1. Part A: General Information Part B: Performance Information Part C: Report on Corporate Governance... 44

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1 CONTENTS 1. Part A: General Information Public entity s general information List of Abbreviations /Acronyms Strategic Overview Legislative Mandates Organisational Structure Foreword by the Chairperson Chief Executive Officer s Overview Part B: Performance Information Statement of Responsibility for Performance Information Overview of the Public Entity s Performance Programme Performance Part C: Report on Corporate Governance Introduction Portfolio Committees Executive Authority The Board Board Charter Composition of the Board Committees Remuneration of Board Members Risk Management Internal Control Internal Audit and Audit Committees Compliance with Laws and Regulations Fraud and Corruption Minimising Conflict of Interest Code of Conduct Health, Safety and Environmental Issues Social Responsibility Audit Committee Report Part D: Human Resources Value of Human Capital in the ECGBB Overview of HR Matters at the ECGBB HR Priorities for the Year Under Review and the Impact of These Priorities Workforce Planning and Key Strategies to Attract and Recruit a Skilled and Capable Workforce Employee Performance Management Framework Employee Wellness Programmes Policy Development Oversight Statistics Part E: Financial Information Statement of Responsibility Report of the External Auditor Annual Financial Statements Statement of Financial Position Statement of Financial Performance Statement of Changes in Net Assets Cash Flow Statement Statement of Comparison of Actual and Budget Amounts Accounting Policies for the year ended 31 March Notes to the Annual Financial Statements

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3 1. Part A: General Information 1.1 Public Entity s General Information Registered name of the public entity Registered Office address Postal Address Eastern Cape Gambling and Betting Board ECGBB Building, Quenera Park Quenera Drive, Beacon Bay East London 5201 PO Box 15355, Beacon Bay East London 5211 Contact telephone numbers Website External Auditors communications@ecgbb.co.za Auditor-General of South Africa, Eastern Cape Province 69 Frere Road Trust Building Vincent East London 5217 PO Box East London 5217 Bankers Information Company Secretary Standard Bank of South Africa. PO Box 7037 East London 5200 Mrs. GP Koyana B.Proc, LLB, MBA Legal Services and Board Secretary 3

4 1.2 List of Abbreviations /Acronyms AFS AGSA APP BOARD BM BSC CAS CEO CFO CSR DEDEAT ECGBB EME FICA GGR HOD IDP IEC IT LOC LPMs MEC MOU MSP MTEF MTREF NGB NPA NRGP PFMA PGDP RFP RO SAACREG SAPS SARS SED SITE A SITE B SLA SMART TOTE WAN Annual Financial Statement Auditor General of South Africa Annual Performance Plan Eastern Cape Gambling and Betting Board Bookmaker Balance Score Card Casino Chief Executive Officer Chief Financial Officer Corporate Social Responsibility Department of Economic Development, Environmental Affairs and Tourism Eastern Cape Gambling and Betting Board Exempted Medium Enterprises Financial Intelligence Centre Act Gross Gaming Revenue Head of Department Integrated Development Plan Information Education Communication Information Technology Letter of Certification Limited Payout Machines Member of the Executive Council Memorandum of Understanding Master Services Plan Medium Term Expenditure Framework Medium Term Revenue and Expenditure Framework National Gambling Board National Prosecuting Authority National Responsible Gambling Programme Public Finance Management Act Provincial Growth and Development Plan Request For Proposal Route Operator South African Advisory Council for Responsible Gambling South African Police Service South African Receiver of Revenue Socio Economic Development Three to five machines 20 to 40 machines Service Level Agreement Specific, Measurable, Achievable, Realistic and Time bound Totalisator Wide Area Network 4

5 1.3 Strategic Overview Vision The Best, Most Efficient, Empowering Gaming Regulator Mission To ensure the Eastern Cape Gaming Industry conducts itself honestly and competitively, with maximum contribution to society. We are therefore committed to protecting the public interest through regulation, licensing and appropriate enforcement. We will do this through providing excellent service to our stakeholders and through facilitating socioeconomic benefits to communities within which we operate Values Value Consultation Friendliness Teamwork Respect Service Delivery Honesty Empowerment Community Development Behavioural Demonstration Keeping stakeholders informed on all key issues and through endeavouring to involve all stakeholders in decision making processes where they are affected by such decisions Encouraging a friendly working relationships and environments People working together towards achieving common goals and targets The equal treatment of staff, honesty on organisational issues and through non-disclosure of confidential information The on-time delivery of a quality and professional service to all our stakeholders Providing open feedback to staff and stakeholders on all issues Providing training and development to employees, and engaging the services of and goods procuring from BBBEE suppliers Giving back to our communities Strategic outcomes oriented goals Goal 1 Strategic Outcome-Oriented Goal Excellent Services to Stakeholders Goal Statement To provide excellent services to our stakeholders. Goal 2 Strategic Outcome-Oriented Goal International Regulatory System Goal Statement To institutionalise an international, competitive regulatory system Goal 3 Strategic- Outcome Oriented Goal Oversight arrangements and Socio-Economic Development commitments Goal Statement To establish sound institutional oversight arrangements and systems to administer socio-economic development commitments that arise from licence conditions Goal 4 Strategic Outcome-Oriented Goal Performing Organisation and recognition of employees Goal Statement To develop a high-performance value-based organisation that recognises ECGBB employees as it s most important assets. Goal 5 Strategic Outcome Oriented Goal Revenue Collection for the Provincial Treasury and Socio-Economic Benefits. Goal Statement To optimise revenue collection for the socio-economic benefits of underprivileged communities. 5

6 1.4 Legislative Mandates Schedule in terms of the PFMA: The Eastern Cape Gambling and Betting Board falls under Schedule 3, Part C of the Public Finance Management Act, No. 1 of Specific Constitutional and Other Legislative, Functional and Policy Mandates Gambling and Betting Act, 1997 (Eastern Cape) (Act No. 5 of National Gambling Act, 2008 (Act No. 10 of 2008) Promotion of Access to Information Act, 2000 (Act No. 2 of 2000) Public Finance Management Act (PFMA), Act No 1 of 1999 and Treasury Regulations Employment Equity Act, No. 5 of Skills Development Levies Act, No 9 of Basic Conditions of Employment Act, No. 75 of Treasury Framework for Strategic Plan and Annual Performance Plans Policy Framework for the Government-wide Monitoring and Evaluation System. 6

7 7 1.5 Organisational Structure

8 1.6 Foreword by the Chairperson Introduction The directors are required by the Public Finance Management Act (Act 1 of 1999), to maintain adequate accounting records. As such, they are responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is the responsibility of the directors to ensure that the annual financial statements fairly represent the state of affairs of the entity at the end of the financial year as well as the results of its operations and cash flows for that period Highlight achievements of the public entity Adv. N. Mayosi The following aspects can be identified as highlights achieved during the reporting period: Revenue collection of R114m as against a target of R112m. We have continued with our drive, informed by necessary governance imperatives, to put in place functional Governance Structures and implement transparent systems of accountability. The introduction and roll-out of bingo occurred during this period. We continued to implement and institutionalise the ECGBB s Risk Management Framework, and advanced the institutionalisation of a risk management culture. The Eastern Cape is the first province in the country where a route operator has reached the milestone of operating 1000 LPMs. A second route operator licence was issued. We closed a number of illegal gambling operations and seized 49 illegal machines in Lusikisiki. The ECGBB ran its first intensive responsible gambling campaign during September The grand opening of the Boardwalk Hotel and Convention Centre in Port Elizabeth was a significant milestone, as was that of the The Venue at Hemingway s Hotel; and The ECGBB was bestowed the BBQ CSI Award acknowledging the organisation s contributions towards its corporate social responsibility projects Challenges Faced by the Board The following challenges were experienced by the Board during the reporting period:- The increased responsibilities associated with new forms of licences as well as increasing LPM sites, placed increased strain on the ECGBB s budget allocation. AGSA s audit fee which increased to R1.9m in the year under review is high for an organisation the size of the ECGBB, placing yet further demands on an already strained budget meant for the operations of the organisation. The legislative review spearheaded by DEDEAT has not yet been finalised. This has a negative impact on the regulatory work of the ECGBB, and constrains its ability to implement technological advancements in the Industry. Increasing demands on board members as a result of the executive nature of the work of the ECGBB s Board of Directors present a continuing challenge. The 1% tax on GGR imposed by national government has created some anxiety among gambling operators, which the Board has had to manage The year ahead For the year ahead the Board will focus and direct the management structures of the ECGBB to: Improve existing processes to enhance our efficiency in the consideration of applications for licences by potential applicants. Enhance our audit and compliance regime to ensure correct and accurate revenue is collected from the industry and transferred to the Provincial Treasury timeously. Strengthen our responsible gambling and education campaigns, utilising various popular platforms to reach a target of up to two million individuals in the province. Continue to strengthen our research capacity to build a strong foundation for valid and empirical research to inform new policy and regulatory reforms. 8

9 Enhance our empowering role as a regulator guided by, among other things, the Anti-Poverty Strategy of the province. Ensure alignment of the work of the ECGBB with National Government s 12 Outcomes; EC Provincial Priorities; Policy Imperatives of the DEDEAT; and the National Development Plan Acknowledgements / Appreciation On behalf of the Board of Directors, I would like to acknowledge and express my appreciation for the sterling work of the CEO and ECGBB staff during the 2012/13 financial year. In addition, my thanks and appreciation goes to all the chairpersons and members of the various Committees of the Board, as well as the members of the entire board. I also extend my sincere thanks to the Board and its committees, as well as ECGBB management and staff, for helping to foster an environment that has allowed both management and the Board the space to perform our respective responsibilities. We also extend our appreciation to the Honourable MEC of DEDEAT and his management team for their guidance in terms of the duties and responsibilities entrusted to us. Furthermore, to the gambling operators and licensees whom we regulate and interact with, I express my deepest gratitude for the space and time you afforded the ECGBB to conduct its business ensuring that there is improvement of and continued accountability in the standards that we set for the industry Other Matter The investigation into the irregular appointment of the CEO was concluded by the Public Protector in the current year. While it was found that the board failed to properly consult with the Hon. MEC on the appointment of the CEO, it was recommended that due to the long-outstanding allegation, appropriate remedial action be taken, and the CEO s appointment has been condoned by the Board and the Hon. MEC Conclusion The ECGBB is held responsible for governance and sustainable performance. As such, it is committed to good corporate governance and will continue to make significant progress in this regard. Against the backdrop of increasing regulatory and legislative compliance requirements within the gambling sector, we aim to strengthen our regulatory processes, with a view to enhancing the Board's effectiveness and, in doing so, ensuring that it is aligned with the sound business practices expected of a stable and functional organisation. ADVOCATE NCUMISA MAYOSI CHAIRPERSON OF THE ECGBB AND ACCOUNTING AUTHORITY 9

10 1.7. Chief Executive Officer s Overview An overview of the public entity s achievements for the financial year under review I am delighted to present the annual performance scorecard of the Eastern Cape Gambling and Betting Board (ECGBB). The review period was an opportune moment for the organisation to sharpen its regulatory armoury and instruments in preparation for the effective and efficient regulation of the gaming industry. This enhanced, effective and efficient discharge of this regulatory role should prove a direct correlation with ECGBBs socio-economic development imperatives Enhanced regulatory role As such, during the review period, the organisation injected its energy towards strengthening this role thorough monitoring of licensees, conditions of licence as well as auditing. These conditions of licence include licensee commitments towards corporate social investment and provincial spend. This work had the intended effect of providing solid assurance that the fees and levies due and payable to the regulator and the province are collected, complete and accurate. In this regard, the Board of Directors, under the energised and astute leadership of chairperson Advocate Ncumisa Mayosi impressed on management that the resultant effects of this inspired regulatory role should be an improved financial contribution to the Provincial Treasury through the collection of gaming taxes. An improvement in tax collections should ensure that the organisation is able to make an enhanced contribution to the general expansion of the Eastern Cape economy. Furthermore, this was also anticipated to translate into an improvement in the general financial health of the organisation, operational efficacy as well as a solid socio-economic contribution. This also meant the organisation had to augment its internal capacity, improve systems and processes for the effective execution and delivery of its stated mandate. This requires an energised and empowered human capital which is capacitated with the right skills set to execute organisational objectives. In this regard, the organisation went through a process of profound internal renewal that should ensure that its human resources outputs support its corporate objectives. Similarly, the organisation is acutely aware that it is only an empowered human capital base which understands the culture of the business which should result in improved organisational efficiencies Empowered human capital Subsequently, a five-year human resources strategy was put in place which took cognisance of the status quo and which lays down the roadmap towards becoming an employer of choice. Among other activities, an employee satisfaction survey was conducted. These employee survey inputs should find expression in how the organisation conducts its business. In addition, a number of policies such as ones for talent management and succession planning were identified, a health and safety policy was developed, as well as the review of the performance management policy which are key to mandate delivery. While the organisation sought to empower its people, it also took on unemployed graduates. This programme serves a twin purpose. It not only capacitates young graduates with the necessary skills set in anticipation of a fiercely competitive job environment, but it also creates a talent pool for the organisation. Subsequently, three graduates were offered internship opportunities in the human resources, strategic management services as well as the compliance and licensing business units. The heads of each unit monitor and review the performance of each intern on a quarterly basis. ECGBB also extends training opportunities to them in the same standard as those afforded full-time staff. The organisation also pays a number of bursaries to staff which allows them to improve their skills, improve their performance and for personal development. In the review period a total of 10 employees were on the bursary scheme in areas such as auditing, business administration as well as financial management. Furthermore, management appointments in information technology and human resources were made in the period under review. In the same period, the vacancy rate dropped from 29% in the previous year to 8,9% in the current financial year. These interventions have had a considerable impact on the delivery of performance targets. 10

