GOVERNMENT EMPLOYEES PROVIDENT FUND (GEPF)

Transcription

1 GOVERNMENT EMPLOYEES PROVIDENT FUND (GEPF) ANNUAL REPORT FOR THE YEAR 2010/2011 i

2 ii

3 GOVERNMENT EMPLOYEES PROVIDENT FUND (GEPF) ANNUAL REPORT FOR THE YEAR 2010/2011 1

4 CORPORATE INFORMATION Board of Management Mrs. M.L. Mwamunyange Chairperson Mr. E.M. Nkuku Member Mr. L.M. Salema Member Mrs. J.M. Shaidi Member Mr. R.E. Chalamila Member Dr. M.I. Nchimbi Member Mr. O. Urassa Member Mr. C. W. Samanyi Member Mr. D.M. Msangi Secretary Audit Committee Dr. M.I. Nchimbi Chairperson Mr. L.M. Salema Mr. R.E. Chalamila Mr. O.M. Urassa Registered Office Ubungo Plaza 1 st Floor, Ubungo Plaza Morogoro Road P O Box Dar -es-salaam Bankers National Bank of Commerce Limited P.O. Box 9062 Dar-es-salaam CRDB Bank PLC P.O. Box Dar-es-Salaam National Micro-finance Bank P.O Box 9213 Dar-es Salaam Auditors MEKONSULT Limited Certified Public Accountants P O Box Dar -es-salaam 2

5 Our Vision To be a leading Professional Provident Fund in Tanzania in terms of widest coverage and customer oriented services. Our Mission To provide quality and timely social security benefi ts under Provident Fund System to nonpension, contractual employees and self employed persons in Tanzania through the use of competent, well motivated staff and modern information communication technology. Our Core Values Accountability Transparency Behave like owner Result oriented Excellence Integrity 3

6 TABLE OF CONTENTS LETTER OF TRANSMITTAL 6 CHAIRPERSON S STATEMENT 7 THE BOARD OF MANAGEMENT 9 THE MANAGEMENT TEAM 10 STATEMENT BY THE DIRECTOR GENERAL 11 MEMBERSHIP 11 CONTRIBUTION COLLECTION 12 BENEFIT PAYMENT 13 INVESTMENTS AND INVESTMENT INCOMES 14 INTEREST CREDITED TO MEMBERS 17 SERVICES TO MEMBERS 17 ANNUAL GENERAL MEETING (AGM) 17 STAFF DEVELOPMENT AND RECRUITMENT 18 AWARENESS AND PUBLIC RELATION 18 EMPLOYEES WELFARE 19 CORPORATE SOCIAL RESPONSIBILITY 20 CORPORATE AND INTERNATIONAL RELATIONS 21 4

7 BOARD S STATEMENT ON CORPORATE GOVERNANCE FOR THE YEAR ENDED 30 JUNE STATEMENT OF BOARD OF MANAGEMENT S RESPONSIBILITIES 24 INDEPENDENT AUDITORS REPORT TO THE CHAIRPERSON OF THE 25 STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDED 30 JUNE STATEMENT OF NET ASSETS AS AT 30 JUNE CASHFLOW STATEMENT FOR THE YEAR ENDED 30 JUNE NOTES TO THE FINANCIAL STATEMENTS 30 5

8 LETTER OF TRANSMITTAL Mr. Ramadhan Khijah, Permanent Secretary, Ministry of Finance, P.O Box 9111, DAR ES SALAAM. Permanent Secretary, RE: ANNUAL REPORT OF THE GOVERNMENT EMPLOYEE S PROVIDENT FUND FOR FINANCIAL YEAR 2010/2011 It is a great pleasure to present to you this Annual Report of Government Employees Provident Fund as at 30 th June This report is presented to you, pursuant to section 3 of GEPF Act No. 52 of 1942, (R.E. 2002). The Report is comprised of: 1. Statement by the Chairperson of GEPF Board of Management; 2. Operational report by the Director General of the Fund; 3. The Fund s Audited Financial Statements for the year 2010/11. Yours Sincerely, Monica L. Mwamunyange CHAIRPERSON 6

