2019 Free State Free State ... - Provincial Government

Annual Report for 2018-19 Financial YearFree State Gambling, Liquor and Tourism Authority


2

1. ENTITY GENERAL INFORMATION ................................................................................................ 5

2. LIST OF ABBREVIATIONS/ACRONYMS ......................................................................................... 6

3. FOREWORD BY THE CHAIRPERSON ............................................................................................. 8

4. REPORT OF THE ACCOUNTING OFFICER (CEO) ......................................................................... 10

5. STATEMENT OF RESPONSIBILITY AND CONFIRMATION OF ACCURACY FOR THE ANNUAL REPORT .................................................................................................................................. 18

6. STRATEGIC OVERVIEW .............................................................................................................. 19

6.1 VISION ............................................................................................................................... 19

6.2 MISSION ............................................................................................................................ 19

6.3 VALUES .............................................................................................................................. 19

7. LEGISLATIVE AND OTHER MANDATES ...................................................................................... 19

8. ORGANISATIONAL STRUCTURE - ............................................................................................... 21

1. AUDITOR GENERAL’S REPORT: PREDETERMINED OBJECTIVES ................................................. 24

2. OVERVIEW OF ENTITY PERFORMANCE ..................................................................................... 28

2.1 SERVICE DELIVERY ENVIRONMENT ................................................................................... 28

2.2 ORGANISATIONAL ENVIRONMENT 28

2.3 SOCIO- ECONOMIC GROWTH AND DEVELOPMENT .......................................................

2.4 KEY POLICY DEVELOPMENTS AND LEGISLATIVE CHANGES ...............................................

3. STRATEGIC OUTCOME OR IENTED GOALS .................................................................................

4. PERFORMANCE INFORMATION 32

5. CONDITIONAL GRANTS ............................................................................................................. 41

5.1. CONDITIONAL GRANTS AND EARMARKED FUNDS PAID ................................................... 41

5.2. CONDITIONAL GRANTS AND EARMARKED FUNDS RECEIVED ...........................................

41

28

28

.............................................................................................


11. AUDIT COMMITTEE REPORT ..................................................................................................... 52

INTRODUCTION ........................................................................................................................ 52

1. OVERVIEW OF HUMAN RESOURCES ......................................................................................... 52

2. HUMAN RESOURCES OVERSIGHT STATISTICS ........................................................................... 53

1. REPORT OF THE AUDITOR GENERAL ......................................................................................... 59

2. ANNUAL FINANCIAL STATEMENTS ............................................................................................ 69

3

1. INTRODUCTION ......................................................................................................................... 43

2. RISK MANAGEMENT .................................................................................................................. 43

3. FRAUD AND CORRUPTION ........................................................................................................ 44

4. MINIMISING CONFLICT OF INTEREST ........................................................................................ 44

5. CODE OF CONDUCT ................................................................................................................... 45

6. HEALTH SAFETY AND ENVIRONMENTAL ISSUES ....................................................................... 45

7. PORTFOLIO COMMITTEES ......................................................................................................... 46

8. PRIOR MODIFICATIONS TO AUDIT REPORTS ............................................................................ 46

9. INTERNAL CONTROL UNIT ......................................................................................................... 46

10. INTERNAL AUDIT AND AUDIT COMMITTEES ............................................................................. 49

4


1. ENTITY GENERAL INFORMATION

PHYSICAL ADDRESS: 111 Zastron Street Westdene

Bloemfontein 9300

POSTAL ADDRESS: PO Box 9229 Bloemfontein

9300

TELEPHONE NUMBER/S: 051 4040 300/02

EMAIL ADDRESS: [email protected] / [email protected]

WEBSITE ADDRESS: www.gla.fs.gov.za / freestatetourism.org


5

General Informa�on

2. LIST OF ABBREVIATIONS/ACRONYMS

Acronyms Description

AMKPI Asset Management Key Performance Indicator

APP Annual Performance Plan

BAS Basic Accounting System

BBBEE Broad Based Black Economic Empowerment

DESTEA Entity of Economic, Small Business, Tourism and

Environmental Affairs

EHWP Employee Health and Wellness Programme

EXCO Executive Council

FDC Free State Development Corporation

FS Free State

FSGLTA Free State Gambling Liquor & Tourism Authority

FSGLA Free State Gambling & Liquor Authority

FSGDS Free State Growth and Development Strategy

GDP Gross Domestic Product

GIAMA Government Immovable Asset Management Act

HR Human Resource

ICT Information Communication Technology

IDP Integrated Development Plan

ITC Information Technology and Communication

MEC Member of the Executive Council

MTSF Medium-Term Strategic Framework

MTEF Medium-Term Expenditure Framework

PP Procurement Plan

PMDS Performance Management Development System

PFMA Public Finance Management Act

PMG Pay Master General

SITA State Information Technology Agency

SMME Small, Medium and Micro Enterprise

SMS Senior Management Services

SRI Social Responsibility Initiatives

Stats SA Statistics South Africa


6


DTI Entity of Trade and Industry

UAMP User Asset Management Plan

VCCT Voluntary and Confidential Counselling and

Testing

LOGIS Logistics Information System

CSD Central Supplier Database

Aware.org Association for Alcohol Responsibility and

Education

DPO Designated Police Officer

DMO Designated Municipal Officer

SARGF South African Responsible Gambling Foundation

SAT South African Tourism

SANPARKS South African National Parks

RFA Request for Application

RFP Request for Proposals


7


The Board appreciates the support it received during the Incorporation

of the Free State

Tourism Authority(FSTA) and the Free State Gambling & Liquor Authority(FSGLTA)

to form

the FSGLTA. The incorporation presented significant challenges, both financially and

operationally due to the complex nature and technical aspects of such a venture, as such

,the continued mitigate some of the incorporation legacy challenges. The Board, however remains committed to ,in the next financial year ,resolving all the post incorporation issues facing the Entity .

The Board continued in its quest to effectively regulate the gambling & liquor industries in the

province, through strict regulation of gambling establishments, persons, third parties,

fairness of games and practices thus ensuring continued public confidence and trust in

lawful gambling in the Province.

The Authority remains committed to promoting sustainable and socially responsible gaming

and liquor trading through:

· The protection of the public and ensuring that our licensees adhere to strict

conditions of trade;

· The continued collaboration with Law Enforcement Agencies including the South

African Police Service(SAPS) and the National Prosecuting Agency (NPA) in

combating both illegal gambling and liquor trade.

Organisational Efficiency and Performance

The Authority operates in a tight economic environment and continued budget reductions for state institutions, as a result ,the Entity has implemented ways to optimise efficiencies and

service delivery.

3. FOREWORD BY THE CHAIRPERSON

Mr. Dhilosen PillayChairperson of the Board

8



Tourism

The tourism industry continues to inspire hope as an economic growth point and the Free

State Province has recorded an increase of 6.9% in international tourist arrivals .The

Province has seen new growth from Botswana, Netherlands, France, which are markets

outside the priority listed countries.

In the same year, the SAT Annual Provincial Performance Report has reported that the

Province has received a total of 1.3 million arrivals, with a spend of R9 billion at an average

length of stay of 10.8 nights. The Entity has noted with concern that the Province has not

performed well with regards to the domestic market and the Entity will be working at

reviewing its Marketing Strategy with

great

emphasis on improving the domestic market.

The province will continue to position events at the core

of its marketing endeavours

to

increase its share of visitor’s arrivals. The third

edition of the Free State Madeira Flower

Festival held in Parys, lion route

was a huge success

further entrenched

social cohesion,

encouraged the previously disadvantaged to venture into flower farming and placed our Big

5 Routes

value

proposition

on

the National and International pedestal.

Signature

events

remain at

the

center

of

our

domestic

drive

to

expand

our

markets,

encourage

new

visitors

to

explore and

experience

destination FreeState

The Entity wishes

to express our sincere

gratitude to the Honorable

Premier of the Province,

Hon S Ntombela,

Member of the Executive Council responsible for DESTEA

Hon

Mr.

Makalo

Mohale,

the Honorable

Chairpersons

and Members of the Portfolio Committees

for their

mentorship and guidance

as well as staff for their support

We are looking forward to the new financial year with great vigor

and resolve to making a

positive contribution

to the economic growth of the province

_________________

Mr. Dhilosen

Pillay

Board Chairperson of the Free State Gambling, Liquor

and Tourism

Authority


9


4. REPORT OF THE ACCOUNTING OFFICER

Mr Kenilworth Itumeleng Dichabe

Chief Executive Officer

Overview of the operations of the Entity:

The Entity’s purpose is to promote legally compliant, responsible, sustainable and transformed gaming and liquor industries through effective licensing, regulating and reporting on the activities of the industries, and to position the Free State Province as a tourist destination of choice.

The 2018-19 achievements;

· The Entity approved 52 Limited Pay-out Machines (LPM) sites and rolled out 188 machines.

· The Authority approved 175 registrations and refused 40 applications.

· The Authority conducted 3458 compliance inspection throughout the Province.

Free State Gambling Liquor & Tourism Authority continues to ensure public confidence in

the integrity of the gambling and liquor industries by conducting compliance inspections and

compliance audits at licensed and registered outlets.

The Entity has signed an MOU with SAT on the adoption and implementation of National

Tourism 5-in-5 strategy . The Entity’s plan is to target 1,3 million international holiday arrivals

in the next 5 years. The agreement has unlocked financial assistance to market the province

through the following:

· Above-the-line advertising;

· Production of marketing collateral;

· Drafting of a provincial Marketing Strategy.


10


Awareness campaigns conducted for the current year

Program

Program Activities

It Starts Today

§

The

programme aimed at reduction of underage drinking known as “It Starts Today” was

officially

launched

in Bloemfontein. §

Four

(4)

schools in Botshabelo

(Hohle Primary,

Pontsheng Primary, Leratong Secondary and

Ntemoseng Secondary Schools has benefited from the pilot programme.

§

The programme

included: formal curriculum, free Wi-Fi in schools, community

engagement and

awareness programme.

SAB – “Smart Drinking

Initiative” -Ella street(

Bloemfontein ) &

Jacobsdal

§ The Entity partnered with SAB to raise awareness in Mangaung and Xhariep district among

school going youth

Sisonke We Care § The Sisonke-We Care Programme initiative was aimed at soliciting youth views on underage

drinking and find solutions to curb could curb the scourge of teenage drinking.

§

The Programme used theatre or drama to showcase social challenges experienced by learners

at schools

and homes. The schools participated in a theatre competition hosted by Pacofs

§

Counselling

was

provided to schools participating in the program.

Launch of RTF

Programme §

The Pilot programme was

launched

in

Botshabelo.

§ The (RFT) Programme was

aimed at assisting

Liquor

outlets to be

business

compliant and

operate in line

with

the

Act and Regulations.

§

Outlet

owners

were

taught management ,and lifesaving

skills and were also incentivised

according to their level of compliance


11


Tourism Events hosted during

Financial Year

Event

Activities

The Free State Madeira

Flower Festival

· The

Events is a key channel to drive domestic tourism. The Festival provided huge exposure

for the FSGLTA through the continuous reinforcement of its Big 5 Route value proposition. In

addition,5

floats reinforced the province’s key marketing pillars, including history, heritage and

sports tourism.

Powerboat Festival

· It’s an annual event that was

in 2018

held as part of the flowere festival in Parys .,Lion Route

· This event is of significance, because of the element of youth development that is conditional

to its continued existence.

· More young people from the previously disadvantaged communities have been trained to pilot

speed boats since the inception of the event.

Cherry Jazz Festival

· The Cherry Jazz Festival provides geographic spread to tourism distribution in the Province.

· The event is one of the key domestic tourism

drivers that attracts Free State, Kingdom of

Lesotho, Gauteng, Eastern Cape

and other provinces

The Tourism Indaba

·

The Tourism Indaba is a premier trade show

is aimed at selling the Province to buyers who

package

the

Country as an

outbound tourism experience.

·

SMME’s within the industry

are provided with a

platform

to sell packages

that seek

to

promote

the province

through the big 5 route value proposition

12


Sales of goods and services

The implementation of the Database Management System (DBMS) will capacitate the Entity

to automate the the processing of applications to enhance revenue collection.

The Entity has incresed efforts to enhance our compliance system and internal controls with

a view to ensure the effective collection of taxes.


13


Overview of the financial results of the Entity:

Entity receipts

Entity receipts

2017/2018 2018/2019 Estimate Actual

Amount Collected (Over)/Under Collection

Estimate

Actual Amount Collected

(Over)/Under Collection

Grant received 112 247 358 112 247 358 - 108 827 000 108 827 000 - Interest received

- 289 611 289 611 - 155 791 (155 791)

Other income - 736 404 736 404 774 608 (774 608)

Total 112 247 358 113 273 373 1 026 015 108 827 000 109 757 399 (930 399)

Financial Transactions in Assets and Liabilities

Programme Expenditure

Programme Name

2017/2018 2018/2019 Final Appropriation

Actual Expenditure

(Over)/ Under Expenditure

Final Appropriation

Actual Expenditure

(Over)/Under Expenditure

Administration 43 503 045 45 253 947 (1 750 902) 53 892 071 48 685 666 5 206 405

Gambling & Liquor 30 858 381 32 100 363 (1 241 982) 25 316 650 26 003 375 (686 725)

Tourism 30 544 626 31 773 980 (1 229 354) 23 091 687 21 004 017 2 087 670

Phakisa 7 341 306

7 636 777 (295 471) 6 526 591

7 452 103 (925 511)

TOTAL 112 247 358 116 765 067 (4 517 709) 108 827 161 103 145 161 5 681 839

14


Plans

of the Entity:

1.

To host Designated Police Officer and Designated Municipal

Officer workshop aimed

at finding a lasting

working solution

for quicker reporting turnaround

time

and

strengthening the partnership between the Authority and

its key partners.

2. The process to commence with the conversion of the Liquor Licenses issued under

the Free State Liquor Act No 27 of 1989 will result in revenue enhancement through

both categorise paying the same fees levied under FSGLTA Act No 6 of 2010

estimated at R8 million per annum thus increasing the FSGLTA contribution to the

provincial fiscus. 3. Formalising the partnership with the SARGF to forge relationship that will realise

more energy being focused towards raising awareness to the scourge of problem

gambling. 4. Intensify efforts to shut down illegal online gambling operations in conjunction with

enforcement agencies, it is estimated that the surge in illegal online gambling results

in an estimated loss of R150 million to the provincial fiscus.

5. Sign MOU with Districts to forge strategic partnership.

a. Sign MOU with NTC3 to leverage from N3 product marketing.

b. Establish a fully flashed Business Events unit.

c. Upgrading of Phakisa Raceway (to bid for more motorsport events and

activities – e.g. advance driving, car testing, etc)

6. Revenue enhancement projects initiatives:

a. Rolling out of Bookmaker licences to Previously Disadvantaged Individuals

(PDIs).

b. The Authority will issue request for application for Bingo Operators as a new

mode of gambling.

c. The Authority will explore the feasibility of rolling out the Fourth casino

licence.

d. Roll out of type B site of 5-40 LPM machines.

e. Explore the feasibility of rolling out independent site licenses

operators.


15


A description of the reasons for unauthorised, fruitless and wasteful expenditure and

the amounts involved as well as steps taken to address and prevent a recurrence:

The entity is participating in an intervention programme of Irregular Expenditure by Provincial

Treasury through PWC. The entity has identified five (5) Officials to attend training at PWC

to improve turnaround time of investigation. The following modules will be provided:

The following cases below have been identified as part of intervention programme by Free

State Provincial Treasury through PWC and cases will be finalised by August 2019. The

entity is going to identify additional cases to be investigated and finalised by November

2019.

Transgression that caused Irregular

Expenditure

Number

of Cases

Number of

Payments

Rand

Values

Over Expenditure 2 9 287 894

Three quotations not obtained 2 2 42 771

Competitive bidding process not followed

Tenders

3 13 10 055 572

Extensions of Department contracts above

threshold

1 12 133 297

Partnerships specify transgression that causes

irregular expenditure

SCM process not followed 1 2 850 000

TOTAL 9 29 20 369 535

Public Private Partnerships

· None

Discontinued activities / activities to be discontinued

· None

New or proposed activities

· None

Supply chain management

· The Entity Supply Chain Management Policy has been reviewed and includes new

Regulations

Gifts and Donations received in kind from non-related parties

· None

Exemptions and deviations received from the National Treasury

· None


16


Appreciation

I also want to take this opportunity to thank the Board of the Free State Gambling Liquor and Tourism Authority, DESTEA Stakeholders, other Government Departments and Municipalities for their unwavering support.

_________________

e Mr K nilworth Itumeleng DichabeChief Executive Officer

Free State Gambling, Liquor and Tourism Authority

Date:


17


5. STATEMENT OF RESPONSIBILITY AND CONFIRMATION OF ACCURACY

FOR THE ANNUAL REPORT

To the best of my knowledge and belief, I confirm the following:

All information and amounts disclosed throughout the annual report are

consistent.

The annual report is complete, accurate and is free from any omissions.

The annual report has been prepared in accordance with the guidelines on the

annual report as issued by National Treasury.

The Annual Financial Statements (Part E) have been prepared in accordance

with the GRAP standard and the relevant frameworks and guidelines issued

by the National Treasury.

The Accounting Officer is responsible for the preparation of the annual

financial statements and for the judgements made in this information.

The Accounting Officer is responsible for establishing and implementing a

system of internal control that has been designed to provide reasonable

assurance as to the integrity and reliability of the performance information, the

human resources information and the annual financial statements.

The external auditors are engaged to express an independent opinion on the

annual financial statements.

In my opinion, the annual report fairly reflects the operations, the performance

information, the human resources information and the financial affairs of the

Entity for the financial year ended 31 March 2019.

Yours faithfully

___________________

e Mr K nilworth Itumeleng DichabeChief Executive Officer

Date:


18


6. STRATEGIC OVERVIEW

6.1 Vision

To contribute to the economic prosperity of the Free State Province through

sustainable and socially responsible gaming, liquor and tourism industries.

