupational Category Top Management Senior Management Professionally qualifi ed and Experienced specialists and Mid-management Skilled technical and Academically qualifi ed workers, Junior management, supervisors, Foremen and superintendents Semi-skilled and discretionary Decisions making Unskilled and defi ned Decision making Total Employees on short-term contracts Total Once the transformation has been fi nalised, a key focus of the Organisation will be strategies for identifying people with disabilities as well as women and minority equity targets. Table 20 shows the number of disabled employees at the IDT. Table 20: Disabled Employees Category Level Male Female Total A Total A Total Top Management Professionally qualifi ed and experienced specialists and mid-management Semi-skilled and discretionary decision making Total ANNUAL REPORT I 2013/14 59

62 4.2.6 Organisational Learning and Development With the reduction of staff numbers over the last three years, the Organisation has given focused attention during this past year to staff capacity enhancement interventions with the understanding that more competent individuals are far more likely to be more productive than people who are less skilled. In this regard the Unit organised a number of organisation-wide skills development interventions. Key among these were the engagements with the Institute of Project Management South Africa for the IDT to be registered with the Institute as an enterprise member. This will in turn open opportunities for IDT programme staff to be registered as professionals and associates at different levels Another intervention focused on strengthening supply chain compliance particularly in the area of application of the new BBBEE codes. The Department of Trade and Industry (DTI) has been engaged to provide training and further training is planned for the 2014/15 fi nancial year Formal Professional Staff Development In addition to the above interventions at least thirty employees are registered for formal professional enhancement courses for the academic year Table 21 shows the distribution of these employees per Region or Unit. Table 21: Student Distribution per Unit or Region Unit/region Number of beneficiaries Offi ce of the CEO 3 Financial Services Unit 2 Corporate Services Unit 7 Limpopo 1 Mpumalanga 5 Gauteng 1 North West 1 Eastern Cape 2 KwaZulu-Natal 6 Free State 2 Total ANNUAL REPORT I 2013/14

63 4.2.8 Planned Training (External Bursaries/Study Assistance) Three years ago the IDT initiated a bursary scheme for deserving students from poor rural communities in which the organisation had a presence. While there has been no new intake of students for the last two years, there are still at least 8 students who are in the process of fi nalising their studies in Two students will be placed for experiential training in the IDT. There is currently a 90% success rate in terms of progress by students to the next level of academic training Short Courses In the Workplace Skills Plan the IDT identifi ed priority training and the targeted number of employees within the organisation to attend those training sessions. Table 22 provides a summary of the number of employees who attended short courses. Table 22: Short-term Organisation-Wide Skills Training Training intervention Number of employees targeted Contracts management 81 Construction project management 20 Supply chain management 6 Financial management 36 Policy management 1 Skills development committee training 11 Diversity management 23 Monitoring and Evaluation 1 Continuous professional education 20 Computer training 40 General admin and management 10 Project management 20 Rural development WELLNESS Employee Wellness Programmes play a vital role in organisations in providing continues support to individual employees and their families where this is required. Employee Wellness Interventions contribute to effective human capital risk management and enhancement strategies, resulting in increased individual performance and greater organisational effectiveness. These Wellness programmes and services become even more important in situations where organisations are going through transformation and or fi nancial stress. Unfortunately in situations where organisations are going through fi nancial stress Wellness programmes and services are usually among the fi rst commitments to be trimmed. This has largely been the case within the IDT. ANNUAL REPORT I 2013/14 61

64 An aerial view of Mazista Primary School in North West 62 ANNUAL REPORT I 2013/14

65 Part E Financial Information ANNUAL REPORT I 2013/14 63 ANNUAL REPORT 2013/14

66 5. FINANCIAL INFORMATION 5.1 STATEMENT OF RESPONSIBILITY FOR THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 The Accounting Authority is responsible for the preparation of the public entity s annual fi nancial statements and for the judgements made in this information. The Accounting Authority is responsible for establishing and implementing a system of internal controls designed to provide reasonable assurance as to the integrity and reliability of the Annual Financial Statements (AFS). In my opinion, the fi nancial statements fairly refl ect the operations of the IDT for the fi nancial year ended 31 March The external auditors are engaged to express an independent opinion on the AFS of the IDT. The IDT s Annual Financial Statements for the year ended 31 March 2014 have been audited by the Auditor-General South Africa and their report is presented on Page 70 to 73. The Annual Financial Statements of the IDT set out on Page 74 to 117 have been approved. Stanley Bhebhe, PhD Acting Chief Executive Offi cer Prof. Somadoda Fikeni Board Chairperson 64 ANNUAL REPORT I 2013/14

67 Table 20: Audit Committee Membership and Attendance Name of Member and Date of Meeting AUDIT AND RISK COMMITTEE 15/05/13 29/07/13 13/11/13 12/02/14 Joint Workshop with the Finance Committee (17/3/14) Mr Z Zitha P P P P P Ms S Boulton - - P P P Ms M Molala P Ms P Nkomo A P P A A Mr R Patel P P P P P Dr. G Zulu-Kabanyane - - P P P Audit and Risk Committee Responsibility The Committee reports that is has complied with its responsibilities arising from Section 51 (1) (a) of the PFMA and Treasury Regulation Ms S BOULTON; Independent Chairperson: Audit & Risk Committee 5.2 AUDIT COMMITTEE REPORT We are pleased to present the Audit and Risk Committee report for the fi nancial year ended 31 March Audit and Risk Committee Members and Attendance The Audit and Risk Committee (the Committee) consists of fi ve (5) independent, non-executive members. Four (4) of the members are Trustees of the Board, with the Chairperson being independent of the Board. The Committee meetings are held as frequently as the Committee considers appropriate, but not less than four (4) times a year as per the approved charter. The table below details the members constituting the Committee and the number of times the meetings were held during the year under review. The Committee reports that it has revised and adopted terms of reference as its Charter, which was approved by the Board and has regulated its affairs in compliance with the Charter and discharged all its responsibilities as set out therein. The Committee monitored its activities on a quarterly basis using the approved schedule of duties that is aligned to the approved charter The Effectiveness of Internal Control Based on the results of the formal documented review of design, implementation and effectiveness of the IDT s system of internal controls conducted by Internal Audit during the fi nancial year ended 31 March 2014, and in addition, considering information and explanations given by management plus discussions held with the Auditor-General South Africa (AGSA) on the results of their audit, apart from the matters noted below, the Committee is of the opinion that the IDT s system of internal control is effective and effi cient. Internal Audit and the AGSA through their reporting has highlighted instances of non-compliance with prescribed policies and procedures, laws and regulations as it relates ANNUAL REPORT I 2013/14 65

68 to procurement and contract management and fi nancial information (that is, inaccuracy of leave provision). The Committee believes that strict adherence and compliance to the policies and procedures should be increased in 2014/15 to achieve a clean audit The Effectiveness of Internal Audit The Committee approved the Internal Audit Charter as well as the annual operational plan for the fi nancial year ended 31 March The function resides within the IDT s National Offi ce and uses a co-sourced model as it carries out its responsibility for reviewing and providing independent assurance on the adequacy of the internal control environment across the IDT s operations. The Committee received a wide variety of audit reports (conducted using a risk-based approach) from Internal Audit and is of the opinion that the function operates effectively in fulfi lling its mandate. The Committee has noted that there is limited capacity (staff) within the in-house team that needs to be addressed to ensure the function fully services the Entity. Compliance with the requirements of the King III on Corporate Governance were reviewed by Internal Audit during the year and the Committee is of the opinion that the IDT addresses the relevant requirements with concerns raised on the sustainability of the IDT as it relates to the delayed conclusion of the Business Case and its mandate during the fi nancial year Risk Management Effectiveness The Committee, assisted by the Risk Management Committee (RMC) ensures that risks are managed within the IDT; this is facilitated through the Compliance and Risk sub-unit whose responsibility is to ensure the Enterprise Risk Management is developed, implemented and monitored. The Audit and Risk Committee plays an oversight role delegated by the Board through the sub-unit reporting quarterly to the Committee and through the membership and attendance of a member of the Committee at the RMC. The Committee however notes that signifi cant improvement is required to ensure that the entity s system of risk management is fully effective, effi cient and transparent and the objectives of the Entity are met. The Committee also has noted that there is limited capacity (staff) within the sub-unit that needs to be addressed to ensure the sub-unit is fully functional The Quality of Management s Quarterly Performance Reports Submitted to the Executive Authority The Committee has reviewed and noted the quarterly reports that have been submitted to the Executive Authority addressing achievements of targets and where targets have not been achieved a review of measures to address the gaps. Just in the fourth quarter, the Committee noted with concern that the management report to the Executive Authority contained a disclaimer that certain parts of the information presented was not validated Integrity of the Annual Report The Committee notes with concern the qualifi cations noted by the AGSA and the satisfaction expressed with regards to the usefulness, relevance and reliability of the IDT s annual performance information. The Audit and Risk Committee, with the assistance of Internal Audit, Compliance and Risk will develop an Action Plan and continue to monitor the processes and procedures in place to ensure the qualifi cations are addressed Auditor s Report We have reviewed the IDT s implementation plan for audit issues raised in the prior year and we are satisfi ed that the matters have been adequately resolved except for the following: Elimination of occurrences of non-compliance with laws and regulations Enhancing contract management Inaccuracy of leave provision Record management 66 ANNUAL REPORT I 2013/14

69 5.2.9 Evaluation of Financial Statements The Committee has evaluated the Annual Financial Statements (AFS) of the Independent Development Trust (IDT) for the year ended 31 March 2014 and, based on the information provided to the Audit & Risk Committee, concurs and accepts that the Auditor-General s conclusions on the Audited AFS be accepted and read together with the report of the Auditor-General Appreciation We extend our appreciation to the Board of the IDT, Acting CEO, Executive Committee and staff for their efforts and dedication in supporting the committee to discharge its duties in the reporting fi nancial year. Ms. S BOULTON Chairperson: Audit & Risk Committee Independent Development Trust Pretoria Date: 31 July 2014 Grade R children playing at a newly built play ground and classrooms at Motsatsi Primary School in North West ANNUAL REPORT I 2013/14 67