9 CHAIRPERSON S STATEMENT Dear Stakeholders, It gives me great pleasure once again to release to you the Annual Report and Audited Accounts of the Fund for the financial year ending 30 th June The year 20010/11 was another very successful year for the Fund. I am delighted to report that during the year we have noticed profound growth in terms of membership, member s contributions and investment income which together have contributed to 30.81% growth in the assets of the Fund. The net assets of the Fund have grown from TZS. 91, million in June 2010 to TZS. 119, million in June The total contributions collected from members grew by 45.10% and investment income by 57.39%. The numbers are indeed a testimony of a very good year for us and the members contributing to the Fund. Economic and Financial Performance During the year we witnessed the recovering of the economy as the Gross Domestic Product (GDP) grew at 7.0% in 2010 compared to 6.0% in The annual headline inflation increased to 9.80% in June 2011 from 8.20% in June The average Treasury bill rate increased to 4.76% in June 2011 from 2.90% in June 2010 while the overall time deposit decrease to 5.82% in June 2011 from 5.90% in June Generally the interest rates were slightly higher than the previous year which symbolises a money market recovery. This good performance of the economy has been an important ingredient that contributed to the positive performance of the Fund. Service to Members The quality of services rendered to members has been improving from time to time as we maintain our quest to give our members the best. In order to achieve this and create a close relationship between members and the Fund three field offices were opened during the period under review at Mafinga-Iringa, Mwanza and Tanga and two more offices are planned to be opened in Mtwara and Dodoma. The goal is to bring services closer to the members. Actuarial Review I am happy to report that during the year the Fund carried out the actuarial review of its assets and liabilities. The report showed that there was a past service actuarial surplus of TZS 5,986 million and a funding level of 107.0%. The report confirmed that the results of the actuarial review shows that the Fund was financially sound as at 30 th June 2010 and that there were sufficient assets to meet the accrued liabilities. Voluntary Savings Retirement Scheme (VSRS) The year 2010/11 was the first year of implementation of VSRS since its inception on pilot basis in November The scheme started with a good pace as of June 2011 a total of 6,555 members had been registered. Social security is human right, therefore the Fund in collaboration with the Government and other stakeholders are eager to make this scheme a reality. 7

10 Appreciation On behalf of the Board and the Management of the Fund, I wish to register my sincere gratitude to the Government and other stakeholders for their continued support during the year under review. At the same time I wish to record my profound thanks to all members of the Board for their untiring efforts to oversee the Fund s operations. I wish to recognise the immerse contributions of the management and the entire staff of GEPF for excellent performance that we have noticed. Finally, I wish to reiterate our continued dedication to provide high standard Social Security Services. Monica L. Mwamunyange CHAIRPERSON 8

11 BOARD OF MANAGEMENT Mrs. M. L. Mwamunyange Chairperson Mr. E. M. Nkuku Vice Chairperson Eng.Ladislaus M. Salema Member. Mr. Charles W. Samanyi Member Dr. Mariam I. Nchimbi (Mrs) Member Mr. Oswald M. Urassa Member Mrs. Joyce M. Shaidi Member Mr. Daud M. Msangi Secretary Mr. Renatus E. Chalamila Member 9

12 MANAGEMENT TEAM Mr. Daud M. Msangi DIRECTOR GENERAL Mr. Philemon P. Minga Mr. Anselim K. Peter Mr. Festo L. Fute Director of Finance & Director of Marketing & Director of Planning & Administration Operations Investments Mr. Hussein I. Kinduu Chief Internal Auditor Mr. Edgar Shumbusho Chief ICT Manager 10

13 STATEMENT BY THE DIRECTOR GENERAL It is my great pleasure to present report on the operational performance of the Fund during financial year 2010/11. The year under review was another successful year that all at GEPF we need to be proud. We have recorded tremendous successes in terms of membership growth and growth of the assets of the Fund. MEMBERSHIP The Fund s membership constitutes the Mandatory Contributory Scheme (SCS) and Voluntary Savings Retirement Scheme (VSRS). The statutory contribution scheme registers all employee s of Central Government, Government Agencies and Independent Government Departments that are working under contracts or operational service, other members come from joint Government and donor funded projects. Coverage will be extended further to include private sector during 2011/12 following the enactment of SSRA Act and the review of GEPF Act. Members under the VSRS are self-employed and all citizens that are able to generate income regardless of whether they live on salaries or not. The scheme also covers employed workers who contributes to other Funds but would like to save more to increase their retirement entitlements. As at 30 th June 2011the total size of membership to the Fund was 41,879. Table 1: Trend in Membership Growth Financial Years Members Percentage Growth 2006/07 27, /08 29, % 2008/09 30, % 2009/10 35, % 2010/11 41, % Director General of the Social Security Regulatory Authority (SSRA) being registered under the Voluntary Savings Retirement Scheme (VSRS) 11

14 Implementation of the Voluntary Savings Retirement Scheme The financial year 2010/11 was the first year of full implementation of VSRS. During the year the Fund focused on setting the base for growth in terms of recruitment of staff, opening of offices and acquisition of support systems and equipment. Focus was maintained in sensitizing targeted groups through a series of seminars and different marketing communication mix to increase recruitment of members and savings collection. The major milestone reached over this period is recognition of GEPF new scheme among Tanzanians from different sectors, employed, self employed and political leaders. During the same period the Fund launched electronic money transfer service through M-PESA offered by Vodacom Tanzania which is aimed at easing contribution collection. The Fund opened offices in Mwanza, Mafinga-Iringa and Tanga to serve VSRS members and other statutory members. As at 30 th June 2011 the total members registered under VSRS since its inception reached 6,555, while contributions cumulatively reached TZS million. Hon. Zito Kabwe (MP) receiving VSRS membership card from Edward Nzota (GEPF staff) at Parliament grounds in Dodoma in August Looking on is James Mlowe (Seniour Marketing Offi cer). CONTRIBUTION COLLECTION During the year the Fund continued to educate the members on the essence of prompt remittance of contribution as an important aspect towards realizing better benefits. Generally the year was 12