6.2 Mission

To promote legally compliant, responsible, sustainable and transformed gaming and liquor industries through effective licensing, regulating and reporting on the activities of the industries, and to market and promote the Free State Province as a tourist destination of choice.

6.3 Values

Shared good values and culture are critical for the success of any organisation. FSGLTA’s planning process and successful execution thereof are under-pinned by the following shared values:

Commitment We are totally dedicated to fulfilling the mandate of the

organization and the meeting the expectations of our clients, partners and stakeholders.

Integrity Leadership and employees conduct themselves in a manner that upholds the good image of the organisation.

Honesty We conduct our business with sincerity and transparency.

Diversity We promote an environment which embraces cultural diversity.

Excellence We strive to deliver quality of services exceeding minimum standards.

7. LEGISLATIVE AND OTHER MANDATES

7.1. Constitutional Mandate In terms of section 216 (1) of the constitution of the Republic of South Africa, the national legislation must establish a national treasury and prescribe measures to ensure both transparency and expenditure control in each sphere of government. The Free State Gambling, Liquor and Tourism Authority complies with the norms and standards as set by National Treasury. It also complies with GRAP and uniform expenditure classification.


19


7.2. Legislative Mandates The core legislative mandates that are applicable to Free State Gambling, Liquor and Tourism Authority are:

I. The Constitution of the Republic of South Africa, 1996

II. Public Finance Management Act, 1999

III. Preferential Procurement Policy Framework Act, 2000 (Act No. 5 of 2000)

IV. Broad Based Black Economic Empowerment Act, of 2003 (Act No. 53 of 2003)

V. Labour Relations Act, 1995 (Act No. 66 of 1995)

VI. Basic Conditions of Employment Act, 1997 (Act No.75 of 1997)

VII. Employment Equity, 1998 (Act No.55 of 1998)

VIII. Skills Development Act, 1998 (Act No.97 of 1998)

IX. Treasury Regulations

X. Preferential Procurement Policy Framework Regulations

XI. SCM Framework Regulations

XII. Free State Growth and Development Strategy

XIII. National Small Business Act, 1996

XIV. National Gambling Act, 4 of 2004

XV. Free State Gambling, Liquor and Tourism Act, 6 of 2010 as amended

XVI. Liquor Act, 27 of 1989


20


21


D. PILLAY CHAIRPERSON OF THE BOARD

S. MONYAKIBOARD MEMBER

J. MTHEMBUBOARD MEMBER

K. DICHABECHIEF EXECUTIVE OFFICER

L. LANEBOARD MEMBER

L. MULEBOARD MEMBER

M. MAHABANEBOARD MEMBER

BOARD OF DIRECTORS

22


23


1. AUDITOR GENERAL’S REPORT: PREDETERMINED OBJECTIVES

The AGSA currently performs certain 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 page 26 of the Report of the Auditor General , published as Part E:

Financial Information.

2. OVERVIEW OF ENTITY PERFORMANCE

2.1 Service Delivery Environment

The mandate of the Free State Gambling, Liquor and Tourism Authority is to regulate the gambling and liquor industries within the Province and to market and promote tourism in the Province. The Authority’s purpose is to promote legally compliant, responsible, sustainable and transformed gaming and liquor industries through effective licensing, regulating and reporting on the activities of the industries, and to position the Free State Province as a tourist destination of choice.

Illegal gambling and online gambling pose a serious threat to the integrity of the gaming industry provincially and nationally, thus having a negative impact on revenue collection and has become increasingly difficult to monitor. Innovation and collaboration with other Provincial Regulators and law enforcement agencies is essential in combating illegal gambling.

The Free State Gambling Sector

The legislation enables the regulation of the gambling activities in the Province to protect public, ensure transparency and to generate revenue.

Revenue collected for the 2018-19 financial year

Economic Classification

Budget

Adjusted

2018/19

R’000

Actual

collection as 31 March 2019

2018/19

R’000

%collection

to date

100% (12/12 months)

Casino revenue

33 014

31 543

96%


24

Perfomance Informa�on

Limited Payout Machines (LPM) 9 377 11 682 125%

Horse Racing 7 679 8 532 111%

Liquor 11 021 12 954 118%

Phakisa 1 067 711 67%

Total 62 158 65 421 105%

Casino

Currently in the Free State Province have four (4) operating Casinos:

• Frontier Inn and Casino (Bethlehem)

• Goldfields Casino (Welkom),

• Naledi Sun Casino (Thaba Nchu)

• Windmill Casino (Bloemfontein).

Bookmakers

The Free State Province has seven (7) bookmakers licensed.

• PB Kuises (Bloemfontein)

• ilse Kriel (QwaQwa)

• Keith Ho (Welkom)

• Bettabets (Bloemfontein)

• Advanced Internet Technologies (Bloemfontein)

• Super Bets (Bloemfontein)

• Errol Thomas (Bloemfontein)

Route Operator

In the Free State Province there are two (2) Route Operator licensed to roll out LPM sites.

• Vukani Gaming

• Goldrush

The Free State Liquor Sector

The enabling legislation the Free State Gambling and Liquor Act, 6 of 2010 (“The Act “) clearly articulate that it is the function of the regulator to regulate retail sale of liquor in the province, providing for public participation in the consideration of applications for registration and to promote the development of a responsible and sustainable liquor industry.


25


Applications for New Registrations in Terms of Section 27

Graph 1: The number and profile of the liquor registrations in the Free State

The Authority promotes the development of a responsible and sustainable liquorindustry by issuing registrations to only qualifying applicants.

Province.

Tourism

In South Africa, tourist arrivals continue to grow every year. the direct and indirectcontribution of tourism to the country’s GDP is currently R 323 billion whichis about 9.5%of total GDP. The tourism sector supports over 1.4 million jobs, representing about 10% of total employment in the country


26


Key strategic Achievements

The Entity has signed MOU with SAT on adoption and implementation of National

Tourism 5-in-5 Project. The Entity’s plan is to target 1.3 million international holiday

arrivals in the next 5 years. The agreement has seen financial assistance to market

the province through:

· Above-the-line advertising;

· Production of marketing collateral;

· Drafting of Marketing Strategy.

Other Stakeholder Engagements

· Signed MOU with Central University of Technology to capacitate the research

knowledge.

· Signed MOU with Northern Cape Tourism Authority to share development and

marketing initiatives.

· From NCTA the Entity is now a member of Business Events Coordinating

Forum (BECF)

The Free State aims to grow its tourism sector to turn what has been called a ‘hidden

treasure of South Africa’ into a popular and repeat destination for thousands of

domestic and international tourists. The province certainly has the assets that make

this goal achievable.

Some of these assets include the following designated tourist routes, namely:


27


Domestic tourism plays a critical role in the tourism sector as it generates more than

half the internal tourism revenue, according to a report released by South Africa

Tourism (SAT).

Free State Province had a total tourism spending of R 12.8 billion in 2018 with an

average annual growth rate of 9.0% since 2007 (R 5.42 billion). Based on the current

economic performance, it is projected that the GVA for tourism will continue to

increase over the next 5-year period.

This, without doubt, indicates that the tourism sector is resilient and bodes well for

the future economic growth of the province.

2.2 Organisational Environment

The Free State Gambling, Liquor and Tourism Authority is strategically positioned

and organised into three pivotal programmes to drive radical socio-economic

transformation as pronounced by the National Government. Comprehensive political

and socio-economic development imperatives are explicitly outlined in the National

Development Plan (NDP), State of the Nation Address (SONA), SOPA, Free State

Growth and Development Strategy (FSGDS) and other key policy imperatives.

These policy fundamentals have informed the Authority’s strategic development

processes.

2.3 Socio-economic Growth and Development

The regulated gambling and liquor industries have a pivotal role to play in addressing

the socio-economic challenges in the Province and to contribute towards economic

growth and development. These operators have the potential to contribute towards

creation of employment. The anticipated roll-out of other gambling modes, i.e. Bingo,

Bookmaker and the Fourth Casino, will further contribute towards revenue growth

and the reduction of unemployment in the Province.

The Authority is committed to facilitating the transformation of the tourism industry in

the Province and promoting sustainable tourism.

2.4 Key policy developments and legislative changes

Proposed Amendments of the FSGLTA Act which includes the historical introduction

of the Tourism Bed levy


28


The implementation of the proposed amendment on stakeholders’ reports (DMO &

DPO reports) will ensure efficient and timely processing of licences Assist in

eliminating litigation costs

The proposed amendments seek to streamline the administrative issues, such as

(licensing timeframes and reducing litigation

3. Strategic Outcome Oriented Goals

Strategic Outcome Oriented Goal 1

To ensure efficient delivery on mandate and good governance.

Goal 1 Statement To facilitate efficient delivery on mandate and good governance by providing effective leadership, strategic management and support services to all programmes in accordance with applicable legislation, regulations and policies.


To promote legally compliant, responsible, sustainable and transformed gaming and liquor industries.

Goal 2 Statement Efficient licensing of gaming and liquor industries and effective compliance monitoring and enforcement.


To contribute to the economic growth of the Free State Province through the promotion of a sustainable and transformed tourism industry.

Goal 3 Statement To promote the Free State Province as a tourist destination of choice through effective marketing and promotion of tourism within the province.

The key achievements for the period 2018-19 are:

· The Entity approved 52 Limited Pay-out Machines (LPM) sites and rolled out

188 machines

· The Authority approved 175 registrations and refused 40 applications.

· The Authority conducted 3458 compliance inspection throughout the

Province.

The Free State Madeira flower Festival:

Event benefits

The Events is a key channel to drive domestic tourism. The Festival

provided huge exposure for the FSGLTA through the continuous

reinforcement of its Big 5 Route positioning. In addition, floats reinforced


29


the province’s key marketing pillars, including history, heritage and sports

tourism.

Media coverage to promote the event

• The Marketing Plan was executed across several channels: electronic,

print, outdoor, social media and Public Relations.

• The event generated approximately 12 million in media exposure for

the Free State tourism

Event statistics

The flower festival is now recognised as the most successful festival in

South Africa and one of the leading tourism events on the African

continent and serves as a fresh vibrant tourism drawcard for the free state

• Attracted 20-30 000 visitors

• Generated 100% occupancy for accommodation establishment within

20km radius in Parys

• Generated between 15 to 20 million for the economy of Parys

• The event also had other spinoffs. Satellite events have now sprung up

in Parys during the Festival, notably a Bridal Expo was hosted at

Egweni Lodge on the Sunday of the Festival. This event attracted close

to 20 local and visiting exhibitors.

• Unlock business opportunities for the flower industry by giving farmers

a platform to exhibit their produce on a national scale and create a

strong national floriculturist annual conference.

Powerboat Festival:

Cherry Festival:

· This event is of significant, because of the element of youth development that is

conditional to its continued existence.

· More young people from the previously disadvantaged communities have been

trained to drive boats pilots since the inception of the event.

It’s an annual event that gets held in Parys as part of the Flower Festival weekend but this

year it was held in November 2018 as part of the 2018 Flower Festival weekend

· The Cherry Jazz Festival provides geographic spread to tourism distribution in the

Province. The event is one of key domestic drives that attracts Free State, Kingdom

of Lesotho, Gauteng and Eastern Cape.

The Cherry Jazz event is hosted in Ficksburg and it has its large market share comprises of

the Kingdom of Lesotho, which are followed by the Free State and Gauteng. Northern Cape,

Eastern Cape and KwaZulu-Natal share the other part of the market share.


30


Brand positioning is therefore a vital aspect that lead to the FSGLTA occupying the space in

search of new markets of travellers who could visit the province.

To the Free State jazz lovers, the province was igniting the passion to travel locally. The

FSGLTA understands that the province is a weekender and short holiday destination in the

context of the South African tourism – hence the province would utilise event as a pillar to

drive its tourism influx.

The Tourism Indaba

The Tourism Indaba is premier trade show that is aimed at selling the Province to buyers who packages the Country as an outbound tourism experience. SMME’s within the industry are provided with an opportunity to sell packages that promotes the province

· SMMEs that are taken to tourism indaba in Durban are given training on how to

market their businesses at trade and consumer shows

· The objective of taking these smme’s to trade shows is to assist them to get to the

market where they can sell their products or services.

· Listing of their products and /or services in the Big 5 Route marketing collateral

· Soliciting external partnerships for their further development


31


4. PERFORMANCE INFORMATION BY PROGRAMME 2018-19

Strategic Objectives

Strategic

objectives

Activities Performance

Indicator

Actual

Achievement

2017/2018

Planned

Target

2018/2019

Actual

Achievement

2018/2019

Deviation

from

planned

target

2018/2019

Comment on

deviations

Programme 1

Internal Audit

1.1 Ensure overall

corporate

compliance

Review of Audit and Risk committee Charter

Number of reviewed audit and risk committee charter

1 1 1 - n/a

1.2 Development of Annual Audit Plan

Number of approved annual audit plan

1 1 1 - n/a

1.3

Execution of the Audit Plan

Number of internal audit performance information reports

3 4 4 - n/a

32



Strategic

objectives


Indicator

Actual

Achievement

2017/2018

Planned

Target

2018/2019

Actual

Achievement

2018/2019

Deviation

from

planned

target

2018/2019

Comment on

deviations

Risk Management

1.4 Ensure overall

corporate

compliance

Fraud Risk Awareness workshops

Number of Fraud Risk Awareness workshops conducted

n/a 2 2 - n/a

1.5 Continuous

process

improvement

Conduct Fraud and Risk Register Review

Number of Fraud and Risk Register revised

1 1 1 - n/a

1.6 Conduct Fraud and Risk Assessments

Number of Quarterly Fraud and Risk Assessments conducted

4 4 4 - n/a

Planning, Monitoring and Evaluation

1.7 Ensure overall

corporate

Development of Annual Performance Plan

Number Approved Annual Performance

1 1 1 - n/a

33



Strategic

objectives


Indicator

Actual

Achievement

2017/2018

Planned

Target

2018/2019

Actual

Achievement

2018/2019

Deviation

from

planned

target

2018/2019

Comment on

deviations

compliance Plan

1.8 Development of an Annual Report

Number of approved Annual Report developed

1 1 1 - n/a

1.9

Compile a non-financial performance Information Reports

Number of Quarterly Performance Information Reports compiled

4 4 4 - n/a

Human Resource

1.10 Promote

collaborations &

partnerships

Employee Wellness

Number of Employee Wellness programs

n/a 2 2 - n/a

1.11 Continuous Conduct security Infrastructure

Number of Security

4 4 4 - n/a

34



Strategic

objectives


Indicator

Actual

Achievement

2017/2018

Planned

Target

2018/2019

Actual

Achievement

2018/2019

Deviation

from

planned

target

2018/2019

Comment on

deviations

process

improvement

Assessments

Assessments conducted

1.12

Recruit & develop

workforce

Revise the Human resource policy

Number of revised Human resource policy

n/a 1 1 - n/a

Legal

1.13 Continuous

process

improvement

Compile a litigation Report

Number of litigation reports compiled

n/a 4 4 - n/a

Information Technology

1.14 Customer

satisfaction

Analyze the employee satisfaction survey questionnaire

Number of IT reports on the employee satisfaction survey

n/a 4 4 - n/a

35



Strategic

objectives


Indicator

Actual

Achievement

2017/2018

Planned

Target

2018/2019

Actual

Achievement

2018/2019

Deviation

from

planned

target

2018/2019

Comment on

deviations

Financial Management

1.15 Improve

prosperity

Allocation of Budget to respective Programme/Managers

Number of Budget Consultation Sessions conducted.

n/a 1 1 - n/a

1.16 Customer

satisfaction

Payments of Service Providers to be made within 7 days upon receipt of original invoice.

Number of 30

Days

Payment

Report

compiled.

12 12 12 - n/a

1.17 Ensure overall

corporate

compliance

Submission of

Annual Financial

Statements to the

AG and Treasury

Number of Annual financial statement compiled

1 1 1 - n/a

36



Strategic

objectives


Indicator

Actual

Achievement

2017/2018

Planned

Target

2018/2019

Actual

Achievement

2018/2019

Deviation

from

planned

target

2018/2019

Comment on

deviations

1.18 Continuous

process

improvement

Annual review of Finance Related Policies

Number of Finance Policies reviewed

n/a 1 1 - n/a

1.19

Improve financial

sustainability

Implementation of Cost Containment Measure

Number of Cost Containment Measures guidelines

n/a 1 1 - n/a

Supply Chain Management

1.20 Increase asset

utilization

Conduct quarterly asset verification

Number of

assets

verification

reports

2 2 2 - n/a

37



Strategic

objectives


Indicator

Actual

Achievement

2017/2018

Planned

Target

2018/2019

Actual

Achievement

2018/2019

Deviation

from

planned

target

2018/2019

Comment on

deviations

Programme 2

Investigation, audit and Gaming Control

1.21 Ensure overall

corporate

compliance

Conduct Revenue Audits

Number of Revenue audits conducted

48 48 50 2 Additional audits conducted Due to a new licensed outlet during the financial year,

1.22 Conduct Compliance Audits

Number of Compliance audits conducted

39 60 64 4 Additional audits conducted, due to a new licensed outlets during the financial year,.