11 1.7.4 Performance dividend I am pleased to announce that these interventions have declared a solid performance dividend for the organisation. They enabled the organisation to achieve 82% of its planned targets measured against organisational performance of 66% in the previous financial period. Not only did these interventions result in a 14 th unqualified audit opinion, they ensured that ECGBB receive a clean bill of health on its finances. The organisation is particularly proud of this achievement considering improvements in areas such as supply chain management. This places the organisation on a firm footing towards a clean audit opinion and to maintain public trust on how it uses taxpayer funds. This has had a spill-over effect and direct bearing on how the organisation conducts its core business. The regulator is proud that it has in the last six years contributed a total of R639 million to the Provincial Treasury through the effective collection of gaming taxes. The tax revenues come from licensees in the form of casinos, limited payout machines, totalisators as well as bookmakers. In the review period, ECGBB has continued this catalytic and empowering role collecting a total of R119 million in taxes exceeding its planned target of R109 million. Taxes from gaming revenue have increased at an average of 7% year-on-year. The improved collections were in part due to growth in the industry itself and also as a result of effective and improved regulation. Of the taxes collected a total of R89 million were from the provinces four casinos, R16 million from limited payout machines, R3,4 million from bookmakers, R3,6 million from totalisators and own revenue of R2 million. The regulator is currently engaged in a process of issuing a fifth casino licence for zone 4 which is in the Mthatha, Port St John s, Libode and Coffee Bay area. The growth in tax collections were largely driven by casinos spurred by recent reinvestments of R1 billion, R400 million and R340 million into the Boardwalk, Hemingway s and Wild Coast casinos respectively. An indication of this has been the steady growth of gross gaming revenue (GGR) in casinos from R780 million in 2011/12 to R1,1 billion in the current financial year. Similarly, gambling taxes in the casinos have increased from R71 million in 2011/12 to R89 million. Horseracing GGR has improved from R135 million in 2011/12 to R 150,8 million in 2012/13. Limited Payout Machine GGR grew from R137,1 million in 2011/12 to R161,3 million in the review period. This is a total of R1,4 billion versus the GGR of R1,2 billion in the previous year. The Eastern Cape gaming industry continues to be the fourth largest in the country behind Gauteng, KwaZulu/Natal and the Western Cape. This increase is also attributable to the growing number of tourists visiting the province s casinos due to their high quality Bingo licensing ECGBB also began a process of issuing the first bingo licences in the provinces during the review period. A total of six licences were issued in Mthatha, East London, Port Elizabeth and in Jeffrey s Bay. With the addition of bingo, the revenue base is expected to increase by between 10 and 15 percent once they are fully operational. This means there will be more money for the province to invest on empowering projects. Linked to these new licences is the employment opportunities which come with the package. Each of six licences will not employ less than 50 people Resource optimisation Furthermore, the organisation is particularly pleased that it continues to collect more taxes than what it receives as grant funding to discharge its core business. For example, during the review period, ECGBB received R28 million in grant funding to carry out its operational obligations. While the organisation saw an increase in the baseline by R7 million, it was for specific campaigns such as responsible gambling. The budget has declined year on year other than the ring fenced funding. There are still challenges in actual operational expenditure versus actual budget allocation. The province as a whole is experiencing financial difficulties with entities and departments required to exercise fiscal restraint. This calls for a new way of doing business and to operate within the available resource allocations. As such the organisation is looking at automating certain processes. The biggest cost to ECGBB is the cost of employment which is sitting well over 55% of total budget. The true test will be striking a balance between this cost element versus goods and services Responsible gambling During the period under review, ECGBB invested a lot of time and resources in dealing with problem gambling. While the organisation works fervently to promote awareness of the industry and its growth thereof, it carries an obligation to educate citizens on the effects of problem gambling and to prevent such behaviour. A person should not gamble more than they can afford. Gambling 11

12 should be no different than going to the movies. It should be seen as entertainment rather than a revenue stream or to chase winnings. The organisation has in the past commissioned a study into the economic benefits of gambling in the province. Part of this study showed a decline in incidences of problem gambling but still high at 2%. This incidence rate still needs to decline. The national average sits at 2,6%. People should be educated about gambling and what is involved and to make responsible choices. As a result, ECGBB launched the first ever responsible gambling month in September 2012 going around the province educating people through Imbizo s about responsible gambling. This was done in partnership with the Eastern Cape Parks and Tourism Agency (ECPTA). This responsible gambling campaign is the first of its kind in South Africa. The spin-offs have been an increase in the number of applications for exclusions of problem gamblers. The regulator runs an exclusions programme for those identified as problem gamblers Brand recognition These campaigns also build awareness and recognition of the ECGBB brand. People are becoming aware of the organisation and its role in the gaming value chain and they are becoming cognisant of the organisation s regulatory role. Through these interactions ECGBB is demonstrating that it is a regulator that cares Strengthening regulatory armoury Similarly, without downplaying the effects of illegal gambling, it has been on the decline since the introduction of illegal gambling. However, there are still concerns around internet gambling which are often disguised as internet cafes. In this regard, the organisation, with the assistance of the South African Police Service and members of the public, destroyed illegal gambling machines to the value of R2 million. Over and above the sweeps conducted by ECGBBs inspectorate throughout the province, the regulator relies on members of the public to report such incidents. This work helps enhance the organisation s regulatory armoury and should improve its prospects of becoming the best, most efficient and effective regulator Socio-economic posture The organisation has continued to play its empowering role through Corporate Social Investment (CSI) initiatives. As an entity, ECGBBs budget is steered towards socio-economic development. This is also translated into a local ownership of issued gaming licences in the Eastern Cape. In the review period, the organisation contributed just shy of R1 million to CSI. ECGBB is equally pleased that licensees are spending much higher in this area. ECGBBs CSI policy is geared towards early childhood development, education, sport and health. The organisation looks at the social needs and aligning them with those of the province Appreciation I would like to extend my appreciation to the MEC for Economic Development and Environmental Affairs, the Honourable Mcebisi Jonas for his policy direction, the Board of Directors of the regulator for its inspired leadership, as well as the management team which has made the discharge of ECGBBs mandate tenable. I also extend my gratitude to the staff of ECGBB for their resilience despite a challenging operating environment. Lastly, I am also thankful to the licensees for their continued support in an endeavour to build a sustainable, responsible and empowering gaming industry. MR. RM ZWANE CHIEF EXECUTIVE OFFICE AND ACCOUNTING OFFFICER 12

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14 2. Part B: Performance Information 2.1 Statement of Responsibility for Performance Information The Chief Executive Officer is responsible for the preparation of the public entity s performance information and for the judgements made in this information. The Chief Executive Officer is responsible for establishing and implementing a system of internal controls designed to provide reasonable assurance as to the integrity and reliability of performance information. In my opinion, the performance information fairly reflects the operations of the public entity for the financial year ended 31 March Name: RM Zwane (Mr) Chief Executive Officer and Accounting Officer Date: 31/05/

15 2.2 Overview of the public entity s performance Strategic Outcome-Oriented Goals OVERALL PERFORMANCE VOTED FUNDS GRANT FUNDING 2008/ / / / /13 TOTAL VOTED FUNDS LESS REPAID TOTAL AIM OF VOTE The ECGBB oversees all gambling and betting activities in the province and matters incidental thereto, as contemplated in the Act. It advises the responsible Member of the Executive Council (MEC) for Economic Development and Environmental Affairs on gambling matters and exercises certain further powers contemplated in the Act. The Aims of the ECGBB include: Licensing of the gaming industry Ensuring compliance with the Act by all licensees Collection of gambling taxes on behalf of the province Combating illegal gambling Undertaking licensing investigations Issuing and revocation of licences Determining licence conditions It is the responsibility of the ECGBB to ensure that an accountable and credible legal gaming industry exists in the province and that there is compliance with internationally recognised standards in the industry. STRATEGIC GOALS To provide excellent services to our stakeholders To institutionalise an international competitive regulatory system To establish sound institutional oversight arrangements and systems to administer socio-economic development commitments that arises from Licence conditions To develop a high-performance, value- based organisation that recognises the ECGBB and its employees as its most important assets To optimise revenue collection for the socio-economic benefit of underprivileged communities. Goal 1 Goal Statement To provide excellent services to our stakeholders. Progress Made by the ECGBB: a) In pursuance of this goal, the ECGBB has developed a Stakeholder Management Strategy. This is a useful tool to support ECGBB s strategic objectives by engaging and influencing the internal and external stakeholders through the creation of a platform to render services direct to communities and regulatory services to the licenced operators in the province. b) A performance survey was conducted by the ECGBB to assess the manner in which its employees conduct themselves when rendering regulatory services. The outcome of the survey was generally positive as the licensed operators are satisfied with the manner in which the ECGBB conducts itself. 15

16 Goal 2 Goal Statement To institutionalise an international competitive regulatory system. Progress Made by the ECGBB: a) In pursuance of this goal, the Board developed and approved a controlled system of an international competitive bidding for issuing licences which includes : Publication of a draft request for proposals regarding different types of licences that the Board rolls out at different periods. Hosting of Bidders Conferences to highlight the requirements of the RFP, draw attention to the EMRs, explain the consequences of non-compliance and the evaluation process, and also to answer written questions put to the Board by prospective licensees. Furthermore, applicants are allowed opportunity to raise issues from the floor and to allow the Board to receive input from interested parties. The Board conducts probity investigations into all applicants of different types of licences to be issued in collaboration with the SAPS and other law enforcement agencies including their shareholders where applicable, to determine compliance with the legislative requirements of the ECGBB Act. Maintaining confidentiality with the process in terms of Section 25 of the Act. Facilitating public participation to ensure transparency before a licence is awarded conducting public hearings hosted by the Board of Directors. Communication of Section 4(1) (b) (iii) of the Competition Act, 1998, which prohibits collusive tendering, to all applicants in order to prohibit collusive tendering and anti-competitive behaviour. Evaluation process of all applications and bids received for various licences is regulated in terms of the ECGBB Act, Essential Minimum Requirements and additional mandatory requirements such as tax compliance, promotion of BBBEE, etc. b) When a licence is finally issued and the licensee is operational, the Board conducts audits to ensure adherence with the conditions of the licence including inspection of various gaming devices. c) Over and above the inspection and revenue audits, the Board also ensures law enforcement and gaming control especially among operators who operate illegally and who were not licenced by the Board. d) In addition, the Board has started strengthening its Responsible Gambling Campaigns and consumer protection strategies, as well as driving public education on legal and illegal gambling. e) In strengthening the regulatory system and ensuring that the Board is internationally competitive, the Board is also beginning to invest in gambling research as this is an area that successful regulators are working on to inform policy and regulatory and strategic reforms. Goal 3 Goal Statement To establish sound institutional oversight arrangements and systems to administer socio-economic development commitments that arise from casino licence conditions Progress Made by the ECGBB: a) Following the appointment of the Board of Directors, a number of structures and committees were established by the Board to facilitate oversight performance of the ECGBB as part of institutional oversight responsibilities. b) An Organisational Performance Reporting System has been institutionalised to ensure that Management Accounts in terms of its performance as well financial prudence. Management reports to the Board on quarterly basis regarding organisational performance. c) An Audit and Risk Committee has been established to fulfil oversight responsibility for the financial reporting process. Other measures which have been successfully implemented include systems of internal control processes for monitoring compliance with laws and regulations as well as the Code of Conduct. d) In addition, conditions attached to all four casino licences will ensure that licence holders / operators establish dedicated Trusts that will specifically benefit previously disadvantaged individuals from the Eastern Cape Licence holder / Operator in order to benefit the Previously Disadvantaged Individuals from the Eastern Cape. 16

17 Goal 3 Goal Statement To establish sound institutional oversight arrangements and systems to administer socio-economic development commitments that arise from casino licence conditions e) The ECGBB is also promoting meaningful empowerment in the gambling industry in the province by requiring adherence to the principles of BBBEE, specially the Level 2 target to be achieved by In some new casino developments, there is a minimum shareholding by local empowerment partners in management companies as a licence condition, where the empowerment grouping must receive at least 30 percent of the management fees due to the management company. f) Furthermore, a number of Trusts have been established by the Casino licensees as part of their Conditions of Licence. These include: Amatola Trust: Hemingways Casino (R10 million once-off donation made in 2001) Boardwalk Trust: Boardwalk Casino (15% shareholding in the Licensee). Mbizana Development Trust: Wild Coast Casino (30% shareholding in the licensee). Zulukamma Trust: Queens Casino (4.5% shareholding in the licensee) Goal 4 Goal Statement To develop a high performance value based organisation that recognises the ECGBB and its employees as its most important assets. Progress Made by the ECGBB: a) The ECGBB has developed a Human Resources Management Strategy that positions its people as unique assets that provide a sustained, competitive advantage within the rapidly changing business environment. b) An Employee Perception and Satisfaction Survey was conducted to determine the perceptions and thoughts of the employees on a range of factors in their work environment. Action plans have been put in place to address areas of concern arising from the survey. c) A number of employee wellness sessions were held to educate and capacitate employees on various wellness issues. d) Furthermore, the ECGBB provides training platforms to a number of employees to ensure that they are capable of executing their line function responsibilities. e) A select number of employees have been allowed to attend international conferences to gain more exposure and insights into gambling regulation, research and consumer protection, as well as public education. Goal 5 Goal Statement To optimise revenue collection for the socio-economic benefits of underprivileged communities. Progress Made by the ECGBB: a) The second route operator licence was awarded in December The licensee started operating with its first limited payout machines in March b) The Board issued request for proposals for Bingo licences which closed in December The Board is in the process of awarding these licences. c) It is anticipated that the licences will be awarded in July 2013 and that the operators will begin operating in September

