eastern cape gambling & betting board

Transcription

1 eastern cape gambling & betting board annual report 2008/2009

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3 Table of Contents Senior Management and Board Members 5 CHAPTER one 3 Statement of Responsibility by the Accounting Authority 7 CHAPTER TWO Accounting Authority s Report 9 Introduction 10 Organizational Structure 10 Principal Activities 10 Review Of Operations 10 Financial Performance Highlights 13 Board Members Remuneration 13 Revenue and Tax Statistics vs Financial Year 14 Distribution of Gambling and betting Takings Financial Year 18 CHAPTER Three Report of the Audit Committee 19 CHAPTER four Report of the Auditor General 21 Report on the Financial Statements 22 Report on other Legal and Regulatory Requirements 25 Appreciation 26 CHAPTER five Statement of Corporate Governance 27 Introduction 28 Stakeholders 28 Governing Bodies 28 Risk Management 29 Internal Audit 29 Related-Party Transactions 30

4 CHAPTER six 31 Performance Report 31 Introduction 32 Definitions 32 Performance Highlights 32 Challenges 32 Action Plans to deal with Challenges 32 Performance Against Operational Plan 33 Annexure 1 36 CHAPTER seven HR Oversight Statistics for the Period April 2008 to March Organisational Structure 48 CHAPTER eight Financial Statements for the Year ended Statement of Financial Position 50 Statement of Financial Performance 51 Statement of Changes in Net Assets 52 Cash Flow Statement 53 Accounting Policies 54 Notes to the Annual Financial Statements 57

5 board members and senior management

6 Board Members as at 31 March 2009 Management as at 31 March 2009 VM Mbina K Canca Acting Chief Executive Officer Chairperson Ex-Officio Board Member N Tom Board Member AC Bomvu Acting Chief Financial Officer CTS Cossie Board Member RM Zwane Manager: Licensing & Compliance Absent: A Ntsonkota N Mtakati M Mqakama N Kusi M Sibam MAF Tokota Board Members with effect from June 2009 Manager: Human Resources SL Majombozi Chairperson M Duma Manager: Research & Communication P White Board Member ZM Nontshinga Manager: Information Technology Absent: A Mabizela

7 CHAPTER one statement of responsibility by the accounting authority

8 The annual financial statements are the responsibility of the Accounting Authority. The external auditors are responsible for independently auditing and reporting on the financial statements. The Office of the Auditor- General has audited the Board s financial statements and it s report is presented on pages 21 to 26. The annual financial statements have been prepared in accordance with Standards of Generally Recognized Accounting Practice (GRAP) and the South African Statements of Generally Accepted Accounting Practices (GAAP), including any interpretations of such Statements, where no GRAP Standard exists. These annual financial statements are based on appropriate accounting policies, supported by reasonable and prudent judgments and estimates. The Accounting Authority has reviewed the Board s budgets and cash flow forecasts for the year to 31 March On the basis of this review, and in the light of the current financial position, the Accounting Authority has every reason to believe that the Board will be a going concern in the year ahead and have continued to adopt the going concern basis in preparing the financial statements. The Accounting Authority sets standards to enable management to meet the above responsibilities by implementing systems of internal control and risk management that are designed to provide reasonable, but not absolute assurance against material misstatements and losses. The entity maintains internal financial controls to provide assurance regarding: or the overriding of controls. An effective system of internal controls, therefore, aims to provide reasonable assurance with respect to the reliability of financial information and, in particular, financial statement presentation. Furthermore, because of changes in conditions, the effectiveness of internal financial control may vary over time. The Accounting Authority has reviewed the entity s systems of internal control and risk management for the period from 01 April 2008 to 31 March The Accounting Authority is of the opinion that the entity s system of internal control and risk management were effective for the period under review. In the opinion of the Accounting Authority, based on the information available to date, the annual financial statements fairly present the financial position of the Eastern Cape Gambling and Betting Board at 31 March 2009 and the results of its operations and cash flow information for the year and the Code of Corporate Practices and Conduct have been adhered to. The annual financial statements for the year ended 31 March 2009, set out on pages 49 to 64, were approved by the Accounting Authority in terms of section 51(1) (f) of the Public Finance Management Act 1999, (Act 1 of 1999) on 30 May, and are signed on its behalf by: The safeguarding of assets against unauthorised use or disposition, and The maintenance of proper accounting records and the reliability of financial information used within the business or for publication. V M MBINA Acting Chief Executive Officer The controls contain self-monitoring mechanisms, and actions are taken to correct deficiencies as they are identified. Even an effective system of internal control, no matter how well designed, has inherent limitations, including the possibility of circumvention K CANCA Chairperson 8

9 CHAPTER TWO accounting authority s report

10 Introduction The Board Members, who constitute the accounting authority in terms of the Public Finance Management Act, 1999 (Act No. 1 of 1999) present their report which forms part of the audited annual financial statements for the year ended 31 March The Eastern Cape Gambling and Betting Board is established as a public entity in terms of the Gambling and Betting Act, 1997 (Act No. 5 of 1997)(Eastern Cape) and is listed as a provincial public entity in Schedule 3C of the Public Finance Management Act, 1999 (Act No. 1 of 1999). The Board Members act as the accounting authority in terms of the PFMA. During the year the Board received an application from Transkei Sun International t/a Sun International ( Transun ) for the Casino licence in Zone 5. The Board evaluated and deliberated this application and made an announcement to award the licence to Transun with conditions attaching to the licence. There are outstanding suspensive conditions to which the licensee has been made subject. The process of re-issuing of the casino licence for Zone 1 has also commenced. An RFP was published and two applications were received. The investigation process is underway and should be completed in the second quarter of the new financial year. The current licence expires in October Organizational Structure A detailed organizational structure diagram is contained on page 48 of the annual report. Principal Activities The existing licensed casinos operate a combined one thousand eight hundred and four machines (1 804) and fifty seven tables (57) and employ a total number of one thousand and seventy one employees (1 071). The machines, in particular, are highly regulated to ensure that the return to player statistics cannot be amended without the Board s regulatory approval and each machine is registered by the Board. The principal activities of the Board are the licensing and regulation of the gambling industry and the collection of gambling and betting taxes and fees within the Eastern Cape. Routes and Sites The Board has licensed and regulates two route operators, viz: Luck at it Eastern Cape (PTY) Limited Vukani Gaming Eastern Cape (PTY) Limited Review Of Operations Casinos The Board has licensed and regulates FOUR casinos: The Boardwalk Casino & Entertainment World in Nelson Mandela Bay Metropole/City; Hemingways Casino in Buffalo City Municipality (East London); Wild Coast Sun in Mbizana Local Municipality (Bizana); and Queens Casino and Hotel in Lukhanji Municipality (Queenstown) The Limited Payout Machine (LPM) industry continues to grow in the Province and to date the Board has licensed one thousand two hundred and eighty five machines (1285) operating out of two hundred and forty six sites (246). The sites are good mix of taverns, clubs and pubs. This industry generated gross gaming revenues of R 108,4 m and contributed R 10,8 m to the Provincial Revenue Fund. 10

11 Bookmakers There are currently seven bookmakers in the province operating out of eighteen branches. There is a steady growth in this industry in the Province, with a number of Bookmakers applying to amend their conditions of licence to include additional premises. Totalisator Phumelela Gaming and Leisure Limited operate the totalisator licence in the province with twentythree branches as well as a call centre to facilitate telephonic betting. Race Courses Phumelela Gaming and Leisure Limited operate the two race courses at Fairview and Arlington. The horseracing industry remains a significant source of employment in the province. Manufacturers and Suppliers of Gaming Equipment The number of manufacturers registered has decreased drastically with most manufacturers opting to apply for a National Licence as provided for in the National Gambling Act, 2004 (Act No. 7 of 2004) ( National Gambling Act ). There are currently eight registered manufacturers. Key Persons and Gambling Employees At the end of the financial year new applications totalling five hundred and one (501) key and gambling employees were processed and approved. A significant number of these are as a result of the continued rollout of the LPM industry. To date, the gambling industry employs One thousand four hundred and ninety eight (1 498) key persons and one thousand two hundred and seventy (1 270) gambling employees. Illegal Gambling Once again the Board had a successful year against illegal operators. There were four (4) raids that were undertaken, resulting in the seizure of four (4) machines. These illegal operators were successfully prosecuted, with two (2) of them paying admission of guilt fines (R each). There were only three (3) cases withdrawn from the courts. Forty three (43) illegally operated machines were forfeited to Board. The Board destroyed over one hundred and seventy (170) illegal machines, one (1) roulette table and over one hundred and sixty (160) illegal gambling devices in the reporting period. These were confiscated from illegal gambling operations throughout the province. Responsible Gambling The Board commissioned a reputable research service provider to investigate awareness and perceptions of gambling among the Eastern Cape population. The study reveals that 39% of the population, who ever tried gambling, gamble at least once in every three months. Of this group of people only 2.7% are identified as problem gamblers. Amongst regular gamblers only 3% are identified as pathological gamblers. These figures are all well below the national average. The final results of these studies will be available in the financial year.. In its pursuit of ensuring that people are not negatively affected by gambling, the Board flighted responsible gambling adverts in five radio stations in three languages (isixhosa, English & Afrikaans). The expenditure on this campaign amounted to more than R1million. The adverts cautioned the public about potential pitfalls of gambling and encouraged members of the public to seek help when necessary. The campaign also popularised the National Responsible Gambling helpline. The Board also distributed information leaflets on gambling during outreach programmes of DEDEA. In line with its undertaking of ensuring ECGBB visibility and encouraging responsible gambling and educating the public about potential pitfalls of gambling, the Board revisited its corporate identity to ensure that it is in line with its corporate objectives and reflects its mandate. The full scale 11