Compliance, Enforcement and Liquor Licensing

1.23 Ensure overall

corporate

compliance

Develop a Conversion strategy

Number of conversion strategies developed

n/a 1 1 - n/a

38



Strategic

objectives


Indicator

Actual

Achievement

2017/2018

Planned

Target

2018/2019

Actual

Achievement

2018/2019

Deviation

from

planned

target

2018/2019

Comment on

deviations

1.24 Ensure overall

corporate

compliance

Conduct compliance inspections

Number of liquor inspections conducted

2683 3368 3361 7 Due to budget constraints which led to the reduction in the number of site visits

1.25

Ensure overall

corporate

compliance

Conduct compliance inspections

Number of gambling compliance inspections conducted

75 78 58 20 Due to budget constraints which led to the reduction in the number of site visits

Programme 3

Marketing

1.26 Promote

collaborations &

partnerships

Development of strategic tourism partnerships

Number of Tourism partnerships

n/a 3 3 - n/a

1.27 Economic growth Hosting the Flower Festival

Number of economic

n/a 1 1 - n/a

39



Strategic

objectives

Activities

Performance

Indicator

Actual

Achievement

2017/2018

Planned

Target

2018/2019

Actual

Achievement

2018/2019

Deviation

from

planned

target

2018/2019

Comment on

deviations

impact reports compiled on the Flower festival

1.28 Improve

corporate

communications

& coordination

Develop corporate communication strategy

Number of corporate communication strategies developed

n/a 1 1 - n/a

Programme 4

Events & Promotions

1.29

Improve

prosperity

Hosting the Flower Festival

Number of festivals hosted

n/a

1

1 -

n/a

1.30

Economic growth

Sports events

Number of sports events held at Phakisa

55

40

37

3

Due a lack of maintenance on infrastructure and the track

at

Phakisa which ledto the inability to

attract prospective motor sports organisers

40


5. CONDITIONAL GRANTS

5.1 Conditional grants and earmarked funds paid

GRANTS AND EARMARKED FUNDS Current Budget (R’000)

Total Expenditure (R’000)

CONDITIONAL GRANT 8 000 000 8 674 959

TOTAL CONDITIONAL GRANT 8 000 000 8 674 959

5.2 Conditional grants and earmarked funds received

The table below details the conditional grants and ear marked funds received during

for the period 1 April 2018 to 31 March 2019.

Conditional Grant: FLOWER FESTIVAL

Entity who transferred the grant DESTEA

Purpose of the grant Free State Madeira Flower Festival

Expected outputs of the grant Tourism

Actual outputs achieved Projects Completed

Amount received (R’000) R 8 000 000

Reasons if amount as per was not received

None

Amount spent by the Entity (R’000) R8 674 959

Reasons for the funds unspent by the entity

n/a

Reasons for deviations on performance

n/a

Measures taken to improve performance

n/a


41


42


INTRODUCTION

The Entity constantly strives to improve its internal processes to ensure effectiveness and efficiency of business processes. Measures have been put in place to popularise and address issues such as the conflict of interest, code of conduct and the health safety environment. Below is an account of processes followed to address these issues.

1. RISK MANAGEMENT

The Free State Gambling Liquor and Tourism Authority adopted the

Enterprise risk management (ERM) approach which is a comprehensive

method for dealing with business uncertainty; distinguishing promising risks

from perilous ones.

The Authority combined the Audit & Risk committee that has an independent

chairperson, the committee provides oversight and line managers and

personnel amongst other things, identify risks that the Authority is exposed to,

the probability of the risk occurring, the impact that the risk would have should

it materialize, risk mitigating strategies and the responsible person(s) or

division in dealing with the risk as well as time frames.

The Authority developed a risk register in terms of the ERM aligned to the

authority’s business model, strategic plan and annual plan. The

implementation of mitigating strategies identified is monitored on a quarterly

basis. The authority is also mindful of the emerging risks, which are assessed

and included in the risk register when they are identified.

2. FRAUD AND CORRUPTION

The Entity’s Fraud Prevention Plan recognizes basic fraud prevention

initiatives and the primary objectives of the plan are to;

· Provide guidelines in preventing, detecting and reporting fraudulent

activities within the Entity.

· Create an environment within the Entity where all employees and

stakeholders continuously behave ethically with or on behalf of the

Entity.

· Encourage all employees and stakeholders to report suspicions of

fraudulent activity without fear of reprisals or recriminations.

Progress made in implementing the plan includes:

· Physical security whereby access to assets, documentation or IT

systems is continuously monitored and controlled. All assets will be

held securely and access to them restricted as appropriate.


43

Governance

3.

4.

· Access to computer systems is an important area, which should be

very tightly controlled not only to prevent unauthorized access and use

but also to protect the integrity of the data.

· The threat to computers can come from inside and outside Entity as

computer hackers may gain access in order to extract or corrupt

information.

· Organizing as a preventative measure involves the allocation

responsibility to individuals or groups so that they work together to

achieve objectives in the most efficient manner.

Major principles in organizing relevant to fraud and corruption are;

· Clear definition of the responsibilities of individuals for resources

allocated, activities, objectives and targets. This includes defining

levels of authority and is a preventive measure, which sets a limit on

the amounts, which sets a limit on the amounts, which may be

authorized by individual officers. To be effective, checks need to be

made to ensure the transactions have been properly authorized;

· Establishing clear reporting lines and the most effective spans of

command allow adequate supervision;

· Avoiding undue reliance on any one individual.

· Through the Fraud Response Plan, the Entity seeks to put its fraud

prevention strategy into perspective and to enforce the commitment to

open business practices and to overall commitment to fraud and

corruption free environment.

MINIMISING CONFLICT OF INTEREST

All officials in Finance and SCM have signed the disclosure forms and

declared their interest. Monitoring is done during the financial year.

CODE OF CONDUCT

The Code of Conduct is an instrument that is used in the entity to promote and maintain a high standard of professional ethics and good governance. It serves as a guideline to all employees in various categories, levels and controls the relations in numerous ways, namely:

· The relationship with the legislature and the executive; · The relationship between the entity and the public; · The relationship between the employees at various levels; · The performance of duties; and · Personal conduct and private interest.

The implementation of the code ensures that there is uniformity in the entity regarding service delivery. It also improves loyalty and brings control, compliance as well as prevention of corruption.


44

Governance

5. HEALTH SAFETY AND ENVIRONMENTAL ISSUES

According to the Occupational Health and Safety Act no 181 of 1993,

Occupational health and Safety aims “to provide for the health and safety of

persons at work and for the health and safety of persons in connection with

the use of plant and machinery; the protection of persons other than persons

at work against hazards to health and safety arising out of or in connection

with the activities of persons at work; to establish an advisory council for

occupational health and safety; and to provide for matters connected

therewith”.

The following are some of the examples of risks/hazards that have been identified and addressed through this Act: · Biological hazards e.g. organisms can be passed from one person to the

other or animal to a person (people working in abattoirs with animals etc. · Mechanical hazards e.g. moving parts or energy sources a broad range

of machinery and equipment are high source of danger (can cause cuts, crush injuries, amputations and fractures).

· Ergonomic hazards e.g. working in cramp positions or spaces, poor lighting, poor seating, or standing for long period (exposure to eye strain, backache, wrist strain and sore shoulders.

· Behavioural hazards e.g. non-compliance with standards, lack of skills, new tasks.

Employers are therefore expected to provide and maintain, as far as is reasonably possible, a working environment that is safe and without risk to the health of the employees. The Entity has established an occupational Health and Safety (OHS) Committee to oversee health and safety matters in the Entity. The main responsibility of the Committee members is to conduct health and safety inspections at their respective workplaces. Their findings are reported to the Human Resources Manager and General Manager – Corporate Services who in turn submit a report with recommendations to the Chief Executive Officer / Board.

6. PORTFOLIO COMMITTEES I

A Portfolio Committee Meeting took place on the following dates: • 4 September 2018 for 1st quarter non-financial performance information. • 6 November 2018 for 2nd quarter non-financial performance information.

The Portfolio Committee raised the following issues during the year under

review:


45

Governance

Irregular Expenditure

Implement measures to ensure that irregular expenditure investigations and finalised within set timeframes.

Performance Information

Ensure that the objectives in entity`s Annual Performance Report are consistent with objectives in the Annual Performance Plan.

Financial Sustainability

The Portfolio Committee was concerned about the entity`s financial sustainability.

7. PRIOR MODIFICATIONS TO AUDIT REPORTS

8. INTERNAL CONTROL UNIT

Internal Control functions are performed in individual sections of the Financial

Management unit. For the Financial Accounting directorate, the Internal Control

function is performed in terms of the verification and safekeeping of financial

transaction documentation and ensuring the availability of credible and verifiable

supporting documentation for internal and external audit purposes.

9. INTERNAL AUDIT AND AUDIT COMMITTEES

Key activities and objectives of the internal audit

Internal Audit is responsible for assisting the Authority to accomplish its objectives by

applying a systematic, disciplined approach to evaluate and improve the

effectiveness of risk management, internal control and governance processes.

The function is a fully in-house function and operates in accordance with the

approved Internal Audit Charter, and the International professional Practices

Framework (IPPF) of 2018.


46

Governance

Internal Audit had planned 13 audits and completed 7 audit projects for the

2018/2019 financial year, due to a lack of staff capacity in the unit and budget

constraints.

Types of engagements included in the planned projects:

· Risk based engagements

The following list constitutes the internal audit work completed, as per the plan,

during the period of review:

· Review of the Entity draft Annual Report

· Finance: Risk Management – Incidents of fraud and corruption

· Review of the quarterly Non-Financial Performance information

· Review of the draft of the 2018/19 Annual Performance Plan

· Budget Management Audit

· Performance Information 1st to 4th Quarter Audit

· Risk Management Audit

· Marketing Audit

Key activities and objectives of the audit committee;

The Audit & Risk Committee’s scope of work is determined by the requirements of

Treasury Regulation 3.1.10. Accordingly, and in line with this section, the

Committee’s objectives were to assess and advise, among other things, on the

following matters:

· Effectiveness of the internal control systems;

· Activities and effectiveness activities of the internal audit function,

including its annual work programme, coordination with the external

auditors, the reports of significant investigations and the responses of

management to specific recommendations;

· Risk areas of the Entity’s operations as covered in the scope of internal

and external audits;

· Adequacy, reliability and accuracy of the financial information provided

to Management and other users of such information; and

Specify summary of audit work done


47

Governance

Attendance of Audit & Risk Committee meetings by committee members

(Tabular form);

The table below discloses relevant information on the Audit & Risk Committee

members for 2018/2019:

Name Qualifications Internal

or

external

If internal,

position in

the Entity

Date

appointed

Date

Resigned

No. of

Meetings

attended

D Nadison

(Chairperson)

Master of Arts External N/A 1 July

2016

30 July

2018

2 of 3

S Monyaki Master’s in

Business

Administration

Board

Member

N/A 1 July

2016

2 of 3

L Mule HR, Sales and

marketing

Board

Member

N/A 1 July

2016

3 of 3

L Maleho Bcompt External N/A 1 July

2016

3 of 3

M Selaledi CA External 27 March

2019

0

K George CA External 27 March

2019

0

· Any accounting and auditing concerns identified as a result of internal

and external audits;

· The Entity’s compliance with legal and regulatory provisions.


48

Governance


49

Governance

10. AUDIT COMMITTEE REPORT

We are pleased to present our report for the year ended 31 March 2019

AUDIT & RISK COMMITTEE RESPONSIBILITY

The Audit & Risk Committee reports that it has complied with its responsibilities

arising from section 51 (1) (a) (ii) of the Public Finance Management Act (Act 1 of

1999) and Treasury Regulation 27.1.10.

The Audit & Risk Committee also reports that it has adopted the Audit & Risk

Committee Charter.

The Audit & Risk Committee oversees:

• The integrity of financial statements, accounting and financial reporting

processes, systems of internal control over financial reporting and our

compliance with legal and regulatory requirements;

• The performance of internal auditors and internal audit functions;

• Guidelines and policies with respect to risk assessment and risk

management; and

The Effectiveness of Internal Control

Our review of the findings of the Internal Audit work, which was based on the risk

assessments conducted in the Department revealed certain weaknesses, which

were then raised with the Department.

The committee is concerned with regards to:

• The budget constraints and the ineffective strategies for revenue

enhancement and collection.

• Inadequate Record keeping and the management

• Non-Compliance to key controls, policies and procedures

• Lack of capacity of the Internal Audit Activity

Internal Audit

The Internal Audit plan represents a clear alignment with the key risks, has adequate

information systems coverage, and a good balance across the different categories of

audits, i.e. risk-based, mandatory, performance and follow-up audits. Internal audit

performed 7 audits during the financial year 2018-19

The Audit & Risk Committee wishes to stress that in order for the Internal Audit

Function to operate at optimal level as expected by the Audit Committee, the

shortage in human resources and skills needs to be fully addressed,


50

Governance

Risk Management

Progress on the Entity’s risk management was reported to the Audit & Risk

Committee on a quarterly basis. The Committees view is that although the actual

management of risk is receiving attention, there are areas that still require significant

improvement.

Management should take full responsibility for the entire Enterprise Risk

Management Process, prioritise the activities of the Risk Management Committee.

Attendance to the Committee is of absolute importance to ensure that risks are

appropriately tracked and managed.

In-Year Management and Monthly/Quarterly Report

The Authority has reported monthly and quarterly to the Treasury as is required by

the PFMA.

EVALUATION OF FINANCIAL STATEMENTS

The Audit & Risk Committee has:

• Reviewed progress made on the Action Plan of previous year’s

audit findings; and

• Approved the internal audit activity plan

• Reviewed Draft Annual Financial Statements to be included in the

Annual Report

Auditor General’s Report

The Audit & Risk Committee concurs and accepts the conclusions of the Auditor-

General on the annual financial statements and believes the audited annual financial

statements be accepted and read together with the report of the Auditor-General.

Mmuso Selaledi CA (SA) Chairperson of the Audit & Risk Committee Free State Gambling Liquor & Tourism Authority

51


INTRODUCTION

The information contained in this part of the annual report has been prescribed by the

Minister for the Public Service and Administration for all Entity’s

in the public service.

1.

OVERVIEW OF HUMAN RESOURCES

The Entity had 121

employees as at 31 March

2019. This number excludes

one

(1) employee

who was appointed on contract. The approved organizational

structure comprised of 137 posts, all of which are funded. During the period

under review, the Entity engaged 2 Information Technology Interns . The vacancy

rate is standing at 11.68% with two (2) position in SMS, four (4) middle

management, four (4) supervisory and the last six (6) at a junior level.

During 2018-19 fiscal year, the Entity advertised 2 positions and filled 1. There were 6 terminations done for the period under review.

Highlights/achievements and challenges faced by the department:

Highlights/achievements:

Secured over R210 000 from CATHSSETA for the training of staff members with

the University of the Free State,

Hosted 2 successful wellness events on financial literacy from accredited

financial advisors, and (2) Cancer Indaba free cancer testing for all willing staff

members.

HR ensured that internships are offered to students from disadvantaged

background in that two students

were appointed in the IT unit.

Two other students completed their internship in Operations Department towards

the end of 2018.

Challenges faced by the department:

Limited budget to operate effectively within the division and to meet the needs of

the internal stakeholders.


52

Human Resource Management

approved

establishment

additional to the

establishment

2. HUMAN RESOURCES OVERSIGHT STATISTICS

Employment and vacancies as on 31 March 2019

Programme Number of

posts on

Number of

posts filled

Vacancy Rate Number of

employees

Administration 7 6 14.29% 0

Operations 46 40 13.04% 0

Corporate Services

21 17 19.05% 0

Tourism 13 12 7.69% 0

Major Sports and Events

35 32 8.57% 0

Finance and SCM

15 14 6.67% 0

Total 137 121 11.67% 0

SMS post information as on 31 March 2019

SMS Level Total number

of funded

SMS posts

Total

number of

SMS posts

filled

% of SMS

posts

filled

Total

number of

SMS posts

vacant

% of SMS

posts vacant

CEO 1 1 100% 0 0%

GM and CFO 5 3 60% 2 40%

Total 6 4 66.67% 2 33.33%

Advertising and filling of SMS posts for the period 1 April 2018 and 31 March 2019

SMS Level

Advertising Filling of Posts

Number of vacancies

per level advertised

in 6 months of

becoming vacant

Number of vacancies

per level filled in 6

months of becoming

vacant

Number of

vacancies per level

not filled in 6

months but filled in

12 months

CEO 0 0 0

GM and CFO 0 0 0

Total 0 0 0


53


Reasons for vacancies not filled within six months

Not applicable

Employees with a disability

Employees

with a

disability

1 0 0 0 1

Annual turnover rates by salary band for the period 1 April 2018 and 31 March 2019

Salary Band Number of

employees at

beginning of

period-April

2018

Appointments

and transfers

into the

department

Terminations and transfers

out of the department

Supervisory 10 0 3

SMS 5 0 1

Contracts 1 0 1

Total 16 0 5

Reasons for not having complied with the filling of funded vacant SMS - Advertised within 6

months and filled within 12 months after becoming vacant for the period 1 April 2018 and 31

March 2019

Reasons for vacancies not advertised within twelve months

Not applicable


54


3.3

Employment Equity

Total number of employees (including employees with disabilities) in each of the following

occupational categories as on 31 March 2019

Occupational

category Male Female Total

African Coloured Indian White African Coloured Indian White

SMS 2 0 0 0 2 0 0 0 4

Professionally

Qualified and

Experienced

Specialist and

Mid

Management

11 0 0 0 3 0 0 0 14

Skilled

Technical and

Academically

Qualified

15 1 0 0 22 0 0 0 38

Workers

Semi-Skilled

and

Discretionary

Decision

Making

25

0

0

0

26

0

0

0

51

Unskilled and

Defined

Decision

Making

9 0 0 0 5 0 0 0 14

Temporary and Contract

Workers/Interns

1 0 0 0 1 0 0 0 2

Total 63 1 0 0 59 0 0 0 123

3.1. Personnel related expenditure

The following tables

summarises

the final audited personnel related expenditure by

programme and by salary bands. It

provides an indication of the following:

·

amount spent on personnel ·

Amount

spent on salaries, overtime, homeowner’s allowances and medical aid.


