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Botswana Accountancy Oversight Authority 2013 Annual Report
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VISION, MISSION AND CORE VALUES
VISIONTo attain international confidence in financial reporting,
audit and corporate governance in Botswana.
MISSIONTo develop, promote and implement globally credible
financial and non-financial reporting, audit and corporate governance standards, through proactive oversight
and regulation of an ethical accountancy profession in Botswana in order to protect the public interest.
VALUESKnowledge and Learning
To strive for enhanced understanding and growth in organisational and personal capabilities.
FortitudeTo demonstrate courage, resilience and strength in
executing the mandate of the Authority.
IndependenceTo promote the autonomy of the Authority, and freedom
from interference in the activities of the organisation.
PrincipledTo act in an ethical, just and honest manner at all times.
AdvocacyTo proactively advance quality and ethical standards in all aspects of financial and non-financial reporting, audit and
corporate governance.
InnovationTo adopt an inventive, imaginative and technological approach to organisational effectiveness and service
delivery.
BA = 100 BLACK
O = C=100 M=96 Y= 25 K= 22
A = C=75 M=13 Y= 0 K= 0
Botswana Accountancy Oversight Authority 2013 Annual Report
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Botswana Accountancy Oversight Authority 2013 Annual Report
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Contents ................................................................................................................................. 3
Legislative Mandate .............................................................................................................. 4
General Information .............................................................................................................. 5
List of Abbreviations/Acronyms ........................................................................................... 6
Chairperson’s Letter to the Minister..................................................................................... 7
Chairperson’s Statement .................................................................................................. 8 - 9
Chief Executive Officer’s Statement ............................................................................. 10 -12
Board of Directors ........................................................................................................ 13 - 16
Finance, Audit and Tender Committee ............................................................................. 17
Human Resources Committee ............................................................................................ 18
Report on Corporate Governance .............................................................................. 18 - 21
Executive Staff ...............................................................................................................22 - 23
Management Team ............................................................................................................. 24
Technical Department Team ............................................................................................... 25
Report from the Technical Department ............................................................................. 26
Finance and Administration Department Staff ................................................................. 27
Reports from the Finance and Administration Department .....................................28 - 30
Annual Financial Statements .............................................................................................. 31
Table of Contents
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THE BOTSWANA ACCOUNTANCY OVERSIGHT AUTHORITY AND ITS LEGISLATIVE MANDATE
• TheBotswanaAccountancyOversightAuthoritywasestablishedbytheFinancialReportingAct,2010.
• AnindependentoversightbodyoftheaccountingandauditingprofessioninBotswana.
• Toregulatethereportingoffinancialmattersofpublicinterestentitiesandthecorporatesector.
• Promote the standard,quality and credibilityofprovidingfinancial andnon- financial informationbyentities.
• Regulateandpromotethehigheststandardsofauditors.
• Issue,adopt,establish,monitor,andenforcefinancialreporting,accountingandauditingstandards.
• Promotehighstandardsofcorporategovernanceandcompliancewithprofessionalethics.
• Protectpublicinterest.
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GENERAL INFORMATION
COUNTRY OF INCORPORATION AND DOMICILE
Botswana
NATURE OF BUSINESS AND PRINCIPAL ACTIVITIES
TheprincipalobjectiveoftheAuthorityistoprovideoversighttotheaccountingandauditingprofessionandpromotethestandard,qualityandcredibilityofprovidingfinancialandnon-financialinformationbyentities.Itsfunctionsincludestandardsetting,financial/non-financialreporting and audit practice reviews, enforcement of compliance and oversight over theeducationandtrainingofprofessionalaccountantsinBotswana.
DIRECTORS
TabakeKobedi-ChairpersonMariaMachailo-Ellis-Vice-ChairpersonDanielN.LoetoEmmaA.PeloetletseHiranMendisKeneilweR.MorrisMendelN.NlandaMichaelLesolleOaitseM.Ramasedi
BUSINESS ADDRESS
Plot145,BlockB,FifthFloorLakeViewOfficeParkGaboroneInternationalFinancePark
POSTAL ADDRESS
PrivateBag0056Gaborone
AUDITOR
Deloitte&ToucheCertifiedAuditors
BANKER
FirstNationalBankofBotswana
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LIST OF ABBREVIATIONS/ACRONYMS
AAT - AssociationofAccountingTechnicians
ACCA - AssociationofCharteredCertifiedAccountants
BAOA - BotswanaAccountancyOversightAuthority
BICA - BotswanaInstituteofCharteredAccountants
CIMA - CharteredInstituteofManagementAccountants
FATC - Finance,AuditandTenderCommittee
FRA - FinancialReportingAct,2010
FRMC - FinancialReportingMonitoringCommittee
HRC - HumanResourceCommittee
IASB - InternationalAccountingStandardsBoard
ICAEW - InstituteofCharteredAccountantsinEnglandandWales
ICT - InformationCommunicationsTechnology
IFIAR - InternationalForumofIndependentAuditRegulators
IFRS - InternationalFinancialReportingStandards
IPSAS - InternationalPublicSectorAccountingStandards
ISA - InternationalStandardsonAuditing
MFDP - MinistryofFinanceandDevelopmentPlanning
MOU - MemorandumofUnderstanding
PIE - PublicInterestEntity
SAICA - SouthAfricanInstituteofCharteredAccountants
SSC - StandardsSettingCommittee
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CHAIRPERSON’S LETTER TO THE MINISTER
HonourableKennethO.MatamboMinisterofFinanceandDevelopmentPlanningPrivateBag008GABORONE
DearSir
ANNUAL REPORT 2013
InaccordancewithSection67oftheFinancialReportingAct,2010,IherebysubmittheAnnualReport2013fortheBotswanaAccountancyOversightAuthority.
ThiscomprehensivereportcoverstheoperationsoftheAuthorityduring2013andisaccompaniedbyafinancialreport,togetherwiththeauditor’sreportandtheFinancialStatementsperSection65oftheFinancialReportingAct,2010.
Yoursfaithfully
--------------------------Tabake KobediBOARDCHAIRPERSON
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CHAIRPERSON’S STATEMENT
It is my pleasure to present the Annual Report2013fortheAuthorityinaccordancewithSection67oftheFinancialReportingAct,2010.
As you might be aware, this is my first reportas chairperson of the new Board following myappointment by the Minister of Finance andDevelopment Planning late last year. We, as theBoardoftheAuthority,faceanenormouschallengeaswe are all new in this field and findourselvestreadingonunchartedterritory.
It is of utmost importance thatwedoeverythingpossibletoempowerourselveswiththeknowledgethat will enable us to give an informed strategicdirection to this new organisation. We have toattend relevant workshops and benchmarkingexercisestoempowerourselvesinthisregard.Asaneworganisationthatisknowledgebasedandwithsuch an enormous responsibility, it is imperativethatitisaccordinglycapacitatedinordertomeetthestakeholderexpectations.
Our objective is to promote the high standards of financial reporting and auditing, create a culture of goodcorporategovernance,andenhancetransparencyandaccountability;whichisvitalfortheefficientandeffectiveoperationofcapitalmarketssoastoprotectpublic interestandattractforeigndirect investment.TheultimateresultbeingthefosteringoftheeconomicgrowthanddevelopmentofBotswana.Thisobjectiveonceachievedwill,withoutdoubt, breedeffectiveboards and audit committees, top class stewardship, competent auditors,effectiveandefficientpublicinterestentities,andageneralatmosphereoftrustandconfidenceinourprofession.Thiswillalsoservetoaddressthedamagesdonebythefinancialcrisisexperiencedafewyearsago.
BAOAisnotalone inall thisasotherregulatorsarealsoplayingtheirownvital roles inthisprocess.Whatweshouldguardagainst,however,isasituationwhererolesareduplicatedandaccountabilitiesblurred.Infurtheranceofthis,wearealreadyworkingonmemorandaofunderstandingwiththeBankofBotswana,Non-BankFinancialInstitutionsRegulatoryAuthority,BotswanaStockExchangeandprofessionalaccountancyorganisationssuchasthe Botswana Institute of CharteredAccountants.We are also pleased to note that The BotswanaCorporateGovernanceCodewas launchedattheendof2013.Wehopethatthecodeisgiventhe legislativebackingitdeservessothatcompliancetherewithcouldbeattheveryleastonthebasisof“ApplyorExplain”.
Westillneedtoaddresspertinentmatters inourprofessionrelatingtocontentious issuesofauditor/auditfirmrotations,auditretendering,andtheprovisionofnon-assuranceprofessionalservicestoassuranceclientsbyauditfirms.Theissueofauditorindependenceisquitetopicalacrosstheglobe;sowehavetoaddressithead-onhereinBotswanaaswell.
It is important thatwe continue towork very closelywith the Professional AccountancyOrganisations (PAOs)likeBotswanaInstituteofCharteredAccountants(BICA),AssociationofCharteredCertifiedAccountants(ACCA),CharteredInstituteofManagementAccountants (CIMA),amongstothers,as it istheirmembersthatareattheforefrontwhen itcomes tomeetingpublicexpectations inserviceprovisionbyaccountants.Thestrengthofaprofessionis inthestrengthofitsprofessionalqualificationse.g.InstituteofCharteredAccountantsinEnglandandWales(ICAEW)intheUKandSouthAfricanInstituteofCharteredAccountants(SAICA)inSouthAfrica.WethereforehaveabigroletoplayintheeducationandtrainingofprofessionalaccountantsinBotswana.ItisourstatutoryroletoaccreditthesePAOs,andtheissuesofthetrainingandregulationofaccountantsconsequentlyaffectBAOA.ItisintheinterestofBAOAthatthePAOsarestrengthenedandexaminationresultsimprovedtoalleviatethesignificantshortageofaccountantsinBotswana.
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CHAIRPERSON’S STATEMENT (continued)
Last but not least, I amdelighted thatBAOAhasbeen admitted as amemberof the International ForumofIndependentAuditRegulators(IFIAR)sosoonafteritsestablishment,makingitthefourthcountrytoachievethismilestoneinAfricaafterSouthAfrica,MauritiusandEgypt.Thebiggerchallenge,however,isforustomaintainthehighstandardsofperformancethatareessentialinfulfillingourmembershipobligationssothatweremainamemberingoodstanding.