12 of this campaign will be felt in the next financial year 2009/ During the year under 70 review 568 persons were 60 excluded by the Board. 50 There was a marked 40 increased in the number 30 of people coming forward as a direct result of the 20 responsible gambling radio 10 campaigns (See Figure 1). 0 Number of Exclusions for the Financial Year 2008/ EXTENSIVE ADVERTISING PERIOD Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar To ensure compliance with requirements of the legislation, all advertising by licence holders in the province is vetted by the Board. All adverts are required to carry slogans relating to responsible gambling and, in the case of print media, must contain the contact details of the National Responsible Gambling Programme. Empowerment The Board is committed in promoting meaningful BBBEE in the gambling industry in the province. Furthermore, with the new casinos, a 50% minimum shareholding by local empowerment partners in management companies was made a condition of licence with the empowerment grouping to receive no less than 30% of management fees due to the management company. Section 40 Applications Three section 40 applications from persons who wished to acquire interests in licensees exceeding 5% were dealt with by the Board. brought a court application seeking to review and set aside the decision of the Board regarding the casino licence for Zone 4. In the alternative the applicants sought an order reviewing and setting aside the decision of the MEC not to request the Premier of the Eastern Cape Provincial Government to establish in terms of Section 44(2) of the Gambling and Betting Act 1997 (Eastern Cape), a gambling and betting review tribunal to review the awarding of the licences for Zone 4 and directing the MEC to request the Premier to do so. (Main application) Argument commenced in the High Court Eastern Cape Division on February 2009 and the matter was adjourned. The relief sought in respect of Zone 3 was settled in court and is no longer a dispute before the Court. Argument in respect of Zone 4 is scheduled to continue on the June Certificates of Suitability There are currently 12 holders of Certificates of Suitability. Litigation Following a tender process the applicant, Ekuphumleni Resorts, was unsuccessful in its bid for a casino licence for Zone 3 (Queenstown) and 4 (Mthatha). The applicant did not accept the decision of the Board and Investigation Compliance Manager In December 2008, the Board suspended the Compliance Manager on account of misconduct and appointed a firm of forensic investigators to investigate the allegations. The investigation has been completed and charges have been preferred against the Compliance Manager. The Board has set the 30 June 2009 and July 2009 as dates for the disciplinary hearings. 12

13 Financial Performance Highlights Operating Results The net surplus of the Board for the year amounted to R (2008: R ). To date the Board has accumulated surplus funds amounting to R These surplus funds will be invested with the Financial Institution with a good credit standing in terms of Treasury Regulation , which deals with investment of surplus funds. The financial performance of the Board is fully disclosed in the accompanying financial statements. Tax and Fee Collections Gambling and betting taxes, fees and interest collected for the Province during the financial year under review totalled a record R 87,8 million (2007/08: R87,1 million). Total collections thus showed a minimal increase of 1% over prior year levels and resulted in additional revenues (over and above the initial projections) of R 700,000 for the Provincial fiscus. The record results achieved are attributed to the continued growth in the gambling industry, which generated gross gaming revenues of R billion, being 3% up on prior year equivalents. The revenue growth experienced was characterised by satisfactory performances by the casino and racing sectors as well as the impact of the fledgling limited payout machine industry. Although growth rates have slowed towards the end of the financial year, it is considered that solid revenue growth in the industry is sustainable over the short to medium term. The Board remains a major revenue driver for the Provincial fiscus. Taxes and fees collected, together with accumulated interest thereon are remitted monthly in arrears. Grant Funding Grant funding totalling R million was received from the Provincial Government. This grant allocation is excluding a surplus of R generated from own revenue such as board admin fees, cost recoveries, interest on call account etc. The surplus funds accumulated by the Board will be invested in terms of Treasury Regulation , which deals with investment of surplus funds. The Board will have a sole mandate to transact on the account. Effectively for every R 1.00 of grant funding employed by the Board during the year under review, an amount of R 4.24 has been generated for the Provincial Treasury. Corporate Governance The Eastern Cape Gambling and Betting Board is committed to corporate governance. To this end all the board members as well as senior management became members of the Institute of Directors and underwent training that was provided by this institute. Board Members Remuneration Non-executive Board and Committee Members: R (2008: R ). We budgeted on the basis of a fully constituted Board. Due to vacancies in the Board, the amount budgeted for Board fees was not fully utilised. Full details are contained in note 11 to the financial statements. Gambling revenues generated by and taxes collected are more fully disclosed in the accompanying graphics on page 14 to 18. K CANCA CHAIRPERSON 13

14 Revenue and Tax Statistics vs Financial Year Revenue and Taxes from Casinos R 940 R 930 R 920 R 910 R 900 R 931, R 917,2 Gross Gaming Revenue Generated by Casinos in R millions R 73 R 72 R 71 R 70 R 69 R 70, R 71,5 Gambling Taxes collected from Casinos in R millions 14

15 Revenue and Taxes from Racing R 121 R 120 R 119 R 118 R 117 R 119, R 118,9 Gross Gaming Revenue Generated by Racing in R millions R 8 R 7 R 6 R 5 R 4 R 6, R 6,4 Betting Taxes collected from Racing in R millions 15

16 Revenue and Taxes from Low Payout Machines (LPMs) R 120 R 110 R 100 R 90 R 80 R 108, R 92,2 Gross Gaming Revenue Generated by LPMs in R millions R 12 R 11 R 10 R 9 R 8 R 10, R 9,2 Gambling Taxes collected from LPMs in R millions 16

17 Revenue and Taxes from combined (total) Industry R 1180 R 1160 R 1140 R 1120 R 1100 R R 1128 Gross Gaming Revenue Generated by Total Industry in R millions R 89 R 88 R 87 R 86 R 85 R 87, R 87,189 Gambling & Betting Taxes collected from Total Industry in R millions 17

18 Distribution of Gambling and betting Takings Financial Year Return to public: % VAT: 0.71 % Distribution of Takings from Gaming Machines Casino Revenue: 4.66 % Gambling Taxes: 0.44 % Distribution of Takings from Gaming Tables Return to public: % VAT: 2.55 % Gambling Taxes: 1.59 % Casino Revenue: % Industry Revenue: 5.77 % Gambling Taxes: 0.54 % VAT: 0.88 % Return to public: % Distrubution of Takings from Overall industry LPM Industry Revenue: 8.82 % GaVAT: 1.39 % mbling Taxes: 1.13 % Distribution of Takings from Racing Return to Public: % Gambling Taxes: 2.32 % VAT: 5.25 % Racing Industry Revenue: % Distribution of Takings from LPMs Return to Public: % 18

19 CHAPTER Three report of the audit committee

20 We are pleased to present our report for the financial year ended 31 March Audit Committee Members and Attendance The audit committee consists of the members listed hereunder and should meet 4 times per annum as per its approved terms of reference. During the current year 5 such meetings were held. Name of Member Number of Meetings Attended S Whitfield 5 R Hill 4 N Tom 3 Audit Committee Responsibility We report that we have adopted appropriate formal terms of reference in our charter in line with the requirements of Section 51(1) (a) of the PFMA and Treasury Regulation We further report that we have conducted our affairs in compliance with this charter. Effectiveness of Internal Control After the balance sheet date, the external auditors uncovered a significant weakness in the collection of registration fee revenues. Therefore, with this exception, the system of internal control applied by the Board over financial and risk management is effective, efficient and transparent. In line with the PFMA and the King II Report on Corporate Governance requirements, Internal Audit provides the Audit Committee and management with assurance that the internal controls are appropriate and effective. This is achieved by means of the risk management process, as well as the identification of corrective actions and suggested enhancements to the controls and processes. From the various reports of the Internal Auditors, the Audit Report on the Annual Financial Statements and the management report of the Auditor-General South Africa, it was noted by the external auditors that there was a failure to collect all registration fees due in terms of the Eastern Cape Gambling and Betting Board Act No 5 of This has resulted in the qualified opinion of the external auditors. Management could not institute collections of these revenues at the time of the finalisation of the audit. Other than this weakness we can report that the system of internal control over financial reporting for the period under review was efficient and effective. The quality of in year management and monthly/ quarterly reports submitted in terms of the PFMA and the Division of Revenue Act. Except for any adjustments necessary caused by the audit report qualification, we are satisfied with the content and quality of monthly and quarterly reports prepared and issued by the Accounting Officer of the Board during the year under review. Evaluation of Financial Statements We have: Reviewed and discussed the audited financial statements to be included in the annual report, with the Auditor-General South Africa and the Accounting Officer. Reviewed the Auditor-General South Africa s management report and the management s response thereto; Reviewed the departments compliance with legal and regulatory provisions Reviewed significant adjustments resulting from the audit. We concur with and accept the Auditor-General of South Africa s report on the annual financial statements, and are of the opinion that the audited annual financial statements should be accepted and read together with the report of the Auditor-General South Africa. Internal Audit We are satisfied that the internal audit function is operating effectively and that it has addressed the risks pertinent to the Board in its audits. As a post balance sheet event, all efforts will be made to ensure that the deficiencies uncovered in revenue collection of registration fees will be reversed to ensure that all revenue is properly accounted for. Auditor-General South Africa We have met with the Auditor-General South Africa to ensure that there are no unresolved issues. S K Whitfield Chairperson of the Audit Committee 20