70 5.3 ACTING CHIEF EXECUTIVE OFFICER: FINANCIAL REVIEW REPORT General Financial Overview The fi nancial year ended 31 March 2014 has been a particularly challenging year for the IDT. It was a year which refl ected continuing growth in the programme portfolio and an increase in the management fees charged, but the fi nancial sustainability issues were not resolved and remain a concern for the organisation. The programme portfolio that is managed and implemented for government by the IDT has continued to grow during the year and programmes to the value of R6,6 billion were delivered. This represents a 16% increase over the 2012/13 fi nancial year which has been achieved with little or no increase in human resources. Indeed total operating costs, before other losses, have decreased from the previous year to R363 million or 3.1%. The IDT measures effi ciency by measuring its operating costs against the value of programme expenditure. Based on this effi ciency ratio, the IDT costs R5.50 per R100 of programme expenditure a ratio of 5,5% The organisation continued to be faced with uncertainty regarding its future fi nancial sustainability despite its delivery performance. The principal challenge was the ability to generate suffi cient revenue from its programme implementation role to cover its operational costs in the short to medium-term as it increased the level of management fees to a level nearer to market related rates. The IDT has now been supported by National Treasury which has, subsequent to the end of the fi nancial year under review, issued an Instruction Note on the management fees charged by the IDT to client departments. We believe that this will assist the organisation in generating suffi cient revenue to enable it to become self-suffi cient in the short to medium term. As a result of this, the Auditor-General s audit report no longer contains an Emphasis of Matter on the going concern status of the organisation. Whilst the role of the IDT has been refi ned to one that is mainly focussed on programme management, there remains an essential element involving the communities in the infrastructure that is being delivered. In this way the IDT mobilises the communities to receive, participate in and own the facility being constructed and ensures that the infrastructure delivered is accepted by the communities in which the IDT operates. This has a major impact on the communities where, as an example, school libraries and computer centres are accessible to the communities. The effect is that the communities take care of the facilities as they are regarded as community assets. Further, the IDT programme management model involves the procurement and the payment of service providers, management of the dedicated programme bank accounts, monitoring and reporting Expenditure Trends The organisation implemented a cost containment strategy during the fi nancial year aimed at ensuring enhanced effi ciencies and better utilisation of all resources. This has had the effect of curtailing certain activities and initiatives planned by the IDT in support of its role as a programme management organisation. Employment costs constitute approximately 64% of the IDT s total operating expenses by virtue of its nature of business, i.e. offering professional and other skills. Total employment costs for the fi nancial year ended March 2014 were R232.9 million, an increase of R12.1 million (5.5% from the previous fi nancial year) Capacity Constraints and Challenges Facing the Entity The fi nancial constraints referred to in the general fi nancial overview have had an impact on the delivery capacity of the IDT. The lack of funding had a material effect on the human resources and, whilst the effi ciency ratio appears to be a positive indicator of performance, it hides the pressures that are being experienced by personnel as delivery levels grow without a concomitant growth in the number of resources and the required skills. 68 ANNUAL REPORT I 2013/14

71 5.3.4 Supply Chain Management Supply Chain Management forms an integral part of the IDT s delivery model and it is recognised that ongoing amendments to procurement legislation and regulations by National Treasury will continue to have a signifi cant impact on the organisation. The IDT is working closely with the Department of Public Works, the Council for the Built Environment (CBE) and with the Construction Industry Development Board (cidb) to ensure that its processes and procedures are in line with industry best practice and with all relevant legislation and regulations Audit Report Matters from the Previous Year The previous year s audit report identifi ed weaknesses in the reporting on predetermined objectives and compliance with laws and regulations, specifi cally relating to: The need for adjustments to the annual fi nancial statements; The procurement of goods, work or services which did not meet the requirements of section 51 (1)(a)(iii) of the PFMA; Inadequate oversight and monitoring regarding fi nancial reporting, compliance and reporting on performance against predetermined objectives. Controls have been introduced to address these matters and to ensure that the impact of such matters are minimised in future Outlook The future of the organisation is largely dependent upon the conclusion of its Business Case which is being prepared, in conjunction with the Department of Public Works, for submission to National Treasury and the Department of Public Service and Administration for recommendation to Cabinet. The Business Case will be informed by the mandate as pronounced by the Executive Authority. This will, in turn, inform the fi nal structure of the IDT and will result in a detailed budget for the Medium-Term Expenditure Framework (MTEF) period. It is anticipated that this work will be concluded during the new fi nancial year Events After the Reporting Date There are no events that have occurred after the year end which have an impact on the annual fi nancial statements Acknowledgements I am deeply indebted to and appreciative the support of the Management Executive and furthermore wish to place on record my grateful thanks to Ms Thembi Nwedamutswu who has left the IDT to follow a new career path and who led the IDT for more than ten years Audit Report Matters for the Current Year The AGSA has issued a qualifi ed fi nancial audit report for the 2013/14 Financial Year. The bases for the qualifi cation are: Insuffi cient appropriate audit evidence for tender deposits amounting to R5.8 million; Inadequate controls in place to ensure that all employee leave records are accurate; and Insuffi cient appropriate evidence regarding funds due from programme principals. Stanley Bhebhe, PhD Acting Chief Executive Offi cer Management has identifi ed those areas of controls that require strengthening and has developed a detailed Action Plan to ensure that controls are implemented with immediate effect. ANNUAL REPORT I 2013/14 69

72 5.4 REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON THE INDEPENDENT DEVELOPMENT TRUST REPORT ON THE FINANCIAL STATEMEN TS Introduction 1. I have audited the fi nancial statements of the Independent Development Trust set out on pages 74 to 117, which comprise of the statement of fi nancial position as at 31 March 2014, the statement of comprehensive income, statement of changes in equity, and statement of cash fl ows for the year then ended, as well as the notes, comprising a summary of signifi cant accounting policies and other explanatory information. Accounting Authority s responsibility for the statements 2. The accounting authority is responsible for the preparation and fair presentation of the fi nancial statements in accordance with South African Statements of Generally Accepted Accounting Practice (SA Statements of GAAP) and the requirements of the Public Finance Management Act, 1999 (Act No. 1 of 1999)(PFMA), and for such internal control as the accounting authority determines is necessary to enable the preparation of fi nancial statements that are free from material misstatement, whether due to fraud or error. Auditor-General s responsibility 3. My responsibility is to express an opinion on these fi nancial statements based on my audit. I conducted my audit in accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA), the General Notice issued in terms thereof and International Standards on Auditing. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement. 4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the fi nancial 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 fi nancial 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 fi nancial statements. 5. I believe that the audit evidence I have obtained is suffi cient and appropriate to provide a basis for my qualifi ed audit opinion. Qualified opinion 6. In my opinion, except for the possible effects of the matters described in the Basis for qualifi ed opinion paragraph, the fi nancial statements present fairly, in all material respects, the fi nancial position of the Independent Development Trust as at 31 March 2014, and its fi nancial performance and cash fl ows for the year then ended in accordance with SA Statements of GAAP and the PFMA. Basis for qualified opinion Other Income 7. I was unable to obtain suffi cient appropriate audit evidence that management had properly charged and accounted for all tender deposits for the current year, due to the status of the accounting records. I was unable to confi rm the tender deposits by alternative means. Consequently, I was unable to determine whether any adjustment to tender deposits stated at R in note 8 on Other Income in the fi nancial statements was necessary. Leave pay accrual 8. The system of control in place does not ensure that all employee leave records are accurate. There were also no satisfactory audit procedures that I could have performed to obtain reasonable assurance that all outstanding employee leave balances were correctly accounted for 70 ANNUAL REPORT I 2013/14

73 at the fi nancial year-end. Consequently, I was unable to satisfy myself as to the accuracy of the accounting records relating to employee leave balances. I was therefore unable to carry out the audit procedures I considered necessary for my audit and could therefore not conclude on the accuracy of the leave pay accrual amounting to R in note 25 in the fi nancial statements. Funds due from programme principals 9. I was unable to obtain suffi cient appropriate audit evidence regarding Funds due from programme principals, as the fi nancial statements were presented for audit purposes without accurate and complete underlying accounting records. I was unable to audit Funds due to programme principals in the fi nancial statements by alternative means. Consequently, I was unable to determine whether any adjustment relating to Funds due from programme principals amounting to R0 in note 21 was necessary. Emphasis of Matter 10. I draw attention to the matters below. My opinion is not modifi ed in respect of these matters. Restatement of corresponding figures 11. As disclosed in note 17 property and equipment to the fi nancial statements, the corresponding fi gures for have been restated as a result of an error discovered during in the fi nancial statements of the Independent Development Trust, and for the year ended, 31 March As disclosed in note 25 Trade and other payables to the fi nancial statements, the corresponding fi gures for the have been restated as a result of a reclassifi cation of leave pay accrual and performance bonus accrual during in the fi nancial statements of the Independent Development Trust, and for the year ended, 31 March Material Impairments 13. As disclosed in note 9 to the fi nancial statements, material losses to the amount of R were incurred as a result of a write-off and provision of irrecoverable trade receivables and funds due from programme principals. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENT S 14. In accordance with the PAA and the general notice issued in terms thereof, I report the following fi ndings on the reported performance information against predetermined objectives for selected programmes presented in the annual performance report, non-compliance with legislation as well as internal control. The objective of my tests was to identify reportable fi ndings as described under each subheading but not to gather evidence to express assurance on these matters. Accordingly, I do not express an opinion or conclusion on these matters. Predetermined objective s 15. I performed procedures to obtain evidence about the usefulness and reliability of the reported performance information for the following selected programmes presented in the annual performance report of the Independent Development Trust for the year ended 31 March 2014: Programme: Integrated service delivery on pages 27 to I evaluated the reported performance information against the overall criteria of usefulness and reliability. I evaluated the usefulness of the reported performance information to determine whether it was presented in accordance with the National Treasury s annual reporting principles and whether the reported performance was consistent with the planned programmes. I further performed tests to determine whether indicators and targets were well defi ned, verifi able, specifi c, measurable, time bound and relevant, as required by the National Treasury s Framework for managing programme performance information (FMPPI). I assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete. I did not raise any material fi ndings on the usefulness and reliability of the reported performance information for the selected programmes. ANNUAL REPORT I 2013/14 71

