the national skills fund is proudly part of the … · 7 national skills fund annual report · 2014...
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Funding To Skill Our Nation
ANNUAL REPORTNATIONAL SKILLS FUND 2013 · 2014
Higher Education and TrainingDepartment:
REPUBLIC OF SOUTH AFRICA
higher education& training
THE NATIONAL SKILLS FUND IS PROUDLY PART
OF THE DEPARTMENT OF HIGHER EDUCATION AND TRAINING
THE NATIONAL SKILLS FUND IS PROUDLY PART OF
THE DEPARTMENT OF HIGHER EDUCATION AND TRAINING
Funding to skill our nation
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PART A: GENERAL INFORMATION ................5
1. PUBLIC ENTITY’S GENERAL INFORMATION ...................................6
2. LIST OF ABBREVIATIONS/ACRONYMS ..........................................7
3. STRATEGIC OVERVIEW ................................................................9
3.1. Our Vision ..........................................................................9
3.2. Our Mission ........................................................................9
3.3. Our 7 Values ......................................................................9
3.4. Strategic Outcome Orientated Goals ..................................9
4. LEGISLATIVE AND OTHER MANDATES ........................................10
4.1 Established in terms of the Skills Development Act ...........10
4.2 Retention of accumulated surplus .....................................10
4.3 Listed as a Schedule 3A public entity in terms of the PFMA .....................................................................10
4.4 Key legislation applicable to the NSF .................................10
5. ORGANISATIONAL STRUCTURE ..................................................11
5.1. Executive Officer’s Office ..................................................11
5.2. Strategic Projects ..............................................................12
5.3. Sector Skills Support .........................................................13
5.4. Finance and Administration ..............................................14
6. FOREWORD BY THE MINISTER ...................................................15
7. FOREWORD BY THE DIRECTOR-GENERAL OF HIGHER EDUCATION AND TRAINING AS THE ACCOUNTING AUTHORITY ........................................................17
8. EXECUTIVE OFFICER’S OVERVIEW ..............................................20
PART B: PERFORMANCE INFORMATION .....23
1. STATEMENT OF RESPONSIBILITY FOR PERFORMANCE INFORMATION ..................................................24
2. AUDITOR’S REPORT: PREDETERMINED OBJECTIVES ....................24
3. OVERVIEW OF PUBLIC ENTITY’S PERFORMANCE ........................25
3.1. Service Delivery Environment ............................................25
3.2. Organisational environment .............................................26
3.3. Key policy developments and legislative changes ..............26
3.4. Strategic Outcome Oriented Goals ...................................27
4. PERFORMANCE INFORMATION BY PROGRAMME ......................28
Programme 1: Skills Development Funding ................................28
Programme 2: NSF Operations ...................................................36
Table of contents
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5. SUMMARY OF FINANCIAL INFORMATION ..................................39
5.1. Revenue Collection ...........................................................39
5.2. Programme expenditure ...................................................40
PART C: GOVERNANCE ..............................41
1. INTRODUCTION .........................................................................42
2. PORTFOLIO COMMITTEES ..........................................................42
3. EXECUTIVE AUTHORITY .............................................................42
4. THE ACCOUNTING AUTHORITY .................................................42
5. RISK MANAGEMENT .................................................................43
6. INTERNAL CONTROL ..................................................................43
7. INTERNAL AUDIT AND AUDIT COMMITTEES ..............................43
8. COMPLIANCE WITH LAWS AND REGULATIONS .........................44
9. FRAUD AND CORRUPTION ........................................................44
10. MINIMISING CONFLICT OF INTEREST..........................................45
11. CODE OF CONDUCT .................................................................45
12. HEALTH SAFETY AND ENVIRONMENTAL ISSUES .........................45
13. SOCIAL RESPONSIBILITY ............................................................45
14. MATERIALITY AND SIGNIFICANCE FRAMEWORK .......................45
15. AUDIT COMMITTEE REPORT ......................................................45
PART D: HUMAN RESOURCE MANAGEMENT 49
1. INTRODUCTION .........................................................................50
2. HUMAN RESOURCE OVERSIGHT STATISTICS ..............................50
PART E: FINANCIAL INFORMATION ............55
1. STATEMENT OF RESPONSIBILITY .................................................56
2. REPORT OF THE EXECUTIVE OFFICER .........................................56
3. REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON THE NATIONAL SKILLS FUND ................................................66
4. ANNUAL FINANICIAL STATEMENTS ............................................70
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PART A General Information
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1. PUBLICENTITY’SGENERALINFORMATION
REGISTERED NAME: National Skills Fund
PHYSICAL ADDRESS: 123 Francis Baard Street
PRETORIA
0002
POSTAL ADDRESS: Private Bag X174
PRETORIA
0001
TELEPHONE NUMBER/S: +27 012 312 5911
FAX NUMBER: +27 012 323 0291
WEBSITE ADDRESS: www.dhet.gov.za
EXTERNAL AUDITORS: The Auditor-General of South Africa
Lefika House
300 Middel Street
New Muckleneuk
Pretoria
0001
BANKERS: National Treasury
40 Church Square
Pretoria
0002
First National Bank
215 Francis Baard Street
Pretoria
0002
2. LISTOFABBREVIATIONS/ACRONYMS
ABET Adult Basic Education and Training
ADEA Association for the Development of Education in Africa
ADTTT Artisan Development Technical Task Team
AET Adult Education and Training
AGSA Auditor-General South Africa
ALCs Adult Learning Centres
ARPL Artisan Recognition of Prior Learning
AU African Union
BAS Basic Accounting System
BNC Bi-National Commission
PART A General Information
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BRICS Brazil, Russia, India, China and South Africa
CAO Centralised Applications Office
CACH Central Applications Clearing House
CAS Career Advice Services
CC Closed Corporation
CD Chief Director
CEM Council of Education Ministers
CEO Chief Executive Officer
CEPD Centre for Education Policy Development
CESM Classification of Educational Subject Matter
CET Community Education and Training
CETA Construction Education and Training Authority
CFO Chief Financial Officer
CHE Council on Higher Education
COL Commonwealth of Learning
COMEDAF Conference of Ministers of Education of the African Union
COSE Collaboration for Occupational Skills Excellence
CPIX Consumer Price Index
CPUT Cape Peninsula University of Technology
CSIR Council for Scientific and Industrial Research
CUT Central University of Technology
DBE Department of Basic Education
DDG Deputy Director-General
DG Director-General
DHET/DEPARTMENT
Department of Higher Education and Training
DIRCO Department of International Relations and Cooperation
DOE Department of Education
DOL Department of Labour
DST Department of Science and Technology
DTI Department of Trade and Industry
ECM Enterprise Content Management
EEP Employment Equity Plan
EFA Education for All
ELRC Education Labour Relations Council
ENE Estimates of National Expenditure
ETQA Education and Training Quality Assurance
EXCO Executive Council
FET Further Education and Training
FETCBU Further Education and Training Colleges Bargaining Unit
FETMISFurther Education and Training Management Information System
FMS&G Financial Management Systems and Guidelines
GENFETQA General and Further Education and Training Quality Assurance
GEPF Government Employee Pension Fund
GETC General Education and Training Certificate
GFETQSFGeneral and Further Education and Training Quality Sub-Framework
GIS Geographical Information System
GITO Government Information Technology Office
GPSSBC General Public Service Sector Bargaining Council
GRAP Generally Recognised Accounting Practices
HE Higher Education
HEAIDS Higher Education HIV/AIDS
HEDCOM Heads of Education Departments Committee
HEI Higher Education Institutions
HEMIS Higher Education Management Information System
HEQF Higher Education Qualifications Framework
HESA Higher Education South Africa
HIV/AIDSHuman Immunodeficiency Virus/Acquired Immunodeficiency Syndrome
HRD Human Resource Development
HRDCSA Human Resource Development Council for South Africa
HRDSA Human Resource Development Strategy for South Africa
HRMIS Human Resource Management Information System
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NSF ALCNational Norms and Standards for Funding Adult Learning Centres
NSF DIS National Skills Fund Disbursement Information System
NSF FETNational Norms and Standards for Funding Further Education and Training Colleges
NSFAS National Student Financial Aid Scheme
OAG Office of the Accountant General
ODA Overseas Development Assistance
OECD Organisation for Economic Cooperation and Development
OFO Organising Framework for Occupations
OQSF Occupational Qualifications Sub-Framework
PALC Public Adult Learning Centre
PED Provincial Education Department
PERSAL Personnel Salary System
PFMA Public Finance Management Act
PIC Public Investment Corporation
PICC Presidential Infrastructure Coordinating Commission
PIVOTAL Professional, Vocational, Technical and Academic Learning
PME Performance Management and Evaluation
PQM Programme Qualification Mix
PSIRA Private Security Industry Regulation Act
PSETA Public Service SETA
QCTO Quality Council for Trades and Occupations
RPL Recognition of Prior Learning
RDG Research Development Grant
SADC Southern African Development Community
SAICA South African Institute of Chartered Accountants
SAIDE South African Institute of Distance Education
SAQA South African Qualifications Authority
SARS South African Revenue Service
SAUS South African Union of Students
SCOPA Standing Committee on Public Accounts
IBSA India-Brazil-South Africa
ICASS Internal Continuous Assessment
ICT Information and Communication Technology
ILO International Labour Organisation
IT Information Technology
ITIL Information Technology Infrastructure Library
INDLELAInstitute for the National Development of Learnerships, Employment Skills and Labour Assessments
IPAP Industrial Policy Action Plan
LAN Local Area Network
MEDUNSA Medical University of South Africa
MIS Management Information System
MLO Media Liaison Officer
MMM Minister’s Management Meeting
MPAT Management Performance Assessment Tool
MTEF Medium Term Expenditure Framework
MTSF Medium Term Strategic Framework
NAMB National Artisan Moderation Body
NASCA National Senior Certificate for Adults
NATED National Accredited Technical Diploma
NC(V) National Certificate (Vocational)
NDP National Development Plan
NGP New Growth Path
NIHE National Institute of Higher Education
NIPF National Industrial Policy Framework
NQF National Qualifications Framework
NRF National Research Foundation
NSA National Skills Authority
NSDS National Skills Development Strategy
NSDSIII National Skills Development Strategy III
NSF/FUND National Skills Fund
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SCM Supply Chain Management
SDA Skills Development Act
SDLA Skills Development Levies Act
SDL Skills Development Levy
SET Science, Engineering and Technology
SETA Sector Education and Training Authority
SIC Standard Industrial Classification
SIP Strategic Integrated Project
SITA State Information Technology Agency
SSP Sector Skills Plan
SPU Sol Plaatje University
SRC Student Representative Council
SSS Student Support Services
TDG Teaching Development Grant
TVET Technical and Vocational Education and Training
TWG Technical Working Group
UCCF University Council Chairs Forum
UIF Unemployment Insurance Fund
UMP University of Mpumalanga
UN United Nations
UNESCO United Nations Educational, Scientific and Cultural Organisation
UoT University of Technology
VCET Vocational and Continuing Education and Training
WAN Wide Area Network
WITS Witwatersrand University
WSU Walter Sisulu University
3. STRATEGIC OVERVIEW
3.1 Our VisiOn
Funding to skill our nation.
3.2 Our MissiOn
To provide funding for national skills development towards a capable workforce for an inclusive growth path.
3.3 Our 7 Values
The National Skills Fund upholds the following 7 values:
i
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INTEGRITY
PASSION
ACCOUNTABILITY
OBjECTIvE
SERvICE EXCELLENCE
COLLABORATIvE
DEvELOPMENT
3.4 strategic OutcOMe Orientated gOals
The strategic goal of the NSF is to provide funds to support projects that are national priorities in the NSDS, that advance the Human Resource Development Strategy of South Africa and that support the National Skills Authority in its work.
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4. LEGISLATIVEANDOTHERMANDATES
4.1 established in terMs Of the skills deVelOpMent act
The National Skills Fund was established in 1999 in terms of section 27 of the Skills
Development Act, No 97 of 1998.
The money of the Fund may be used for the primary objectives as defined by the
prescripts of the Skills Development Act, namely:
1. To fund projects identified in the National Skills Development Strategy as national priorities (section 28(1) of the Skills Development Act);
2. To fund projects related to the achievement of the purposes of the Skills Development Act as the Director-General determines (section 28(1) of the Skills Development Act);
3. To administer the Fund within the prescribed limit (section 28(3) of the Skills Development Act). Regulations to prescribe the limit for the administration of the Fund at 10% of revenue has been approved and published in Notice No. R.1030, Government Gazette No. 33740 dated 8 November 2010; and
4. To fund any activity undertaken by the Minister to achieve a national standard of good practice in skills development (section 30B. of the Skills Development Act).
The current main revenue sources for the National Skills Fund are:
1. 20% of the skills development levies as contemplated in the Skills Development Levies Act;
2. Interest earned on investments held at the Public Investment Corporation; and
3. Funding received from the SETAs specifically earmarked for TVET infrastructure development.
The National Skills Fund may also receive revenue from the following sources:
1. The skills development levies collected and transferred to the Fund, in terms of the Skills Development Levies Act, in respect of those employers or sectors for which there are no SETA’s;
2. Money appropriated by Parliament for the Fund;
3. Donations to the Fund; and
4. Money received from any other source.
4.2 retentiOn Of accuMulated surplus
In terms of section 29(3) of the Skills Development Act, the unexpended balance in the Fund at the end of the financial year must be carried forward to the next financial year as a credit to the Fund.
4.3 listed as a schedule 3a public entity in terMs Of the pfMa
On 12 October 2012, the Minister of Finance listed the National Skills Fund as a Schedule 3A public entity in terms of the Public Finance Management Act, 1999, retrospectively effective from 1 April 2012 (Notice number 821 in the Government Gazette No. 35759). Prior to the listing as a public entity, the National Skills Fund operated as a programme under the Skills Development Branch of the Department of Higher Education and Training.
4.4 key legislatiOn applicable tO the nsf
The following key pieces of legislation are applicable to the NSF:
1. Skills Development Act, 1998 (Act No. 97 of 1998), as amended;
2. Skills Development Levies Act, 1999 (Act No. 9 of 1999), as amended;
3. Public Finance Management Act, 1999 (Act No. 1 of 1999), as amended and Treasury Regulations; and
4. Public Service Act, 1994 (Act No. 38 of 1994), as amended.
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5. ORGANISATIONALSTRUCTURE
5.1 executiVe Officer’s Office
Mr M MacikamaEXECUTIVE OFFICER
Mrs E HortonSECRETARY
Mr MN SitholeASSISTANT DIRECTOR
Mr TJ SephaiSENIOR
PRACTITIONER
Mrs MM Mosehla ASSISTANT DIRECTOR
Mrs BA KhumaloSENIOR
PRACTITIONER
Mr. NE Ramakokovhu ASSISTANT DIRECTOR
Mr D ZongoSENIOR
PRACTITIONER
Mrs C KhambakoDD:BURSARIES
Mrs B SipenganeDD: OFFICE ADMIN
Vacant SECRETARY
Mr D MatsimaneASSISTANT DIRECTOR
Mrs KF HlongwaneDIRECTOR: PROVINCIAL
OPERATIONS
Ms S MakhesaContract
Mr TT SelepeContract
Ms M MakinaContract
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5.2 strategic prOjects
Mr E MashabaneDIRECTOR: SP
Mrs N DlaminiSECRETARY
Mrs M Gijima DD: CLUSTER 5
Mrs T Moila ASSISTANT DIRECTOR
VacantPRACTITIONER
Mrs M Malatji CONTRACT
Mr K Maluleka DD: CLUSTER 3
Mr J Magabane ASSISTANT DIRECTOR
Mr O MolefeDD: CLUSTER 4
Mr J Zulu ASSISTANT DIRECTOR
Mrs L Gwebu DD: CLUSTER 2
Mr R Boshielo ASSISTANT DIRECTOR
Mr H MasemolaDD: CLUSTER 1
Mr P RamawaASSISTANT DIRECTOR
VacantSENIOR PRACTITIONER
Vacant Frozen for
Contract Post SENIOR CLERK
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5.3 sectOr skills suppOrt
Mr F StrydomDIRECTOR: SSP
Mrs T MadunaSECRETARY
Mr S FredericksDD: CLUSTER 1
Mr G FerreiraASSISTANT DIRECTOR
Mrs C MboyaPRACTITIONER
Mrs VS NkiwaneDD: CLUSTER 3
Mrs NM RannyamaASSISTANT DIRECTOR
Mr J Nchabaleng PRACTITIONER
Mr B MkhizeDD: CLUSTER 2
Mr E MothlabaneASSISTANT DIRECTOR
Mrs H SebopetsaPRACTITIONER
Mr GG SaulsDD: CLUSTER 4
Mrs Z MahlabaASSISTANT MANAGER
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5.4 finance and adMinistratiOn
Mr W MinnieCHIEF FINANCIAL OFFICER
Vacant SECRETARY Frozen for
Contract Post
Mrs P MalekaSENIOR
PRACTITIONER
Mrs B SetukiSENIOR CLERK
Vacant SENIOR CLERK
Frozen for Contract Post
Mrs B BouwerSENIOR CLERK: PROCUREMENT
Ms C BothaSENIOR CLERK
Mr J MogoroSENIOR
PRACTITIONER
Mr T MogotshaneSENIOR CLERK:
ASSETS
Vacant SENIOR CLERK
Frozen for Contract Post
Mrs R SouwitszkyCLERK
Mrs C PieterseSENIOR CLERK
Mrs M MonosiSENIOR
PRACTITIONER
Vacant ASSISTANT DIRECTOR:
FINANCE
Vacant ASSISTANT DIRECTOR:
FINANCE
Mr E SakoASSISTANT DIRECTOR:
ADMINISTRATION
Mrs M FerreiraDEPUTY DIRECTOR
Ms K TjalePRACTITIONER:
SCM
Mrs A SmitSENIOR
PRACTITIONER: HRM
Ms R KoenSENIOR CLERK:
REGISTRY
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The anomaly of high unemployment levels and a simultaneous chronic shortage
persists at a time when state resources have become scarce. The NSF surplus,
although a reflection of past underperformance, present the Post School Education
and Training system with an opportunity to make significant investments and to
make an impact on human resource and skills development. I believe the NSF has
now occupied its rightful place in the post school system, correctly focusing on
national priorities and providing resources to catalyse interventions that unlock
national human resource potential.
The National Development Strategy III (NSDS III) and the White Paper on the
Post School Education and Training both emphasise that the NSF is responsible
for skills development aligned to national development strategies and priorities.
This includes building linkages within the skills system and providing funds for
government strategies such as youth programmes, building small businesses and
cooperatives, and rural development. It also funds research and innovation that is
not confined to a particular sector.
6. FOREWORDBYTHEMINISTER
The Human Resource Development Strategy of South Africa commits us, amongst
other things, to overcome the shortage of people with the skills needed for the
successful implementation of our strategies to achieve accelerated economic
growth. We must increase the number of appropriately skilled people to meet our
economic and social development priorities and help overcome poverty, inequality
and unemployment.
Central to meeting our commitments is an effective and efficient post school
provisioning system of which the National Skills Fund is an integral part. During
the year under review, the NSF continued to make a significant contribution to our
integrated post school education and skills development trajectory by empowering
and developing citizens.
"The National Development Strategy III (NSDS III) and the White Paper on the Post School Education and Training both emphasise that the NSF is responsible for skills development aligned to national development strategies and priorities. "
DR B E NzIMANDE, MP
Minister of Higher Education
and Training
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The high levels of financial commitments by the NSF in this financial year represent
a clear resolve to undertake projects that are in alignment with the National Skills
Development Strategy and support the National Development Plan, the New
Growth Path and the Industrial Policy Action Plan. This involves, among other
things, support for rural development, the green economy and skills development
in education and health.
The NSF has made important strides in improving its internal capacity, structures
and operations. Equally important is the progress made in meeting all compliance
requirements pertaining to a listed Schedule 3A Public Entity. The NSF continued,
once more, to achieve an unqualified audit opinion, as was the case for the past
number of years, indicating good corporate governance through effective oversight
by the Departmental leadership.
I extend my gratitude and appreciation to the Director-General, Mr Gwebinkundla
Qonde, who is the Accounting Authority of the NSF, as well as the NSF management
and staff for their enthusiasm and their hard work in the quest to improve the skills
of our people.
DRBENZIMANDE,MP
MINISTEROFHIGHEREDUCATIONANDTRAINING
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creating a vibrant and responsive post-school education and training system that
will contribute to a growing economy that is appropriately transformed, so that the
benefits of growth are shared by all citizens.
In successive years, the country has seen commendable improvements in the basic
education matric results, including improvements in the pass rates of mathematics
and sciences. This welcome improvement happens against the backdrop of a dire
shortage of critical skills that are required to give a massive boost to economic
development, thereby providing the country with a critical mass of enrolments in
the scarce and critical skills post education programmes.
In response to this overwhelming improvement by the country’s school going youth,
the Department, through the NSF, envisaged the establishment of a dedicated NSF
Bursaries Unit to be the single point of reference for bursary applicants, who will
respond to national priorities as outlined in the National Development Plan, NSDS III
and all other related developmental strategies. The NSF, through the establishment
of a dedicated bursary unit recognised the importance of providing bursary
assistance to financially and academically deserving students who otherwise would
be unable to access funding during their post-schooling year. The NSF is committed
to allocate annual funds for this purpose.
7. FOREWORD BY THE DIRECTOR-GENERAL OFHIGHER EDUCATIONAND TRAININGAS THEACCOUNTINGAUTHORITY
In this report, we seek to highlight the progress and achievements made by the
National Skills Fund during the 3rd year of the implementation of the National Skills
Development Strategy III (NSDS III). Equally important is sharing the challenges that
the organisation faced in its journey towards meeting its vision of skilling the nation.
The Department, inclusive of the NSF, has continued to work from the premise that
economic growth and development, including the creation of decent work on a
large scale and investment in quality education and skills development, are at the
centre of the Government’s strategy. The NSF and its partner institutions within the
Department, collectively, are expected to work towards realization of the goals of
"The support of the NSF has enabled the Human Resource Development Council of South Africa to identity and research blockages that relate to human resource development in South Africa and submit recommendations thereon."
MR GWEBINkUNDLA FELLIX QONDE
Director-General of
Higher Education and Training
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graduate and post-graduate qualifications across the country.
• South African Maritime Safety Authority (SAMSA)
With over 3 000 kilometres of coastal area, South Africa is endowed with a huge economic potential that remains largely untapped, partly due to the lack of appropriate skills and in-depth research. To this end, the Department has entered into a Memorandum of Understanding (MoU) with the South African Maritime Safety Authority for the funding of eligible students pursuing Maritime post-graduate qualifications at the World Maritime University in Sweden. This project currently benefits 27 students pursuing post-graduate qualifications at the United Nations World Maritime University in Malmo, Sweden.
• South African Institute of Chartered Accountants (SAICA)
The SAICA programmes are a culmination of a number of initiatives that focuses on transforming the accounting profession in South Africa and bring about a dispensation in which the profession will fairly represent the current population demographics through the development of qualified accountants with the designation CA (SA). Another essential objective of this project is to build the capacity of selected institutions delivering accountancy programmes in order that these institutions receive accreditation from professional bodies, thereby ensuring that learners in these institutions do not waste their valuable time studying programmes that are below acceptable standards as set out by professional bodies. Affected institutions include the University of Limpopo and University of Fort Hare who have regained accreditation, Walter Sisulu University who is in their second year of capacity building intervention and the University of the Western Cape who has maintained accreditation. This project benefits more than 900 students pursuing accounting under-graduate and post-graduate qualifications at the University of Limpopo, University of Fort Hare and the University of the Western Cape.
The NSF is specifically tasked in the NSDS III to support identified priorities that advance the Human Resource Development Strategy, decided upon in consultation
Some of the projects that have been born out of this initiative and managed by the NSF Bursaries Unit include, but are not limited to:
• National Research Foundation (NRF)
The Department entered into a Memorandum of Understanding (MoU) with the National Research Foundation for the management and disbursement of bursaries to eligible students pursuing various academic programmes linked to scarce and critical skills. This initiative supports the National Skills Development Strategy objectives through the growth in the numbers of well-trained post-graduate researchers and revival of the academic profession. This project benefits 1 056 students pursuing post-graduate qualifications across all higher education institutions in the country.
• International Scholarship
There are a number of international scholarship opportunities currently available to South African students for university programmes and skills development programmes abroad, some of which require co-funding. Foreign missions and agencies have been used by their countries as conduits to facilitate formal contact with South African government departments, and higher education and training institutions. As the Department responsible for post-school education and training, it seeks to develop a coherent framework to coordinate current offers as well as to expand these and create new opportunities for South Africans to study abroad. For the year under review, this project has assisted 40 students to pursue both under-graduate and post-graduate qualifications in China and Russia respectively.
• National Student Financial Aid Scheme
The Department also entered into a Memorandum of Agreement (MoA) with the National Student Financial Aid Scheme (NSFAS) for the administration and disbursement of funds to all higher education institutions for the full cost of study to eligible students in scarce and critical skills that are of a national priority as determined in the NSDS III and other policy frameworks. This programme benefits over 12 000 students pursuing both under-
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For all the Technical Tasks Teams, the recommendations in resolving the identified blockages were accepted by the HRDC. What remains is for the implementing agencies and/or departments to move forward with implementation, and for the HRDC to continue monitoring progress in this regard.
NSF funding has also made it possible for the HRDC to host for the first time an HRDC Summit which took place in March 2014 with the objective of sharing the findings of the TTTs with its stakeholders thereby strengthening their research findings through participation by the experts and stakeholders.
Finally, I wish to thank the Minister of Higher Education and Training, Dr BE
Nzimande, and the Deputy Minister, Mr M Manana, for continuously challenging
our limits and the boundless enthusiasm with which they lead the Department. I
am equally grateful for their unwavering support in all spheres of our work, as well
as for their leadership in the challenges that we face as the Department serving the
educational and training needs of all South African citizens.