21 CHAPTER four report of the auditor general

22 REPORT OF THE AUDITOR-GENERAL TO THE EASTERN CAPE PROVINCIAL LEGISLATURE ON THE FINANCIAL STATEMENTS AND PERFORMANCE INFORMATION OF EASTERN CAPE GAMBLING AND BETTING BOARD FOR THE YEAR ENDED 31 MARCH 2009 REPORT ON THE FINANCIAL STATEMENTS Introduction 1. I have audited the accompanying financial statements of the Eastern Cape Gambling and Betting Board which comprise the statement of financial position as at 31 March 2009, and the statement of financial performance, the statement of changes in net assets and the cash flow statement for the year then ended, a summary of significant accounting policies and other explanatory notes as set out on pages 49 to 64. The accounting authority s responsibility for the financial statements 2. The accounting authority is responsible for the preparation and fair presentation of these financial statements in accordance with the basis of accounting determined by the National Treasury, as set out in accounting policy note 1 and in the manner required by the Public Finance Management Act, 1999 (Act No. 1 of 1999) (PFMA) and the Eastern Cape Gambling and Betting Act, 1997 (Act No. 5 of 1997) and for such internal control as the accounting authority determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Auditor-General s responsibility 3. As required by section 188 of the Constitution of the Republic of South Africa, 1996 read with section 4 of the Public Audit Act, 2004 (Act No. 25 of 2004) (PAA) my responsibility is to express an opinion on these financial statements based on my audit. 4. I conducted my audit in accordance with the International Standards on Auditing read with General Notice 616 of 2008, issued in Government Gazette No of 15 May Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. 5. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 6. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Basis for qualified opinion Revenue 7. Fees amounting to R3.7million as disclosed in the statement of financial performance are understated by R as the Board failed to collect all registration fees that are due in terms of the Eastern Cape Gambling and Betting Act No.5 of 1997 and IAS18. The resultant effect is that receivables as disclosed in the statement of financial position is also understated by R , net surplus in the statement of financial performance is understated similarly. Qualified Opinion 8. In my opinion, except for the effects of the matter described in the Basis for qualified opinion paragraphs, the financial statements of the Eastern Cape Gambling & Betting Board have been prepared, in all material respects, in accordance with the basis of accounting as 22

23 set out in accounting policy note 1 and in the manner required by the Public Finance Management Act, 1999 (Act No. 1 of 1999) (PFMA). Emphasis of matters I draw attention to the following matters on which I do not express a qualified opinion: Basis of accounting 9. The Board s policy is to prepare financial statements in accordance with the basis of accounting determined by the National Treasury, as set out in accounting policy note 1. Restatement of corresponding figures 10. As disclosed in notes N1 to N5 to the financial statements, the corresponding figures for 31 March 2008 have been restated as a result of an error identified in the financial statements of the Eastern Cape Gambling and Betting Board for the year ended 31 March 2008, during the year ended 31 March Irregular expenditure 11. As disclosed in note 11.3 to the financial statements, irregular expenditure to the amount of R was incurred, as the Board did not adhere to supply chain management regulations. Other matters I draw attention to the following matters that relate to my responsibilities in the audit of the financial statements: in terms of section 18(9). They did not keep full and proper records as required by section 18(5) of the Eastern Cape Gambling and Betting Act No.5 of Due to the non compliance the board did not collect gambling taxes amounting to R on behalf of the Eastern Cape Provincial Administration. Governance framework 14. The governance principles that impact the auditor s opinion on the financial statements are related to the responsibilities and practices exercised by the accounting authority and executive management and are reflected in the internal control deficiencies and other key governance requirements addressed below: Internal Control Deficiencies 15. Section 51(1)(a)(i) of the PFMA states that the accounting authority must ensure that the Board has and maintains effective, efficient and transparent systems of financial and risk management and internal control. The table below depicts the root causes that gave rise to the deficiencies in the system of internal control, which led to the qualified opinion. The root causes are categorised according to the five components of an effective system of internal control. (The number listed per component can be followed with the legend below the table) In some instances deficiencies exist in more than one internal control component. Par. no. Basis for qualified opinion 7 Under collection of registration fees CE RA CA IC M Non-compliance with applicable legislation PFMA 12. The accounting authority did not comply to the relevant Income tax legislation in paying Pay As You Earn deductions over within seven days after the end of the month in which the deduction was made, as required by section 51(1)(d) the PFMA. Eastern Cape Gambling and Betting Act 13. The accounting authority did not maintain a register of the name and required particulars of each person to whom a certificate of registration has been issued Legend CE = Control environment The organisational structure does not address areas of responsibility and lines of reporting to support effective control over financial reporting. Management and staff are not assigned appropriate levels of authority and responsibility to facilitate control over financial reporting. Human resource policies do not facilitate effective recruitment and training, disciplining and supervision of personnel. Integrity and ethical values have not been developed and are not understood to set the standard for financial reporting. The accounting authority does not exercise oversight responsibility over financial reporting and internal control

24 Management s philosophy and operating style do not 6 promote effective control over financial reporting. The entity does not have individuals competent in financial 7 reporting and related matters. RA = Risk assessment Management has not specified financial reporting 1 objectives to enable the identification of risks to reliable financial reporting. The entity does not identify risks to the achievement of 2 financial reporting objectives. The entity does not analyse the likelihood and impact of 3 the risks identified. The entity does not determine a risk strategy/action plan to 4 manage identified risks. The potential for material misstatement due to fraud is not 5 considered. CA = Control activities There is inadequate segregation of duties to prevent 1 fraudulent data and asset misappropriation. General information technology controls have not been 2 designed to maintain the integrity of the information system and the security of the data. Manual or automated controls are not designed to ensure 3 that the transactions have occurred, are authorised, and are completely and accurately processed. Actions are not taken to address risks to the achievement 4 of financial reporting objectives. Control activities are not selected and developed to 5 mitigate risks over financial reporting. Policies and procedures related to financial reporting are 6 not established and communicated. Realistic targets are not set for financial performance measures, which are in turn not linked to an effective reward system. 7 IC = Information and communication Pertinent information is not identified and captured in a 1 form and time frame to support financial reporting. Information required to implement internal control is 2 not available to personnel to enable internal control responsibilities. Communications do not enable and support the 3 understanding and execution of internal control processes and responsibilities by personnel. M = Monitoring Ongoing monitoring and supervision are not undertaken 1 to enable an assessment of the effectiveness of internal control over financial reporting. Neither reviews by internal audit or the audit committee 2 nor self -assessments are evident. Internal control deficiencies are not identified and 3 communicated in a timely manner to allow for corrective action to be taken. Key governance responsibilities 16. The PFMA tasks the accounting authority with a number of responsibilities concerning financial and risk management and internal control. Fundamental to achieving this is the implementation of certain key governance responsibilities, which I have assessed as follows: No. Matter Y N Clear trail of supporting documentation that is easily available and provided in a timely manner 1. No significant difficulties were experienced during the audit concerning delays or the availability of requested information. 3 Quality of financial statements and related management information 2. The financial statements were not subject to any material amendments resulting from the audit The annual report was submitted for consideration prior to the tabling of the auditor s report. 3 Timeliness of financial statements and management information 4. The annual financial statements were submitted for auditing as per the legislated deadlines in section 55 of the PFMA. 3 Availability of key officials during audit 5. Key officials were available throughout the audit process. 3 Development and compliance with risk management, effective internal control and governance practices 6. Audit committee The board had an audit committee in operation 3 throughout the financial year. The audit committee operates in accordance with 3 approved, written terms of reference. The audit committee substantially fulfilled its 3 responsibilities for the year, as set out in section 77 of the PFMA and Treasury Regulation Internal audit The board had an internal audit function in 3 operation throughout the financial year. The internal audit function operates in terms of an 3 approved internal audit plan. The internal audit function substantially fulfilled 3 its responsibilities for the year, as set out in Treasury Regulation There are no significant deficiencies in the design 3 and implementation of internal control in respect of financial and risk management. 9. There are no significant deficiencies in the design and implementation of internal control in respect of compliance with applicable laws and regulations The information systems were appropriate 3 to facilitate the preparation of the financial statements. 11. A risk assessment was conducted on a regular basis 3 and a risk management strategy, which includes a fraud prevention plan, is documented and used as set out in Treasury Regulation Powers and duties have been assigned, as set out in 3 56 of the PFMA. Follow-up of audit findings 13. The prior year audit findings have been substantially 3 addressed. 14. SCOPA resolutions have been substantially 3 implemented. Issues relating to the reporting of performance information 15. The information systems were appropriate to 3 facilitate the preparation of a performance report that is accurate and complete. 24

25 No. Matter Y N 16. Adequate control processes and procedures are 3 designed and implemented to ensure the accuracy and completeness of reported performance information. 17. A strategic plan was prepared and approved for 3 the financial year under review for purposes of monitoring the performance in relation to the budget and delivery by the board against its mandate, predetermined objectives, outputs, indicators and targets Treasury Regulation There is a functioning performance management system and performance bonuses are only paid after proper assessment and approval by those charged with governance. 3 Lack of effective, efficient and transparent systems and internal controls regarding performance management 22. The accounting authority did not ensure that the Board has and maintains an effective, efficient and transparent system and internal controls regarding performance management, which describe and represent how the entity s processes of performance planning, monitoring, measurement, review and reporting will be conducted, organised and managed, as required in terms of section 51(1)(a)(i) of the PFMA. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS Report on performance information 17. I have reviewed the performance information as set out on pages 31 to 36. The accounting authority s responsibility for the performance information 18. The accounting authority has additional responsibilities as required by section 55(2)(a) of the PFMA to ensure that the annual report and audited financial statements fairly present the performance against predetermined objectives of the board. The Auditor-General s responsibility 19. I conducted my engagement in accordance with section 13 of the PAA read with General Notice 616 of 2008, issued in Government Gazette No of 15 May In terms of the foregoing my engagement included performing procedures of an audit nature to obtain sufficient appropriate evidence about the performance information and related systems, processes and procedures. The procedures selected depend on the auditor s judgement. Audit findings (performance information) 21. I believe that the evidence I have obtained is sufficient and appropriate to provide a basis for the audit findings reported below. Usefulness and reliability of reported performance information 23. The following criteria were used to assess the usefulness and reliability of the information on the board s performance with respect to the objectives in its strategic plan and annual performance plan: Consistency: Has the board reported on its performance with regard to its objectives, indicators and targets in its approved strategic plan/annual performance plan? Relevance: Is the performance information as reflected in the indicators and targets clearly linked to the predetermined objectives and mandate. Is this specific and measurable, and is the time period or deadline for delivery specified? Reliability: Can the reported performance information be traced back to the source data or documentation and is the reported performance information accurate and complete in relation to the source data or documentation? The following audit findings relate to the above criteria: Quality of performance indicators/measures and targets inadequate 24. The following indicators/measures of the listed programmes/objectives evaluated, were not clear or well defined to allow for data to be collected consistently: Programme Pre-determined objective Indicator Licensing & Compliance To licence and regulate casino, horseracing, route and site and bingo operations and to ensure the ongoing regulation of other gambling operations Applications considered. Inspections and investigations of licence holders completed. 25