74 Additional matters 17. Although I identifi ed no material fi ndings on the usefulness and reliability of the reported performance information for the selected programme, I draw attention to the following matters: Achievement of planned targets 18. Refer to the annual performance report on page 26 to 31 for information on the achievement of the planned targets for the year. Adjustment of material misstatements 19. I identifi ed material misstatements in the annual performance report submitted for auditing on the reported performance information for integrated service delivery. As management subsequently corrected the misstatements, I did not raise any material fi ndings on the usefulness and reliability of the reported performance information. Unaudited supplementary information 20. The supplementary information set out on pages 21 to 25 does not form part of the annual performance report and is presented as additional information. I have not audited these schedules and, accordingly, I do not report thereon. Compliance with legislation 21. I performed procedures to obtain evidence that the entity had complied with applicable legislation regarding fi nancial matters, fi nancial management and other related matters. My fi ndings on material non-compliance with specifi c matters in key legislation, as set out in the general notice issued in terms of the PAA, are as follows: Annual financial statements, performance and annual reports 22. The fi nancial statements submitted for auditing were not prepared in accordance with the prescribed fi nancial reporting framework and supported by full and proper records as required by section 55(1) (a) and) (b) of the PFMA. Material misstatements of non-current assets, revenue, liabilities, disclosure items identifi ed by the auditors in the submitted fi nancial statements were subsequently corrected, but the uncorrected material misstatements and supporting records that could not be provided resulted in the fi nancial statements receiving a qualifi ed audit opinion. Procurement and contract management 23. Suffi cient appropriate audit evidence could not be obtained that goods, works and services were procured through a procurement process which is fair, equitable, transparent and competitive as required by the PFMA section 51(1)(a)(iii). Expenditure management 24. The accounting authority did not take effective steps to prevent fruitless and wasteful expenditure, as required by section 51(1)(b)(ii) of the PFMA. Revenue management 25. The accounting authority did not take effective and appropriate steps to collect money due, as required by section 51(1)(b)(i) of the Public Finance Management Act and Treasury Regulations (a) and (e). Internal control 26. I considered internal control relevant to my audit of the fi nancial statements, annual performance report and compliance with legislation. The matters reported below are limited to the signifi cant internal control defi ciencies that resulted in the basis for qualifi ed opinion, the fi ndings on the annual report and the fi ndings on non-compliance with legislation included in this report. Leadership 27. Leadership s oversight and monitoring responsibility in terms of fi nancial and performance reporting and compliance with laws and regulations were not adequate. Financial and performance management 28. Management did not implement effective controls to ensure accurate and complete fi nancial statements and performance reporting and compliance with laws and regulations. 72 ANNUAL REPORT I 2013/14

75 OTHER REPOR TS Investigations 29. An investigation was conducted by an independent consulting fi rm on request by the IDT. The investigation was initiated based on allegations of possible fraud around the supply chain management process and programme expenditure, which has been concluded and necessary action has been taken by management. 30. There are four investigations in progress. Three of which are being conducted by internal audit, and the remaining one is being investigated by the public protector, these investigations were initiated based on allegation of possible fraud around the supply chain management and programme expenditure. Auditor-General Pretoria 31 July 2014 ANNUAL REPORT I 2013/14 73

76 5.5 ANNUAL FINANCIAL STATEMENTS Independent Development Trust STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 March Notes R 000 R 000 Restated Revenue Investment revenue Interest revenue Other income Other losses 9 (42 516) (40) Employment expense 10 ( ) ( ) Depreciation and amortisation expense 10 (5 373) (6 249) Administration expense 10 ( ) ( ) Finance expense 11 (1 630) (1 107) Fair value gains on investments 12 (854) Other expenses 13 (70) (708) SURPLUS / (DEFICIT) FOR THE YEAR ( ) TOTAL COMPREHENSIVE SURPLUS / (DEFICIT) FOR THE YEAR ( ) 74 ANNUAL REPORT I 2013/14

77 Independent Development Trust STATEMENT OF FINANCIAL POSITION as at 31 March R 000 R 000 R 000 Notes Restated Restated Non-current assets Property and equipment Intangible assets Investments with fi nancial institutions Current assets Investments with fi nancial Institutions Trade and other receivables Funds due from programme principals Cash and cash equivalents TOTAL ASSETS Equity And Liabilities Main Fund Initial Funding Accumulated Defi cit ( ) ( ) ( ) LIABILITIES Non-current liabilities Finance leases Current liabilities Short term portion on fi nance leases Funds due to programme principals Trade and other payables TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES ANNUAL REPORT I 2013/14 75

78 Independent Development Trust STATEMENT OF CHANGES IN EQUITY for the year ended 31 March 2014 INITIAL FUNDING ACCUMULATED DEFICIT MAIN FUND (Total) Notes R 000 R 000 R 000 Balance at 1 April ( ) Impact of material prior year adjustments Restated balance as at 1 April ( ) Prior year adjustments (not material) Total comprehensive defi cit for the year - ( ) ( ) Balance at 31 March ( ) Prior year adjustments (not material) Total comprehensive surplus for the year Total Main Fund as at 31 March ( ) ANNUAL REPORT I 2013/14

79 Independent Development Trust STATEMENT OF CASH FLOWS for the year ended 31 March R 000 R 000 Notes Restated CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts from customers Cash paid to suppliers and employees ( ) ( ) Cash utilised in operations ( ) Investment revenue Interest revenue Finance expense 11 (1 630) (1 107) Net cash outflows from operating activities ( ) CASH FLOWS FROM INVESTING ACTIVITIES Additions to: Property and equipment 17 (3 993) (3 553) Intangible assets 18 (197) - Proceeds on disposal of: Property and equipment Investments: (Increase)/Decrease in investments with approved institutions (8 175) Net cash inflows from investing activities (12 364) CASH FLOWS FROM FINANCING ACTIVITIES Increase in: Finance lease obligations Net cash inflows from financing activities Net increase/ (decrease) in cash and cash equivalents (41 369) Cash and cash equivalents at the beginning of the year Cash and cash equivalents at end of the year ANNUAL REPORT I 2013/14 77

80 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March ACCOUNTING POLICIES 1.1 BASIS OF PREPARATION OF FINANCIAL STATEMENTS The Independent Development Trust is a Trust domiciled in South Africa. The fi nancial statements have been prepared in accordance with South African Statements of Generally Accepted Accounting Practice as prescribed by the Accounting Standards Board. The fi nancial statements have been drafted under the historical cost convention, except where specifi cally indicated otherwise in the accounting policies below, where certain items, such as certain fi nancial assets and fi nancial liabilities are measured at fair value through profi t and loss. The preparation of the fi nancial statements in conformity with South African Statements of Generally Accepted Accounting Practice as prescribed by the Accounting Standards Board requires the use of estimates and assumptions that affect the reported amounts of fi nancial assets and liabilities and disclosure of contingent liabilities at the date of the fi nancial statements and the reported amounts of revenues and expenses during the reported period. Although these estimates are based on management s best knowledge of current events and actions, actual results may ultimately differ from those estimates and judgements made. The fi nancial statements have been prepared on a going concern basis which assumes that the organisation will be able to meet its obligations as they become due. As at 31 March 2014, current assets exceeded current liabilities by R thousand. Management acknowledges that uncertainty remains over the ability of the organisation to receive suffi cient funding from the shareholder department (Public Works) in the ensuing years to enable it to meet future operational needs. On the basis of new agreements concluded with various client departments, management has reasonable expectation that it will recover suffi cient management fees to cover for the projected operational costs. During March 2012 it was announced that the South African Statements of Generally Accepted Accounting Practice will be withdrawn and will cease to apply in respect of fi nancial years commencing on or after 01 December National Treasury and the Public Sector Accounting Standards Board are in the process of considering proposed changes to the Treasury Regulations to take account of the withdrawal of SA GAAP. Following the result of the above process the IDT will start the process of conversion to the relevant accounting practice. The IDT has consequently for this year prepared its fi nancial statements in accordance with South African Statements of Generally Accepted Accounting Practice as prescribed by the Accounting Standards Board. UNDERLYING CONCEPTS Accounting policies are the specifi c principles, bases, conventions, rules and practices applied in preparing and presenting fi nancial statements. Changes in accounting policies are accounted for in accordance with the transitional provisions in the standard. If no such guidance is given, they are applied retrospectively. However, if it is impracticable to apply the change retrospectively, the change is applied prospectively. Except as otherwise disclosed, these accounting policies are consistent with those applied in previous years. 78 ANNUAL REPORT I 2013/14

81 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 The preparation of fi nancial statements in conformity with South African Statements of Generally Accepted Accounting Practice as prescribed by the Accounting Standards Board requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Trust s accounting policies. For the areas where assumptions and estimates are signifi cant further disclosure is made in the notes to the fi nancial statements. These changes in accounting estimates are adjustments to assets or liabilities or the amounts of periodic consumption of assets that result from new information or new developments. Such changes are recognised through profi t or loss in the period they occur. Prior period errors are omissions from or misstatements in the fi nancial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that was available when the fi nancial statements for those periods were authorized for issue and could reasonably be expected to have been obtained. Such prior period errors are retrospectively restated unless it is impracticable to do so, in which case they are applied prospectively. Retrospective restatement is correcting the recognition, measurement and disclosure of amounts as if a prior period error had never occurred. Accounting policies are not applied when the effect of applying them is immaterial, i.e. if individually or collectively they would not infl uence the economic decisions of the users of the fi nancial statements. The fi nancial statements, including the notes, have been rounded off to the nearest thousand Rand except where stated otherwise in the body of the notes. 1.2 MEASUREMENT CURRENCY The fi nancial statements are presented in South African Rand, which is the presentation currency of the IDT. TRANSACTIONS AND BALANCES Transactions in currencies other than the IDT s measurement currency are recognised at the exchange rate ruling on the dates of the transactions. Monetary assets and liabilities denominated in such currencies are translated at the exchange rate ruling at the reporting date. Gains and losses on exchange differences are recognised through the Statement of Comprehensive Income. 1.3 PROPERTY AND EQUIPMENT All property and equipment are initially recognised at historical cost and subsequently stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the item. Subsequent costs are included in the assets carrying amount, or recognised as a separate asset, only when it is probable that the future economic benefi ts associated with the item will fl ow to the IDT and the cost of the item can be measured reliably. When plant and equipment comprise signifi cant components in relation to the specifi c asset with different useful lives, these components are depreciated separately over their estimated useful lives. Owner-occupied property represents property held for administrative purposes. The owner-occupied property is carried at cost less accumulated depreciation and any impairment losses where the residual value of the asset is estimated to be lower than its carrying amount. Currently the residual value of the owner occupied property has increased to a value greater than its carrying amount. ANNUAL REPORT I 2013/14 79