I hereby present this report to the Minister of Higher Education and Training, Dr BE Nzimande, MP, and Deputy Minister, MP, Mr M Manana, and invite them to table it in Parliament.
MRGWEBINKUNDLAFELLIXQONDE
DIRECTOR-GENERALOFHIGHEREDUCATIONANDTRAINING
with the Human Resource Development Council (HRDC). To this end, the HRDC has identified blockages that relate to human resource development and appointed Technical Task Teams (TTTs) to research these blockages and submit recommendations to Council. Funding from NSF has assisted the TTTs to fund research work during the period under review:
• Enabling entrepreneurship
This task team made recommendations which touched on the work of Schools; Universities; Technical and Vocational Education and Training (TVET) colleges and SMMEs, in which they were required to include and improve on the issue of Entrepreneurship in their curriculum or spheres of operation.
• Production of professionals
Some of the recommendations made to the HRDC included, but not limited to the fact that professional councils should play a more active role in enabling individuals to enter professions as well as providing necessary support in improving mathematics and science programmes at schools.
• Alignment of the Human Resource Development Strategy with the New Growth Path
The key recommendation from this task team was that a central demand side mechanism driven by the Department, with a greater role for the economic departments, and a revised role for SETAs should be established. This project is currently being implemented by the Department together with the Economic Development Department (EDD) playing a stronger role and the Presidential Infrastructure Coordinating Committee (PICC) participating as requested.
• Skills System Review
Amongst other recommendations, this task team made a recommendation that supported the development of a new skills system in line with the vision, mission and key fundamentals set out in its report which the Department should implement.
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This trajectory has seen NSF not only increasing its financial commitments
extensively, but also annual disbursements have reached record levels. Over the
last 3 years, since the new NSDS III was launched, the NSF’s performance has
increased significantly due to both deliberate interventions to improve the Fund’s
performance under NSDS III and the resolve to build concrete partnerships with
the entire post school education and training family. These deliberate interventions
resulted in the Fund becoming more efficient towards funding the critical skills
needs in South Africa.
The Fund’s grants disbursements towards skills development increased to
R3,1 billion (2013: R2,6 billion) during the current financial year, benefiting over
77 000 learners.
The majority of these 77 000 learners are still receiving training on on-going
courses during the next financial year as their training courses extend over periods
longer than one year. The NSF remains committed towards funding these learners
over their entire qualification period. This is to ensure a maximum throughput of
learners obtaining their qualifications and preventing a high drop-out of learners
from one academic year to the next due to a lack of funding to continue studies.
8. EXECUTIVEOFFICER’SOVERVIEW
The National Skills Fund has been characterised as a catalytic fund that is expected
to promote strategic partnerships and innovation in project delivery. It is correctly
viewed as a national resource which must be used to both initiate as well as to
respond to national skills priorities. It must be used to target gaps and complement
resource shortages for national priorities. This trajectory, as advocated in the
NSDS III has been a driving force behind the NSF making significant contributions to
the integrated post school education and skills development, in the form of direct
investment in sustainable education and training facilities and equipment and
most importantly, by funding cost of study for thousands of learners taking various
programmes ranging from a security guard to a pilot or an engineer or a doctor.
"The approach adopted by the NSF has been to primarily serve as a “catalytic” fund, aiming to unblock systemic blockages in the Post-School Training System and to unlock skills development funding sitting with other stakeholders, including Government Departments and State Owned Companies."
MR MVUyISI MACIkAMA
ExecutiveOfficer
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later in this annual report, were:
• Priorities identified that advance the Human Resource Strategy as identified and decided by the Human Resource Development Council;
• Priorities identified by the Minister in consultation with the National Skills Authority (NSA) aimed at strengthening the country’s skills development capacity; and
• Projects that are in alignment with the National Skills Development Strategy and support the National Development Plan, the new economic growth path, the Industrial Policy Action Plan, skills to support the Green Economy, Rural Development, and skills development in Education and Health, and that contribute towards capacity building and skills development for institutions operating in the Post School System.
The approach adopted by the NSF has been to primarily serve as a “catalytic”
fund, aiming to unblock systemic blockages in the Post-School Training System
and to unlock skills development funding sitting with other stakeholders, including
Government Departments and State Owned Companies, who shared common
objectives. This was achieved through funding research and development and to
support national strategic training interventions by topping up funding of national,
provincial, local and community priority projects, whose success in attaining its
objectives would otherwise be compromised due to a lack of funding, systems, or
expertise. Other core criteria for selection of projects were its sustainability beyond
the periods of intervention and its envisaged impact on the communities it aims to
serve.
In line with the propositions of the White Paper for Post School Education
and Training, the NSF has prioritised the utilisation of partnerships with other
government departments, public institutions such as Universities, Universities of
Technology, Technical and Vocational Education and Training institutions, Sector
Education and Training Authorities, State Owned Companies, the South African
Qualification Authority, as well as non-government and not for profit organisations,
cooperatives and associations working with persons living with disabilities for the
This significant increase in the efficiency of the NSF can be clearly noted in the NSF’s
increase in grants disbursements towards scarce and critical skills:
1. 1st Year of NSDS III (2011/12): Grants disbursements increased with 131% from R564 million to R1,3 billion; and
2. 2nd Year of NSDS III (2012/13): Grants disbursements increased with 97% from R1,3 billion to R2,6 billion.
3. 3rd Year of NSDS III (2013/14): Grants disbursements increased with 19% from R2,6 billion to R3,1 billion.
The listing of the NSF as an entity together with the implementation of
NSDS III presented the organisation with unique, but exciting challenges as well as
tremendous opportunities. The main challenge that had to be met was to continue
with uninterrupted service delivery whilst at the same time changing the structures
and operations to comply with the legal prescripts demanded of a listed entity.
The NSF has had to embark on a transformation journey that would see it meeting
expectations of its stakeholders both from a compliance angle as well as service
delivery angle. It has presented the organisation with a rear opportunity to critically
interrogate its programmes and self-introspect with the main purpose of introducing
changes that will see the organisation operating effectively and optimally in pursuit
of its vision of funding to skill the nation.
Through this journey, we seek to build an organisation with processes, systems and
structures that truly integrate its value. We seek to infuse integrity in systems and
people behind them, stimulate passion in pursuit of our vision, ensure accountability
among all stakeholders and partners and most importantly, achieve excellence in
service delivery to all our communities.
The robust implementation of our annual plans has also been characterised
by greater alignment between all the National Skills Fund’s activities and
OUTCOME 5 of government’s 12 performance outcomes, namely: A skilled
and capable workforce to support and inclusive growth path. In support of this
outcome, the national priorities that received funding, details of which are outlined
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I would like to extend my sincere gratitude and appreciation to the Minister of
Higher Education and Training, Dr. B E Nzimande, MP, the Deputy Minister of
Higher Education and Training, Mr MC Manana, MP, the Director-General of the
Department of Higher Education and Training, Mr GF Qonde, for your visionary
leadership and guidance, and NSF management and staff for your dedication and
sacrifice to ensuring a higher level of performance by the NSF towards the skilling
of our nation.
MRMVUYISIMACIKAMA
EXECUTIVEOFFICER:NATIONALSKILLSFUND
implementation of its projects. I believe that through partnerships the NSF has not
only greatly improved the sustainability of its interventions, but has also succeeded
in creating greater value for every rand spent of the Fund.
The NSF will continue to strive to improve on the efficiency and effectiveness of
its operations, systems and programmes, however, certain systemic issues need
to be addressed urgently to ensure optimisation of the skills development funds
and maximum benefit to the learners. Systemic issues include amongst others
inadequate research, improvements to the “feeder system,” i.e. the schooling
system with specific reference to the teaching of literacy, maths and science,
unevenness in quality of delivery on the part of providers (both public and private),
progression of learners, articulation, access to approved workplaces for experiential
learning required for certification purposes.
Whilst the NSF has opted for a developmental approach to its work, we still find
that due to the aforementioned systemic issues unacceptable wastage in the
system as learners do not qualify in the optimum time and as such also do not
access employment quick enough to upgrade to a sustainable livelihood. It should
be noted that in the South African context, a sustainable livelihood of one learner
results in improvement of the livelihoods for a number of persons.
23 NATIONAL SKILLS FUND ANNUAL REPORT · 2014
PART B Performance Information
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1. STATEMENT OF RESPONSIBILITY FOR PERFORMANCE INFORMATION
stateMent Of respOnsibility fOr perfOrMance infOrMatiOn fOr the year ended 31 March 2014
The Accounting Authority is responsible for the preparation of the public entity’s
performance information and for the judgements made in this information.
The Accounting Authority is responsible for establishing, and implementing a
system of internal control designed to provide reasonable assurance as to the
integrity and reliability of performance information.
The performance information reflects the actual achievements against planned
objectives, indicators and targets as per the strategic and annual performance plan
of the public entity for the financial year ended 31 March 2014.
The performance information of the entity set out on page 23 to page 40 was
approved by the Director-General of Higher Education and Training, as the
accounting authority of the National Skills Fund.
GWEBINKUNDLAFELLIXQONDEDIRECTOR-GENERALOFHIGHEREDUCATIONANDTRAINING
MVUYISIMACIKAMAEXECUTIVEOFFICERNATIONALSKILLSFUND
31 July 2014
PART B Performance Information2. AUDITOR’S REPORT: PREDETERMINED
OBJECTIVES
The AGSA currently performs the necessary audit procedures on the performance
information to provide reasonable assurance in the form of an audit conclusion.
The audit conclusion on the performance against predetermined objectives is
included in the report to management, with material findings being reported under
the Predetermined Objectives heading in the Report on other legal and regulatory
requirements section of the auditor’s report.
Refer to the Report of the Auditor-General to Parliament on the National Skills Fund
(pages 66 to 69), published as Part E: Financial Information.
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The majority of these 77 000 learners are still receiving training on on-going
courses during the next financial year as their training courses extend over periods
longer than one year. The NSF remains committed towards funding these learners
over their entire qualification period. This is to ensure a maximum throughput of
learners obtaining their qualifications and preventing a high drop-out of learners
from one academic year to the next due to a lack of funding to continue studies.
The NSF’s increased performance under NSDS III can be clearly noted below:
• 1st Year of NSDS III (2011/12): Grants disbursements increased with 131% from R564 million to R1,3 billion; and
• 2nd Year of NSDS III (2012/13): Grants disbursements increased with 97% from R1,3 billion to R2,6 billion.
• 3rd Year of NSDS III (2013/14): Grants disbursements increased with 19% from R2,6 billion to R3,1 billion.
Furthermore, the NSF has a remaining commitment of R11,3 billion towards the various skills development projects of national priority. This high level of commitment has strategically positioned the Fund to maintain its high level of performance during the next two years until the end of the NSDS III.
The high level of commitment will also result in the Fund putting both its annual income and historic accumulated surpluses to effective use towards skills development until the end of the NSDS III period.
3. OVERVIEW OF PUBLIC ENTITY’S PERFORMANCE
3.1 serVice deliVery enVirOnMent
On 12 October 2012, the National Skills Fund was listed retrospectively effective
from 1 April 2012.
Since the listing of the National Skills Fund as a Schedule 3A public entity on
12 October 2012, the Fund reports on its performance against its strategic plan and
annual performance plan to relevant stakeholders, who includes, amongst other
the following:
• The Minister and Director-General of Higher Education and Training, through the relevant structures of the DHET. Reports of the NSF are discussed in the Department’s senior management meetings at various levels including a dedicated review session with the Executive Authority. The NSF is also part of the Annual Review and planning workshops, where annual performance is discussed and planning of the new financial year is undertaken;
• Relevant parliamentary portfolio committees; and
• A committee of the National Skills Authority also provides monitoring with respect to the contribution of the NSF to the targets of the National Skills Development Strategy.
These performance reports include, amongst others, quarterly monitoring of
performance, derived from the annual performance plan of the NSF and ENE
targets and reported via Department of Higher Education and Training;
Since the dawn of the NSDS III the National Skills Fund’s performance
has increased significantly seeing the Fund’s grants disbursements towards skills development
increasing to R3,1 billion (2013: R2,6 billion) during the current
financial year, benefiting over 77 000 learners.
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3.3 key pOlicy deVelOpMents and legislatiVe changes
Following publication of the National Skills Development Strategy for 2011-2016
(NSDS III), the Fund has engaged the National Skills Authority to develop the
Strategic Framework and Criteria for the allocation of funding to support NSDS III.
This Strategic Framework document was approved by the Minister and paved the
way for the National Skills Fund to fund projects under the NSD SIII.
The key programmes of the NSF as set out in the Strategic Framework for the
allocation of funding are the following:
1. Supporting the priorities of the Human Resource Development Strategy of South Africa;
2. Supporting the priorities of the Minister in consultation with the National Skills Authority;
3. Funding National Skills Development Strategy III priorities in the following areas:
a. New Economic Growth Path;
b. Industrial Policy Action Plan;
c. Skills to support rural development;
d. Skills for a green economy;
e. Skills for education and health;
f. Skills to support the justice sector; and
g. Support towards artisan development.
4. Funding priorities identified by the Director-General supporting the Skills Development Act in the following areas:
a. Worker Education;
b. Skills System Institution Capacity Building;
c. Trainee Lay-off Scheme; and
d. Academic profession, research and development.
3.2 OrganisatiOnal enVirOnMent
The key organisational challenges for the National Skills Fund to overcome during
the next financial year relates to following:
• Overcoming capacity constraints with regards to the research and analysis towards initiating skills development projects;
• Overcoming capacity constraints to ensure sufficient skills development project support, project financial management and projects monitoring and evaluation;
• Overcoming capacity constraints with regards to support functions to be established required for the NSF as a fully-fledged public entity; and
• Improving the efficiency of the NSF’s financial and performance information processes and systems to ensure timely and accurate reporting.
The Fund has embarked on an integrated initiative aimed at improving the efficiency
and effectiveness of the NSF. This includes amongst others the following:
• Improving alignment of the organisation to its mandate;
• Optimising the NSF’s operations;
• Reviewing and optimising the NSF’s processes;
• Building, sourcing and aligning the NSF’s organisation structure;
• Building, sourcing and improving the NSF’s project support and monitoring and evaluation capability; and
• Building and improving the NSF’s performance management, information and reporting.
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3.4 strategic OutcOMe Oriented gOals
The strategic objective of the National Skills Fund is to provide funds to support
projects that are national priorities in the NSDS III, that advance the Human Resource
Development Strategy (HRDS) of South Africa and that support the NSA in its work.
The National Skills Fund’s high level of performance has resulted in the Fund over-
achieving on its strategic outcome oriented goals.
5. Priorities to address skills infrastructure in the following areas:
a. Recapitalisation of public delivery infrastructure;
b. Community Education Centres;
c. Skills Development Institutes; and
d. State-owned enterprises.
On 3 December the Minister of Higher Education and Training published new SETA
grant regulations in terms of section 36 of the Skills Development Act (Government
Gazette 35940 Notice No. 990). As per new SETA grant regulations, the remaining
surplus of the uncommitted discretionary funds from the SETAs must be paid over
by each SETA by 1 October of each year into the National Skills Fund. This regulation
might significantly increase the income of the National Skills Fund, especially during
the first year in which the applicable section relating to the grant regulations will
come into effect namely 2014/15.
The release of the White Paper on Post School Education and Training set out a vision for a single, coherent, differentiated and articulated
post education and training system. This will result in the review of all post school
education and training legislation and a drive towards a higher degree of integration
with the post school education training system.
The NSF’s current projects are aligned to the priorities as contained in the National Development Plan 2030.
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4. PERFORMANCE INFORMATION BY PROGRAMME
strategic ObjectiVes, perfOrMance indicatOrs planned targets and actual achieVeMents
Programme 1: Skills Development Funding
Purpose: To invest in projects identified in the National Skills Development Strategy (NSDS) as national priorities and invest in projects related to the achievement of the Skills
Development Act as per the discretion of the Director-General.
revised strategic target for the nsdsiii period 2011/12
to 2015/16
performance indicator
actual achievement
2012/13
planned target
2013/14
actual achievement
2013/14
deviation from
planned target
to actual achievement
for 2013/2014
comment on deviations
1 R 14,025 billion contractually committed to fund projects that are of national priority over the NSDS III period.
Amount contractually committed to fund projects of national priority over the stipulated period.
R5,863 billion R2,4 billion R5,377 billion R2,907 billion over-achievement
The National Skills Fund’s high level of performance in committing funds towards skills development projects of national priority during the past financial year lead to the over-achievement. Efficient reprioritisation between sub-objectives ensured that funds are put to efficient use to ensure achievement of the overall objective.
1.1 HRDSA: R 0,253 billion contractually committed to fund projects that are of national priority over the NSDS III period.
Amount contractually committed to fund projects of national priority over the stipulated period.
R0,055 billion R0,05 billion R0 billion R0,05 billion under-achievement
The Human Resource Development Council of South Africa (HRDCSA) has not fully utilised its previous allocation and was rolled over to the current financial year. Hence no additional allocation was not made available towards the HRDCSA during the current financial year. The saving in funding earmarked towards the HRDCSA was put to efficient use in the NSF’s other objectives.
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revised strategic target for the nsdsiii period 2011/12
to 2015/16
performance indicator
actual achievement
2012/13
planned target
2013/14
actual achievement
2013/14
deviation from
planned target
to actual achievement
for 2013/2014
comment on deviations
1.2 NSA MINISTERIAL: R 0,221 billion contractually committed to fund projects that are of national priority over the NSDS III period.
Amount contractually committed to fund projects of national priority over the stipulated period.
R0,037 billion R0,04 billion R0,033 billion R0,014 billion under-achievement
The National Skills Authority (NSA) has not fully utilised its prior year’s allocation and the unspent funds was rolled over to the current financial year and the additional allocation was thus reduced with the unspent funds rolled over. The saving in funding earmarked towards the NSA was put to efficient use in the NSF’s other objectives.
1.3 NSDS III GOVERNMENT PRIORITIES: R 7,661 billion contractually committed to fund projects that are of national priority over the NSDS III period.
Amount contractually committed to fund projects of national priority over the stipulated period.
R4,289 billion R1,5 billion R0,652 billion R0,847 billion under-achievement
The reprioritisation funding towards the NSFAS shortfall (part of DG priorities) and TVET college infrastructure development has led to the under-achievement on the commitment of funding towards projects categorised under Government Priorities.
1.4 DG PRIORITIES: R 5,305 billion contractually committed to fund projects that are of national priority over the NSDS III period.
Amount contractually committed to fund projects of national priority over the stipulated period.
R0,896 billion R0,69 billion R1,675 billion R1,202 billion over-achievement
The over-achievement can mainly be attributed towards the additional R1 billion allocated towards the NSFAS shortfall.
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revised strategic target for the nsdsiii period 2011/12
to 2015/16
performance indicator
actual achievement
2012/13
planned target
2013/14
actual achievement
2013/14
deviation from
planned target
to actual achievement
for 2013/2014
comment on deviations
1.5 SkILLS INFRASTRUCTURE: R 0,585 billion contractually committed to fund projects that are of national priority over the NSDS III period.
Amount contractually committed to fund projects of national priority over the stipulated period.
R0,586 billion R0,12 billion R2,736 billion R2,616 billion over-achievement
The over-achievement can mainly be attributed towards the R2,5 billion allocated towards the TVET college infrastructure development.
2 490 projects funded over the NSDS III period by the outer year of the NSDS III period.
Number of projects funded over the relevant NSDS period by the outer year of the relevant NSDS period.
177 projects 350 projects 164 projects 186 projects under-
achieved
The NSF funded projects of higher amounts and learner numbers. Hence the NSF over-achieved on the contractual commitments target and the number of learners funded for training even though the number of projects as target was not achieved.
2.1 HRDSA: 1 project funded over the NSDS III period by the outer year of the NSDS III period.
Number of projects funded over the relevant NSDS period by the outer year of the relevant NSDS period.
1 project 1 project 1 project 0 projects over-achieved
Achieved target.
2.2 NSA MINISTERIAL: 39 projects funded over the NSDS III period by the outer year of the NSDS III period.
Number of projects funded over the relevant NSDS period by the outer year of the relevant NSDS period.
15 projects 28 projects 14 projects 14 projects under-
achieved
Target not achieved due to delays in contracting new NSA constituency capacity building projects. Contracting took place subsequent to year-end.
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revised strategic target for the nsdsiii period 2011/12
to 2015/16
performance indicator
actual achievement
2012/13
planned target
2013/14
actual achievement
2013/14
deviation from
planned target
to actual achievement
for 2013/2014
comment on deviations
2.3 NSDS III GOVERNMENT PRIORITIES: 309 projects funded over the NSDS III period by the outer year of the NSDS III period.
Number of projects funded over the relevant NSDS period by the outer year of the relevant NSDS period.
112 projects 221 projects 126 projects 95 projects under-
achieved
The NSF funded projects of higher amounts and learner numbers. Hence the NSF over-achieved on the contractual commitments target and the number of learners funded for training even though the number of projects as target was not achieved.
2.4 DG PRIORITIES: 128 projects funded over the NSDS III period by the outer year of the NSDS III period.
Number of projects funded over the relevant NSDS period by the outer year of the relevant NSDS period.
45 projects 91 projects 10 projects 81 projects under-
achieved
The NSF funded projects of higher amounts and learner numbers. Hence the NSF over-achieved on the contractual commitments target and the number of learners funded for training even though the number of projects as target was not achieved.
2.5 SkILLS INFRASTRUCTURE: 13 projects funded over the NSDS III period by the outer year of the NSDS III period.
Number of projects funded over the relevant NSDS period by the outer year of the relevant NSDS period.
4 projects 9 projects 6 projects 3 projects under-
achieved
The NSF funded projects of higher amounts and learner numbers. Hence the NSF over-achieved on the contractual commitments target and the number of learners funded for training even though the number of projects as target was not achieved.
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revised strategic target for the nsdsiii period 2011/12
to 2015/16
performance indicator
actual achievement
2012/13
planned target
2013/14
actual achievement
2013/14
deviation from
planned target
to actual achievement
for 2013/2014
comment on deviations
3 200 000 learners funded for training.
Number of learners funded for training.
95 688 learners
40 000 learners
77 913 learners
37 913 learners over-achievement
The National Skills Fund’s high level of performance in committing funds towards skills development projects of national priority during the past financial year lead to the over-achievement.
3.1 NSDS III GOVERNMENT PRIORITIES: 162 250 learners funded for training.
Number of learners funded for training.
77 714 learners
32 450 learners
46 067 learners
13 617 learners over-achievement
The National Skills Fund’s high level of performance in committing funds towards skills development projects of national priority during the past financial year lead to the over-achievement.
3.2 DG PRIORITIES: 37 750 learners funded for training.
Number of learners funded for training.
17 974 learners
7 550 learners 31 846 learners
24 296 learners over-achievement
The National Skills Fund’s high level of performance in committing funds towards skills development projects of national priority during the past financial year lead to the over-achievement.
4 Minimum of 70% of grants revenue received during each year disbursed as skills development grants during the year.
Percentage of grants revenue received during each year disbursed as skills development grants during the year.
100% 70% 100% 30% over-achievement
This indicator measures the NSF’s ability to put its revenue received during the financial year to effective use towards skills development grants. The dawn of the new NSDS III has facilitated significant improvement in the NSF resulting in a higher commitment towards skills development projects of national priority, which resulted in improved grant disbursement efficiencies. Not only have the NSF started to put its annual revenue to effective use towards skills development, but also its accumulated reserves.
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revised strategic target for the nsdsiii period 2011/12
to 2015/16
performance indicator
actual achievement
2012/13
planned target
2013/14
actual achievement
2013/14
deviation from
planned target
to actual achievement
for 2013/2014
comment on deviations
5 Minimum of 95% of skills reserves accumulated during the year contractually committed towards skills development grants at the end of the year.
Percentage of skills reserves accumulated during the year contractually committed towards skills development grants at the end of the year.
100% 95% 100% 5% over-achievement
This indicator measures the NSF ability to put its surplus accumulated during the year to effective use in the future through its contractual commitments towards skills development at year-end. The dawn of the new NSDS III has facilitated significant improvement in the NSF resulting in a higher commitment towards skills development grants, which resulted in improved grant disbursement efficiencies. Not only have the NSF started to put its annual revenue to effective use towards skills development, but also its accumulated reserves.
6 Minimum of 70% of cumulative grants revenue received over the NSDS period disbursed as skills development grants over the NSDS period by the outer year.
Percentage of cumulative grants revenue received to date over the NSDS period disbursed as skills development grants to date over the NSDS period.
93% 95% 100% 5% over-achievement
This indicator measures the NSF’s grants disbursements efficiency since the dawn of the NSDS III in April 2011. The new NSDS III has facilitated significant improvement in the NSF resulting in a higher commitment towards skills development grants, which resulted in improved grant disbursement efficiencies. Not only have the NSF started to put its annual revenue to effective use towards skills development, but also its accumulated reserves.
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revised strategic target for the nsdsiii period 2011/12
to 2015/16
performance indicator
actual achievement
2012/13
planned target
2013/14
actual achievement
2013/14
deviation from
planned target
to actual achievement
for 2013/2014
comment on deviations
7 Minimum of 95% of skills reserves accumulated over the NSDS period contractually committed towards skills development grants by the outer year of the NSDS period.
Percentage of skills reserves accumulated to date over the NSDS period contractually committed towards skills development grants at the end of the year.
100% 95% 100% 5% over-achievement
This indicator measures the NSF ability to put its entire surplus accumulated surplus at year-end (surplus accumulated both in the current and prior years) to effective use in the future through its contractual commitments towards skills development at year-end. The dawn of the new NSDS III has facilitated significant improvement in the NSF resulting in a higher commitment towards skills development grants, which resulted in improved grant disbursement efficiencies. Not only have the NSF started to put its annual revenue to effective use towards skills development, but also its accumulated reserves.