26 Indicators or measures are not well defined 25. The following indicators/measures of the listed programmes/objectives evaluated, were not clear or well defined to allow for data to be collected consistently. APPRECIATION 29. The assistance rendered by the staff of the Gambling Board during the audit is sincerely appreciated. Indicator/measure per output Actual performance achieved Systems to safeguard all assets Systems monitored and and ensure efficiencies are updated enforced Accountability to be enforced Financial controls monitored and all financial controls monitored East London 31 July 2009 Indicators or measure are not time bound 26. The following indicators/measures of the listed programme /objectives evaluated, were not time bound Performance targets not included in the performance report 28. The performance report does not include a complete and comprehensive coverage of planned outputs, as per the annual performance plan. Subprogrammes Pre-determined objective Licensing & Compliance To licence and regulate casino, horseracing, route and site and bingo operations and to ensure the ongoing regulation of other gambling operations Indicator Applications considered. Inspections and investigations of licence holders completed. Target RFP issued for zone one. Casino application considered for zone five. Inspections and investigations of licence holders completed 26

27 CHAPTER five statement of corporate governance

28 INTRODUCTION Corporate Governance is concerned with the organisational arrangements that have been put into place to provide an appropriate set of checks and balances within which the stewards of the Board operate. The objective is to ensure that those to whom the stakeholders have entrusted the direction and success of the Board act in the best interest of these stakeholders. The Eastern Cape Gambling and Betting Board ensures that its processes and practices are reviewed on an ongoing basis in order to comply with good corporate governance practices, which are continually benchmarked against best practice. The Accounting Authority recognizes the need to conduct the business of the enterprise with the highest degree of integrity and in full compliance with generally accepted corporate governance practices. The Board is committed to the principles of openness, accountability and integrity which flow from this compliance and believe that compliance with the principles incorporated in the King Report on Corporate Governance for South Africa 2002 has been achieved. STAKEHOLDERS In addition to the interest of government as the shareholder, the Accounting Authority acknowledges the interests of other stakeholders, including employees, creditors, customers, suppliers and local communities. The Accounting Authority regularly communicates with all stakeholders on material matters of significant interest and concern. The information furnished to stakeholders conforms to the criteria of promptness, openness, substance over form, relevance, clarity, effectiveness, transparency and objectivity. The Accounting Authority places great emphasis on reporting on both financial and non-financial matters, as well as addressing both positive and negative aspects. GOVERNING BODIES Board The Board comprises of eight non-executive members appointed in terms of section 5 of the Gambling and Betting Act 1997 (Act no. 5 of 1997 (Eastern Cape). Three members represent Provincial Government Departments whilst the remaining five are independent members appointed by virtue of their specialist knowledge and skills. The Chief Executive Officer is an ex-officio member of the Board with no voting powers. The Board meets on a monthly basis. The term of office of all Accounting Authority is five years. The Accounting Authority is responsible for determining strategic direction and policy and for the monitoring of operational performance and management. Board Committees The Board has put into place the following committees to assist it in discharging its responsibilities: Audit Committee The Audit Committee is constituted in accordance with the requirements of the Public Finance Management Act (PMFA). The Chairperson is independent and non - executive and the committee consists of a majority of independent members. A representative of the Office of the Auditor-General attends all meetings of the Audit Committee in an observer capacity. All members of the Audit Committee are financially literate and no relationships exist which could interfere with the members independence from management. Both internal and external auditors have unrestricted access to the Audit Committee. The Audit Committee has adopted appropriate formal terms of reference which have been approved by the Board and are encapsulated in the Audit Committee Charter. Internal Audit reports directly to the Audit Committee on an operational level. 28

29 The principal functions of the Audit Committee are to: Review the Annual Financial Statements Review the effectiveness of internal controls and systems Evaluate the risks associated with the operations of the Board Evaluate the effectiveness of the risk management systems in place Evaluate the findings of internal audit. RISK MANAGEMENT The Accounting Authority is responsible for the implementation and maintenance of effective, efficient and transparent systems of risk management and internal control. Management, as mandated by the Accounting Authority, has established a system of internal control to manage significant risks. The risk management and internal control systems are reviewed on an ongoing basis for effectiveness and for establishing appropriate risk and control policies. Finance Committee The Finance Committee consists of four nonexecutive members as well as the Chief Executive Officer. The Finance Committee has adopted formal terms of reference, which have been approved by the Board. The principal functions of the Finance Committee are to: Review the budget process and recommend the annual budget for approval of the Board Review the monthly management accounts and monitor financial performance against approved budgets Review and recommend the annual financial statements for the approval of the Board Advise the Board on all matters with financial implications. Remuneration Committee The Remuneration Committee consists of two nonexecutive members as well as the Chief Executive Officer. The principal functions of the Remuneration Committee are to: Establish and maintain the remuneration policy Ensure acceptable corporate governance in terms of the Board remuneration practices Establish the basis and content of GCTC Establish variable pay schemes as appropriate based on grade level and job categories Appoint consultants as required to advise the Remuneration Committee as and when required There is an ongoing process for identifying and managing the significant risks faced by the Board, which has been in place for the year under review and up to the date of approval of the annual report and financial statements. There is an adequate system of internal control in place to mitigate the significant risks faced by the Board to an acceptable level. The system is designed to manage, rather than eliminate, the risk of failure or maximise opportunities to achieve business objectives. This can only provide reasonable, but not absolute, assurance. The Accounting Authority is of the opinion that appropriate risk management policies and practices are in place and that adequate systems and expertise are being applied to achieve compliance with those policies and procedures. INTERNAL AUDIT The Accounting Authority has an internal audit function that has the support and co-operation of both the Board and Management. The internal audit function has written terms of reference, approved by the Board of Directors and encapsulated in the Internal Audit Charter. The internal audit function is under the control and direction of the Audit Committee and reports at the highest level of authority and at all audit committee meetings. 29

30 The internal audit function provides an independent, objective appraisal and evaluation of the risk management processes, internal controls and governance processes in terms of which corrective actions and recommended enhancements to controls and processes are proactively identified. Audit plans are risked-based and are updated annually based on the outcome of risk assessment reviews, ensuring that the audit coverage is focused on identified areas of high risk. RELATED-PARTY TRANSACTIONS No related-party transactions occurred during the financial year under review. Attendance Register for Board and Committee Meetings Name Board (29 Meetings) Audit Committee (5 Meetings) Finance Committee (2 Meetings) Joint Audit & Finance Committee Meetings (0 Meeting) Remuneration Committee Meetings (1 Meeting) Capacity Attendance Capacity Attendance Capacity Attendance Capacity Attendance Capacity Attendance K Canca Chair 27 Member 2 A Ntsonkota Member 27 Chair 1 P Mnqandi Member 4 1 N Mqakama Member 26 Member Member 0 CTS Cossie Member 6 N Mtakati Member 24 M Sibam Member 9 N Tom Member 24 Member 3 Chair 2 Danisa Member 3 N Kusi Member 8 Member 1 S Whitfield Chair 5 R Hill Member 4 30

31 CHAPTER six performance report

32 INTRODUCTION This Performance Report has been prepared through the endeavours of management and staff representatives as delegated by the Board. It remains at all times a dynamic and working document that will form the basis of our operations. CHALLENGES 1. Litigation in Zone 4 2. Key positions of the organisation remain unfilled. Chief Executive Officer Chief Financial Officer 3. Proposal on Legislation amendments to be resubmitted to the Department. DEFINITIONS Board CEO LPM MEC Other licences Other registrations PFMA RFP SAACREG Section 40 Applications Site A Site B WAN LOC Eastern Cape Gambling and Betting Board Chief Executive Officer Limited Payout Machine Member of the Executive Committee Bookmakers and manufacturers Certificate of suitability Public Finance Management Act Request For Proposal South African Advisory Council for Responsible Gambling Acquisition of financial interest as defined in the Act Three to five machines Twenty to forty machines Wide Area Network Letter of Certification ACTION PLANS TO DEAL WITH CHALLENGES 1. The application in Zone 4 is pending in court. 2. The recruitment process for the two positions is underway. 3. A process to review the entire Act will be implemented. PERFORMANCE HIGHLIGHTS 1. Revenues totaling R87.8m were collected and paid over to the province 2. The LPM industry contributed R10.8m to the total taxes collected. 3. Research projects on socio-economic study of gambling in EC and stakeholder survey (Customer care) have been approved by the Board. 4. Commencement of Zone 1 Casino licensing process. 5. Unqualified audit opinion on annual financial statements. 6. Completion of Zone 5 Casino licencing process. 7. Rollout of LPM s of the targeted 2000 machines. 8. All staff contracted. 32