InthepastyearthereweresomechangestoourBoardwhichsawMrLimitedNkaniresigningasmemberandchairpersonoftheBoardandIbeingappointedChairpersonasalreadyexplained;andMrMendelNgoniNlandaalsobeingappointedbytheMinistertojointheBoard.
MythanksgotoallmyfellowBoardmembers,stakeholdersandstaffforcontributingtotheachievementofourmandate.
_______________Tabake KobediCHAIRPERSON
27March2014
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CHIEF EXECUTIVE OFFICER’S STATEMENT
The year 2013 was dominated by issues relating tothe establishment of the Authority. These includedtherecruitmentofstaff,inparticular,thetechnicalstaffwhoareascarceresourceinBotswana,puttinginplacetheappropriateInformationTechnologyinfrastructuretoprovidethenecessarysupporttotheoperationsofBAOA,andmostsignificantlythetrainingoftechnicalstaff toundertakeauditquality reviewsandfinancialstatementsmonitoring.
Appropriate governance structures were also put inplace,includingsomeofthestatutoryandothernon-statutorycommitteesoftheBoard,namely:
➣ Finance,AuditandTenderCommittee➣ HumanResourcesCommittee➣ StandardsSettingCommittee
TheMinister of Finance and Development PlanningappointedmembersoftheBoardasrequiredbytheFinancialReportingAct,2010(theAct)andbytheendoftheyear,theBoardwasoperatingwithafullBoardmembership.
Stakeholderinteractionsonaone-on-onebasiswereundertakenandtheseincludemeetingswith:➣ BankofBotswana(BOB)➣ BotswanaStockExchange(BSE)➣ Non-BankFinancialInstitutionsRegulatoryAuthority(NBFIRA)➣ AuditFirms➣ TheBotswanaInstituteofCharteredAccountants(BICA)
Memoranda of Understanding (MOUs)
Followingthesemeetings,theregulators(BOB,BSE,NBFIRAandBICA)agreedthatitwasnecessarytocloselycooperatewiththeAuthorityincarryingouttheirrespectiveresponsibilitiesofoversightofpublicinterestentitiestoavoidpossibleduplicationofeffort,withtheconsequentmisallocationofthescarceresourcesofthecountry.Itwas,therefore,agreedthatthiscooperationshouldtaketheformofMemorandaofUnderstanding(MOUs).Atthetimeofwritingthisreport,fourdraftMOUshadbeenpreparedandwereintheprocessofbeingfinalisedbytherelevantboardsoftheregulators.
Extensive Training of Audit Quality and Financial Statements Monitoring Reviewers
AnextensiveprogrammewasdesignedfortheReviewersandthistooktheformofseveraltrainingworkshopsfor thenewlyrecruitedstaff.ThetrainingwasconductedbytheWorldBankthrough itsfirst initiativeprogramagreedwiththeMinistryofFinanceandDevelopmentPlanningtoofferassistanceindevelopingtheaccountancyprofessioninBotswana.AuditFirmswerealsoverycooperativeintheprocessandtheyavailedtheirauditfilestotheAuthoritytofacilitateareallifesimulationreviewofauditfilesforthebenefitofstaff.Threeauditfirmsandeightcertifiedauditorswere,therefore,reviewedwiththeassistanceofaWorldBankexpertinattendance.Thesereviewswerenotdifferentfromtheliveauditreviewsconductedundernormalcircumstancesandasaresultthereviewswerejudgedtohavesatisfiedtherequirementsforathreeyearreviewcycle.
Membership of the International Forum of Independent Audit Regulators (IFIAR)
BAOAwas admitted into themembership of the global body of audit regulators, the International ForumofIndependentAuditRegulators(IFIAR),andbecamethefourthcountryinAfricatobeacceptedintomembershipof
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thisesteemedbody;theotherthreecountriesbeingSouthAfrica,MauritiusandEgypt.Atotalof48countriesintheworldhavepassedthestringenttestofmembershipofIFIARwhichisdominatedbyEurope,whohaveincludedthisrequirementasaprerequisiteforgainingEuropeanUnionmembership.MembershipofIFIARmeansthatfromaglobalperspective,thedevelopmentoftheaccountancyprofessioninBotswanahasreachedaninternationallyacceptablelevelandthatitsinstitutionalframeworkincludingthesupportinglegislationandtechnicalexpertiseintheAuthoritymeetinternationalstandards.
Strategy Formulation
AtaworkshopheldinKanye,Managementcameupwitharoadmaptogiveguidanceatthisearlystageonissuesofastrategicnaturethatwouldrequiretobepursuedinthenextcoupleofyearsbeforeafullcorporatestrategyisprepared.Basedonthestakeholderexpectationsidentified,fivestrategicdriversorfocusareaswereidentifiednamely;OrganisationalDevelopment,RevisionoftheActtoalignitwithpracticalimplementationconsiderations,QualityAssuranceintermsofauditqualityreviewsandfinancialstatementsmonitoring,HumanResourcesandCommunications.Measurableobjectivestogetherwithcompletiontimelinesandaccountabilitiesweredevelopedforeachfocusarea.
Policies and Procedures
Inordertofacilitateoperations,provideguidanceandenhancethesystemofinternalcontrolswithintheAuthority,thefollowingpoliciesandprocedureswereprepared:
➣ GeneralConditionsofService➣ ProcurementandTenderProcedures➣ FinancialProcedures➣ InformationTechnologyRelatedProcedures➣ OtherHumanResourcesRelatedProcedures
Presentations made on the role of an oversight authority
TheCEOpresentedapaperontheroleofanindependentregulatoroftheaccountancyprofession,totheEastandSouthernAfricanAssociationofAccountantsGeneral(ESAAG)members,attendedbythirteencountries.HealsopresentedasimilarpaperattheLesothoInstituteofAccountants’Congress. Itwasnotedthatallbutfourcountries inAfrica still use self-regulation in their respective jurisdictions. Thepaper emphasised the need tomoveawayfromself-regulationasitsuffersfromafundamentalweaknessoflackofindependencewhichmakestheapproachineffectiveand,consequently,doesnotmeettherequirementsofinternationalbestpractice.Whiletheparticipantswere inagreementwith the recommendation, they indicated that the lackofpoliticalwillandgovernmentsponsorshipintheirrespectivecountriesmadethisrecommendedapproachdifficulttoimplement;asthestartingpointwouldbetheenactmentofarobustlegislativeframeworktosupporttheapproach,whichtheirrespectivegovernmentswereunlikelytosupport.
2013 Financial Statements
AsthiswasthefirstyearthattheAuthoritywasoperatingatfullcapacity,nomaterialincomewasreceivedfromsourcesotherthantheGovernmentsubvention;onlyasmallamountofinterestandotherincomewasreceived.Fiftysixpercent(56%)ofthissubventionwasspentonsalariesandwages,tenpercent(10%)onrental,sixteenpercent (16%)onotheradministrativecosts,andthebalanceonplantandequipment. In future it isexpectedthatmoreincomewillbegeneratedfromregistrationandinspectionfees.Itis,however,importantthatwedeviseafundingmodelthatisacceptabletothestakeholdersandatthesametimeensurethattheAuthorityremainsindependentoftheentitiesthatitregulates,foritssurvival.Itisalsoimportantthatintheinitialyears,GovernmentcontinuestobetheprincipalprovideroffinanceuntilsuchtimeastheAuthorityisinapositiontogenerateitsownrevenuestreamsindependently,andhasgainedtheconfidenceofthepublicthroughitsvisibilityandreputation.
CHIEF EXECUTIVE OFFICER’S STATEMENT (continued)
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Intermsofassets,aboutThreeMillionPulawasspentoncomputers,officeequipment,furnitureandfittingsandleasehold improvements. Since thiswas the initial outlay, futureexpenditureon such items is expected tobeminimal.
Work in Progress
ThepreparationoftheFinancialReportingRegulationsiswellunderwayandshouldbefinalisedandsubmittedtotheMinisterofFinanceandDevelopmentPlanningduringthesecondquarterof2014.ThiswillalsobeimmediatelyfollowedbythefinalisationoftheBAOARules.TheregistrationofPIEs,certifiedauditorsofPIEs,andfirmsofcertifiedauditorsofPIEsandaccreditationofProfessionalAccountancyBodieswouldthencommence.
ThepreparationofoperatingmanualsforauditqualityreviewsandfinancialstatementsmonitoringtobeusedduringthereviewofPublicInterestEntitiesiswellunderway,andshouldalsobecompletedduringthesecondquarterof2014.
The Challenges Ahead
WhilealotofprogresshasbeenmadeinthetrainingofourReviewers,theactualperformanceofthereviewstendstobemorechallenging.Thereisempiricalevidencethatmoreoftenthannotresistanceisencounteredfromsomestakeholdersreviewed.Thesesituationswill,therefore,needtobehandledwithcareandtact.
Amovefromself-regulationto independent regulation isabigstepwhichwill taketimetobe fullyaccepted.Therefore,anyimpedimentstoitssuccessfulimplementationshouldbeaddressedthroughtheapplicationofanappropriatechangemanagementstrategy.
FundingisalsoprovingtobeanobstacleasthemodelofgeneratingfundingfromthePIEsbeingregulatedbyBAOAisnotgloballyacceptableduetotheperceivedlossofindependencethatattachestothisapproach.Intheforeseeablefuture,therefore,itisexpectedthattheAuthoritywillcontinuetorelyonGovernmentfundinguntilaworkablefundingsolutionisfound.
BAOAshouldcontinuallybealerttoanychangesinotherrelatedlegislationsandchangesintheneedsofinvestors.Itwillneedtostriketherightbalancebetweenoverregulationandself-regulation;aswellasabalancebetweenpublicinterestprotectionandprotectionoftheprofession,especiallythoseauditorswhodotheirworkwithcareandduediligence.
Alineofcommunicationwithauditorsshouldbemaintainedthroughforumssuchassteeringcommitteessothattheresponsibilityforcreatinginternationalconfidenceinfinancialreporting,audit,andcorporategovernanceinBotswanaissharedbytheprofessionasawhole,notjustbyBAOA.