8 Minimum of 95% of remaining skills reserves accumulated at inception of the NSDS period contractually committed towards skills development grants at the end of the NSDS period.
Percentage of remaining skills reserves accumulated at inception of the NSDS period contractually committed towards skills development grants at the end the NSDS period.
94% 95% 100% 5% over-achievement
This indicator measures the NSF ability to put its surplus accumulated during prior NSDS periods to effective use in the future through its contractual commitments towards skills development at year-end. The dawn of the new NSDS III has facilitated significant improvement in the NSF resulting in a higher commitment towards skills development grants, which resulted in improved grant disbursement efficiencies. Not only have the NSF started to put its annual revenue to effective use towards skills development, but also its accumulated reserves.
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actual achievement
2012/13
planned target
2013/14
actual achievement
2013/14
deviation from
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to actual achievement
for 2013/2014
comment on deviations
9 Minimum of 50% of skills reserves accumulated at inception of the NSDS period disbursed as skills grants at the end of the NSDS period.
Percentage of skills reserves accumulated at inception of the NSDS period disbursed as skills grants at the end of the current year.
0% 95% 2% 93 % under-achievement
This indicator measures how the NSF started to put its surplus accumulated during prior NSDS periods to effective use during the current financial year. The dawn of the new NSDS III has facilitated significant improvement in the NSF resulting in a higher commitment towards skills development grants, which resulted in improved grant disbursement efficiencies. Not only have the NSF started to put its annual revenue to effective use towards skills development, but also its accumulated reserves. The NSF only started to put its accumulated reserves from prior NSDS periods to effective use within the current financial year and it is expected that the percentage will increase in the next financial year going forward as the NSF meets its high commitments towards skills development.
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Programme 2: NSF Operations
Drive the National Skills Fund towards increased excellence in skills development funding by enhancing the administrative and operational excellence of the National Skills
Fund.
revised strategic target for the nsdsiii period 2011/12 to 2015/16
performance indicator
actual achievement
2012/13
planned target
2013/14
actual achievement
2013/14
deviation from
planned target
to actual achievement
for 2013/2014
comment on deviations
1 Set at least 3 key administrative and operational goals to achieve per year over the NSDS period.
Number of key administrative and operational goals achieved per year over the NSDS period.
N/A. New indicator for 2013/14 financial year and was not used to measure performance for the 2012/13 financial year.
11 goals 1 goal10 goals under-
achieved
The under-achievement was mainly due a delay in the appointment of a service provider to assist the NSF in establishing itself as a fully-fledged public entity. The appointment has occurred shortly after year-end and the administrative targets will be achieved within the next two years as part of the NSF public entity project. The delay in the appointment of the service provider was mainly due to a delay in the DHET procurement processes.
2 Achieve 17 key administrative and operational goals in total over the NSDS period.
Number of key administrative and operational goals achieved in total over the NSDS period.
N/A. New indicator for 2013/14 financial year and was not used to measure performance for the 2012/13 financial year.
11 goals 1 goal10 goals under-
achieved
The under-achievement was mainly due a delay in the appointment of a service provider to assist the NSF in establishing itself as a fully-fledged public entity. The appointment has occurred shortly after year-end and the administrative targets will be achieved within the next two years as part of the NSF public entity project. The delay in the appointment of the service provider was mainly due to a delay in the DHET procurement processes.
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2012/13:
skills deVelOpMent (national skills development services)
strategic objectives
performance indicator
actual achievement 2011/2012
planned target
2012/2013
actual achieve-
ment2012/2013
deviation from
planned target
to actual achievement
for 2012/2013
comment on deviations
Provide funds to support projects that are national priorities in the NSDS, that advance the Human Resource Development Strategy (HRDS) of South Africa and that support the NSA in its work.
Amount earmarked to support projects of national priority
N/A. New indicator for 2012/13 financial year and was not used to measure performance for the 2011/12 financial year.
R 2,2 billion earmarked to support
projects that are of national priority
R8,833 billion R6,633 billion over-achievement
The NSF’s high level of performance in committing funds towards skills development projects of national priority during the past financial year lead to the over-achievement.
Number of projects supported by National Skills Fund
N/A. New indicator for 2012/13 financial year and was not used to measure performance for the 2011/12 financial year.
262 projects supported by National Skills Fund by outer
Year
157 projects 105 projects under-
achievement
The NSF funded projects of higher amounts and learner numbers. Hence the NSF over-achieved on the amounts earmarked target and the number of learners trained even though the number of projects as target was not achieved.
Number of learners trained in NSF projects
N/A. New indicator for 2012/13 financial year and was not used to measure performance for the 2011/12 financial year.
32 179 learners
trained in NSF projects
95 554 learners
63 375 over- achievement
The NSF’s high level of performance of disbursing funds towards skills development projects during the past financial year lead to the over-achievement.
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Strategy to overcome areas of under performance
The NSF will consider reviewing the relevance of the number of projects as an
indicator for performance as the indicator does not reflect the true performance of
the Fund. The NSF over-achieved on the number of learners benefitting from the
skills development projects and overachieved on the amount earmarked towards
skills development projects. This is due to the fact that NSF funded higher value
projects benefitting more learners per project.
The NSF will continue to implement its current commitments, which will effectively
result in the NSF utilising its accumulated reserves from prior NSDS periods and
therefore contribute towards achieving indicator 9 on Programme 1 – Skills
Development Funding.
The NSF has started with the transformation of the Fund from a directorate within
the Skills Development Branch in the Department of Higher Education and Training
into a fully-fledged public entity.
Changes to planned targets
No changes were made to planned targets during the 2014 financial year.
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Linking performance with budgets
programme name
2013/2014 2012/2013
budget actualexpenditure
(Over)/under expenditure budget actual
expenditure(Over)/
under expenditure
R’000 R’000 R’000 R’000 R’000 R’000
Skills Development 5 662 117 3 594 317 2 067 800 4 086 724 2 619 157 1 467 567
Total 5 662 117 3 594 317 2 067 800 4 086 724 2 619 157 1 467 567
5. SUMMARY OF FINANCIAL INFORMATION
5.1 reVenue cOllectiOn
sources of revenue
2013/2014 2012/2013
estimate actual amount collected
(Over)/under collection estimate actual
amount collected(Over)/
under collection
R’000 R’000 R’000 R’000 R’000 R’000
Skills Development Levies 2 407 603 2 416 365 (8 762) 2 280 000 2 244 379 35 621
Income from SETAs - 514 581 (514 581) - - -
Finance Income 398 982 356 893 42 089 378 182 393 215 (15 033)
Other Income - 34 171 (34 171) - - -
Total 2 806 585 3 322 010 (515 510) 2 658 182 2 637 594 20 588
The Skills Development Levies and interest received from investments were on par with the amounts estimated. The actual revenue received exceeded the budgeted revenue
by 21.7%, mainly due to income received from the SETAs earmarked towards the TVET college infrastructure development initiative that were not budgeted for in the current
year.
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5.2 prOgraMMe expenditure
programme name
2013/2014 2012/2013
budget actual expenditure
(Over)/under
expenditure
budget actual expenditure
(Over)/under
expenditure
R’000 R’000 R’000 R’000 R’000 R’000
Skills Development 5 662 117 3 594 317 2 067 800 4 086 724 2 619 158 1 467 567
NSF Operations 207 631 85 428 117 236 191 675 76 038 115 633
Total 5 869 748 3 679 745 2 190 003 4 278 399 2 695 196 1 583 204
The actual skills development grant disbursements were 36.5% below budget, which can mainly be attributed to the following:
1. Delays in the appointment of construction companies to start construction on the new TVET college campuses resulted in R705,729 million (20% of budget difference) not being disbursed in the current financial year, which will be rolled over to the next financial year;
2. There has been generally slow progress on the implementation of skills development projects with the various TVET colleges, resulting in R361,281 million (10% of budget difference) not being disbursed in the current financial year, which will be rolled over to the next financial year;
3. There has been slow progress in new commitments towards co-operatives, small enterprises, NGO’s & community training initiatives, mainly due to the NSF’s current high level of commitments; and
4. The payment of post-graduate bursaries of R132,916 million towards the National Research Foundation occurred subsequent to year-end and not as budgeted within the current financial year (4% of budget difference).
41 NATIONAL SKILLS FUND ANNUAL REPORT · 2014
PART C Governance
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1. INTRODUCTION
Corporate governance embodies processes and systems by which public entities
are directed, controlled and held to account. In addition to legislative requirements
based on a public entity’s enabling legislation, corporate governance with regard to
public entities is applied through the precepts of the Public Finance Management
Act (PFMA) and run in tandem with the principles contained in the King’s Report
on Corporate Governance.
Parliament, the Executive and the Accounting Authority of the public entity are
responsible for corporate governance.
2. PORTFOLIOCOMMITTEES
For the year under review, the National Skills Fund attended Portfolio Committee
engagements as part of the DHET team since it operated, in all material respects,
as a programme within the Department. This has meant that the committee did
not single out the NSF for specific areas of implementation other than what would
have been applicable to the entire Skills Development Branch under which the NSF
operated as a departmental programme.
3. EXECUTIVEAUTHORITY
As per the requirements of the PFMA, the National Skills Fund reported quarterly
to the Minister of Higher Education and Training as the executive authority of the
Fund. These quarterly reports entail the reporting on the NSF’s financial status,
compliance with the PFMA and Treasury Regulations and performance information.
4. THEACCOUNTINGAUTHORITY
intrOductiOn
The Director-General of Higher Education and Training is the accounting authority
of the National Skills Fund as stipulated in section 29(1) of the Skills Development
Act.
The Director General of Higher Education and Training is responsible for the control
of the Fund and ultimately accountable to the Minister and Parliament for the
Fund’s performance, strategic direction and money spent by the Fund. Within
the framework of the Director-General’s delegations of authority, the day-to-day
operations of the NSF are managed by the Executive Officer.
The NSF further reports through the governance structures set by the Department
of Higher Education and Training. These include the Skills Development Branch
Management Meetings, the Senior Management Meetings and the Ministerial
Management Meetings.
the rOle Of the accOunting authOrity is as fOllOws:
As accounting authority of the National Skills Fund, the Director-General of Higher
Education and Training has amongst others the following responsibilities:
1. To manage the Fund in accordance with the Public Finance Management Act;
2. Keep a proper record of all financial transactions, assets and liabilities of the Fund;
3. Prepare annual financial statements for the Fund in the prescribed form;
PART C Governance
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7. INTERNALAUDITANDAUDITCOMMITTEES
key actiVities and ObjectiVes Of internal audit
The objective of the internal audit function is to provide independent, objective
assurance and consulting services designed to add value and improve the NSF
operations. It helps the NSF accomplish its objectives by bringing a systematic,
disciplined approach to evaluate and improve the effectiveness of risk management,
control, and governance processes.
The main activities of Internal Audit are:
• Compile three year rolling strategic and annual audit plan
• Performing internal audit on the following systems:
– Risk management systems:
– Control systems
– Governance systems
• Report to management and the Audit Committee.
audit wOrk
The following activities as per audit plan were completed:
• Corporate Governance
• Compliance with laws and regulations
• Review of quarterly monitoring reports on projects
• Audit of funding windows
• Audit of commitments
4. Subject to the laws governing the public service, appoint the executive officer of the Fund, who will, upon such appointment, be in the employ of the public service;
5. To prescribe a limit for the amount that can be used in the administration of the Fund; and
6. To submit the annual financial statements to the National Skills Authority for information as soon as possible after they have been prepared.
cOMpOsitiOn Of the accOunting authOrity
The Director-General of Higher Education and Training, Mr Gwebinkundla Fellix
Qonde, is the accounting authority of the National Skills Fund as per section 29(1)
of the Skills Development Act.
reMuneratiOn Of accOunting authOrity
The Director-General of Higher Education and Training does not receive any
remuneration in his capacity as the accounting authority of the National Skills Fund.
5. RISKMANAGEMENT
The risk management activities of the NSF are covered by the NSF's risk assessment.
6. INTERNALCONTROL
Management has focused on improving internal control through its partnership
with the DHET in terms of the Memorandum of Agreement with the latter as well
as assistance from internal audit.
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8. COMPLIANCEWITHLAWSANDREGULATIONS
The NSF aims to embed compliance with laws and regulations throughout its
organisation as an integral part of all relevant processes.
To assist with compliance monitoring, the NSF uses the DHET’s Compliance Calendar
to ensure compliance with all required documentation in terms of the PFMA and
Treasury Regulations, within legislated deadlines.
The NSF also uses the National Treasury template to assess compliance with laws
and regulations on a quarterly basis as part of the quarterly reporting process to
the executive authority.
Action plans to address non-compliance are developed and the implementation
thereof monitored regularly.
The NSF also attends various other committee meetings to keep abreast of laws
and regulations that need to be complied with.
9. FRAUDANDCORRUPTION
The activities of the NSF are covered within the Good Governance Policy, which
includes fraud prevention, compiled by the Directorate: Internal Audit of the
Department of Higher Education and Training.
The NSF uses the whistle blowing policy of the DHET while the Memorandum of
Agreement for shared services with DHET exists.
No cases of fraud have become known to the NSF during the current financial year.
key actiVities and ObjectiVes Of the audit cOMMittee
The objective of the Audit Committee is to assist the Accounting Authority in
fulfilling oversight responsibilities regarding the financial reporting process, the
system of internal control and management of risks, the audit process, and the
monitoring of compliance with laws and regulations.
The main activities are:
• Consider the effectiveness of the internal control systems;
• Understand the scope of internal and external auditor’ review of internal control over financial reporting, and obtain reports on significant findings and recommendations together with management’s responses;
• Assess whether the Fund's assets have been properly safeguarded and used;
• Review the NSF risk profile on an annual basis and ensure management is effectively managing the risks;
• Review the effectiveness of the system for monitoring compliance with laws and regulations and the results of management’s investigation and follow-up (including disciplinary action) of any instances of non-compliance; and
• Review the adequacy, reliability and accuracy of the financial information provided to management and other users of such information and annually review the Annual Financial Statements and recommend its approval to the Director-General.
Attendance of audit committee meetings:
Name of member Number of meetings attended
Prof. DP van der Nest 5
Ms S Padayachy 4
Mr S Makhubu 5
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15.AUDITCOMMITTEEREPORT
We are pleased to present our report for the financial year ended 31 March 2014.
audit cOMMittee MeMbers and attendance:
The Audit Committee consists of the members listed hereunder and should meet
at least four times per annum as per its approved terms of reference. During the
current year five meetings were held.
Attendance of audit committee meetings:
Name of member Number of meetings attended
Prof. DP van der Nest 5
Ms S Padayachy 4
Mr S Makhubu 5
audit cOMMittee respOnsibility
The Audit Committee reports that it has complied with its responsibilities arising from Section 51(1)(a)(ii) of the Public Finance Management Act and Treasury Regulation 27.1. The Audit Committee also reports that it has adopted appropriate formal terms of reference as its committee charter, has conducted its affairs in compliance with this charter and has discharged all its responsibilities as contained therein.
the effectiVeness Of internal cOntrOl
The system of internal control is designed to provide cost-effective assurance that assets are safeguarded and that liabilities and working capital are effectively managed. In line with the PFMA requirements, internal audit and the Auditor-General South Africa (AGSA) provide the Audit Committee and management with assurance that the internal controls are adequate and effective. This is achieved by
10.MINIMISINGCONFLICTOFINTEREST
Through the Memorandum of Agreement with the Department of Higher Education
and Training for shared services, the NSF has permission from the Department
of Higher Education and Training to use its bid committees, which follow the
Department’s supply chain management policy.
11.CODEOFCONDUCT
The NSF employees are bound by the Code of Conduct of the DHET as all NSF
employees are currently employed by the Department of Higher Education and
Training.
12.HEALTHSAFETYANDENVIRONMENTALISSUES
The NSF is situated in the offices of the DHET. The building is being upgraded
to comply with the necessary Health Safety and Environmental issues. One major
concern is limited parking and unfriendly access to parking.
13.SOCIALRESPONSIBILITY
Not applicable to the NSF for the 2014 financial year.
14.MATERIALITYANDSIGNIFICANCEFRAMEWORK
The NSF prepared its Materiality and Significance Framework which has been
approved by the Director-General of Higher Education and Training as the
Accounting Authority of the NSF and submitted to the Minister for concurrence.
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• reviewed the AGSA’s management report and management’s response
thereto;
• reviewed changes in accounting policies and practices;
• reviewed the NSF compliance with legal and regulatory provisions;
• reviewed significant adjustments resulting from the audit; and
• reviewed information on predetermined objectives to be included in the
annual report.
The Audit Committee concurs with, and accepts the AGSA’s conclusions on the
annual financial statements, and is of the opinion that the audited annual financial
statements be accepted and read together with the report of the AGSA. There
were material misstatements identified during the audit of the financial statements,
these were adjusted by management.
internal audit
The Audit Committee is satisfied that the internal audit function is operating
effectively and that it has addressed the risks pertinent to the National Skills Fund
in its audits. Additional capacity was obtained for internal audit and they were able
to complete all the audits approved in the coverage plan by the Audit Committee.
auditOr-general sOuth africa
The Audit Committee has met with the Auditor-General South Africa to ensure that
there are no unresolved issues.
means of evaluating the effectiveness of the management of identified risks, as
well as the identification of corrective actions and suggested enhancements to the
controls and processes.
The system of internal control was not entirely effective during the year under
review, as several instances of non-compliance with internal controls were reported
by both Internal Audit and the AGSA. It is a concern for the Audit Committee that
a number of the matters raised by the AGSA are repeat findings from one or more
previous years. The Audit Committee will continue to monitor progress against the
corrective action plans implemented by management.
The system of control over the generation, collation and reporting of performance
information requires improvement. This continues to be an area of concern to the
Audit Committee.
The lack of an integrated financial management system for NSF has resulted in
ineffective control over financial reporting.
the quality Of in-year ManageMent and MOnthly/quarterly repOrts subMitted in terMs Of the pfMa
The Audit Committee is satisfied with the content and quality of monthly and
quarterly reports prepared and issued by the Accounting Authority of the National
Skills Fund during the year under review.
The reporting of performance information against set objectives continues to be a
cause for concern.
eValuatiOn Of financial stateMents
The Audit Committee has:
• reviewed and discussed the audited financial statements to be included in
the annual report, with the AGSA and the Accounting Officer;
47 NATIONAL SKILLS FUND ANNUAL REPORT · 2014
cOnclusiOn
The Audit Committee congratulates the National Skills Fund for achieving an
unqualified audit report for the year under review. Our appreciation is also extended
to management, the Chief Financial Officer and staff for their efforts regarding the
financial statements for the year and to the team from the AGSA for the value they
continue to add to the NSF. The Audit Committee will monitor the improvements
made by management in addressing control deficiencies identified by external and
internal audit.
PROFD.P.VANDERNESTCHAIRPERSONOFTHEAUDITCOMMITTEE31 July 2014
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49 NATIONAL SKILLS FUND ANNUAL REPORT · 2014
PART D Human Resource Management
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1. INTRODUCTION
The Nationals Skills Fund has a current funded staff establishment of 144 posts of which 87 posts are vacant. All employees of the NSF are currently employed by the Department of Higher Education and Training within the public service as the NSF operated as a programme under the Department prior to its listing as a public entity on 12 October 2012. The NSF refunds the Department for the employee costs incurred by the Department on behalf of the NSF.
The key HR priorities to be addressed during the next financial year are the following:
Addressing the current capacity constraints in the Fund, with specific reference to the following:
• capacity constraints experienced in relation to the initiation, support, monitoring and evaluation and financial management of projects;
• capacity constraints experienced with regards to financial management of the Fund; and
• capacity constraints experienced with regards to support services required with the establishment of the NSF as a fully-fledged public entity.
PART D Human Resource Management
These capacity constraints will be prioritised within the next two financial years.
The NSF is embarking on a process to establish itself as a fully-fledged public entity, whilst at the same time improving its efficiency and effectiveness.
All employees are required to sign performance agreements with their immediate supervisors, which is assessed quarterly and annually. The NSF’s performance management framework will be reviewed as part of improving the Fund’s efficiency during the establishment of the Fund as a fully-fledged public entity.
2. HUMANRESOURCEOVERSIGHTSTATISTICSPersonnel Cost by programme
ProgrammeTotal Expenditure for the
entity (R’000)Personnel Expenditure
(R’000)
Personnel Expenditure. as a % of total
expenditure (R’000)Number of employees
Average personnel cost per employee (R’000)
Skills Development 3 233 871 24 307 0.75% 58 419
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Personnel cost by salary band
Level Personnel Expenditure (R’000)% of Personnel Expenditure to total personnel cost (R’000)
Number of employeesAverage personnel cost per
employee (R’000)Top Management 4 422 18.2% 5 884Senior Management 8 055 33,2% 12 671Skilled 11 830 48.6% 41 289Semi-skilled 0 0% 0 0TOTAL 24 307 100% 58 419
Performance Rewards
Programme Performance rewards (R’000) Personnel Expenditure (R’000)% of performance rewards to total
personnel cost (R’000)Top Management 0 4 422 0%Senior Management 180 8 055 2.2%Skilled 236 11 830 2.0%Semi-skilled 0 0 0%TOTAL 593 24 307 2.4%
Training Costs
Directorate/Business Unit Personnel Expenditure (R’000)Training Expenditure
(R’000)Training Expenditure as a % of
Personnel Cost
NSF staff establishment 24 307 103 0.4%
Employment and vacancies
Programme2012/2013
Number of Employees2013/2014 Approved
Posts2013/2014
Number of Employees
2013/2014
Vacancies% of vacancies
Skills Development 42 144 58 86 60%
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Programme
20
12
/2013
Num
ber
of
Empl
oyee
s
20
13/2
014
App
rove
d Po
sts
20
13
/2014
Num
ber
of
Empl
oyee
s
20
13/2
014
Vaca
ncie
s
% of vacancies
Top Management
4 6 5 1 17%
Senior Management
8 21 12 9 43%
Professional qualified
0 0 0 0 0%
Skilled 30 117 41 76 65%
Semi-skilled 0 0 0 0 0%
Unskilled 0 0 0 0 0%
TOTAL 42 144 58 86 60%
Employment changes
Salary BandEmployment at beginning
of periodAppointments Terminations
Employment at end of the
periodTop Management
5 0 0 5
Senior Management
12 0 0 12
Professional qualified
0 0 0 0
Skilled 40 2 1 41
Semi-skilled 0 0 0 0
Unskilled 0 0 0 0
Total 57 2 1 58
Reasons for staff leaving
Reason Number % of total number of staff leaving
Death 0 0%
Resignation 0 0%
Dismissal 0 0%
Retirement 0 0%
Ill health 0 0%
Expiry of contract 0 0%
Other 1 1.7%
Total 0 0%
No staff left during the past financial year.
Labour Relations: Misconduct and disciplinary action
Nature of disciplinary Action Number
Verbal Warning 0
Written Warning 0
Final Written warning 0
Dismissal 0
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Equity Target and Employment Equity Status
Levels
MALE
African Coloured Indian White
Current Current Current Current
Top Management 2 0 0 2
Senior Management 4 2 0 0
Professional qualified 0 0 0 0
Skilled 17 0 0 1
Semi-skilled 0 0 0 0
Unskilled 0 0 0 0
TOTAL 23 2 0 3
Levels
FEMALE
African Coloured Indian White
Current Current Current Current
Top Management 1 0 0 0
Senior Management 5 0 0 1
Professional qualified 0 0 0 0
Skilled 16 0 0 7
Semi-skilled 0 0 0 0
Unskilled 0 0 0 0
TOTAL 22 0 0 8
Levels
Disabled Staff
Male Female
Current Current
Top Management 0 0
Senior Management 0 0
Professional qualified 0 0
Skilled 0 1
Semi-skilled 0 0
Unskilled 0 0
TOTAL 0 1
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55 NATIONAL SKILLS FUND ANNUAL REPORT · 2014
PART E Financial Information
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1. STATEMENTOFRESPONSIBILITY
stateMent Of respOnsibility fOr the annual financial stateMents fOr the year ended 31 March 2014
The Accounting Authority is responsible for the preparation of the public entity’s annual financial statements and for the judgements made in this information.
The Accounting Authority is responsible for establishing and implementing a system of internal control designed to provide reasonable assurance as to the integrity and reliability of the annual financial statements.
In my opinion, the financial statements fairly reflect the operations of the public entity for the financial year ended 31 March 2014.
The external auditors are engaged to express an independent opinion on the AFS of the public entity.
The Annual Financial Statements of the public entity set out on page 70 to page 135 have been approved.
GWEBINKUNDLAFELLIXQONDEDIRECTOR-GENERALOFHIGHEREDUCATIONANDTRAINING
MVUYISIMACIKAMAEXECUTIVEOFFICERNATIONALSKILLSFUND
31 July 2014
2. REPORTOFTHEEXECUTIVEOFFICER
general financial reView Of the public entity
This report marks the third year of implementation under the new NSDS III. As with
the previous two years under NSDS III, the Fund continued to increase its grants
disbursements towards skills development projects of national priority as identified
in the NSDS III and skills development projects as identified by the Director-General
as priority towards achieving the Skills Development Act.
With the move of the NSF to the DHET in 2010, the deliberate interventions of
the DHET towards improving the performance of the NSF can be clearly noted in
the NSF’s consistent increase in skills development grants disbursements, as illustrated in the graph below.
Years
NSDS I NSDS II NSDS III NSDS IV
Current Position (2013/14): Grants disbursements of R3,594 billion exceeding total revenue of R3,322 billion by R0,272 billion.