55


Table 3.1.1 Personnel expenditure by programme for the period 1 April 2018

and 31 March

2019

Programme

Total

Expendit

ure

(R’000)

Personnel

Expenditur

e

(R’000)

Training

Expenditu

re

(R’000)

Profession

al and

Special

Services

Expenditur

e (R’000)

Personne

l

Expendit

ure as a

% of total

expenditu

re

Numb

er of

empl

oyees

per

progr

amm

e

Average

personnel

cost per

employee

ADMINISTRATION

45 253 947

21 710 963 35 716 1 034 746 48% 39

556 691

GAMBLING & LIQUOR

32 100

363 24 877 003 25 335 733 985 77% 43

578 535

TOURISM 31 773 980

9 628 802

25 077

726 523

30% 15

641 920

PHAKISA

7

636 777

5 625 003

6 027

174 618

74%

33

170 455

TOTAL

116 765

067

61 841 770

92 155

2 669 872

130

Table 3.1.2 Personnel costs by salary band for the period 1 April 2018 and 31 March 2019

Salary band Personnel

Expenditure

(R’000)

% of total

personnel

cost

No. of

employees Average

personnel cost

per employee

Highly skilled production (Levels

6-8)

26 921 971

44%

54 498 555.02

Highly skilled supervision

(Levels 9-12) 16 686 000

27%

27 618 000.00

Lower skilled (Levels 1-2) 5 500 000 9% 38 144 736.84

Senior management (Levels 13-

16) 12 733 799 21% 11 1 157 618.09

Total 61 841 770 100% 130.00 475 705.92


56


Table 3.1.3 Salaries, Overt ime,

Home Owners Allowance and

Medical Aid

by programme for

the period 1 April 2018

and 31 March 2019

Programme

Salaries

Overtime

Home Owners Allowance

Medical Aid

Amount (R’000

Salaries as a % of personnel costs

Amount (R’000) Overtime as a %

of personnel costs

Amount (R’000) HOA as a % of

personnel costs

Amount (R’000)

Medical aid as a % of personnel costs

ADMINISTRATION

28 629 720

67%

383 801

1,34%

- 0,00%

785 778

2,74%

GAMBLING & LIQUOR

22 751 399

67%

304 998

1,34%

- 0,00%

994 856

4,37%

TOURISM 7 258 201 67% 97 301 1,34%

- 0,00% 303 402 4,18%

PHAKISA 6 043 011 67% 81 011 1,34% 480 784 7,96% 355 656 5,89%

TOTAL 64 682 331 67% 867 110 1,34% 480 784 1,34% 2 439 691 3,77%

57



58


Report of the auditor-general to the Free State Legislature on the Free

State Gambling, Liquor and Tourism Authority Report on the audit of the financial statements

Disclaimer of opinion 1. I was engaged to audit the financial statements of the Free State Gambling, Liquor and

Tourism Authority set out on pages 4 to 55, which comprise the statement of financial position

as at 31 March 2019, the statement of financial performance, the statement of changes in net

assets, the statement of cash flows and the statement of comparison of budget and actual for

the year then ended, as well as the notes to the financial statements, including a summary of

significant accounting policies.

2. I do not express an opinion on the financial statements of the public entity. Because of the

significance of the matters described in the basis for disclaimer of opinion section of this

auditor’s report, I was unable to obtain sufficient appropriate audit evidence to provide a basis

for an audit opinion on these financial statements.

Basis for disclaimer of opinion Receivables from non-exchange transactions

3. I was unable to obtain sufficient appropriate audit evidence for receivables from non-exchange

transactions. The entity could not provide evidence of the recoverability of the long-outstanding

debtors and did not include these debtors as part of their provision for doubtful debts. I was

unable to confirm the receivables from non-exchange transactions by alternative means.

Consequently, I was unable to determine whether any adjustments were necessary to the

receivables from non-exchange transactions, stated at R1 886 761 as disclosed in note 9 to the

financial statements.

Property, plant and equipment

4. I was unable to obtain sufficient and appropriate audit evidence for the restatement of the

corresponding amount for property, plant and equipment. As described in note 30 to the

financial statements, the restatement was made to rectify a previous year misstatement, but it

could not be substantiated by supporting audit evidence. I was unable to confirm the

restatement by alternative means. Consequently, I was unable to determine whether any

adjustments were necessary to the corresponding amount stated at R12 497 401 in note 3 to

the financial statements.

59

Financial Informa�on

Intangible assets

5.

I was unable to

obtain

sufficient appropriate

audit evidence

that management

had

properly

accounted for

intangible

assets

under development, due

to

the

status of

accounting

records

and non-submission

of

information in support

of the intangible

asset under development.

Furthermore, the

entity

did not

present

the

intangible assets

in accordance

to

SA Standards of

GRAP, Intangible assets, GRAP 31, as

the

entity

did not

adequately

disclose

the

reasons

for

significant delays to

complete the

development

of the

intangible asset.

I was unable to

confirm

the intangible assets by

alternative means.

Consequently,

I was unable to

determine

whether

any adjustments

were

necessary

to

intangible assets

stated at

R4

520

507

(2018:

R4

755 164)

as disclosed in 4 to the financial statements.

Payables from exchange transactions

6. I was unable to obtain sufficient appropriate audit evidence for the restatement of the

corresponding amount for payables from exchange transactions. As disclosed in note 30 to the

financial statements, the restatement was made to rectify a previous year misstatement, but it

could not be substantiated by supporting audit evidence. I was unable to confirm the

restatement by alternative means. Consequently, I was unable to determine whether any

adjustments were necessary to the corresponding amount stated at R12 039 963 in note 13 to

the financial statements.

General Expenses

7. I was unable to obtain sufficient appropriate audit evidence for General Expenses due to the

status of accounting records and non-submission of information in support of expenditure

during the year. I could not confirm general expenditure by alternative means. Consequently, I

was unable to determine whether any adjustments were necessary to the general expenditure,

stated at R28 296 284 (2018: R38 138 537) as disclosed in note 16 to the financial statements.

Additionally, there was a resultant impact on payables from exchange transactions and the ‘ear

marked’ funds for flower festival in both the current and previous period.

Contingencies

8. I was unable to obtain sufficient appropriate audit evidence for contingencies as the entity did

not have adequate systems and records to account for outstanding litigations and claims. I was

unable to confirm details of outstanding litigations and claims by alternative means.

Consequently, I was unable to determine

whether any

adjustments

were

necessary to

the

contingencies stated

at

R70

608

152

as disclosed in

note

26

to

the


Principals

and

agents

9.

I was unable to

obtain

sufficient appropriate

audit evidence

for the

principals

and agents

note

to the

financial statements. The

entity

had

a number

of

principal and agent arrangements,

as

described in note 28

to

the

financial statements, but the

financial transactions

relating to

these


60


arrangements could not be substantiated due to inadequate supporting audit evidence. I was

unable to confirm these transactions by alternative means. Consequently, I was unable to

determine whether any adjustments were necessary to payables from non-exchange

transactions stated at R15 051 645 in note 13 and note 28 to the financial statements in its

entirety.

Statement of comparison of budget and actual amounts

10. The entity did not prepare the statement of comparison of budget and actual amounts in

accordance with GRAP 24, Presentation of budget information in financial statements. Budget

amounts used to prepare the statement were not from the approved budget and the reasons

provided were not valid. I have not included the omitted information in this auditor’s report as it

was impracticable to do so.

Emphasis of matters 11. I draw attention to the matters below. My opinion is not modified in respect of these matters.

Restatement of corresponding figures

12. As disclosed in note 30 to the financial statements, the corresponding figures for

31 March 2018 were restated as a result of errors in the financial statements of the entity at,

and for the year ended, 31 March 2019.

Material losses

13. As disclosed in note 35 to the financial statements, the entity incurred settlement payments of

R1 992 953 (2018: R1 100 787) as a result of the unfair dismissal of a number of employees

and legal costs due to settlements.

Fruitless and wasteful expenditure

14. As disclosed in note 33 to the financial statements, the entity incurred fruitless and wasteful

expenditure of R1 760 030 due to settlement payments made on to unfair terminations of

employment, penalties and interest caused by penalties and interest on audit fees and salary

related payables.

Irregular expenditure

15. As disclosed in note 34 to the financial statements, irregular expenditure of R16 561 262 was

incurred due to non-compliances with supply chain management (SCM) processes. In addition,

the full extent of irregular expenditure was still in the process of being determined.


61


Responsibilities of the accounting authority for the financial statements 16. The accounting authority is responsible for the preparation and fair presentation of the financial

statements in accordance with the SA Standards of GRAP and the requirements of the PFMA,

and for such internal control as the accounting authority determines is necessary to enable the

preparation of financial statements that are free from material misstatement, whether due to

fraud or error.

17.

In

preparing

the

financial statements, the

accounting

authority

is

responsible

for

assessing

the

public entity’s

ability

to continue as

a going

concern, disclosing,

as

applicable,

matters

relating

to going

concern and

using

the

going

concern basis

of

accounting unless the

appropriate

governance structure

either

intends

to

liquidate

the

public

entity

or

to cease operations, or

has

no realistic

alternative but to do

so.

Auditor-general’s

responsibilities

for the

audit of

the

financial statements

18.

My

objectives are

to obtain reasonable assurance

about whether the


as

a

whole are

free

from

material misstatement,

whether

due

to

fraud or

error,

and to

issue

an

auditor’s report that includes my opinion.

Reasonable assurance

is

a

high

level of

assurance,

but

is

not a

guarantee

that

an

audit conducted

in

accordance

with

the

ISAs

will always

detect

a

material misstatement when it

exists. Misstatements

can

arise

from

fraud

or

error

and

are

considered

material if, individually

or

in aggregate, they

could reasonably

be expected

to

influence

the

economic

decisions

of

users

taken on the

basis

of these


19.

I

am

independent

of the entity in accordance with sections

290 and

291

of

the

International

Ethics

Standards

Board

for

Accountants’ Code of ethics

for

professional accountants, parts

1

and 3

of the

International

Ethics

Standards

Board

for

Accountants’ International code of ethics

for

professional accountants (including

International Independence

Standards)

(IESBA codes)

and the

ethical

requirements

that are

relevant to

my

audit

of the


in South

Africa. I have

fulfilled

my

other ethical

responsibilities in

accordance with these

requirements

and the

IESBA codes.

Report

on

the

audit of

the

annual

performance

report

Introduction and scope

20.

In accordance

with the

Public

Audit

Act of

South

Africa, 2004

(Act

no. 25

of

2004) (PAA)

and

the

general notice

issued

in terms

thereof, I have

a responsibility

to

report material

findings

on

the

reported

performance information

against predetermined objectives

for

selected

programmes

presented

in the

annual performance report. I

performed

procedures

to identify

findings

but not to

gather evidence

to express

assurance.

21. My procedures address the reported performance information, which must be based on the

approved performance planning documents of the public entity. I have not evaluated the


62


completeness and appropriateness of the performance indicators/measures included in the

planning documents. My procedures also did not extend to any disclosures or assertions

relating to planned performance strategies and information in respect of future periods that may

be included as part of the reported performance information. Accordingly, my findings do not

extend to these matters.

22. I evaluated the usefulness and reliability of the reported performance information in accordance

with the criteria developed from the performance management and reporting framework, as

defined in the general notice, for the following selected programmes presented in the annual

performance report of the public entity for the year ended 31 March 2019:

Programmes

Pages in the annual

performance report

Programme 2 – gambling and liquor operations

8 – 9

Programme 3 – tourism

10 – 10

Programme 4 – Phakisa

11 – 11

23. I performed procedures to determine whether the reported performance information was

properly presented and whether performance was consistent with the approved performance

planning documents. I performed further procedures to determine whether the indicators and

related targets were measurable and relevant, and assessed the reliability of the reported

performance information to determine whether it was valid, accurate and complete.

24. The material findings in respect of the usefulness and reliability of the selected programmes

are as follows:

Programme 2 – gambling and liquor operations

Various indicators

25. The planned target for these indicators were not specific in clearly identifying the nature and

required level of performance.

Indicator Target Reported

achievement

Indicator 1 - number of revenue audits conducted 48 50

Indicator 2 - number of compliance audits conducted 60 64


63


Indicator 3 – number of gambling inspections conducted

26. The achievement for this indicator reported in the annual performance report was 97. However,

the supporting evidence provided did not agree to the reported achievement and indicated an

achievement of 58.

Programme 3 - tourism

Indicator 1 – number of tourism partnerships

27. The planned target for this indicator was not specific in clearly identifying the nature and


28. There was no clear and logical link between the indicator and the strategic objective to which it

relates. The indicator focused on facilitating provincial forums to strengthen partnerships in

three spheres of government, while the strategic objective aimed to achieve marketing tourism,

promoting tourism or developing sustainable tourism in the province.

Programme 4 - Phakisa

Indicator 2 – number of sports events held at Phakisa

29. The planned target for this indicator was not specific in clearly identifying the nature and


Other matters 30. I draw attention to the matters below.

Achievement of planned targets

31. Refer to the annual performance report on pages 4 to 6 for information on the achievement of

planned targets for the year and explanations provided for the under/over achievement of a

significant number of targets. This information should be considered in the context of the

material findings on the usefulness and reliability of the reported performance information in

paragraphs 30 to 39 of this report.

Adjustment of material misstatements

32. I identified material misstatements in the annual performance report submitted for auditing.

These material misstatements were on the reported performance information of programme 2:

gambling and liquor operations, programme 3: tourism and programme 4 - Phakisa. As

management subsequently corrected only some of the misstatements, I raised material

findings on the usefulness and reliability of the reported performance information. Those that

were not corrected are reported above.


64


Report

on

the

audit of compliance with legislation

Introduction and scope

33.

In accordance

with the

PAA

and

the

general

notice issued

in

terms thereof, I

have a

responsibility to report

material

findings

on

the

compliance of

the public

entity with specific

matters in

key

legislation.

I performed

procedures to

identify

findings

but

not to

gather

evidence

to express assurance.

34. The

material

findings on

compliance

with

specific

matters

in

key

legislations

are

as

follows:

Procurement and

contract management

35. Some

goods

and

services with a

transaction

value

below

R500 000 were

procured

without

obtaining the

required

price

quotations, as

required by

treasury

regulation

16A6.1. Similar

non-

compliance was reported for the past two consecutive years.

36. Some goods and services with a transaction value above R500 000 were procured without

inviting competitive bids, as required by treasury regulations 16A6.1 and 16A6.4. Similar non-

compliance was reported in the previous year. This non-compliance was identified in the

procurement for the logistical and events management of the Free State Madeira Flower

Festival services, where the appointed agents did not follow any supply chain management

processes to acquire the relevant goods and services.

37. Sufficient appropriate audit evidence could not be obtained that contracts and quotations were

awarded to suppliers based on preference points that were allocated and calculated in

accordance with the requirements of the Preferential Procurement Policy Framework Act and

its regulations.

38. Sufficient appropriate audit evidence could not be obtained that contracts and quotations were

awarded to bidders that scored the highest points in the evaluation process, as required by

section 2(1)(f)

of the

Preferential

Procurement Policy

Framework

Act and Preferential

Procurement Regulations.

39. Some

contracts

were

extended or modified

without the

approval of

a properly

delegated

official,

as required by

section

44 of

the

PFMA and treasury

regulations 8.1 and

8.2. Similar

non-

compliance was reported

in the

previous

year.

Financial statements and annual report

40. Financial statements

were

not submitted

for

auditing

within two months

after the

end

of

financial year, as required by

section 55(1)(c)(i) of

the

PFMA.

41.

The


submitted

for

auditing

were

not

prepared

in accordance

with the

prescribed

financial reporting

framework

and

supported

by

full and proper

records,

as

required

by

section 55(1)(a)

and

(b)

of the

PFMA.

Material misstatements

of

assets, liabilities,

revenue,


65


expenditure and disclosure items identified by the auditors in the submitted financial

statements were corrected and the supporting records were provided subsequently, but the

uncorrected material misstatements and resulted in the financial statements receiving a

disclaimer of opinion.

Expenditure management

42. Effective and appropriate steps were not taken to prevent irregular expenditure disclosed in

note 34 to the financial statements, as required by section 51(1)(b)(ii) of the PFMA. The full

extent of the irregular expenditure could not be quantified.

43. Effective and appropriate steps were not taken to prevent irregular expenditure amounting to

R16 561 262 as disclosed in note 34 to the annual financial statements, as required by section

51(1)(b)(ii) of the PFMA. Irregular expenditure of R10 045 634 was incurred on the Free State

Madeira Flower Festival, probity investigations, contract extensions and legal fees, which did

not follow the correct procurement processes.

44. Effective steps were not taken to prevent fruitless and wasteful expenditure amounting to

R1 760 030, as disclosed in note 33 to the annual financial statements, as required by section

51(1)(b)(ii) of the PFMA. The majority of the fruitless and wasteful expenditure was caused by

settlement payments made due to unfair terminations of employment, penalties and interest

caused by penalties and interest on audit fees and salary related payables.

45. Prepayments were made before goods/services were received, in contravention of treasury

regulation 31.1.2(c). This relates to prepayments for the Free State Madeira Flower Festival as

well as towards the probity investigations conducted.

46. Expenditure was incurred in excess of the approved budget, in contravention of section 53(4)

of the PFMA. The entity incurred expenditure in excess of the approved budget for the flower

festival.

Consequence management

47. I was unable to obtain sufficient appropriate audit evidence that disciplinary steps were taken

against officials who had incurred irregular expenditure, as required by section 51(1)(e)(iii) of

the PFMA. This was due to proper and complete records not being maintained as evidence to

support the investigations into irregular expenditure.

48. I was unable to obtain sufficient appropriate audit evidence that disciplinary steps were taken

against officials who had incurred fruitless and wasteful expenditure, as required by section

51(1)(e)(iii) of the PFMA. This was due to proper and complete records not being maintained

as evidence to support the investigations into fruitless and wasteful expenditure.


66


Revenue management

49. Effective and appropriate

steps

were

not taken

to

collect

all revenue

due, as

required

by

section 51(1)(b)(i) of the

PFMA.

Other information

50. The accounting authority is responsible for the other information. The other information

comprises the information included in the annual report, which includes the audit committee’s

report. The other information does not include the financial statements, the auditor’s report and

those selected programmes presented in the annual performance report that have been

specifically reported in this auditor’s report.

51. My opinion on the financial statements and findings on the reported performance information

and compliance with legislation do not cover the other information and I do not express an

audit opinion or any form of assurance conclusion thereon.

52. In connection with my audit, my responsibility is to read the other information and, in doing so,

consider whether the other information is materially inconsistent with the financial statements

and the selected programmes presented in the annual performance report, or my knowledge

obtained in the audit, or otherwise appears to be materially misstated.