Acknowledgements
Finally,IwouldliketothankmyBoardmembersfortheirdirectionandguidanceinadifficultenvironmentinwhichnoneofthemhadanypriorexperience.IwouldalsoliketothanktheMFDPforfacilitatingallthesedevelopmentsatBAOA,andtheWorldBankforitssupportinprovidingappropriatetechnicaltraining.Lastbutnotleast,IwouldliketothankthestaffofBAOAwhoworkedtirelesslytobringthenewAuthoritytothelevelthatitisattoday.
________________________Duncan Dankie MajindaCHIEFEXECUTIVEOFFICER
27March2014
CHIEF EXECUTIVE OFFICER’S STATEMENT (continued)
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PriortoassuminghisnewroleasManagingDirectorofDTCBotswana,Mr.TabakeKobediwastheGroupFinanceManagerforDebswana,managingadiverse rangeof activities in finance, supply chain, riskmanagement
andinsurance.HehasbeenaseniorfigureandkeydriveroftheorganisationalalignmentinitiativeacrossDebswana.TabakeisanAssociateMemberoftheChartered Institute of Management Accountants and holds a Bachelor ofCommerceDegreewithaMajorinAccounting.
InhisroleasManagingDirectorofDTCBotswana,TabakeKobedileadsmultiplefunctionsthatmakeupDTCBotswana,whichmostcriticallyincludesdiamondsorting.HeplaysakeyroleinleveragingtheskillsandservicesprovidedbyDTCInternationalinordertomaximisethecommercialandtechnicalaspectsofthebusiness.HealsocontributestoDTCInternationalthroughhisparticipationataseniorlevelintheglobaloperationsofthatcompany.
ChairpersonTabake Kobedi
BOARD OF DIRECTORS
Ms. Machailo-Ellis is the Chief Executive Officer of BotswanaConfederationofCommerce,IndustryandManpower(BOCCIM).Sheis a CharteredCertifiedAccountant (FCCA) and FellowMember of
the Botswana Institute of Chartered Accountants (BICA). She obtained herACCAfromtheLondonSchoolofAccountancyintheUKandaB.A.degreeinEconomicsandAccountsfromtheUniversityofBotswana.Maria’sexperiencecovers areas of FinancialManagement,ManagementQuality Systems (ISO9000),Subcontracting,ForeignLinkages,ExportMarketingandLeadership.ShehasheldpositionsofAccountant,FinanceManagerandChiefExecutiveOfficerinvariouscompaniesinBotswana.
MsMachailo-Ellishas28yearsofexperience,ofwhich15yearshavebeenin working with Small andMedium size enterprises, and has a passion forentrepreneurshipandSMEdevelopment,havingtrainedover500entrepreneursin Botswana andMauritius. Her past and present BoardMemberships andparticipation in Other Bodies include amongst others; Local EnterpriseAuthority(Chairperson),WomeninBusinessAssociation(President),Botswana
Institute for Development Policy Analysis (BIDPA), Vision 2016 Council, American and AfricanWomen’sAlliance,BOCCIMCouncilandCitizenContractor’sFundsAppeals.
SheisalsoaNationalCoachforBotswanaWomeninMediaundertheMediaLeadershipProgramWAN–INFRA,whichisrunninginBotswana,NamibiaandZambia.
Vice-ChairpersonMaria Machailo-Ellis
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BOARD OF DIRECTORS (CONTINUED)
AChartered Certified Accountant (FCCA), Michael is currently theExecutiveDirectorofBotswanaAccountancyCollege(BAC),arolehehasdischarged for justoverfiveyears.Before thenhe servedas the
CEOofBotswanaSavingsBank(BSB).Thepastfifteenyearsofhisprofessionalcareerwere spent in theorganisational leadership role at the apex, andasarchitect/designeroforganisationaltransformation,strategyformulationanditsimplementation,aswellasmanagingchange.MikestartedhisaccountancycareerintheU.K.withthefirmofcharteredaccountants,DeloitteHaskins&Sells (as itwasknownat the time).WithinDeloitte,hehadexposure to theCorporate Finance, Consulting and Small Enterprise divisions of the firm.He learnt the ropeswithin the firm in the statutory audits of the blue chipcompaniesinvariousindustrygroupings,mostofthemlistedoninternationalexchanges.
AsCEO,hisaccountabilitiesatbothBACandBSB,entailedtheengineeringof teams’ behavioral changedynamics,mind-set change, the imperative ofholding the customer in high esteem, embracing technology, anticipating
marketchangesandwealthcreation.Hehascontributedextensively intheaccountancyprofessionatthethenBotswanaInstituteofAccountants(BIA),nowBotswanaInstituteofCharteredAccountants(BICA),whereformanyyearshewasMemberofCouncil,andultimatelyasPresidentoftheInstitute.Atinternationallevel,hewasinvolvedwithseveralACCAGlobalinitiatives.Inasimilarfashion,MikewasanactivememberoftheBotswana InstituteofBankers,andatsomepoint the InstitutePresident.HehaspreviouslyundertakenasignificantamountofPublicSectorConsultancywork.
Heisanon-executivedirectoronanumberofBoardsincludingasmemberoftheBDCAuditCommittee,ChairmanofVenturePartnersBotswana,formerMemberofUniversityofBotswanaCouncilandothers.
DanielNLoeto isChiefAccountantandHeadofFinanceDepartment,BankofBotswana.Heisresponsibleforaccounting,strategicplanningandriskmanagement.HeholdsaBachelorofScience(Mathematicsand
Physics)Degree;PostGraduateDiplomainEducationandaMasterofBusinessAdministrationDegree,allfromtheUniversityofBotswana.HeobtainedtheACCAqualificationinDecember,1997andwasadmittedasaFellowoftheAssociationoftheCharteredCertifiedAccountantsinFebruary2005;andhasbeenaFellowoftheBotswanaInstituteofBankerssinceDecember1998afterpassingtheAssociateDiplomaexaminationsinMarch1993.
Mr.LoetoisamemberoftheInternationalMonetaryFund(IMF)’s3-memberExternalAuditCommitteechargedwiththeresponsibilityoftheIMF’sexternalauditoversight for theperiodNovember1,2013toOctober31,2016;andservedon theBoardofBotswanaUnifiedRevenueService (BURS) from theorganisation’sinception(June2004)astheBank’srepresentativetoJune30,2013.Mr. Loeto has also served as amember of theBotswana Institute ofBankersCouncil,andtheThornhillPrimarySchoolCouncil,andasanEmployee
TrusteeoftheBankofBotswanaDefinedContributionPensionFund.
Intermsoftraining,Mr.LoetoattendedtheExecutiveDevelopmentProgrammeoftheUniversityofCapeTown’sGraduateSchoolofBusinessinJuly-August,2005,andhasalsoattendedseveralseminars,workshopsandothershort-termtrainingcoursesattheBankofEngland,DuetschbundesBankandtheEuropeanCentralBank,mainlyrelatedtoaccountingandcentralbanking.
BeforejoiningtheBankinAugust1991,Mr.LoetotaughtMathematicstoAdvanceLevelforabout5years,andhasalsobeenaparttimelecturerattheBotswanaInstituteofBankersforseveralyears.
MemberMichael Lesolle
MemberDaniel N Loeto
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Mr. Hiran Mendis was appointed the Chief Executive Officer of theBotswanaStockExchange(BSE)inJuly2006.PriortojoiningtheBSE,Mr.MendiswastheDirectorGeneraloftheColomboStockExchange
(CSE)inSriLankafor9years.
Mr.Mendis is a FellowMember of theChartered Institute ofManagementAccountants(CIMA),UnitedKingdom(UK)andhasservedontheCouncilofCIMAinLondon,SriLankaandSouthernAfrica.HealsoholdsMBAandMA(Economics)degreesfromtheUniversityofColomboinSriLanka.
TheBSEisundergoingaphaseofchangeandMr.HiranMendisisresponsibleforimplementingseveralstrategiestomodernizetheBSE.HeisresponsibleforsettingthestrategicdirectionoftheBSEandimplementingseveralprojectstodeveloptheBSE’sInfrastructure,RegulatoryFrameworkandProductOfferings,amongstmanyareasofdevelopment.
BOARD OF DIRECTORS (CONTINUED)
MemberHiran Mendis
Mr.KeneilweRMorrisisacareertaxofficialwhobringsover30years’experienceinthecustomsandtaxadministrationfield.Herosethroughthe ranks and has occupied various management and leadership
positions ingovernmentand theBotswanaUnifiedRevenueService.TheseincludeDirectorofCustomsandExcise,CommissionerofCustomsandExcise,andChiefExecutiveOfficer,BURS,apositionhehasoccupiedsinceDecember,2010.
Mr.Morrisisamemberofvariouslocal,regionalandinternationalcommitteesdealingwithtaxandcustomspolicyformulationandadministrationmatters.These include the membership to the Taxation Review Committee, theAfricanTaxAdministrationForumGoverningCouncil,andtheWorldCustomsOrganisationPolicyCommission.Someofhispersonalachievementsincludecoordinatingand leading the teamwhichestablished theBotswanaUnifiedRevenueServicein2004.
Mr. Morris has attended several technical, management and strategicleadershiptrainingprogrammeslocallyandabroad.
Mr. Nlanda is currently the Director of Finance at the University ofBotswana[UB].HeisaFellowmemberofboththeBotswanaInstituteof Chartered Accountants (BICA) and Association of Chartered
CertifiedAccountants (ACCA), a UK based professional body of CharteredCertified Accountants. He studied at Emile Wolf College in London andqualifiedasaCharteredCertifiedAccountantin1996.HealsoholdsaBachelorofCommerceDegreefromtheUniversityofBotswanaobtainedin1985.HesuccessfullycompletedacourseonStrategicFinancialManagementinHigherEducationofferedbyUNESCO/InternationalInstituteforEducationalPlanning(IIEP),Paris,France.
Mr.NlandaisaninsightfulandhighlyexperiencedAccountantandAdministrator.HespentayearonsabbaticalattheUniversityofPennsylvania,USA(July1,2008–June30,2009)togainhandsonexperienceontheinternationalsceneand at aworld class university. Apart from FinanceDirectorship at UB,Mr.NlandaisalsothePrincipalOfficeroftheUBPensionFund,thethirdlargestpensionfundbyvalueinthecountry,thetreasureroftheUBFoundationand
DeputyChairmanoftheUBTenderCommittee.