Skills Development Grants vs Revenue R'000
Skills Development Grants Revenue
R'0
00
1,000,000 -
2,000,000 3,000,000 4,000,000 5,000,000 6,000,000
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
2016/17
2017/18
2018/19
PART E Financial Information
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1,000,000 -
2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 9,000,000
R'0
00
Years
NSDS I NSDS II NSDS III NSDS IV
Decline in Accumulated Surplus
2004
/05
2005
/06
2006
/07
2007
/08
2008
/09
2009
/10
2010
/11
2011
/12
2012
/13
2013
/14
2014
/15
2015
/16
2016
/17
2017
/18
2018
/19
Current Position (2013/14): Grants disbursements of R3,594 billion exceeding total revenue of R3,322 billion by R0,272 billion,
resulting in the decline in accumulated surplus.
The Funds improved capability to manage higher levels of grants disbursements
has laid a solid foundation for continued improvement in skills development funding under the next NSDS IV.
The NSF’s R3,1 billion grants disbursements towards skills
development projects during the past financial and remaining R11,3 billion in contractual commitments can be attributed to the following:
1. R1,776 BILLION DISBURSED TOWARDS BURSARIES, WITH A R1,715 BILLION COMMITMENT REMAINING
The NSF has disbursed R1,776 billion towards undergraduate and postgraduate bursaries as a priority identified by the Director-General in support of the Higher Education sectors. This support has benefitted 29 136 undergraduate and 1 026 postgraduate students respectively. As at 31 March 2014, R1,715 billion remains committed towards bursaries until the end of the NSDS III.
The NSF has a R1,399 billion commitment towards funding undergraduate
bursaries via the National Student Financial Aid Scheme (NSFAS) over the remainder
As indicated in the graph, The NSF’s annual grants disbursement towards skills
development has been increasing consistently year-on-year since the launch of the
NSDS III:
1. 1st Year of NSDS III (2011/12 year): Grants disbursements increased with 131% from R564 million to R1,3 billion; and
2. 2nd Year of NSDS III (2012/13): Grants disbursements increased with 97% from R1,3 billion to R2,6 billion.
3. 3rd Year of NSDS III (2013/14): Grants disbursements increased with 19% from R2,6 billion to R3,1 billion.
These increases within the respective NSDS III years represent a 430% increase in
the average grants disbursement rate under the previous NSDS II and are a clear
indication that the NSF’s performance under NSDS III has increased significantly.
Spending trends of the Fund, including new and proposed activities
It is expected that the NSF will maintain its systematic increase in grants
disbursements over the next two years until the end of the NSDS III period
(31 March 2016) as the NSF meets its current contractual commitments of R11,3 billion towards skills development. As these current commitments become due, it is expected that
the NSF’s accumulated surpluses will gradually decline towards the end of the NSDS
III period, as illustrated in the graph below:
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3. R457 MILLION DISBURSED TOWARDS SKILLS INFRASTRUCTURE DEVELOPMENT OF NATIONAL PRIORITY, WITH A R3,061 BILLION COMMITMENT REMAINING
TheNSF’sprioritiestoaddressskillsinfrastructureisintendedtocontributetothebuildingandrevitalisationof theskills infrastructure thatwill lead toexpandedaccessanddeliveryofskillsfundedthroughthelevysystem.Thefollowingareashavebeenprioritised:
• Recapitalisationofpublicdeliveryinfrastructure;
• CommunityEducationCentres;
• SkillsDevelopmentInstitutes;and
• State-ownedenterprises.
During the2014financialyear, theNSFdisbursedR457million towardsskillsinfrastructuredevelopmentasnationalpriorityofgovernment.
Asat31March2014,R3,061billionremainscommittedtowardsthefollowingkeyskillsinfrastructuredevelopmentprojectsofnationalpriority:
• University of Pretoria
R106 million was disbursed towards the University of Pretoria for expanding
the University’s medical and veterinary facilities, with a R344 million
commitment remaining towards completion of the skills infrastructure
development project. The expansions of the University of Pretoria’s medical
and veterinary facilities are key public delivery infrastructure that will increase
the number of medical doctors and veterinaries trained annually. Both
skills are scarce and critical skills for South Africa to address the demands
posed by the National Health Insurance scheme to make health universally
accessible to every citizen of the country and to address an urgent need for
food security and general animal health.
of the NSDS III period. This will result in an annual contribution of approximately R466 million by the NSF towards the NSFAS. The NSFAS has financially assisted many financially needy, but eligible students to obtain their qualification in the past.
The NSF has further committed R310 million towards funding postgraduate bursaries via the National Research Foundation (NRF) over the remainder of the NSDS III period. This will result in an annual contribution of approximately R103,3 million by the NSF towards the NRF. The increase in PhD’s will contribute towards the achieving the objectives as outlined in the National Development Plan, the New Growth Path, the Industrial Policy Action Plan and the Department of Science and Technology’s Ten-Year Innovation Plan.
2. R480 MILLION DISBURSED TOWARDS TVET COLLEGE SECTOR EXPANSION, WITH R1,702 BILLION COMMITMENT REMAINING
The NSF has disbursed R480 million towards the TVET colleges for expansion of their current student intake and building of the colleges’ capacity as a national priority identified in the NSDS III. This support has benefitted an additional 25 850 learners within the TVET college sector. As at 31 March 2014, R1,702 billion remains committed towards expansion of the TVET college sector until the end of the NSDS III.
Funding towards the TVET colleges is aimed at expanding the colleges’ student intake into technical and vocational education and training programmes (e.g. NCV and Report 191 programmes), as well as new skills development interventions aimed at work integrated learning such as learnerships, internships and work integrated skills programmes. The increased learner intake into the TVET college sector contributes towards increasing the number of artisans and technicians developed annually.
This is in line with the National Development Plan and the National Skills Development Strategy (NSDS III) aimed at increasing the number of artisans and technicians developed annually and promoting growth within the public TVET college system that is responsive to sector, local, regional and national skills needs
and priorities.
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energy production and gradually reduce the country’s carbon footprint. The
Department has seen it fit to establish this dedicated education and training
capacity for the country to produce high and middle level skills in the area
of renewable energy, which is currently an area of growth within the South
African economy.
The renewable energy skills infrastructure development project at the Cape
Peninsula University of Technology has begun during the current financial
year and is well on course according to plan for completion in the 2016/17
financial year.
• 12 new TvET College Campuses and refurbishment of 4 existing TvET College Campuses
R223,073 million disbursed towards planning the development and
refurbishment of the 16 TVET college campuses (12 new and 4 existing
campuses), with a R2,438 billion commitment remaining. The TVET college
campuses are developed in geographical areas close to communities in high
demand for post school education facilities, based on the density of the
population within each identified area and the unavailability of sufficient
school education and training facilities within the region. It is vital to provide
these South Africans communities from these geographical locations with
the opportunity towards acquiring a skill, relevant to the workplace, by
establishing sufficient campuses closer to their communities. The 2011
census indicates that there is over 3 million out of school youth of ages
between 15 to 25, who are neither in education, employment nor any
kind of training and with less than a grade 12 qualification. The state and
its respective institutions have the ultimate responsibility, as a last line of
defence, to ensure that education and training opportunities are made
available to overcome the skills shortage and high unemployment in the
country.
The physical construction of the new 12 TVET college campuses is due to
begin within the 2014/2015 financial year.
These skills infrastructure development projects at the University of Pretoria
have already begun in the 2013 financial year and are well on course
according to plan for finalisation in the 2015/16 financial year.
• University of johannesburg
R96 million was disbursed towards the University of Johannesburg and
R159 million remains committed towards establishing work-integrated
learning facilities for engineering students, which includes a training
workshop, design centre and industrialisation centre. These facilities, as key
public delivery infrastructure, are critical to improve the production of quality
engineers for the entire university sector. Engineers are a scarce and critical
skills for South Africa, especially taking cognisance of South Africa’s ratio of
engineers to citizens in comparison with other BRICS countries. This shortage
of engineers can be partly contributed towards the lack of work integrated
learning for a large number of engineering graduates as a result of the lack
of workplace opportunities. The work-integrated learning facilities at the
University of Johannesburg aim to overcome this challenge. These facilities,
in the form of a production environment, will be accessible to all engineering
students in need of work integrated learning, irrespective of the university
or origin.
This skills infrastructure development project at the University of
Johannesburg have already begun in the 2013 financial year and is well on
course according to plan for finalisation in the 2015/16 financial year.
• Cape Peninsula University of Technology
R8,492 million was disbursed towards the Cape Peninsula University
of Technology and R101,88 million remains committed towards the
establishment of renewable energy training facilities. These facilities, as key
public delivery infrastructure, are critical in the production of a set of new
skills required for the green economy. This initiative, being the first of its kind
in the country, seeks to respond to the country’s adopted strategy to promote
renewable energy production in order to supplement the current fossil fuel
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• Harry Oppenheimer Diamond Training School Project, with 31 students enrolled on learnerships to obtain practical skills on top and bottom polishing of diamonds.
5. R65 MILLION DISBURSED TOWARDS THE IPAP, WITH R301 MILLION COMMITMENT REMAINING
The NSF has disbursed R65 million towards skills development projects contributing towards achieving the objectives of the Industrial Policy Action Plan (IPAP) as a national priority identified in the NSDS III. As at 31 March 2014, R301 million remains committed towards IPAP skills development projects.
Amongst the various projects contributing towards achieving the IPAP, is the DTI
Tool and Die Initiative, aimed at training 1 610 learners as Tool and Die makers
within the manufacturing sector, who are considered pivotal to the manufacturing
industry.
6. R103 MILLION DISBURSED TOWARDS RURAL DEVELOPMENT, WITH R605 MILLION COMMITMENT REMAINING
The NSF has disbursed R103 million towards rural skills development projects as a national priority identified in the NSDS III, with R605 million remaining committed towards the rural skills development projects.
These commitments includes amongst others the following:
• R194 million committed towards the Expanded Public Works Programme (EPWP Programme) aimed at employing and skilling unemployed people for EPWP projects until the end of the NSDS III;
• R161 million committed towards the NARYSEC Project, aimed at skills development amongst rural youth on a variety of skills development programmes;
• R79 million committed towards the Sisonke Economic Development Agency for the provision of skills development programmes to benefit the previously
4. R304 MILLION DISBURSED TOWARDS THE NEW GROWTH PATH, WITH R488 MILLION COMMITMENT REMAINING
The NSF has disbursed R304 million towards skills development projects contributing towards achieving the objectives of the New Growth Path as a national priority identified in the NSDS III. As at 31 March 2014, R488 million remains committed towards the New Growth Path skills development projects.
Amongst the various projects contributing towards achieving the New Growth
Path, are the following:
• TRANSNET Rail Engineering Project, aimed at training 1 000 artisans to work on the railways of South Africa;
• SAMSA Project, aimed at developing 420 learners in a variety of maritime skills programmes, which includes cadetships, maritime engineers and workplace training programmes. The project also aims to increase the capacity of the TVET college sector to be more responsive to the maritime industry. The objective of the project is to increase South Africa’s maritime skills capacity and thereby increasing South Africa’s participation in the global seafarer job market.
• Agriseta & Commissioner for Land Rights Restitution Project, aimed at providing skills development to 4 750 learners linked to land restitution, which includes amongst others farm management, technical farming skills, governance & leadership;
• Vukani Aviation Project, aimed at training 100 learners on the national aviation cadet programme;
• SAICA Municipalities Project, aimed at providing financial skills development to 1 000 municipal finance staff;
• Lepelle Northern Water Project, aimed at developing scarce skills in the water sector in Limpopo, which includes water & waste treatment reticulation, plumbing, electrical, mechanical and internship programmes; and
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• Developing a skills plan for the Strategic Integrated Projects of the National Infrastructure Plan
• Prioritisation model for the development of artisan trades
Through funding the NSF contributed towards the development of a
prioritisation model for the development of artisan trades, involving the
identification of priority artisan trades for development to ensure that the
current needs in the country are met. This has led to the creation of the call
centre at the Ekurhuleni East TVET College, which manages this process for
the country.
8. R107 MILLION DISBURSED TOWARDS STRENGTHENING THE TVET COLLEGE SECTOR
The NSF has disbursed R92 million towards various key interventions and initiatives
aimed at strengthening the TVET college sector, with a remaining commitment of
R49 million as at 31 March 2014.
Amongst these key interventions and initiatives funded are the following:
• TVET college improvement projects for all Limpopo TVET colleges and all Eastern Cape TVET colleges. The objectives of the improvement projects are to:
a. strengthen or establish effective management and governance;
b. support colleges to develop structured and relevant policies, strategies and procedures;
c. improve teaching and learning capacity in the colleges;
d. improve capacity to support students in colleges;
e. develop and implement clear monitoring, evaluation and reporting framework and capacity in colleges; and
f. develop a capitalization plan for colleges and the capacity to manage their implementation.
disadvantaged communities of the Sisonke District Municipality that will alleviate poverty, reduce unemployment and increase job creation.
7. R25 MILLION DISBURSED TOWARDS ESTABLISHING A CREDIBLE SKILLS PLANNING MECHANISM WITHIN AN INTEGRATED POST SCHOOL EDUCATION SYSTEM
The NSF has disbursed R25 million towards various key academia, research and
broader skills system development projects aimed at establishing a credible skills
planning mechanism within an integrated post school education system, with a
remaining commitment of R117 million as at 31 March 2014.
The investments into the various key projects have taken the process of developing
a credible skills mechanism a long way.
Amongst these key projects funded are the following:
• Labour Market Intelligence System
The NSF funded the development of the Labour Market Intelligence System.
This system will be able to provide strategic demand side information for
skills planning. The system is developed in partnership with the HSRC, Wits
EPU and ADRS.
• Integrated Higher Education and Training Management Information System
The NSF contributed funding to the development of an integrated Higher
Education and Training Management Information System (HETMIS). This
entails developing HETMIS policy, standards and requirements for the
collection, processing and dissemination of data. The aim of this project to
is to replicate the unit record system of the Higher Education Management
Information for Universities, for the Colleges and SETA sectors. This system
will be able to provide detailed information for the planning and provisioning
(supply) of education and training.
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• The establishment of a central application service.
• The establishment of good governance and administration at identified universities.
11. SUPPORTING THE HUMAN RESOURCE DEVELOPMENT STRATEGY OF SOUTH AFRICA
The NSF supports the priorities agreed by the Human Resource Development Council of South Africa (HRDCSA), which oversees the implementation of the Human Resource Development Strategy for South Africa for 2030. The priorities agreed by the Council relate to the following:
• To strengthen and support the expansion of TVET college access;
• The production of intermediate skills (in particular artisans) and professionals;
• The production of academics and stronger industry-university partnerships in research and development;
• Strengthening foundational learning; and
• Address worker education.
The following work of the Artisan and Technician Development Technical Task Team
was funded by the NSF and was recommended to and approved by the HRDCSA:
• Single uniform funding and administration model for artisan learners
• Recognition of Prior Learning model
• Prioritisation model for the development of artisan trades
12. R18 MILLION DISBURSED TOWARDS SUPPORTING THE WORK OF THE NATIONAL SKILLS AUTHORITY
The successful delivery of the NSDS III relies on the role played by social partners in the delivery of skills. In consultation with the NSA, the Minister has identified a number of priorities that are to support the NSA in its advisory
• The provision of Chartered Accountants (SA) as support CFO’s for all colleges through SAICA to assist in implementing stability in sound financial management at the TVET colleges.
9. R2 MILLION DISBURSED TOWARDS STRENGTHENING THE ARTISAN DEVELOPMENT SYSTEM
The NSF has disbursed R2 million towards key interventions aimed at strengthening
the artisan development system, with a remaining commitment of R110 million as
at 31 March 2014.
Amongst these key interventions funded are the following:
• The implementation of a single national artisan development strategy and system based on scientific artisan development data analysis implemented through an integrated national artisan development management process. This intervention is implemented through the National Artisan Moderation Body (NAMB).
• Developing a single uniform funding and administration model for artisan learners.
• Recognition of prior learning model in particular for artisan aides.
10. R17 MILLION DISBURSED TOWARDS STRENGTHENING THE UNIVERSITY SECTOR
The NSF has disbursed R17 million towards key interventions and initiatives aimed
at strengthening the university sector, with a remaining commitment of R41 million
as at 31 March 2014.
Amongst these key interventions and initiatives funded are the following:
• The development of academic scholarships amongst previously disadvantaged graduates to attain equity in the academic establishment of teaching, research and publications. The initiative is implemented in partnership with the University of KwaZulu Natal.
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• R9 million disbursed towards worker education, with a R22 million commitment remaining;
• R14 million disbursed towards skills system capacity building, with a R60 million commitment remaining; and
• R17 million disbursed towards the Trainee Lay-off Scheme, with a R15 million commitment remaining towards the Scheme.
A key health project funded by the NSF is a R70 million commitment towards the
Nelson Mandela Children’s Hospital Trust, aimed at training paediatric nurses and
doctors for the new Nelson Mandela Children’s Hospital.
capacity cOnstraints and challenges facing the fund
The increase in the NSF’s commitments and number of projects requires an increase
in the NSF’s project support, project financial management and project monitoring
and evaluation capacity. The capacity constraints of the NSF were clearly identified
as an area for improvement within the NSDS III.
As a result of the NSF’s listing as a Schedule 3A public entity, the NSF needs to
establish the required core and support structures, which includes establishing
capacity within the following areas: research and analysis, finance, human resource
management, supply chain management, legal services, compliance and risk
management and ICT management.
The support services are currently provided by the Department of Higher Education
and Training.
The establishment of these core and support structures are vital towards ensuring
the NSF operates optimally at the highest levels of efficiency and effectiveness.
work and build the capacity of the social partners in the implementation of the NSDS III. These are:
• Review the skills development legislative framework to support the integration of education and training with the national priorities of government (inclusive of the NSF framework);
• Develop frameworks on the mobilisation of business, government, community and labour to take full ownership of the NSDS III;
• Post school education and training that encourages society to support and build a developmental state focussing on rural development and state owned entities;
• Strengthen the monitoring and evaluation functions particularly on the NSDS III performance and governance;
• Research, development and innovation to promote beneficiation andbursariesenterprisedevelopmentopportunities;and
• Revitalisationoftheacademicposition.
The NSF disbursed R18 million towards supporting the work of the National Skills
Authority during the 2014 financial year.
13. R317 MILLION DISBURSED TOWARDS OTHER NATIONAL PRIORITIES, WITH R1,7 BILLION COMMITMENT REMAINING
During the 2014 financial year, the NSF disbursed and committed funds towards
the following national priorities as identified in the NSDS III:
• R56 million disbursed towards Justice and Crime Prevention, with a R1,136 million commitment remaining;
• R131 million disbursed towards Co-operatives, NGO’s and small enterprises, with a R274 million commitment remaining;
• R8 million disbursed towards education and health, with a R85 million commitment remaining;
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• Challenges experienced and how resolved
With the listing of the NSF as a Schedule 3A public entity, it is envisaged
that the NSF will establish its own Supply Chain Management unit under the
office of the NSF’s Chief Financial Officer.
audit repOrt Matters in the preViOus year and hOw it wOuld be addressed
Inaccurate and untimely financial and performance reporting resulting in non-
compliance with applicable laws and regulations has been identified as an audit
report matter to be addressed by the NSF.
The root causes resulting in inaccurate and untimely financial reporting can be
attributed towards insufficient financial capacity within the Fund and shortcomings
in the current financial system. Both of these root causes are currently being
addressed through appointing sufficient financial capacity within the Fund and
upgrading the NSF’s financial systems from cash base to accrual base.
The root cause resulting in inaccurate and untimely performance information
reporting can be attributed towards insufficient projects monitoring capacity
within the Fund, shortcomings in the current performance information system and
overreliance on third parties to provide the performance information accurately
and timely. These root causes are currently being addressed with the establishment
of sufficient internal monitoring capacity and improved monitoring systems and
practices within the Fund.
OutlOOk fOr the future tO address financial challenges
The NSF has current commitments of R11,3 billion towards skills
development projects of national priority as at the end of the 2014 financial year.
Most of these commitments will become due over the remainder of the NSDS III
period until 31 March 2016.
discOntinued actiVities/actiVities tO be discOntinued
Projects under NSDS II was either aligned to NSDS III for continued funding or
closed-off and discontinued during the 2013 financial year.
requests fOr rOll OVer Of funds
The NSF applied for the retention of the net surplus for the 2014 financial year
(R8,462 billion) in terms of section 53(3) of the PFMA from National Treasury during
the first quarter of the 2015 financial year. This approval has not yet been granted
by National Treasury.
The request was based on the following reasons:
1. the NSF’s current effective utilisation of skills development resources benefitting over 77 000 learners;
2. The NSF’s current contractual commitments;
3. To prevent the severe disruption of the +- 77 000 learners currently receiving on-going training, as well as legal backlash for cancelling projects;
4. The increased capacity requirements of the NSF.
supply chain ManageMent
• Unsolicited bid proposals
No unsolicited bid proposals were concluded during the year.
• SCM processes and systems in place
Due to the NSF forming part of the DHET as a programme under the Skills
Development Branch, the NSF has been fully reliant on DHET's SCM policies,
processes and systems. The Memorandum of Agreement was engaged
with DHET to assist NSF with SCM functions including utilisation of Bid
committees.
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Other pfMa requireMents
The NSF reports through the structures and processes of the Department of Higher
Education and Training in so far as compliance with the PFMA is concerned, namely:
• Basis of Accounting – The NSF prepared its financial statements for 2014 financial year on an accrual basis as required by the PFMA for Schedule 3A public entities.
• Quarterly reporting – The quarterly reporting for the 2013/14 financial year formed part of the reporting process on performance against the NSF’s strategic plan and annual performance plan. Furthermore the NSF submits quarterly reports on its financial and performance information to National Treasury in the prescribed format and timeframes.
• Actual revenue and expenditure projections – The relevant information that forms part of the MTEF & ENE processes are submitted to National Treasury via the processes of the Department of Higher Education and Training in the prescribed format and timeframes.
• Annual Financial Statements – These statements are compiled by the National Skills Fund and have been submitted timeously for audit purposes.
• Annual report – Information with regard to the NSF are covered within the Annual Report of the National Skills Fund.
• Completeness of revenue - Skills Development Levy (SDL) transfers are recognised when it is probable that future economic benefit can be measured reliably. This occurs when the Department of Higher Education and Training (DHET) either makes an allocation or payment, whichever comes first, to the SETAs and NSF, as required by Section 6(5) of the Skills Development Levies Act, 1999 (Act No.9 of 1999). The SDL Transfer is measured at the fair value of the consideration received.
These commitments will be funded through the NSF’s current surpluses of R8,461 billion and through the NSF’s future expected income from skills
development levies and interest received on investments.
The NSF’s levy increased with 11.6% from the 2013 to the 2014 financial year. It
is expected that the future skills development levies will increase with a minimum
of inflation currently at 6% per annum until the end of the NSDS III period, namely
31 March 2016. Thus, a total of R5,593 billion in skills development levy income is expected for the remainder of the NSDS III period.
Through improved cash flow management, the NSF has increased its ability to
operate at optimal levels of grants disbursement efficiency, whilst ensuring that the
Fund is able to meet its skills development commitments as it becomes due.
eVents after the repOrting date
There are no events after reporting date.
ecOnOMic Viability
As per the Regulation approved by the Executive Authority, the NSF may utilise
10% of its income towards administration of the Fund. This allocation towards
administrative costs is sufficient for the NSF to fund its operations.
financial ManageMent
The NSF’s financial management is sound and compliant to PFMA and National
Treasury regulations. The financial statements have been prepared in accordance
with the effective Standards of Generally Recognised Accounting Practices (GRAP)
including any interpretations, guidelines and directives issued by the Accounting
Standards Board.
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3. REPORTOFTHEAUDITOR-GENERALTOPARLIAMENTONTHENATIONALSKILLSFUND
repOrt On the financial stateMents
Introduction
1. I have audited the financial statements of the National Skills Fund (NSF) set out on pages 70 to 135, which comprise the statement of financial position as at 31 March 2014, statement of financial performance, statement of changes in net assets and cash flow statement for the year then ended, as well as the notes, comprising a summary of significant accounting policies and other explanatory information.
Accounting authority’s responsibility for the financial statements
2. The accounting authority is responsible for the preparation and fair presentation of these financial statements in accordance with the South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) and the requirements of the Public Finance Management Act of South Africa, 1999 (Act No. 1 of 1999) (PFMA) and the Skills Development Act of South Africa, 1998 (Act No. 97 of 1998) (SDA), and for such internal control as the accounting authority determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor-general’s responsibility
3. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA), the general notice issued in terms thereof and International Standards on Auditing. Those standards require that I comply with ethical requirements, and plan and perform the audit to obtain reasonable assurance about whether the financial statements
asset ManageMent
The NSF’s assets are currently managed by the Department of Higher Education and
Training as the NSF operated as a sub-programme under the Department.
irregular expenditure
The NSF did not incur any irregular expenditure during the 2013/14 financial year.
scOpa resOlutiOns
There were no new SCOPA resolutions affecting the fund during the reporting
period.
exeMptiOns and deViatiOns receiVed frOM natiOnal treasury
There were no exceptions and deviation received from National Treasury.
apprOVal
The Annual Financial Statements have been approved by the Accounting Authority.
MVUYISIMACIKAMA
EXECUTIVEOFFICER
NATIONALSKILLSFUND
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Restatement of corresponding figures
8. As disclosed in note 27 to the financial statements, the corresponding figures for 31 March 2013 have been restated as a result of errors discovered during the year ended 31 March 2014 in the financial statements of the NSF at, and for the year ended, 31 March 2013.
repOrt On Other legal and regulatOry requireMents
9. In accordance with the PAA and the general notice issued in terms thereof, I report the following findings on the reported performance information against predetermined objectives for selected programmes presented in the annual performance report, non-compliance with legislation as well as internal control. The objective of my tests was to identify reportable findings as described under each subheading but not to gather evidence to express assurance on these matters. Accordingly, I do not express an opinion or conclusion on these matters.