82 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 Depreciation of an asset begins when it is available for use i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Depreciation of an asset ceases at the earlier of, the date the asset is classifi ed as held for sale or impaired and the date that the asset is derecognised. Depreciation is calculated on the straight-line method to write-off the cost of each asset to its residual values over its estimated useful life. The method of depreciation and useful lives are reviewed annually. The depreciation rates applicable to each category of property and equipment are shown in note 17 of the annual fi nancial statements. Land is not depreciated. The assets residual values and useful lives are reviewed at each reporting date and adjusted if appropriate, any changes are applied prospectively. Property and equipment are tested for impairment whenever there is an indication that the asset may be impaired in accordance with the requirements of IAS 36- Impairment of Assets. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are included in the Statement of Comprehensive Income. Assets, which are subject to fi nancial lease agreements, are capitalised at the lowest of the net present value of future lease payments or fair value and the corresponding liabilities are recognised. Finance lease charges are included in interest expenditure on the effective interest basis. 1.4 INTANGIBLE ASSETS An intangible asset is an identifi able non-monetary asset without physical substance. Intangible assets are initially recognised at historical cost and subsequently carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation begins when an asset is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Amortisation ceases at the earlier of the date that the asset is impaired and the asset is derecognised. Assets are amortised over their useful lives to their residual values using the straight line basis. The useful lives of the assets are reviewed at each reporting date. Intangible assets are tested for impairment if there is an indication that they may be impaired. Amortisation for the year is included in the Statement of Comprehensive Income. IDT does not have any assets with an indefi nite useful life. Research costs, being the original and planned investigation undertaken with the prospect of gaining new technical knowledge and understanding, are recognised in the Statement of Comprehensive Income as an expense as they are incurred. Development costs, being the application of research fi ndings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, processes, systems or services before starting production or use, are capitalised if it meets the recognition criteria. An internally-generated intangible asset arising from development is recognised if, and only if, all of the following have been demonstrated: 80 ANNUAL REPORT I 2013/14

83 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 The technical feasibility of completing the intangible asset so that it will be available for use or sale; The intention to complete the intangible assets and use or sell it; The ability to use or sell the intangible asset; How the intangible asset will generate probable future economic benefi ts; The availability of adequate technical, fi nancial and other resources to complete the development and to use or sell the intangible asset; The ability to measure reliably the expenditure attributable to the intangible assets during its development. The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset fi rst meets the recognition criteria listed above. If not, development expenditure is charged to the Statement of Comprehensive Income in the period in which it was incurred. 1.5 IMPAIRMENT OF ASSETS An impairment loss is the amount by which the carrying amount of an asset (i.e. the amount recognised on the Statement of Financial Position after deducting any accumulated depreciation and accumulated impairment losses), exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell, and its value in use. Value in use is the present value of the future cash fl ows expected to be derived from an asset. At each reporting date the carrying amount of property, equipment and intangible assets are assessed to determine whether there is any indication that those assets may have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. In assessing value in use the estimated future cash fl ows are discounted to their present value using a discount rate that refl ects the current market assessment of the time value of money and risks specifi c to the asset for which the cash fl ows have not been adjusted. If the recoverable amount of an asset is estimated to be less than its carrying amount, its carrying amount is reduced to the higher of its recoverable amount and zero. Impairment losses are recognised in the Statement of Comprehensive Income. Subsequent to the recognition of an impairment loss, the depreciation or amortisation charge for the asset is adjusted to allocate the remaining carrying amount over its remaining useful life. If an impairment loss subsequently reverses, the carrying amount of the assets is increased to the revised estimate of its recoverable amount but limited to the carrying amount that would have been determined had no impairment loss been recognised in prior years. A reversal of an impairment loss is recognised in the Statement of Comprehensive Income. All references to assets apply equally to cash generating units. 1.6 LEASES OPERATING LEASES Leases of assets where a signifi cant portion of the risks and benefi ts of ownership are effectively retained by the lessor are classifi ed as operating leases. Operating lease costs are charged to the Statement of Comprehensive Income on a straight line basis over the period of the lease. ANNUAL REPORT I 2013/14 81

84 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 FINANCE LEASES Leases that transfer substantially all the risk and rewards of ownership of the underlying asset to the lessee are classifi ed as fi nance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value or the present value of the minimum lease payments. The capital element of future obligations under the leases is included as a liability in the Statement of Financial Position. Lease payments are allocated using the effective interest rate method to determine the fi nance lease expense, which is charged to the Statement of Comprehensive Income, and the capital repayment, which reduces the liability to the lessor. 1.7 FINANCIAL INSTRUMENTS Financial instruments carried on the Statement of Financial Position include cash and cash equivalents, investments with fi nancial institutions, trade and other receivables, trade and other payables and borrowings. Financial assets are recognised, using trade date accounting, when the IDT has rights or other access to economic benefi ts. Such assets consist of cash or a contractual right to receive other fi nancial assets. Financial assets are classifi ed into the following specifi ed categories: fi nancial assets at fair value through profi t and loss (FVTPL), and loans and receivables. Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market. These are included in current assets, except for maturities greater than 12 months from the reporting date, which are classifi ed as non-current assets. Loans and receivables are initially recognised at fair value plus transaction costs and are subsequently measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised in the Statement of Comprehensive Income by applying the effective interest rate on the balance. Short-term receivables with no stated interest rate are not discounted where the effect would be immaterial. Loans and receivables comprise trade and other fi nancial receivables, cash and cash equivalents. The effective interest method is a method of calculating the amortised cost of fi nancial assets and allocating interest income over the life of the fi nancial asset. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the fi nancial assets. Financial assets at FVTPL are initially and subsequently stated at fair value, with any gains or losses arising on re-evaluation recognised in the Statement of Comprehensive Income. Financial assets other than those at FVTPL are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the fi nancial asset, the estimated future cash fl ows of the investment will not be fully recovered. For certain categories of fi nancial assets, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment of receivables could include past experience of recovering amounts due, an increase in the number of delayed payments past the average collection period, as well as observable changes in national or local economic conditions that correlate with default receivables. 82 ANNUAL REPORT I 2013/14

85 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 For fi nancial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the assets carrying amount and the present value of estimated future cashfl ows, discounted at the fi nancial assets original effective interest rate. The carrying amount of the fi nancial assets is reduced by the impairment loss directly for all fi nancial assets with the exception of trade receivables where an allowance account is used. When a trade receivable is considered unrecoverable, it is written off through the Statement of Comprehensive Income to other expenses. Subsequent recoveries of amounts previously written off are credited against other income. Financial liabilities are recognised when there is an obligation to transfer economic benefi ts and that obligation is a contractual obligation to deliver cash or another fi nancial asset or to exchange fi nancial instruments with another entity on potentially unfavourable terms. Financial liabilities include trade and other payables and borrowings. These fi nancial liabilities are initially recognised at fair value plus transaction costs and subsequently measured at amortised cost, with interest expense recognised using the effective interest method. The effective interest method is a method of calculating the amortised cost of a fi nancial liability and allocating the interest expense over the contract period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the fi nancial liability. The recognition and measurement criteria for each of these fi nancial instruments are separately disclosed under their respective accounting policies. The face values of fi nancial assets and liabilities with a maturity of less than one year approximate their fair values. A fi nancial instrument, being a contract that gives rise to a fi nancial asset of one entity and a fi nancial liability or equity instrument of another entity, is recognised when the IDT becomes a party to the contractual provisions of the instrument. TRADE AND OTHER RECEIVABLES Trade receivables are recognised initially at fair value plus transaction costs and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the IDT will not be able to collect all amounts due according to the original terms of the receivables. Signifi cant fi nancial diffi culties of the debtor are considered an indicator that the trade receivable may be impaired. The amount of the loss is the difference between the carrying amount and the recoverable amount of the asset, being the present value of the estimated future cash fl ows, discounted at the original effective interest rate. This loss is recognised in the Statement of Comprehensive Income. Subsequent recoveries of amounts previously written off are credited to expenses in the Statement of Comprehensive Income. TRADE AND OTHER PAYABLES Trade and other payables are initially recognised at fair value plus transaction costs and subsequently measured at amortised cost using the effective interest rate method. ANNUAL REPORT I 2013/14 83

86 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 FINANCIAL RISK MANAGEMENT FINANCIAL RISK FACTORS The IDT s activities expose it to a variety of fi nancial risks, which include market risk (currency risk, fair value risk, and interest rate risk), credit risk and liquidity risk. The management of these risks is disclosed under note 4 to the fi nancial statements. 1.8 PROVISIONS A provision is a liability of uncertain timing or amount. Provisions are recognised when the IDT has a present legal or constructive obligation as a result of past events and it is probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Provisions are measured at the present value of the expected future outfl ows of economic benefi ts required to settle the obligation. 1.9 INVESTMENT REVENUE Investment revenue comprises of returns earned on amounts invested with fi nancial institutions. Interest is recognised as revenue on the effective interest method REVENUE Revenue is measured at the fair value of the consideration received or receivable. Revenue is recognised only when the amount can be measured reliably, and it is probable that the economic benefi ts associated with the transaction will fl ow to the entity. a) Management Fees Service revenue is recognised by reference to the stage of completion of the transaction at the reporting date. Stage of completion is determined by services performed to date as a percentage of total services to be performed. b) Grant received Government grants are recognised in the statement of fi nancial position initially as deferred income when there is reasonable assurance that they will be received and that the organisation will comply with the conditions attached to them. Grants that compensate the organisation for expenses incurred are recognised as revenue in profi t or loss on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the organisation for the cost of an asset are recognised in as revenue on a systematic basis over the useful life of the asset INTEREST REVENUE Interest revenue is recognised when it is probable that the economic benefi ts will fl ow to the IDT and the amount of revenue can be measured reliably. Interest revenue is the unwinding of the discounting of loans and receivables 1.12 MAIN FUND The Main Fund is the residual interest in the assets after deducting all liabilities. 84 ANNUAL REPORT I 2013/14