33 PERFORMANCE AGAINST OPERATIONAL PLAN Measurable objective Performance Indicator Achievement To licence and regulate casinos, horseracing, routes, sites and bingo Consultations with stakeholders on proposed amendments Evaluate applications; ensure that all criteria are in place. Licensing of LPM sites. Register key persons, gambling employees and devices. Assign work to inspectorate; evaluate applications and conduct interviews with those who are possibly disqualified. Licensing and registration of other applicants. Carrying out inspections, investigations and audits of licensees. Consultations with stakeholders on proposed amendments Approval of draft amendments to the Act, & Regulations by the Board and the submission thereof to DEDEA for consideration Informed decisions taken by the Board based on sound legal advise Less litigation against the decisions of the Board Meaningful interaction with other Boards through participation in relevant forums 89 Site A applications processed. Site visits and public hearings were held in respect of Zone 5. An RFP was issued and bidder s conference held in respect of Zone 1. 2 applications received for two additional bookmaker premises 2 applications for acquisition of financial interest in a licensee (section 40) applications were lodged. 2 applications received in respect of Zone 1 casino licence An application for acquisition of financial interest (Section 40) in respect of Luck-At-It was lodged. Announcement made on the preferred bidder for the Zone 5 casino licence 85 Site A licences issued. 1 application for a transfer of premises of a totalisator lodged 1 application for a transfer of premises of a site a licence 501 Key and gambling employees were registered. 282 Slot machines registered. 643 LOCs were approved. 72 registration of gambling devices 300 transportation approvals for slot machines 2 Transfer of site A licences processed and 1 transfer approved. 1 amendment of site A premises processed. 1 acquisition of financial interest of site A licence processed. 1 investigation of a transfer of premises of a Site A licence holder 2 application for a transfer of premises of a totalisator licence 13 Bookmaker revenue audits conducted. 12 casino revenue audits conducted. 2 Route Operator revenue audits conducted. 108 Site A pre-licensing inspections conducted. 14 Site B pre-licensing inspections conducted. 94 site A post licensing inspections conducted. 103 Site A compliance inspections conducted. 12 site camera changes made. Inspection work carried out in respect of various requests received 512 self-exclusions received and processed. 9 Illegal machines and 1 table seized 2 Illegal poker club premises closed down Full preparation for the litigation in Zone 4 done. Attended court on 19 and 20 February where the matter was argued. Drafting of amendments is in progress. Continuous advice given to the Board on various matters. Quarterly meetings held with all casino licence holders in the Eastern Cape. Quarterly meetings held with Bookmakers. CEO s Forum meetings attended. 33

34 Measurable objective Performance Indicator Achievement To provide appropriate advice, information & support to internal & external stakeholders, in particular the responsible MEC on matters relating to the gambling industry in the province To ensure accurate budgeting, sound cash flow management and the preparation of management accounts and annual financial statements in accordance with relevant standards and legislation To ensure the collection of complete and accurate gambling fees, taxes and cost recoveries and timeous payment of amounts due to the Province To maintain an equitable balance between the economic benefits of gambling and public responsibility Credible licensing process Up to date knowledge of legal issues prevailing in the industry Office of the MEC abreast with all issues pertaining to gambling Informed decisions taken by the MEC based on The Budget will be completed in accordance with PFMA deadlines. Budget draw downs will be timeously received Annual financial statements produced in accordance with PFMA requirements. Annual reporting process completed in accordance with PFMA requirements. Monthly management accounts produced and quarterly reports submitted to the Province. Systems to safeguard all assets and ensure efficiencies enforced. Accountability to be enforced and all financial controls monitored Collection of gambling and betting tax of R103m. Monitor timeousness, accuracy and completeness of tax returns Timeous receipting and invoicing of all gambling taxes. Follow-up and collection of arrears. Imposition of penalties and/or interest in accordance with the Act. Collection of R2,2m in fees. All fees should be timeously collected. Fees should be accurately and timeously allocated between the province and board in accordance with the Act. Recover R2.4m in respect of costs incurred in licensing and compliance Conduct a cognitive behavioural research study in the province in order to establish gambling related awareness attitudes and knowledge about gambling. Make recommendations to the Board regarding responsible gambling programmes. Commission a communications service provider to conduct a public education campaign. Utilise relevant research results which were conducted nationally and internationally. Keep abreast with national and international developments in gambling industry. Licence conditions for Zone 5 casino licence finalised. Deliberations finalised in respect of Zone 5 casino licence application. Casino application process in respect of Zone 1 is in progress. Report submitted to MEC in respect of the Zone 5 casino licence process. Advice given to MEC on issues regarding the ECGBB. 2009/2010 Budget completed and submitted to DEDEA as per guidelines and letter of acknowledgement received Transfers received quarterly in advance Annual financial statements completed and approved in May Annual report completed and approved in May. An unqualified audit opinion was received from the Auditor- General. Management accounts produced monthly. Quarterly reports submitted to the Province timeously Systems monitored and updated. Financial controls monitored. Collected R87.8m and paid over to Provincial Revenue Fund. Revenue audits conducted to ensure timeousness, accuracy and completeness of monies collected and paid. Gambling taxes and fees timeously invoiced. Arrears collected within 30 days. Penalties and interest amounting to R151,000 were raised. Collected R2.1m Fees timeously collected Fees correctly allocated according to law Recovered R1.8m in investigation costs First phase of the research programmes has been completed and the second phase is continuing. Research is in progress and recommendations are made on receipt of results. Radio and print adverts commissioned. Various research reports collected and used to benchmark and inform ECGBB surveys. Continuous monitoring of local and international media on gambling related issues done. 34

35 Measurable objective Performance Indicator Achievement To deliver a quality, customer oriented service to the public, licensees and other stakeholders To implement and review human resources policies to ensure sound human resources practices and training and development of staff To implement, review and maintain an up to date, secure and appropriate information technology system that ensures optimal information and communication management Issue appropriate press statements and advertisements based on the outcomes of the research studies and responsible gambling programmes. Monitor licence holders social investment commitments Ensure effective communication with all stakeholders. Monitor licence conditions which relate to tourism No press statements were issued during this period. Monitored Newsletter published bi-monthly. Revamping of the corporate identity and marketing started. Monitored. Follow up leads from public and investigate Over 300 illegal gambling machines and devices and arrange with SAPS and Director of destroyed. Prosecutions for appropriate actions in respect of illegal gambling activities Customer care services Continuous assessment of the standard of customer satisfaction. Regular visits to customers by Senior Management. Maintain professional and objective relationship with customers. Training and development Implement work place skills plan. Performance Management Conclude performance agreements. Review performance. Annual performance appraisal carried out. HR Policy Recommend updates of Human Resources and Remuneration policy and update manual in line with Board resolutions. Ensure that payroll is correctly administered. General Administration Ensure the efficient management of the switchboard, pool cars, security and the building. Labour Relations Ensure compliance with relevant labour legislation and ensure that disciplinary, grievance and dispute resolution procedures are adhered to Recruitment and Selection Ensure compliance with relevant Legislation e.g. Employment Equity Act, Labour Relations Act. Compliance with controls and adherence to policies, procedures and legislation. Review existing policies and procedures. Perform internal IT audits to establish compliance with policies, procedures and legislation. Information security control procedure Review the information security system. Communication with licencees and stakeholders. Maintain WAN connections. Study to measure service satisfaction by licensees commissioned. The Survey is being implemented. Meetings held with senior management of licensees. Continuous. 26 employees attended training opportunities offered. All permanent employees contracted. Half yearly reviews conducted for 28 employees Performance reviews conducted for 28 employees and payment of performance bonuses affected Bursary committee constituted. Nine applications for bursary considered by the committee for the current financial year. Payment effected to different learning institutions on behalf of employees awarded the bursary. HR Policy Manual reviewed by Management and to be submitted for Board approval. Monitored. Two vehicles replaced with two new vehicles. Security tender advertised in the local newspaper. Complied with employment relation s policies. Filling of vacant positions pending. IT systems were configured in order to enforce policy compliance. Security Policy reviewed. Two Internal Network audits performed. Security vulnerabilities detected by the COMSEC network scan were satisfactorily addressed. The antivirus system was upgraded. Communication systems are maintained and the stakeholders are engaged to ensure high service levels. 35

36 Measurable objective Performance Indicator Achievement Monitor communication systems. Promote and upgrade website and intranet as needed. Develop and upgrade systems as and when required. Interaction with users to develop and acquire software. Provision of appropriate hardware systems. Support all systems. Maintain IT systems documentation. Monitored Both the intranet and the external websites are bieng redesigned and were maintained and updates published 12 monthly updates performed. New improved Gambling Information Management System awaiting approval for testing phase to begin. An exercise to ensure data integrity on all gambling systems was successfully performed and system are continuously improved. A document management system as well as office communication systems were considered and evaluated for implementation. Hardware prevention maintenance was performed and all hardware system function at optimal level. Latest applicable patches were either downloaded or developed and implemented. Exclusions database specification document was completed. Employee registration system specification document Training plan for new GIMS complete. Annexure 1 Tax and Fee Collection Five Year Review of the Board PROVINCIAL REVENUE 2004/ / / / /2009 TOTAL R 000,000 R 000,000 R 000,000 R 000,000 R 000,000 v R 000,000 Casino 46,345 53,060 65,346 71,556 70, ,823 Bookmakers Taxes 1,674 1,670 1,689 2,296 2,339 9,668 Totalisator Taxes 3,549 3,924 4,040 4,116 4,147 19,776 LPM 2,261 7,175 9,300 10,840 29,576 Fees 1,111 1,563 1,752 1,801 1,378 7,605 OWN REVENUE Exclusivity Fee Application Fee ,301 2,319 2,086 6,869 Administration Fee 1,470 1,766 1, ,065 TOTAL REVENUE 54,513 65,043 83,238 91,931 93, ,382 GRANT FUNDING VOTED 13,364 14,364 19,246 20,233 20,690 87,897 LESS: REPAID 2,357 4,897 7,254 NETT UTILISED 11,007 9,467 19,246 20,233 20,690 80,643 During the financial year under review taxes and fees collected from the gambling industry amounted to R93, 7m. The accumulated revenues collected in the past five years amounted to R m in relation to net provincial funding of R m. Effectively for every rand of government funding employed an amount of R 4 81 has been generated. afforded to us during the course of the financial year and to management and staff for their performance in achieving the goals of the Board. On behalf of the Board we wish to express our sincere gratitude to the Provincial Government for the support V M MBINA Acting Chief Executive Officer 36