Predetermined objectives
10. I performed procedures to obtain evidence about the usefulness and reliability of the reported performance information for the following selected programmes presented in the annual performance report of the public entity for the year ended 31 March 2014:
– Programme 1: skills development funding on pages 28 to 35
11. I evaluated the reported performance information against the overall criteria of usefulness and reliability.
12. I evaluated the usefulness of the reported performance information to determine whether it was presented in accordance with the National Treasury’s annual reporting principles and whether the reported performance was consistent with the planned programmes. I further performed tests to determine whether indicators and targets were well defined, verifiable, specific, measurable, time bound and relevant, as required by the National Treasury’s Framework for managing programme performance information (FMPPI).
are free from material misstatement.
4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
5. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.
Opinion
6. In my opinion, the financial statements present fairly, in all material respects, the financial position of the NSF as at 31 March 2014 and its financial performance and cash flows for the year then ended, in accordance with SA Standards of GRAP and the requirements of the PFMA and the SDA.
Emphasis of matter
7. I draw attention to the matter below. My opinion is not modified in respect of this matter.
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corrected only some of the misstatements, I raised material findings on the reliability of the reported performance information.
Compliance with legislation
20. I performed procedures to obtain evidence that the public entity had complied with applicable legislation regarding financial matters, financial management and other related matters. My findings on material non-compliance with specific matters in key legislation, as set out in the general notice issued in terms of the PAA, are as follows:
Annual financial statements, performance and annual reports
21. The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework as required by section 55(1)(b) of the PFMA. Material misstatements in other income, grant expenditure, accounts receivables from non-exchange transactions, cash and cash equivalents, trade payables, provisions, and disclosure notes, identified by the auditors were subsequently corrected resulting in an unqualified audit opinion.
Internal control
22. I considered internal control relevant to my audit of the financial statements, the annual performance report and compliance with legislation. The matters reported below are limited to the significant internal control deficiencies that resulted in the findings on non-compliance with legislation included in this report.
Leadership
23. The finance and performance management units are not capacitated with individuals with the appropriate skills. As a result, there was over-reliance on the chief financial officer.
13. I assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete.
Usefulness of reported performance information
14. I did not raise any material findings on the usefulness of the reported performance information for the selected programme.
Reliability of reported performance information
15. The material findings in respect of the selected programme is as follows:
16. The FMPPI requires auditees to have appropriate systems to collect, collate, verify and store performance information to ensure valid, accurate and complete reporting of actual achievements against planned objectives, indicators and targets. Two significantly important targets were not reliable when compared to the source information or evidence provided. This was due to a lack of standard operating procedures for the recording and monitoring of performance, monitoring of the completeness of source documentation in support of actual achievements, and frequent review of the validity of reported achievements against source documentation.
Additional matters
17. I draw attention to the following matters :
Achievement of planned targets
18. Refer to the annual performance report on pages 23 to 40 for information on the achievement of planned targets for the year. This information should be considered in the context of the material finding on the reliability of the reported performance information in paragraph 16 of this report.
Material adjustments to the annual performance report
19. I identified material misstatements in the annual performance report submitted for auditing on the reported performance information of programme 1: skills development funding. As management subsequently
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24. The NSF’s standard operating procedures for performance information had not been updated to include the current procedures and processes for recording data, validation of data, data approval, data storage and security, protection of confidential data.
25. Senior management did not hold individuals accountable for their roles and responsibilities.
26. The NSF developed an action plan to address internal and external audit findings. However, not all of the actions included in the action plan were implemented within the committed timelines. This resulted in repeat findings.
Financial and performance management
27. The NSF did not have a proper record and information management system for financial and performance reporting.
28. Daily and monthly processing and reconciling of transactions were performed on a cash basis and not an accrual basis.
Pretoria
31 July 2014
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ANNUAL FINANCIAL STATEMENTS • for the year ended 31 March 2014
NationalSkillsFund FinancialStatements
fortheyearended31March2014
The Annual Financial Statements for the year ended 31 March 2014 have been
approved by the Accounting Authority in terms of section 55(1)(c) of the Public
Finance Management Act (PFMA), No 1 of 1999.
MR.GWEBINKUNDLAFELLIXQONDE
DIRECTORGENERALOFHIGHEREDUCATIONANDTRAINING
ACCOUNTINGAUTHORITYOFTHENATIONALSKILLSFUND
31 July 2014
TABLEOFCONTENTS PAGE
1. STATEMENT OF FINANCIAL PERFORMANCE 71
2. STATEMENT OF FINANCIAL POSITION 72
3. STATEMENT OF COMPARISON OF BUDGET AGAINST ACTUAL AMOUNTS 73
4. STATEMENT OF CHANGES IN NET ASSETS 75
5. CASH FLOW STATEMENT 76
6. ACCOUNTING POLICIES TO THE ANNUAL FINANCIAL STATEMENTS 77-90
7. NOTES TO THE ANNUAL FINANCIAL STATEMENTS 91-135
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ANNUAL FINANcIAL STATEmENTS • for the year ended 31 March 2014
STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 31 MARCH 20142013/14 2012/13
RestatedNotes R’000 R’000
reVenue
REVENUEFROMNON-EXCHANGETRANSACTIONS 3 619 910 2 270 797
Skills development levies 2 2 514 907 2 254 020
Income from SETAs 3 1 104 809 -
Other income 4 194 16 777
REVENUEFROMEXCHANGETRANSACTIONS 391 064 428 112
Finance income 5 356 893 389 517
Other income 6 34 171 38 595
TOTALREVENUE 4 010 974 2 698 909
expenses
SKILLSDEVELOPMENTGRANTDISBURSEMENTS 7 3 138 491 2 575 125
ADMINISTRATIVEEXPENSES 95 380 84 795
Employee costs 8 24 307 17 732
Operating expenses 9 19 949 16 401
Management fees and bank charges 10 2 092 2 008
Collection costs to SARS 48 745 48 631
Depreciation 11 287 23
TOTALEXPENSES 3 233 871 2 659 920
NETSURPLUSFORTHEYEAR ** 777 103 38 989
** The National Skills Fund's mandate is to fund skills development as outlined in the Skills Development Act. Hence, the nature of the Fund is developmental and not profit-driven. The Fund's purpose is not to accumulate large reserves for investment, but to put its funds to effective use towards skills development and thereby contribute towards unlocking the human potential of South Africa's citizens. Since the dawn of the NSDS III, the National Skills Fund's performance in skills development grants disbursements has increased consistently and significantly. The National Skills Fund started to put both its annual income and accumulated reserves to effective use towards funding skills development.
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ANNUAL FINANcIAL STATEmENTS • for the year ended 31 March 2014
STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 20142013/14 2012/13
RestatedNotes R’000 R’000
assets
Non-current assets 990 102 Property, plant and equipment 11 765 102 Intangible assets 12 225 -
Current assets 9 910 456 9 132 545 Deferred expenditure on skills development grant disbursements 13 2 303 998 1 734 703 Cash and cash equivalents 14 1 161 912 4 845 Investments 15 5 797 841 7 346 649 Trade and other receivables from non-exchange transactions 16 646 705 46 348
tOtal assets 9 911 446 9 132 647
Current liabilities 1 449 654 1 447 961 Trade and other payables from non-exchange transactions 17.1 981 182 830 845 Trade and other payables from exchange transactions 17.2 25 422 14 724 Provisions 18 443 050 602 392
tOtal liabilities 1 449 654 1 447 961
tOtal net assets 8 461 792 7 684 686
funds cOntributed by:
Capital and reservesAccumulated surplus 6 015 205 7 684 686 TVET college infrastructure development reserve 2 446 587 -
tOtal capital and reserVes ** 8 461 792 7 684 686
** As at year-end the NSF has committed and earmarked its entire reserves of R8,462 billion towards skills development projects.
The National Skills Fund’s mandate is to fund skills development as outlined in the Skills Development Act. Hence, the nature of the Fund is developmental and not profit-driven. The Fund’s purpose is not to accumulate large reserves for investment, but to put its funds to effective use towards skills development and thereby contribute towards unlocking the human potential of South Africa’s citizens. Since the dawn of the NSDS III, the National Skills Fund’s performance in skills development grants disbursements has increased consistently and significantly. The National Skills Fund started to put both its annual income and accumulated reserves to effective use towards funding skills development. The NSF improved performance can be clearly noted through its high level of commitments towards skills development. Please refer to note 20.
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ANNUAL FINANcIAL STATEmENTS • for the year ended 31 March 2014
STATEMENT OF COMPARISON OF BUDGET AGAINST ACTUAL AMOUNTS
reVenue approved and final budget *
actual amounts on accrual basis
adjustments to cash basis
actual amounts on cash basis
(under)/Over budget
(under)/Over budget
Notes R’000 R’000 R’000 R’000 R’000 %
reVenue frOM nOn-exchange transactiOns 30.1 2 407 603 3 619 910 (688 879) 2 931 031 523 428 22%Skills development levies 2 407 603 2 514 907 (98 542) 2 416 365 8 762 0%Income from SETAs - 1 104 809 (590 228) 514 581 514 581 100%Other income - 194 (109) 85 85 100%
reVenue frOM exchange transactiOns 30.2 398 982 391 064 - 391 064 (7 918) (2%)Finance income 398 982 356 893 - 356 893 (42 089) (11%)Other income - 34 171 - 34 171 34 171 100%
tOtal reVenue 2 806 585 4 010 974 (688 879) 3 322 095 515 510 18.4%
* The budget was prepared on the cash basis and there are no changes between the approved and final budget.
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ANNUAL FINANcIAL STATEmENTS • for the year ended 31 March 2014
STATEMENT OF COMPARISON BUDGET AGAINST ACTUAL AMOUNTS
expenses approved and final budget *
actual amounts on accrual basis
adjustments to cash basis
actual amounts on cash basis
(under)/Over budget
(under)/Over budget
Notes R’000 R’000 R’000 R’000 R’000 %
skills deVelOpMent grant disburseMents
nsds ii - - (810) (810) (810) 100%Discretionary and Innovation - - (37) (37) (37) 100%Strategic Projects - - (773) (773) (773) 100%
nsds iii 5 662 117 3 170 586 424 541 3 595 127 (2 066 990) (37%)HRDSA 62 501 19 833 (19 833) - (62 501) (100%)NSA Ministerial 62 397 15 172 2 810 17 982 (44 415) (71%)Government Priorities 2 080 000 1 308 720 (157 312) 1 151 408 (928 592) (45%)DG Priorities 2 296 343 1 523 696 444 955 1 968 651 (327 692) (14%)Skills Infrastructure 1 160 876 303 165 153 921 457 086 (703 790) (61%)
tOtal skills deVelOpMent grant disburseMents
30.3 5 662 117 3 170 586 423 731 3 594 317 (2 067 800) (37%)
adMinistratiVe expenses
Employee costs 30.4 45 710 24 307 (278) 24 029 (21 681) (47%)Operating expenses 30.5 36 921 19 949 (10 420) 9 529 (27 392) (74%)Management fees and bank charges 30.6 2 253 2 092 - 2 092 (161) (7%)Collection costs to SARS 30.7 114 647 48 745 19 48 764 (65 883) (58%)Depreciation - 287 (287) - - 100%Capital expendiure 30.8 8 100 888 126 1 014 (7 086) (88%)
tOtal adMinistratiVe expenses 207 631 96 268 (10 840) 85 428 (122 203) (59%)
net surplus fOr the year (3 063 163) 744 120 (1 101 770) (357 650) 2 705 513 (88%)
* The budget was prepared on the cash basis and there are no changes between the approved and final budget.
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ANNUAL FINANcIAL STATEmENTS • for the year ended 31 March 2014
STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDED 31 MARCH 2014tVet college infrastructure development
reserve
accumulated surplus
tOtal capital and reserVes
Notes R’000 R’000 R’000
Balance as at 1 April 2012 - 7 645 697 7 645 697
Net surplus per Statement of Financial Performance - 38 992 38 992
As originally stated - 34 582 34 582
Prior period correction 27 - 4 410 4 410
Balance at 31 March 2013 - 7 684 689 7 684 689
Accumulated surplus earmarked for TVET college infrastructure development 1 500 000 (1 500 000) -
Net surplus per Statement of Financial Performance 946 587 (169 484) 777 103
Total revenue 1 104 809 2 906 165 4 010 974
Total expenses (158 222) (3 075 649) (3 233 871)
Balance at 31 March 2014 * ** 2 446 587 6 015 205 8 461 792
** As at year-end the NSF has committed and earmarked its entire reserves of R8,462 billion towards skills development projects.
The National Skills Fund’s mandate is to fund skills development as outlined in the Skills Development Act. Hence, the nature of the Fund is developmental and not profit-driven. The Fund’s purpose is not to accumulate large reserves for investment, but to put its funds to effective use towards skills development and thereby contribute towards unlocking the human potential of South Africa’s citizens. Since the dawn of the NSDS III, the National Skills Fund’s performance in skills development grants disbursements has increased consistently and significantly. The National Skills Fund started to put both its annual income and accumulated reserves to effective use towards funding skills development. The NSF improved performance can be clearly noted through its high level of commitments towards skills development. Please refer to note 20.
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ANNUAL FINANcIAL STATEmENTS • for the year ended 31 March 2014
CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2014
2013/14 2012/13Notes R’000 R’000
cash flOws frOM Operating actiVitiesOperating activitiesCash receipts from stakeholders 2 931 140 2 338 898
Levies, interest and penalties received 2 416 365 2 338 898 Other cash receipts from stakeholders 514 775 -
Cash paid to stakeholders, suppliers and employees (3 678 602) (2 691 263)Skills development grant payments (3 594 400) (2 614 796)Employee costs (23 836) (14 759)Payments to suppliers and other (60 366) (61 708)
Cash generated from operations 19 (747 462) (352 365)Finance income 356 893 389 517
Netcash(out)/inflowfromoperatingactivities (390 569) 37 152
cash flOw frOM inVesting actiVitiesWithdrawals from/(additions to) investments 1 548 811 (149 991)Additions to property, plant and equipment and intangible assets (1 175) (118)
Netcashoutflowfrominvestingactivities 1 547 636 (150 109)
Net increase in cash and cash equivalents 1 157 067 (112 957)Cash and cash equivalents at the beginning of the year 4 844 117 801 Cash and cash equivalents at the end of the year 14 1 161 912 4 844
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AccOUNTiNg POLiciEs TO THE ANNUAL FiNANciAL sTATEMENTs
1.1 basis Of preparatiOn
The financial statements have been prepared in accordance with the effective Standards of Generally Recognised Accounting Practices (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board. The financial statements are presented in South African rands which is the functional reporting currency for the National Skills Fund and all values are rounded off to the nearest thousands (R’000). The financial statements have been prepared on the accrual basis, except for assets which are revalued. The financial statements have been prepared on the going concern basis and the accounting policies have been consistently applied to all the years presented.
The Accounting Framework of the entity, based on the preceding paragraph, is therefore as follows:• GRAP 1: Presentation of financial statements• GRAP 2: Cash flow statements• GRAP 3: Accounting policies, changes in accounting estimates and errors• GRAP 9: Revenue from exchange transactions • GRAP 12: Inventories • GRAP 13: Leases• GRAP 14: Events after reporting date • GRAP 17: Property, plant and equipment • GRAP 19: Provisions, contingent liabilities and contingent assets• GRAP 21: Impairment of Non-cash-generating Assets• GRAP 23: Revenue from Non-exchange Transactions • GRAP 24: Presentation of Budget Information in the Financial Statements• GRAP 25: Employee Benefits• GRAP 26: Impairment of Cash-generating Assets• GRAP 100: Non-current assets held for sale and discontinued operations • GRAP 104: Financial Instruments
Directives issued and effective:• Directive 1: Repeal of existing transitional provisions in, and consequential
amendments to, standards of GRAP• Directive 2: Transitional provisions for the adoption of standards of GRAP
by Public Entities,Trading Entities, Municipal Entities and Constitutional Institutions
• Directive 5: Determining the GRAP reporting framework• Directive 7: The application of deemed cost on the adoption of standards
of GRAP
Interpretations of the Standards of GRAP approved:• IGRAP 1: Applying the probability test on the initial recognition of
exchange revenue• IGRAP 2: Changes in existing decommissioning, restoration and similar
liabilities• IGRAP 3: Determining whether an arrangement contains a lease• IGRAP 4: Rights to interest arising from decommissioning, restoration and
environmental rehabilitation funds• IGRAP 5: Applying the restatement approach under the standard of GRAP
on financial reporting in hyperinflationary economies• IGRAP 6: Loyalty programmes• IGRAP 8: Agreements for the construction of assets from exchange
transactions• IGRAP 9: Distributions of non-cash assets to owners• IGRAP 10: Assets received from customers• IGRAP 13: Operating leases - Incentives• IGRAP 14: Evaluating the substance of transactions involving the legal
form of a lease
Approved guidelines of standard of GRAP:• Guide 1: Guideline on Accounting for Public Private Partnerships
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1.3 critical judgeMents, estiMatiOns and assuMptiOns
In the application of the NSF accounting policies management is required to make judgements, estimations and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on past experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Property, plant and equipment
Management has made certain estimations with regards to the determination of estimated useful lives and residual values of items of property, plant and equipment, as discussed further in note 1.10.1
Leases
Management has applied its judgement to classify all lease agreements that the company is party to as operating leases, as they do not transfer substantially all the risks and rewards of ownership to the company. Furthermore, as the operating lease in respect of office equipment is only for a relatively short period of time, management has made a judgement that it would classify the agreement in its entirety as an operating lease.
1.4 gOing cOncern assuMptiOn
These financial statements have been prepared on the going concern basis. In assessing whether the NSF is a going concern, the Accounting Authority has considered the fact that the power to collect skills development levies will enable the NSF to be considered as a going concern for at least the next twelve months. The NSF surplus reserves of R8,462 billion to enable it to continue operating as going concern.
Effective accrual based IPSASs: • IPSAS 20: Related parties disclosure
Effective IFRSs and IFRICs that are applied:• IAS 19 (AC 116): Employee benefits
1.2 changes in accOunting pOlicies, estiMates and errOrs
The accounting policies applied are consistent with those used to present the previous year’s financial statements, unless explicitly stated otherwise.
The entity changes an accounting policy only if the change:
• Is required by a standard of GRAP; or
• Results in the Annual Financial Statements providing reliable and more relevant information about the effects of transactions, other events or conditions, on the performance or cash flow.
Changes in accounting policies that are affected by management have been applied retrospectively in accordance with GRAP 3 requirements, except to the extent that it is impracticable to determine the period-specific effects or the cumulative effect of the change in policy. In such cases the entity restated the opening balances of assets, liabilities and net assets for the earliest period for which retrospective restatement is practicable.
Changes in accounting estimates are applied prospectively in accordance with GRAP 3 requirements. Details of changes in estimates are disclosed in the notes to the Annual Financial Statements where applicable.
Correction of errors is applied retrospectively in the period in which the error has occurred in accordance with GRAP 3 requirements, except to the extent that it is impracticable to determine the period-specific effects or the cumulative effect of the error. In such cases the entity shall restate the opening balances of assets, liabilities and net assets for the earliest period for which retrospective restatement is practicable.
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Accounting policy 1.8.1 on revenue from non-exchange transactions and accounting policy 1.8.2 on revenue from exchange transactions describes the conditions under which revenue will be recorded by the management of the entity.
In making their judgement, the management considered the detailed criteria for recognition of revenue as set out in GRAP 9 (revenue from exchange transactions). The management of the entity is satisfied that recognition of the revenue in the current year is appropriate.
When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the end of the reporting period.
The outcome of a transaction can be estimated reliably when all the following conditions are satisfied:
• the amount of revenue can be measured reliably;
• it is probable that the economic benefits associated with the transaction will flow to the entity;
• the stage of completion of the transaction at the end of the reporting period can be measured reliably; and
• the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.
When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognised only to the extent of the expenses recognised that are recoverable. Service revenue is recognised by reference to the stage of completion of the transaction at the end of the reporting period.
Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for services provided in the normal course of business, net of value added tax.
1.5 Offsetting
Assets, liabilities, revenues and expenses have not been offset except when offsetting is required or permitted by the standard.
1.6 cOMparatiVe infOrMatiOn
Budget information in accordance with GRAP 1 has been provided in the notes to the financial statements for the current financial year only, and forms part of the audited annual financial statements. (Refer to note 30 for more detail).
When the presentation or classification of items in the annual financial statements is amended, prior period comparative amounts are restated. The nature and reason for the reclassification is disclosed. Where accounting errors have been identified in the current year, the correction is made retrospectively as far as is practicable, and the prior year comparatives are restated accordingly. Where there has been a change in accounting policy in the current year, the adjustment is made retrospectively as far as is practicable, and the prior year comparatives are restated accordingly.
1.7 eVents after repOrting date
Events after the reporting date are those events, both favourable and unfavourable, that occur between the reporting date and the date when the financial statements are authorised for issue. Events after reporting date that are classified as adjusting events have been accounted for in the annual financial statements. Events after reporting date that have been classified as non-adjusting events have been disclosed in the disclosure notes to the annual financial statements.
1.8 reVenue recOgnitiOn
Revenue is recognised when its probable that future economic benefits or service potential will flow to the entity and the entity can measure the benefits reliably.
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According to section 28(2) of the Skills Development Act, 1998, the Accounting Authority approved the utilisation of 10% of the money allocated to the fund in terms of section 8(3)(a) of the Skills Development Levies Act to administer the fund. The utilisation of the 10% allocation may be applied for short term employee benefits as well as other operating expenses.
1.8.1.2 State contributions
State contributions represents unconditional grants received from the Department of Higher Education and Training (DHET) and are measured at fair value of the consideration received.
1.8.1.3 Income from SETAs towards TVET College Infrastructure Development
Skills Development Circular No 08/2013 stipulates the role of SETAs with regards to the TVET College infrastructure development. In terms of the Circular, each SETA's contribution towards the TVET College infrastructure development is a fixed amount, which was based on 4.8% of the SETA's estimated Discretionary Grant.
1.8.2 reVenue frOM exchange transactiOns
Revenue from exchange transactions refers to revenue that accrued to the entity directly in return for services rendered/goods sold, the value of which approximates the consideration received or receivable.
1.8.2.1 Finance income
Finance income represents interest earned on investments and is accrued on a time proportion basis, taking into account the principal amount outstanding and the effective interest rate over the period to maturity.
1.8.1 reVenue frOM nOn-exchange transactiOnsRevenue from non-exchange transactions refers to transactions where the entity received revenue from another entity without directly giving approximately equal value in exchange. Revenue from non-exchange transactions is generally recognised to the extent that the related receipt or receivable qualifies for recognition as an asset and there is no obligation or condition to repay the amount.
1.8.1.1 Skills development levy (SDL) income
Skills development levy (SDL) transfers are recognised when it is probable that future economic benefits can be measured reliably, and occurs when the Department of Higher Education and Training (DHET) makes the allocation or the payment, whichever event comes first, to the National Skills Fund (NSF) as required by section 8 of the Skills Development Levies Act, 1999 (Act No.9 of 1999). SDL income is measured at fair value of the consideration received and is based on the information supplied by DHET.
In terms of section 3(1) and 3(4) of the Skills Development Levies Act, 1999 (Act No. 9 of 1999), registered member companies pay a skills development levy of 1% of the total payroll cost to the South African Revenue Services (SARS), who collects the levies on behalf of the Department of Higher Education and Training. 20% of the skills development levies are paid over to the NSF and 80% to the SETAs.
National Skills Fund SDL income is set aside in terms of the Skills Development Act, 1998 (Act No. 97 of 1998) as amended for the purpose of:
2013/14 2012/13Employee costs and other operating expenditure of the NSF
10% 10%
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1.9.3 shOrt terM eMplOyee benefits
Short term employee benefits comprise of salaries, paid annual leave, paid sick leave, thirteenth cheques, performance bonuses and non-monetary benefits such as medical care, housing and car allowances. The cost of short term employee benefits are charged to the Statement of Financial Performance as employee cost in the year to which they relate, except for non-accumulating benefits which are only recognised when the specific event occurs.
Short term employee benefits that give rise to a present legal or constructive obligation are included in the Statement of Financial Position as accruals in the year to which they relate.
1.9.4 skills deVelOpMent grant disburseMents
Skills development grant disbursements comprise:
• costs that relate directly to the specific contract;
• costs that are attributable to contract activity in general and can be allocated to the project; and
• such other costs as are specifically chargeable to the NSF under the terms of the contract.
Skills development grant disbursements are recognised as expenses in the period in which they are incurred.
Skills development grant disbursements includes the following:
1.9.4.1 Payments for training of unemployed people
The training of unemployed people is undertaken by selected training contractors on a basis of a predetermined course fee per day. Upon completion of the training, certified claims are submitted by training contractors upon which payments are made.
1.8.2.2 Other income
Other income represents interest received by the training providers on the advance payments affected by NSF based on the approved memorandum of agreement entered into between the parties. This interest received by the training providers are utilised to incur project expenditure on behalf of NSF.
Other income is accrued on a time proportion basis, taking into account the principal amount outstanding and the effective interest rate over the period to maturity.
1.9 expenditure
1.9.1 cOllectiOn cOsts paid tO sars
In terms of section 10(2) of the Skills Development Levies Act, 1999 (Act. No. 9 of 1999), the Accounting Authority must, on a monthly basis as may agreed between SARS and the Accounting Authority, settle the costs of collection by SARS from the levies paid into the National Skills Fund. The total amount of the collection costs, may not exceed 2% of the total amount of the levies collected by SARS.
1.9.2 nsf 10% eMplOyee cOsts and Other Operating expenses
According to section 28(2) of the Skills Development Act, 1998, the Accounting Authority approved the utilisation of 10% of the money allocated to the fund in terms of section 8(3)(a) of the Skills Development Levies Act to administer the Fund. The utilisation of the 10% allocation may be applied for short term employee benefits as well as other operating expenses.