18 2.2.2 Overview of the Service Delivery Environment Context within which the ECGBB operated during the 2012/13 financial year To assist users of the annual report to gain an understanding of the challenges, successes and other factors that might impact on the ECGBB s performance, the following overview is provided of the context within which the ECGBB implemented its five year strategic plan and three annual performance plan for 2012/13-14/15 MTEF period. During the 2012/13 financial year, the following contextual factors informed the operations and activities of the ECGBB:- Fostering a better understanding and appreciation of the requirements of our regulatory regime by engaging at a strategic level with all stakeholders in the province. Enhancing our knowledge base of the gambling industry, which informs risk assessments that enabled us, among other things, to clarify and, in some cases, reduce the information requirements of the gambling industry. Informing consumers and the public about legal and illegal gambling activities and implementing and completing a gambling consumer education strategy. Enhancing investigations and intelligence gathering and strengthening our relationship with the Criminal Justice Cluster in the province. Developing and refining our responsibility to contribute meaningfully to the social milieu of the Eastern Cape. ECGBB s Overall Performance A balanced overview of performance by the ECGBB is provided below. This not only highlights relevant factors that might be regarded as mitigating circumstances to support the ECGBBs delivery record, it also offers overall performance highlights and flags successes that were achieved against planned targets. In addition, significant developments per budget programme have been identified including the manner in which they impacted either on the demand for the ECGBB s services or on the ability to deliver those services. The ECGBBs overall performance and its key outputs, particularly as it relates to services rendered directly to the public during the reporting period, can be summarised as follows:- The ECGBB developed first ever Gambling Consumer Protection Strategy in order to inform, advice consumers of gambling services including choices to be made regarding gambling and mitigating excessive gambling. Six responsible gambling campaigns were successfully hosted during the reporting period, including the 2012 September Campaigns that were related to the National Tourism Month activities for responsible gambling. Three seminars were hosted on problem gambling and consumer protection. In protecting the public interest from unfair illegal competition, five operation raids were conducted on illegal gambling activities in the province. Three platforms (print, electronic, events) were successfully utilised to communicate and profile the work of the ECGBB to the broader population of the province including the production of three newsletters which were introduced for the first time. An amount of R was made available directly to a number of organisations in the Eastern Cape during the reporting year towards meeting the social responsibility of the ECGBB, as guided by its Socio-Economic Development Policy and the Eastern Cape Anti-Poverty Strategy championed by the Eastern Cape Department of Social Development and Special Programme. Over and above rendering services direct to the public, the ECGBB also provides regulatory services to the Industry in terms of the Eastern Cape Gambling and Betting Act. The following regulatory services were conducted successfully during the reporting year:- 88 licence applications for various gambling licences were investigated with 88 public hearings conducted during the reporting period to ensure transparency in the process of awarding licences. 85 gambling licences were issued by the Board to qualifying applicants. These included Type A and B licences, Route Operator licences, Transfer of Type A Licences, Bookmaker and Acquisition of Interest Licences from a licence holder. 67 Compliance Audits were conducted at a number of licence operators within the province gambling devices were tested for quality assurance purposes and to verify that they meet the National Regulator for Compulsory Specifications (NCRS) and National Standards & Norms applicable to gambling devices 28 Revenue Audits were conducted in order to verify the authenticity of gaming revenue generated by all the operators within the province, and R114 million was transferred to the Provincial Treasury 18

19 15 Annual Financial Statements of Licences were reviewed and analysed as part of the regulatory financial requirements of the Act. 9 FICA compliance audits were also conducted. Challenges encountered and corrective steps The table below details challenges encountered by the ECGBB during the reporting period in providing the relevant services, and corrective steps that were/are to be taken in dealing with these challenges. BUDGET SUB- PROGRAMME PERFORMANCE INDICATOR CHALLENGES ENCOUNTERED CORRECTIVE STEPS UNDERTAKEN OR TO BE ADDRESSED Investigation and Licensing Administration Law Enforcement and Gaming Control Percentage of Licence applications Investigated. Number of MOU s developed with SAPS, SARS, FIC and NPA Number of Casino Gambling Devices tested. Priority was given to bingo licensing process. Due to the magnitude of applications received all the available resources were utilised for this purpose. Numerous attempts were made to secure meetings with the relevant institutions with no avail. However, our licensing officers maintain a positive working relationship with both SARS and SAPS officials at lower level. Unplanned targets to test gambling devices caused derailment in other planned targets. The Board is embarking on window periods for each type of licence to be issued; upon which each type of licence will have its own dedicated period. Due to non-availability of these officials, the board has investigated an option of utilising creditable organisation (INDECO) to provide the board with the necessary probity information. This has been normal with all other gambling board to utilise these institutions. Licensees will be engaged to submit their projections on their need for the ECGBB to test their devices in order for these projections to be used as reporting indicators rather that forward looking planning indicators. Audit and Compliance Services Number of Environmental Audits Conducted. There was a delay in concluding the tripartite Service Level Agreement which was resolved in the last quarter. Suitable dates could not be secured with the appointed service provider to complete the audits by year end. The respective Service Level Agreements concluded are for a period of three years. Socio Economic Development MOU s developed between the ECGBB and Licensees Trusts. Number of Donations or Sponsorships awarded to deserving communities The Trust was unable to sign the proposed SLAs or MOUs because the SLAs or MOUs appeared to be a repetition of the conditions of licences A number of applications were received from communities seeking assistance from the Board, especially for boxing purposes. However, the budget of the SED Budget Sub-programme is limited and decreasing in real terms. Content and context of the proposed MOUs will be included in the current conditions of licences which will then be amended and submitted to the Board for approval. The SED Policy will be utilised accordingly and a committee to adjudicate proposal and request will consider whether these proposals are compliant with the SED Policy. Legal Services and Board Secretariat Legislative Review Processes Non-finalisation of the review of the ECGBB Act and the Regulations. Develop a new schedule to be approved by the Hon. MEC that will ensure the finalisation of the process that was started in the previous financial year. The ECGBB will also engage the Legislative Review Committee at the Provincial Legislature to ensure that the process of reviewing the Act and the Regulations is done and finalised within the second quarter of 2013/14 financial year. Description of Significant Developments Significant developments external to the ECGBB took place during the reporting period. These have impacted either on the demand for the ECGBB s services or on the ECGBB s ability to deliver its services. 19

20 Significant Developments within the Corporate Services Management & Administration Budget Programme One PERFORMANCE INDICATOR SIGNIFICANT DEVELOPMENTS YES NO NAME OF THE SIGNIFICANT DEVELOPMENT IN 2012/13 IMPACT ON THE DEMAND FOR THE ECGBB SSERVICES IMPACT ON THE ECGBB S ABILITY TO DELIVER ITS SERVICES STRATEGIC MANGEMENT SERVICES Number of Medium to Long term Statutory Planning Documents Tabled at the Provincial Legislature. X New Proposed Treasury Regulations regarding the Development and Tabling of Operational Plans of Departments and Entities N/A The ECGBB will be expected to develop and table the Operational Plan at the same time with the Annual Performance Plan in the 2013/14 financial year. Stakeholder Management Strategy Approved X The approval and adoption of the Stakeholder Management Strategy of the ECGBB. The approved Stakeholder Management Strategy will require the ECGBB to engage comprehensively with all its stakeholders and strategic partners in order to realise the objectives of the ECGBB. The limited capacity of the SMS Division to ensure that all potential stakeholders of the ECGBB are engaged may hamper the ability of the ECGBB to implement the Stakeholder Management Strategy. LEGAL SERVICES AND BOARD SECRETARIAT Percentage of various licences issued by the ECGBB. X The issuing of various licences in particular the 2 nd Route Operator The Board is compelled to sit regularly so as to issue gambling licences for all the submitted applications for licences. Costs incurred by the ECGBB in terms of Board Fees have increased as a result of the number of gambling licence application to be adjudicated. The more licences the ECGBB issues to successful applicants the more it will have to increase its inspection and auditing capacity to ensure that the new operators comply fully with all licence conditions. ECGBB Legislation reviewed. X The non-finalisation of the Review of the ECGBB Act and Regulations The demand on the ECGBB s services increased and is further aggravated by the need to ensure that the ECGBB legislation is finalised in order for services to be properly provided in terms of updated legislation. The ECGBB s delivery of services is hampered by the fact that an obsolete Act negatively impacts its ability to achieve optimum service delivery. HUMAN RESOURCES MANGEMENT AND DEVELOPMENT Approved Human Resource Plan of the ECGBB. X The approval of the HRM Strategy by the Board of Directors Recruitment and retaining of key employees that will drive the ECGBB s strategic objectives. Number of Unemployed Graduates on 12 Months Internship Programme. X 3 Unemployed Learners Recruited. Unemployed learners are capacitated with practical experience in the industry. The organisation trains interns in areas identified with skills shortages so that they may be able to be placed when positions become vacant. Significant Developments within the Gambling Regulation and Consumer Protection Budget Programme Two PERFORMANCE INDICATOR SIGNIFICANT DEVELOPMENTS YES NO NAME OF THE SIGNIFICANT DEVELOPMENT IN 2012/13 IMPACT ON THE DEMAND FOR THE ECGBB SSERVICES IMPACT ON THE ECGBB S ABILITY TO DELIVER IT S SERVICES LAW ENFORCEMENT AND GAMING CONTROL Number of operations / raids ( Sweeps ) conducted on illegal gambling in the province. X The closure of illegal sites and confiscation of illegal machines The continuous detection of illegal gambling sites and the higher number of intelligence reports the ECGBB receives will certainly increase the demand for services and actions to strengthen our law enforcement activities. The more successful the organisation is in terms of illegal gambling operations, the more it will be required to testify in courts of law to ensure the availability of credible evidence. These court processes may delay the organisation in strengthening its law enforcement and gaming control. 20

21 CONSUMER PROTECTION AND PUBLIC EDUCATION Gambling Consumer Protection Strategy Approved. X The development of the Gambling Consumer Protection Strategy. The implementation of the Strategy will cause an increase in the demand for the services of the ECGBB. Human Resources shortages to effectively implement the strategic imperatives of the Strategy will have a negative impact on the implementation of the Strategy. Number of responsible gambling campaigns conducted accordingly. X The Focused 2012 September month activities on Responsible Gambling Campaigns. There will be an increasing demand for the services of the ECGBB to communicate with and inform communities, and consumer of gambling activities. An inability to prioritise the subdivision as well as the nonappointment of personnel to champion the implementation of responsible gambling campaigns will impact negatively on the ability of the ECGBB to implement this mandate. Significant Developments within Research and Development Budget Programme Three PERFORMANCE INDICATOR SIGNIFICANT DEVELOPMENTS YES NO NAME OF THE SIGNIFICANT DEVELOPMENT IN 2012/13 IMPACT ON THE DEMAND FOR THE ECGBB SSERVICE S IMPACT ON THE ECGBB S ABILITY TO DELIVER IT S SERVICES EMPIRICAL RESEARCH ON GAMBLING INDUSTRY Research and Development Strategy approved by the Board of Directors of ECGBB. X The development of the Research and Development Strategy of the ECGBB The areas and themes of the Research and Development Strategy will contribute on the demand by various operators and institutions to conduct research on various areas associated with Gambling Regulation and Consumer Protection The non-prioritisation of Research and Development including nonprovision of budget as a Budget Programme of the organisation will impact negatively on the implementation of the strategy and further deprive the ECGBB of the evidence -based knowledge the organisation needs to effectively conduct its business. Number of MOU s developed to strengthen the Research Agenda of the ECGBB. X Signing of MOUs with Different Universities. The ECGBB will be expected to provide comprehensive leadership on research in the area of Gambling Regulation and Consumer Protection Lack of capacity and utilisation of a single official will impact negatively on the implementation of the approved Research and Development Strategy, including an inability to benefit from conducting research and producing research outcomes to inform potential policy reforms and strategies. 21

22 Overview of the Organisational Environment In preparing the 2012/13, 2013/14 and2014/15 APP, the ECGBB identified a number of organisational development weaknesses to be addressed over the next three to five years. These were characterised in terms of the following:- Undefined Budgeting Processes to ensure that the Department of Economic Development Environmental Affairs and Tourism allocates an appropriate budget that is based on the mandate and service delivery performance of the ECGBB. Lack of Human Capital and personnel to ensure that the ECGBB is able to execute its responsibility to regulate the gambling and betting industry, and to protect consumers and the general public with regards compulsive gambling. Lack of an Information Management System to ensure that information developed is properly documented and stored appropriately for ease of utilisation. Lack of cohesion with and among employees of the ECGBB, characterised by an absence of teamwork, guidance and mentoring of employees by senior managers of the organisation. Non-documented procedures and processes (SOP s) to conduct the core business of the ECGBB. In mitigating the above matters, it is important to report the following:- The budget process of the ECGBB was developed adherence to the three Budget Programmes of the organisation, with Planned Targets informed by the statutory requirements of the ECGBB as well as other prescripts and funding responsibilities. Although a number of personnel were appointed in 2012/13, this remains a significant challenge, especially within the Supporting Services of the ECGBB as work performed is voluminous. The organisation started utilising the DIGIBILITY Information Management System to document and appropriately store information generated by the organisation, for ease of utilisation. In addition, research on the records and document management was also conducted and a report to guide the ECGBB was submitted for consideration. With regards to these lack of social cohesion within the ECGBB, two team building exercises were conducted, the efficacy and impact of which has yet to be determined. Of significance was the development of the Human Resources Management Strategy which outlines various strategic imperatives related to employee-management relations and processes that should be undertaken to address this organisational challenge Key policy developments and legislative changes There were no major changes to relevant policies or legislation within the ECGBB during the 2012/13 financial year Summary of Revenue Collection SUMMARY OF REVENUE IN THE LAST FIVE YEARS GAMING PERFORMANCE REVENUE CATEGORY REVENUE FISCUS TO 2007/ / / / / /13 TOTAL Rm Rm Rm Rm Rm Rm Rm Casino Bookmakers Taxes Totalisator Taxes Total taxes LPM Fees Exclusivity Fee TOTAL TO FISCUS