37 CHAPTER seven hr oversight statistics for the period april 2008 to march

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

39 Table 2.4 Salaries, Overtime, Home Owners Allowance & Medical Aid by Salary Band Salary Bands Salaries Salaries as % of Personnel Costs Overtime Overtime as % of Personnel Costs HOA HOA as % of Personnel Costs Medical Ass. Medical Ass. as % of Personnel Costs Total Personnel Coat Lower skilled (Band B1-B2) Skilled (Band B3-B5) Highly skilled production (Band C1-C5) Highly skilled supervision (Band D1-D3) Senior management (Band D4-E1) TOTAL Table 3.1 Employment and Vacancies by Programme at end of period Programme Number of Posts Number of Posts Filled Vacancy Rate Number of Posts Filled Additional to the Establishment Eastern Cape Gambling & Betting Board TOTAL Table 3.2 Employment and Vacancies by Salary Band at end of period Salary Band Number of Posts Number of Posts Filled Vacancy Rate Number of Posts Filled Additional to the Establishment Lower skilled (Band B1-B2) Skilled (Band B3-B5) Highly skilled production (Band C1-C5) Highly skilled supervision (Band D1-D3) Senior management (Band D4-E1) TOTAL Table 4.1 Job Evaluation Salary Band Number of Posts Number of Jobs Evaluated % of Posts Evaluated Number of Posts Upgraded % of Upgraded Posts Evaluated Number % Of of Posts Downgraded Downgraded Posts Evaluated Lower skilled (Band B1-B2) Skilled (Band B3-B5) Highly skilled production (Band C1-C5) Highly skilled supervision (Band D1-D3) Senior management (Band D4-D5) Senior management Services (Band E1-E2) TOTAL

40 Table 4.2 Profile of employees whose positions were upgraded following upgrading of their posts Beneficiaries African Asian Coloured White Total Female Male Total Employees with Disabilities Table 4.3 Employees whose salary level exceed the grade determined by Job Evaluation [i.t.o. PSR 1.V.C.3] Occupation Number of Employees Job Evaluation Level Remuneration Level Reason for Deviation No of Employees in Dept Manager: Legal Services 1 D2 1 System Analyst 1 C1 3 Total 2 4 % of Total Employment Table 4.4 Profile of employees whose salary level exceeded the grade determined by Job Evaluation [i.t.o. PSR 1.V.C.3] Beneficiaries African Asian Coloured White Total Female Male Total Employees with Disabilities Table 5.1 Annual Turnover Rates by Salary Band Salary band Employment at Appointments Terminations Turnover Rate Beginning of Period Lower skilled (Band B1-B2) Skilled (Band B3-B5) Highly skilled production (Band C1-C5) Highly skilled supervision (Band D1-D3) Senior management Service Band D4-D5- Permanent Senior management Service Band E1-E2 Permanent TOTAL

41 Table 5.3 Reasons why staff are leaving the Board Termination Type Number % of Total Resignations % of Total Employment Total Total Employment Death Permanent Resignation Permanent Dismissal-operational changes Permanent Discharge due to ill health Permanent Dismissal-misconduct Permanent Retirement Permanent TOTAL Resignations as % of Employment 3.60% Table 5.5 Promotions by Salary Band Salary Band Employment at Beginning of Period Promotions to another Salary Level Salary Level Promotions as a % of Employment Progressions to another Notch within Salary Level Notch progressions as a % of Employment Lower skilled (Band B1-B2) Skilled (Band B3-B5) Highly skilled production (Band C1-C5) Highly skilled supervision (Band D1-D3) Senior management (Band D4-E1) TOTAL Table 6.1 Total number of Employees (incl. Employees with disabilities) per Occupational Category (SASCO) Occupational Category Male, African Male, Coloured Male, Indian Male, Total Blacks Male, White Female, African Female, Female, Female, Female, Coloured Indian Total Blacks White Senior officials & managers, Permanent Professionals, Permanent Clerks, Permanent Service & sales workers, Permanent Craft & related trade workers, Permanent Plant & machine operators & assemblers, Permanent Elementary occupations, Permanent TOTAL Employees with Disabilities TOTAL 41

42 Table 6.2 Total number of Employees (incl. Employees with disabilities) per Occupational Bands Occupational Bands Male, African Male, Coloured Male, Indian Male, Total Blacks Male, White Female, African Female, Female, Female, Female, Coloured Indian Total Blacks White Top Management, Permanent TOTAL Senior Management, Permanent Professionally qualified and experienced specialists and midmanagement, Permanent Skilled technical and academically qualified workers, junior management, supervisors, foremen, Permanent Semi-skilled & discretionary decision making, Permanent Unskilled & defined decision making, Permanent TOTAL Table 6.3 Recruitment Occupational Bands Male, African Male, Coloured Male, Indian Male, Total Blacks Male, White Female, African Female, Female, Female, Female, Coloured Indian Total Blacks White Senior Management, Permanent Professionally qualified and experienced specialists and midmanagement, Permanent Skilled technical and academically qualified workers, junior management, supervisors, foremen, Permanent TOTAL TOTAL Table 6.5 Terminations Occupational Bands Male, African Male, Coloured Male, Indian Male, Total Blacks Male, White Female, African Female, Female, Female, Female, Coloured Indian Total Blacks White Senior Management, Permanent Professionally qualified and experienced specialists and midmanagement, Permanent Skilled technical and academically qualified workers, junior management, supervisors, foremen, Permanent Semi-skilled & discretionary decision making, Permanent Unskilled & defined decision making, Permanent TOTAL TOTAL 42

43 Table 6.6 Disciplinary Action Disciplinary Action Male, African Male, Coloured Male, Indian Male, Total Blacks Male, White Female, African Female, Female, Female, Female, Coloured Indian Total Blacks White TOTAL TOTAL Table 7.1 Performance Rewards by Race Gender & Disability Number of Beneficiaries Total Employment % of Total Employment Cost Average Cost per Beneficiary African Female African Male White Male White Female Indian Female Employee with a disability TOTAL Table 7.2 Performance Rewards by Salary Band for Personnel below Senior Management Service Salary Band Number of Beneficiaries Total Employment % of Total Employment Cost Average Cost per Beneficiary Lower skilled (Band B1-B2) Skilled (Band B3-B5) Highly skilled production (Band C1-C5) Highly skilled supervision (Band D1-D3) TOTAL Table 7.4 Performance Related Rewards (Cash Bonus) by Salary Band for Senior management Service SMS Band Number of Beneficiaries Total Employment % of Total Employment Cost Average Cost per Beneficiary % Of SMS Wage Bill Personnel Cost SMS Level D Level D Level E TOTAL

44 Table 8.1 Foreign Workers by Salary Band Salary band Employment at Beginning period % Of Total Employment at End of Period % of Total Change in % of Employment Total Total Employment at Beginning of Period Total Employment at End of Period Total Change in Employment Lower skilled (Level 1-2) Skilled (Level 3-5) Highly skilled production (Level 6-8) Highly skilled supervision (Level 9-12) Senior management (Level 13-16) NO FOREIGN WORKERS EMPLOYED TOTAL Table 9.1 Sick Leave for Jan2008 to Dec 2008 Salary Band Total Days % Days with Medical Certificate Number of Employees using sick leave % of total Employees using sick leave Average Days per Employee Estimated Cost (R 000) Total number of Employees using sick leave Total number of days with medical certification Lower skilled (Band B1-B2) Skilled (Band B3-B5) Highly skilled production (Band C1-C5) Highly skilled supervision (Band D1-D3) Senior management (Band D4-E1) TOTAL Table 9.2 Disability Leave for Jan2008 to Dec 2008 Salary Band Total Days %Days with Medical Certificate Number of Employees using Disability Leave % of total Employees using Disability Leave Average Days per Employee Estimated Cost (R 000) Total number of Employees using Disability Leave Total number of days with medical certification C TOTAL Table 9.3 Annual Leave for Jan 2008 to Dec 2008 Salary Band Total Days Taken Average per Employee Employment Lower skilled (Band B1-B2) Skilled (Band B3-B5) Highly skilled production (Band C1-C5) Highly skilled supervision (Band D1-D3) Senior management (Band D4-E1) TOTAL

45 Table 9.5 Leave Payouts Reason Total Amount Number of Employees Capped leave payouts on termination of service for 2008/2009 Current leave payouts on termination of service for 2008/2009 NO CAPPED LEAVE Average Payment per Employee TOTAL Table 10.2 Details of Health Promotion & HIV/AIDS Programmes [tick YES/NO and provide required information] Question YES NO Details if any 1. Has the department designated a member of the SMS to implement the provisions contained in Part VI E of Chapter 1 of the Public Service Regulations 2001? If so provide her/his name and position. 2. Does the department have a dedicated unit or have you designated specific staff members to promote health and well being of your employees? If so indicate the number of employees who are involved in this task and the annual budget that is available for this purpose. 3. Has the department introduced an Employee Assistance or Health Promotion Programme for your employees? If so indicate the key elements/services of the programme. 4. Has the department established (a) committee(s) as contemplated in Part VI E.5 (e) of Chapter 1 of the Public Service Regulations 2001? If so please provide the names of the members of the committee and the stakeholder(s) that they represent. 5. Has the department reviewed the employment policies and practices of your department to ensure that these do not unfairly discriminate against employees on the basis of their HIV status? If so list the employment policies/practices so reviewed. 6. Has the department introduced measures to protect HIV-positive employees or those perceived to be HIV-positive from discrimination? If so list the key elements of these measures. 7. Does the department encourage its employees to undergo Voluntary Counselling and Testing? If so list the results that you have achieved. 8. Has the department developed measures/indicators to monitor & evaluate the impact of your health promotion programme? If so list these measures/indicators. 3 M Tokota H R Manager 3 M Mame, S Renga, W Smit, H D Alton 3 M Mame, S Renga, W Smit, H D Alton 3 HR Manual, Recruitment Table 11.2 Misconduct & Disciplinary Hearings Finalized Outcomes of disciplinary hearings Number % of Total Total TOTAL Table 11.3 Type of Misconduct Addressed & Disciplinary Hearings Type of Misconduct Number % of Total Misconduct TOTAL

46 Table 11.7 Precautionary Suspensions Precautionary Suspensions Number of people suspended 1 Number of people whose suspension exceeded 30 Days 1 Average number of days suspended 90 Cost (R 000) of suspensions Table 12.1 Training Needs Occupational Categories Gender Employment Learnerships Skills Programmmes & other short courses Legislators senior officials and managers Other forms of training Female Male Professionals Female Male Total Technicians and associate professionals Female Male Clerks Female Male Total Table 12.2 Training Provided Occupational Categories Gender Employment Learnerships Skills Programmmes & other short courses Legislators senior officials & managers Other forms of training Female Male Professionals Female Male Total Technicians & associate professionals Female Male Clerks Female Male TOTAL