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1.10 assets
1.10.1 prOperty, plant and equipMent
The Director-General of the Department of Higher Education and Training is the Accounting Authority of the Fund in terms of the PFMA and must control the Fund. Property, plant and equipment comprise mainly of computer equipment, as all other property, plant and equipment utilised are owned, controlled and disposed of by the Department of Higher Education and Training. Property, plant and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:
• Computer equipment: 3 years
• Office Equipment: 5 years
• Office Furniture: 5 years
• Office Appliances: 5 years
The assets’ residual values and useful lives are reviewed, and adjusted, if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within net surplus/deficit in the Statement of Financial Performance.
1.9.4.2 Funds allocated to training providers for skills development training
The NSF allocates funds in respect of skills development to training providers in terms of approved memorandum of agreements entered into between the parties. Funds not spend by the training providers at year-end are accounted for as deferred expenditure in the financial statements of the NSF until the related eligible project expense are incurred by the training providers and the relating expenditure recognised. If eligible expenses are not incurred, the amount allocated to the training providers should be refunded to the NSF including any accrued interest.
1.9.5 fruitless and wasteful expenditure
Fruitless and wasteful expenditure means expenditure that was made in vain and would have been avoided had reasonable care been exercised.
Fruitless and wasteful expenditure is recognised as expenditure in the Statement of Financial Performance according to the nature of the payment and not as a separate line item on the face of the statement. If the expenditure is recoverable it is treated as an asset until it is recovered from the responsible person or written off as irrecoverable in the Statement of Financial Performance.
1.9.6 irregular expenditure
Irregular expenditure comprises expenditure, other than unauthorised expenditure, incurred in contravention of or that is not in accordance with a requirement of any applicable legislation, including: the Public Finance Management Act, Act No. 1 of 1999 (as amended by Act 29 of 1999); the State tender Board Act, 1968 (Act No. 86 of 1968, or any regulation made in terms of that Act); or any provincial legislation providing for the procurement procedures in that provincial government.
Irregular expenditure is recognised as expenditure in the Statement of Financial Performance. If the expenditure is not condoned by the relevant authority it is treated as an asset until it is recovered or written off as irrecoverable.
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1.10.4 deferred expenditure On skills deVelOpMent grant disburseMents
Deferred expenditure represents grant disbursement made in advance to training providers based on the signed memorandum of agreement between the parties. Deferred expenditure paid reflects the outstanding capital amounts as well as accrued interest received by the training providers at financial year end. NSF will only be entitled to the unspent funds, including any accrued interest, at the end of the project term.
Deferred expenditure is initially recognised at cost and subsequently measured at fair value less any provision for impairment.
1.10.5 trade and Other receiVables frOM nOn-exchange transactiOns
Trade and other receivables from non-exchange transactions are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. The provision is made in accordance with GRAP 104.64 whereby the recoverability of the outstanding advance is assessed individually and then collectively after grouping the assets in financial assets with similar credit risks characteristics.
1.10.6 cash and cash equiValents
Cash includes cash on hand (including petty cash) and cash with banks (including call deposits). Cash equivalents are short-term highly liquid investments, readily convertible into known amounts of cash, that are held with registered banking institutions with maturities of three months or less and are subject to an insignificant risk of change in value.
In terms of section 29(2) of the Skills Development Act, 1998 (Act No.97 of 1998) any money in the fund not required for immediate use should be invested with the Public Investment Corporation (PIC). Cash and cash equivalents are measured at fair value.
For purposes of the Cash Flow Statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks and investments in financial instruments.
1.10.2 prOperty, plant and equipMent acquired by prOject iMpleMenting agencies fOr nsf special prOjects
Property, plant and equipment acquired by project implementing agencies for NSF special projects are capitalised in the financial statements of the respective agencies, as the agencies control such assets for the duration of the project. Such assets could however, only be disposed of in terms of an agreement and specific written instructions by the NSF.
1.10.3 intangible assets
The Director-General of the Department of Higher Education and Training is the Accounting Authority of the Fund in terms of the PFMA and must control the Fund. Intangible comprise mainly of computer software. Intangible assets are stated at historical cost less accumulated amortisation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Amortisation is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:
• Computer equipment: 3 years
• Computer Software: 3 years
The assets’ residual values and useful lives are reviewed, and adjusted, if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within net surplus/deficit in the Statement of Financial Performance.
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AccOUNTiNg POLiciEs TO THE ANNUAL FiNANciAL sTATEMENTsThe liability for leave pay is based on the total accrued leave days at year-end and is shown as an accrual in the Statement of Financial Position. The entity recognises the expected cost of performance bonuses only when the entity has a present legal or constructive obligation to make such payment and a reliable estimate can be made. No accrual is made for post retirement benefits, as the NSF does not provide for such benefits for its employees.
1.11.3 accrual fOr prOjects
No accrual is made for projects approved at year-end, unless the service in terms of the contract has been delivered or the contract is of an onerous nature. Where a project has been approved, but has not been accrued for or provided for, it is disclosed as commitments in the notes to the financial statements.
1.11.4 prOVisiOns
In terms of GRAP 19 a provision is defined as a liability of uncertain timing or amount. Provisions can be distinguished from other liabilities such as payables and accruals because there is uncertainty about the timing or amount of the future expenditure required in settlement.
Provision for skills development grant expenditure
Due to the nature of the NSF operations, numerous contracts exists that requires management estimation and judgement to determine the provision amount at financial year-end relating to possible services rendered on these contracts not yet invoiced/claimed by the training providers.
Provision for projects are estimated on an annual basis. These estimates and underlying assumptions are reviewed on an ongoing basis. For purposes of the provision calculations management deems the training be rendered equally over the original contract term. These estimates are based on the remaining portion of the contract for a specific year that has not been invoiced/claimed by the training providers. Actual results may differ from these estimates. Provisions recognised for the relevant financial year is deducted from the remaining contract commitment.
1.11 liabilities
1.11.1 defined cOntributiOn plans
A defined contribution plan is a plan under which the entity pays fixed contributions into a separate entity. The entity has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to service in the current or prior periods.
The NSF provides for retirement benefits for all its permanent employees through a defined contribution scheme that is subject to the Pension Funds Act, 1956 as amended. In terms of the Pension Funds Act, the fund is not required to be actuarially valued. Contributions are at a rate of 13% of pensionable emoluments. The entity’s contributions to the defined contribution scheme are established in terms of the rules governing the scheme.
Contributions are recognised in the Statement of Financial Performance in the period in which the service is rendered by the relevant employees. The entity has no further payment obligations once the contributions have been paid.
1.11.2 leaVe and bOnus accruals
The entity has opted to treat its provision for leave and bonus pay as an accrual.
The cost of all short-term employee benefits is recognised during the period in which the employee renders the related service. Employee entitlements are recognised when they accrue to employees. An accrual is recognised for the estimated liability as a result of services rendered by employees up to the reporting date. Accruals related to employee benefits included in the Statement of Financial Position includes annual leave, capped leave, thirteenth cheque as well as performance bonus commitments at year-end (based on current salary rates).
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1.12.1 financial assets - classificatiOn
A financial asset is any asset that is a cash or contractual right to receive cash. The entities principle financial assets as reflected on the face of the Statement of Financial Position are classified as follows:
• Cash and cash equivalents;
• Investments; and
• Trade and other receivables.
In accordance with GRAP 104 the financial assets of the entity are classified as follows into the categories as allowed by the standard:
type of financial asset classification in terms of grap 104
Cash and cash equivalents Financial assets at fair valueInvestments Financial assets at amortised costTrade and other receivables Financial assets at cost
Cash includes cash on hand (including petty cash) and cash with banks (including call deposits). Cash equivalents are short-term highly liquid investments, readily convertible into known amounts of cash, that are held with registered banking institutions with maturities of three months or less and are subject to an insignificant risk of change in value. For purposes of the Cash Flow Statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks and investments in financial instruments. The entity categorises cash and cash equivalents as financial assets: Loans and receivables.
Financial assets at fair value are financial assets that meet either of the following conditions:
• They are classified as held for trading; or
• Upon initial recognition they are designated as at fair value through the Statement of Financial Performance.
Provision for levies less than threshold
Section 4(b) of the Skills Development Levies Act, No. 9 of 1999, stipulates that employers with a total yearly remuneration expense of below R500,000 are exempt from contributing skills development levies. In practice it does happen that some of these exempted employers contribute skills development levies. As a result, they are entitled to claim their contributions back. There is uncertainty over the timing and amount of the provision for levies paid below threshold, as the NSF does not know the amount or time of contributions that will be claimed back in the future. For purposes of calculating the provision management expects the future claims to be in line with the historic levies less than threshold claimed back. The historic levies less than threshold claimed back in comparison with total skills development levies received is used as a basis for estimating the provision.
Provision for performance bonuses
Performance bonuses are provided for based on the NSF’s past practice to pay annual performance bonuses. Uncertainty exists over the amount and the timing of the performance bonuses as NSF has not yet completed the performance assessments at year-end and determined the performance bonus payable. Management estimates the performance bonus payable to be in line with the prior period’s performance bonus paid with an average increase for inflation.
1.12 financial instruMents
The entity has various types of financial instruments and these can be broadly categorised as either financial assets or financial liabilities. The classification of financial assets and liabilities into categories, is based on judgement by management.
Financial assets and financial liabilities are recognised on the Statement of Financial Position when the NSF becomes a party to the contractual provisions of the instrument.
Financial instruments are initially measured at fair value. Subsequent to initial recognition these instruments are measured as set out below.
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1.12.3 initial and subsequent MeasureMent
1.12.3.1 Financial Assets: Financial assets at fair value through surplus/deficit
Money market financial instruments are initially and subsequently measured at fair value. It is the policy of NSF to account for changes in the fair value of monetary securities classified at fair value, through the Statement of Financial Performance. The fair value adjustment is calculated between the difference of the market value at the end of the reporting period and the cost of the investment. These investments are revaluated once a year at the end of the reporting period.
1.12.3.2 Financial Assets: Trade and other receivables
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
1.12.3.3 Financial liabilities: Trade and other payables
Trade and other payable financial instruments are measured at amortised cost using the effective interest rate method. Accruals represent goods/services that have been received together with an accompanied invoice, but final authorisation to affect payment has not been effected. Accruals are recognised in the Statement of Financial Position as trade and other payables.
1.12.4 iMpairMent Of financial assets
Financial assets, other than those at fair value through surplus or deficit, are assessed for indicators of impairment at each reporting date. Financial assets are impaired where there is objective evidence of impairment of Financial Assets (such as the probability of insolvency or significant financial difficulties of the debtor). If there is such evidence the recoverable amount is estimated and an impairment loss is recognised in accordance with GRAP 104.
Financial assets at amortised cost are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than twelve months, which are classified as non-current assets. Loans and receivables are initially measured at cost which represents fair value. After initial recognition financial assets are measured at amortised cost, using the effective interest method less provision for impairment.
1.12.2 financial liabilities - classificatiOn
A financial liability is a contractual obligation to deliver cash or another financial asset to another entity, or exchange financial assets or financial liabilities under conditions that are potentially unfavourable to the entity. The entities principal financial liabilities relates to accounts payable which are classified as follows on the face of the Statement of Financial Position:
• Trade and other payables.
There are two main categories of financial liabilities, the classification based on how they are measured. Financial liabilities may be measured at:
• Fair value through surplus or deficit; or
• At amortised cost using the effective interest method.
Financial liabilities at fair value are financial liabilities that are essentially held for trading (i.e. purchased with the intention to sell or repurchase in the short term; derivatives other than hedging instruments or are part of a portfolio of financial instruments where there is recent actual evidence of short-term profiteering or are derivatives). Financial liabilities that are measured at fair value through surplus or deficit are stated at fair value, with any resulted gain or loss recognised in the Statement of Financial Performance.
Any other financial liabilities are classified as other financial liabilities and are initially measured at fair value. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.
In accordance with GRAP 104 the Financial Liabilities of the entity are all classified as “other financial liabilities”.
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1.12.6 derecOgnitiOn Of financial assets
A financial asset or a portion thereof is derecognised when the NSF realises the contractual rights to the benefits specified in the contract, the rights expire, the NSF surrenders those rights or otherwise loses control of the contractual rights that comprise the financial asset. On derecognition, the difference between the carrying amount of the financial asset and the sum of the proceeds receivable and any prior adjustment to reflect the fair value of the asset that had been reported in capital and reserves is included in net surplus or deficit for the period.
If the entity neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the entity recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the entity retains substantially all the risks and rewards of ownership of a transferred financial asset, the entity continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
1.12.7 derecOgnitiOn Of financial liabilities
A financial liability or a part thereof is derecognised when the obligation specified in the contract is discharged, cancelled, or expires. On derecognition, the difference between the carrying amount of the financial liability, including related unamortised costs, and the amount paid for it is included in net surplus or deficit for the period.
1.12.8 fair Value cOnsideratiOns
The fair values at which financial instruments are carried at the reporting date have been determined using available market values. Where market values are not available, fair values have been calculated by discounting expected future cash flows at prevailing interest rates. The fair values have been estimated using available market information and appropriate valuation methodologies, but are not necessarily indicative of the amounts that the NSF could realise in the normal course of business. The carrying amounts of financial assets and financial liabilities with a maturity of less than one year are assumed to approximate their fair value due to the short-term trading cycle of these items.
Accounts receivable are initially valued at cost, which represents fair value, and subsequently carried at amortised cost using the effective interest rate method. An estimate is made for a provision for impairment based on past default experience of all outstanding amounts at year-end. Bad debts are written off the year in which they are identified as irrecoverable. Amounts receivable within 12 months from the date of reporting are classified as current.
A provision for impairment of accounts receivable is established when there is objective evidence that NSF will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is based on long outstanding non-active supplier contracts where the recovery of the outstanding amount is uncertain as no new contracts exist for the recovery of the outstanding balance. Based on past default experience it is the policy of the entity to provide for 50% of non-active contracts between 180 days and 270 days outstanding and 100% of non-active contracts exceeding 270 days.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in the Statement of Financial Performance. When the receivable is uncollectable, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to the Statement of Financial Performance.
1.12.5 iMpairMent and gains and lOsses frOM subsequent MeasureMent
A gain or loss arising from a change in the fair value of a financial asset or financial liability measured at fair value shall be recognised in surplus or deficit.
For financial assets and financial liabilities measured at amortised cost or cost, a gain or loss is recognised in surplus or deficit when the financial asset or financial liability is derecognised or impaired, or through the amortisation process.
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1.13 related parties
1.13.1 related party transactiOns
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions or if the related party entity and another entity are subject to common control.
Related party transactions are classified by the entity as those transactions between related parties other than transactions that would occur within a normal supplier or client/recipient relationship on terms and conditions no more or less favourable than those which it is reasonable to expect the entity would have adopted if dealing with that individual or entity at arm’s length in the same circumstances. Only transactions with related parties not at arm’s length or not in the ordinary course of business are disclosed.
1.13.2 key ManageMent persOnnel
Key management personnel is defined as being individuals with the authority and responsibility for planning, directing and controlling the activities of the entity, including those charged with the governance of the entity in accordance with legislation, in instances where they are required to perform such functions. Close members of the family of a person are considered to be those family members who may be expected to influence or be influenced by management in their dealings with the entity.
The Executive Officer (EO) of NSF on post level 14 is currently regarded as being at key management level including employees on level 13 or below acting in the position of the EO. Transactions conducted with key management, as well as with close family members of key management, is regarded as related party transactions. Only transactions with related parties not at arm’s length or not in the ordinary course of business are disclosed.
1.12.9 risk ManageMent Of financial assets and liabilities
It is the policy of the entity to disclose information that enables the user of its financial statements to evaluate the nature and extent of risks arising from financial instruments to which the entity is exposed on the reporting date.
Risks and exposure are disclosed as follows:
1.12.9.1 Credit risk:
• Each class of financial instrument is disclosed separately.• Maximum exposure to credit risk not covered by collateral is specified.• Financial instruments covered by collateral are specified.
1.12.9.2 Liquidity risk:
• A maturity analysis for financial assets and liabilities that shows the remaining contractual maturities.
• Liquidity risk is managed by ensuring that all assets are reinvested at maturity at competitive interest rates in relation to cash flow requirements. Liabilities are managed by ensuring that all contractual payments are met on a timeous basis and, if required, additional new arrangements are established at competitive rates to ensure that cash flow requirements are met.
• A maturity analysis for financial liabilities (where applicable) that shows the remaining undiscounted contractual maturities is disclosed in note 21 to the annual financial statements.
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• GRAP 20: Related party Disclosure
Standard is to ensure that a reporting entity’s financial statements contain the disclosures necessary to draw attention to the possibility that its financial position and surplus or deficit may have been affected by the existence of related parties and by transactions and outstanding balances with such parties.
• GRAP 32: Service Concession Arrangements: Grantor
The Standard prescribes the accounting for service concession arrangements by the grantor, a public sector entity.
• GRAP 105: Transfer of functions between entities under common control (Effective date: Not announced)
The Standard establishes accounting principles for the acquirer and transferor in a transfer of functions between entities under common control.
• GRAP 106: Transfers of functions between entities not under common control (Effective date: Not announced)
The Standard establishes accounting principles for the acquirer in a transfer of functions between entities not under common control.
• GRAP 107: Mergers (Effective date: Not announced)
The Standard establishes accounting principles for the combined entity and combining entities in a merger.
• GRAP 108: Statutory Receivables
The Standard prescribes accounting requirements for the recognition, measurement, presentation and disclosure of statutory receivables.
Application of all of the above GRAP standards will be effective from the date as announced by the Minister of Finance. Currently not all of these dates have been announced.
1.14 cOMMitMents
Commitments include expenditure approved and contracted as well as expenditure approved, but not yet contracted. Approved and contracted commitments includes expenditure that has been approved and the contract has been awarded at the reporting date. Approved, but not yet contracted commitments includes expenditure that has been approved and the contract has yet to be awarded or is awaiting finalisation at the reporting date.
1.15 cOntingent assets and cOntingent liabilities
Management judgement is obtained through the services of legal counsel when disclosing contingent assets and liabilities. The probability that an inflow or outflow of economic resources will occur due to past events, which will only be confirmed by the occurrence or non-occurrence of one or more future events as well as any possible financial impact is disclosed based on management estimation in the disclosure notes.
1.16 new standards and interpretatiOns (igrap) issued, but nOt yet effectiVe as at 31 March 2014:
The following GRAP standards have been issued, but are not yet effective and have not been early adopted by the entity:
• GRAP 18: Segment reporting: (Effective date: Not Announced)
The Standard is to establish principles for reporting financial information by segments. The disclosure of this information will:
(a) Enable users of the financial statements to better understand the entity’s past performance, to evaluate the nature and financial effects of the activities in which it engages and the economic environments in which it operates;
(b) Identify the resources allocated to support the major activities of the entity and assist in making decisions about the allocation of resources; and
(c) Enhance the transparency of financial reporting and enable the entity to better discharge its accountability obligations.
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The following interpretations (IGRAP) have been issued but not yet effective and have not been early adopted by the entity:
• IGRAP 7: The limit on defined benefit asset, minimum funding requirements and their interaction
• IGRAP11: Consolidation - Special Purpose Entities
• IGRAP 12: Jointly Controlled Entities – Non Monetary Contributions by Venturers
• IGRAP17: Interpretation of the Standard of GRAP on Service Concession Arrangements Where a Grantor Controls a Significant Residual Interest in an Asset
Management has considered all of the above-mentioned GRAP standards issued (both effective and not effective) and anticipates that the adoption of these standards will not have a significant impact on the financial performance, financial position or cash flows of the entity.
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2013/14 2012/13Notes R’000 R’000
2. skills deVelOpMent leVies (nOn-exchange reVenue)
In terms of the Skills Development Act and the Skills Development Levies Act, the total levy income per the Statement of Financial Performance is as follows:
Percentage of payroll payable as Skills Development Levy 1% 1%
Skills Development Levies received from SARS (20%):
Skills Development Levies received 2 510 885 2 338 898 Skills Development Levies collected by SARS 12 554 444 11 694 493 Less: Amount withheld by the Department of Higher Education and Training and paid to the SETAs (80%) (10 043 559) (9 355 595)Movement in Provision for levies less than threshold 18.2 4 022 9 642 Less: Accrual for UIF contribution to NSF 17.1 - (94 520)
Total 2 514 907 2 254 020
3. incOMe frOM setas (nOn-exchange reVenue)
Income from SETAs towards TVET College Infrastructure Development 1 104 809 -
4. Other incOMe (nOn-exchange reVenue)
Provision for impairment reversed 16.3 - 16 777 Bad debts recovered 194 -
194 16 777
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2013/14 2012/13Notes R’000 R’000
5. finance incOMe (exchange reVenue)
Finance income from investments at the Public Investment Corporation (PIC) 15 354 612 388 786 Interest income from other commercial banks 2 281 731
Total 356 893 389 517
Finance income from investments at the Public Investment Corporation (PIC) is disclosed net of realised fair value profits of R80,415 million (2013: R0 million) relating to financial assets that matured during the current financial year.
6. Other incOMe (exchange reVenue)
Interest received from advance payments 34 171 38 595
Total 34 171 38 595
Interest received is from advance payments made by the NSF to skills development project providers in terms of the agreed Memorandum of Agreements between the parties. In terms of these agreements the interest may be applied to incur training expenditure on behalf of the Fund. On contract finalisation, any remaining accrued interest should be returned to the Fund.
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS2013/14 2012/13
RestatedR’000 R’000
7. skills deVelOpMent grant disburseMents
NSA Ministerial 15 172 17 303 National Public Dialogue and Advocacy 4 179 3 134 Constituency Capacity Building 8 432 14 169 Skills Marketing and Communication 578 -Provincial Skills Development Forums 351 -Capacity Building 1 632 -
Government Priorities 1 308 720 1 091 354 New Growth Path 428 456 223 775 Industrial Policy Action Plan 64 800 43 385 Rural Development 101 008 113 017 Education and Health 5 920 12 593 Justice and Crime Prevention 106 151 131 032 Co-operatives and Small Enterprises 107 354 129 294 Public Sector Capacity 495 031 438 258
DG Priorities 1 523 696 1 447 469 Worker Education 9 433 4 584 Skills System Capacity Building 11 888 (2 511)Training Lay-off 17 091 39 483 Academia, Research and Development - 390 Bursaries 1 272 200 1 238 398 DHET Projects for Academia, Research and Development 213 084 167 125
Skills Infrastructure 303 165 53 951 Public Delivery Infrastructure 275 061 32 838 Community Education Centres 28 104 21 113
HRDSA 19 833 6 665 Research 19 833 6 665
NSDSII (32 095) (41 617)Critical Skills Support (32 095) (4 980)Industry Support Programme * - (3 280)Discretionary and Innovation * - (993)Strategic Projects * - (32 444)ABET * - 24 Social Development * - 56
Total 3 138 491 2 575 125
* These negative amounts refer to over provisions relating to projects during the previous 2011/12 and 2012/13 financial years.
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2013/14 2012/13Notes R’000 R’000
8. eMplOyee cOsts
Salaries and wages 21 288 15 481 Basic salaries 17 399 12 357 Performance awards 259 504 Service bonuses 1 247 968 Other non-pensionable allowances 2 097 1 418 Overtime 8 -Net movement: Leave accrual 116 131 Net movement: Service bonus accrual 162 103
Social contributions 3 019 2 251 Provident fund contributions: defined contribution plans 25 2 140 1 529 Medical aid contributions 876 719 Bargaining council 3 3
Total 24 307 17 732
Average number of employees 57 58
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2013/14 2012/13Notes R’000 R’000
9. Operating expenses
Consultancy and service provider fees * 4 572 3 778 External Auditor’s remuneration 2 816 2 612 Internal Auditor’s remuneration - 1 029 Bad debts written off 26 - Telephone and Fax 389 284 Travel and subsistence 4 252 3 233 Printing and Publications 102 - Entertainment 10 9 Operating Leases 86 140 Catering 28 (60)Venues and Facilities 28 8 Stationery 464 310 Computer consumables 5 45 Cleaning services - 2 Training and development 103 160 Repairs and maintenance 1 36 Education and training practices SETA - 10 Courier and delivery 4 1 Laundry Services - 1 Bursaries 189 - Other 1 - DHET Shared Services Charge 6 873 4 804
Total 19 949 16 401
* The consulting and service provider fees relates to services provider to assist with the execution of the cash to accrual conversion, including the implementation of an accrual accounting system.
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10. ManageMent fees and bank charges
Bank charges paid to banks 13 11 Management fees paid to Public Investment Corporation (PIC) 15 2 079 1 997
Total 2 092 2 008
11. prOperty, plant and equipMent 2013/14computer equipment total
R’000 R’000At 31 March 2014
Reconciliation of cost to net book valueCost 1 020 1 020 Accumulated depreciation (255) (255)
Carrying value at 31 March 2014 765 765
For the year ended 31 March 2014
Reconciliation of opening and closing net book valueOpening carrying value 102 102 Additions 896 896 Depreciation (233) (233)
Closing carrying value at 31 March 2014 765 765
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11. prOperty, plant and equipMent (cOntinued) 2012/13Computer equipment
Total
R’000 R’000At 31 March 2013
Reconciliation of cost to net book valueCost 125 125 Accumulated depreciation (23) (23)
Carrying value at 31 March 2013 102 102
For the year ended 31 March 2013
Reconciliation of opening and closing net book valueOpening carrying value 7 7 Additions 118 118 Depreciation (23) (23)
Closing carrying value at 31 March 2013 102 102
Computer equipment relates to printers, CPUs, notebooks and monitors.
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS
12. intangible assets 2013/14computer software total
R’000 R’000
At 31 March 2014
Reconciliation of cost to net book value
Cost 279 279
Accumulated depreciation (54) (54)
Carrying value at 31 March 2014 225 225
For the year ended 31 March 2014
Reconciliation of opening and closing net book value
Opening carrying value - -
Additions 279 279
Depreciation (54) (54)
Closing carrying value at 31 March 2014 225 225
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS
2012/13Computer equipment
Total
R’000 R’000
At 31 March 2013
Reconciliation of cost to net book value
Cost - -
Accumulated depreciation - -
Carrying value at 31 March 2013 - -
Year ended 31 March 2013
Reconciliation of opening and closing net book value
Opening carrying value - -
Additions - -
Depreciation - -
Closing carrying value at 31 March 2013 - -
Computer software relates to off-the-shelf software packages.