Internal control deficiencies 53. I considered internal control relevant to my audit of the financial statements, reported

performance information and compliance with applicable legislation; however, my objective

was not to express any form of assurance on it. The matters reported below are limited to the

significant internal control deficiencies that resulted in the basis for the disclaimer of opinion,

the findings on the annual performance report and the findings on compliance with legislation

included in this report. Summary

54. The entity’s board and audit committee did not provide adequate oversight to ensure that

prescribed supply chain management processes and procedures are implemented to prevent

the increase of irregular expenditure. In the previous years, the entity incurred irregular

expenditure in relation to sponsorships. In the current year, the board overturned its decision to

cancel sponsorships when the policies and procedures in relation to these processes had not

been corrected to stop the increase of such irregular expenditure. In addition, included in these

irregular sponsorships

is

an

amount that was awarded

to a

company

where one of the

board

members is

a director, refer

to

note

29

to

the


for

further

details.

55.

The

audit

committee

did

not review

the

effectiveness of

the internal audit

unit. There was only

one senior internal auditor

with

no

chief

audit executive,

which is insufficient

capacity

to


67


adequately discharge the internal audit function taking into account the organisational needs.

The vacancies in the audit committee also resulted in the committee being ineffective for most

parts of the year.

56. Management did not implement proper record keeping for financial statements and compliance

with laws and regulations. This resulted in the auditee not being able to provide information

timely when requested during the audit process. Material limitation misstatements were

identified on both the financial and compliance testing, of which some were corrected. Those

not corrected resulted in the entity obtaining a disclaimer of audit opinion.

57. Management did not implement internal controls for effective contract management, resulting in

numerous control deficiencies on contracts. Some contracts were open-ended, as they did not

state the measures that the entity will use to monitor contract performance. Where measures

were stated, the contract monitoring measures were not sufficiently detailed. Some service

providers did not submit monthly reports as stipulated in the contract. The entity did not

terminate these contracts and no penalties were invoked against the service provider.

Bloemfontein

04 August 2019


68


Free State Gambling, Liquor and Tourism Authority

Financial statementsfor the year ended 31 March 2019

Free State Gambling, Liquor and Tourism AuthorityFinancial Statements for the year ended 31 March 2019

Index

The reports and statements set out below comprise of the financial statements presented to the :

Page

Accounting Authority's Report 3

Statement of Financial Position 4

Statement of Financial Performance 5

Statement of Changes in Net Assets 6

Cash Flow Statement 7

Statement of Comparison of Budget and Actual Amounts 8 - 10

Accounting Policies 11 - 23

Notes to the Financial Statements 24 - 55

GRAP Generally Recognised Accounting Practice

DESTEA Department of Economic, Small Business Development, Tourism AndEnvironmental Affairs

PFMA Public Finance Management Act


69



Accounting A uthority 's Report

The member submits his report for the year ended 31 March 2019.

The financial statements set out on pages 3 to 56, which have been prepared on the going concern basis, were approved bythe accounting authority on 30 May 2019 and were signed on its behalf by:

Mr. D. PillayChairperson of the Board


70



Statement of Financial Position as at 31 March 20192019 2018

Restated*Note(s) R R

Assets

Current Assets

Inventories 7 - 43 427

Receivables from exchange transactions 8 466 269 545 044

Receivables from non-exchange transactions 9 1 886 761 1 974 866

Prepayments 5 1 497 426 1 174 488

Cash and cash equivalents 10 15 691 685 10 950 117

19 542 141 14 687 942

Non-Current Assets

Property, plant and equipment 3 10 485 401 12 497 401

Intangible assets 4 4 520 507 4 755 164

Deposits 6 70 449 70 449

15 076 357 17 323 014

Non-Current Assets 15 076 357 17 323 014

Current Assets 19 542 141 14 687 942Total Assets 34 618 498 32 010 956

Liabilities

Current Liabilities

Finance lease obligation - 3 570

Payables from exchange transactions 12 12 457 207 19 852 063

Payables from non-exchange transactions 13 15 051 645 12 039 963

Provisions 11 3 946 094 3 699 135

31 454 946 35 594 731

Non-Current Liabilities - -

Current Liabilities 31 454 946 35 594 731Total Liabilities 31 454 946 35 594 731

Assets 34 618 498 32 010 956

Liabilities (31 454 946) (35 594 731)Net Assets 3 163 552 (3 583 775)

Accumulated surplus 3 163 553 (3 583 776)


71



Statement of Financial Performance2019 2018


Revenue

Revenue from exchange transactions

Other income 15 211 513 736 404

Interest received - investment 21 155 791 289 611

Total revenue from exchange transactions 367 304 1 026 015

Revenue from non-exchange transactions

Transfer revenue

Government Grant - Operations 14 100 827 000 82 499 808

Public contributions and donations 14 - 600 000

Conditioonal Grant - DESTEA projects 14 - 2 747 550

Conditional Grant - Flower Festival 14 8 000 000 8 772 459

Conditional Grant - REA 14 563 095 922 535

Total revenue from non-exchange transactions 109 390 095 95 542 352

367 304 1 026 015

109 390 095 95 542 352Total revenue 109 757 399 96 568 367

Expenditure

Employee related costs 18 (63 609 515) (57 196 856)

Board fees 29 (1 072 818) (993 174)

Administration 19 (3 311 655) (2 790 842)

Depreciation and amortisation 3&4 (2 445 744) (1 972 828)

Impairment loss/ Reversal of impairments 3&4 (8 581) (8 226)

Finance costs 22 (106 087) (94 764)

Lease rentals on operating lease 24 (2 281 542) (2 886 938)

Loss on disposal of assets and liabilities 3 (19 982) (1 744 500)

General Expenses 16 (28 296 284) (38 138 537)

Settlement and other losses 35 (1 992 953) (1 100 787)

Total expenditure (103 145 161) (106 927 452)

- -

Total revenue 109 757 399 96 568 367

Total expenditure (103 145 161) (106 927 452)

Surplus (deficit) before taxation 6 612 238 (10 359 085)Surplus (deficit) for the year 6 612 238 (10 359 085)

* See Note 30


72



Statement of Changes in Net AssetsAccumulated

surplusTotal netassets

R R

Balance at 01 April 2017 (1 322 510) (1 322 510)Changes in net assetsSurplus for the year (10 359 085) (10 359 085)Prior year adjustments 8 097 819 8 097 819

Total changes (2 261 266) (2 261 266)

Opening balance as previously reported (2 301 206) (2 301 206)AdjustmentsPrior year adjustments (1 282 569) (1 282 569)

Restated* Balance at 01 April 2018 as restated* (3 583 775) (3 583 775)Changes in net assetsSurplus for the year 6 612 238 6 612 238Depreciated replacement value 135 090 135 090

Total changes 6 747 328 6 747 328

Balance at 31 March 2019 3 163 553 3 163 553

* See Note


73


* See Note


Cash Flow Statement2019 2018


Cash flows from operating activities

Receipts

Grants 109 390 095 95 542 352

Interest income 155 791 289 611

Other Income 211 513 736 404

109 757 399 96 568 367

Payments

Employee costs (64 682 333) (58 190 030)

Operating expenses (39 999 760) (37 003 901)

(104 682 093) (95 193 931)

Total receipts 109 757 399 96 568 367

Total payments (104 682 093) (95 193 931)

Net cash flows from operating activities 25 5 075 306 1 374 436

Cash flows from investing activities

Purchase of property, plant and equipment 3 (227 650) (628 878)

Proceeds from sale of property, plant and equipment 3 - 209 000

Purchase of other intangible assets 4 - (2 838)

Transfer of functions between entities under common control - 312 482

Net cash flows from investing activities (227 650) (110 234)

Cash flows from financing activities

Finance lease payments (106 087) (94 764)

Net increase/(decrease) in cash and cash equivalents 4 741 569 1 169 438

Cash and cash equivalents at the beginning of the year 10 950 117 9 780 677

Cash and cash equivalents at the end of the year 10 15 691 686 10 950 115


74



Statement of Comparison of Budget and Actual AmountsBudget on Cash Basis

Approvedbudget

Adjustments Final Budget Actual amountson comparable

basis

Differencebetween finalbudget and

actual

Reference

R R R R R

Statement of Financial Performance

Revenue

Revenue from exchangetransactions

Other income 12 000 - 12 000 211 513 199 513 A.1

Interest received - investment 412 312 - 412 312 155 791 (256 521) A.2

Total revenue from exchangetransactions

424 312 - 424 312 367 304 (57 008)

Revenue from non-exchangetransactions

Transfer revenue

Government grants & subsidies 100 327 000 500 000 100 827 000 100 827 000 - B.1

Conditional Grant - FlowerFestival

12 000 000 (4 000 000) 8 000 000 8 000 000 - B.2

Conditional Grant - REA - - - 563 095 563 095 B.3

Total revenue from non-exchange transactions

112 327 000 (3 500 000) 108 827 000 109 390 095 563 095

'Total revenue from exchangetransactions'

- - - 367 304 -

'Total revenue from non-exchange transactions'

112 327 000 (3 500 000) 108 827 000 109 390 095 563 095

Total revenue 112 327 000 (3 500 000) 108 827 000 109 757 399 563 095

Expenditure

Personnel (60 840 117) - (60 840 117) (63 609 515) (2 769 398) C

Remuneration of Boardmembers

(5 450 012) - (5 450 012) (1 072 818) 4 377 194 D

Administration (2 073 004) - (2 073 004) (3 311 655) (1 238 651) E

Finance costs (120 000) - (120 000) (106 087) 13 913 F

Lease rentals on operating lease (2 435 027) - (2 435 027) (2 281 542) 153 485 G

Repairs and maintenance (197 295) - (197 295) (773 504) (576 209) H

Settlement and other losses - - - (1 992 953) (1 992 953) J

General Expenses (41 211 545) 3 500 000 (37 711 545) (27 522 780) 10 188 765 I

Total expenditure (112 327 000) 3 500 000 (108 827 000) (100 670 854) 8 156 146

Net difference - - - 9 086 545 9 086 545

- - - - -

Net diffence - - - 9 086 545 9 086 545

Deficit - - - 9 086 545 9 086 545

- - - - -

Actual Amount on ComparableBasis as Presented in theBudget and ActualComparative Statement

- - - 9 086 545 9 086 545


75




Approvedbudget


basis


actual

Reference

R R R R R

Reconciliation

Add back non-cash items

Depreciation and amortisation (2 445 744)

Impairment loss (8 581)

Loss on disposal of assets (19 982)

Actual Amount in theStatement of FinancialPerformance

6 612 238


76




Approvedbudget


basis


actual

Reference

R R R R R

A.1 - Other income it was budgeted for R 12 000 and money received for the year amount to R 211 513. The variance is dueto bursary fund received from CATHSETA which was not budgeted for.

A.2 Interest received - it was budgeted for R 412 312, interest earned was R 155 791 and there was a variance of R 256521. The target was not met due to cashflow from the department, the transferw were received on a monthly basis instead ofquartely.

B.1 - Operational Grant - The Authority received an operational grant of R 100 327 000, an adjustment budget of R 500 000and total operational budget for the year was R 100 827 000.

B.2 - Flower Festival - The Authority was originally allocated a conditional grant of R 12 000 000 for Flower Festival, theallocation was adjusted down to R 8 000 000.

B.3 - REA project - This relates to the unspent grant of REA projects which were not utilised in the prior year. In the yearunder review the grant was utilised for Bookmakers RFP (Request for proposal) and licence payment for a server. The amountwas R 563 095

C - Personnel - The original budget was R 60 840 117, actual expenditure incurred was R 63 609 515 and there was ashortfall of R 2 769 398. The reason for the variance is largely due to medical aid allowance introduced in the year underreview.

D Remuniration for Board - The original budget was R 5 450 012, actual expenditure icurred was R 1 072 818 and there wasa saving of R 4 377 194. The reason for saving was due to some members of the Board were public officials, were not entitledto board claims and another reason is that there were two vacancies in the board for the year under review. One memberresigned and other member is deceased.

E - Administration - The original budget was R 2 733 404, the actual expenditure incurred was R 3 311 655 and the budgetwas exceeded by R 1 238 651. The reason for over expenditure was due to licence renewals demand in the year under reviewand inventory items which was expensed in the current year.

F - Finance cost s - The original budget was R 120 000, the actual expenditure incurred was R 106 087. There was a saving ofR 13 913.

G - Lease rentals on operating lease - The original budget was R 2 435 027, the actual expenditure incurred was R 2 281542 and saving was R 153 485. The Authority budgeted for operating lease for a bigger office space hence saving was realisedon this line item.

H - Repairs and maintenance - The original budget was R 197 295, the actual expenditure incurred was R 773 504 and thewas shortfall of R 576 209.The reason for over expenduture is due to repair to float truck and pool vehicles.

I - General expenses - The original budget was R 37 711 545 (The amount include the following budget items: (1) Accruals - R11 574 894, (2) Capital expenditure - R 1 700 000 and other operating expenditure) the expenditure incurred was R 27 522780, excluding accrual repayments and capital expenditurewhich are recorded under balance sheet. The saving of R 10 188765 was utilised to pay for accruals accumulated over the years.

J- Settlement and losses - There was not budget for this line item, the expenditure incurred was R 1 992 953. These losses aredue to court cases lost in the course of doing business and the settlement order by the labour court against the Entity for unfairdismissal of employee.


77



Accounting Policies

1. Basis of preparation

The financial statements have been prepared in terms of section 55 of the Public Finance Management Act, 1999 (Act No. 1 of1999) and in accordance with the Standards of Generally Recognised Accounting Practice (GRAP) including anyinterpretations, guidelines and directives issued by the Accounting Standards Board.

These financial statements have been prepared on an accrual basis of accounting and are in accordance with historical costconvention unless specified otherwise. They are presented in South African Rand.

A summary of the significant accounting policies, which have been consistently applied, are disclosed below .

1.1 Property , plant and equipment

Property, plant and equipment is initially measured at cost.

The cost of property, plant and equipment is the purchase price and other costs attributable to bring the asset to the locationand condition necessary for it to be capable of operating in the manner intended by management. Trade discounts and rebatesare deducted in arriving at the cost.

Where an asset is acquired at no cost, or for a nominal cost, its cost is its fair value as at date of acquisition.

Property, plant and equipment are depreciated on the straight line basis over their expected useful lives to their estimatedresidual value.

Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses.

The useful lives of items of property, plant and equipment have been assessed as follows:

Item Average useful lifeRacetrack building and structures 4 - 20 yearsFurniture and fixtures 3 - 25 yearsMotor vehicles 3 - 15 yearsOffice equipment 2 - 20 yearsIT equipment 3 - 15 yearsInfrastructure 4 - 15 yearsRacetrack 14 - 15 yearsRacetrack equipment 3 - 11 yearsSporting facilities 14 - 22 years

Useful lives were revised during the financial year and the ef fect of these changes have been disclosed under note The depreciable amount of an asset is allocated on a systematic basis over its useful life.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item isdepreciated separately.

The depreciation method used reflects the pattern in which the asset’ s future economic benefits or service potential areexpected to be consumed by the entity. The depreciation method applied to an asset is reviewed at least at each reporting dateand, if there has been a significant change in the expected pattern of consumption of the future economic benefits or servicepotential embodied in the asset, the method is changed to reflect the changed pattern. Such a change is accounted for as achange in an accounting estimate.

The entity assesses at each reporting date whether there is any indication that the entity expectations about the residual valueand the useful life of an asset have changed since the preceding reporting date. If any such indication exists, the entity revisesthe expected useful life and/or residual value accordingly. The change is accounted for as a change in an accounting estimate.

The depreciation charge for each period is recognised in surplus or deficit unless it is included in the carrying amount ofanother asset.

Items of property, plant and equipment are derecognised when the asset is disposed of or when there are no further economicbenefits or service potential expected from the use of the asset.


78



Accounting Policies

1.1 Property , plant and equipment (continued)

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in surplus or deficit whenthe item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment isdetermined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

The entity separately discloses expenditure to repair and maintain property, plant and equipment in the notes to the financialstatements (see note 3).

The entity discloses relevant information relating to assets under construction or development, in the notes to the financialstatements (see note 3).

1.2 Intangible assets

An intangible asset is an identifiable non-monetary asset without physical substance.

Costs associated with developing or maintaining computer software programs are recognized as an expense incurred.Costs that are directly associated with identified software product controlled by the Free State Gambling and LiquorAuthority (the Authority) and that will generate benefits exceeding cost beyond one year, are recognized as intangibleassets. Intangible assets are stated as historical cost less accumulated amortization is recognised over their useful lives onstraight line method. The useful life of intangible assets is finite. It is the policy of the Authority to review amortization andamortization method for intangible assets at each reporting date.

An intangible asset is recognised when:� it is probable that the expected future economic benefits or service potential that are attributable to the asset will

flow to the entity; and� the cost or fair value of the asset can be measured reliably.

Intangible assets are initially recognised at cost.

An intangible asset arising from development (or from the development phase of an internal project) is recognised when:� it is technically feasible to complete the asset so that it will be available for use or sale.� there is an intention to complete and use or sell it.� there is an ability to use or sell it.� it will generate probable future economic benefits or service potential.� there are available technical, financial and other resources to complete the development and to use or sell the

asset.� the expenditure attributable to the asset during its development can be measured reliably .

The amortisation period and the amortisation method for intangible assets are reviewed at each reporting date.

Reassessing the useful life of an intangible asset with a finite useful life after it was classified as indefinite is an indicator thatthe asset may be impaired. As a result the asset is tested for impairment and the remaining carrying amount is amortised overits useful life.

Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows:

Item Useful lifeComputer software, other 3 - 15 yearsIntangible assets under development 3 - 15 years

The entity discloses relevant information relating to assets under construction or development, in the notes to the financialstatements (see note 4).

Intangible assets are derecognised:� on disposal; or� when no future economic benefits or service potential are expected from its use or disposal.

1.3 Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or a residualinterest of another entity.


79



Accounting Policies

1.3 Financial instruments (continued)

The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability ismeasured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the ef fectiveinterest method of any difference between that initial amount and the maturity amount, and minus any reduction (directly orthrough the use of an allowance account) for impairment or uncollectibility .