MemberKeneilwe R Morris
MemberMendel N Nlanda
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Mr.OaitseMRamasedi is currently theChiefExecutiveOfficerof theNon-BankFinancialInstitutionsRegulatoryAuthority(NBFIRA).Priortothat,heheadedtheNationalDevelopmentBankforalmostadecade.
Mr.RamasediisaCharteredManagementAccountantbytraining,andholdsaBachelorofCommerceandaMasterofArtsdegreesfromtheUniversityofBotswana, aswell as banking and insurance related qualifications from theBotswana Institute of Bankers (BIOB) and the Insurance Institute of SouthAfrica(IISA),respectively.
Hehasservedinanumberoforganisationsasaboardmember,andcurrentlychairstheSADCCommitteeonInsurance,SecuritiesandNon-BankAuthoritiesandalsositsontheBotswanaRetiredNursesSociety(BORNUS)Board.
BOARD OF DIRECTORS (CONTINUED)
Mrs.EmmaAPeloetletseistheAccountantGeneraloftheRepublicofBotswana,apositionshewasappointedtoin2009.SheisaBachelorofCommercegraduate from theUniversity of Botswana, andholds
a post-graduate Diploma in Public Finance from the National Institute ofFinancialManagementinIndia.Mrs.Peloetletsehasasoundbackgroundandexperience in strategic management and public sector governance issuesacquired fromthemore than twodecadesof service in theGovernmentofBotswanaatvariouslevels;frombeingatraineeaccountantandrisingthroughtherankstothepositionofthecountry’sAccountantGeneral.
Mrs.Peloetletsehasparticipatedinseveralhighlevelregionalandinternationalconferences representing theGovernmentofBotswana, andhas servedonseveral boards. She is currently amember of the Botswana PublicOfficersPensionFund (BPOF)Board,andtheBotswanaAccountancyCollege (BAC)Board. She is the reigning Chairperson of the East and Southern AfricanAssociationofAccountantsGeneral(ESAAG)ExecutiveCommittee,apositionshehasheldfromFebruary2013todate.
MemberEmma A Peloetletse
MemberOaitse M Ramasedi
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Daniel N LoetoChairperson
Emma A Peloetletse Oaitse M Ramasedi
COMMITTEES OF THE BOARD
Finance, Audit and Tender Committee
Human Resources Committee
Hiran Mendis Keneilwe R MorrisMaria Machailo-EllisChairperson
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REPORT ON CORPORATE GOVERNANCE
The Board of Directors
Thepowers and functionsof theAuthority are vested in theBoardofDirectors appointedby theMinister ofFinanceandDevelopmentPlanningintermsofSection7oftheFinancialReportingAct,2010.
Composition of the Board
It isessential thattheBoardofBAOAis independentoftheaccountancyandauditingprofessionbecausetheAuthoritywasestablishedtooverseetheprofession.Thisisalsoaprerequisiteformembershipoftheglobalbodyofregulators,IFIAR.TheBoardisthereforecomprisedofsixindependentex-officiomembersrepresentingthekeystakeholdersinthecountryandthreeexpertstoprovidecounseloncomplexaccountingandauditingmatters,making a total of ninemembers. For this reason, expertBoardmembers shouldpossesspractical knowledgeof internationally recognised financial reporting and auditing standards. The expert members consist of twoexperiencedmembers from the Botswana Institute of Chartered Accountants and one academic professionalaccountantmemberrepresentinginstitutesofhigherlearninginBotswana.
Theex-officioBoardmemberscompriseheadsofthefollowingentities:➣ AccountantGeneral➣ BankofBotswana➣ BotswanaConfederationofCommerce,IndustryandManpower➣ BotswanaStockExchange➣ BotswanaUnifiedRevenueService➣ Non-BankFinancialInstitutionsRegulatoryAuthority
TheBoardiscurrentlyoperatingwithitsfullcomplementofmembership.
Committees
InaccordancewithSection16oftheFinancialReportingAct,2010theBoardmay,forthepurposesofperformingitsfunctions,establishsuchcommitteesasitconsidersappropriateandmaydelegate,toanycommittee,anyofitsfunctionsasitconsidersnecessary.
During2013,theBoardestablishedthefollowingcommittees:
Name of committee Number of members
Finance,AuditandTenderCommittee 3HumanResourcesCommittee 3StandardsSettingCommittee 13
TheStandardsSettingCommitteewasestablishedasarequirementofSection16(2)oftheAct,whiletheHumanResources and Finance, Audit and Tender Committees were established to strengthen corporate governancewithintheAuthority.
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REPORT ON CORPORATE GOVERNANCE (continued)
BOARD AND COMMITTEE MEMBERSHIP
Name Board FATC HRC SSCMr.TabakeKobedi Chairperson
Ms.MariaMachailo-Ellis Vice-Chairperson Chairperson
Mr.DanielNLoeto Member Chairperson Member
Ms.EmmaAPeloetletse Member Member
Mr.HiranMendis Member Member
Mr.KeneilweRMorris Member Member
Mr.MendelNNlanda Member Vice-Chairperson
Mr.MichaelLesolle Member Chairperson
Mr.OaitseMRamasedi Member Member
AAT Member
ACCA Member
AuditorGeneral Member
AccountantGeneral Member
BICA Member
CIMA Member
InternalAudit Member
SpecialistKnowledge(co-opted) Adhoc
TertiaryInstitutions Two(2)Members
Key:-FATC=Finance,AuditandTenderCommitteeHRC=HumanResourcesCommitteeSSC=StandardsSettingCommittee
In termsofSection7(4)of theFinancialReportingAct,2010, theChairpersonof theBoard isappointed fromamongmembersoftheBoardandshallholdofficeforthreeyears,unlessheorsheceasestobeamemberoftheBoard,andshallbeeligibleforre-appointmentforonefurtherterm.TheViceChairpersoniselectedbyBoardmembersatthefirstmeetingoftheBoardandshallholdofficefortwoyears,andshallbeeligibleforre-appointmentunlessheorsheceasestobeamemberoftheBoard.
Ex-officiomembersof theBoardshall serveasmembersof theBoardbyvirtueof theoffices theyholdwhileexpertsandacademicsappointedasmembersshall serve foraperiodnotexceeding fouryears,andshallbeeligibleforre-appointment.
Mandate of the Board of Directors
TheBoard’sresponsibilitiesinclude,amongotherthingsthefollowing:• strategicoversightovertheAuthorityandensuringcompliancewithgoodcorporategovernance;• settingandreviewingoftheAuthority’sstrategicplanandmonitoringtheimplementationthereof;and• approvaloftheannualbusinessplanandbudgetoftheAuthority.
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REPORT ON CORPORATE GOVERNANCE (continued)
Management of the Authority
Thedaytodaymanagementof theAuthorityhasbeendelegatedtotheChiefExecutiveOfficerwhoshallbeassistedbyanExecutiveManagementteam;subjecttosuchdirectiononmattersofpolicyasmaybegivenbytheBoard.
Board Meetings
Section15(2)oftheFinancialReportingAct,2010providesthattheBoardshouldholditsmeetingsatleastonceeverythreemonths.
TheBoardheldfive(5)BoardMeetingsthisreportingyear.
Quorum
ThequorumateveryBoardmeetingshallbefive(5)memberscomprisingofatleastthree(3)ex-officiomembersandoneexpertasdefinedbytheAct.
BOARD MEETINGS ATTENDANCE REGISTER
BOARD MEETING DATES
No Board Member Date of Appointment
29 Jan 2013
14 May 2013
27 Jun 2013
10 Oct 2013
28 Nov 2013 Total
1. TabakeKobedi Nov2011 √ √ √ √ √ 5/5
2. MariaMachailo-Ellis Nov2011 √ √ A A A 2/5
3. DanielNLoeto Nov2011 √ √ √ √ √ 5/5
4. EmmaAPeloetletse Nov2011 A √ √ √ A 3/5
5. HiranMendis Nov2011 A A √ √ √ 3/5
6. KeneilweRMorris Nov2011 √ A A √ √ 3/5
7. MendelNNlanda Sept2013 x x x W √ 1/1
8. MichaelLesolle Nov2011 √ √ A A A 2/5
9. OaitseMRamasedi Nov2011 A √ √ √ A 3/5
Key: √ - Present A- Apologies x - Notmember W- Member,butnotinvited
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REPORT ON CORPORATE GOVERNANCE (continued)
FINANCE, AUDIT AND TENDER COMMITTEE ATTENDANCE REGISTER
MEETING DATES
No Committee Member Date of Appointment 16 August 2013 18 November
2013 Total
1. DanielNLoeto November2011 √ √ 2/2
2. EmmaAPeloetletse November2011 √ √ 2/2
3. OaitseMRamasedi November2011 A √ 1/2
Key: √ - Present A - Apologies
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Duncan Majinda is the current CEO of Botswana Accountancy OversightAuthority (BAOA). His accountancy career started when he qualified asanAccountingTechnician in1984.UsinghisAATto launchhiscareer,he
completedACCAin1990andwentontodohisMBA(Finance)attheUniversityofManchesterinEngland.HispastemployersareMinistryofLocalGovernmentandLands,DepartmentofLocalGovernmentAudit,AngloAmericanCorporation,DeloitteandTouche,BankofBotswanaandtheBotswanaInstituteofCharteredAccountants(BICA).HewentthroughtheranksfromAccountsClerktoAccountsSupervisor,toFinanceManagerbeforehejoinedBICAandBAOAasCEO.
DuncanhasservedinseveralpastandcurrentDirectorshipsincludingBotswanaAccountancyCollege;BotswanaStockExchange(Treasurer);Mascom;BotswanaInstitute of Accountants; Stockholm International School in Sweden (AuditCommitteeChairman);BotswanaInternalAudit(FoundingPresident);Companiesand Intellectual Property Authority (CIPA) (Audit Committee Chairman); GrandDeLuxeInvestmentandConsultingCompany;andTlotloHotelandConferenceCenter(Chairman).