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ANNUAL FINANcIAL STATEmENTS • for the year ended 31 March 2014
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
2013/14 2012/13Restated
Notes R’000 R’00013. deferred expenditure On skills deVelOpMent grant disburseMents
NSA Ministerial - 2 131 Constituency Capacity Building - 2 131
Government Priorities 784 940 1 087 790 New Growth Path 178 021 251 071 Industrial Policy Action Plan 16 716 11 253 Rural Development 71 034 63 558 Education and Health 4 687 636 Justice and Crime Prevention - 69 642 Co-operatives and Small Enterprises 63 059 56 720 Public Sector Capacity 451 423 634 910
DG Priorities 1 313 144 585 227 Worker Education 2 588 2 259 Skills System Capacity Building 8 209 6 752 Bursaries 1 302 347 554 541 DHET Projects for Academia, Research and Development - 21 675
Skills Infrastructure 205 114 39 521 Public Delivery Infrastructure 200 002 26 904 Community Education Centres 5 112 12 617
HRDSA 800 20 034 Research 800 20 034
Total 2 303 998 1 734 703
Deferred expenditure represents skills development grant disbursements paid or payable in advance to skills development project providers based on the signed memorandum of agreement between the parties.
Deferred expenditure reflects the outstanding capital amounts including accrued interest received by the skills development project providers at financial year-end. NSF will only be entitled to the unspent funds, including any accrued interest, at the end of the project term.
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS
2013/14 2012/13Notes R’000 R’000
14. cash and cash equiValents
Cash at bank 1 161 912 4 845
Cash and cash equivalents at year-end 1 161 912 4 845
As required in Treasury Regulation 31.2, National Treasury approved the banks where the NSF bank accounts are held. The weighted average interest rate on short term bank deposits was 5.32% for the financial year (2013: 5.51%).
Cash includes cash with commercial banks. Cash equivalents are short term, highly liquid investments that are held with registered banking institutions with maturities of three months or less and that are subject to an insignificant risk of change in value.
For purposes of the Cash Flow Statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks, net of bank overdrafts.
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ANNUAL FINANcIAL STATEmENTS • for the year ended 31 March 2014
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
2013/14 2012/13Notes R’000 R’000
15. inVestMents
It is the policy of NSF to account for changes in the fair value of monetary securities classified as held for trading through the Statement of Financial Performance. The fair value adjustment is calculated as the difference between the market value at the end of the reporting period and the cost of the investment. These investments are revalued once a year at the end of the reporting period by the Public Investment Corporation (PIC). The latest revaluation was performed on 31 March 2014.
Composition at fair valueInvestments with the Public Investment Corporation (PIC) 5 797 841 7 346 649
Financialassetsatfairvaluethroughsurplus/(deficit)canbereconciledasfollows:
Balance at the beginning of the year 7 346 649 7 196 658 Invested during the year 3 498 659 1 853 202 Interest received and capitalised 5 354 612 388 786 Management fees 10 (1 903) (1 997)Expenses for the period 10 (176) - Withdrawal (5 400 000) (2 090 000)
Closingbalanceatendoftheyear(Noneofthefinancialassetsareimpaired) 5 797 841 7 346 649
The NSF has committed its entire investment balance as at year-end. Refer to note 20.
NSF assesses at each reporting date whether there is objective evidence that a financial asset or group financial assets are impaired. None of the financial assets at fair value through surplus/(deficit) are impaired on reporting date.
The Skills Development Act Regulations state that the NSF may, if not otherwise specified by the Public Finance Management Act, invest the moneys in accordance with the approved NSF investment policy.
Treasury Regulation 31.3 requires that, unless exempted by the National Treasury, the NSF as a public entity, that is listed in Schedule 3A of the Public Finance Management Act, must invest surplus funds with the Corporation for Public Deposits. The NSF obtained exemption from National Treasury to invest surplus funds with the Public Investment Corporation (PIC) in accordance the NSF’s investment policy.
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ANNUAL FINANcIAL STATEmENTS • for the year ended 31 March 2014
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
2013/14 2012/13Restated
Notes R’000 R’00016. trade and Other receiVables frOM nOn-exchange transactiOns
The carrying and fair value of trade and other receivables are as follows:
Receivables from skills development projects 16.1 56 477 46 348 Carrying amount 67 916 57 787 Less: Provision for impairment 16.3 (11 439) (11 439)
Advances to training providers for payment of allowances 16.2 - - Carrying amount - 5 180 Less: Provision for impairment 16.3 - (5 180)
SETA receivables for TVET college infrastructure development 16.1 590 228 - Carrying amount 590 228 - Less: Provision for impairment 16.3 - -
Total 646 705 46 348
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ANNUAL FINANcIAL STATEmENTS • for the year ended 31 March 2014
NOTES TO THE ANNUAL FINANCIAL STATEMENTS16. trade and Other receiVables frOM nOn-exchange transactiOns (cOntinued)
16.1 ageing Of trade and Other receiVables
Trade and other receivables are all considered for impairment. Based on past default experience it is the policy of the entity to provide for 50% of non-active contracts between 180 days and 270 days outstanding and 100% of non-active contracts exceeding 270 days.
At 31 March 2014, R41,226 million (2013:R77 million) were more than 180 days past due but not impaired due to the fact that these contracts are still active. The ageing of trade and other receivables not impaired is as follows:
2014 2014 2014 2014 2014
current 31 to 180 days 181 to 270 days Over 270 days total
R’000 R’000 R’000 R’000 R’000
Receivables from skills development projects 4 679 11 230 1 718 22 074 39 701 Advances to training providers for payment of allowances - - - - - SETA receivables for TVET college infrastructure development 590 228 - - - 590 228
Total 594 907 11 230 1 718 22 074 629 929
2013 2013 2013 2013 2013Restated Restated Restated Restated RestatedCurrent 31 to 180 days 181 to 270 days Over 270 days TotalR’000 R’000 R’000 R’000 R’000
Receivables from skills development projects 2 231 44 391 - 13 638 60 260 Advances to training providers for payment of allowances - - - - - SETA receivables for TVET college infrastructure development - - - - -
Total 2 231 44 391 - 13 638 60 260
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS16. trade and Other receiVables frOM nOn-exchange transactiOns (cOntinued)
16.2 ageing Of trade and Other receiVables iMpaired
As at 31 March 2014, gross trade and other receivables of R28,215 million (2013: R33,395 million) were impaired and provided for. The amount of the provision is R11,439 million as at 31 March 2014 (2013: R16,619 million). The ageing of the gross impaired trade and other receivables (net R16,776 million, 2013: R16,776 million) is stipulated as follows:
2014 2014 2014 2014 2014current 31 to 180 days 181 to 270
daysOver 270 days total
R’000 R’000 R’000 R’000 R’000
Receivables from skills development projects - - - 28 215 28 215 Advances to training providers for payment of allowances - - - - - SETA receivables for TVET college infrastructure development - - - - -
Total - - - 28 215 28 215
2013 2013 2013 2013 2013Current 31 to 180 days 181 to 270 days Over 270 days TotalR’000 R’000 R’000 R’000 R’000
Receivables from skills development projects - - - 28 215 28 215 Advances to training providers for payment of allowances - - - 5 180 5 180 SETA receivables for TVET college infrastructure development - - - - -
Total - - - 33 395 33 395
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ANNUAL FINANcIAL STATEmENTS • for the year ended 31 March 2014
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
2013/14 2012/13Restated
Notes R’000 R’000
16. trade and Other receiVables frOM nOn-exchange transactiOns (cOntinued)
16.3 recOnciliatiOn Of prOVisiOn fOr iMpairMent
Opening balance 16 619 33 396 (Utilised)/Provided during the year 9 (5 180) - Provision reversed during the year - (16 777)
Total 11 439 16 619
Current year provision attributable to:
Advances to training providers for payment of allowances - 5 180 Opening balance 5 180 5 180 (Utilised)/Provided during the year (5 180) -
Receivables from skills development projects 11 439 11 439 Opening balance 11 439 28 216 (Utilised)/Provided during the year - - Provision reversed during the year - (16 777)
Total 11 439 16 619
Trade and other receivables are individually impaired when there is objective evidence that the asset is impaired. The creation and release of the provision for impaired receivables have been included in operating expenses (note 9) in the Statement of Financial Performance. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable as mentioned above.
Credit quality of trade and other receivables
Management considers that all of the above financial assets are of good credit quality, excluding a portion of the PSETA’s debt: R11,439 million from the PSETA’s trade receivables are not considered recoverable. The maximum exposure to credit risk at reporting date is the fair value of each class of receivables as mentioned above.
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ANNUAL FINANcIAL STATEmENTS • for the year ended 31 March 2014
NOTES TO THE ANNUAL FINANCIAL STATEMENTS2013/14 2012/13
RestatedNotes R’000 R’000
17. trade and Other payables
17.1 trade and Other payables frOM nOn-exchange transactiOns
Payables to skills development projects 981 182 736 325 SARS accrual: UIF to be refunded - 94 520
981 182 830 845
17.2 trade and Other payables frOM exchange transactiOns
Other administrative payables 87 2 058 SARS Payable 4 034 4 054 Administrative payables due to the Department of Higher Education and Training (DHET) 19 901 7 490 Leave and bonus accruals 17.3 1 400 1 122
Total 25 422 14 724
17.3 leaVe and bOnus accrual
Balance at the beginning of the year 1 122 889 Amounts utilised during the year (1 122) ( 889) Amount recognised during the year 1 400 1 122
Closing carrying amount 1 400 1 122
Leave and bonus accrual composition:
Current
Leave accrual 797 681 Bonus accrual (Thirteenth cheque) 603 441
Total 1 400 1 122
Leave is calculated based on leave days outstanding at year-end and quantified in terms of total cost of employment per employee. The bonus accrual relates to thirteenth cheque commitments owed to NSF employees at financial year-end.
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS2013/14 2012/13
RestatedNotes R’000 R’000
18. prOVisiOns
Provision for skills development grant expenditure 18.1 438 731 594 244 Provision for levies less than threshold 18.2 3 622 7 644 Performance bonus provision 18.3 697 504
Total 443 050 602 392
18.1 prOVisiOn fOr skills deVelOpMent grant expenditure
Objectives (2013/14)
carrying value at the beginning of
year
additional provisions
utilised during the year
carrying value at the end of
year
restatedR’000 R’000 R’000 R’000
NSDS IIINSA Ministerial 3 212 332 (3 212) 332 Constituency Capacity Building 3 212 332 (3 212) 332
Government Priorities 546 757 396 577 (546 757) 396 577 New Growth Path 75 135 124 136 (75 135) 124 136 Industrial Policy Action Plan 6 384 11 407 (6 384) 11 407 Rural Development 19 849 24 615 (19 849) 24 615 Education and Health 472 2 045 ( 472) 2 045 Justice and Crime prevention 38 484 17 165 (38 484) 17 165 Co-operatives and Small Enterprises 44 103 28 997 (44 103) 28 997 Public Sector Capacity 362 330 188 212 (362 330) 188 212
DG Priorities 18 468 6 472 (18 468) 6 472 Worker Education 1 208 1 670 (1 208) 1 670 Skills System Capacity Building 6 690 4 251 (6 690) 4 251 DHET Projects for Academia, Research and Development 10 570 551 (10 570) 551
Skills Infrastructure 25 807 35 350 (25 807) 35 350 Public Delivery Infrastructure 17 637 30 238 (17 637) 30 238 Community Education Centres 8 170 5 112 (8 170) 5 112
Total 594 244 438 731 (594 244) 438 731
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS18. prOVisiOns (cOntinued)
18.1 prOVisiOn fOr skills deVelOpMent grant expenditure (cOntinued)
Objectives (2012/13)Carrying value
at the beginning of year
Additional provisions
Utilised during the year
Carrying value at the end of
yearRestated Restated
R'000 R'000 R'000 R'000NSDS IIINSA Ministerial - 3 212 - 3 212
NSA Constit Capacity Building - 3 212 - 3 212
Government Priorities 115 311 546 757 (115 311) 546 757 New Growth Path 74 537 75 135 (74 537) 75 135 Industrial Policy Action Plan 1 156 6 384 (1 156) 6 384 Rural Development 27 675 19 849 (27 675) 19 849 Education and Health 1 060 472 (1 060) 472 Justice and Crime prevention 3 390 38 484 (3 390) 38 484 Co-operatives and Small Enterprises 7 493 44 103 (7 493) 44 103 Public Sector Capacity - 362 330 - 362 330
DG Priorities 11 335 18 468 (11 335) 18 468 Worker Education 6 1 208 (6) 1 208 Skills System Capacity Building 6 617 6 690 (6 617) 6 690 Training lay-off 1 871 - (1 871) - Academia, Research and Development 2 841 - (2 841) - DHET Projects - 10 570 - 10 570
Skills Infrastructure - 25 807 - 25 807 Public Delivery Infrastructure - 17 637 - 17 637 Community Education Centres 68 8 170 (68) 8 170
NSDS II 42 347 - (42 347) - Critical Skills Support 2 707 - (2 707) - Industry Support Programme 3 340 - (3 340) - Discretionary and Innovation 1 402 - (1 402) - Strategic Projects 34 898 - (34 898) -
Total 168 993 594 244 (168 993) 594 244
As at 31 March 2014, a provision for skills development grant expenditure amounting to R438,731 million (2013: R606,831 million) was recognised. Provision for skills development grant expenditure is estimated on an annual basis. For purposes of the provision calculations management deems the skills development activities to be rendered equally over the original contract term. These estimates are based on the remaining portion of the contract for a specific year which has not been invoiced/claimed by the training providers. The provisions recognised for the relevant financial year is deducted from the remaining contractual commitments.
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS
2013/14 2012/13Notes R’000 R’000
18. prOVisiOns (cOntinued)
18.2 prOVisiOn fOr leVies less than threshOld
Balance at the beginning of the year 7 644 17 286 Levies less than threshold provision realised for the year (4 022) (9 642)
Closing carrying amount 3 622 7 644
18.3 perfOrMance bOnus prOVisiOn
Balance at the beginning of the year 504 425 Performance bonus provision unutilised (449) - Performance bonus paid during the year (55) (425)Performance bonus provision for the year 697 504
Closing carrying amount 697 504
As at 31 March 2014, the performance bonus provision amounting to R697 000 (2013: R504 000) was recognised.
Performance bonuses accrue to staff on an annual basis subject to the achievement of predetermined performance standards. The provision is an estimate of the amount due to staff in the service of the NSF at the reporting date.
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ANNUAL FINANcIAL STATEmENTS • for the year ended 31 March 2014
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
2013/14 2012/13Notes R’000 R’000
19. recOnciliatiOn Of net cash flOw frOM Operating actiVities tO net surplus/(deficit)
Netsurplus/(deficit)asperStatementofFinancialPerformance 777 103 34 580 Adjusted for non-cash items:
Depreciation 287 22 Increase/(decrease) in provisions:
Relating to employment 471 312 Relating to impairment (5 180) (16 777)Relating to grant disbursement provisions (155 513) 552 612 Relating to levy provisions 2 & 18.2 (4 022) (9 642)
Adjusted for items separately disclosed:Finance income (356 893) (389 518)
Adjusted for working capital changes: (1 003 715) (523 954)(Increase)/decrease in trade and other receivables (595 177) (56 645)(Increase)/decrease in deferred expenditure (569 295) (517 462)Increase/(decrease) in trade and other payables 160 757 50 153
Cash generated from operations (747 462) (352 365)
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS
20. cOMMitMents and earMarked funds
As at year-end the NSF has committed and earmarked its entire reserves of R8,462 billion towards skills development projects.
The National Skills Fund’s mandate is to fund skills development as outlined in the Skills Development Act. Hence, the nature of the Fund is developmental and not profit-driven. The Fund’s purpose is not to accumulate large reserves for investment, but to put its funds to effective use towards skills development and thereby contribute towards unlocking the human potential of South Africa’s citizens. Since the dawn of the NSDS III, the National Skills Fund’s performance in skills development grants disbursements has increased consistently and significantly. The National Skills Fund started to put both its annual income and accumulated reserves to effective use towards funding skills development. The NSF’s improved performance can be clearly noted through its high level of commitments towards skills development.
2013/14Notes R’000
tOtal capital and reserVes as at year-end 8 461 792
cOMMitted and earMarked tOwards:
Approved and contracted projects 20.1 & 20.5 7 861 462 Approved, not yet contracted projects 20.2 432 750 Earmarked for recommended projects 20.3 764 373 Earmarked for constructive annual recurring commitments 20.4 2 273 740
Total future expenditure 11 332 325
OVercOMMitMent ** 2 870 533
** The NSF will be able to meet its commitments as it becomes due through effective cash flow management.
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS20. cOMMitMents (cOntinued)
20.1 Approved and contracted projects are commitments where the NSF has a contractual obligation to fund the skills development projects or administrative projects. With a contractual obligation there is a written agreement with specific terms between the NSF and the third party, whereby the third party undertakes to perform certain deliverables as outlined in the agreement. Performance on these deliverables will obligate the NSF to make payment.
20.2 Approved, not yet contracted projects, are skills development projects that have been approved by the Director General of Higher Education and Training, but have not yet been contracted at year-end. Contracting will take place subsequent to approval after year-end.
20.3 Earmarked for recommended projects, are skills development projects that have been recommended to the Director General of Higher Education and Training for approval before year-end. Approval and contracting will take place after year-end.
20.4 Fund earmarked for constructive annual recurring commitments are commitments whereby the NSF commits funds annually towards ongoing skills development projects. Due to this established pattern of past practice the NSF has created a valid expectation on the part of the third parties, that it will continue to fund these skills development projects, until the end of the NSDS III period. Constructive commitment towards these ongoing skills development projects consist of:
2013/14R’000
1. Commitment towards bursaries* 1 082 514 2. Commitment towards training of workers under the Expanded Public Works Programme* 240 385 3. Commitment towards training of workers under the dti Monyetla Programme* 155 690 4. Commitment towards National Artisan Development* 520 183 5. Commitment to support the Human Resource Development Council of South Africa 137 006 6. Commitment to support the National Skills Authority 137 962
2 273 740
* These commitments are limited toward the NSDS III strategic period and are expected to increase annually by inflation, currently estimated at 5.9%. Although the commitments above are limited to the NSDS III period, it can be reasonably expected that the commitments may continue during NSDS IV.
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS2013/14 2012/13
RestatedNotes R’000 R’000
20. cOMMitMents (cOntinued)
20.5 expenditure cOntracted fOr at balance sheet date, which will be financed thrOugh Ordinary trading OperatiOns, but nOt recOgnised in the financial stateMents is as fOllOws:
NSDS IIINSA Ministerial 38 662 21 326
Constituency Capacity Building 5 413 10 071 National Public Dialogue and Advocacy 4 493 7 925 Skills Marketing and Communication 4 422 - Provincial Skills Development Forums 1 649 - Capacity Building 3 598 3 330 Good Practice in Skills Development 150 - Skills Legislation Research and Review 18 937 -
Government Priorities 3 457 677 4 134 204 New Growth Path 488 128 836 262 Industrial Policy Action Plan 301 503 22 860 Rural Development 604 641 444 341 Education and Health 85 257 2 724 Justice and Crime Prevention 1 136 124 063 Co-operatives, Small Enterprises and NGO’s 274 679 357 968 Public Sector Capacity 1 702 333 2 345 986
DG Priorities 1 274 420 734 731 Worker Education 22 310 14 276 Skills System Capacity Building 60 279 72 167 Training Lay-off Scheme 14 851 5 550 Bursaries 632 394 68 121 DHET Projects for Academia, Research and Development 544 586 574 617
Skills Infrastructure 3 061 401 532 257 Public Delivery Infrastructure 3 043 075 488 209 Community Education Centres 18 326 44 048
HRDSA 29 302 49 134 Research 29 302 49 134
Administrative commitments - 2 759
Total 7 861 462 5 474 411
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS21. financial instruMents - financial risk ManageMent
Exposure to currency, commodity, interest rate and credit risk arise in the normal course of the operations. This note presents information about the exposure to each of the above risks, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout these financial statements.
Fair values
Set out below, is a comparison by class of the carrying amounts and fair value of the financial instruments.
carrying amount fair value
R’000 R’000Financial assets
2014
Cash and cash equivalents 1 161 912 1 161 912 Financial assets at fair value through surplus/(deficit) 5 797 841 5 797 841 Trade and other receivables 646 705 646 705
7 606 458 7 606 458
2013
Cash and cash equivalents 4 845 4 845 Financial assets at fair value through surplus/(deficit) 7 346 649 7 346 649 Trade and other receivables 46 348 46 348
7 397 842 7 397 842
Financial liabilities
2014
Trade and other payables 1 006 604 1 006 604 1 006 604 1 006 604
2013
Trade and other payables 845 569 845 569 845 569 845 569
The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation.
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS21. financial instruMents - financial risk ManageMent (cOntinued)
The following methods and assumptions were used to estimate the fair values:
Cash and cash equivalentsCash and cash equivalents comprise of cash on hand and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value. The carrying amount of cash and cash equivalents approximate fair value due to the relatively short-term maturity of these financial assets.
Financial assets at fair value through surplus/(deficit)Fair value of financial assets is derived from quoted market prices in active markets, if available.
Trade and other receivablesTrade and other receivables are subsequently measured at amortised cost using the effective interest rate method, less any impairment losses. The carrying amount of accounts receivable, net of allowances for bad debt, approximates fair value due to the relatively short-term maturity of these financial assets.
Trade and other receivablesTrade and other payables are stated at amortised cost, which approximates their fair value due to the relatively short-term maturity of these financial liabilities.
Fair value hierarchyThe NSF uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: Quoted (unadjusted) prices in active markets for identical assets and liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as price) or indirectly (i.e., derived from prices).
Level 3: Techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.
As at 31 March 2014, NSF held the following financial instruments measured at fair value:
level 1 level 2 level 3 R’000 R’000 R’000 R’000
Investments with the Public Investment Corporation (PIC) 5 797 841 5 797 841 - - 5 797 841 5 797 841 - -
During the reporting period ending 31 March 2014, there were no transfers between level 1 and level 2 fair value measurements.
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS
21. financial instruMents - financial risk ManageMent (cOntinued)
As at 31 March 2013 NSF held the following financial instruments measured at fair value:
Level 1 Level 2 Level 3 R’000 R’000 R’000 R’000
Investments with the Public Investment Corporation (PIC) 7 346 649 7 346 649 - - 7 346 649 - 7 346 649 - -
During the reporting period ending 31 March 2013, there were no transfers between level 1 and level 2 fair value measurements.
credit risk
Financial assets, which potentially subject NSF to concentrations of credit risk, consist primarily of cash and cash equivalents, investments and accounts receivable. Credit risk arises from the risk that a counterparty may default or not meet its obligations timeously.
NSF management limits its treasury counter-party exposure by only dealing with well-established financial institutions approved by National Treasury through the approval of their investment policy in terms of the Treasury Regulations.
Credit risk with respect to levy paying employers is limited due to the nature of the income received. NSF does not have any material exposure to any individual or counter-party. NSF’s concentration of credit risk is limited to the industry in which the NSF operates. No events occurred in the industry during the financial year that may have an impact on the recovery of trade and other receivables.
Before training advances are paid to service suppliers, provider vetting, as well as site visits, are conducted by the NSF. A list of successful providers are compiled and approved by the Project Grants Committee (PGC) prior to the disbursement of any funds. The risk of non-performance by these counter parties are also mitigated through the application of a reconciliation process which initiates the clearing of an outstanding provider advance before a second advance will be granted.
The carrying amount of the financial assets represent the maximum credit exposure. The maximum exposure to credit risk as at 31 March 2014 :
rated non-rated totalR’000 R’000 R’000
Cash and cash equivalents 1 161 912 1 161 912 Investments 5 797 841 5 797 841 Trade and other receivables 646 705 646 705
Total 6 444 546 1 161 912 7 606 458
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS21. financial instruMents - financial risk ManageMent (cOntinued)
liquidity risk
Liquidity risk is the risk of the NSF not being able to meet its obligations as they fall due. The NSF manages the liquidity risk through proper management of working capital, capital expenditure and actual vs. forecasted cash flows. Adequate reserves and liquid resources are also maintained.
Forecast Liquidity reserve as of 31 March 2014 is as follows:
2014 2015 2016R’000 R’000 R’000
Opening balance for the period 6 959 754 4 705 664 4 775 883 Operating proceeds 3 247 890 3 385 723 3 771 223 Operating outflow (5 855 206) (3 577 762) (3 296 119)Cash flow from investments 353 226 262 258 198 580
Closing balance for the period 4 705 664 4 775 883 5 449 567
The table below analyses the financial liabilities that will be settled on net basis into the relevant maturity groupings based on the remaining period at financial statement date to the contractual maturity date:
less than 1 year total
At 31 March 2014 R’000 R’000
Trade and other payables 1 006 604 1 006 604 1 006 604 1 006 604
Less than 1 year Total
At 31 March 2013 R’000 R’000
Trade and other payables 845 569 845 569 845 569 845 569
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS21. financial instruMents - financial risk ManageMent (cOntinued)
Market risk
Interest rate sensitivity analysis
Financial assets
NSF is sensitive to the movements in the money market repo rate which is the primary rate to which the investment portfolios are exposed. The rates of sensitivity are based on management’s assessment of possible changes to the interest rates and is formulated on a 100 basis point movement.