A concessionary loan is a loan granted to or received by an entity on terms that are not market related.

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to dischargean obligation.

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes inforeign exchange rates.

Derecognition is the removal of a previously recognised financial asset or financial liability from an entity’s statement offinancial position.

A derivative is a financial instrument or other contract with all three of the following characteristics:� Its value changes in response to the change in a specified interest rate, financial instrument price, commodity price,

foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided in the case ofa non-financial variable that the variable is not specific to a party to the contract (sometimes called the ‘underlying’).

� It requires no initial net investment or an initial net investment that is smaller than would be required for other typesof contracts that would be expected to have a similar response to changes in market factors.

� It is settled at a future date.

The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability (or group offinancial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period. Theeffective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life ofthe financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financialliability. When calculating the effective interest rate, an entity shall estimate cash flows considering all contractual terms of thefinancial instrument (for example, prepayment, call and similar options) but shall not consider future credit losses. Thecalculation includes all fees and points paid or received between parties to the contract that are an integral part of the ef fectiveinterest rate (see the Standard of GRAP on Revenue from Exchange Transactions), transaction costs, and all other premiumsor discounts. There is a presumption that the cash flows and the expected life of a group of similar financial instruments can beestimated reliably. However, in those rare cases when it is not possible to reliably estimate the cash flows or the expected lifeof a financial instrument (or group of financial instruments), the entity shall use the contractual cash flows over the fullcontractual term of the financial instrument (or group of financial instruments).

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties inan arm’s length transaction.

A financial asset is:� cash;� a residual interest of another entity; or� a contractual right to:

- receive cash or another financial asset from another entity; or- exchange financial assets or financial liabilities with another entity under conditions that are potentiallyfavourable to the entity.

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for aloss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of adebt instrument.

A financial liability is any liability that 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.

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes inmarket interest rates.

Liquidity risk is the risk encountered by an entity in the event of difficulty in meeting obligations associated with financialliabilities that are settled by delivering cash or another financial asset.


80



Accounting Policies

1.3 Financial instruments (continued)

Loan commitment is a firm commitment to provide credit under pre-specified terms and conditions.

Loans payable are financial liabilities, other than short-term payables on normal credit terms.

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes inmarket prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk.

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes inmarket prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factorsspecific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in themarket.

A financial asset is past due when a counterparty has failed to make a payment when contractually due.

A residual interest is any contract that manifests an interest in the assets of an entity after deducting all of its liabilities. Aresidual interest includes contributions from owners, which may be shown as:

� equity instruments or similar forms of unitised capital;� a formal designation of a transfer of resources (or a class of such transfers) by the parties to the transaction as

forming part of an entity’s net assets, either before the contribution occurs or at the time of the contribution; or� a formal agreement, in relation to the contribution, establishing or increasing an existing financial interest in the net

assets of an entity.

Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset orfinancial liability. An incremental cost is one that would not have been incurred if the entity had not acquired, issued ordisposed of the financial instrument.

Financial instruments at amortised cost are non-derivative financial assets or non-derivative financial liabilities that have fixedor determinable payments, excluding those instruments that:

� the entity designates at fair value at initial recognition; or� are held for trading.

Financial instruments at cost are investments in residual interests that do not have a quoted market price in an active market,and whose fair value cannot be reliably measured.

Financial instruments at fair value comprise financial assets or financial liabilities that are:� derivatives;� combined instruments that are designated at fair value;� instruments held for trading. A financial instrument is held for trading if:

- it is acquired or incurred principally for the purpose of selling or repurchasing it in the near-term; or- on initial recognition it is part of a portfolio of identified financial instruments that are managed together and forwhich there is evidence of a recent actual pattern of short term profit-taking;- non-derivative financial assets or financial liabilities with fixed or determinable payments that are designated atfair value at initial recognition; and- financial instruments that do not meet the definition of financial instruments at amortised cost or financialinstruments at cost.

Derecognition1.4 TaxTaxation

The Free State Gambling and Liquor Authority's income is exempted from taxation in terms of Section 10 (1) (cA) (i) of theincome Tax Act.

1.5 Leases

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease isclassified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.


81



Accounting Policies

1.5 Leases (continued)

When a lease includes both land and buildings elements, the entity assesses the classification of each element separately .

Finance leases - lessee

Finance leases are recognised as assets and liabilities in the statement of financial position at amounts equal to the fair valueof the leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor isincluded in the statement of financial position as a finance lease obligation.

The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease .

Minimum lease payments are apportioned between the finance charge and reduction of the outstanding liability . The financecharge is allocated to each period during the lease term so as to achieve a constant periodic rate on the remaining balance ofthe liability.

Operating leases - lessee

Finance charges are recognised as an expense on a straight-line basis over the lease term . The difference between theamounts recognised as an expense and the contractual payments are recognised as an finance lease asset or leaseobligation.

1.6 Inventories

Inventories are assets:

(a) In the form of materials or supplies to be consumed in the production process;

(b) in the form of materials or supplies to be consumed or distributed in the rendering of services;

(c) held for sale or distribution in the ordinary course of operations; or

(d) in the process of production for sale or distribution.

Inventories are initially measured at cost except where inventories are acquired at no cost, or for nominal consideration, thentheir costs are their fair value as at the date of acquisition.

Subsequently inventories are measured at the lower of cost or net realisable value. Inventories for which the costs are notrecoverable due to damage, whole or partial obsolescence, or decline in selling price are written down to net realisable value.

Inventories are measured at the lower of cost and current replacement cost where they are held for;� distribution at no charge or for a nominal charge; or� consumption in the production process of goods to be distributed at no charge or for a nominal charge.

Net realisable value is the estimated selling price in the ordinary course of operations less the estimated costs of completionand the estimated costs necessary to make the sale, exchange or distribution.

Current replacement cost is the cost the entity incurs to acquire the asset on the reporting date.

The cost of inventories comprises of all costs of purchase, costs of conversion and other costs incurred in bringing theinventories to their present location and condition.

The cost of inventories of items that are not ordinarily interchangeable and goods or services produced and segregated forspecific projects is assigned using specific identification of the individual costs.

The cost of inventories is assigned using the first-in, first-out (FIFO) formula. The same cost formula is used for all inventorieshaving a similar nature and use to the entity.


82



Accounting Policies

1.6 Inventories (continued)

When inventories are sold, the carrying amounts of those inventories are recognised as an expense in the period in which therelated revenue is recognised. If there is no related revenue, the expenses are recognised when the goods are distributed, orrelated services are rendered. The amount of any write-down of inventories to net realisable value or current replacement costand all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of anyreversal of any write-down of inventories, arising from an increase in net realisable value or current replacement cost, arerecognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.


83



Accounting Policies

1.7 Impairment of cash-generating assets

Cash-generating assets are assets used with the objective of generating a commercial return. Commercial return means thatpositive cash flows are expected to be significantly higher than the cost of the asset.

Impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognitionof the loss of the asset’s future economic benefits or service potential through depreciation (amortisation).

Carrying amount is the amount at which an asset is recognised in the statement of financial position after deducting anyaccumulated depreciation and accumulated impairment losses thereon.

A cash-generating unit is the smallest identifiable group of assets used with the objective of generating a commercial returnthat generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups ofassets.

Costs of disposal are incremental costs directly attributable to the disposal of an asset, excluding finance costs and income taxexpense.

Depreciation (Amortisation) is the systematic allocation of the depreciable amount of an asset over its useful life.

Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm’ s length transaction betweenknowledgeable, willing parties, less the costs of disposal.

Recoverable amount of an asset or a cash-generating unit is the higher its fair value less costs to sell and its value in use.

Useful life is either:� the period of time over which an asset is expected to be used by the entity; or� the number of production or similar units expected to be obtained from the asset by the entity.

Judgements made by management in applying the criteria to designate assets as cash-generating assets or non-cash-generating assets, are as follows:

[Specify judgements made]

1.8 Impairment of non-cash-generating assets

Cash-generating assets are assets used with the objective of generating a commercial return. Commercial return means thatpositive cash flows are expected to be significantly higher than the cost of the asset.

Non-cash-generating assets are assets other than cash-generating assets.

Impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognitionof the loss of the asset’s future economic benefits or service potential through depreciation (amortisation).

Carrying amount is the amount at which an asset is recognised in the statement of financial position after deducting anyaccumulated depreciation and accumulated impairment losses thereon.

A cash-generating unit is the smallest identifiable group of assets managed with the objective of generating a commercialreturn that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets orgroups of assets.

Costs of disposal are incremental costs directly attributable to the disposal of an asset, excluding finance costs and income taxexpense.

Depreciation (Amortisation) is the systematic allocation of the depreciable amount of an asset over its useful life.

Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm’ s length transaction betweenknowledgeable, willing parties, less the costs of disposal.

Recoverable service amount is the higher of a non-cash-generating asset’ s fair value less costs to sell and its value in use.

Useful life is either:� the period of time over which an asset is expected to be used by the entity; or


84



Accounting Policies

1.8 Impairment of non-cash-generating assets (continued)� the number of production or similar units expected to be obtained from the asset by the entity.

Judgements made by management in applying the criteria to designate assets as non-cash-generating assets or cash-generating assets, are as follows:

[Specify judgements made]

Identification

When the carrying amount of a non-cash-generating asset exceeds its recoverable service amount, it is impaired.

The entity assesses at each reporting date whether there is any indication that a non-cash-generating asset may be impaired.If any such indication exists, the entity estimates the recoverable service amount of the asset.

Value in use

Value in use of an asset is the present value of the asset’s remaining service potential.

The present value of the remaining service potential of an asset is determined using the following approach:

Recognition and measurement

If the recoverable service amount of a non-cash-generating asset is less than its carrying amount, the carrying amount of theasset is reduced to its recoverable service amount. This reduction is an impairment loss.

An impairment loss is recognised immediately in surplus or deficit.

After the recognition of an impairment loss, the depreciation (amortisation) charge for the non-cash-generating asset isadjusted in future periods to allocate the non-cash-generating asset’ s revised carrying amount, less its residual value (if any),on a systematic basis over its remaining useful life.


85



Accounting Policies

1.9 Employ ee benefits

Short-term employ ee benefits

Short-term employee benefits are employee benefits (other than termination benefits) that are due to be settled within twelvemonths after the end of the period in which the employees render the related service.

Short-term employee benefits include items such as:� wages, salaries and social security contributions;� short-term compensated absences (such as paid annual leave and paid sick leave) where the compensation for the

absences is due to be settled within twelve months after the end of the reporting period in which the employeesrender the related employee service;

� bonus, incentive and performance related payments payable within twelve months after the end of the reportingperiod in which the employees render the related service; and

� non-monetary benefits (for example, medical care, and free or subsidised goods or services such as housing, carsand cellphones) for current employees.

When an employee has rendered service to the entity during a reporting period, the entity recognise the undiscounted amountof short-term employee benefits expected to be paid in exchange for that service:

� as a liability (accrued expense), after deducting any amount already paid. If the amount already paid exceeds theundiscounted amount of the benefits, the entity recognise that excess as an asset (prepaid expense) to the extentthat the prepayment will lead to, for example, a reduction in future payments or a cash refund; and

� as an expense, unless another Standard requires or permits the inclusion of the benefits in the cost of an asset.

The expected cost of compensated absences is recognised as an expense as the employees render services that increasetheir entitlement or, in the case of non-accumulating absences, when the absence occurs. The entity measure the expectedcost of accumulating compensated absences as the additional amount that the entity expects to pay as a result of the unusedentitlement that has accumulated at the reporting date.

The entity recognise the expected cost of bonus, incentive and performance related payments when the entity has a presentlegal or constructive obligation to make such payments as a result of past events and a reliable estimate of the obligation canbe made. A present obligation exists when the entity has no realistic alternative but to make the payments.

1.10 Provisions and contingencies

Provisions are recognised when:� the entity has a present obligation as a result of a past event;� it is probable that an outflow of resources embodying economic benefits or service potential will be required to

settle the obligation; and� a reliable estimate can be made of the obligation.

The amount of a provision is the best estimate of the expenditure expected to be required to settle the present obligation at thereporting date.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Provisions are reversed if it isno longer probable that an outflow of resources embodying economic benefits or service potential will be required, to settle theobligation.

A contingent asset is a possible asset that arises from past events, and whose existence will be confirmed only by theoccurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity .

A contingent liability is a possible obligation that arises from past events, and whose existence will be confirmed only by theoccurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or a presentobligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodyingeconomic benefits or service potential will be required to settle the obligation; or the amount of the obligation cannot bemeasured with sufficient reliability.

Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 26.

1.11 Revenue from exchange transactions

Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in anincrease in net assets, other than increases relating to contributions from owners.


86



Accounting Policies

1.11 Revenue from exchange transactions (continued)

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties inan arm’s length transaction.

Measurement

Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and volume rebates.

Rendering of services

When the outcome of a transaction involving the rendering of services can be estimated reliably , revenue associated withthe transaction is recognised by reference to the stage of completion of the transaction at the reporting date. The outcomeof 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 or service potential associated with the transaction will flow to the entity;� the stage of completion of the transaction at the reporting date 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 is recognisedonly to the extent of the expenses recognised that are recoverable.

Interest

Revenue arising from the use by others of entity assets yielding interest is recognised when:� It is probable that the economic benefits or service potential associated with the transaction will flow to the entity,

and� The amount of the revenue can be measured reliably.

Interest is recognised, in surplus or deficit, using the effective interest rate method.

1.12 Revenue from non-exchange transactions

Non-exchange transactions are defined as transactions where the entity receives value from another entity without directlygiving approximately equal value in exchange.

Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in anincrease in net assets, other than increases relating to contributions from owners.

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties inan arm’s length transaction.

Measurement

Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and volume rebates.


87



Accounting Policies

1.12 Revenue from non-exchange transactions (continued)

Government grants

Government grants are recognised as revenue when:� it is probable that the economic benefits or service potential associated with the transaction will flow to the entity,� the amount of the revenue can be measured reliably, and� to the extent that there has been compliance with any restrictions associated with the grant.

The entity assesses the degree of certainty attached to the flow of future economic benefits or service potential on the basis ofthe available evidence. Certain grants payable by one level of government to another are subject to the availability of funds.Revenue from these grants is only recognised when it is probable that the economic benefits or service potential associatedwith the transaction will flow to the entity. An announcement at the beginning of a financial year that grants may be available forqualifying entities in accordance with an agreed programme may not be sufficient evidence of the probability of the flow.Revenue is then only recognised once evidence of the probability of the flow becomes available.

Restrictions on government grants may result in such revenue being recognised on a time proportion basis. W here there is norestriction on the period, such revenue is recognised on receipt or when the Act becomes effective, which-ever is earlier.

When government remit grants on a re-imbursement basis, revenue is recognised when the qualifying expense has beenincurred and to the extent that any other restrictions have been complied with.

Other grants and donations

Other grants and donations are recognised as revenue when:� it is probable that the economic benefits or service potential associated with the transaction will flow to the entity;� the amount of the revenue can be measured reliably; and� to the extent that there has been compliance with any restrictions associated with the grant.

If goods in-kind are received without conditions attached, revenue is recognised immediately . If conditions are attached, aliability is recognised, which is reduced and revenue recognised as the conditions are satisfied.

1.13 Accounting by principals and agents

Identification

An agent is an entity that has been directed by another entity (a principal), through a binding arrangement, to undertaketransactions with third parties on behalf of the principal and for the benefit of the principal.

A principal is an entity that directs another entity (an agent), through a binding arrangement, to undertake transactions withthird parties on its behalf and for its own benefit.

A principal-agent arrangement results from a binding arrangement in which one entity (an agent), undertakes transactions withthird parties on behalf, and for the benefit of, another entity (the principal).

Identify ing whether an entity is a principal or an agent

When the entity is party to a principal-agent arrangement, it assesses whether it is the principal or the agent in accountingfor revenue, expenses, assets and/or liabilities that result from transactions with third parties undertaken in terms of thearrangement.

The assessment of whether an entity is a principal or an agent requires the entity to assess whether the transactions itundertakes with third parties are for the benefit of another entity or for its own benefit.

Recognition

The entity, as a principal, recognises revenue and expenses that arise from transactions with third parties in a principal-agent arrangement in accordance with the requirements of the relevant Standards of GRAP.

The entity, as an agent, recognises only that portion of the revenue and expenses it receives or incurs in executing thetransactions on behalf of the principal in accordance with the requirements of the relevant Standards of GRAP.


88



Accounting Policies

1.13 Accounting by principals and agents (continued)

The entity recognises assets and liabilities arising from principal-agent arrangements in accordance with the requirementsof the relevant Standards of GRAP.

1.14 Comparative figures

Where necessary, comparative figures have been reclassified to conform to changes in presentation in the current year.

1.15 Fruitless and wasteful expenditure

In terms of section 55(2) (b) (i) of the Public Finance Management Act, 1999 the financial statements must include particularsof any irregular and fruitless and wasteful expenditure.

Irregular expenditure means expenditure incurred in contravention of, or in accordance with, a requirement of any applicablelegislation, including.

- The PFMA, or- Any provincial legislation providing for procurement procedures in the Provincial Government.

Fruitless expenditure means expenditure made in vain and would have been avoided had reasonable care been exercised.

All expenditure relating to fruitless and wasteful expenditure is recognised as an expense in the statement of financialperformance in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of theexpense, and where recovered, it is subsequently accounted for as revenue in the statement of financial performance .

1.16 Irregular expenditure

Irregular expenditure as defined in section 1 of the PFMA is expenditure other than unauthorised expenditure, incurred incontravention of or that is not in accordance with a requirement of any applicable legislation, including -

(a) this Act; or(b) the State Tender Board Act, 1968 (Act No. 86 of 1968), or any regulations made in terms of the Act; or(c) any provincial legislation providing for procurement procedures in that provincial government.

Irregular expenditure is treated in terms of National Treasury practice note no. 4 of 2008/2009 which was issued in terms ofsections 76(1) to 76(4) of the PFMA (effective from 1 April 2008) as follows:

Irregular expenditure that was incurred and identified during the current financial and which was condoned before year endand/or before finalisation of the financial statements is recorded appropriately in the irregular expenditure register . In such aninstance, no further action is also required with the exception of updating the note to the financial statements.