LimitedQuiteNkaniistheDirectorofFinanceandAdministration.HestartedworkwiththeMinistryofLocalGovernmentandLandsintheDepartmentofLocalGovernmentAuditandproceededtowork forCoopersandLybrand,
nowPricewaterhouseCoopersandthenjoinedtheBotswanaInsuranceHoldingsGroupwherehebecameActingGeneralManagerofBotswanaLife in2002 to2003.HeproceededtoworkforMetropolitanBotswanaasManagingDirectorin2006andin2008joinedtheNationalFoodTechnologyResearchCentreastheDirectorofCorporateServices.
HeisaCharteredCertifiedAccountant,havingqualifiedin1985asanACCAandadmittedtomembershipin1989.HeholdsaMasterofBusinessAdministration(MBA)fromtheUniversityofBotswana.
Hehasattendedanumberofshortcourses;inInsurance,BusinessDevelopment,Management Leadership and Quality Assurance; in Botswana, South Africa,GermanyandtheUnitedStatesofAmerica.
Chief Executive OfficerDuncan Dankie Majinda
EXECUTIVE STAFF
Director Finance & AdminLimited Quite Nkani
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SonnyMabheju is currently theDirector in charge of Technical andQualityAssurance.BeforethathewasTechnicalDirectorattheBotswanaInstituteofCharteredAccountants.
HeprovidedinternationalconsultancyservicestotheWorldBankfortwoandahalfyearsintheareaofcorporatefinancialreporting;coveringsomecountriesinSouthernAfricaandtheCaribbeanregioninSouthAmerica.
Before thatSonnywas theChiefExecutiveOfficerof the InstituteofCharteredAccountants of Zimbabwe for three years, and at the same time providingconsultancyservicesinforensicauditsintheminingsectorinZimbabwe.
HeservedarticleswithPricewaterhouseCoopersinHarare.HeworkedforDeloitteasSeniorManager,wherehewasresponsibleforauditandtraininginBulawayo,andwasPartneratBDOinHararefor12years,beinginchargeofauditandtraining,andwasamemberoftheBDOSouthernAfricaTechnicalCommittee.
HeisaCertifiedFraudExaminer(USA);CertifiedProfessionalAccountant(Botswana);andCharteredAccountant(Zimbabwe).
JoeMutwale is a holder of a Bachelor of Business Administration Degree(University of Zambia), Fellow of the Botswana Institute of CharteredAccountants, Fellowof theAssociationofCharteredCertifiedAccountants
(ACCA),FellowoftheZambiaInstituteofCharteredAccountants;withmorethantwentysevenyearsofpost-qualificationexperiencemainlyincentralbankinternalauditingandfinance,mining,andtheauditingprofession.
Between 2011 and 2013 he served as Group Internal Auditor of the SefalanaGroupofcompanies.PriortothatheservedinvariouscapacitiesintheBankofBotswanaforelevenandhalfyears,includingasChiefInternalAuditorforaperiodofsixyears,andasDeputyDirectorofFinance(ChiefAccountant)formorethanthreeyears.
Hehasextensivepracticalauditingexperience,includingprovisionofspecialisedprofessionalservicestorecipientsoffundsfrominternationalfundingorganisationssuchastheAfricanDevelopmentBankandtheWorldBank;gainedwhileworkingforDeloitteZambiaforatotalofsevenyears,whereherosefromAuditSeniorto
SeniorAuditManager.HealsoservedasSeniorAuditManagerwithKPMGBotswanafortwoyears.
EXECUTIVE STAFF (continued)
Director Technical & Quality Assurance
Sonny Mabheju
Chief Quality ReviewerJoe Mutwale
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MANAGEMENT TEAM
Left to right: EphifaniaNkanga•MosheCZilaLibengo•BoitumeloRaditladi•MerapeloMokgosi•LameObotseng•PatrickJansen
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TECHNICAL DEPARTMENT TEAM
Left to right:JoeMutwale•LesegoPheto•LameObotseng•EphifaniaNkanga•KennethUgokwe
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REPORT FROM THE TECHNICAL DEPARTMENT
Technical Department
TheTechnicalDepartmentisresponsibleforauditreviewsofCertifiedAuditorsofPublicInterestEntitiesandAuditFirmsofPublicInterestEntities.TheDepartmentisalsoresponsibleforfinancialstatementsmonitoringofPublicInterestEntitiesandgovernanceissuesinPublicInterestEntities.
IntermsoftheFinancialReportingAct,2010,BAOAisallowedtoestablishthree(3)technicalcommittees;StandardsSettingCommittee,FinancialReportingMonitoringCommittee,andtheAuditPracticeReviewCommittee.Allthethreecommitteeswereatdifferentstagesofbeingformedinthecurrentyear.MembersoftheStandardsSettingCommitteewereidentifiedandapprovedbytheBoard.MembershipoftheothertwocommitteesisstillbeingconsideredandwillbepresentedtotheBoardforapprovalin2014.
TheAuthority’sfocusfortheTechnicalDepartmentwasonrecruitmentandtraining.Afullcomplementofstaffwasrecruitedduringtheyear,andtechnicaltrainingwasalsosuccessfullyconductedwithsupportfromtheWorldBankasfollows:
a) Handsontrainingfortheconductoffinancialstatementsreviewswasconductedovertwo(2)separatebutrelatedsessions.
b) Traininginauditpracticereviewscoveringthelegalcontext,processes,procedures,andthemethodologyofauditpracticereviewswasconductedoverasevenmonthperiod.Thisincludedhandsonpracticaltrainingatthree(3)volunteerauditfirmsthatvolunteeredtobeusedforBAOAstafftraining.
c) AnintegratedtrainingcourseonthepracticalapplicationofIFRSsandISAswasalsoconducted.SomelocalSmallandMedium-sizedPracticeswithnoglobalnetworkconnectionsalsoattendedthissession.Thiswasaimedatassistingtheminimplementingqualitycontrolsystemsintheirpractices,appropriatelyapplyingISAsonauditassignments,andenhancingtheirknowledgeofIFRSsforpracticalapplication.AsimilarcourseonIPSASwasplannedforJanuary2014.
Manualsforuseduringauditpracticeandfinancialstatementsreviewswerealsodevelopedandwillcontinuetobeimprovedupon,takingintoaccountanychangesintheinstitutionalframeworkandinternationalbestpracticeaffectingfinancialreportinginBotswana.
OneofthekeymandatesoftheAuthorityasoutlinedinSection5(g)oftheActistopromotehighstandardsofcorporategovernanceandcompliancewithprofessionalethicsbyentities,includingpublicinterestentities.
TheBotswanaCorporateGovernanceCode,basedonthe“ApplyorExplain”approach,waslaunchedlatein2013andisnowapplicable.CompilationofCorporateGovernanceReviewProgrammestobeusedcommencedduringthisreviewperiodandisexpectedtobecompletedandbroughtintouseduringthenextreviewperiod.
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FINANCE AND ADMINISTRATION DEPARTMENT STAFF
Left to right (front row):KylieK.Kereng•LebogangMokgadinyana•ConstanceBolaane•MargretMontebatsiMerapeloMokgosi•BoitumeloRaditladi•KeitumetseKgasudi
Left to right (back row): BlessedSeretse•PatrickJansen•MosheCZilaLibengo•OlebeletseMokone
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REPORTS FROM THE FINANCE AND ADMINISTRATION DEPARTMENT
TheFinanceandAdministrationDepartmentprovidessupportservicestothewholeorganisation.Inparticular,it deals with financial matters, procurement, administration, information technology and human resourcemanagement.TheDepartmenthaseleven(11)membersofstaff.
FINANCE SECTIONInaccordancewithSection66oftheFinancialReportAct,2010,theAuthorityisrequiredtoproduceanannualreport which shall include its audited financial statements. The annual report shall report on the Authority’soperationsandaffairsforthefinancialyear.
InaccordancewithSection60oftheFinancialReportAct,2010,therevenuesoftheAuthorityshallconsistof:a) suchmoniesasmaybeappropriatedbytheNationalAssembly;b) feesthattheAuthoritymaychargeforservicesitmayrender;c) moneypaidinrespectoffinesimposedbytheAuthorityundertheAct;d) grantsanddonationsthattheAuthoritymayreceive;e) incomethattheAuthoritymayreceivefrominvestments,rentals,saleoflandandbuildings;andf) suchothersourcesasmaybeapprovedbyGovernment.
DuringtheyearunderreviewtheAuthority’srevenuealmostentirelycamefromtheGovernment.TheAuthorityis in its infancy and has neither developed a comprehensive charging system for the services it is allowed toprovidenorhasitprovidedanyofthoseservicesyet.ConsultationswithstakeholdersisongoingsothattheycanappreciatetheroleoftheAuthorityandthebenefitsthatwillaccruetothemandtothebusinesscommunityatlarge.Intheshortandmediumterm,theAuthorityisthereforeexpectedtoderivemostofitsrevenuesfromtheGovernment.
BotswanaAccountancyOversightAuthorityisaknowledgebasedorganisationand,therefore,itisnotsurprisingthatduringtheyearoversixty-fourpercent(64%)ofitsadministrationcostsrelatedtosalaries.Otheradministrationcostscomprisedmainlyofrent,whichrelatestoafive(5)yearleaseofofficespacecommencing1stJanuary2013,anddepreciation.
Directors’feesaresignificantlylessthan2012feesduetofewermeetingsheldin2013.WhentheAuthoritystarteditsoperationsin2012,Boardmeetingswereheldmorefrequentlytoaddressurgentissuesrelatingtothenewlyestablishedorganisation.Theseincluded,amongstothers,staffingandacquisitionofplantandequipment.TheassetbaseisnowconsideredadequateasitenablestheAuthoritytocarryoutitsmandate.Goingforward,onlyitemsofamaintenanceandreplacementnaturearelikelytobeacquired.(Foradetailedbreakdownofassetsheld,seeNote3onPage52ofthefinancialstatements). Currently,theAuthoritydoesnotownanylandandbuildings.
AccountsreceivableincludestaffloanswhiletherestarepredominantlyprepaymentssecuringfutureservicesfortheAuthority.
CashandcashequivalentshavedeclinedfromP1,555,747in2012toP629,931in2013duetotheacquisitionofcomputerequipment,officeequipment,furniturefittingsandleaseholdimprovementsin2013.
Liabilities
Accountspayablecomprisepayroll-relatedaccruals,auditfees,andotherpayablesforgoods/servicessuppliedbutnotpaidfor.