87 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March FINANCE EXPENSE Finance expense includes interest and other expenditure incurred in connection with the borrowing of funds. Finance expenses directly attributable to the acquisition or production of qualifying assets are added to the cost of those assets. Finance expense not incurred on qualifying assets is expensed in the period in which they are incurred. Finance expenses comprise of interest on obligations under fi nance leases, and interest incurred on fi nancial liabilities. Finance expense is recognised on a time-proportion basis using the effective interest method POST REPORTING DATE EVENTS Recognised amounts in the fi nancial statements are adjusted to refl ect events arising after the reporting date that provide evidence of conditions that existed at the reporting date. Material events after the Statement of Financial Position date that are indicative of conditions that arose after the reporting date are dealt with by way of a note RELATED PARTY DISCLOSURES Parties are considered to be related to the IDT if either one party directly or indirectly has the ability to control or jointly control or exercise signifi cant infl uence over the other party in making fi nancial and operational decisions or is a member of the key management of the IDT. For details of related parties refer to note FRUITLESS AND WASTEFUL EXPENDITURE Fruitless and wasteful expenditure means expenditure which was made in vain and would have been avoided had reasonable care been exercised. It is recognised as an asset until such time as the expenditure is recovered, based on the probability of it being recovered, or written off as irrecoverable in the Statement of Comprehensive Income IRREGULAR EXPENDITURE Irregular expenditure means expenditure, other than unauthorised expenditure, incurred in contravention of, or that is not in accordance with, a requirement of any applicable legislation. It is charged to the Statement of Comprehensive Income NON-CURRENT ASSETS HELD FOR SALE Non-current assets are classifi ed as non-current assets held for sale if the carrying amount will be recovered principally through sale rather than through continuing use. This condition is regarded as met only when the sale is highly probable, the non-current assets are available for immediate sale in their present condition and management is committed to the sale which should be expected to qualify for recognition as a sale within one year from the date of classifi cation. Immediately prior to being classifi ed as non-current assets held for sale, the carrying amount of the item is measured in accordance with the applicable standard. After classifi cation as held for sale it is measured at the lower of the carrying amount and fair value less costs to sell. An impairment loss is recognised in the Statement of Comprehensive Income for any initial and subsequent write-down of the asset to fair value less costs to sell. A gain for any subsequent increase in fair value less costs to sell is recognised in the Statement of Comprehensive Income to the extent that it is not in excess of the cumulative impairment loss previously recognised. ANNUAL REPORT I 2013/14 85

88 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March EMPLOYEE BENEFIT EXPENSE Employee benefi t costs include all forms of consideration given in exchange for services rendered by employees. The cost of providing employee benefi ts is recognised in the Statement of Comprehensive Income in the period in which the related services are rendered by employees. The expected cost of bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments. Contributions to defi ned contribution plans are expensed as they accrue. IDT has no defi ned benefi t plan for employees. Expenses for wages and salaries and annual leave expected to be settled within twelve months of the reporting date, are recognised as liabilities as the employees render services that increase their entitlement or, in the case of nonaccumulating absences, when the absence occurs. Termination benefi ts are payable whenever an employee s employment is terminated before normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefi ts. The IDT recognises termination benefi ts when it is demonstrably committed to either terminate the employment of current employees according to a detailed plan without possibility of withdrawal or to provide termination benefi ts as a result of an offer made to encourage voluntary redundancy CONTINGENT LIABILITIES A contingent liability is a possible obligation that arises from past events and whose existence will be confi rmed only by the occurrence or non-occurrence of one or more uncertain future events; not wholly within the control of the IDT; or a present obligation that arises from past events but is not recognised because it is not probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation or the amount of the obligation cannot be measured with suffi cient reliability. Contingent liabilities are not recognised as liabilities in the Statement of Financial Position CASH AND CASH EQUIVALENTS Cash and cash equivalent are initially measured at fair value and subsequently measured at amortised cost. For the purposes of the Statement of Financial Position, cash and cash equivalents comprise cash-on-hand and deposits held on call with banks. For the purposes of the Statement of Cash Flow, cash and cash equivalents comprise cash-on-hand, deposits held on call with banks less bank overdrafts which form part of IDT s cash management CONSTRUCTION CONTRACT IAS 11: Construction Contracts defi nes a construction contract as a contract specifi cally negotiated for the construction of assets and does prescribe the accounting treatment thereof. The IDT as an agent acting on behalf of the principal, has a role to facilitate the delivery of infrastructure programme by offering programme management services and development advisory services and it is therefore concluded that IAS 11: Construction Contracts is not applicable to the IDT FUNDS DUE TO/FROM PROGRAMME PRINCIPALS When, in the processing of transactions relating to the delivery of programmes, the IDT expends its own funds prior to the reimbursement from the dedicated programme funds, such timing difference will result in a claim against the programme principals by the IDT. When programme funds are expended before due date, this will result in funds being due to the programme principals. 86 ANNUAL REPORT I 2013/14

89 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March COMPARATIVE FIGURES Comparative fi gures are reclassifi ed or restated as necessary to afford a proper and more meaningful comparison of results as set out in the affected notes to the fi nancial statements. Comparative fi gures are restated in the event of a change in accounting policy or material prior period error. 2 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS In the application of the IDT s accounting policies, which are described in note 1 above, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates will, by defi nition, rarely equal the actual results achieved. The estimates and judgements that have a signifi cant risk of causing a material adjustment to the carrying values of assets and liabilities are discussed below. Estimates and judgments are continually evaluated and are based on historical experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances. These estimates and assumptions do however affect the reported amounts of assets and liabilities at the reporting date, as well as the reported income and expenditure recorded in the Statement of Comprehensive Income. Although these estimates are based on management s best knowledge of current events and actions, actual results may ultimately differ from those estimates. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Critical assumptions and judgements in applying accounting policies The following are the key assumptions and judgements concerning the future that have a signifi cant risk of causing adjustments to the carrying amounts of assets and liabilities within the next fi nancial year. 2.1 Useful life and residual value of property, equipment and intangible assets The IDT depreciates or amortises its assets over their estimated useful lives, as more fully described in the accounting policies for property and equipment and intangible assets. The estimation of the useful lives of assets is based on historic performances as well as expectations about future use and therefore requires a signifi cant degree of judgement to be applied by management. The actual useful lives of these assets can vary depending on a variety of factors, including technological innovation and repairs and maintenance. When determining the residual value for property and equipment the following factors are taken into account 1) External residual value undertaken by an independent sworn appraiser for the building; 2) An Internal review of the condition of equipment being used. During the review, management determined that the useful lives of certain equipment should be lengthened, due to the condition and the continuous use of certain of the assets. The fi nancial effect of this assessment, assuming the assets are held until the end of their revised estimated useful lives, is to reduce the depreciation expense in the current fi nancial year. The annual depreciation charge will be adjusted for any changes in these estimates (refer to note 17). These estimates are based on management s experience, knowledge and current expectations. ANNUAL REPORT I 2013/14 87

90 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March Average discount rate used on financial assets and liabilities In accordance with IAS 39- Financial Instruments: recognition and measurement, fi nancial assets and liabilities are discounted to present value using the average yield on the investment portfolio of the IDT. The IDT bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifi cs of each arrangement. The IDT has consistently used the average yield on the investment portfolio for the last fi ve fi nancial years in discounting fi nancial assets and liabilities. 2.3 Impairment of assets Property and equipment and intangible assets are assessed for impairment at least annually, as more fully described in the accounting policy in respect of impairment and notes 9 and 17. The market conditions and the expected lives of each of these assets are discussed in more detail in the notes to the annual fi nancial statements. 2.4 Write off of funds recoverable A signifi cant degree of judgement is applied by management when considering whether a debtor is recoverable or not. The following factors are taken into account when considering whether a debtor is impaired: 1) History of the specifi c client department with the IDT; 2) Indications of fi nancial diffi culties or funds committed to other commitments by the client department; 3) General economic conditions and the ability of the client department to obtain Government funding based on their MTEF submissions to National Treasury. 2.5 Fair value determination The carrying values of fi nancial assets and liabilities with a maturity of less than one year are assumed to approximate their fair value when the impact of discounting is not material. 88 ANNUAL REPORT I 2013/14

91 3 CATEGORIES OF FINANCIAL INSTRUMENTS Details of the signifi cant accounting policies and methods adopted (including the criteria for recognition, the bases of measurement, and the bases for recognition of income and expense) for each class of fi nancial asset and fi nancial liability are disclosed in the accounting policies above R 000 R 000 Restated Financial Assets Classification Investments with fi nancial Institutions - Non Current Fair value through profi t and loss Investments with fi nancial Institutions - Current Fair value through profi t and loss Trade and other receivables Loans and receivable at amortised cost Funds due from programme principals Loans and receivable at amortised cost Cash and cash equivalents Loans and receivable at amortised cost Financial Liabilities Long term portion of fi nance leases Financial liabilities at amortised cost Short term portion fi nance leases Financial liabilities at amortised cost Trade and other payables (including accrued expenditure) Financial liabilities at amortised cost The carrying amounts refl ected above represents the IDT s maximum exposure to credit risk for loans and receivables 4 MANAGEMENT OF RISK 4.1 General The IDT has exposure to the following risks: market, interest rate, credit and investment risk. The Board of Trustees is responsible for strategic risk-management within the IDT and tasks the Audit and Risk Committee with ensuring effective risk-management. The purpose of the IDT risk-management strategy is to identify the risks and ensure that the overall risk profi le remains at acceptable levels. The risk-management strategy provides reasonable, but not absolute, assurance that risks are being adequately managed. The IDT risk policy sets out the minimum standards of risk-management to be adopted and adhered to by all units within the IDT. The risk policy is established to identify and analyse the risks faced by the IDT, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to refl ect changes in market conditions and IDT activities. The risk-management strategy, which has been reviewed and updated in the current year, contains processes for identifying both the impact and likelihood of such risk occurring. Risks that have been identifi ed as having a potentially severe impact on the IDT are regarded as unacceptable and, where possible, will be avoided. Responsibility for ensuring adherence to the IDT risk-management strategy is headed by the Acting GM Compliance, who has access to the Audit and Risk Committee and members of the Executive Committee. ANNUAL REPORT I 2013/14 89