Irregular expenditure that was incurred and identified during the current financial year and for which condonement is beingawaited at year end is recorded in the irregular expenditure register. No further action is required with the exception of updatingthe note to the financial statements.

Where irregular expenditure was incurred in the previous financial year and is only condoned in the following financial year , theregister and the disclosure note to the financial statements is updated with the amount condoned.

Irregular expenditure that was incurred and identified during the current financial year and which was not condoned by theNational Treasury or the relevant authority is recorded appropriately in the irregular expenditure register . If liability for theirregular expenditure can be attributed to a person, a debt account is created if such a person is liable in law . Immediate stepsare thereafter taken to recover the amount from the person concerned. If recovery is not possible, the accounting of ficer oraccounting authority may write off the amount as debt impairment and disclose such in the relevant note to the financialstatements. The irregular expenditure register is updated accordingly. If the irregular expenditure has not been condoned andno person is liable in law, the expenditure related thereto remains against the relevant programme/expenditure item, isdisclosed as such in the note to the financial statements and updated accordingly in the irregular expenditure register .

1.17 Government grant

Government grants are recognized when there is a reasonable assurance that the entity will comply with the conditions of thetransfer agreement and that the grant will be received. Any excess portion of the grant should be returned to the ExecutiveAuthority as prescribed by the transfer agreement.


89



Accounting Policies

1.18 Budget information

The Entity is typically subject to budgetary limits in the form of appropriations or budget authorisations (or equivalent), which isgiven effect through authorising legislation, appropriation or similar .

General purpose financial reporting by entity shall provide information on whether resources were obtained and used inaccordance with the legally adopted budget.

The financial statements and the budget are on the same basis of accounting therefore a comparison with the budgetedamounts for the reporting period have been included in the financial statements.

The Statement of comparative and actual information have been included in the financial statements as the recommendeddisclosure when the financial statements and the budget are on the same basis of accounting as determined by NationalTreasury.

1.19 Related parties

The entity operates in an economic sector currently dominated by entities directly or indirectly owned by the South AfricanGovernment. As a consequence of the constitutional independence of the three spheres of government in South Africa, onlyentities within the provincial sphere of government are considered to be related parties.

Management are those persons responsible for planning, directing and controlling the activities of the entity, including thosecharged with the governance of the entity in accordance with legislation, in instances where they are required to perform suchfunctions.

Close members of the family of a person are considered to be those family members who may be expected to influence, or beinfluenced by, that management in their dealings with the entity.

1.20 Events after the reporting date

Events after the reporting date are those events, both favourable and unfavourable, that occur between the reporting dateand the date when the financial statements are authorised for issue. Such events are of two types:

(a) those that provide evidence of conditions that existed at the reporting date (adjusting events after the reporting date); and

(b) those that are indicative of conditions that arose after the reporting date (non-adjusting events after the reporting date).

Management continuously reviews events after the financial position date which might have an adjusting or non-adjustingeffect on the financial statements. Events after the financial position disclosed in the financial statements where applicable.

Amounts recognised in the financial statements are, where applicable, adjusted to reflect adjusting events after thereporting date. Non adjusting events are not adjusted for.


90



Notes to the Financial Statements2019 2018

R R

2. New standards and interpretations

2.1 Standards and interpretations effective and adopted in the current y ear

In the current year, the entity has adopted the following standards and interpretations that are ef fective for the currentfinancial year and that are relevant to its operations:

Standard/ Interpretation: Effective date:Years beginning on orafter

Expected impact:

� IGRAP 19: Liabilities to Pay Levies 01 April 2019 Expected impact is...� GRAP 12 (as amended 2016): Inventories 01 April 2018 The impact of the is not

material.� GRAP 17 (as amended 2016): Property, Plant and

Equipment01 April 2018 The adoption of this has

not had a material impacton the results of thecompany, but has resultedin more disclosure thanwould have previouslybeen provided in thefinancial statements

� GRAP 21 (as amended 2016): Impairment of non-cash-generating assets

01 April 2018

� GRAP 26 (as amended 2016): Impairment of cash-generating assets

01 April 2018 The impact of the is notmaterial.

� GRAP 27 (as amended 2016): Agriculture 01 April 2018 Unlikely there will be amaterial impact

� GRAP 31 (as amended 2016): Intangible Assets 01 April 2018� GRAP 103 (as amended 2016): Heritage Assets 01 April 2018 Unlikely there will be a

material impact� Directive 12: The Selection of an Appropriate Reporting

Framework by Public Entities01 April 2018 The impact of the is not

material.

2.2 Standards and interpretations not y et effective or relevant

The following standards and interpretations have been published and are mandatory for the entity’s accounting periodsbeginning on or after 01 April 2019 or later periods but are not relevant to its operations:

Standard/ Interpretation: Effective date:Years beginning on orafter

Expected impact:

� Guideline: Guideline on Accounting for Landfill Sites 01 April 2099 Unlikely there will be amaterial impact

� Directive 13: Transitional Provisions for the Adoption ofStandards of GRAP by Community Education and Training(CET) Colleges

01 April 2019 Unlikely there will be amaterial impact

� GRAP 35: Consolidated Financial Statements 01 April 2020 Unlikely there will be amaterial impact

� GRAP 36: Investments in Associates and Joint Ventures 01 April 2020 Unlikely there will be amaterial impact

� GRAP 37: Joint Arrangements 01 April 2020 Unlikely there will be amaterial impact

� Guideline: Accounting for Arrangements Undertaken i.t.othe National Housing Programme


� GRAP 110 (as amended 2016): Living and Non-livingResources


� GRAP 6 (as revised 2010): Consolidated and SeparateFinancial Statements


� GRAP 7 (as revised 2010): Investments in Associates 01 April 2019 Unlikely there will be amaterial impact


91



Notes to the Financial Statements

2. New standards and interpretations (continued)� GRAP 8 (as revised 2010): Interests in Joint Ventures 01 April 2019 Unlikely there will be a

material impact� GRAP 18 (as amended 2016): Segment Reporting 01 April 2019 Unlikely there will be a

material impact� GRAP 32: Service Concession Arrangements: Grantor 01 April 2019 Unlikely there will be a

material impact� GRAP 107: Mergers 01 April 2019 Unlikely there will be a

material impact� IGRAP 11: Consolidation – Special purpose entities 01 April 2019 Unlikely there will be a

material impact� IGRAP 12: Jointly controlled entities – Non-monetary

contributions by ventures01 April 2019 Unlikely there will be a

material impact� IGRAP 17: Service Concession Arrangements where a

Grantor Controls a Significant Residual Interest in an Asset01 April 2019 Unlikely there will be a

material impact


92



Notes to the Financial StatementsFigures in Rand

3. Property , plant and equipment

2019 2018

Cost /Valuation

Accumulateddepreciation

andaccumulatedimpairment

Carry ing value Cost /Valuation

Accumulateddepreciation


Carry ing value

Racetrack buildings and structures 1 602 864 (205 146) 1 397 718 1 602 864 (93 053) 1 509 811Furniture and fixtures 2 459 652 (1 329 037) 1 130 615 2 460 686 (1 012 468) 1 448 218Motor vehicles 3 966 747 (2 176 499) 1 790 248 3 856 926 (1 427 877) 2 429 049Office equipment 1 745 250 (683 896) 1 061 354 1 698 196 (362 849) 1 335 347IT equipment 3 884 685 (2 995 593) 889 092 3 862 595 (2 556 636) 1 305 959Infrastructure 156 450 (37 677) 118 773 156 450 (17 090) 139 360Racetrack 2 368 533 (300 680) 2 067 853 2 368 533 (136 386) 2 232 147Racetrack equipment 409 114 (124 075) 285 039 398 710 (46 493) 352 217Work in progress 1 737 356 - 1 737 356 1 737 356 - 1 737 356Sporting Facility 8 422 (1 069) 7 353 8 422 (485) 7 937

Total 18 339 073 (7 853 672) 10 485 401 18 150 738 (5 653 337) 12 497 401

93




3. Property , plant and equipment (continued)

Reconciliation of property , plant and equipment - 2019

Openingbalance

Additions Disposals Depreciation Impairmentloss

Total

Racetrack buildings and structures 1 509 811 - - (112 093) - 1 397 718Furniture and fixtures 1 448 218 - (158) (310 139) (7 306) 1 130 615Motor vehicles 2 429 049 125 925 (10 209) (754 517) - 1 790 248Office equipment 1 335 347 65 651 (6 955) (332 003) (686) 1 061 354IT equipment 1 305 959 23 278 (834) (438 167) (1 144) 889 092Infrastructure 139 360 - - (20 587) - 118 773Racetrack 2 232 147 - - (164 294) - 2 067 853Racetrack equipment 352 217 12 796 (1 303) (78 671) - 285 039Work in progress 1 737 356 - - - - 1 737 356Sporting facility 7 937 - - (584) - 7 353

12 497 401 227 650 (19 459) (2 211 055) (9 136) 10 485 401

94





Reconciliation of property , plant and equipment - 2018

Openingbalance

Additions Additionsthrough

transfer offunctions /

mergers

Disposals Transfers Depreciation Impairmentloss

Total

Buildings - - 1 602 864 - - (93 053) - 1 509 811Furniture and fixtures 931 295 - 793 426 (4 254) - (272 249) - 1 448 218Motor vehicles 1 532 153 268 852 1 271 347 (28 658) - (611 747) (2 898) 2 429 049Office equipment 866 888 54 150 227 224 (33 307) 403 207 (180 816) (1 999) 1 335 347IT equipment 1 053 733 207 981 476 483 (38 710) - (390 199) (3 329) 1 305 959Infrastructure assets - - 156 450 - - (17 090) - 139 360Racetrack - - 2 368 533 - - (136 386) - 2 232 147Racetrack equipment - - 401 057 (1 388) - (47 452) - 352 217Work in progress - - 2 140 563 - (403 207) - - 1 737 356Sporting facility - - 1 860 825 (1 838 441) - (14 447) - 7 937

4 384 069 530 983 11 298 772 (1 944 758) - (1 763 439) (8 226) 12 497 401

Assets subject to finance lease (Net carry ing amount)

IT equipment 96 496 126 235

Change in estimates

The useful life of certain property, plant and equipment was revised during the year. The effect of this revision has decreasedthe depreciation charges for the current year by R 282 367.

95




R R


Reconciliation of Work-in-Progress 2019

Includedwithin Other

PPE

Total

Opening balance 1 737 356 1 737 356

Reconciliation of Work-in-Progress 2018

Includedwithin Other

PPE

Total

Transferr from FSTA 2 140 563 2 140 563Transferred to completed items (403 207) (403 207)

1 737 356 1 737 356

�� The entity is in the process of coordinating with the service providers to finalise the installation of the signage and

Entity anticipate to complete the process soon.�

Expenditure incurred to repair and maintain property , plant and equipment

Expenditure incurred to repair and maintain property , plant and equipmentincluded in Statement of Financial PerformanceOffice Building - rented 61 447 159 197Racetrack 38 749 21 496Vehicles 673 309 14 174

773 505 194 867

Repairs and Maintenace - refer to note number 16


96




4. Intangible assets

2019 2018

Cost /Valuation

Accumulatedamortisation


Carry ing value Cost /Valuation

Accumulatedamortisation


Carry ing value

Computer software, other 719 784 (610 123) 109 661 719 784 (375 466) 344 318Intangible assets under development 4 410 846 - 4 410 846 4 410 846 - 4 410 846

Total 5 130 630 (610 123) 4 520 507 5 130 630 (375 466) 4 755 164

97




4. Intangible assets (continued)

Reconciliation of intangible assets - 2019

Openingbalance

Amortisation Total

Computer software, other 344 318 (234 657) 109 661Intangible assets under development 4 410 846 - 4 410 846

4 755 164 (234 657) 4 520 507

Reconciliation of intangible assets - 2018

Openingbalance

Additions Disposals Amortisation Total

Computer software, other 639 189 2 838 (87 787) (209 922) 344 318Intangible assets under development 4 410 846 - - - 4 410 846

Intangible assets in the process of being constructed or developed

Cumulative expenditure recognised in the carry ing value of Intangible assetsComputer software, other 4 410 846 4 410 846

Other information

98




R R

5. Prepayments

Expenses paid in advance 1 497 426 1 174 488

The expenses relate to renewal costs of different expenditure items which are payable annually, the renewal costs are spreadbetween two financial years. The renewal costs relates to the following services among others: - Financial system software (CaseW are) - Payroll system software (VIP)- Internal audit software (Teammate)- Professional Bodies membership

Prepayments relating to projects not completed : - Signage related to billboards not erected yet - Polo event not yet done- Bloem show

6. Deposits

Deposits for rent and municipality servicesDeposit's Paid/Deposit Water & lights St 31 970 31 970Deposit's Paid/Antonios Necholus Family 17 699 17 699Deposit's Paid/Matjhabeng Local Municipality 2 000 2 000Deposit's Paid/Johan Broodryk 8 000 8 000Deposit - Rent 10 780 10 780

70 449 70 449

7. Inventories

Stationery, promotional items and catridges - 43 427

- 43 427

inventory pledges and other matters

No inventory was pledge as a security

Inventory recognised as an expense during the year amounted to R 293 219 (2018: R 303 052)

Inventory reconciliationInventory opening balance 01/04/2018 43 427 113 001Add: Purchases 299 947 256 383Less: Issued stationery (343 374) (325 957)

- 43 427

8. Receivables from exchange transactions

Payables from exchange transactions with debit balance 232 024 114 453Staff debt 92 687 320 679Sundry receivables 141 558 109 912

466 269 545 044


99




R R

8. Receivables from exchange transactions (continued)

Impairment of receivables from trade transactions Gross balance Impairment Net balancePayables with debit balance 238 023 (5 999) 232 024Staff debt 109 617 (16 930) 92 687Sundry receivable 141 558 - 141 558

489 198 (22 929) 466 269

Ageing for receivables from tradetransactions

+120 days 90 days 60 days 30 days Current Balance

Payables with debit balance - - - - 232 024 232 024Staff debt 92 687 - - - - 92 687Sundry receivable 89 437 - - - 52 121 141 558

Subtotal 182 124 - - - 284 145 466 269

182 124 - - - 284 145 466 269

9. Receivables from non- exchange transactions

DESTEA balances 86 373 24 373Payables from non exchange transactions with credit balance 287 472 -Licence receivables 205 123 642 700CATHSSETA 1 046 832 1 046 832NTCE balance 260 961 260 961

1 886 761 1 974 866

impairment of receivables from non exchange transactions Gross balance Impairment TotalDESTEA balance 173 082 (86 710) 86 372Licence receivables 205 123 - 205 123CATHSSETA 1 046 832 - 1 046 832NTCE 405 263 (144 301) 260 962Payables with debit balance 287 472 - 287 472

2 117 772 (231 011) 1 886 761

Ageing of receivables from nonexchange transactions

+120 days 90 days 60 days 30 days Current Balance

DESTEA balance 24 373 - 62 000 - - 86 373Licence receivables - - 205 123 - - 205 123CATHSSETA 1 046 832 - - - - 1 046 832NTCE 260 961 - - - - 260 961Payables with debit balance - - - - 287 472 287 472

Subtotal 1 332 166 - 267 123 - 287 472 1 886 761

1 332 166 - 267 123 - 287 472 1 886 761

10. Cash and cash equivalents

Cash and cash equivalents consist of:

Cash on hand 2 674 99Bank balances 15 689 011 10 950 018

15 691 685 10 950 117


100




R R

10. Cash and cash equivalents (continued)

Bank accountsCorporate account (Standard bank) 4 050 583 2 146 839Gambling account (Standard bank) 9 499 321 8 187 707Liquor account (Standard bank) 1 342 290 137 731Salary account (Standard bank) 742 543 474Illegal gambling account (Standard bank) 45 589 401 237Call account (Standard bank) 4 524 1 647NTCE account (ABSA bank) - 74 384Tourism Monitoring Training account (Standard bank) 4 160 -

15 689 010 10 950 019

The bank balance of R 10 887 200 belong to DESTEA relating to revenue accounts.

11. Provisions

Reconciliation of provisions - 2019

OpeningBalance

Additions Utilisedduring the

year

Total

Leave days provision 3 699 135 828 231 (581 272) 3 946 094

Provisions raised relates to leave days due to employees in rand value at year end.

The expected timing of any resulting outflow of economic benefits, will only happen upon the resignation of employees in anygiven time which is unknown due to uncertainties about an amount or timing of those outflows.

Reconciliation of provisions - 2018

OpeningBalance

Transfersfrom FSTA

Provisioncharge/contri

bution

Utilisedduring the

year

Total

Performance Bonus (PMS) 135 316 892 000 - (1 027 316) -Leave days provision 2 799 905 872 000 566 783 (539 553) 3 699 135

2 935 221 1 764 000 566 783 (1 566 869) 3 699 135

Provisions raised relates to leave days due to employees in rand value and performance bonus to be paid to qualifiedemployees based on the Performance Management System policy of the Entity.