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REPORTS FROM THE FINANCE AND ADMINISTRATION DEPARTMENT (continued)
FINANCE SECTION (continued)
Budget Process
InaccordancewithSection61oftheFinancialReportingAct,2010(theAct),theAuthorityshallprepare,insuchformandatsuchtime,notlaterthanthreemonthsbeforethecommencementofeachfinancialyear,asmaybeprescribed:
a) abudgetinrespectofthenextensuingfinancialyearthatsetsforththeAuthority’sestimatedreceiptsandexpendituresandthesumswhicharelikelytoberequiredbyitfromtheGovernmentduringthenextensuingfinancialyearandforward;
b) abusinessplananditsstrategyandactivityprogramme;and
c) acertificationbytheChiefExecutiveOfficerandanyotherseniorofficerinchargeofaccountingandfinance functionsof theAuthority, that thebudget representsa fairand reasonableprojectionof theincomeandexpenditureoftheAuthority.
TheAuthority’sapprovedBudgetandBusinessPlanfor2014/15wentthroughtheabovebudgetaryprocessduring2013.
TheAuthorityhasstrengtheneditsfinancialandbudgetingmanagementbyemployingqualifiedandexperiencedstaffintheFinanceSection.
INFORMATION TECHNOLOGY (IT) SECTIONTheITSectionthisfinancialyearwasengagedinseveralprojectswhichincludedinitialinfrastructureacquisition,deploymentandcommissioningthereof.MostoftheservicesrequiredforthesmoothoperationofBAOAICTserviceshavebeenput inplaceandareprovidingthe requiredservices toBAOAusers. Tosafeguardthe ITInvestment, the IT Section has put in place several policies to guide the users of the information technologysystems.
BeingasmallunitoftheDepartment,theBAOAITSectionsignificantlyreliesontheservicesofthirdpartyserviceproviders.Toensurethatservicesarerenderedeffectively,thedepartmenthassignedservicelevelagreementswithitsserviceproviders.
TheITSectionhasalsodevelopedtheBAOAwebsite,whichisexpectedtobelaunchedtothegeneralpublicsometimein2014.ThewebsiteisintendedtoserveasanimportantcommunicationchannelbetweenBAOA,thegeneralpublicandallindividualsandentitiesregisteredwiththeAuthority.
TheSectionarrangedtrainingsessionsonofficeproductivitytools.Thesetraininginterventionswereaimedatbridgingthetrainingneedsgapinthetoolsusedbythetechnicalandadministrativestaffintheirdailyactivities.
HUMAN RESOURCES SECTIONTheHumanResourcesSection’scorefunction is toattractandretainqualifiedandexperiencedstaff toenabletheAuthoritytomeet itsmandate. Italsoundertakestraininganddevelopmentofstaff;anddevelopshumanresourcespoliciesandprocedureswithintheambitoftheLabourLawsofBotswana.
StaffingTheAuthorityhasanapprovedestablishmentofnineteen(19)employees.Allpositionswerefilledatthecloseoftheyear;eightyninepercent(89%)beingcitizensandelevenpercent(11%)beingnon-citizens.
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REPORTS FROM THE FINANCE AND ADMINISTRATION DEPARTMENT (continued)
HUMAN RESOURCES SECTION (continued)
Training and Development
TheAuthoritycontinuestodevelopandnurturetalentinordertoachieveitsmandate.Professionalemployeesweretrainedthroughvariousmeansthatincludedworkshops,conferencesandcoursesintheperiodunderreview.TheareascoveredwereInternationalPublicSectorAccountingStandards,FinancialStatementsAnalysis,InternationalFinancialReportingStandards(IFRS)andInternationalStandardsonAuditing(ISA).
Thisisexpectedtoimprovethelevelofknowledgeofstaffmembersandaddtothedevelopmentoftheorganisation.
Remuneration Survey
TheAuthorityparticipated in a remuneration survey, intended todeterminehow theAuthority’s remunerationcomparestothemarket.This,togetherwiththeoutcomeofthejobevaluationexercise,shouldassistindeterminingthevalue/worthofeachjobinrelationtoothers.Theexerciseisstillon-goingandwillbeusedforpurposesofestablishingarationalpaystructurefortheAuthority.
TheAuthorityintendstoalignitsremunerationwiththemarketinordertoattractandretaincompetentemployeesandatthesametimemotivateindividualperformance,whilemaintainingsufficientlevelsofremunerationwhicharefairlydistributedwithintheorganisation.
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ANNUAL FINANCIAL STATEMENTSFor the year ended 31 December 2013
BoardResponsibilitiesandApproval...................................................................................................................... 32
IndependentAuditor’sReport................................................................................................................................ 33
StatementofFinancialPosition.............................................................................................................................. 34
StatementofComprehensiveIncome.................................................................................................................... 35
StatementofChangesinReserves......................................................................................................................... 36
StatementofCashFlows........................................................................................................................................ 37
AccountingPolicies.........................................................................................................................................38-44
NotestotheFinancialStatements..................................................................................................................45-50
ThefollowingsupplementaryinformationdoesnotformpartoftheAnnualFinancialStatements:
DetailedStatementofComprehensiveIncome..................................................................................................... 51
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BOARD RESPONSIBILITIES AND APPROVAL
TheBoardand theAuthorityare required tomaintainproperbooksof accountsand recordsof accountsandareresponsibleforthecontentandintegrityoftheannualfinancialstatementsandrelatedfinancialinformationincludedinthisreport. It istheirresponsibilitytoensurethattheannualfinancialstatementsfairlypresentthestateofaffairsoftheAuthorityasattheendofthefinancialyearandtheresultsofitsoperationsandcashflowsfortheperiodthenended,inconformitywiththeFinancialReportingAct,2010andInternationalFinancialReportingStandards.
TheannualfinancialstatementsarepreparedinaccordancewithInternationalFinancialReportingStandardsandarebaseduponappropriateaccountingpoliciesconsistentlyappliedandsupportedbyreasonableandprudentjudgementsandestimates.
TheBoardandtheAuthorityacknowledgethattheyareultimatelyresponsibleforthesystemofinternalfinancialcontrolestablishedbytheBoardandtheAuthorityandplaceconsiderableimportanceonmaintainingastrongcontrolenvironment.ToenabletheBoardandtheAuthoritytomeettheseresponsibilities,theBoardandAuthorityset standards for internal control aimed at reducing the risk of error or loss in a cost effectivemanner. Thestandardsincludetheproperdelegationofresponsibilitieswithinaclearlydefinedframework,effectiveaccountingproceduresandadequatesegregationofdutiestoensureanacceptablelevelofrisk.ThesecontrolsaremonitoredthroughoutbytheBoardandtheAuthorityandallemployeesarerequiredtomaintainhighestethicalstandardsinensuringtheBoard’sandtheAuthority’sbusinessisconductedinamannerthatinallreasonablecircumstancesisabove reproach. The focusof riskmanagement in theAuthority ison identifying,assessing,managingandmonitoringallknownformsofriskacrosstheAuthority.Whileoperatingriskcannotbefullyeliminated,theBoardand theAuthority endeavour tominimise it by ensuring that appropriate infrastructure, controls, systems andethicalbehaviourareappliedandmanagedwithinpredeterminedproceduresandconstraints.
TheBoardandtheAuthorityareoftheopinion,basedontheinformationandexplanationsgivenbyManagementthatthesystemofinternalcontrolprovidesreasonableassurancethatthefinancialrecordsmaybereliedonforthepreparationoftheannualfinancialstatements.However,anysystemofinternalfinancialcontrolcanprovideonlyreasonable,andnotabsolute,assuranceagainstmaterialmisstatementorloss.
TheBoardandtheAuthorityhavereviewedtheAuthority’scashflowforecastfortheyearto31December2014and,inthelightofthisreviewandthecurrentfinancialposition,aresatisfiedthattheAuthorityhas,orhasaccessto,adequateresourcestocontinueinoperationalexistencefortheforeseeablefuture.
TheannualfinancialstatementssetoutonPages39to59,whichhavebeenpreparedonthegoingconcernbasis,wereapprovedbytheBoardon27thMarch2014andweresignedonitsbehalfby:
Director___________________________________ Director___________________________________
Date:____________________________ Date:____________________________
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF BOTSWANA ACCOUNTANCY OVERSIGHT AUTHORITY
Wehaveaudited theaccompanyingfinancial statementsofBotswanaAccountancyOversightAuthority,whichcomprisethestatementoffinancialpositionasat31December2013,thestatementsofcomprehensiveincome,changesinreservesandcashflowsfortheyearthenended,andasummaryofsignificantaccountingpoliciesandotherexplanatorynotesassetoutonpages39to59.
Directors’ Responsibility for the Financial Statements
TheDirectorsareresponsibleforthepreparationandfairpresentationofthesefinancialstatementsinaccordancewith International Financial Reporting Standards and in the manner required by the Financial Reporting Act,2010andforsuchinternalcontrolastheDirectorsdetermineisnecessarytoenablethepreparationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.
Auditor’s Responsibility
Our responsibility is to express anopinionon these financial statementsbasedonour audit. We conductedourauditinaccordancewithInternationalStandardsonAuditing.Thosestandardsrequirethatwecomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreefrommaterialmisstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancialstatements.Theproceduresselecteddependontheauditor’sjudgement,includingtheassessmentoftheriskofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,theauditorconsidersinternalcontrolrelevanttotheentity’spreparationandfairpresentationofthefinancialstatements inorder todesignauditprocedures thatareappropriate in thecircumstances,butnot forthepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalcontrol.AnauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebyManagement,aswellasevaluatingthepresentationofthefinancialstatements.
Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.
Opinion
Inouropinion,thefinancialstatementsgiveatrueandfairviewofthefinancialpositionofBotswanaAccountancyOversightAuthorityasof31December2013anditsfinancialperformanceanditscashflowsfortheyearthenendedinaccordancewithInternationalFinancialReportingStandardsandinthemannerrequiredbytheFinancialReportingAct,2010.
Other Matter - Supplementary Information
Withoutqualifyingouropinion,wedrawattentiontothefactthatthesupplementaryinformationassetoutonpage60doesnotformpartoftheannualfinancialstatementsandispresentedasadditionalinformation.Wehavenotauditedthisinformationandaccordinglywedonotexpressanopiniononit.