92 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March Managements responsibilities Management is responsible for the identifi cation, assessment and control of all key risks facing the IDT, functions and processes under their control. In addition, management is required to manage all risks under their control that contribute to the IDT s risk profi le. A documented formal policy framework has been put in place in order to achieve the following: - Place accountability on Management for designing, implementing and monitoring the process of risk management - Place responsibility on Management for integrating the risk management process into the day to day activities and operations of the IDT - Ensure that the risk strategy is communicated to all stakeholders. To assist the IDT s Risk Committee in discharging its responsibilities, it has; - assigned risk management responsibilities to certain members of the Risk Committee; and - appointed a Risk Champion to develop, communicate, coordinate and monitor risk. The Acting General Manager: Compliance is required to monitor the status of risk within the IDT and to report on any material changes to the risk profi le and any losses incurred as a result thereof. Management is expected to put in place appropriate controls for these risks and provide assurance that such controls perform as intended. 4.3 Financial risk profile Risk management relating to each of these risks is discussed under the headings below. The fi nancial risks the IDT primarily faces are market risk (interest rate risk), investment risk and credit risk Market risk management The IDT s activities expose it primarily to the fi nancial risks of changes in interest rates. There has been no change to the IDT exposure to market risk or the manner in which it manages and measures the risk Interest rate risk management Interest rate risk arises primarily from IDT s investment strategy to ensure capital preservation in line with IDT s investment policy. As a result of this exposure to interest rate risk, Fund Managers manage the investments according to their investment mandate (refer to sensitivity analysis below). Performance of each Fund Manager is reviewed on a monthly basis by an outside independent expert. The nature of IDT s exposure to interest rate risk and its objectives, policies and procedures for managing interest rate risk have not changed signifi cantly from the prior period. 90 ANNUAL REPORT I 2013/14

93 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 R 000 R 000 Fund Managers returns for the year % % Momentum Asset Management (formerly RMB) Returns for the year Fund benchmark Sensitivity analysis In managing interest rate risk, the Investment Committee of the IDT reviews the investment strategy on a regular basis to ensure that the highest returns are achieved within the mandate which is risk adverse. The funds will only be invested with reputable fi nancial institutions. It is estimated that by increasing the returns by 100 basis points on the amounts invested will result in a further R being earned in investment income in the Statement of Comprehensive Income. As capital is applied in pursuit of the mandate of the organisation, the amount available will gradually diminish which will reduce the sensitivity to interest rates as the main fund diminishes over time Investment risk management IDT funds are invested in money market fi nancial instruments and in government, parastatal and corporate bonds as defi ned in the investment strategy which, due to their liquid nature, allows immediate access to these funds. Money market instruments are invested in institutions which have at least an A+ rating to ensure capital preservation in line with the IDT s investment strategy. It s not the intention of the IDT to hold the bonds to maturity but to allow for fl exibility in order to maximize yield. An independent expert monitors the performance of the Fund Managers to ensure that the returns are achieved within the parameters of the IDT cash requirements (refer above to Fund Managers returns on investments) Credit risk management Credit risk is the risk of fi nancial loss to the IDT if a customer or counterparty defaults on its contractual obligations to the IDT. The maximum exposure to credit risk is represented by the carrying amount of each fi nancial asset in the Statement of Financial Position. The carrying value for trade and other receivables, net of impairment amount to R214 million (2013 R83 million). The IDT only transacts with various Government Institutions who have no independent rating. Trade and other receivables consist of management fees in the amount of R202 million (2013 R80 million). The IDT does not have any signifi cant credit risk exposure to any single counterparty having similar characteristics. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. Government departments have no independent rating, however based on historical experience and other factors none of the amounts due to the IDT are impaired. ANNUAL REPORT I 2013/14 91

94 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 Notes R 000 R 000 IDT s key areas of exposure to credit risk in the current financial year include: Amounts due from programmes for management fees; Funds due from programme principals Amounts due from SARS in respect of VAT; and Cash and cash equivalents held with fi nancial institutions. The nature of IDT s exposure to credit risk and its objectives, policies and processes for managing credit risk have not changed signifi cantly from the prior period. Exposure to credit risk Cash and cash equivalents Investments held with fi nancial institutions Trade and other receivables Funds due from programme principals Cash and cash equivalents held with reputable fi nancial institutions are used for investing and cash handling purposes. The carrying values of the above fi nancial assets are net of any impairment and approximate their fair value. None of the amounts disclosed above have been pledged as security or collateral for liabilities or contingent liabilities nor have any amounts been renegotiated or have been defaulted on. 92 ANNUAL REPORT I 2013/14

95 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 Notes R 000 R INVESTMENTS WITH APPROVED INSTITUTIONS % Money Market and Bonds with a maturity date of less than 1 year Bonds with a maturity date of: 1-3 years years years years Funds are invested in money market fi nancial instruments and in government, parastatal and corporate bonds issued by local reputable fi nancial institutions. Whilst the bonds have a maturity period in excess of 1 year, they are all highly liquid instruments. Minimum standalone rating Portfolio market value limit Bills, bonds and securities issued by Government N/A No limit Deposits with and balances in current and savings account Bills, bonds and securities issued or guaranteed by Local Authorities Utilities (per issuer) or major banks AAA 35% ANNUAL REPORT I 2013/14 93

96 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 R 000 R AGEING OF FINANCIAL ASSETS Trade and other receivables % Carrying amount Carrying amount Current 89% Days 0% Days 0% Greater 90 days 11% The amounts above represent management fees due from programme principals and VAT refundable from SARS IDT does not have collateral or other credit enhancements for its credit risk exposure from fi nancial assets during the current or prior year. The carrying amount approximates fair value because of the short period of recovery Funds (recoverable from)/ due to programs % Carrying amount Carrying amount Current (13 881) (13 881) IDT does not have collateral or other credit enhancements for its credit risk exposure from fi nancial assets during the current year or prior year. Amounts due from programme principals are spread across various departments. Based on expectations at the end of the reporting period, the IDT considers it highly unlikely that the amounts will be recoverable. 94 ANNUAL REPORT I 2013/14

97 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 R 000 R TRADE AND OTHER PAYABLES The maximum exposure to liquidity risk: The fair value of borrowings, together with the carrying amounts shown in the Statement of Financial Position is as follows: % Carrying amount Carrying amount Current 98.57% Days 0.01% Days 1.42% Greater than 90 days 0.00% % IDT has signifi cant exposure on fi nance leases where the increase in interest rates could impact the amount owed. The carrying amount approximates fair value because of the short period of settlement. 4.7 DETERMINATION OF FAIR VALUES Except as detailed in the table under note 3 above, management consider that the carrying amounts of financial assets and liabilities recognised at amortised cost in the financial statements approximate their fair value when the impact of discounting is not material. The valuation techniques and assumptions applied for the purposes of measuring fair value are determined as follows: Property, equipment and Intangible assets The fair value of property is based on market valuation. The market value of the IDT property was determined based on an independent valuation, which conforms to the valuation standards based on the income capitalisation method of valuation. Investments The carrying value of investments with fi nancial institutions is carried at fair value. Trade and other receivables and payables The carrying value of trade receivables and payables are assumed to approximate their fair values. The fair value of fi nancial assets and liabilities for disclosure purposes is estimated by discounting the future contractual cash outfl ows and infl ows at the average yield on the investment portfolio. Borrowings For fi nance leases the market rate of interest is determined by reference to similar lease agreements. ANNUAL REPORT I 2013/14 95

98 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 R 000 R REVENUE Grants received Management fees received The grant was received from the shareholder department to fund the operating activities Management fees are earned from the implementation of programmes on behalf of various government departments. 6 INVESTMENT REVENUE Money market Bond market The amounts represents gains derived on fi nancial assets invested with fi nancial institutions held at fair value through profi t and loss. Fees charged by Fund Managers to administer the funds on behalf of the IDT amount to R270 thousand (2013: R719 thousand) included under administrative expenditure in note INTEREST REVENUE Interest revenue Interest (calculated using the effective interest method) on fi nancial assets not held at fair value and adjusted through the Statement of Comprehensive Income The amounts represent actual gains derived on fi nancial assets held with fi nancial institutions at fair value through profi t and loss. 8 OTHER INCOME Sale of tender documents to tenderers Other income ANNUAL REPORT I 2013/14

99 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 R 000 R OTHER LOSSES Loss on disposal of equipment Impairment of funds due from programme principals Impairment of trade receivables Provision for doubtful debts Loss on disposal of equipment represents loss on disposal of property, plant and equipment carried at cost less accumulated depreciation and impairment losses. Impairment of funds due from programme principals and trade receivable arose from the write-off of account balances to their recoverable amount. ANNUAL REPORT I 2013/14 97

100 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 R 000 R EXPENSES FOR THE YEAR Deficit for the year has been arrived at after taking into account the following: DEPRECIATION AND AMORTISATION EXPENSE Depreciation on equipment - Computer equipment Canteen Furniture and fi ttings Leased equipment Offi ce Equipment Mechanical equipment Motor vehicles Amortisation of computer software Change in estimate - (284) EMPLOYMENT EXPENSE Wages and salaries Remuneration Performance awards Arbitration award Third party contributions Medical UIF Offi cial unions and associations Retirement benefi ts - defi ned contribution plan Total employment expense ANNUAL REPORT I 2013/14

101 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 R 000 R 000 ADMINISTRATION EXPENSES Catering, meals and entertainment Construction costs Consultancy fees Development initiatives External audit fees Fund management fee Insurance Internal audit IT expenses Leasehold improvements Legal fees Maintenance and repairs Media communications Other Printing and stationery Rentals in respect of operating leases- Buildings Staff Training Telephone Travel and accommodation Trustees remuneration Water, rates and electricity Workshop, conferences and seminars ANNUAL REPORT I 2013/14 99

102 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 R 000 R FINANCE EXPENSES Interest on obligations under fi nance lease Interest (calculated using the effective interest method) for fi nancial liabilities that are not at fair value through profi t or loss FAIR VALUE GAINS / (LOSSES) ON INVESTMENTS Unrealised profi ts on money market (73) 99 Unrealised profi ts on bonds (2 520) Realised losses on money market 53 (135) Realised profi ts on bonds (854) These are realised and unrealised profi t and losses recognised on investments invested in the bond and money markets and include fair value adjustments incurred in the relevant assets. 13 OTHER EXPENSES Fruitless and wasteful expenditure Refer to note 15 on fruitless and wasteful expenditure. 14 TAXATION No provision is made for taxation as the IDT was exempted from income tax in terms of section 10(1)(cN) of the Income Tax Act, 1962, as amended. The IDT has been approved as a Public Benefi t Organisation in terms of section 30 of the Act. 15 FRUITLESS AND WASTEFUL EXPENDITURE AND IRREGULAR EXPENDITURE 15.1 Fruitless and wasteful expenditure The expenditure relates to penalties and interest relating to VAT, interest in respect of late payments of offi ce rentals and telephone rentals and expenses, etc ANNUAL REPORT I 2013/14