If the weighted average interest rate as at 31 March 2014 had been 100 basis higher or lower the interest income would have been affected as follows:
increase/decrease in basis point
effect on the surplus/deficit
R’0002014Financial assetsInvestments - PIC +100 65 918
-100 (65 918)
Increase/Decrease in basis point
Effect on the surplus/deficit
R’0002013Financial assetsInvestments - PIC +100 65 918
-100 (65 918)
Foreign exchange risk
NSF does not initiate any transactions with international parties and is therefore not exposed to any exchange risk due to currency fluctuations. All transactions are denominated in South African Rand with local vendors.
Price Risk
NSF is exposed to equity securities price risk because of investments held and classified as financial assets at fair value through surplus/(deficit) on the Statement of Financial Position. These financial assets are classified as held for trade. NSF is not exposed to commodity price risk.
To manage its price risk arising from equity securities NSF diversifies its portfolio with the Public Investment Corporation (PIC). Diversification of the portfolio is done in accordance with limits set and agreed with PIC.
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS21. financial instruMents - financial risk ManageMent (cOntinued)
Cash flow and fair value interest rate risk
As NSF has significant interest bearing assets, the revenue and operating cash flows are substantially depended on changes in market interest rates. As NSF does not have significant interest bearing liabilities, the expenses and cash flows are not substantially dependent on changes in market interest rates.
effective interest rate
subject to interest rate movement:
floating
non-interest bearing total
Year ended 31 March 2014 % R’000 R’000 R’000
Currentfinancialassets 5.32% 5 797 841 3 617 234 5 797 841 Cash and cash equivalents N/A 1 161 912 1 161 912Investments 5.32% 5 797 841 5 797 841 Trade and other receivables N/A 646 705 646 705
Current Liabilities - 1 006 604 1 006 604 Trade and other payables N/A - 1 006 604 1 006 604
Effective interest rate
Subject to interest rate movement:
Floating
Non-interest bearing
Total R’000
% R’000 R’000 R’000Year ended 31 March 2013Currentfinancialassets 5.51% 7 346 649 7 449 035 7 397 842 Cash and cash equivalents N/A - 4 845 4 845 Investments 5.51% 7 346 649 - 7 346 649 Trade and other receivables N/A - 46 348 46 348
Currentfinancialliabilities - 845 569 845 569 Trade and other payables N/A - 845 569 845 569
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS
2013/14 2012/13
Notes R’000 R’000
22. cOntingent liabilities
The following contingent liabilities exist:
Legal claims instituted against the NSF 22.1 1 739 1 808
Application to retain accumulated surplus as at year-end 22.2 8 461 792 7 684 686
SERVICE SETA creditor 11 312
ESETA creditor 1 236
22.1 legal claiMs instituted against the nsf
The legal claims instituted against the National Skills Fund relates to five cases against services providers who rendered skills development training on behalf of the Fund. These claims relates to alleged breach of contract by the NSF. The legal processes is still ongoing to determine the final outcome of the claims.
22.2 applicatiOn tO retain accuMulated surplus as at year-end
The NSF will be applying for the retention of the 31 March 2014 accumulated surplus in terms of section 53(3) of the PFMA from National Treasury during the first quarter of the 2014/15 financial year. The accumulated surplus as at year-end is therefore disclosed as a contingent liability until the approval has been obtained.
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS
2013/14 2012/13Notes R’000 R’000
23. cOntingent assets
Legal claims instituted by NSF 23.1 663 411 Uncommitted surplus funds of SETAs to be transferred to the NSF 23.2 1 651 120 -
Total 1 651 783 411
23.1 legal claiMs instituted by nsf
The legal claims instituted by the National Skills Fund relates to six cases against services providers who rendered skills development training on behalf of the Fund. These claims relates to service providers failing to deliver the service/training as per contract. The relevant state attorneys have issued summons to the respective service providers. The legal processes is still ongoing to determine the final outcome of the claims.
23.2 uncOMMitted surplus funds Of setas tO be transferred tO the nsf
On 3 December 2012, the Minister of Higher Education and Training published the new SETA grant regulations in terms section 36 of the Skills Development Act, 1998 (No 97 of 1998), in Government Gazette No. 35940 to be effective from 1 April 2013. In terms of new SETA grant regulation 3(12), the uncommitted surpluses of the SETAs as at each year-end must be paid over by each SETA to the National Skills Fund by 1 October of each year. However, the SETA is allowed in terms of grant regulation 3(11) to retain a maximum of 5% of the uncommitted surpluses to be carried over to the next financial year. The SETA may also in terms of SETA grant regulation 3(12) submit a business case to the Minister requesting approval to carry over the surpluses where exceptional circumstances have led to projected under-spending.
Great uncertainty exists over the a reasonable estimate for the contingent asset to be received from the SETA uncommitted surpluses as at the current year-end, due to reasonably accurate information not being readably available with regards each SETA’s uncommitted surplus and with regards to the specific interpretation of the new SETA grant regulations. Also, no information is available as to whether the Minister of Higher Education and Training will allow the SETAs to retain their surpluses.
The SETAs’ uncommitted surpluses can only be more reasonable estimated once the audit process have been completed for each SETA closer to the end of July of each year and once an indication has been obtained as to whether the Minister of Higher Education and Training will grant the SETAs approval to retain their surpluses. However, the contingent asset was estimated based on the prior year uncommitted surpluses of the SETAs on the assumption that the Minister will not approve any SETA to retain their surpluses.
24. related party transactiOns
The National Skills Fund reports to the Minister of Higher Education and Training. Accordingly the NSF transact with a number of related parties within the Department of Higher Education and Training.
All related party transactions that occurred during the current financial year were at arm’s-length and in the normal course of business, in accordance with the mandate of the National Skills Fund.
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS
24. related party transactiOns (cOntinued)
24.1 realatiOnships
Department Department of Higher Education and Training
Advisory body within the Department National Skills Authority
Entities under the Department• Qualification Council for Trades and Occupations
(QCTO)• Education Training and Development Practices SETA
(EDTP SETA)• Manufacturing, Engineering and Related Services SETA
(MERSETA)• South African Qualifications Authority (SAQA) • Energy and Water SETA (EWSETA) • Media, Information and Communication Technologies
SETA (MICT SETA)• National Student Financial Aid Scheme (NSFAS) • Finance and Accounting Services SETA (FASSET) • Mining Qualifications Authority (MQA)• Agricultural SETA (AGRISETA) • Food and Beverages SETA (FOODBEV) • Public Sector SETA (PSETA)• Bank SETA • Fibre Processing and Manufacturing SETA (FP&M SETA) • Safety and Security SETA (SASSETA)• Culture, Arts, Tourism and Hospitality SETA (CATHSETA) • Health and Welfare SETA (HWSETA) • Services SETA• Construction Education and Training Authority (CETA) • Insurance SETA (INSETA) • Transport Education and Training Authority (TETA)• Chemical Industries Education and Training Authority
(CHIETA)• Local Government SETA (LGSETA) • Wholesale and Retail SETA (W&RSETA)
TvET Colleges under the Department• Motheo TVET College • False Bay TVET College • Northern Cape Rural TVET College • Vuselela TVET College • South Cape TVET College • Western Gauteng TVET College• Taletso TVET College • West Coast TVET College • Tswane South TVET College• Orbit TVET College • Majuba TVET college • Ikhala TVET College• South West Gauteng TVET College • Umgungundlovu TVET College • Ingwe TVET College• Ekurhuleni East TVET College • Elanzeni TVET College • Central Johannesburg TVET College• Ekurhuleni West TVET College • Elangeni TVET College • Lephalale TVET College• Sekhukhune TVET College • Mnambithi TVET College • Northern Cape Urban TVET College• Vhembe TVET College • Thekwini TVET College • East Cape Midlands TVET College• Mopani South East TVET College • Mthashana TVET College • Lovedale TVET College• Waterberg TVET College • Nkangala TVET College • Esayidi TVET College• Sedibeng TVET College • Gert Sibande TVET College • Coastal TVET College• Capricorn TVET College • Umfolozi TVET College • King Sabata TVET College• Maluti TVET College • Buffalo City TVET College • Port Elizabeth TVET College• Goldfields TVET College • Flavius Mareka TVET College• Boland TVET College • Letaba TVET College• North Link TVET College • King Hintsa TVET College• College of Cape Town TVET College • Tswane North TVET College
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS24. related party transactiOns (cOntinued)
24.1 relatiOnships (cOntinued)
Members of senior management• Executive Officer• Chief Financial Officer• Director Strategic Projects• Director Skills Support Program• Director Provincial Operations
24.2 related party transactiOns and balances - Operating expenses
Operating expenses
accruals balance at
31 March 2014 R'000 R'000
DHET - Shared Services 6 873 3 729 DHET - Reimbursed Goods and Services N/A 16 172
6 873 19 901
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS
24. related party transactiOns (cOntinued)
24.3 related party transactiOns and balances - skills deVelOpMent prOjects
related party
income from setas towards tVet college infrastructure development
Other income - interest received
skills development
grant disbursement
expense
accruals balance at 31 March
2014
provision for skills
development expense
balance at 31 March
2014
deferred expense
balance at 31 March
2014
receivables balance at 31 March
2014
R’000 R’000 R’000 R’000 R’000 R’000 R’000Department of Higher Education and Training 371 438 121 843 64 852 National Skills Authority 10 994 1 903 National Student and Financial Aid Scheme (NSFAS) 17 156 1 059 120 708 920 596 381 South African Qualification Authority (SAQA) 204 37 064 Quality Council for Trades Occupations (QCTO) - 280 280 280 AGRISETA 24 844 13 328 3 421 Bank SETA 71 827 CATHSETA 24 543 CETA 49 696 CHIETA 43 170 ETDP SETA 33 128 54 EWSETA 23 221 FASSET 39 272 FOODBEV 25 087 245 FP&M SETA 29 869 6 688 HWSETA 31 748 INSETA 33 924 LGSETA 41 517 10 403 MERSETA 114 530 600 (432) 551 1 543 MICT SETA 60 590 (1)MQA 88 655 3 326 PSETA 355 8 107 1 969 5 204 28 216 SASSETA 21 724 Services SETA 162 786 (32 095) 4 974 TETA 55,831 W&RSETA 128 847 False Bay TVET College 42 18 678 5 443 10 514 374
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS
24. related party transactiOns (cOntinued)
24.3 related party transactiOns and balances - skills deVelOpMent prOjects (cOntinued)
related party
income from setas towards tVet college infrastructure development
Other income - interest received
skills development
grant disbursement
expense
accruals balance at 31 March
2014
provision for skills
development expense
balance at 31 March
2014
deferred expense
balance at 31 March
2014
receivables balance at 31 March
2014
R’000 R’000 R’000 R’000 R’000 R’000 R’000Umgungundlovu TVET College 83 21 038 2 498 2 498 Gert Sibande TVET College 20 321 4 796 4 796 Motheo TVET College 17 869 29 574 29 574 Vuselela TVET College 16 400 410 5 000 Taletso TVET College 1 719 5 564 5 564 Orbit TVET College (10 109) 1 12 204 South West Gauteng TVET College 410 (8 896) 2 186 16 122 Ekurhuleni East TVET College 4 (6 325) 21 14 072 Ekurhuleni West TVET College 616 (10 151) 4 387 29 198 Sekhukhune TVET College 185 (949) 3 419 8 930 Vhembe TVET College 43 45 323 2 230 2 230 Mopani South East TVET College 11 18 428 5 471 5 471 Waterberg TVET College 122 7 732 2 269 4 913 Sedibeng TVET College 121 (3 883) 544 4 548 Capricorn TVET College 394 29 710 1 638 1 638 Maluti TVET College (6 009) 17 309 Goldfields TVET College 11 636 1 222 1 222 Boland TVET College 133 28 067 8 539 8 539 North Link TVET College 67 48 686 7 797 11 923 College of Cape Town TVET College 219 24 170 3 833 7 424 South Cape TVET College 35 9 793 4 264 8 076 West Coast TVET College 105 16 141 5 855 11 867 Majuba TVET college 2 26 251 9 393 9 393 Elanzeni TVET College 3 669 3 669 Elangeni TVET College 439 16 717 6 254 6 254 Mnambithi TVET College 158 (8,161) 693 16,240 Thekwini TVET College 448 11,720 735 735
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS
24. related party transactiOns (cOntinued)
24.3 related party transactiOns and balances - skills deVelOpMent prOjects (cOntinued)
related party
income from setas towards tVet college infrastructure development
Other income - interest received
skills development
grant disbursement
expense
accruals balance at 31 March
2014
provision for skills
development expense
balance at 31 March
2014
deferred expense
balance at 31 March
2014
receivables balance at 31 March
2014
R’000 R’000 R’000 R’000 R’000 R’000 R’000Mthashana TVET College 1 18 747 2 250 2 250 Nkangala TVET College 50 1 526 1 529 1 529 Umfolozi TVET College 4 67 134 20 963 20 963 Buffalo City TVET College 117 3 124 978 4 164 Flavius Mareka TVET College - 11 462 Letaba TVET College 163 (5 327) 912 12 323 King Hintsa TVET College 21 (4 625) 273 15 230 Tshwane North TVET College 19 (20 478) 348 20 846 Northern Cape Rural TVET College 504 20 565 13 737 17 915 Western Gauteng TVET College 1 (8 227) 6 14 966 Tshwane South TVET College 22 4 987 736 3 592 Ikhala TVET College 43 2 108 839 1 086 Ingwe TVET College 69 3 975 33 33 Central Johannesburg TVET College 45 (6 776) 698 13 233 Lephalale TVET College 145 (3 080) 653 3 878 Northern Cape Urban TVET College 5 18 916 988 988 East Cape Midlands TVET College 378 6 707 11 997 24 919 Lovedale TVET College 3 018 431 431 Esayidi TVET College (12 480) 4 24 649 Coastal KZN TVET College 651 22 359 8 313 8 313 King Sabata TVET College 29 3 179 642 642 Port Elizabeth TVET College 1 10 616 1 1
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS
24. related party transactiOns (cOntinued)
24.4 key ManageMent persOnnel
number of individuals 2013/14 2012/13
R’000 R’000Shorttermemployeebenefits
Postlevel14:ExecutiveOfficer 1Basic salary and social contributions 681 644 Bonuses and performance related payments - 87 Other short term employee benefits 323 285
Postlevel13:ChiefFinancialOfficer 1Basic salary and social contributions 645 154 Bonuses and performance related payments - - Other short term employee benefits 155 34
Post level 13: Director Strategic Projects 1Basic salary and social contributions 656 596 Bonuses and performance related payments - - Other short term employee benefits 323 243
Post level 13: Director Skills Support Program 1Basic salary and social contributions 749 704 Bonuses and performance related payments - - Other short term employee benefits 124 100
Post level 13: Director Provincial Operations 1Basic salary and social contributions 655 545 Bonuses and performance related payments - 42 Other short term employee benefits 120 67
Total 4,431 3,501
Personnel remuneration is paid by the Department of Higher Education and Training and claimed back as part of the 10% administration fee. No transactions were conducted with any family members of key management personnel during the current or previous period under review.
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS25. defined cOntributiOn plan
The NSF provides for retirement benefits for all its permanent employees through a defined contribution scheme to the GEPF that is subject to the Pension Funds Act, 1956 as amended. In terms of the Pension Funds Act, the fund is not required to be actuarially valued.
The NSF’s liability is limited to its considerations made.
2013/14 2012/13Notes R’000 R’000
Contributions for the year included in employee cost 8 2 140 1 529
26. change in accOunting estiMate
As defined in GRAP 3, a change in an accounting estimate is an adjustment of the carrying amount of an asset or liability, or the amount of periodic consumption, resulting from reassessing the present status of, and the expected future benefits and obligations associated with, the asset or the liability. Changes in accounting estimates result from new information or new developments and accordingly are not corrections of errors.
Due to the nature of NSF operations, registered project claims undergo a verification process before the actual payments are made. During the verification process the validity and accuracy of the claims are confirmed, recalculated and communicated with the training providers. Changes identified through this process are accounted for as a change in accounting estimate in terms GRAP 3 in relation to previous year registered accruals included in trade and other payables.
26.1 The impact of these adjustments on the Statement of Financial Performance and the Statement of Financial Position for the year ending 31 March 2014 are as follows:
grant disburseMents - 5 906
Public Sector Capacity - 10 Skills System Capacity Building - 6 Justice and Crime Prevention - 105 Training Lay-off Scheme - 899 Discretionary and Innovation - 31 Bursaries - 4 908 Industrial Policy Action Plan - (74) New Growth Path - 25 Co-operatives, Small Enterprises and NGO’s - (28) ABET - 24
The effect of the changes have no impact on the opening balance of deferred expenditure (2013: decrease from R664,6 million to R658,547 million), no impact on the opening balance of trade and other receivables (2013: decrease from R 2,439 million to R2,415 million) and no impact on the opening balance of trade and other payables from non-exchange transactions (2013: decrease from R794,295 million to R794,124 million).
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS26. change in accOunting estiMate (cOntinued)
26.2 During the prior financial year it became evident that the PSETA will be able to provide the NSF with appropriate supporting evidence to substantiate the expenditure incurred under the PSETA project previously funded by the NSF. This is due to substantial efforts from the PSETA to obtain the required information during the current financial year. Once the expenses are verified with the new supporting evidence, the full debtor balance will no longer be refundable by the PSETA to the NSF. The changes identified through the new information from PSETA are accounted for as a change in accounting estimate in terms of GRAP 3 in relation to previous year’s SETA debtors and the related provision for impairment included in trade and other receivables. Changes identified through this verification process are also accounted for as a change in accounting estimate in terms GRAP 3 in relation to previous year registered accruals included in trade and other payables.
The impact of these adjustments on the Statement of Financial Performance and the Statement of Financial Position for the year ending 31 March 2014 are as follows:
2013/14 2012/13Notes R’000 R’000
Other incOMe (nOn-exchange) 16.3 - 16 777 Provision for impairment reversed - 16 777
The effect of the changes have no impact on the opening balance of deferred expenditure (2013: no effect), no effect on the opening balance of trade and other receivables and in reversal of impairment as indicated above (2013: R3,827 million increase to R77,249 million).
27. priOr periOd cOrrectiOn
27.1 cOMMitMents incOMplete and inaccurate in the priOr periOd
The following prior period errors occurred with regards to commitments:
1. Reductions in skills development project budgets in the prior year were not taken into consideration in determining the commitment balance at year-end.
2. Additional commitments in the prior year were not taken into consideration in determining the commitment balance at year-end.
3. Deferred expenses, debtors and provisions were incorrectly recognised with regards to projects that have closed or were inaccurately calculated.
The net effect of the above errors resulted in the commitment balance being understated by R55,771 million. The prior period commitment balance was restated to reflect the correct commitment balance as at the prior period year-end. This prior period error does not impact on the Statement of Financial Position, Statement of Financial Performance and Cash Flow Statement.
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS
27. priOr periOd cOrrectiOn (cOntinued)
27.2 prOVisiOn fOr skills deVelOpMent grants expenditure inaccurately calculated
The provision for skills development grants expenditure was inaccurately calculated in the 2013 financial year resulting in the provision and the related grants disbursement expense being overstated by R22,068 million.
27.3 incOrrect classificatiOn between deferred expenditure On skills deVelOpMent grant disburseMents and trade and Other receiVables frOM nOn-exchange transactiOns
Receivables and deferred expenditure relating to skills development projects amounting to R13,247 million (net) were incorrectly classified between deferred expenditure and trade and other payables in the 2013 financial year.
27.4 deferred expenditure and receiVables relating tO skills deVelOpMent prOjects were inaccurately and incOrrectly recOgnised
Deferred expenditure and receivables relating to skills development projects amounting to R17,658 million (net) were inaccurately and incorrectly recognised in the 2013 financial year resulting in the deferred expenditure and receivables (cumulative) being overstated by R17,658 million and the related grants disbursement expense being understated by R17,658 million.
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS27. priOr periOd cOrrectiOn (cOntinued)
27.5 iMpact Of priOr periOd cOrrectiOn On the financial stateMents
2012/13Notes R’000
STATEMENT OF FINANCIAL PERFORMANCE
expenses 27.2 & 27.4 2 659 921 As originally stated 2 664 331 Prior period correction (4 410)
skills deVelOpMent grant disburseMents 27.2 & 27.4 2 575 125 As originally stated 2 579 535 Prior period correction (4 410)
net surplus fOr the year 27.2 & 27.4 38 989 As originally stated 34 579 Prior period correction 4 410
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS27. priOr periOd cOrrectiOn (cOntinued)
27.5 iMpact Of priOr periOd cOrrectiOn On the financial stateMents (cOntinued)
2012/13Notes R’000
STATEMENT OF FINANCIAL POSITION
current assets 27.3 & 27.4 9 132 545 As originally stated 9 150 203 Prior period correction (17 658)
deferred expenditure On skills deVelOpMent grant disburseMents 27.3 & 27.4 1 734 705 As originally stated 1 721 463 Prior period correction 13 242
trade and Other receiVables frOM nOn-exchange transactiOns 27.3 & 27.4 46 349 As originally stated 77 249 Prior period correction (30 900)
tOtal assets 9 132 647 As originally stated 9 150 305 Prior period correction (17 658)
current liabilities 27.2 1 447 961 As originally stated 1 470 029 Prior period correction (22 068)
prOVisiOns 27.2 602 392 As originally stated 624 460 Prior period correction (22 068)
capital and reserVes 27.2 & 27.3 & 27.4
7 684 686
As originally stated 7 680 276 Prior period correction 4 410
accuMulated surplus 27.2 & 27.3 & 27.4
7 684 688
As originally stated 7 680 278 Prior period correction 4 410
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS2013/14 2012/13
R’000 R’00028. Operating lease rentals
NSF as lesseeFuture lease payments under non-cancellable operating leases:
Photocopy machines
Due within one year 34 56Due within two to five years 54 5Later than five years - -
88 61
Minimum lease payments recognized as an expense during the period amount to R79 273 (2013: R 56 404). Leased machinery are contracted for the remaining periods of one and four years, with renewal options available in certain instances.
29. eVents after the repOrting periOd
There are no material adjusting events after the reporting date.
30. nOtes tO the stateMent Of cOMparisOn Of budget against actual aMOunts
30.1 reVenue frOM nOn-exchange transactiOns
The actual revenue received from non-exchange transactions exceeded the budgeted revenue by 21.7%. The increase can be attributed to the income received from the SETAs earmarked towards the TVET college infrastructure development initiative that was not budgeted for in the current financial year.
30.2 reVenue frOM exchange transactiOns
The actual revenue received from exchange transactions remained in line with the budgeted revenue. The actual revenue is 2% slightly below the budget revenue, which is expected due to the decline in the NSF’s investments as a result of the NSF’s high commitments towards funding skills development projects.
30.3 skills deVelOpMent grant disburseMents
The actual skills development grant disbursements was 36.5% below budget, which can mainly be attributed to the following:
1. Delays in the appointment of construction companies to start construction on the new TVET college campuses resulted in R705,729 million (20% of budget difference) not being disbursed in the current financial year, which will be rolled over to the next financial year;
2. There has been generally slow progress on the implementation of skills development projects with the various TVET colleges, resulting in R361,281 million (10% of budget difference) not being disbursed in the current financial year, which will be rolled over to the next financial year;
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ANNUAL FINANcIAL STATEmENTS • for the year ended 31 March 2014
NOTES TO THE ANNUAL FINANCIAL STATEMENTS3. There has been slow progress in new commitments towards co-operatives, small enterprises, NGO’s & community training initiatives, mainly due to the NSF’s current high level
of commitments; and
4. The payment of post-graduate bursaries of R132,916 million towards the National Research Foundation occurred subsequent to year-end and not as budgeted within the current financial year (4% of budget difference).
30.4 eMplOyee cOsts
The actual employee costs are 47% below the budgeted employee costs. This is mainly due to the delay in implementing the “Project Monitoring and Evaluation Structure”, which would have entailed appointing 59 new employees. The delay was deemed necessary as a result of the listing of the National Skills Fund as a schedule 3A public entity. It is expected that the additional posts will be filled within the next two years with the implementation of the NSF’s organisational improvement and transformation initiative that the Fund is currently engaged with.
30.5 Operating expenses
The actual operating expenses are 74% below the budgeted operating expenses. This saving is driven by the lower than budgeted employee costs mainly due to the delay in implementing the “Project Monitoring and Evaluation Structure”, which would have entailed appointing 59 new employees. The delay was deemed necessary as a result of the listing of the National Skills Fund as a schedule 3A public entity. It is expected that the additional posts will be filled within the next two years with the implementation of the NSF’s organisational improvement and transformation initiative that the Fund is currently engaged with.
30.6 ManageMent fees and bank charges
The decline in management fees and bank charges is mainly due to a decline in management fees charged by the PIC on the management of investments. This is expected as the PIC’s management fees are based on the NSF’s investment balances with the PIC. As the NSF’s investments decline it is expected that the PIC management fees will also decline.
30.7 cOllectiOn cOsts tO sars
There was a saving of R65,883 million on the actual SARS collection costs for the year in comparison to the costs budgeted for the year. SARS is allowed to charge up to 2% as collection costs but have historically only charged 1%, which is the amount budgeted for. SARS invoices the NSF on a monthly basis for the actual costs incurred to collect skills development levies, which were about 0.4%.
30.8 capital expenditure
The actual capital expenditure is below budget as the capital expenditure projects (Accounting system, Payroll system, HR system, Supply Chain system, Performance Information and Management System etc) are still in the planning and design phase, and is due for roll out and implemetation within the next two financial years with the implementation of the efficiency and effectiveness improvement initiative.
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NOTES
Annual Report 2014ISBN: 978-0-621-43067-7 • RP291/2014
NATIONAL SKILLS FUND · Funding To Skill Our Nation
THE NATIONAL SKILLS FUND IS PROUDLY PART
OF THE DEPARTMENT OF HIGHER EDUCATION AND TRAININGHigher Education and TrainingDepartment:
REPUBLIC OF SOUTH AFRICA
higher education& training