Deloitte&ToucheCertifiedAuditors GaboronePracticingMember:MEBardopoulos(20090042) …………………...2014
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STATEMENT OF FINANCIAL POSITIONas at 31 December 2013
Figures in Pula Note(s) 2013 2012
ASSETS
Non-current assets
Plant and equipment 3 3,082,655 502,962
Current assets
Accounts receivable 4 631,757 127,632
Cash and cash equivalents 5 629,931 1,555,747
1,261,688 1,683,379
Total assets 4,344,343 2,186, 341
RESERVES AND LIABILITIES
RESERVES
Retained earnings 3,173,061 1,865,225
LIABILITIES
Current liabilities
Accounts payable 6 1,009,776 321,116
Straight-lining lease liability 161,506 -___
1,171,282 321,116
Total equity and liabilities 4,344,343 2,186,341
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STATEMENT OF COMPREHENSIVE INCOMEfor the year ended at 31 December 2013
Figures in Pula Note(s) 2013 2012
Revenue 9 9,453,290 2,730,748
Other income 7,750 -____
9,461,040 2,730,748
Operating expenses (8,179,929) ( 877,758)
Operating surplus before interest 1,281,111 1,852,990
Interest income 11 26,725 17,932
Finance costs 12 ___ -_____ (5,697)
Surplus for the year 1,307,836 1,865,225 Other comprehensive income - ____ -____Total comprehensive income for the year 1,307,836 1,865,225
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STATEMENT OF CHANGES IN RESERVESfro the year ended 31 December 2013
Figures in PulaRetained Earnings
Total Reserves
Balance at 01 January 2012 - -
Changes in Reserves
Total comprehensive income for the year 1,865,225 1,865,225
Total Changes 1,865,225 1,865,225
Balance at 31 December 2012 1,865,225 1 865 225
Balance at 01 January 2013 1,865,225 1,865,225
Changes in Reserves
Total comprehensive income for the year 1,307,836 1,307,836
Total Changes 3,173,061 3,173,061
Balance at 31 December 2013 3,173,061 3,173,061
Botswana Accountancy Oversight Authority 2013 Annual Report
37
STATEMENT OF CASH FLOWSFor the year ended 31 December 2013
Figures in Pula Note(s) 2013 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash flows from operating activities 13 2,103,156 2,082,826
Interest income 11 26,725 17,932
Finance costs 12 ____-___ (5,697)
Net cash from operating activities 2,129,881 2,095,061
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment 3 (3,055,697) ( 539,314)
Net cash flows used in investing activities (3,055,697) ( 539,314)
Changes in cash and cash equivalents ( 925,816) 1,555,747
Cash and cash equivalents at beginning of the year 1,555,747 -____
Cash and cash equivalents at the end of the year 5
629,931 1,555,747
Botswana Accountancy Oversight Authority 2013 Annual Report
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ACCOUNTING POLICIES
1. PRESENTATION OF ANNUAL FINANCIAL STATEMENTS
The annual financial statements have been prepared in accordance with International Financial Reporting Standards, and the Financial Reporting Act, 2010. The annual financial statements have been prepared on the historical cost basis, and incorporate the principal accounting policies set out below. They are presented in Botswana Pula.
1.1 NATURE OF THE BUSINESS
The principal objectives of the Authority is to provide oversight to the accounting and auditing profession and promote the standard, quality and credibility of providing financial and non-financial information by entities. Its functions include standard setting, financial reporting and audit practice reviews, enforcement of compliance and oversight over the education and training of professional accountants in Botswana. The Authority commenced operations in 2012.
1.2 SIGNIFICANT JUDGEMENTS AND SOURCES OF ESTIMATION UNCERTAINTY
In preparing the annual financial statements, management is required to make estimates and assumptions that affect the amounts represented in the annual financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future may differ from these estimates which may be material to the annual financial statements. Significant judgements include:
Loans and receivables
The Authority assesses its loans and receivables for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in the statement of comprehensive income, the Authority makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset.
Estimation of remaining useful lives and residual values of items of plant and equipment
The Authority estimates the residual values and remaining useful lives of items of plant and equipment at each reporting date.
Estimation of impairment of assets
The Authority assesses its assets for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in the statement of comprehensive income, the Authority makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from an asset.
Estimation of remaining useful lines and residual values of items of plant and equipment
The useful lives of assets are estimated based on the pattern of use, industry practice and technological advances on the market. These estimates are used in determining the depreciation charge for the year.
The estimation of residual values is affected by the market price of similar used items, technological advances, pattern of use and the industry practice. These estimates have an impact on the level of depreciation charged to the statement of comprehensive income and the carrying values of items of plant and equipment in the statement of financial position.
Botswana Accountancy Oversight Authority 2013 Annual Report
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1.3 PLANT AND EQUIPMENT
The cost of an item of plant and equipment is recognised as an asset when:
it is probable that future economic benefits associated with the item will flow to the Authority; and
the cost of the item can be measured reliably.
Plant and equipment is initially measured at cost.
Cost includes costs incurred initially to acquire or construct an item of plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of plant and equipment, the carrying amount of the replaced part is derecognised.
Plant and equipment is carried at cost less accumulated depreciation and any impairment losses.
Plant and equipment are depreciated on the straight line basis over their expected useful lives to their estimated residual values.
The useful lives of items of plant and equipment have been assessed as follows:
Item Average useful life
Motor vehicle 4 years
Computer equipment 4 years
Office equipment 4 years
Furniture and fittings 4 years
The residual value and useful life of each category of asset are reviewed at the end of each reporting period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.
The depreciation charge for each period is recognised in the statement of comprehensive income unless it is included in the carrying amount of another asset.
The gain or loss arising from the derecognition of an item of plant and equipment is included in the statement of comprehensive income when the item is derecognised. The gain or loss arising from the derecognition of an item of plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.
1.4 FINANCIAL INSTRUMENTS
Classification
The Authority classifies financial assets and financial liabilities into the following categories:
Loans and receivables
Financial liabilities measured at amortised cost.
Classification depends on the purpose for which the financial instruments were obtained/incurred and takes place at initial recognition. Classification is re-assessed on an annual basis.
ACCOUNTING POLICIES (continued)
Botswana Accountancy Oversight Authority 2013 Annual Report
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ACCOUNTING POLICIES (continued)
1.4 FINANCIAL INSTRUMENTS(continued)
Initial recognition and measurement
Financial instruments are recognised initially when the Authority becomes a party to the contractual provisions of the instruments.
The Authority classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement.
Financial instruments are measured initially at fair value. Transaction costs are included in the initial measurement of the instrument.
Subsequent measurement
Loans and receivables which comprise accounts receivable, and financial liabilities which comprise accounts payable, are subsequently measured at amortised cost, using the effective interest rate method, less accumulated impairment losses.
Impairment of financial assets
At each reporting date the Authority assesses all financial assets to determine whether there is objective evidence that a financial asset or group of financial assets has been impaired.
For amounts due to the Authority, significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default of payments (more than 60 days overdue) are all considered indicators of impairment. The amount of the provision (allowance) is the difference between the asset’s carrying amount and the present value of the estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the statement of comprehensive income within operating expenses.
When a trade receivable is uncollectable, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating expenses in the statement of comprehensive income.
Impairment losses are recognised in the statement of comprehensive income.
Impairment losses are reversed when an increase in the financial asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the financial asset at the date that the impairment is reversed shall not exceed what the carrying amount would have been had the impairment not been recognised.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other short term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value.
1.5 TAXATION
The Botswana Accountancy Oversight Authority is an entity wholly owned by the Botswana Government and as such it is exempt from income tax under Part 1 paragraph ii of the Second Schedule of the Income Tax Act Cap 52:01.
Botswana Accountancy Oversight Authority 2013 Annual Report
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ACCOUNTING POLICIES (continued)
1.6 LEASES
A lease is classified as a finance lease if it transfers substantially all risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all risks and rewards incidental to ownership.
Operating leases – lessee
Operating lease payments are recognised as an expense on a straight line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease liability. This liability is not discounted.
Any contingent rents are expensed in the period they are incurred.
1.7 IMPAIRMENT OF ASSETS
The Authority assesses at the end of each reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the Authority estimates the recoverable amount of the asset.
If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable
amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined.
The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use.
If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss.
The Authority assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of those assets are estimated.
The increased carrying amount of an asset attributable to a reversal of an impairment loss is limited to the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods.
1.7 IMPAIRMENT OF ASSETS (continued)
A reversal of an impairment loss of assets carried at cost less accumulated depreciation is recognised immediately in the statement of comprehensive income.
1.8 EMPLOYEE BENEFITS
Short-term employee benefits
The cost of short-term employee benefits, i.e. those payable within 12 months after the service is rendered, such as paid vacation leave and sick leave, bonuses, and non-monetary benefits such as medical care, are recognised in the period in which the service is rendered and are not discounted.
Botswana Accountancy Oversight Authority 2013 Annual Report
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ACCOUNTING POLICIES (continued)
1.8 EMPLOYEE BENEFITS (continued)
Post-employment benefits
Contract staff members of the Authority are entitled to gratuities on leaving the employment of the Authority or at the end of their contracts at the rates, and in accordance with the terms specified, in their contracts of employment.
An accrual is raised in respect of gratuity owed as the employee renders services to the Authority.
1.9 REVENUE RECOGNITION
Government Grants
Government grants are recognised when there is reasonable assurance that:
the Authority will comply with the conditions attaching to them; and
the grants will be received.
Government grants are recognised as income over the periods necessary to match them with the related costs that they are intended to compensate.
A government grant that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs is recognised as income of the period in which it becomes receivable.
Government grants related to assets, including non-monetary grants at fair value, are presented in the statement of financial position by setting up the grant as deferred income or by deducting the grant in arriving at the carrying amount of the asset.
Interest Revenue
Interest is income is recognised in the statement of comprehensive income on an accrual basis, by reference to the principal outstanding and the effective interest rate that exactly discounts estimated future cash receipts through the expected life of the financial assets to that asset’s net carrying amount.
1.10 BORROWING COSTS
All borrowing costs are recognised as an expense in the period in which they are incurred.