23 2007/ / / / / /13 TOTAL REVENUE CATEGORY REVENUE TO FISCUS Rm Rm Rm Rm Rm Rm Rm OWN REVENUE Application Fee Administration Fee TOTAL OWN REVENUE Gambling and betting taxes, fees and interest collected during the financial year under review totalled R114, 9 million (2011/12: R121, 9 million). The total Gross Gaming Revenues (GGR) generated in the financial year under review was R1, 4 billion. Full details are contained in the annual financial statement. The following is a graphical depiction of the gaming performance per gaming category: Revenue and Tax Statistics vs 2011/

24 24

25 Distribution of Gambling and Betting Takings: 2012/13 Financial Year 25

26 26

27 Summary of actual revenue collected against budget. 2012/ /12 Source of Revenue Budget Amount R 000 Actual Amount Collected R 000 (Over)/Under Collection R000 Budget Amount R 000 Actual Amount Collected R 000 (Over)/Under Collection R000 Casino 86,599 89,047 (2,448) 77,260 78,886 (1,626) Route Operators 13,416 16,130 (2,714) 13,515 13,710 (195) Totalisator 5,307 3,612 1,695 4,370 3, Bookmakers 2,592 3,439 (847) 2,630 2,851 (221) Annual license and registration fees 1,833 2,226 (393) 1,895 2,501 (606) Bank Interest (149) (829) Exclusivity Fee ,000 20,000 1, , ,873 (4,856) 120, ,874 (2,094) Casino fees collected were by R2, 448 million over the budget target. This is a result of an increase in gross gaming revenue achieved by the casinos. Boardwalk, Hemingway s and Wild Coast Sun completed their major capital revamp. This resulted in an increase in gross gaming revenue and a subsequent increase in gaming taxes. Route operator taxes increased by R2, 714 million. This was caused by V-Slots increasing their allocation of limited payout machines to the allocated 1000 machines. This increase also resulted from the second route operator, Pioneer Slots starting operations during the year Summary of payments by programme ACTUAL VS BUDGET EXPENDITURE BY PROGRAMME 2012/ /12 Programme Name Budget Actual expenditure Over / (Under) Expenditure Budget Actual expenditure Over / (Under) Expenditure R'000 R'000 R'000 R'000 R'000 R'000 Corporate Service Management and Administration 26,575 30,080 3,505 28,986 34,599 5,612 Gambling Regulation and Consumer Protection 16,617 15,285 (1,331) 9,191 7,587 (1,604) Research and Development Total 44,032 46,229 2,197 38,177 42,186 4,009 Corporate Service Management and Administration overspent on the following areas during the current financial year: External audit fee Printing and stationery Maintenance of the building and fixtures and fittings Water, electricity and property rates and taxes Consulting fees relating to job grading Staff wellness and well being. CAPEX Gambling Regulation and Consumer Protection overspent on Hearing and Evaluation costs. This was due to the extensive process involved in the bingo licensing process. It under spent COE related costs in the Consumer Protection sub-programme. Research and Development under spent on budget as a result of not meeting the survey and research targets for the year. 27

28 2.3 Programme Performance Budget Programme 1: Corporate Services Management & Administration Purpose of the programme The purpose of this programme is to provide corporate administrative and management support services to the organisation including the Board of Directors in ensuring that the mandate of the ECGBB is executed and achieved accordingly Sub-programmes Office of the Chief Executive Officer Strategic Management Services Legal Services and Board Secretariat Financial Management Human Resources Management and Development Communication and Marketing Designated Programmes and Vulnerable Groups Socio Economic Development Information Management and Technology Strategic objectives To deliver a quality customer-oriented service to the public, licensees and other stakeholders. To maintain and review effective risk management systems. To ensure that only suitable qualified applicants are awarded licences and licence holders optimise revenue growth and measurable contributions to socio economic development. To influence and maintain a regulatory framework for the gambling industry and provide appropriate advice to the responsible executive authority. To ensure accurate budgeting, sound cash flow management and preparation of management accounts and AFS in accordance with relevant standards and legislation. To review and update human resources policies. To ensure an adequately trained and resourced staffing structure to deliver a quality service. To implement a balanced scorecard and integrated performance management system capable of monitoring and evaluating performance at shareholder, Board and operational levels. To ensure optimal information & communication systems. To ensure that the Act, Regulations and Rules meet the needs of the province and developments within the industry. To review, maintain and update secure and appropriate information technology systems. 28

29 Key Performance measures, their targets and actual results for 2012/13 Financial Year Strategic Objectives: To deliver a quality customer-oriented service to the public, licensees and other stakeholders; and To maintain and review effective risk management systems. OFFICE OF THE CEO Performance Indicator Number of governance sessions hosted with the HOD & Hon. MEC of DEDEAT in terms of the SLA. Actual Achievement 2011/2012 (Baseline Information) Planned Target Actual Achievement Variance from2011/2012 to Deviation from planned Comment on Variances target for Achieving the planned target depends on the availability of the Hon. MEC and is therefore not in the control of the ECGBB. Number of interaction sessions with licensees regarding regulatory services of the ECGBB. (Casinos, Route Operators, Bookmakers & Totalizator). Number of new international agreement signed. Revised Risk Management Policy of the ECGBB approved by the Board of Directors Number of Risk Assessment Reviews conducted. Percentage of the Risks Register Updated. Number of mandatory Internal Audits conducted. Number of Managers with Risk Management included in their Individual Performance Agreements No Variance No Variance No Deviation No Variance No Deviation 100% 100% 100% No Variance No Deviation No Variance No Deviation Not Applicable No Variance No Deviation The non-achievability of the planned targets was competing responsibilities which resulted in other sessions with licensees not being hosted. There were no budget implications regarding this matter. The Research Partners in Canada wanted to meet and engage the ECGBB. This was not the budget was not sufficient to travel to Canada. SUB-PROGRAMME: STRATEGIC MANAGEMENT SERVICES Strategic Objectives: To deliver a quality customer-oriented service to the public, licensees and other stakeholders. Performance Indicator Planning and Organisational Performance Framework Approved. Number of medium to long term Statutory Planning Documents tabled at the Provincial Legislature. Actual Achievement 2011/2012 (Baseline Information) Planned Target Actual Achievement Variance from2011/2012 to Deviation from planned target for N/A 1 1 No Variance No Deviation No Variance No Deviation Number of sessions to N/A 3 3 No Variance No Deviation Comment on Variances 29

30 SUB-PROGRAMME: STRATEGIC MANAGEMENT SERVICES Strategic Objectives: To deliver a quality customer-oriented service to the public, licensees and other stakeholders. Performance Indicator communicate the strategic imperatives of the ECGBB to all its stakeholders. Number of organisational Performance Compliance Reports submitted on time. Stakeholder Management Strategy approved. Framework on developing policies approved Non-Financial Performance Information Policy of the ECGBB approved. Actual Achievement 2011/2012 (Baseline Information) Planned Target Actual Achievement Variance from2011/2012 to Deviation from planned target for No Variance No Deviation N/A 1 1 No Variance No Deviation N/A 1 1 No Variance No Deviation N/A 1 1 No Variance No Deviation Comment on Variances SUB-PROGRAMME: LEGAL SERVICES AND BOARD SECRETARIAT Strategic Objectives: To ensure that only suitably qualified applicants are awarded licences and that licence holders optimise revenue growth and measurable contributions to socio economic development; and To influence and maintain a regulatory framework for the gambling industry and provide appropriate advice to the responsible MEC. Performance Indicator Actual Achievement 2011/2012 (Baseline Information) Planned Target Actual Achievement Variance from2011/2012 to Deviation from planned target for Comment on Variances Percentage of various licences issued by the ECGBB. N/A 100% % 85 No Variance No Deviation Number of sub-committee reports approved by the ECGBB Board of Directors No Deviation Number of subcommittee meetings in 2012/13 was reduced Number of internal Organisational Performance Reports to be considered by the ECGBB Board of Directors No Variance No Deviation Number of mandatory reports submitted by the Board of Directors No Variance No Deviation Legal Policy Framework approved N/A 1 1 No Variance No Deviation 30

31 SUB-PROGRAMME: LEGAL SERVICES AND BOARD SECRETARIAT Strategic Objectives: To ensure that only suitably qualified applicants are awarded licences and that licence holders optimise revenue growth and measurable contributions to socio economic development; and To influence and maintain a regulatory framework for the gambling industry and provide appropriate advice to the responsible MEC. Performance Indicator Actual Achievement 2011/2012 (Baseline Information) Planned Target Actual Achievement Variance from2011/2012 to Deviation from planned target for Comment on Variances ECGBB legislation reviewed No Variance No Deviation Percentage of legal advisory services provided 100% 100% (78) 100% (78) No Variance No Deviation SUB-PROGRAMME: FINANCIAL MANAGEMENT SERVICES Strategic Objective: To ensure accurate budgeting, sound cash flow management and preparation of management accounts and AFS, in accordance with relevant standards and legislation. Performance Indicator Budget Planning Process approved. Actual Achievement 2011/2012 (Baseline Information) Planned Target Actual Achievement Variance from2011/2012 to Deviation from planned N/A 1 1 No Variance No Deviation Revenue collected. N/A R112m R114m No Variance +R2m Number of Financial Compliance Reports Submitted on time 100% (2) No Variance No Deviation Procurement Plan Approved N/A 1 1 No Variance No Deviation Number of EME s contracted. N/A 10 minimum Percentage monitoring of budget over / under expenditure per programme Number of verifications conducted on ECGBB fixed assets 46 EME s No Variance Comment on Variances target for +36 EMES N/A 10% 10% No Variance No Deviation N/A 2 2 No Variance No Deviation Revenue generation was more than anticipated, as was projected and planned. There were no budgetary or financial implications. EME s used for procurement of goods & services was more than anticipated. However, the expenditure incurred was within the budgeted amount for the period under review. 31

32 SUB-PROGRAMME: HUMAN RESOURCES MANAGEMENT AND DEVELOPMENT Strategic Objectives: To review and update human resources policies. To ensure an adequately trained and resourced staffing structure to deliver a quality service; and To implement a balanced score card and integrated performance management system capable of monitoring and evaluating performance at shareholder, Board and operational levels. Performance Indicator Approved Human Resource Plan of the ECGBB Employment Equity Plan of the ECGBB Approved Disaster Management Plan of the Board Approved Number of disaster management drills conducted at the ECGBB offices Percentage of contracted employees from the beginning of the financial year Training Development Plan of the ECGBB approved Actual Achievement 2011/2012 (Baseline Information) Planned Target Actual Achievement Variance from2011/2012 to Deviation from planned 25% 1 1 No Variance No Deviation N/A 1 1 No Variance No Deviation N/A 1 1 No Variance No Deviation N/A 2 2 No Variance No Deviation 100% (33) 100% (45) 100% (45) No Variance Comment on Variances target for No Deviation 65% 1 1 No Variance No Deviation Number of employees provided with training to execute the ECGBB mandate N/A Number of Unemployed Graduates on 12 months internship programme. Number of bursaries awarded to employees of ECGBB Number of employee wellness sessions conducted. Number of performance assessment reviews conducted on ECGBB employees No Variance -11 N/A 3 3 No Variance No Deviation N/A 7 10 No Variance +3 N/A 2 3 No Variance +1 N/A 4 4 No Variance No Deviation Training was prioritized in terms of relevance and importance to the - divisions. Budget allocated became insufficient because of price increase in the cost of training by different training institutes and service providers. Additional employees applied for bursaries. The Bursary Budget had sufficient funds to accommodate more applicants and all the bursaries were aligned to the organisations priorities. The Organisation was approached by an NGO to promote HIV& AIDS awareness during World Aids Day to all employees of the ECGBB. There was no additional budget that was utilised for this awareness session. 32