15 very good as contributions increased to TZS 25, million from TZS 16, million collected in the previous year. Table 2 shows the trend of contribution collection which has been increasing annually from TZS 8, million recorded in June 2006 to TZS 25, million in June Table 2: Trend in Contribution Collections Year Amount collected in TZS ( ) Percentage Growth 2006/07 8, /08 10, % 2008/09 13, % 2009/10 16, % 2010/11 25, % Various collection means were introduced including the use of electronic transfers (through mobile phones) and issuance of standing orders to banks. The two methods are applied for the case of VSRS. Mr. Frankline Bagala a representative from Vodacom explaining how GEPF members contributions can be collected via Vodacom M-Pesa BENEFIT PAYMENTS Among the four important responsibilities of the Fund is to pay benefit to retirees. Others are registration of members, collection of contribution and investing such contributions to generate income. It is therefore a critical responsibility that the Fund s retirees are paid promptly upon retirement or completion of their employment contracts. During the year the Fund paid benefit to members amounting to TZS 3, million which is 10.58% higher when compared with previous year benefits amounted to TZS 3, million. The benefit paid included transfers 13

16 to Public Service Pension Fund for members who graduated to pensionable status. Benefit payment to members has been increasing each year due to numbers of members leaving the Fund and growth in terms of amount paid. Table 3 provide the amount paid as benefits for the last five years since 2005/06. Table 3: Trend of Terminal Benefit Payment Year Amount paid in TZS ( ) Percentage Growth 2006/ /08 1, % 2008/09 1, % 2009/10 3, % 2010/11 3, % INVESTMENTS AND INVESTMENT INCOME The Funds investment is guided the Investment Policy to ensure all investments are made in areas with optimum returns. The Fund s investments are in different portfolio including government securities, fixed deposit with commercial banks, corporate bonds, listed shares at the DSM stock exchange, loans and real estates. During the year under review, the Fund Investments increased to TZS. 101, million which is 22.83% higher than the previous year where investments were valued at TZS. 81, million. Table 4: Investment Portfolio Structure Portfolio 2006/ / / / /11 Government Securities 23, , , , , Fixed deposit 10, , , , , Equity 2, , , , , Corporate bond 1, , , , Loan , , , , UTT Real Estate , Total 37, , , , , From table 4 above it can be seen that the size of investible funds has continued to grow from as low as TZS 37, million in June 2007 to as high as TZS 101, million in June Chart 1 provides the percentage distribution of investment made. 14

17 Chart 1: Percentage distribution of Investment Structure (2010/11) Investment in Real Estates During the year the Fund signed a contract with Group Six International (Contractor) to start implementation of construction of GEPF house on plot number 37 Regent Estate along New Bagamoyo Road. This is a twelve storey commercial building (including two basement floors) which will be used for office accommodation and other commercial needs. The construction is expected to start on 1 st July During the same period the Fund acquired two plots with a total area of 17,554 SQM at Kibaha Town Council. The plot is ideal for construction of commercial building comprising hotel and offices. Detailed studies will be carried out during 2011/12. Investment Income During the year the Fund realized income from investment amounting to TZS 9, million which is an increase of 27.49% when compared to the previous year income of TZS 7, million. This good performance is a result of prudent investment decision while selecting instruments. Due consideration was given to investments with high returns but careful selected to minimize risks involved. The Fund will continue investing in high yielding investments, which have minimal risks but provide high returns. Table 5 demonstrates trends in investment income. 15

18 Table 5: Income from Investments (TZS ) Portfolio 2006/ / / / /11 Treasury bills , , Treasury Bonds , , , , Govt. Stocks Fixed deposits , , , , Dividends/C. Gain Corp. Bond UTT , Interest from Loans Total 3, , , , , Annual Growth 57.1% 12.6% 40.5% 27.5% The trend is further demonstrated in chart no. 2 which shows that 2010/11 increased at a decreasing rate. The phenomena is a result of low interest fetched from the market during the year. Chart 2: Trend of income from investments (percentage growth) Return from investments During the period under review the Fund managed to earn an average return of 9.65% from the total investments held as at 30 th June 2011 which is considered good return given the country s financial market situation. This return excludes TZS. 4,909.81million paid as mobilization fund for construction of GEPF House during the month of May Such exclusion is necessary given that the return from real estate investment will start to be realised only when the building is completed. 16