103 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 R 000 R Irregular Expenditure Incorrect calculation on score card Preference point system not used Deviation from procurement processes Condoned during the year - - Awaiting condonation from the Board of Trustees Incorrect calculation on score card A scorecard with incorrect calculation of the 80/20 preference point system was used, and the quotations were awarded to incorrect supplier. The scorecard has since been corrected and recirculated. The transactions require condonation from the Board. Preference point system not used Expenditure was incurred without using the preference point system. The transactions occurred during period of migration to full compliance with Treasury Regulations. The transaction requires condonation by the Board. Deviation from procurement processes Legal expenses and one administrative expenditure transactions were procured without following approved procurement processes. The deviation should have been approved by the tender adjudication committee. The transaction requires condonation by the Board. ANNUAL REPORT I 2013/14 101

104 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 R 000 R CONTINGENT LIABILITY IDT is a defendant in a legal action where a third party has instituted summons against the IDT for work done and has been subsequently placed on hold. The IDT will defend the matter IDT is a defendant in a legal action where a third party has instituted summons against the IDT for non-payment. IDT disputes the quantum or has referred the matter to the relevant client department and will defend this matter IDT is a defendant in a legal action where a third party has instituted summons against the IDT for alleged repudiation of the agreement with the IDT. IDT has not entered into any agreement with the third party, and neither has the third party rendered any services to the IDT. IDT will defend this matter IDT is a defendant in a legal action where a third party has instituted summons against the IDT. The IDT will defend this matter IDT is a defendant in a legal action where a third party has instituted summons against the IDT for alleged sale and delivery of goods to the IDT. The IDT believes this claim to be fraudulent and will defend the matter IDT is a defendant in a legal action where a third party has instituted summons against the IDT for alleged services rendered where the IDT is alleging breach of contract and/or non-delivery. The IDT will defend this matter IDT is a defendant in a legal action where a third party has instituted summons against the IDT for alleged services rendered. There has been part settlement of the matters and the IDT needs to close account with legal representatives IDT is disputing rates charged by a service provider. The negotiations with the supplier are ongoing ANNUAL REPORT I 2013/14

105 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 R 000 R PROPERTY AND EQUIPMENT Cost Impairment - - Disposals (279) (40) Change in estimate Prior year s adjustments Accumulated depreciation (32 756) (32 156) Net carrying amount Canteen equipment Furniture and fi ttings Computer equipment Leased Offi ce equipment Mechanical Equipment Offi ce equipment Motor Vehicles Land Owner occupied building Net carrying amount ANNUAL REPORT I 2013/14 103

106 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 Furniture Canteen and equipment fittings Computer equipment Office equipment Leased Office Mechanical equipment Equipment Motor vehicles Land Owner occupied building Totals R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 Cost Balance at 1 April Prior year s adjustments (349) Additions Disposals (5) (32) (16) (8) (28) (89) Balance at 31 March Prior Year adjustments Reclassifi cations 20 (5) (15) Additions Disposals (5) (441) (3 472) (2 371) (1 652) (7 941) Balance at 31 March Accumulated depreciation and impairment Balance at 1 April Material prior year adjustments (3) (5 094) 172 (1) 112 (4 290) Reinstated balance as at 1 April Depreciation Prior Year adjustments (345) 200 (2) (14) Disposals (2) (17) (7) (5) (18) (49) Change in estimate - (58) (180) (32) - - (10) - - (280) 104 ANNUAL REPORT I 2013/14

107 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 Furniture Canteen and equipment fittings Computer equipment Office equipment Leased Office Mechanical equipment Equipment Motor vehicles Land Owner occupied building Totals R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 Balance at 31 March Depreciation Reclassifi cations 19 - (4) (15) Disposals (5) (347) (3 323) (2 335) (1 652) (7 662) Change in estimate Balance at 31 March Carrying amount As at 31 March 2013 (Reinstated) As at 31 March As required by IAS 16: Property, Plant and Equipment, IDT has reviewed the useful lives and residual values of property and equipment. The review resulted in an adjustment to the residual values and useful lives of equipment in the current year. There were no indication of impairment noted in the current year and comparative period last year. Included in the amounts above for Offi ce Equipment are assets held under fi nance leases with a net book value of R1 829 thousand ( R781 thousand) The IDT no longer depreciates the owner-occupied building until such time as the residual value decreases below the carrying amount in accordance with IAS 16: Property, Plant and Equipment par 54. Estimates and judgments are evaluated annually and are based on historical experience and other factors. Management has considered the impact of IAS 16: Property, Plant and Equipment on the annual fi nancial statements for the year ended 31 March 2014 and the assumptions made in respect to useful life on property and equipment are as follows: ANNUAL REPORT I 2013/14 105

108 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 With the continuous changes in technology, computer equipment is replaced on average every fi ve years. The straight line method is still deemed to be a true refl ection of the write off period. However, computer equipment with a remaining useful life of less than 1 year, which is still currently being used by the IDT, will be extended by a further 3 years. Where computer equipment whose useful life was extended by a further 3 years and is still in use will be extended by a further 2 years and thereafter will be either impaired or extended by a further year. A signifi cant portion of furniture and fi ttings have been on the asset register for a period exceeding its initial useful life expectancy. Furniture and fi ttings with a remaining useful life of less than 1 year, still in good condition and currently still being used by the IDT will be extended by another 3 years. Where furniture and fi ttings whose useful life was extended by a further 3 years and is still in use will be extended by a further 2 years and thereafter will be either impaired or extended by a further year. The motor vehicle which has a remaining useful life of less than 1 year which is still in good condition and is still currently being used by the IDT will be extended by a further 3 years. Management has reviewed the useful life on both offi ce and canteen equipment and believe that the straight line method of 10 years is still deemed to be a true refl ection of the write off period. Equipment is tested for impairment whenever there is an indication that the asset may be impaired in accordance with the requirements of IAS 36: Impairment of Assets. The impairment losses have been included in the line item other expenses in the Statement of Comprehensive Income. None of the property or equipment has been pledged as security or collateral for liabilities. The estimation of the useful lives of equipment is based on historical performance as well as expectations about future use and therefore requires a signifi cant degree of judgment to be applied by management. These depreciation rates represents managements current best estimate of the useful lives of the assets. Freehold land and buildings carried at fair value An independent valuation of the IDT s land and buildings was performed by Val-co to determine the residual value and useful life of the land and buildings. The valuation, which conforms to the valuation standards, was determined by reference to the income capitalisation method of valuation. The effective date of the valuation was 1 April ANNUAL REPORT I 2013/14

109 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 The depreciation period applicable to each category of property and equipment are as follows: - Canteen equipment - 10 years - Computer equipment years - Furniture and fi ttings years - Motor Vehicles - 8 years - Offi ce Equipment years - Owner occupied building - 50 years - Mechanical equipment years - Leased offi ce equipment years ANNUAL REPORT I 2013/14 107

110 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 R 000 R INTANGIBLE ASSETS Computer Computer Software Software Cost Balance at 1 April 2012 (2011) Additions Disposals Balance at 1 April 2013 (2012) Additions Prior year s adjustments - 12 Balance at 31March 2014 (2013) Accumulated amortisation and impairment Balance at 1 April 2012 (2011) Amortisation Prior year s adjustments 16 Disposals Balance at 1 April 2013 (2012) Amortisation Change in accounting estimate - -4 Prior year s adjustments Balance at 31March 2014 (2013) Carrying amount As at 31 March 2013 (2012) As at 31 March 2014 (2013) Computer software is amortised over its useful life using the straight-line method (fi nite useful life). The amortisation expense has been included under the line item Depreciation and amortisation expense in the Statement of Comprehensive Income. 108 ANNUAL REPORT I 2013/14

111 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 R 000 R 000 Management has reviewed the useful life on computer software and believe that the straight line method of two years is still deemed to be a true refl ection of the write off period. The estimation of the useful lives of software is based on historical performance as well as expectations about future use. The amortisation rate represents management s current best estimate of the useful lives of the assets. - Intangible Asset 2 years 19 INVESTMENTS WITH FINANCIAL INSTITUTIONS Cash and short-term investments (maturity less than one year) Long-term fi xed interest Percentage of total investments % % Cash and short-term investments (maturity less than one year) Long-term fi xed interest The funds are invested in money market fi nancial instruments and in government, parastatal and corporate bonds issued by reputable local fi nancial institution which, due to their liquid nature, allows immediate access to the funds. The duration of the portfolio is determined by the term of the fi xed interest bonds. It is not the intention of the IDT to hold the bonds to maturity but to allow for fl exibility in order to maximise yield. The average duration of the portfolio is 1 year which is in line with the approved mandate. The average yield on the portfolio for the year ended 31 March 2014 is 7,99% (2013 8,13 %). An independent expert monitors the performance of the fund managers and confi rms the fair value of the investments at year end. None of the investments has been provided as security or collateral for liabilities or contingent liabilities or is past due. Fair value gains and losses on the underlying investments are disclosed separately in the Statement of Comprehensive Income and notes to the fi nancial statements (refer note 12). ANNUAL REPORT I 2013/14 109

112 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 R 000 R TRADE AND OTHER RECEIVABLES VAT refundable Trade receivables Other receivables Trade and other receivables disclosed above are classifi ed as loans and receivables and are therefore measured at amortised cost. No interest is charged on any outstanding balance due. Included in trade and other receivables is an amount of R203 million (2013: 80 million) which represents the balance of management fees to be recovered from programmes. Trade and other receivables disclosed above that are past due includes an impairment of R6 801 thousand (2013: R0) and a provision for doubtful debts of R (2013: R0) thousand based the objective evidence available at year end that the IDT might not be able to collect the amount due. None of the Trade or other receivables has been pledged as security or collateral for liabilities or contingent liabilities nor have any terms of any receivable been renegotiated. The carrying amount approximates fair value because of the short period to maturity. The ageing of amounts past due and quality of trade receivables are discussed further under note FUNDS DUE (FROM) TO PROGRAMME PRINCIPALS - (13 881) The balance represents funds due (from)/ to programme principals for expenses relating to programme delivery which were already registered in the accounting records as at year end. Impairment reviews are conducted annually at each year end and where, in the opinion of management, the recovery is doubtful it is written off through profi t and loss. None of the funds recoverable from programmes has been pledged as security or collateral for liabilities or contingent liabilities nor have any terms of any receivable been renegotiated or amounts owed have been defaulted on. 110 ANNUAL REPORT I 2013/14