33 SUB-PROGRAMME: COMMUNICATION AND MARKETING Strategic Objective: To ensure optimal information and communication systems. Performance Indicator Advertorial programme of the ECGBB approved. Number of external newsletters to communicate strategic imperatives of the ECGBB. Number of platforms to profile the work of the ECGBB (print, electronic and general events platforms) Communication Crisis Plan approved. Actual Achievement 2011/2012 (Base Line Information) Planned Target Actual Achievement Variance from2011/2012 to Deviation from planned N/A 1 1 No Variance No Deviation N/A 3 5 No Variance +2 N/A 1 1 No Variance No Deviation Comment on variances target for The employee that is responsible for this sub-programme is also responsible for three other major sub-programmes within the ECGBB. Capacity to implement all the planned targets therefore remained a serious challenge. Two additional platforms were made available to the Board to profile and communicate the work of the ECGBB. SUB-PROGRAMME: SOCIO ECONOMIC DEVELOPMENT Strategic Objective: To ensure that the Act, Regulations and Rules meet the needs of the province and developments within the industry. Performance Indicator Actual Achievement 2011/2012 (Baseline Information) Planned Target Actual Achievement Variance from2011/2012 to Deviation from planned target SED policy reviewed. N/A 1 1 No Variance No Deviation Number of Functional SED Projects of the ECGBB. Number of MOU s developed between the ECGBB and the Licensees Trusts. Number of functional Trusts supported in terms of licence conditions. Number of sessions attended to acknowledge the designated groups within the province. (Youth, Disabled, Women and Elderly) N/A 6 6 No Variance No Deviation N/A 5 0 No Variance N/A 5 3 No Variance -2 N/A 8 8 No Variance No Deviation Comment on Variances for -5 MOU s have been developed and all the Trusts were consulted and engaged in the process to sign the MOUs. Despite numerous attempts of persuade Trustees to sign the MOU s, they are still engaging / consulting with their legal advisors on this issue. There were no budgetary implications for this target. Two Trusts Amatola Trust and Boardwalk Trust are not and therefore and was no support to be provided as planned. There were no budgetary implications regarding the two non-operational Trusts. 33

34 SUB-PROGRAMME: INFORMATION MANAGEMENT AND TECHNOLOGY Strategic Objective: To review, maintain and update secure and appropriate information technology systems Performance Indicator Number of Information Technology Systems Approved Percentage of a Functional Intranet of the ECGBB. Percentage of a Functional Internet of the ECGBB Percentage of a Functional Gambling Information Management System of the ECGBB Actual Achievement 2011/2012 (Baseline Information) Planned Target Actual Achievement Variance from2011/2012 to Deviation from planned target N/A 4 3 No Variation % 100% 100% No Variance No Deviation 98% 100% 100% +2% No Deviation 95% 100% 100% +5% No Deviation Comment on Variances for DEDEAT instructed all public entities to cease the development of Performance Information Systems as they are going to lead the development and alignment of IT Performance Systems. The functional time of the internet improved during 2012/13 The functional time of the Information Management System improved during 2012/13 Summary of payments by sub-programme of Budget Programme One: 2012/ /12 Programme Name Budget Actual expenditure Over / (Under) Expenditure Budget Actual expenditure Over / (Under) Expenditure R'000 R'000 R'000 R'000 R'000 R'000 Office of the CEO 5,484 5,191 (292) 10,395 17,841 7,445 Strategic Management Services 3,560 3,404 (156) 2, (2,041) Financial Management 6,052 6, ,323 6,754 1,431 Legal Services and Board Secretariat 4,830 6,263 1,433 2, Human Resource Management and Development 4,372 5,494 1,122 3,976 4, Communication and Marketing 981 1, ,233 3, Socio Economic Development ,004 1,004 Information Management and Technology (28) 957 1, Total 26,575 30,080 3,505 28,986 34,599 8,262 Primary areas of actual to budget differences are as follows: Financial Management o Increasing audit fees o Increased cost of printing and stationery Legal Services and Board Secretariat o Higher than anticipated Board members remuneration as a result of the intense involvement of Board member s in the bingo licensing process. Human Resource Management and Development o Increased need for CAPEX items to cater for increased headcount o Costs of building and fixtures and fittings maintenance higher than budgeted o Ever increasing rates and taxes o Consulting fees as a result of workforce planning and organisational design analysis 34

35 Strategies to overcome Areas of underperformance by Budget Programme One: BUDGET SUB- PERFORMANCE INDICATOR PROGRAMME Office of the CEO Human Resources Management and Development Communication and Marketing Socio Economic Development Information Management and Technology Number of governance sessions hosted with the HOD & Hon. MEC of DEDEAT in terms of the SLA. Number of interaction sessions with Licensees regarding regulatory services of the ECGBB. (Casinos, Route Operators, Bookmakers & Totalizator). Number of new international agreement signed. Number of employees provided with training to execute the ECGBB mandate. Number of bursaries awarded to employees of ECGBB Number of employee wellness sessions conducted Number of external newsletters to communicate strategic imperatives of the ECGBB. Number of platforms to profile the work of the ECGBB (print, electronic and general events platforms) Number of MOUs developed between the ECGBB & the Licensees Trusts. Number of functional Trusts supported in terms of licence conditions. Number of Information Technology Systems approved. 2012/13 TARGET : VARIANCE (-) OR DEVIATION (+) STRATEGY TO OVERCOME UNDERPERFORMANCE (VARIATION) AND DEVIATION FROM THE PLANNED TARGETS The ECGBB will treat this indicator as a reporting indicator and not as a forward looking or planning indicator as it is not in the control of the ECGBB. The reporting period for the number of licensees sessions will be reduced from quarterly to bi-annually in order to report the sessions in the financial year it has occurred. This indicator and target will be included in the International Travelling Schedule of the Board. It will not be a standalone activity and will further be treated as a reporting indicator. The Division will conduct an annual training needs analysis in order to determine the actual provision of training based on the strategic objectives of the ECGBB. Quarter Training Reports to measure the impact of the provision of training will be developed and submitted during the 2013/14 financial year. The consideration of internal bursaries to be awarded to employees will be informed by intensive engagements of all employees as well as the Bursary Policy of the ECGBB to ensure the planned bursary targets are determined before the end of the calendar year. A proper Employee Wellness Programme informed by an Employee Wellness Policy or Human Resources Management Strategy will be developed with clear planned targets including engaging other organisation so that their services are included in the EWP of the year. Due to a lack the lack of capacity in the Unit, the SMS Division has determined that only three newsletters should be developed instead of five for the 2013/14 financial year. All targets that appear to be over-achievement, but in real terms may be deviation from planned targets will be avoided in the future as they impact negatively on budget baselines. The SED will incorporate the contents of the MOUs to conditions of licence so that one source document will serve as a guiding document to achieve the desired outcomes to work with Trusts established in terms of licence conditions. The SED Budget sub-programme will continue working with the functional and existing Trusts as two trusts are not operational because of lack of funding. An ICT Manager has been appointed by the organisation and the planned target that was not achieved during the 2012/13 will be implemented in 2013/14 financial year. RELEVANT OFFICIAL Mr. D. Mzonke Mrs. A. Camagu Mr. M. Duma Mr. M. Duma Mr. D. Mzonke Mr. K. Chetty Changes to planned targets There were no changes on the performance indicators that were made during the financial year of reporting. 35

36 2.3.2 Budget Programme 2: Gambling Regulation and Consumer Protection Purpose of the Programme The purpose of this programme is to implement the ECGBB Act and other statutory mandates through conducting compliance, auditing, licensing, investigations, gaming control and law enforcement as well as protecting and educating consumers and the public about responsible gambling Sub-programmes Investigation & Licensing Administration Law enforcement and gaming control Audit and compliance services Consumer protection and public education Strategic objectives To conduct investigations and regulatory functions in an objective manner to ensure that the decision-making processes are impeccable and watertight to avoid any possible legal challenges. To protect the public interest and the licenced operators from unfair and illegal competition Key Performance measures, their targets and actual results for 2012/13 Financial Year Strategic Objectives: To conduct investigations and regulatory functions in an objective manner to ensure that the decision-making processes are impeccable and watertight to any possible legal challenges; and To protect the public interest and the licenced operators from unfair and illegal competition. INVESTIGATION AND LICENSING ADMINISTRATION Performance Indicator Actual Achievement 2011/2012 Planned Target Actual Achievement Variance from2011/2012 to Deviation from planned target for Comment on Variances Percentage of Licence applications Investigated. N/A 100% (94) 94% (88) No Variance (6%) -6 Priority was given to the bingo licensing process. Due to the magnitude of applications received all the available resources were utilised for this purpose. Percentage of Certification of Suitability Applications Investigated. N/A 100% (3) 100% (3) No Variance No Deviation Percentage of public hearing sessions held. N/A 100% (5) 100% (5) No Variance No Deviation Percentage of Employee Registration Certificates issued. N/A 100% (561) 100% (580) No Variance +19 The amount on the APR was incorrectly shown as 561 instead of

37 SUB-PROGRAMME: LAW ENFORCEMENT AND GAMING CONTROL Strategic Objectives: To protect the public interest and the licenced operators from unfair and illegal competition Performance Indicator Number of operations / raids ( Sweeps ) conducted on illegal gambling in the province. Number of MOUs developed with SAPS, SARS, FIC and NPA. Percentage of gaming devices registered. Number of Casino Gambling Devices tested. Actual Achievement 2011/2012 Planned Target Actual Achievement Variance from2011/2012 to Deviation from planned target for No Deviation N/A N/A 100% (867) 4 1 No Variation % (867) No Variation No Variation No Deviation No Deviation Comment on Variances Numerous attempts have been made to try and secure meetings with the relevant institutions to no avail. Licensees requested the ECGBB to test 799 devices over and above the planned target due to casino developments in Zone 1 and 2. The costs were incurred by licensees. SUB-PROGRAMME: AUDIT AND COMPLIANCE SERVICES Strategic Objectives: To ensure compliance and adherence to bid commitments, licence conditions, legislation and regulations prior to and after the commencement of the operations. Performance Indicator Number of Compliance Audits Conducted Percentage of Gambling Devices Verified Percentage of Employees in the Gaming Industry Verified Number of Revenue Audits Conducted Number of FICA compliance audits conducted Number of Licensees AFS Analysed Number of environmental audits conducted Actual Achievement 2011/2012 Planned Target Actual Achievement Variance from2011/2012 to Deviation from planned target for No Deviation 100% 100% (546) 100% (546) No Variance No Deviation N/A 100% (407) 100% (408) No Variance No Deviation No Deviation N/A 11 9 No Variation -2 N/A No Variance No Deviation 100% Comment on Variances The final reports for two audits were concluded after year end. The report for Boardwalk was concluded within the year but erroneously omitted from the POE There was a delay in concluding the tripartite Service Level Agreement (SLA) which was resolved in the last quarter suitable dates 37

38 SUB-PROGRAMME: AUDIT AND COMPLIANCE SERVICES Strategic Objectives: To ensure compliance and adherence to bid commitments, licence conditions, legislation and regulations prior to and after the commencement of the operations. Performance Indicator Number of SED audits conducted in terms of Licence Bid Commitments Actual Achievement 2011/2012 Planned Target Actual Achievement Variance from2011/2012 to Deviation from planned target for 100% 6 4 No Variation -2 Comment on Variances could not be secured with the appointed service provider to complete the audits by year end. The audit for Queens Casino was conducted in conjunction with a compliance audit. The audit for Cradock was only concluded post year end. SUB-PROGRAMME: CONSUMER PROTECTION AND PUBLIC EDUCATION Strategic Objective: To educate the public on gambling related issues Performance Indicator Gambling Consumer Protection Strategy Approved. Number of Sessions to Communicate the Approved Gambling Consumer Protection Strategy. Number of Responsible Gambling Campaigns Conducted Accordingly. Number of seminars hosted on Problem Gambling and Consumer Protection Actual Achievement 2011/2012 Planned Target Actual Achievement Variance from2011/2012 to Deviation from planned target for N/A 1 1 No Variation No Deviation N/A 3 3 No Variation No Deviation No Variation +3 N/A 3 3 No Variation No Deviation Comment on Variances The additional three targets achieved was a result of invitations received from different public sector organisations. The ECGBB was invited to conduct more awareness programmes on responsible gambling during the last quarter of the financial year. There were no additional budget implications 38

39 Summary of payments by sub-programme of Budget Programme Two: 2012/ /12 Programme Name Budget Actual expenditure Over / (Under) Expenditure Budget Actual expenditure Over / (Under) Expenditure R'000 R'000 R'000 R'000 R'000 R'000 Licensing and Investigation 4,917 6,015 1, Law Enforcement and Gaming Control 2,617 2,479 (138) Audit and Compliance 3,034 2,765 (270) Consumer Protection and Public Education 6,048 4,027 (2,021) Total 16,617 15,285 (1,331) Primary areas of actual to budget differences are as follows: Licensing and investigation o Higher evaluation and hearing costs as a result of the Bingo Licensing process. These costs are however recoverable and shown under recovery income, therefore having a nil effect on surplus / deficit. Consumer Protection and Public Education o There was an under spend on employee costs o The grant relating to consumer protection was received in December 2012 which meant that the Board only had three months to implement this programme. Expenditure was not budgeted for on a sub-programme level in the previous year. 39

40 Strategies to overcome areas of underperformance by Budget Programme Two: BUDGET PROGRAMME Investigation and Licensing Administration SUB- Law Enforcement And Gaming Control PERFORMANCE INDICATOR 2012/13 TARGET : VARIANCE (-) OR DEVIATION (+) Percentage of Licence applications Investigated. (-6%) -6 Percentage of public hearing sessions held. (-6%) -6 Number of MOUs developed with SAPS, SARS, FIC and NPA Number of Casino Gambling Devices tested STRATEGY TO OVERCOME UNDERPERFORMANCE (VARIATION) AND DEVIATION FROM THE PLANNED TARGETS The Board is embarking on having window periods for each type of licence to be issued; upon which each type of licence will have its own dedicated period. The Board is embarking on having window periods for each type of licence to be issued; upon which each type of licence will have its own dedicated period. RELEVANT OFFICIAL Mr. M. Vanda Mr. M. Vanda Due to non availability of these officials, the board has investigated an option of utilising a creditable organisation (INDECO) to provide the Board with the necessary probity of information. This has been standard practice with all other gambling Boards utilising these institutions. Mrs. B. Mnqokoyi Licensees will be engaged to submit their projections regarding their need for the ECGBB to test their devices. These projects will be used as reporting indicators rather than forward looking planning indicators. Audit and Compliance Services Number of environmental audits conducted. -4 The respective Service Level Agreements concluded are for a period of three years. Ms. H. Adonisi Consumer Protection and Public Education Number of responsible gambling campaigns conducted accordingly +3 All targets that appear to be an over-achievement but which are a deviation from planned targets in real terms will be avoided in the future as they impact negatively on budget baselines. Mrs. B. Mnqokoyi Changes to planned targets There were no changes on the performance indicators that were made during the financial year of reporting. 40