19 Actuarial Valuation During the period under review the Fund conducted actuarial review of the Fund where the report shows that there is a past service actuarial surplus of TZS 5,986 million and a funding level of 107.0%. The report confirmed that the results of the actuarial review on this basis show that the Fund was financially sound as at 30 June 2010 and that there were sufficient assets to meet the accrued liabilities. Given the realized actuarial Surplus the Fund is considering to introduce death-in-service and/ or disability (ill-health) benefit of a multiple of salary payable to the dependants. This would provide the necessary protection to the dependants in the event of the death or permanent disability of their breadwinner. A consultant will be engaged to carry out a financial review of the proposed benefits and necessary arrangement made to introduce the same during 2012/13. INTEREST CREDITED TO MEMBERS As a result of increased income from investments, the Fund has managed to improve further interest to be credited to members account from 5.20% credited during 2009/10 to 6% in 2010/11. This increase is higher than the rates offered by the financial market on short term instruments. It is the intention of the Fund to increase interest rates every year commensurate with revenue performance. SERVICES TO MEMBERS During the year the Fund continued to implement successful the Client Service Charter. Claims for benefit payments are tracked from date of receipt to the date the members are paid. We are proud to report that on average all members were paid within seven working days. The Fund also visited some members on their working stations to inform them on the Fund s activities and respond to different queries. This also involved meeting members in different national exhibitions such as Saba Saba, Nane Nane, Public Service week and International Trade Fair. The use of modern information Technology provided impetus in servicing members through timely provision of members statements, contribution history and different reports. The Funds website is being updated regularly with current members information. We continue to urge our members to visit the Fund s website ( to access their statements and different reports. As a measure to move closer to the members, three offices were opened in Mafinga, Mwanza and Tanga. Two more offices will be opened in Dodoma and Mtwara during 2011/12. ANNUAL GENERAL MEETING (AGM) The 3 rd AGM was conducted in May 2011 in Arusha where 166 stakeholders participated. During the meeting different educational papers were presented and the Fund s operational reports were also presented. Stakeholders were given time to discuss the papers and operational report. Participants indicated their satisfaction with the good performance achieved during the year 2010/11 and put forward some recommendations and challenges to be addressed by the Fund. Issues raised are summarized below. Limited benefits that need to be expanded to include health care and low cost houses; Need to introduce papers on HIV/AIDS and other diseases during the future conference; Need to change the name Government Employees Provident Fund to GEPF Retirement Benefits Fund 17

20 The status of implementation of such recommendations is as follows:- With regard to adding more benefits the Fund is in the process of employing a consultant to determine the likely cost of additional benefits after taking into account the actuarial results for the year ending June 2010; On the need to include papers on HIV/AIDS and other diseases during the future conferences, the same will be implemented starting from the 2012 Annual General Meeting; The Fund is on the final process of reviewing its current Act which will include the change of the name. Participants at the Annual General Meeting held at Naura Spring Hotel in Arusha in May Sitting sixth from left is Hon. Isidori Shirima-Regional Commissioner for Arusha (Guest of Honour), on his immediate left is MS Monica Mwamunyange (Board Chairperson). AWARENESS AND PUBLIC RELATIONS During the year under review, awareness campaigns were carried out to increase public awareness on GEPF and its activities. Different promotional strategies were employed targeting the general public aimed specific groups. Radio and television advertisement programs, participation in National exhibitions such as Saba saba, Nane Nane and Public Service Week were used to reach the general public. The Fund also carried out different seminars with Police Force, Prison Department and other Government departments both in Zanzibar and Tanzania mainland. During these seminars new members were registered. 18

21 Marketing and Compliance Manager Mr Aloyce Ntukamazina explaining the Operation of Voluntary Savings Retirement Scheme (VSRS) to Drivers attending training at VETA Dare Es Salaam. EMPLOYEES WELFARE Employment Policy GEPF is committed to employment policies which follow best practices, based on equal opportunity for all employees regardless of sex, race, religious, disability and other discriminatory conditions. The Fund recognizes the need for ensuring fair employment practices in recruitment and selection, retention, training and career development of its staff. Management/Employees Relationship The Fund maintained a good relationship between management and staff. Employees are involved in major decisions affecting them through measures such as monthly departmental meetings, internal communication and biannual workers council meetings. There are well established procedures, including staff regular meetings to ensure that the views of employees are taken into account in reaching various decisions. Training The Fund allocated sufficient resources in its Annual Plan and Budget (APB) to meet training needs. The employees are trained to equip them with knowledge, skills and abilities necessary to achieve GEPF goals. Training is normally carried out with focus on core business of the Fund. During the year the Fund continued to implement three year Training programme drawn from training needs assessment. It takes into account identified skills gaps and exposure to new and changing working and business environment. It is therefore guarantees availability of high caliber employees capable of realising the Fund s vision and mission. 19

22 Medical Assistance All staff and their spouses up to a maximum number of four children have access to medical services covering consultation and treatment. During the period, AAR provided the medical service to the Fund. Awareness and prevention of HIV/AIDS Employees are constantly made aware of HIV/AIDS and its associated risks. The Fund is regularly inviting experts to conduct seminars with particular emphasis on the preventive strategies, good conduct, undertaking voluntary counselling and testing (VCT). A formal HIV/AID policy will be put in place during 2011/12 to guide the Fund s operations in this aspect. Financial Support Loans, salary advances and other financial assistance are made available to the employees in accordance with the approved staff policies and regulations. Director General Mr. Daud Msangi presents an award to the best worker of the year 2010/11 Ms Revina Kashuku Assistant Accountant. CORPORATE SOCIAL RESPONSIBILITY The Fund provides direct support to the community especially in the areas of education and health. Corporate social responsibility is necessary to support the Government s efforts towards attainment of Millennium Development Goals (MDGs) such as reducing poverty and improving the standard of living. 20