Botswana Accountancy Oversight Authority 2013 Annual Report
43
ACCOUNTING POLICIES (continued)
2 (a) ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS AND INTERPRETATION
In the current year, the following are applicable new or revised Standards issued by the International Accounting Standards Board (IASB) and effective for annual reporting periods beginning on 1 January 2013.
New/Revised International Financial Reporting Standards
IFRS 1 Amendments resulting from Annual Improvements 2009-2011 Cycle (repeat application)
IFRS 7 Financial Instruments: Disclosures (Amendments related to the offsetting of assets and liabilities)
IFRS 13 Fair Value Measurement (Amendments resulting from Annual Improvements 2010-2012 Cycle)
IAS 1 Presentation of Financial Statements (Presentation of other comprehensive income)
IAS 1 Amendments resulting from Annual Improvements 2009-2011 Cycle (comparative information)
IAS 16 (Amendment) Property, Plant and Equipment
IAS 32 Financial Instruments: Presentation (Amendments resulting from Annual Improvements 2009-2011 Cycle (tax effect of equity distributions)
Botswana Accountancy Oversight Authority 2013 Annual Report
44
ACCOUNTING POLICIES (continued)
2(b) NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS AND INTERPRETATION IN ISSUE NOT YET EFFECTIVE
Revised Statements in issue not yet effective
Effective date (Reporting period on or after)
IFRS 7 Financial Instruments: Disclosure (deferral of mandatory effective date of IFRS 9 and amendments to transition disclosures)
1 January 2015
IFRS 9 Financial Instruments: Reissue to include requirements for the classification and measurement of financial liabilities and incorporate existing derecognition requirements
1 January 2017
IFRS 9 Financial Instruments: Deferral of mandatory effective date of IFRS 9 and amendments
1 January 2015
IFRS 13 Fair Value Measurement (Amendments resulting from Annual Improvements 2011-2013 Cycle)
1 January 2014
IAS 16 Property, Plant and Equipment (Amendments resulting from Annual Improvements 2010-2012 Cycle)
1 July 2014
IAS 19 Employee Benefits (Amended to clarify the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods or service)
1 July 2014
IFRIC 21 Provides guidance on when to recognise a liability for a levy imposed by a government, both for levies that are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and those where the timing and amount of the levy is certain
1 January 2014
Botswana Accountancy Oversight Authority 2013 Annual Report
45
NO
TES
TO T
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FIN
AN
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L ST
ATEM
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for t
he y
ear e
nded
31
Dec
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P
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8
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____
1
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234,
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63
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3
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,697
At 3
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Ch
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9
86,6
46
-
____
113,
457
_
-__
__
5
02,9
62
Botswana Accountancy Oversight Authority 2013 Annual Report
46
NOTES TO THE FINANCIAL STATEMENTS (continued)
4. ACCOUNTS RECEIVABLE
2013
P
2012
PDeposits 55,895 55,895
Prepayments 355,361 69,944
Staff loans 216,931 -
Other receivables 3,570 1,793
631,757 127,632
5. CASH AND CASH EQUIVALENTS
2013
P
2012
PBank balances 629,931 1,555,747
6. ACCOUNTS PAYABLE
2013
P
2012
P Employee costs accrual
Audit fee accrual
888,935
80,000
284,396
30,000
Directors’ fees payable (Note 15) 7,140 6,720
Other payables 33,701
1,009,776
_-___
321,116
Fair value of accounts payable
Accounts payable 1,009,776 321,116
Botswana Accountancy Oversight Authority 2013 Annual Report
47
NOTES TO THE FINANCIAL STATEMENTS (continued)
7. FINANCIAL ASSETS BY CATEGORY
The accounting policies for financial instruments have been applied to the items below:
2013
P
2012
PLoans and receivables
Accounts receivable 276,396 57,688
Bank balances 629,931 1,555,747
8. FINANCIAL LIABILITIES BY CATEGORY
The accounting policies for financial instruments have been applied to the line item below:
2013
P
2012
PFinancial Liabilities at Amortised cost
Accounts payable 113,701 30,000
9. REVENUE
2013 P
2012
P
Government grant (Note 15) 9,453,290 2,730,748
10. OPERATING SURPLUS BEFORE INTEREST
Operating surplus before interest for the year is stated after accounting for the following:
2013
P
2012
P Audit Fees 85,280 30,000
Depreciation on plant and equipment 476,004 36,352
Employee costs 5,254,692 324,399
Directors’ fees (Note 15) 32,480 103,050
Rental charge 910,127 -____
Botswana Accountancy Oversight Authority 2013 Annual Report
48
NOTES TO THE FINANCIAL STATEMENTS (continued)
11. INTEREST INCOME
2013
P
2012
PBank 17,712 17,932
Staff loans 9,013 -___
26,725 17,932
12. FINANCE COSTS
2013 2012
P P
Bank interest - 5,697
13. NET CASH FLOWS FROM OPERATING ACTIVITIES
2013
P
2012
P Total comprehensive income for the year 1,307,836 1,865,225
Adjustments for:
Depreciation charge 476,004 36,352
Finance costs - 5,697
Interest income (26,725) (17,932)
Changes in working capital
Accounts receivable (504,125) (127,632)
Accounts payable 688,660 321,116
Deferred lease liabilities 161,506 _____-___
2,103,156 2,082,82614. COMMITMENTS
2013
P
2012
P Operating leases – as lessee expense
Minimum lease payments due:
Within one year 824,907 628,740
In second to fifth year inclusive 2,971,244 3,209,780
3,796,151 3,838,520
Operating lease payments represent rentals payable by the Authority for certain buildings it rents for use as offices. Leases are negotiated for an average term of five years. No contingent rent is payable.
The current lease agreement was signed on November 12, 2012 and took effect on January 1, 2013. Therefore, no rent was paid during 2012.
Botswana Accountancy Oversight Authority 2013 Annual Report
49
NOTES TO THE FINANCIAL STATEMENTS (continued)
15. RELATED PARTIES
All related party transactions are entered into at arm’s length in the ordinary course of business. The transactions with key Management personnel are staff benefits provided for under the General Conditions of Service of the Authority.
2013
P
2012
PRelated party transactions
Grant received from related party (Note 9)
Government of the Republic of Botswana
Ministry of Finance and Development Planning 9,453,290 2,730,748
Compensation of key management personnel
Executive Management 2,937,560 -____
Loans to key Management 66,672 -_ _
Directors’ fees expense (Note 10) 32,480 103,050
Directors’ fees payable (Note 6) 7,140 6,720
16. RISK MANAGEMENT
Liquidity risk
Liquidity risk is the risk that the Authority will be unable to meet its payments obligations when they fall due. The source of the Authority’s cash resources is mainly from the Government annual subvention. Any expenditures and commitments are, therefore, restricted to the level of subvention received. Continuous monitoring through cash flow forecasts and variance analysis is in place to ensure that expenditure does not exceed the Authority’s cash resources.
Given below is the Authority’s net liquidity gap derived from comparing current assets with current liabilities. The liquidity gap (P251, 912) shows net liquidity exposure. The maximum liquidity exposure (P1, 009,776) is the total liabilities due within 12 months.
The amounts disclosed are the contractual undiscounted cash flows due within 12 months and are equal to their carrying balances as the impact of discounting is not significant.
Botswana Accountancy Oversight Authority 2013 Annual Report
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NOTES TO THE FINANCIAL STATEMENTS (continued)
16. RISK MANAGEMENT (continued)
Liquidity risk (continued)
ASSETS
2013
P
2012
P
Accounts receivable
Cash and Cash equivalent
Total liquid assets
LIABILITIES
Accounts Payable
631,757
629,931
1,261,688
1,009,776
127,632
1,555,747
1,683,379
321,116
Net liquidity gap 251,912 1,362,263
Interest rate risk
The Authority invests practically all its surplus funds in interest- earning overnight bank deposit accounts in order to discharge its liabilities as they fall due. The average interest rate on the overnight bank deposits is 0.5% (2012: 0.5%)
For a change in interest rates of 25 basis points, the gross interest earned would be negligible.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in financial loss to the Authority.
Credit risk relates mainly to cash deposits, cash equivalents and accounts receivable. The Authority only deposits cash with major banks with high quality credit standing. Therefore, credit risk is minimal.
The following table summarises the maximum exposures to credit risk without taking into account collateral held, in respect of which none is received on any of the financial assets.
2013
P
2012
PCash at bank 629,931 1,555,747
Accounts receivable 631,757 127,632
Total exposure to credit risk 1,261,688 1,683,379
17. EVENTS AFTER THE REPORTING DATE
No events have occurred between the statement of financial position date and the date of the approval of the annual financial statements, which would materially affect the annual financial statements.
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DETAILED STATEMENT OF COMPREHENSIVE INCOMEfor the year ended 31 December 2013
Figures in Pula
Note(s) 2013 2012
Government subvention 9 9,453,290 2,730,748
Other Income 7,750 -___
9,461,040 2,730,748
OPERATING EXPENSES
Accounting fees 48,160 -
Advertising 7,773 24,229
Audit fees 85,280 30,000
Bank charges 34,209 10,341
Computer expenses 72,264 -
Consulting fees 66,083 -
Depreciation on plant and equipment 476,004 36,352
Donations 5,000 -
Directors’ fees 32,480 103,050
Insurance 123,422 618
Hospitality & Entertainment 54,189 -
Meetings & Conferences expenses 213,764 54,747
Motor vehicle expenses 21,648 -
Office expenses 53,692 -
Photocopier - Leasing 15,599 -
Printing & Stationery 245,835 -
Publications & Reference Material 31,293 -
Rent 910,127 -
Recruitment expenses 34,360 140,280
Employee costs 5,254,692 324,399
Subscriptions 29,938 -
Strategic planning 70,240 -
Security expenses 64,901 -
Telephone, Postage & Fax 113,714 2,255
Training 42,420 -
Travel & Accommodation 10,171 147,744
Utilities 62,671 3,743
8,179,929 877,758
Operating surplus before interest 1,281,111 1,852,990
Finance costs - Bank interest - (5,697)
Interest received 11 26,725 17,932
Total comprehensive income for the year 1,307,836 1,865,225
This detailed Statement of Comprehensive Income does not form part of the audited financial statements covered by the audit opinion on pages 37-38.
Botswana Accountancy Oversight Authority 2013 Annual Report
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