41 2.3.3 Budget Programme 3: RESEARCH AND DEVELOPMENT Purpose of the programme The purpose of this programme is to build a strong foundation of valid and reliable empirical research to inform operational, policy advisory and public interest activities such as consumer protection List of sub-programmes Empirical research on gambling industry and consumer protection General and ad hoc surveys List of strategic objectives To guide the generation of information in the Gambling industry. To deliver a quality customer-oriented service to the public, licensees and other stakeholders Key Performance measures, their targets and actual results for the 2012/13 Financial Year Strategic Objectives: To guide the generation of information about the gambling industry; and To deliver a quality customer-oriented service to the public, licensees and other stakeholders EMPIRICAL RESEARCH ON GAMBLING INDUSTRY Performance Indicator Research and Development Strategy approved by the Board of Directors of ECGBB. Number of Research work Conducted by ECGBB. Research Database of the ECGBB Established Number of MOUs developed to strengthen the Research Agenda of the ECGBB. Actual Achievement 2011/2012 Planned Target Actual Achievement Variance from2011/2012 to N/A 1 1 No Variance No Deviation N/A 2 0 No Variance -2 N/A 1 1 No Variance No Deviation N/A 2 3 No Variance +1 Deviation from Comment on Variances planned target for The bidder recommended by the Bid Committee to undertake the second research project was not signed off and the assignment could not proceed as planned. The additional MOU achieved was a result of a new stakeholder identified to partner with the ECGBB. There were no budget implications. GENERAL AND ADHOC SURVEYS Strategic Objectives: To deliver a quality customer-oriented service to the public, licensees and other stakeholders. Number of Surveys Conducted by ECGBB. N/A 3 0 No Variance -3 All surveys were completed in the first quarter of 2013/14. 41

42 Summary of payments by sub-programme of Budget Programme Three: 2012/ /12 Programme Name Budget Actual expenditure Over / (Under) Expenditure Budget Actual expenditure Over / (Under) Expenditure R'000 R'000 R'000 R'000 R'000 R'000 Empirical Research General and Adhoc Surveys Total Primary areas of actual to budget differences are as follows: Empirical Research o Programme 3 did not meet its target of completing two research projects during the year. This resulted in a cost saving. General and Ad hoc Surveys o Two surveys conducted during the year costing more than anticipated. Programme 3 is new to the ECGBB in the year under review. There is therefore nothing to report on for the previous year. Strategies to overcome areas of underperformance by Budget Programme Three: BUDGET PROGRAMME SUB- PERFORMANCE INDICATOR 2012/13 TARGET : VARIANCE (-) OR DEVIATION (+) STRATEGY TO OVERCOME UNDERPERFORMANCE (VARIATION) AND DEVIATION FROM THE PLANNED TARGETS RELEVANT OFFICIAL Empirical Research on Gambling Industry Number of Research work Conducted by ECGBB. -2 The post testing of responsible gambling messages that was planned during the 2012/13 financial year will be considered during the 2013/14 financial year. Mr. M. Duma General and Ad Hoc Surveys Number of Surveys Conducted by ECGBB. -3 The pre-opening of Zone 4 Casino Survey will be conducted when a final determination regarding the Request for Proposal for the Licence is finalised and advertised to prospective bidders. Mr. M. Duma Changes to planned targets There were no changes to the performance indicators that were made during the financial year of reporting 42

43

44 3. Part C: Report on Corporate Governance 3.1 Introduction Corporate governance embodies processes and systems by which public entities are directed, controlled and held to account. In addition to legislative requirements based on a public entity s enabling legislation, and the Companies Act, corporate governance with regard to public entities is applied through the precepts of the Public Finance Management Act (PFMA) and run in tandem with the Protocol on Corporate Governance, which encapsulates the principles contained in the King s Report on Corporate Governance. Parliament, the Executive and the Boards of the public entities are responsible for corporate governance. 3.2 Portfolio Committees The Eastern Cape Provincial Legislature exercises its role through evaluating the performance of the ECGBB by interrogating its annual financial statements and other relevant documents which may be tabled as well as any other documents tabled from time to time. The Standing Committee on Public Accounts (SCOPA) reviews the annual financial statements and the audit reports of the external auditor. The Portfolio Committee on Economic Development, Environmental Affairs and Tourism exercises oversight over the service delivery performance of the ECGBB and, as such, reviews the non-financial information contained in the annual reports of the ECGBB. As such, it is concerned with service delivery and enhancing economic growth. NO DATE BUSINESS OF MEETINGS AND ENGAGEMENTS 1 19 April 2012 Presentation of the 2012/13-14/15 Annual Performance Plan of the ECGBB June 2012 Portfolio Committee visits ECGBB sites in PE 3 25 July 2012 Committee debate the casino visit report 4 8 November 2012 Consideration of the Annual Report and Financial Oversight Reports 3.3 Executive Authority Oversight by the Executive Authority rests largely on the prescripts of the PFMA. The PFMA governs/gives authority to the Executive Authority for oversight powers. The Executive Authority has the power to appoint and dismiss the Board of a Public Entity. The Executive Authority must also ensure that the appropriate mix of executive and non-executive directors is appointed and that directors have the necessary skills to guide the Public Entity. Reports submitted to the Executive Authority during the year under review: NO DATE REPORTS SUBMITTED TO THE EXECUTIVE AUTHORITY 1 30 July /13 First Quarter Performance Report 2 31 August /12 Annual Financial Statements / Annual Report 3 30 September /14 Annual Budget 4 23 October /13 Second Quarter Performance Report 5 23 October 2012 Six Months Oversight Report and Six Months Performance Information Report 6 22 January /13 Third Quarter Performance Report 7 29 April /13 Fourth Quarter Performance Report 44

45 3.4 The Board The purpose of the Board is to regulate the conduct of its business by the Board, in accordance with the principles of good Corporate Governance, the ECGBB Act, and the PFMA. The Board Charter sets out the specific responsibilities to be discharged by the Board members collectively as well as in their individual roles. Roles and responsibilities of the Board: The primary responsibilities of the Board are as follows: 3.5 Board Charter Giving strategic direction to the organisation. Identifying key risk areas and key performance indicators of the organisation s business Monitoring significant investment, regulatory and project related decisions Considering significant financial applications. Reviewing the performance of management against business plans, budgets and Corporate Governance standards; and Ensuring that its obligations in terms of the relevant legislation, including the PFMA are effectively discharged. As recommended by the King Code of Governance Principles, the Board has a charter setting out its responsibilities, which should be disclosed in its annual report. At a minimum, the charter should confirm: The Board s responsibility for the adoption of strategic plans; Monitoring of operational performance and management; Determination of policy processes to ensure the integrity of the Public Entity risk management and internal controls; and Communication policy, as well as director selection, orientation and evaluation. Progress made regarding compliance with the charter The objective of the Board Charter is to ensure that all Board members, employees of the Board and other stakeholders are aware of the duties and responsibilities of the Board and has the basis upon which it interacts with Management, in giving effect to its obligations. The Board Charter ensures that Board members are responsible for the full and effective control of the Board and assumes responsibility for the following: Monitoring of the Management of the organisation and the implementation of its plans and strategies; Ensuring a comprehensive system of policies and procedures remains operative; Ensuring ethical behaviour; Reserving specific powers to the Board where considered appropriate or necessary; Acting responsibly toward stakeholders; and Ensuring compliance with Corporate Governance principles and relevant legislation. The Board Charter recognises that the two key and distinct tasks associated with the conduct of the Board s affairs are the running of the affairs of the organisation and the executive responsibility for the conduct of the organisations business. 45

46 3.6 Composition of the Board The Honourable MEC for Economic Development and Environmental Affairs appointed a new Board of Directors who commenced their duties on 1 April The Board consists of 8 non-executive directors. The Board is: Adv. N Mayosi (Chairperson) Mr O Mtati (Deputy Chairperson) Miss Y Makhasi Mr P Voges Mr Z Nomafu Mr M Vena Mr V Tshangana Ms P Nqakula Composition of the Board continued: Name Designation Date Appointed Date Resigned Qualifications Area Expertise of Board Directorships (List Entities) Other Committees No. meetings attended of Adv. N. Mayosi Chairperson 01 April 2011 N/A B. Proc LLB, LLM Advocate of the High Court. Law None None 22 Mr. O Mtati Deputy chairperson 01 April 2011 N/A B.A, B. Juris Entrepreneurship Director and a shareholder in RB and Associates. Compliance and Licensing, Human Resources and Remuneration 24 Miss Y Makhasi Member 01 April 2011 N/A M. Public Policy and Management Management Madison Investments Human Resources and Remuneration 10 Mr. P Voges Member 01 April 2011 N/A B.Comm(Hons), M Comm (Economics) Environment Development None Compliance and Licensing, Finance 20 Mr. Z Nomafu Member 01 April 2011 N/A B.Compt(Hons), M.Comm, CA(SA) Chartered Accountancy None Finance, Audit and Risk 20 Mr. M Vena Member 01 April 2011 N/A B. Juris Community Interests None Compliance and Licensing, Human Resources and Remuneration 19 Mr. V Tshangana Member 01 April 2011 N/A B.Proc, LLM, Admitted Attorney Law / Treasury Tshangana Attorneys Finance 17 Ms. P Nqakula Member 01 April 2011 B.Soc Sci, P.G Dip International Studies Safety None Compliance and Licensing 14 Appointment of Board Directors The Board is established as a statutory body in terms of the Gambling and Betting Act, 1997 (Act No. 5 of 1997) (Eastern Cape) and is listed as a provincial public entity in Schedule 3C of the Public Finance Management Act, 1999 (Act No. 1 of 1999). The Board members act as the accounting authority in terms of the PFMA. The accounting authority is responsible for determining strategic direction and policy, and for the monitoring of operational performance and management. The current board of directors for the ECGBB was appointed in April 2011 by the Hon. MEC for Economic Development, Environmental Affairs and Tourism and all assumed responsibilities in April 2011 following a rigorous and independent process headed by a retired judge. 46

47 3.7 Committees The Board has four sub-committees. They are: Audit and Risk Committee Compliance and Licensing Committee Finance Committee Human Resources and Remuneration Committee Roles and Responsibilities of Committees Audit and Risk Committee The audit and risk committee assists management in fulfilling its oversight responsibilities for the financial reporting process, the system of internal control, the audit process and ECGBB's process for monitoring compliance with laws and regulations and the code of conduct. Unless otherwise stated, the Audit Committee performs an advisory role to the ECGBB. The Audit Committee is accountable to the Accounting Authority to properly consider and evaluate any matter that it has to deal with or which has been referred to it. Finance Committee The finance committee is formed to review and recommend the annual financial statements, and any other publicly released financial statement, of the Board; any change in the Board's financial year or tax year; any material change in the ECGBB accounting policies other than changes which bring the ECGBB accounting policies in conformity with Generally Recognised Accounting Principles (GRAP); the approval of any expenditure beyond the budgeted limits and perform such other functions that from time to time may be assigned to it by the Board. Human Resources and Remuneration Committee The purpose of the human resources and remuneration committee is to: Advise and make recommendations to the Board on Human Resources including but not limited to the organisational structure skills and development and policies and practice; Ensure that the Chief Executive Officer, Senior Managers and the Staff of the Board receive reasonable and fair rewards for their individual and combined contributions to the overall performance of the Board; and Make recommendations to the Board on the remuneration of members. Compliance and Licensing Committee The function of the compliance and licensing committee is to: consider and recommend to the Board licensing investigation reports, investigation methods, the licensing, regulatory compliance, revenue audit processes and technology; conduct hearings, enquiries and evaluations on any matter presented before it; impose fines and issuing of warnings to licensees on any non-compliance matter before it; monitor adherence to the internal control procedures, compliance plans and bid deliverables by the licences; review and enforce the findings relating to amongst others, special investigations, illegal gambling activities, cheating activities, excluded persons and patron disputes; and perform such other functions that from time to time may be assigned to it by the Board. consider the outcome of the legislative review process and make recommendations to the Board in respect thereof. Number of meetings held during 2012/13 financial year: Committee No. of meetings held No. of members Names of members Audit and Risk 5 4 Ms L Smith; Mr Z Nomafu Mr P White; Mr H Marsberg Compliance and Licensing 9 4 Mr P Voges; Mr M Vena Ms P Nqakula; Mr O Mtati Finance Committee 6 3 Mr Z Nomafu; Mr P Voges Mr V Tshangana; Human Resources and Ms Y Makhasi; Mr M Vena 5 3 Remuneration Mr O Mtati 47