23 During the period under review the Fund continued to give back to the society part of its income by supporting the communities in different aspects. A total of TZS 11.8 million was donated during the period under review. Some of the beneficiaries are Association of Bus Drivers (Ubungo Bus Terminal), Mufindi Tea Growers (CHAWACHAMU), Orphanage Centers, Medical Women Association of Tanzania (MEWATA) and victims of bomb explosion at Gongolamboto Military Base. Mr Anselim Peter the Director of Operations and Marketing presenting a donation of TZS 1.0 million to MEWATA representative being donation to breast Cancer campaign conduct by MEWATA. Looking on is Marketing Manager Aloyce Ntukamazina. CORPORATE AND INTERNATIONAL RELATIONS During the financial year, the Fund participated in different Social Security forums through Tanzania Social Security Association (TSSA), East and Central African Social Security Association (ECASSA) and International Social Security Association (ISSA). Currently the Fund is a member to TSSA, ECASSA and ISSA and benefits from forums and materials generated by these institutions. Through such association the Fund has also benefited through access to educational publications issued to members. 21

24 GEPF Board Members with Offi cials of Social Security Fund of Rwanda (CSR) in front of one CSR s real estate investments. The visit to Rwanda was made to study among others Rwanda s progress in extension of coverage. Appreciation On behalf of the Management and staff, I hereby record our thanks and appreciation to the Board for their cooperation, guidance and support provided during the year under review. In the same manner I wish to thank the members of the Fund and all stakeholders for their continued advice. We encourage all stakeholders to continue with their support and we solemnly promise that the Fund will continue to improve the quality of its services for wellbeing of the members. 22

25 BOARD S STATEMENT ON CORPORATE GOVERNANCE FOR THE YEAR ENDED 30 JUNE 2011 The Board considers Corporate Governance as key to good performance of the Fund. The Board continued to strengthen good governance systems by reviewing various policies to meet its performance goals. BOARD OF MANAGEMENT The Board comprise 9 members out of whom 8 are non-executive. All non-executive members are appointed by the Minister for Finance, for tenure of three years renewable. During the period 8 Board meetings were held, covering ordinary and special meetings. The matters reserved to the Board for decision include the approval of the audited financial statements, the Fund s annual plans and budget, and major investments. Four ordinary meetings were dedicated to discussion of quarterly progress reports and giving guidance to management. The Board has delegated to management the powers to make decisions on operational matters, including those relating to placement of funds in banks, investments in government debt instruments, fixed deposit receipts and investment in listed equities, within the framework of approved Board policies. AUDIT COMMITTEE The Audit committee comprises 4 members with Chief Internal Auditor (CIA) who serves as Secretary to the committee. The committee functions are to govern internal audit activities and other governance matters of the Fund. The audit committee meets at least 4 times a year. During the period, the Audit Committee received reports from management and held discussion with management and auditors. In discharging its duties the committee reviewed the financial statements and the quality and acceptability of the related accounting policies, practices and financial reporting disclosures; the scope of the work of the Fund s Internal audit unit, reports from external auditors on their findings on accounting and internal controls. INDUCTION AND TRAINING The training programme was executed, which allowed Board members to be trained on their roles in assessing and managing risk. The course equipped them with risk assessment and management skills. As a result of the exposure the Fund has strengthened its risk management best practices. BY ORDER OF THE BOARD OF MANAGEMENT, M.L. Mwamunyange Chairperson 20/12/

26 STATEMENT OF BOARD OF MANAGEMENT RESPONSIBILITIES GEPF Act of 1942 and Public Finance Act 2001 (revised 2004) require the Fund to prepare the financial statements for each financial year and ensure that the Fund keeps proper accounting records of its income, expenditure, assets and liabilities. The Board is responsible for the preparation and fair presentation of the financial statements in accordance with the International Financial Reporting Standards (IFRS). Such responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances. The Board accepts responsibility for the financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgements and estimates, in conformity with IFRS, GEPF Act of 1942 (R.E. 2002) and the Public Finance Act 2001 (revised 2004). The Board is of the opinion that the financial statements give a true and fair view of the financial transactions of the Fund and of the disposition of its assets and liabilities, other than liabilities to pay benefits falling due after the end of the year. The Board further accept responsibility for the maintenance of accounting records which may be relied upon in the preparation of Financial Statements, as well as for safeguarding the assets of the Fund and hence for taking reasonable steps for the prevention of fraud and other irregularities. The Board certify that, to the best of their knowledge and belief, the information furnished to the Auditors for the purpose of the audit was correct and complete in every respect. M. L. Mwamunyange D. M. Msangi Chairperson Secretary 20/12/ /12/