47 Table 14.1 Report on consultant appointments using appropriate funds Project Title Total number of consultants that Duration: Work days Contract value in Rands worked on the project SAB&T Internal Audit Softline VIP Nompozolo & Gabelana Cyberx Consulting Routledge Modise Smit Tabata Others TOTAL NUMBER OF PROJECTS Table 14.2 Analysis of consultants using appropriate funds i.t.o. HDI s Project Title % ownership by HDI Groups % Management by HDI Groups Number of Consultants from HDI groups that work on the project SAB&T Internal Audit TOTAL The following tables of the HR statistics for the year ending 31 March 2009 were not published as they either have zeros or are not applicable: Table 1.2 Consultation arrangements for customers Table 1.3 Service delivery access strategy Table 1.4 Service information tool Table 1.5 Complaint mechanism Table 3.3 Employment and vacancies by critical occupation at end of period Table 5.2 Annual turnover rates by critical occupation Table 5.4 Promotions by critical occupation Table 6.4 Promotions Table 6.7 Skills development Table 7.3 Performance rewards by critical occupation Table 8.2 Foreign workers by major occupation Table 9.4 Capped leave for January 2008 to December 2009 Table 10.1 Steps taken to reduce the risk of occupational exposure Table 11.1 Collective agreements Table 11.4 Grievances lodged Table 11.5 Dispute lodged Table 11.6 Strike actions Table 13.1 Injury on duty Table 14.3 Report on consultants appointments using donor funds Table 14.4 Analysis of consultants appointments using donor funds i.t.o HDI 47

48 Organisational Structure Board of Directors Chief Executive Officer (Vacant) Internal Audit (Outsourced) CEO s Personal Assistant Chief Financial Officer (Vacant) Compliance & Licensing Manager Executive Assistant Research & Communications Manager HR/ Administration Manager Information Technology Manager Legal Services Manager Executive Assistant Accountant HR Administrator (Vacant) Analyst Programmer Senior Inspector (Vacant) Senior Investigator (Vacant) Assitant Accountant Receptionist Network Administrator 6 Inspectors (1Vacant) 5 Investigators Accounts Clerk Revenue Clerk Messenger/ Driver Licensing Officer 48

49 CHAPTER eight financial statements for the year ended

50 Statement of Financial Position for the Year ended March 2009 NOTES R R ASSETS Non-current assets Property, plant and equipment Current assets Inventories Trade and other receivables Cash and cash equivalents TOTAL ASSETS Non-current liabilities Deferred Income Current Liabilities Trade and other payables Collections for distribution Bank overdraft TOTAL LIABILITIES NET ASSETS ANALYSIS OF NET ASSETS Accumulated surpluses TOTAL NET ASSETS

51 Statement of Financial Performance for the Year ended March 2009 NOTES R R REVENUE Fees Recoveries Government Grant - Operations Government Grant Released Interest Received Other Revenue (profit on sale of assets, discount received, forfieted funds) EXPENDITURE Employee costs Training costs Research costs Legal expenses Board Members' emoluments Depreciation - property plant & equipment year celebrations - ECGBB Consulting fees Travelling & subsistance Inspection & investigation costs Interest paid Auditors' fees Operating expenses SURPLUS FOR THE YEAR

52 Statement of Changes in Net Assets for the Year ended March 2009 NOTES Accumulated Surplusses R Total R Balance at 1 April Less prior years WCA under-provisions (N2) (93 536) (93 536) Less prior year credit memo reversed in the current year (N3) (62 037) (62 037) Balance At 1 April 2007 as restated Add deferred income adjustment (N1) Net surplus for the year Add Provincial Revenue fund surrendered reversed Balance at 31 March Surplus for the year Balance at 31 March N1: This journal has been processed to adjust the deferred income balance to agree with the net book value of the building. N2: This journal has been processed to adjust the prior years underprovision of WCA. N3: Interest raised in the prior year and paid to the Province during the year under review. 52

53 Cash Flow Statement for the Year ended March 2009 NOTES R R CASH FLOWS FROM OPERATING ACTIVITIES Receipts Gambling Fees and taxes Grant Customers Payments Gambling Fees and taxes Suppliers & employees Cash generated from operations Interest received Interest paid (19 986) - Net cash flows from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds on disposal of property, plant and equipment Acquisition of property, plant and equipment ( ) ( ) Net cash outflows from investing activities ( ) ( ) CASH FLOWS FROM FINANCING ACTIVITIES Decrease in bank overdraft Net cash (outflows) / inflows from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year

54 Accounting Policies The principal accounting policies adopted in the preparation of these financial statements are set out below and are consistent with those applied in the previous year. 1.1 Basis of Preparation The financial statements have been prepared in accordance with the South African Statements of Generally Accepted Accounting Practices (GAAP) including any interpretations of such Statements issued by the Accounting Practices Board, with the prescribed Standards of Generally Recognised Accounting Practices (GRAP) issued by the Accounting Standards Board replacing the equivalent GAAP Statement as follows: Standard of GRAP GRAP 1: Presentation of financial statements GRAP 2: Cash flow statements GRAP 3: Accounting policies, changes in accounting estimates and errors Replacement of GAAP AC 101: Presentation of financial statements AC 118: Cash flow statements AC 103: Accounting policies, changes in accounting estimates and errors The recognition and measurement principles in the above GRAP and GAAP Statements do not differ or result in material differences in items presented and disclosed in the financial statements. The implementation of GRAP 1, 2 & 3 has resulted in the following significant changes in the presentation of the financial statements: Terminology differences: Standard of GRAP Replacement of GAAP Statement of financial position Balance sheet Statement of financial Income Statement performance Statement of changes in net Statement of changes in equity assets Net assets Equity Surplus/deficit for the period Profit/loss for the period Accumulated surplus/deficit Retained earnings Contributions from owners Share capital Distributions to owners Dividends Reporting date Balance sheet date The cash flow statement can only be prepared in accordance with the direct method Specific information such as: a. receivables from non-exchange transactions, including taxes and transfers; b. taxes and transfers payable; c. trade and other payables from non-exchange transactions; d. must be presented separately on the statement of financial position The amount and nature of any restrictions on cash balances is required to be disclosed. Paragraph of GRAP 1 has not been implemented as the budget reporting standard is in the process of being developed by the international and local standard setters. Although the inclusion of budget information would enhance the usefulness of the financial statements, nondisclosure will not affect fair presentation. 1.2 Revenue Recognition Revenue compromises principally of: Fees charged for services rendered (i.e. Annual admin fees); Recoveries of expenses incurred in the production of revenues; Grant funding received from Provincial Government and Interest income Revenue is recognised on an accrual basis. 1.3 Gambling Taxes and Fees The gambling taxes and fees collected are paid over to the Provincial Revenue Fund at the end of each month. These gambling taxes and fees are not recognised as revenue. 1.4 Property, Plant & Equipment Fixed assets are stated at historical cost less accumulated depreciation. Depreciation is calculated 54

55 on the straight - line method to write off the cost of assets to their residual values over their anticipated useful lives as follows: Buildings 50 Years Surveillance Equipment 4 Years Computer Equipment 3 Years Motor Vehicles 5 Years Fixtures and Fittings 10 Years Cellphone Equipment 2 Years Furniture and Equipment 4 10 Years Library Books 3 Years Land is not depreciated as it is deemed to have an indefinite life. Library books are capitalised and depreciated over a period of 3 years. leases are charged to the statement of financial performance as incurred. 1.7 Inventories Inventories are valued at the lower of cost and net realisable value. Cost is determined on the first-in, first-out (FIFO) method. 1.8 Financial Instruments Financial assets are recognised when the board has a right or other access to economic benefits. Financial liabilities are recognised when there is a contractual obligation to transfer benefits. Investments in financial assets are initially recognised at cost. Subsequently financial assets and liabilities are re-measured at fair value. Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the sales proceeds and the carrying amount of the asset and are recognised in the statement of financial performance as realised. 1.9 Cash and Cash Equivalents Cash and cash equivalents are carried in the balance sheet at cost. For purposes of the cash flow statement, cash and cash equivalents comprise cash in hand and deposits held on call with the bank. Property, plant and equipment are reviewed for impairment losses whenever events indicate that the carrying amount may not be recoverable. An impairment loss is recognised in respect of the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of an asset s net selling price and value in use. An impairment loss or a reversal of an impairment loss is recognised as an expense/income in the statement of financial performance as incurred. 1.5 Estimates Except for property, plant and equipment, there were no estimates. 1.6 Leases Operating Leases Leases where the lessor retains the risks and rewards of ownership of the underlying asset are classified as operating leases. Payments made under operating 1.10 Trade Receivables Trade receivables are carried at original invoice amount less provision made for impairment. A provision for impairment is established when there is objective evidence that the Board will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the carrying amount and the recoverable amount Trade Payables Trade payables are carried at the fair value of the consideration to be paid in future for goods or services that have been received or supplied and invoiced or formally contracted for with the supplier Provisions Provisions are recognised when the Board has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources 55

56 embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made Retirement Benefits The policy of the Board is to provide retirement benefits through an established fund governed by the Pension Funds Act. The provident fund is a defined contribution fund which does not require an actuarial valuation. Contributions to the provident fund are charged to the Income Statement in the year to which they relate. The Board has no obligations to fund post retirement medical benefits Leave Accrual The employees of the Board are entitled to 22 working days per annum as leave gratuity. The policy adopted by the Board is that all its employees should take leave during the year, failing which they will forfeit their leave days on the 30th of June each year. The leave days are accrued on a monthly basis. The employees of the Board cannot cash their accumulated leave days except when resigning. Government grants relating to the acquisition of assets are included in non-current liabilities as deferred income and are released to the statement of financial performance over the expected lives of the related assets Going Concern The financial statements have been prepared on the basis that the Entity will continue to operate in the foreseeable future Comparatives Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current financial year Bonus Accrual The employees of the Board can structure their salary packages to have a bonus portion which is paid on the 15th of January each year. The bonus is accrued on a monthly basis for those employees who have elected to structure their salary packages to have a bonus portion Foreign Currency Transactions Foreign currency transactions are recorded at the rates ruling at the date of transaction and all gains and losses are recognised in the statement of financial performance as incurred Government Grants Government grants relating to operational costs are recognized in the statement of financial performance over the period necessary to match them with the costs which they are intended to compensate 56