48 3.8 Remuneration of board members Board remuneration is payable as follows: Chairperson R per day and R per month retainer Deputy chairperson R per day Ordinary board member R8 500 per day Committee members appointed as representatives of the respective provincial departments are not paid for board meetings; except in exceptional circumstances. Name Remuneration (R) Other re-imbursements (R) Total (R) Adv N Mayosi Mr M Vena Mr O Mtati Mr P Voges Ms Y Makhasi Mr Z Nomafu Mr V Tshangana Ms P Nqakula Risk management Nature of risk management The ECGBB has adopted an Enterprise Risk Management which is a continuous, proactive and systematic process, effected by the Board, Executive Management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the ECGBB, manage risk to be within its risk appetite, and further provide reasonable assurance regarding the achievement of the ECGBB s objectives. Risk management strategies to identify risks and manage those risks The identification and management of risks within the ECGBB can be outlined in terms of the following processes:- A methodology and framework for Enterprise Risk Management is defined and agreed upon by the Organisation, i.e. the Board and the Management of the ECGBB. Gap analysis of the entity s Enterprise Risk Management process, is conducted at regular intervals, taking into account the Auditor- General reports. Annual risk management assessments and risk assessments for all major changes and incidents are facilitated including accidents, purchases of capital equipment, restructuring of operational processes ; Implementing a risk identification process with the ECGBB s targets and objectives aligned together. A system to facilitate risk monitoring and risk improvement is developed and implemented on a quarterly basis; Decisions regarding mitigation for every key risk facing the ECGBB are documented in the risk register of the ECGBB. Solutions and mitigation strategies for common risks are negotiated collectively by the Management of the ECGBB. Risk management training is conducted at appropriate levels within the entity to inculcate a risk Risk registers for all functional areas at strategic, tactical and operational levels is also conducted A risk management framework and methodology is communicated to all employees; Necessary risk management documentation is developed in respect of the risk management process; Validation that enterprise risk management is functioning in all functional areas and that all significant risks are being recognised and effectively managed in a timely manner; Communication with the audit and risk committee regarding the status of enterprise risk management; Reports to the Audit and risk committee regarding the progression of enterprise risk management and its implementation, as well as the identification of significant and material risk exposures and recommendations across the ECGBB; 48

49 Risk assessments Risk assessment is the determination of quantitative or qualitative value of risk related to a concrete situation and a recognized threat. Quantitative risk assessment requires calculations of two components of risk, the magnitude of the potential loss and the probability (p) that the loss will occur. Risk assessment allows an entity to consider how potential events might affect the achievement of objectives. Management assesses events by analysing the likelihood and its impact. Below here is a process that is utilised by the ECGBB to assess its risks, the magnitude and potential loss. Impact Parameters: Severity Ranking Critical Major Moderate Minor Insignificant Continuity of Service Delivery Reputation/ Safety Strategic Mandate Risk event will result in widespread and lengthy reduction in continuity of service delivery to customers of greater than 48 hours Reduction in service delivery or disruption for a period ranging between 24 and 48 hours over a significant area Reduction in service delivery or disruption for a period between 8 and 47 hours over a regional area Brief local inconvenience (work around possible). Loss of an asset with minor impact on operations No impact on business or core systems Major environmental damage Serious injury (permanent disability) or death of personnel or members of the public Major negative media coverage Significant injury of personnel or public. Significant negative media coverage Lower level safety or health impacts. Negative media coverage. Little environmental, safety or health impacts Limited negative media coverage. No environmental, safety or health impacts and/or negative media coverage. Critical outcomes or missed opportunities that are of critical importance to the achievement of the objectives. Will lead to non- achievement of objectives and or collapse of business activity Major outcomes or missed opportunities that are likely to have a relatively major impact on the ability to meet objectives. It may also lead to cost increase greater than 20% Moderate outcomes or missed opportunities that are likely to have a relatively moderate impact on the ability to meet objectives and may also lead to cost increase greater than 10% Minor outcomes or missed opportunities that are likely to have a relatively minor impact on the ability to meet objectives and may lead to cost increase greater than 10% Insignificant outcomes or missed opportunities that are likely to have an insignificant impact on the ability to meet objectives and may have minimal or no impact on cost Likelihood Parameters Please note: Risk rating = impact X likelihood Probability Factor Common Likely Moderate Unlikely Rare Measurement Criteria Qualification Criteria Rating The risk is already occurring, or is likely to occur more than once within the next 12 months The risk will easily occur, and is likely to occur at least once within the next 12 months There is an above average chance that the risk will occur at least once in the next 3 years The risk could easily occur, and is likely to occur at least once within the next 12 months The risk is already occurring, or is likely to occur more than once within the next 12 months The risk is almost certain to occur in the current circumstances More than an even chance of occurring 4 Could occur quite often 3 Small likelihood but could happen 2 Not expected to happen - Event would be a surprise

50 SUMMARY OF THE TOP TEN RISKS AS PER RISK REGISTER DURING 2012/13 FINANCIAL YEAR No Risk Description Implications for Business Risk Mitigation Plans Risk Owners: Budget Subprogrammes 1 Non compliance by licensees with licence conditions Under collection of revenue, noncompliance with licence conditions Continuous monitoring of compliance with licence conditions and imposition of fines and penalties Gambling Regulation and Consumer Protection 2 Out-dated legislation Challenges from licensees in the form of complaints or litigation Submit annual updates of legislation to DEDEAT Legal Services and Board Secretariat 3 Inadequate funding to achieve overall mandate Mandate not accomplished Engage DEDEAT and Provincial Treasury annually to allocate more funding Office of the Chief Executive Officer 4 Incorrect information supplied by licensees resulting in inaccurate information maintained in GIMS database Under collection of gambling fees Annual verification audits and the database is monitored monthly Gambling Regulation and Consumer Protection; 5 Challenges with implementation of integrated performance management system Organisation will not achieve its objectives Monthly performance centre meeting All Budget Sub-Programmes 6 Not keeping abreast with industry developments Challenges from licensees in the form of complaints or litigation Training on industry updates annually, attendance at compliance fora ( GRAF, IAGRA, CEO, Legal & Compliance, IT, HRBF, Law enforcement, Gambling Expo) Gambling Regulation and Consumer Protection; 7 Non compliance with various sections of the Provincial Gambling Act e.g. revenue collection. Failure to effect ECGBB mandate The database is monitored monthly by Compliance and licensing division and bi annually audit by internal audit. Gambling Regulation and Consumer Protection; Financial Management 8 Merger between Liquor Board and Gambling Board Possible disruption of operations Beyond Management control, dependant on MEC Office of the Chief Executive Officer 9 Failure to deliver on ECGBB socio-economic development (SED) initiatives due to external dependencies or parties (not delivering) Socio-economic development (SED) initiatives may not be achieved Annual monitoring of compliance with trust initiatives Gambling Regulation and Consumer Protection Socio Economic Development 10 Retention and succession strategy not in place or inactive Experienced staff leaving the organisation, inability to retain staff resources Pending approval of the Retention and Succession Strategy Human Resources Management and Development 3.10 Internal Control Internal controls are tested and verified by the work of internal audit. During the year, the following areas were covered by internal audit: Compliance Revenue review processes followed by Programme 2 and confirm compliance of process with the Gambling Act and Regulations Revenue Finance related controls around the billing and recoveries process Performance Reporting effectiveness of internal controls relating to quarterly performance reports. The reports on the above sections highlighted areas in which controls are either inadequate or not functioning effectively. The Board makes use of an audit tracking document to assist in keeping track of these issues following progress in instituting corrective measures. The audit tracking document is reported to management and the Board members on a monthly basis. 50

51 3.11 Internal Audit and Audit Committees The audit and risk committee assists management in fulfilling its oversight responsibilities for the financial reporting process, the system of internal control, the audit process and ECGBB's process for monitoring compliance with laws and regulations and the code of conduct. Unless otherwise stated, the Audit Committee performs an advisory role to the ECGBB. The Audit Committee is accountable to the Accounting Authority to properly consider and evaluate any matter that it has to deal with or referred to it. Name Qualifications Internal or external Date appointed No. of meetings attended Ms L Smith Chartered Accountant External 01 April Mr Z Nomafu Chartered Accountant External 01 April Mr P White Chartered Accountant External 01 April Mr H Marsberg Bachelor of Commerce External 01 April The internal audit function is outsourced to an external service provider. During the reporting period the three-year contract for internal audit came up for renewal and a new company won the bid for the next three years Compliance with laws and regulations In executing its responsibilities, the ECGBB complies with the following laws, codes and regulations:- Constitution of the Republic of South Africa. The ECGBB ensures that the bill of rights is observed in respect of all dealings with its stakeholders and employees National Gambling Act of 2004 and the Eastern Cape Gambling and Betting Act5 of The ECGBB performs all its functions in compliance with the procedural prescripts set out in these two Acts. The PFMA 1of 1999 and Treasury Regulations with respect to Strategic and Budget Planning, Financial Management and Internal Control Systems. The Division of Revenue Act with respect to disbursement and accountability of funds transferred to other organisations. Labour Relations Act/1995; The Basic conditions of employment Act 75/1997 and the Employment Equity Act 55 of All employees within the ECGBB observes the procedural prescripts set out in the legislation listed above. Preferential Procurement Policy Framework Act. The ECGBB ensures that all its supply chain processes are undertaken in terms of the above Act. Broad Based Black Economic Empowerment Act and the Codes of Good Practice Over and above the aforementioned pieces of legislation and regulations, the Board has developed its own policies and; plans to guide and regulate its functionality. These include among others: Delegation of authority policy Supply Chain Policy Asset Management Policy within the Finance Policy Human resource Management Policy Fraud Prevention Plan Risk Management Framework Performance Management Policy Disaster Management Policy Travel and Subsistence Policy 51

52 3.13 Fraud and corruption The Board makes use of a Fraud Prevention Policy which is reviewed annually by the Audit and Risk Committee as well as the Board. The policy is work shopped to all new staff during the induction process. The policy seeks to define the term Fraud and provide employees with steps to follow should they suspect fraudulent activities. The policy sets out the reporting lines to be followed should an employee wish to report a possible fraudulent activity. The Board also makes use of a Fraud Hotline number should the employee wish to report fraudulent activity anonymously Minimising conflict of interest The Board manages conflict of interest by including a standing agenda item for all Board and Committee meetings in which members are required to state any conflicts of interest. On an annual basis the Board and Committee members are also required to sign a detailed declaration of interest document Code of conduct The Code of Conduct consists of statutory principles which inform the general code of conduct and ethics of all members of the ECGBB Board and its employees as laid down in the ECGBBB Act. The Code is applied with due consideration to the following entrenched provisions: All members of the Board are required to declare any conflict of interest as provided for in the ECGBB Act Employees may not have controlling interest or any financial interest in any gaming activity Board and Employees shall not participate in any gaming or betting in the Province except in the performance of his or her duties in terms of the Act Board member and employees and their families may not accept any donation, reward or other benefit directly or indirectly from an applicant or licence holder except within the recognised exceptions for in the Act 3.16 Health, Safety and Environmental issues No Health, Safety and Environment issues were reported during the year under review One policy and emergency evacuation plan was developed in the year under review A risk assessment was conducted by the Buffalo City Metro Municipality, who reported back to the entity on the findings, along with recommendations. 52

53 Below is a summary of the ECGBB contribution to the population of the Eastern Cape Province during the reporting year in terms of meeting its social responsibility as guided by its Socio-Economic Development Policy and the Eastern Cape Anti-Poverty Strategy championed by the Eastern Cape Department of Social Development and Special Programme Social Responsibility 53 NO. ORGANISATION / BENEFICIARY AREA OR DISTRICT NATURE OF CSI (DONATION, SUPPORT AND /OR SPONSORSHIP) CATEGORY: BASKET R - VALUE 1. Downtown Boxing Gym Academy East London Running of the gym for Boxing Academy. Sport R The Daily Bread Mission Charitable Trust Children s Home. King William s Town 3. Ndoni Dance Art Academy Port Elizabeth Playing equipment and Electric Sewing Machines for the abandoned and orphaned children s at Children s home. Kids who are attending a dance festival in England and funds for running the academy. Social Development and early childhood. R Arts & Culture R Sunduza Junior Secondary School. Sterkspruit Computer laboratory at Sunduza Village in Sterkspruit. Education R National Youth Development Agency Port Elizabeth Youth Month Celebrations. Social Development R Take a Girl Child to school campaign East London Take a Girl Child to school campaign. Social Development R Be The Youth - Nelson Mandela Metropolitan University Department of Social Development and Special Programmes Port Elizabeth Port Elizabeth 9. Zamani Training Centre King William s Town A Campaign against sexual abuse organised by Nelson Mandela Metropolitan University. Partnership with Social Development and Special Programmes for Catering for what Women in Leadership Conference Donated sewing machines, steel tables, Polyshell chairs and television sets to Zamani Training Centre. Education R Social Development R Social Development R XC Monti Mdantsane Sponsor student for his cricket abilities Sport R SEED Organisation Port Elizabeth Supported a campaign on substance and drug abuse by the youth in various areas at Port Elizabeth Social Development R Religious Community and Council of Churches Somerset East Donated Laptops to local Churches in Somerset East. Other: Donation R Fontein Combined School Port Elizabeth Donated Afcon Tickets to Fontein Combined School in Port Elizabeth and T- shirts for the schools attended Afcon soccer matches. Other: Donation R Umngazi Super Sport Soccer Club Port St Johns Donated Afcon Tickets to Umngazi Super Sport Soccer Club in Port St Johns. Other: Donation R Ndyebo Senior Secondary School Port Elizabeth Donated Afcon Tickets to Ndyebo Senior Secondary School in Port Elizabeth. Other: Donation R Y. Ntoni East London Buffalo City Mayor s Children Fund. Social Development R Department of Social Development and Special Programmes Port Elizabeth Partnership with Social Development and Special Programmes for Centenary celebrations. Social Development R TOTAL RAND VALUE OF CORPORATE SOCIAL REPSONSIBILITY (DONATIONS AND SPONSORSHIPS) UNDERTAKEN DURING THE 2012/13 FINANCIAL YEAR R