27 AUDIT REPORT ON THE FINANCIAL STATEMENTS To. Chairperson of the Board of Management, Government Employees Provident Fund, P.O. Box 11492, DAR ES SALAAM. REPORT OF THE CONTROLLER AND AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF GOVERNMENT EMPLOYEES PROVIDENT FUND FOR THE YEAR ENDED 30 TH JUNE 2011 I have audited the accompanying fi nancial statements of the Government Employees Provident Fund (GEPF) which comprise the Statement of Net Assets as at 30 th June, 2011, Statement of Changes in Net Assets, Statement of cash fl ows for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes set out from pages 15 to 37 of this report. Directors Responsibility for the financial statements The Board of the Management of the Fund is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. The responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Responsibilities of the Controller and Auditor General My responsibility as an auditor is to express an independent opinion on the financial statements based on our audit. The audit was conducted in accordance with International Standards on Auditing (ISAs), International Standards of Supreme Audit Institutions (ISSAs) and such other audit procedures I considered necessary in the circumstances. These 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 judgment, including the assessment of risks material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the Government Employees Provident Fund 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 Government Employees Provident Fund 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. 25

28 In addition, Sect. 10 (2) of the Public Audit Act of 2008 requires me to satisfy myself that the accounts have been prepared in accordance with appropriate accounting standards and that; reasonable precautions have been taken to safeguard the collection of revenue, receipt, custody, disposal, issue and proper use of public property, and that the law, directions, and instructions applicable thereto have been duly observed, expenditures of public monies have been properly authorized. Further, Sect. 44 (2) of the Public Procurement Act No. 21 of 2004 and Reg. No. 31 of the Public Procurement (goods, works, non-consultant services and disposal of public assets by Tender) Regulations issued under G.N. 97 of 2005 requires me to state in my annual audit report whether or not the auditee has complied with the provisions of the law and its regulations. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Unqualified Opinion In my opinion, the financial statements give a true and fair view of the statement of the net assets available for benefits for the Government Employees Provident Fund as at 30 June 2011, its surplus, cash flows and changes in equity for the year then ended in accordance with International Financial Reporting Standards and comply with GEPF Cap.52 of Report on Compliance with Procurement Legislation In view of my responsibility on the procurement legislation, and taking into consideration the procurement transactions and processes I reviewed as part of this audit, I state that the Government Employee Provident Fund has generally complied with the Public Procurement Act, 2004 and its related Regulations of LUDOVICK S. L. UTOUH CONTROLLER AND AUDITOR GENERAL National Audit Office, Dar es Salaam, TANZANIA DATE: 16/1/

29 STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED 30 JUNE 2011 Note TZS 000 TZS 000 CONTRIBUTIONS AND BENEFITS Members contributions 6 25,688,944 16,321,456 Benefit payments 7 3,675,458 3,323,664 Net surplus from dealing with members 22,013,486 12,997,792 RETURNS ON INVESTMENTS Dividend income 338, ,207 Interest income 8 8,116,630 7,046,842 Discount income on treasury bonds 651, ,486 Net appreciation in shares and unit trusts 19(c) 463, ,884 9,569,373 8,075,419 Other income 9 12,490 19,800 31,595,349 21,093,011 Administrative expenses 10 3,496,239 2,400,168 Increase in net assets for the year 28,099,110 18,692,844 Balance at the beginning of the year 91,282,349 72,549,570 Contribution received from PSPF 11 22,953 39,935 Balance at the end of the year 119,404,412 91,282,349 27

30 STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS AS AT 30 JUNE Note TZS 000 TZS 000 ASSETS Non Current Assets Property and equipment 12 6,809,197 1,136,151 Intangible assets , ,932 Members and staff loans 14 1,619,659 1,579,471 8,564,417 2,859,554 Investments Loan to corporate 15 3,477,337 4,134,901 Corporate bond 16 5,391,305 1,467,928 Treasury bonds 17 39,105,619 33,879,539 Treasury bills 18-2,166,067 Government stocks - 4,764 Quoted shares 19(a) 5,448,688 4,120,154 Unit Trust of Tanzania 19(b) 991,947 1,906,821 Short term deposits 20 44,796,725 38,268,733 99,211,621 85,948,907 Current Assets Members and staff loans , ,645 Prepayments and other receivables 21 57,177 14,515 Dividend receivable 45,853 - Contributions receivable 151, ,716 Cash and bank balances 2211,095,871 1,361,186 12,053,016 2,679,062 TOTAL ASSETS 119,829,053 91,487,523 CURRENT LIABILITIES Benefits payable 73,207 40,688 Other payables and accruals 351, , , ,174 NET ASSETS 119,404,412 91,282,349 REPRESENTED BY: FUND BALANCE ,404,412 91,282,349 The financial statements on pages 13 to 39 were approved by the Board of Management on 16/12/ 2011 and signed on its behalf by: M. L. Mwamunyange D. M. Msangi Chairperson Secretary 28