57 Notes to the Annual Financial Statements for the Year ended March 2009 Note 2 - Property, Plant & Equipment 2009 Land Buildings Computer Equipment & Library Books Motor Vehicles Fixtures And Fittings Cellphone Equipment Furniture & Equipment R R R R R R R R Total Net Book Value 01/04/ Current Year Movements - Additions Disposals (1 001) (27 433) (4 262) (32 696) - Depreciation ( ) ( ) ( ) (13 939) (34 112) ( ) ( ) Net Book Value 31/03/ Made up as follows: Cost Accumulated Depreciation ( ) ( ) ( ) (71 050) (72 615) ( ) ( ) Net Book Value Net Book Value 01/04/ Current Year Movements - Additions Disposals ( ) (6 842) (27 599) ( ) - Depreciation ( ) ( ) ( ) (13 651) (15 530) ( ) ( ) Net Book Value 31/03/ Made up as follows: Cost Accumulated Depreciation ( ) ( ) ( ) (57 111) (38 504) ( ) ( ) Net Book Value The total net book value of cellphone equipment, as included above, represents leased assets held in terms of incentive lease agreements. Land and buildings comprise a sub-division of Erf 2863, Beacon Bay measuring 2376 m2, purchased in 2002, together with an office building. 57

58 R R Note 3 Inventories Stationery Crockery Note 4 Trade and other receivables Trade receivables Other receivables Prepayments Allowance for losses ( ) (75 538) Note 5 Deferred Government Grant Government Grants received to be recognised in future accounting periods At the beginning of the year Deferred Income Adjustments ( ) Released to Income ( ) ( ) At the end of the year Note 6 Trade and other payables Trade payables Accruals and sundry payables - invoices Accruals - research projects Accruals - strategic planning Accruals - staff costs Accruals - audit fees Accruals - legal fees Accruals - Board fees Lease incentive - cell phones Other payables - investigation deposits

59 Note 7 Board Members and Executives Emoluments Fees Travel Exp Allow. Other Salary Allow. Fund Contr. Non-Executive Board Members R R R R R R R R R Bonus Total 2009 Total 2008 K.Canca A.Ntsonkota N. Mtakati N. Cossie M. Sibam N Tom N Mqakama N K Kusi S L Majombozi* X.Mbangxa* S.Mlonyeni* P.Mnqandi* P.Nqakula* M. Fatyela* P Myles P Danisa* Non-Executives Audit Committee Members S.Whitfield R.Hill Executives Compliance & Licencing Manager/ Acting CEO Investigator/Acting Compliance & Licensing Manager Accountant/Acting CFO Administration Manager (HR) IT Manager Research & Communications Manager Legal Services Manager/Acting CEO Chief Executive Officer (N1) Chief Financial Officer (N2) *: Previous Board Members N1: Previous CEO N2: Previous CFO 59

60 Note 8 Taxation The income of the Board is exempt from taxation interms of section 10 (1) (ca) of the Income Tax Act no 58 of R R Note 9 Notes to the cash flow statements 9.1 Reconciliation of cash flows from operating activities to surplus Surplus Non - cash movements : Depreciation Government Grant released ( ) ( ) Net Investment income ( ) ( ) Allowance for losses Surplus on disposal of property, plant and equipment ( ) (3 892) Interest paid Operating cash flows before working capital changes ( ) Working capital changes : Decrease / (Increase) in inventories (28 461) (6 705) Decrease in trade and other receivables ( ) ( ) Increase in trade and other payables ( ) Increase/(Decrease) in collections for distribution Cash and cash equivalents Cash on hand and balances at bank As required in terms of section 31.2 of the Treasury Regulations to the Public Finance Management Act, approval from National Treasury has been obtained in respect of the bank where funds are held. Note 10 Commitments Operating Lease Commitments Not later than one year Later than one year and not later that five years Note 11 Statutory information in terms of the Public Finance Management Act, 1999 (Act no. 1 of Material Losses - Criminal Conduct and Irregular, Fruitless and Wasteful Expenditure 60

61 Fruitless and Wasteful Expenditure The Board has incurred the following expenditure which is considered to be fruitless and wasteful expenditure: Interest on late payments of invoices Interest on overdraft Penalty on license renewal The interest of R was as a result of statements of accounts received long after the due date. The interest on overdraft was as a result of electronic banking not accesible for effecting eletronic transfers as a result of routine system maintenance. This was only known after the bank was informed about the problem. The penalty incurred was due to late payment made for license renewal due to the fact that the company that has been supporting the Board with its accounting system did not inform the Board in time that it is longer providing any support for the accounting system that the Board is using. The Board was only informed by this company after several telephone calls made for the renewal of the license. To avoid this problem from happening, the Board has decided to acquire a new accounting system that has a local service provider. R R 11.3 Irregular Expenditure The Board has incurred R795, for procuring the services of consultants to assist the Board with cases that require specialised expertise. The condonement of this irregular expenditure is awaiting approval of the Board Criminal or disciplinary steps taken as a consequence of material losses - Nil 11.5 Losses recovered or written off Doubtfull debts Bad debts recovered Financial Assistance from the State Grant funding - Operations Note 12 Contingent Liability There is a contingent liability in respect of a court case that has been brought up by two applicants who were unsucessful in their application for a casino licence. The costs of this litigation cannot be ascertained. 61

62 Note 13. Operating expenses Operating expenses are made up of the following line items: R R Maintenance services Telephone costs Evaluation & Hearing costs Advertising, subscriptions & publications Insurance Printing, stationary & postage Municipal services & taxes Computer expenses Rentals Carting & refreshments Bank charges Allowance for losses Stationery and crockery written-off Note 14. Risk Management 14.1 Liquidity risk The Board manages liquidity risk through an ongoing review of the future commitments. Cash flow forecasts are prepared and monitored. Interest rate risk The Board policy is to manage interest rate risk so that fluctuations in variable rates do not have material impact on surplus (deficit). At year end, financial instruments exposed to interest rate risk were as follows: Cash flow interest rate risk Financial instrument Current interest rate Due in less than a year Cash in current banking institution 8.90% Credit risk Credit risk consists mainly of cash deposits and cash equivalents. The Board only deposits cash with major banks with high credit standards. The Board has therefore no concerntration of credit risks. 62

63 R R Note 15 Research and public education The costs for research and public education are made up as follows:- Branding and marketing Media coverage - responsible gambling Socio-economic impact Stakeholder survey Assessment of responsible gambling adverts Note 16 Training and development costs Included in the training costs is travel and accommodation that relates to overseas conferences attended by the Board members and Senior management during the year under review. The costs for this line item has always been budgeted under training as well as under research and development and reported as such in the annual financial statements. Travel and Accommodation Car hire Other (registration daily allowance) Note 17. Post balance sheet events There were no events occurred after the balance sheet date. Note 18. Accounting standards that have been approved, but were only effective after the reporting date. Paragraph 31 of GRAP 3 requires an entity to disclose the possible impact of the new standards of GRAP, that have been approved but not yet effected. These below mentioned standards were only effective for periods beginning on or after 1 April The entity has not applied the below mentioned statements, or made any early adoption. The impact of these above standards on fair presentation and disclosure is not material, as these are not applicable to the entity. Standard no. Standard Title Impact GRAP 5 Borrowing Costs None. GRAP 6 Consolidated and Separated Financial Statements None. GRAP 7 Investments in Associates None GRAP 8 Investments in Joints Ventures None GRAP 10 Financial Reporting in Hyperinflationary Economies None. GRAP 11 Constructions Contracts None GRAP 16 Investments Property None GRAP 100 Non-current Assets Held for Sale and Discontinued Operations None GRAP 101 Agriculture None GRAP 102 Intangible None 63

64 The impact of the following accounting standards was also considered to be insignificant, as similar accounting standards from GAAP were applied and these accounting standards do not differ significantly from the GRAP standards. Standard no. Standard Title Impact GRAP 4 The Effects of Changes in Foreign Exchange Rates Insignificant GRAP 9 Revenue from Exchange Transactions Insignificant GRAP 12 Inventories Insignificant GRAP 13 Leases Insignificant GRAP 14 Events After the Reporting Date Insignificant GRAP 17 Property, Plant and Equipment Insignificant GRAP 19 Provisions, Contingent Liabilities and Contingent Assets Insignificant R R Note 19. Accounting standards which have been approved, but are not yet effective. The entity has not applied the below mentioned statements, or made any early adoption. The impact of these above standards on fair presentation and disclosure is not material, as these are either not applicable to the entity, or similar GAAP standards that have the same impact have been applied. Standard no. Standard Title Impact GRAP 21 Impairment of non-cash generating assets. None. GRAP 23 Revenue of non-cash generating assets None. GRAP 26 Impairment of cash-generating assets. None GRAP 103 Heritage Assets None The following accounting statements will have a significant impact on the financial statements when they are implemented Standard no. Standard Title Impact GRAP 18 Segmental Reporting Additional information will be reported for ever segment of the entities operations. GRAP 24 Presentation of Budget Information in Financial Statements. Budget information will be disclosed in the Financial Statements for every line item. 64

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66 ECG&BB Building Quenera Office Park Quenera Drive Beacon Bay East London P.O. Box Beacon Bay East London 5205 Tel. +27 (0) Fax. +27 (0) NATIONAL RESPONSIBLE GAMBLING PROGRAMME: PR182/2009 ISBN: Title of Publication: Eastern Cape Gambling & Betting Board, Annual Report 2008/2009.