54 3.18 Audit and Risk Committee Report Report of the Audit and Risk Committee We are pleased to present our report for the financial year ended 31 March Audit and Risk Committee Members and Attendance: The audit committee consists of the members listed hereunder and should meet at least four times a year as per its approved terms of reference. During the current year 5 meetings were held. Name of Member Number of Meetings Attended L Smith (Chairperson) CA(SA), RA 5 P White CA(SA) 5 H Marsberg, B.Com 5 Z Nomafu (Director and Audit Committee Member) CA(SA) 4 The audit committee is considered to have the correct experience, qualifications and skills to carry out their responsibilities effectively. Audit and Risk Committee Responsibility We report that we have adopted appropriate formal terms of reference in our charter in line with the requirements of Section 38(1) (a) of the Public Finance Management Act, No. 1 of 1999 and Treasury Regulation 3.1. We further report that we conducted our affairs in compliance with this charter. The effectiveness of internal control Based on the information provided to the Audit and Risk Committee by both Management and Internal audit, it would appear that the system of internal control was effective for the year under review. Evaluation of Financial Statements We have: Internal Audit Reviewed and discussed the annual financial statements which have been recommended to the Accounting Authority to be submitted to the Auditor-General for audit purposes at 31 May Reviewed the Auditor-General South Africa s management report and management s response thereto in respect of the 2012 year. Due to the timing of this report, no matters have been communicated by the Auditor General to the audit committee in respect of the 2013 financial year. Reviewed the entity s compliance with legal and regulatory provisions. Reviewed the performance information to be approved by the Accounting Authority. Reviewed significant adjustments resulting from the audit. The Internal Audit function is outsourced to a service provider. During the year, the service provider s contract came to an end and a new service provider was appointed. This did impact on the smooth audit process. However, the plan was met for the year. Risk Management The Audit and Risk Committee has ensured that the Risk Management framework was prepared and approved during the financial year. Risks were identified during a formal risk identification process and the Chief Executive Officer has been appointed as the Risk Officer for the Entity. 54

55 Auditor-General South Africa We concur with and accept the Auditor-General South Africa s report on the annual financial statements, and are of the opinion that the audited annual financial statements should be accepted read together with the report of the Auditor-General South Africa. Loren Smith Chairperson of the Audit and Risk Committee 31 July

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57 4. Part D: Human Resources 4.1 Value of Human Capital in the ECGBB Human Capital plays an increasingly important role in the organisation s success. Success goes to organisations that effectively manage their human capital. The organisation has placed tremendous value on its human capital by creating strategies, policies and practices that remove barriers to performance resulting in motivated and satisfied human capital. The implementation of the Human Resource Management Strategy will play a vital role in the achievement of the organisation's overall strategic objectives and its mandate which is to regulate the gambling industry and protection of the public in the province. 4.2 Overview of HR Matters at the ECGBB Employment Equity: The Organisation s Employment Equity Profile has been aligned to that of the National Legislative Framework as follows: Human Resources Statistics Category Description 2012 /2013 African Male Coloured Male Indian Male White Male African Female Coloured Females Indian Female White Female Foreign Males Foreign Female EQUITY Provincial Economic Active Population Percentages Actual Employee numbers Disabled Employees ECGBB Workforce Percentages 39.3% 5.9% 0.8% 5.6% 37.8% 4.8% 0.6% 5.4% 0.0% 0.0% % 2.4% 2.4% 9.3% 57.1% 2.7% 0.0% 2.4% 0.00% 0.00% Training and Development: Staff attended 21 Training Interventions during the year under review. Occupational Health & Safety: The organisation places an emphasis on the Health and Safety of its employees. With this in mind the organisation has developed a Health & Safety Policy to guide the Management of Health and Safety in the Workplace. Recruitment and Selection During the year under review the organisation placed emphasis on Recruitment of Talent into vacant positions. The vacancy rate decreased from 29.5% during the 2011/12 financial year to 8.7% during 2012/ HR Priorities for the year under review and the impact of these priorities Developing a Human Resources Management Strategy to support the human capital aspect in the delivery of the organisation s objectives. Creating sound employee relations and open communication channels by disseminating of information to all employees in a structures and timely manner. 57

58 Creating employee engagement to achieve business objectives. Promoting Employee Well-being 4.4 Workforce planning and key strategies to attract and recruit a skilled and capable workforce The Organisation has developed the following to attract and recruit a skilled and capable workforce: Recruitment and Selection Policy Remuneration and Reward Policy Employee performance management framework The Organisation has developed an Integrated Performance Management Policy. This Policy ensures that the organisations strategic objectives are translated into operational and performance objectives that are cascaded at every level (from top to bottom throughout the organisation) and inform the manner in which both the institution and its employees function. The performance is then measured quarterly to assess whether the employees are moving toward the correct direction. 4.5 Employee performance management framework The organisation has developed an Integrated Performance Management Policy. This Policy ensures that the organisations strategic objectives are translated into operational and performance objectives that are cascaded at every level (from top to bottom throughout the organisation) and inform the manner in which both the institution and its employees function. The performance is then measured quarterly to assess whether the employees are moving toward the correct direction. 4.6 Employee wellness programmes The organisation values the wellness of its employees and during the year under review facilitated three Wellness Interventions to create awareness in various areas of wellness amongst all employees. 4.7 Policy development The following Human Resources Policies and Strategies were developed: The Human Resources Management Strategy The Health and Safety Policy inclusive of the Emergency Evacuation Plan Challenges faced by the public entity: Insufficient budget to implement the Training and Development Plan of the Organisation Lack of office space to accommodate employees Lack of Human Resources Capacity to fulfil the mandate of the Organisation Future HR plans /goals: Implementation of the Human Resources Management Strategy which will ensure that a number of programmes and policies are put in place. To become an employer of choice where employee are engaged and positively contribute towards the Organisation s objectives. Maintain a minimal to 0% vacancy rate. 58

59 4.8 Oversight Statistics Personnel Cost by Programme: Programme Total Expenditure for the entity (R 000) Personnel (R 000) Expenditure Personnel exp. as a % of total exp. No. of employees Average personnel cost per employee (R 000) Office of the CEO % Compliance & Licensing % Financial Management % Human Resources % Information Technology % Legal Services & Board Secretariat % Strategic Services Management % Personnel Cost by Salary Band: Level Personnel Expenditure (R 000) % of personnel exp. to total personnel cost (R 000) No. of employees Average personnel cost per employee (R 000) Senior Management % Professional Qualified % Skilled % Semi-Skilled % Unskilled % Total % Performance Awards: Programme Performance rewards Personnel Expenditure (R 000) % of performance rewards to total personnel cost (R 000) Senior Management % Professional qualified % Skilled % Semi-skilled % Unskilled % Total % 59

60 Training Costs: Directorate/ Unit Business Personnel (R 000) Expenditure Training Expenditure (R 000) Training Expenditure as a % of Personnel Cost. No. of employees trained Avg training cost per employee Office of the CEO R % 1 R9 200 Strategic management services Legal services and Board Secretariat R % 2 R R % 1 R9 200 Corporate Services R % 8 R3 105 Compliance and Licensing R % 9 R5 428 Employment and vacancies: Programme 2011/2012 No. of Employees Approved Posts No. of Employees Vacancies % of vacancies Compliance & Licensing % Corporate Services Legal Services Office of the CEO Strategic Management Services Senior Management Professional qualified Skilled % Semi-skilled % Unskilled Total There were no vacancies in senior management during the year. A number of positions were unlocked by the Board in October 2012 of which four were vacant at year end. Employment Changes: Salary Band Employment at beginning of period Appointments Terminations Employment at end of the period Senior Management Professional Qualified Skilled Semi-Skilled Unskilled Total

61 Reasons for staff leaving: Reason Number % of total no. of staff leaving Death 0 0% Resignation % Dismissal % Retirement 0 0% Ill health 0 0% Expiry of contract 0 0% Other 0 0% Total 4 9.5% One staff member was dismissed due to misconduct. Two employees resigned due to better growth prospects and career growth opportunities. All four positions were replaced within the year. Labour Relations: Misconduct and disciplinary action Nature of disciplinary Action Number Verbal Warning 1 Written Warning 2 Final Written warning 0 Dismissal 1 Equity Target and Employment Equity Status Levels MALE African Coloured Indian White Current Target Current Target Current Target Current Target Senior Management Professional qualified Skilled Semi-Skilled Unskilled Total

62 Equity Target and Employment Equity Status: Levels FEMALE AFRICAN COLOURED INDIAN WHITE Current Target Current Target Current Target Current Target Senior Management Professional Qualified Skilled Semi-Skilled Unskilled Total Levels Disabled Staff Male Female Current Target Current Target Senior Management Professional qualified Skilled Semi-Skilled Unskilled Total

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64 5. Part E: Financial Information 5.1 Statement of Responsibility Statement of responsibility for the financial statement for the year ended 31 March 2013 The Directors are responsible for the preparing financial statements that fairly present the financial position, performance and cash flows for the period and for the related information contained in the annual report. The Directors maintained adequate accounting records and an effective system of internal controls and risk management and comprised in all material respects with applicable laws and regulations. The Directors prepared the annual financial statements presented on pages 68 to93 using Standards of GRAP. Appropriate accounting policies supported by reasonable and prudent judgements and estimates have been used consistently; The external auditors are responsible for reporting on whether the financial statements are fairly presented. Their report is presented on page 65. The Directors are financially dependent on a transfer payment from Provincial Treasury. On the basis that the transfer payment has been listed on the Estimates of National Expenditure the Board believes that it will continue to be a going concern in the year ahead. Based on this reason, the Board prepared the annual financial statements on a going concern basis. The annual financial statements for the year ended 31 March 2013 were approved by the Board on 24 May 2013 and are signed on its behalf by the undersigned Name: Adv N. Mayosi Capacity: Chairperson Date: 31 May Name: R.M. Zwane Capacity: Chief Executive Officer Date: 31 May

65 5.2 Report of the External Auditor Introduction I have audited the financial statements of the Eastern Cape Gambling and Betting Board set out on pages 68 to 93, which comprise the statement of financial position as at 31 March 2013, the statement of financial performance, statement of changes in net assets and the cash flow statement for the year then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information Accounting authority s responsibility for the financial statements The accounting authority is responsible for the preparation and fair presentation of these financial statements in accordance with the South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) and the requirements of the Public Management Finance Act of South Africa, 1999 (Act No.1 of 1999) (PFMA), and for such internal control as the accounting authority determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error Auditor-General s responsibility My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA), the General Notice issued in terms thereof and International Standards on Auditing. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion Opinion In my opinion, the financial statements present fairly, in all material respects, the financial position of the Eastern Cape Gambling and Betting Board as at 31 March 2013, and its financial performance and cash flows for the year then ended in accordance with SA Standards of GRAP and the requirements of the PFMA REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the PAA and the General Notice issued in terms thereof, I report the following findings relevant to performance against predetermined objectives, compliance with laws and regulations and internal control, but not for the purpose of expressing an opinion Predetermined objectives I performed procedures to obtain evidence about the usefulness and reliability of the information in the annual performance report as set out on pages 28 to 42 of the annual report. The reported performance against predetermined objectives was evaluated against the overall criteria of usefulness and reliability. The usefulness of information in the annual performance report relates to whether it is presented in accordance with the National Treasury s annual reporting principles and whether the reported performance is consistent with the planned objectives. The usefulness of information further relates to whether indicators and targets are measurable and relevant as required by the National Treasury Framework for managing programme performance information. 65

66 The reliability of the information in respect of the selected objectives is assessed to determine whether it adequately reflects the facts. There were no material findings on the annual performance report concerning the usefulness and reliability of the information Additional matter I draw attention to the matter below Material adjustments to the annual performance report Material audit adjustments in the annual performance report were identified during the audit, all of which were corrected by management Compliance with laws and regulations I performed procedures to obtain evidence that the entity has complied with applicable laws and regulations regarding financial matters, financial management and other related matters. My finding on material non-compliance with specific matters in key applicable laws and regulations as set out in the General Notice issued in terms of the PAA is as follows: Strategic planning and performance management The accounting authority did not ensure that the public entity had and maintained an effective, efficient and transparent system of internal control regarding performance management, as required by section 51(1)(a)(i) of the PFMA. This relates to material misstatements identified during the audit, which were subsequently corrected Internal control I considered internal control relevant to my audit of the financial statements, the performance report and compliance with laws and regulations. The matters reported below under the fundamentals of internal control are limited to the significant deficiencies that resulted in the finding on compliance with laws and regulations included in this report Leadership Monitoring of action plans for prior year findings on performance information was not properly implemented. The entity also did not have sufficient monitoring controls in place to ensure proper implementation of the overall process of planning, budgeting, implementation and reporting pertaining to the overall performance management systems and processes Financial and performance management The entity did not have a proper filing system in place that provides for the maintenance of information that supports reported performance contained in the annual performance report. The annual performance report contained numerous material misstatements that were identified through the audit process, that were subsequently corrected by management. This was mainly due to staff members not fully understanding the requirements of the National Treasury Framework for managing programme performance information (FMPPI), as well as lack of review of the portfolio of evidence by management to support the reported performance. 66

67 Governance The internal audit unit identified certain significant internal control deficiencies in the year under review; however, deficiencies relating to the validity, accuracy and completeness of reported performance information were not reported. to the validity, accuracy and completeness of reported performance information were not reported. East London 31 July