31 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE TZS 000 TZS 000 Cash flows from operating activities Contributions received 26,558,499 16,051,605 Other income 12,490 14,400 Benefits paid (3,642,939) (3,308,609) Payment for administrative expenses (3,204,650) (2,051,279) Net cash generated from operating activities 19,723,400 10,706,117 Cash flows from investing activities Dividend income 292, ,207 Interest income 7,927,494 7,220,901 Purchase of quoted investments (1,933,862) - Sale of quoted investments 1,983,304 - Purchase of Treasury bonds (6,665,822) (11,742,866) Receipts from matured Treasury bonds 2,189,600 2,418,300 Net sale/(purchase) of Treasury bills 2,099,940 12,456,665 Net sale of Government stock 4,409 - Purchase of corporate bonds (4,000,000) - Receipts from matured part of Corporate Bonds 200, ,000 Loan issued to TANESCO - (2,500,000) Receipts from matured part of loan to TANESCO 650, ,000 Placement with commercial banks (6,381,900) (18,024,900) Acquisition of property, equipment and intangible assets (5,874,075) (205,556) Net increase in members loan, staff loans and staff advances (480,206) (756,891) Net cash used in investing activities (9,988,715) (10,266,140) Increase/(decrease) in cash and cash equivalents 9,734, ,977 Cash and cash equivalents at start of the year 1,361, ,209 Cash and cash equivalents at end of the year 11,095,871 1,361,186 29

32 1. GENERAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 Government Employees Provident Fund (GEPF) is registered in Tanzania under GEPF Act, Cap.51 of 1942 amended by GEPF Act, Cap.52 of It is registered as a defined contribution scheme, and is administered in Tanzania. The address of its registered office is: Government Employees Provident Fund 1 st Floor, Ubungo Plaza Morogoro Road P O Box Dar es Salaam 2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS Statement of compliance The financial statements have been prepared in accordance with and comply with the International Financial Reporting Standards (IFRS). Adoption of new and revised International Financial Reporting Standards (a) New standards and amendments to published standards effective for the year ended 30 June 2011 IFRS 1, First time adoption of International Financial Reporting Standards (effective for annual periods beginning on or after 1 January 2009); IFRS 3, Business Combinations Comprehensive revision on applying the acquisition method (effective for annual periods beginning on or after 1 July 2009); IFRS 7, Financial Instruments: Disclosures Amendments enhancing disclosures about fair value and liquidity risk (Revised March 2009) effective for annual periods beginning on or after 1 January 2009; IFRS 8, Operating Segments (effective for annual periods beginning on or after 1 January 2009); IFRS for SME, International Financial Reporting Standard for Small and Mediumsized Entities, issued in 2009, (effective immediately on issue); 30

33 IAS 1, Presentation of Financial Statements (effective for annual periods beginning on or after 1 January 2009); IAS 23, Borrowing Cost borrowing costs relating to qualifying assets for which capitalization is on or after 1 January 2009 (effective for annual periods beginning on or after 1 January 2009); IAS 24, Related Party Disclosures - Revised definition of related parties (effective annual periods beginning on or after 1 January 2009); IAS 27, Consolidated and Separate Financial Statements - (effective annual periods beginning on or after 1 January 2009); IAS 28, Investments in Associates (effective annual periods beginning on or after 1 January 2009); IAS 31, Interests in Joint Ventures - Consequential amendments arising from amendments to IFRS 3 (effective for annual periods beginning on or after 1 July 2009); IAS 32, Financial Instruments: Presentation amendments relating to puttable instruments and obligations arising on liquidation (2008) (effective annual periods beginning on or after 1 January 2009); April 2009 and May 2010 Improvements to IFRSs (effective from various annual periods mainly periods beginning on or after 1 January 2010). IFRS 1, First time adoption of International Financial Reporting Standards Amendments relating to oil and gas assets and determining whether an arrangement contains a lease (effective for annual periods beginning on or after 1 January 2010); IFRS 1, First time adoption of International Financial Reporting Standards Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters (effective for annual periods beginning on or after 1 July 2010); IFRS 2, Share-based Payment Amendment relating to vesting conditions and cancellations (effective for annual periods beginning on or after 1 January 2010); IAS 24, Related Party Disclosures Revised definition of related parties (November 2009) effective annual periods beginning on or after 1 January 2011; IAS 32, Financial Instruments: Presentation amendments relating to classification of rights issues (2009) effective for annual periods beginning on or after 1 February 2010; 31

34 April 2009 and May 2010 Improvements to IFRSs (effective from various annual periods mainly periods beginning on or after 1 January 2010). (b) New and amended pronouncements (amendments) applicable after 30 June 2011 IFRS 1, First time adoption of International Financial Reporting Standards Severe Hyper Inflation and Removal of Fixed Dates First Time Adopters (effective for annual periods beginning on or after 1 July 2011); IFRS 7, Financial instruments: Disclosures - Amendments (effective for annual periods beginning on or after 1 July 2011); IFRS 1, First time adoption of International Financial Reporting Standards (effective for annual periods beginning on or after 1 January 2009); IFRS 9, Financial Instruments Classification and Measurement (November 2009) effective annual periods beginning on or after 1 January 2013; IFRS 12, Income taxes (Amendment) deferred taxes: recovery of underlying Assets (effective for annual periods beginning on or after 1 January 2012). (c) New and amended interpretations in issue which are effective in the year ended 30 June 2011 IFRIC 13, Customer Loyalty Programmes - Amendments resulting from May 2010 Annual Improvements to IFRSs (effective annual periods beginning on or after 1 January 2011); IFRIC 14, IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction - November 2009 Amendments with respect to voluntary prepaid contributions (effective annual periods beginning on or after 1 January 2011); and IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments (effective annual periods beginning on or after 1 July 2010). (d) Impact of new and amended standards and interpretations on the financial statements for the year ended 30 June 2011 and future annual periods IAS 1 (as revised in 2007) Presentation of Financial Statements IAS 1(2007) has introduced terminology changes (including revised titles for the financial statements) and changes in the format and content of the financial statements. In addition, the revised Standard has required the presentation of a third statement of financial position at 1 January 2008, because the entity has retrospectively restated its financial statements. 32