113 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 R 000 R CASH AND CASH EQUIVALENTS For the purposes of the Statement of Cash Flows, cash and cash equivalents include cash on hand and in banks and money held in call accounts which belongs to the IDT. Cash and cash equivalents at the end of the fi nancial year as shown in the Statement of Cash Flows can be reconciled to the related items in the Statement of Financial Position as follows; Current accounts and cash Cash and cash equivalents are placed with reputable fi nancial institutions. Guarantees, issued in favour of lessors for the renting of offi ce premises, are neither negotiable nor transferable, and are further restricted to the payment of the sum of money limited to the guaranteed amount of R299 thousand (2013: R354 thousand). 23 MAIN FUNDS Balance at the beginning of year Prior year s adjustments Surplus/(Defi cit) for the year ( ) Balance at the end of the year (Refer to Note 28 for prior period adjustments) ANNUAL REPORT I 2013/14 111

114 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 R 000 R FINANCE LEASES Obligations under finance leases Finance leases relate to printers with a lease term of 3 years. IDT does not contractually have the option to buy the equipment for a nominal amount at the conclusion of the lease agreement. Reconciliation of minimum lease payments Minimum lease payments No later than one year Later than one year and not later than fi ve years Finance expense Present value of minimum lease payments No later than one year Later than one year and not later than fi ve years The weighted average interest rate applicable to the fi nance leases did not exceed 11% (2013:14%) The underlying assets are considered to be security for the fi nance lease liability. There were no defaults or breaches of the contractual terms of the fi nance leases during the fi nancial year. The carrying amounts of the fi nance lease were not materially different from the fair values of equipment at year end (refer to note 17) 25 TRADE AND OTHER PAYABLES Trade payables Accrued leave pay Performance bonus accrual Other payables ANNUAL REPORT I 2013/14

115 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 R 000 R 000 The IDT recognises trade payables at fair value and subsequently measures at amortised cost using the effective interest method. In accordance with IAS 39: Financial Instruments Recognition and Measurement trade payables are to be discounted. An interest rate of 7.99% (2013: 8.13%) was used for discounting taking into account the date of purchase by the IDT to the date of expected payment. There were no defaults on any amounts payable nor were there any amounts re-negotiated with suppliers of the IDT. Accrued leave pay represents annual leave and vested long service leave entitlements accrued to employees. Performance bonus accruals are based on the application of a three-tier performance management system. Performance bonuses are paid when approved by the Board of Trustees. 26 RELATED PARTY TRANSACTION The IDT acts as a programme implementation manager on behalf of a number of Government Departments. The IDT is a public entity whose Executive Authority is the Minister of Public Works and which reports to parliament through the Department of Public Works. Accordingly, departments at national level are generally considered to be related parties. However in terms of IAS 24: Related Party Disclosures paragraph 11 public utilities, departments and agencies of a government that does not control, jointly control or signifi cantly infl uence the reporting entity, simply by virtue of their normal dealings with an entity (even though they may affect the freedom of action of an entity or participate in its decision-making process) are deemed not to be related parties The value of work undertaken on behalf of the Department of Public Works: Department of Public Works Management fees charged for the year included under Revenue Department of Public Works Management fees outstanding at year end included under other receivables: Department of Public Works Recoveries charged for staff secondments Department of Public Works ANNUAL REPORT I 2013/14 113

116 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March Remuneration of Trustees and Executives Board of Trustees Appointed Trustees fees Prof. S Fikeni (Chairperson) 1 July Mr B Matutle (Executive Authority Representative) 1 July Ms Z Mdhladhla 1 July Mr M Mlengana 1 July Ms M Molala 1 July 2012 to 12 August Mr T Motswaledi (Deputy Chairperson and Sub-Committee Chairperson) 1 July Ms T Mpumlwana 1 July Mr R Patel 1 July Ms P Nkomo 1 July Mr Z Zitha (Sub-Committee Chairperson) 1 July Dr. G Zulu-Kabanyane 1 July Independent Chairperson of the Audit & Risk Committee Ms S Boulton 10 September Comparative for ANNUAL REPORT I 2013/14

117 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March Executive Management Salary Provident fund contributions Acting Allowance Performance bonus Total R 000 R 000 R 000 R 000 R 000 Ms T Nwedamutswu (CEO) Prof. E Vries (to 30 September 2013) Mr A Wakaba Mr I Ellis Dr. S Bhebhe Mr M Sidambe (from 1 October 2013) Comparative for R 000 R PRIOR PERIOD ADJUSTMENTS 27.1 Property and Equipment In reviewing the opening balances of fi xed assets, assets had been understated and have subsequently been corrected. - - In reviewing the opening balances of intangible assets, assets had been understated and have subsequently been corrected Reinstatement of prior year effect of depreciation which arose due to system errors Intangible assets In reviewing the opening balances of intangible assets, assets had been understated and have subsequently been corrected Administrative expenditure Administrative expenditure that was incorrectly classifi ed in the prior fi nancial year has been corrected in the current fi nancial year ANNUAL REPORT I 2013/14 115

118 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 R 000 R 000 Other expenditure that was incorrectly classifi ed in the prior fi nancial year has been corrected in the current fi nancial year Increase in net asset 27.4 Revenue Revenue accrual that was understated in the prior fi nancial year has been corrected in the current fi nancial year. (644) Other expenditure Total prior year adjustments CASH GENERATED FROM/(UTILIZED IN) OPERATIONS Surplus/(Defi cit) for the year ( ) Investment income (7 917) (12 838) Interest received (1 201) (1 793) Interest paid Non-cash movements/working capital changes (88 513) (40 187) Depreciation Amortisation Change in estimate - (284) air value gains and losses on investments 854 (5 028) Loss on disposal Increase in payables Decrease /(increase)in funds from programs (18 332) Prior year s adjustments movement (Increase) in receivables ( ) (31 077) Net cash flows from operating activities ( ) 116 ANNUAL REPORT I 2013/14

119 Independent Development Trust Notes to the Annual Financial Statements for the year ended 31 March 2014 R 000 R OPERATING LEASE ARRANGEMENTS Lessee Payments recognised as an expense At the reporting date the IDT had outstanding commitments under non-cancellable operating leases, which fall due as follows: Up to 1 year to 5 years The IDT has entered into various non-cancellable operating lease agreements in respect of rented premises. Leases are contracted for periods up to 5 years. The leases have varying terms, escalation clauses and renewal rights, but the IDT has no option to purchase the leased buildings at the expiry of the lease period. The basis on which rent is determined by the Lessor is based on the existing rental market. There are no restrictions imposed by the Lessors on any of the buildings leased. The lease expenditure is straight lined and charged to the Statement of Comprehensive Income (refer to note 9). 30 CAPITAL COMMITMENTS Capital commitments for the acquisition of equipment and approved expenditure on the Mud School Eradication Programme for which board approval has been obtained. Authorised but not contracted for Capital expenditure GIFTS AND DONATIONS TO THE ORGANISATION Gift from client - 3 ipads for the CEO Awards - - Mpumalanga Region Year End Function ANNUAL REPORT I 2013/14 117

120 An aerial view of the Manguzi Service Centre in KwaZulu-Natal 118 ANNUAL REPORT I 2013/14

121 Independent Development Trust Part Notes to the FAnnual Financial Statements for the year ended 31 March 2014 Notes R 000 R 000 Annexure I 119 ANNUAL REPORT 2013/14

122 6. ANNEXURE 1: IMPACT ASSESSMENT TECHNICAL DATA (SOURCES OF NORMS AND STANDARDS) FACILITIES Early Childhood Development Centre NUMBER OF HOUSEHOLDS DIRECTLY IMPACTED (RELATIVE TO SIZE OF FACILITY) Small Medium Large 325 [1] SOURCES OF NORMS AND STANDARDS (AND COMMENTS) CSIR (2010). Evaluation of community social facilities and recreational space in City of Cape Town: current and future provision for 2016 and optimal location of new facilities. CSIR Built Environment Project Report, Pretoria. National Department of Education (2012). Guidelines relating to planning for public school infrastructure. Primary school [2] CSIR (2011). Summary Guidelines and Standards for the Planning of Social Facilities and Recreational Spaces in Metropolitan, Pretoria, South Africa. National Department of Education (2012). Guidelines relating to planning for public school infrastructure. Secondary school [3] ; [4] CSIR (2011). Summary Guidelines and Standards for the Planning of Social Facilities and Recreational Spaces in Metropolitan, CSIR, Pretoria. Clinic Hospital Playground Community library Community Hall Computer Centre Multi-purpose Centre Court 150 Police Station Prison Department of Housing (2005). Guidelines for Human Settlement Planning and Design, CSIR Pretoria. There are no national norms and standards with respect to prison facilities, hence the use of the source stated below. Hardenberg (2001). Virginia Courthouse Facility Guidelines. Williamsburg, Virginia. Household facility (toilets, solar units, water tanks) 1 Each household facility is planned to benefi t a single household, hence the number of impacted households equalling the number of facilities developed. [1] The total number of 325 children mentioned in the Educational facilities norms and standards is used to calculate the number of impacted households. [2] Total average numbers indicated divided by 3. The fi nal answer of 488 learners is used as the estimated number of learners at the primary school level. [3] Total average number divided by 3. The fi nal answer of 534 learners is used to estimate number of learners / impacted people at the secondary school level. [4] The total number of learners in primary school and secondary school was then added and divided by 2 (i.e = 511) in order to get the total estimated number learners per school. 120 ANNUAL REPORT I 2013/14

123 A collage of community health centre project implemented by the IDT ANNUAL REPORT I 2013/14 121

124 A collage of school building projects implemented by the IDT 122 ANNUAL REPORT I 2013/14

125 A collage of EPWP Non-State Sector food security projects ANNUAL REPORT I 2013/14 123