35 Improving Disclosures about Financial Instruments (amendments to IFRS 7 Financial Instruments: Disclosures) The amendments to IFRS 7 expand the disclosures required in respect of fair value measurements and liquidity risk. The Fund has elected not to provide comparative information for these expanded disclosures in the current year in accordance with the transitional reliefs offered in these amendments. Improvements to IFRSs (April 2009 and May 2010) In addition to the changes affecting amounts reported in the financial statements described at 1(a) above, the Improvements have led to a number of changes in the detail of the Fund s accounting policies some of which are changes in terminology only, and some of which are substantive but have had no material effect on amounts reported. The majority of these amendments are effective from 1 January Board of Management will continue assessing the impact of new and revised standards and interpretations which are in issue but not effective once are effective and determine their impact to the results and presentation of the Fund s financial reports. 3.0 SIGNIFICANT ACCOUNTING POLICIES The financial statements have been prepared in accordance with the International Financial Reporting Standards. The principal accounting policies adopted in the preparation of the financial statements are stated below: Basis of Preparation The financial statements have been prepared on the historical cost basis except for the revaluation of certain assets and financial instruments. A historical cost is generally based on the fair value of the consideration given in exchange for assets. Property and Equipment Property and equipment are stated in the statement of net assets at cost less accumulated depreciation and accumulated impairment. Depreciation is recognised so as to write off the cost of assets (other than properties under construction) less their residual values over their useful lives, using the straightline method. The estimated useful lives, residual values and depreciation method are reviewed at each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. 33

36 The useful lives of assets under different categories are as follows: Useful life (years) Motor vehicles 4 Machines and equipment 5 Furniture and fittings 10 Computer hardware 4 Computer software 4 Partitioning 5 The gain or loss arising on the disposal or retirement of an item of property and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset less transaction costs and is recognised in the statement of changes in net assets. Intangible Assets Computer software is stated at cost less accumulated amortisation. The software is amortised over its expected useful life of 4 years on a straight line. Impairment At each reporting date, the Fund reviews the carrying amounts of its financial assets, tangible and intangible assets to determine whether there is any indication of impairment losses. If any such indication exists, the asset s recoverable amount is estimated and an impairment loss is recognized in the statement of changes in net assets whenever the carrying amount of the asset exceeds its recoverable amount. Contribution Income Contributions from members are recorded on the accrual basis. Contribution income is recognized based on the salary actually paid by the member employer to employee. Dividend income Dividend income from investments is recognised when the shareholders rights to receive payment have been established. Interest income Interest income is recognized when it is probable that the economic benefits will flow to the Fund and amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset s net carrying amount on initial recognition. Benefits payable Benefits payable are accounted for in the period in which they fall due. 34

37 Financial instruments Receivables Receivables are financial assets with fixed or determinable payments and are not quoted in an active market. After initial measurement at cost, receivables are subsequently remeasured at amortized cost using the effective interest rate method, less allowance for impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the effective interest rate. Financial assets at fair value through profi t or loss Financial assets through profit or loss are those which were either acquired for generating a profit from short-term fluctuations in price or dealer s margin, or are securities included in a portfolio in which a pattern of short-term profit-taking exists. Investments held for trading are initially recognised at cost and subsequently re-measured to fair value based on quoted bid prices or dealer price quotations, without any deduction for transaction costs. All related realised and unrealised gains and losses are included in the income statement. Interest earned whilst holding held for trading investments is reported as interest income. Held to maturity investments These are financial investments which carry fixed or determinable payments and have fixed maturities. With such investments the Fund has the intention and ability to hold until maturity. After initial measurement, the investments are subsequently measured at amortised cost using the effective interest rate method, less allowance for impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the effective interest rate. The amortisation and losses arising from impairment of such investments are recognised in the income statement. Available for sale fi nancial assets Investment securities intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity, or changes in interest rates, exchange rates or equity prices are classified as available for sale and are initially recognised at cost. Available for sale investments are subsequently re-measured at fair value, based on quoted bid prices or amount derived from cash flow models. Unrealised gains and losses arising from changes in the fair value of securities classified as available for sale are recognised directly in statement of net assets until the asset is de-recognised, at which time the cumulative gains or losses previously recognised in statement of net assets shall be recognised in the income statement. Investment in Quoted equities Investment in quoted equities are classified as fair value through profit or loss and investment properties are stated at market values as estimated at the end of reporting period. Investments in quoted stocks and shares are stated at market value and any surplus arising there from is recognized at investment income in the statement of change in net assets. 35