12. Payables from exchange transactions

Trade creditors 9 220 343 11 706 796Salary related payables 1 441 297 4 552 985Bonus accruals 1 649 625 3 500 308Other payables 145 942 91 974

12 457 207 19 852 063

Ageing of pay ables from exchangetransactions

90 + days 60 days 30 days Current Total Due

Creditors 7 683 623 161 742 182 803 1 192 174 9 220 342Payroll recons 848 057 1 344 - 590 408 1 439 809Bonus accruals - - - 1 649 625 1 649 625Other payables 147 431 - - - 147 431

8 679 111 163 086 182 803 3 432 207 12 457 207


101




R R

13. Payables from non-exchange transactions

Unspent conditional grants 4 000 000 563 095Receivable from non exchange transactions with credit balance 287 472 -Funds to be surrendered to Treasury 7 885 693 9 254 310Funds to be surrendered to Phumelela 101 384 99 664Bookmakers Trust account Sepels 140 000 -DESTEA EPWP 112 128 2 122 894Probity investigation paid in advance 2 524 968 -

15 051 645 12 039 963

Ageing for pay ables from non-exchange pay ables

120 + days 90 days 60 days 30 days Current Total Due

Funds to be surrendered to Treasury - - 5 906 565 - 1 979 128 7 885 693Funds to be surrendered toPhumelela

- - - - 101 384 101 384

Bookmakers Trust Account Sepels 140 000 - - - - 140 000Tourism South Africa ConditionalGrant

- - - - 4 000 000 4 000 000

DESTEA transactions 112 129 - - - - 112 129Probity investigation Bookmakers 4 100 000 - - - (1 575 033) 2 524 967Receivable with credit balance - - - - 287 472 287 472

Subtotal 4 352 129 - 5 906 565 - 4 792 951 15 051 645

4 352 129 - 5 906 565 - 4 792 951 15 051 645


102




R R

14. Revenue from non-exchange transactions

Operating grants

Government grant - Operational 100 827 000 82 499 808Public contributions and donations - 600 000Conditional Grant - DESTEA projects - 2 747 550Conditional Grant - Flower Festival 8 000 000 8 772 459Conditional Grant - REA 563 095 922 535

109 390 095 95 542 352

109 390 095 95 542 352

Conditional grants reconciliations

Flower FestivalGrant received 8 000 000 8 772 459Donations received from the Municipalities - 600 000Expenditure (8 257 632) (9 616 738)

(257 632) (244 279)

There was an over expenditure on the flower festival project to the value of R 257 632 (2018: R 244 279) as disclosed above:

Revenue Enhancement AllocationRoll over grant 563 095 922 535Expenditure (563 095) (359 440)

- 563 095

The outstanding REA conditional grant in the financial year 2017/18 was rolled over to financial year 2018/19 and it was fullyutilised in the year under review.

Tourism South AfricaGrant received 4 000 000 -

The conditional grant of Tourism South Africa was not spent at year end.

DESTEA projectsGrant received - 2 747 550Expenditure Women Heroins Awards - (450 000)Expenditure Little Miss Flower - (500 000)Expenditure Groen Park Event - (500 000)Expenditure Macufe - Jezreel Group - (498 000)Expenditure Cherry Festival - (350 000)Expenditure Sellodihole Promotional Attire - (449 550)

- -


103




R R

15. Other income

Sale of Bid Documents 2 136 -Administration levies Phumelela 12 000 12 000Insurance claim - 8 050Income Indaba Contr Municipality - 132 000Grant CATHSETA 197 377 2 761Fund Management Fee NTCE - 554 898Legal fee refund - 26 695

211 513 736 404

16. General expenses

Advertising 987 222 662 169Auditors remuneration 4 102 417 3 631 157Cleaning 114 125 167 865Computer expenses 40 894 498 729Consulting and professional fees 3 477 583 4 573 754Refreshments 368 460 397 462Conferences and seminars 29 894 10 824Marketing 11 725 048 21 010 375Postage and courier 2 487 10 590Printing 479 675 923 053Repairs and maintenance 773 504 194 867Security services 17 543 21 275Staff welfare 11 077 77 984Training and development 219 727 49 844Travel costs 3 913 946 3 237 683Municipal services 1 291 310 1 427 305Impact Study for gambling and liquor 700 745 011Publications 47 584 -Public hearings 196 020 282 330Penalty and Interest 497 068 216 260

28 296 284 38 138 537

Consulting and professional fees are listed on note 17.

Details of auditors remuniration is listed under note 23.

Details of travel cost is listed under note 20.

17. Consulting and professional fees

Legal expenses 2 331 942 2 887 395Investigation fees 31 096 822 522Consulting and professional fees 715 775 863 837Probity investigation bookmakers 398 770 -

3 477 583 4 573 754


104




R R

18. Employ ee related costs

Basic Salary 43 431 163 41 472 127Non pensionable allowance 990 296 959 377Acting allowance 1 684 346 1 387 122Overtime 867 110 542 331Travelling allowance 724 108 770 356Other allowances 873 015 740 021Casual labour 18 538 57 634Medical aid - company contributions 2 439 691 1 217 046UIF 215 157 212 984SDL 163 620 139 745Leave pay provision charge 828 232 566 782Pension fund contributions 5 473 863 5 047 842Bonus 5 403 294 3 610 358Cell phone allowances 497 082 473 131

63 609 515 57 196 856

Remuneration of CEO - Mr. K Dichabe, appointed December 2018

Annual Remuneration 1 282 622 1 503 812Acting Allowance 704 197 518 427Bonus 84 525 80 500Pension 147 575 154 022Cell phone allowance 24 400 25 400Medical aid 17 500 -UIF 1 785 -

2 262 604 2 282 161

Remuneration of chief financial officer - Mr. O Seseane

Annual Remuneration 848 362 468 441Travelling allowance 48 000 28 000 Bonus 70 466 52 941Pension 102 669 57 726Cell Allowance 20 400 11 900Medical aid allowance 17 500 -UIF 1 785 -

1 109 182 619 008

Remuneration of senior accountant - Mr. TP Matshaba acting since 01 March 2016 until 31 July 2017

Annual Remuneration - 253 462Travelling allowance - 12 000Acting allowance - 65 352Medical aid - 26 665Bonus - 17 071Pension - 27 426Cell phone allowance - 3 600

- 405 576

General Manager: Corporate Services - Me. S Mohale

Annual Remuneration 1 245 070 660 934Bonus 199 969 83 901Medical aid 56 532 44 535


105




R R

18. Employ ee related costs (continued)Pension 145 898 82 031Cell phone allowance 20 400 11 900UIF 1 785 -

1 669 654 883 301

General Manager: Marketing - Mr K Thole - Transferred from FSTA - until 31 August 2018

Annual Remuneration 443 438 797 062Travelling allowance 73 230 146 460 Bonus 51 697 64 677Medical aid 12 500 21 210Pension 69 548 107 885SDL 7 050 1 700UIF 892 -

658 355 1 138 994

General Manager: Phakisa - Me R Taku

Annual Remuneration 847 734 470 312Bonus 70 547 53 518Pension 97 266 54 688Cell phone allowance 20 400 11 900Medical aid 15 116 -UIF 1 785 -

1 052 848 590 418

General Manager: Marketing - Mr. T Lerumo since 01 September 2018

Annual Remuneration 985 152 -Travelling allowanve 130 132 -Pension 155 439 -Bonus 62 999 -Cell phone allowance 14 400 -Acting allowance 69 181 -Medical aid 31 515 -UIF 1 785 -SDL 12 578 -

1 463 181 -

Mr. Magashule S : Acting GM Operations since January 2019

Annual Remuneration 886 839 -Acting allowance 12 264 -Bonus 139 486 -Medical aid 46 356 -Pension 101 390 -Cell phone allowance 3 600 -Subsistance and travel 7 461 -

1 197 396 -

19. Administrative expenditure

Administrative expenses 3 311 655 2 790 842

3 311 655 2 790 842


106




R R

19. Administrative expenditure (continued)

Administrative expenditure - detailsBank charges 490 527 366 464Internet fees 409 916 568 312Telecommunication office 918 780 1 046 419Stationery 293 219 303 052Insurance 396 326 345 952Motor Licence 8 304 7 890Membership 666 112 141 226Administration - 11 527Computer Licence 128 471 -

3 311 655 2 790 842

20. Travel cost

Subsistence & Travel local 534 131 1 625 882Subsistence & Travel foreign 23 428 4 200Travel local 510 487 263 915Motor vehicle fuel 966 274 617 066Accommodation 807 924 181 512Fuel Vehicle 34 826 178 426Car rentals 290 407 275 201Transport 737 249 77 911Parking 935 280Venues & Facilities 8 285 13 290

3 913 946 3 237 683

21. Investment revenue

Interest revenueBank 155 791 289 611

- -155 791 289 611

22. Finance costs

Finance leases 106 087 82 102Late payment of tax - 12 662

106 087 94 764

23. Auditors' remuneration

Auditor general fees 4 102 417 3 601 157Internal audit fees - 117 964

4 102 417 3 719 121

24. Lease rentals on operating lease

PremisesContractual amounts 2 281 542 2 886 938


107




R R

24. Lease rentals on operating lease (continued)

The leases relate to the following:

a) Buildings occupied by the FSGLA with the different lessors / suppliers below:Barbour & Thorne - The inception date 01 May 2016, included with the lease term 3 years and an esclation of 8% of perannum.Sevas - The inception date 01 August 2015, included with the lease term 5 years and an esclation of 10% per annum.

Dispiet - The lease contract ended on 31 March 2016 and the entity entered into month to month contracts with the lessor

FDC - The inception date 01 May 2015, included with the lease term 5 years and an esclation of 10% per annum.

JHI - The inception date 01 January 2016 , included with the lease term 3 years and an esclation of 6% per annum.

Johan - The inception date 01 August 2017, included with the lease term 5 years and an escalation of 8% per annum

VehiclesThe entity is leasing vehicles from Free State Department of Police, Roads and Transport over a period of 36 monthscommencing 1st November 2016.

25. Cash generated from operations

Surplus (deficit) 6 612 238 (10 359 085)Adjustments for:Depreciation and amortisation 2 445 744 1 972 828Loss on disposal of assets and liabilities 19 982 1 744 500Finance costs - Finance leases 106 087 94 764Impairment deficit 8 581 8 226Movements in provisions 246 959 763 914Deposits - (27 699)Transfer of assets and liabilities from FSTA - (4 006 324)Revenue to be surrendered - (370 950)Changes in working capital:Inventories 43 427 69 574Receivables from exchange transactions 78 775 (255 628)Receivable from non-exchange transactins 88 105 (926 219)Prepayments (322 938) (836 337)Payables from exchange transactions (7 394 856) 10 410 589Payable from non-exchange transaction 3 011 682 3 092 283Depreciated replacement cost 135 090 -Other non cash items (3 570) -

5 075 306 1 374 436


108



109




R R

27. Related parties

`

Name of related partyNon executive directors (Board members) Refer to member's report note 27Department of Economics, Small business development, Tourism andEnvironmental Affairs (DESTEA)

Refer to grant received as disclosed in note 14

Related party balances

Amounts included in Trade receivable regarding related partiesDESTEA 459 454 111 082

Amounts included in (Trade Pay able) regarding related partiesDESTEA - (2 122 894)

Related party transactions

Transaction relating to Board memberBold moves 98 500 000 850 000

Board members , Audit Committee Members' emoluments refer to note number 29

Loans key management Openingbalance

Loansadvanced

Loans repaid Closingbalance

Mr. K. Dichabe (CEO) 26 629 85 994 (94 893) 17 730Mr. O Seseane (CFO) 23 900 159 000 (146 000) 36 900Mrs. R Taku (GM Phakisa) 1 913 30 693 (11 434) 21 172

52 442 275 687 (252 327) 75 802

Advances were given to key management personnel and those advances are interest free as per the HR policy because theyare payable within 30 days.


110




R R

28. Principals and Agents

A – Authority as an agent of DESTEA

The purpose of the agreement is for the Authority to regulate gambling, liquor and tourism industries in the province asstipulated by the act which created the Authority. In the course of regulating these industries the Authority collects the revenueon a weekly basis. The revenue collected are surrendered to DESTEA on a weekly basis.

Resources used to carry the mandate

It is based on the grant received from DESTEA refer to note 14

There is no remittance of any resources during the period, as well as the expected timing of remittance of any remainingresources to the principal. The budget which was allocated to the Authority was fully utilised and other portion was used tosettle accruals accumulated over the years.

The Authority collects revenue on behalf of the principal and surrenders it on weekly basis. The collected revenue thatremained at year end is disclosed as payables which will be paid over following week after the financial year end. It is illustratedon the table of payables

Revenue collected n behalf of the Principal (DESTEA)Horse Racing 8 532 346 8 002 682Casino Revenue 31 543 039 32 142 637Limited Payout Machines 11 681 664 8 212 646Liquor Revenue 12 953 664 10 285 600Phakisa Revenue 710 511 799 218

65 421 224 59 442 783

RECEIVABLE Expectedrevenue

Less:revenue

collection forthe year

(Write-offs /Under

Collection)

Overcollection

Total Due

Horse Racing 7 679 314 (8 327 223) - 853 032 - 205 123Casino Revenue 33 013 914 (31 543 039) (1 470 875) - - -Limited Payout Machine 9 376 870 (11 681 664) - 2 304 794 - -Liquor Revenue 11 021 235 (12 953 664) - 1 932 429 - -Phakisa Revenue 1 066 667 (710 511) (356 156) - - -Interest received from the revenuebank accounts

155 940 (249 712) - 93 772 - -

Subtotal 62 313 940 (65 465 813) (1 827 031) 5 184 027 - 205 123

62 313 940 (65 465 813) (1 827 031) 5 184 027 - 205 123

PAYABLES Collected Paid over toPrincipal

Balance

Horse Racing 9 578 824 (8 283 689) 1 295 135Casino Revenue 34 022 916 (30 523 275) 3 499 641Limited Payout Machine 14 076 514 (11 430 043) 2 646 471Liquor Revenue 12 953 664 (12 802 472) 151 192Phakisa Revenue 710 511 (666 974) 43 537Interest received from the revenue bank accounts 249 712 - 249 712

Subtotal 71 592 141 (63 706 453) 7 885 688

71 592 141 (63 706 453) 7 885 688

B - Authority as an agent of Phumelela Gaming (Totalizator)


111




R R

The received taxes paid by bookmakers are shared equally between Authority and Phumelela Gaming. The authoritysurrenders portion of Phumelela Gaming on Monthly basis and retain R 1 000 on a monthly basis as an administration fees.

Resources used to carry the mandate

There is no remittance of any resources during the period, as well as the expected timing of remittance of any remainingresources to the principal.

There was no revenue expected from the third parties (Bookmakers) which belonged to the principal (Phumelela Gaming)

The Authority collects revenue on behalf of the principal and surrenders it on monthly basis. The collected revenue thatremained at year end is disclosed as payables which will be paid over following week after the financial year end. It is illustratedon the table of payables.

Phumelela Gaming revenueThe revenue for the holder of race meeting licence 1 761 794 1 930 895

Phumelela Gaming - amounts included in (Trade Pay able) regarding Principalsand AgentsOpening balance (99 664) (95 556)Movements (1 720) (4 108)

Closing balance (101 384) (99 664)

Phumelela revenue collection Expectedrevenue

Revenuecollection for

the year

Less: Write-offs / Undercollection

Total Due

Bookmakers levies 1 396 248 (1 761 794) 264 162 (101 384)

Subtotal 1 396 248 (1 761 794) 264 162 (101 384)

1 396 248 (1 761 794) 264 162 (101 384)

(C) Free State Madeira Flower Festival event

The Authority appointed below service providers to implement the event on its behalf. The Authority will act as a principal tothese agreements.

(i) Amanzi ahlo bile trading

(ii) Xhibit IT

The Authority entered into an agreement with Xhibit IT on the 1st of November 2018 to assist with marketing and promote FreeState Madeira Flower Festival.

The Authority entered into an agreement with Amanzi ahlo bile on the 1st of November 2018 to assist with logisticalarrangements for hosting Free State Madeira Flower Festival.

Management fee for running the project:

The fees as a compensation to the agent – the agreed management fee was 20% of contract.

Amanzi ahlo bile trading was paid R 739 011

Xhibit IT was paid R 850 400

Retention fees


112




R R

The Entity withhold retention fee of 10% which shall be paid upon receiving post-festival report.

Resources of the Authority

There are no assets and liabilities of the Entity that are under the custodianship of an agent. There are no any other resourceremitted during the period along with expected timing of remittance of any remaining resources back to the Entity (whereapplicable) or to third parties.

Free State Madeira Flower FestivalBudget allocated - Conditional grant 8 000 000 8 772 459Donations recceived from the Municipalities - 600 000Combined expenditure incurred (8 257 632) (9 616 738)

(Over) / Under expenditure (257 632) (244 279)


113




29. Board Members', Audit Committee Members' emoluments

Non-executive

2019

Board fees Committeeand other fees

Cell phoneallowance

Total Subsistenceand travel

allowances

Grand total

Mr. Pillay, D 159 500 168 500 18 000 346 000 - 346 000Me. Mochochoko (Resigned) - - 3 000 3 000 - 3 000Mr. Mahabane, E 96 000 52 700 18 000 166 700 8 661 175 361Me. Monyaki, S 103 000 79 859 18 000 200 859 141 311 342 170Mr. Mule, L 117 000 47 059 18 000 182 059 70 794 252 853Mr. Mthembu, J (Deceased) 68 500 36 200 12 000 116 700 - 116 700Me. Lane, LR - - 18 000 18 000 1 548 19 548Mr. Nadison, D (Resigned) - 11 000 10 500 21 500 - 21 500Maleho L - - 18 000 18 000 9 211 27 211

544 000 395 318 133 500 1 072 818 231 525 1 304 343

During the financial year under review, the entity entered into transaction with a company owned by one of the Board members

Me. Monyaki, S (Bold Moves 198) R 500 000 - Declaration of interest has been completed by the Board member.

114




29. Board Members', Audit Committee Members' emoluments (continued)

2018

Board fees Committeeand other fees

Cell phoneallowance

Total Subsistenceand travel

allowances

Grand total

D Pillay 137 500 87 900 18 000 243 400 11 248 254 648N Mochochoko (from 01/06/2017) 40 000 - 13 500 53 500 - 53 500E Mahabane (From 01/06/2017) 96 000 36 300 13 500 145 800 16 692 162 492S Monyaki 11 123 13 293 18 000 42 416 95 251 137 667L Mule 118 493 54 572 18 000 191 065 44 232 235 297J Mthembu 153 000 36 600 18 000 207 600 2 294 209 894LR Lane - - 18 000 18 000 1 413 19 413R Kalidass 12 000 - 4 500 16 500 7 694 24 194M Gasela - - 3 000 3 000 - 3 000Kalane L - - 3 000 3 000 - 3 000Nadison D - 32 893 18 000 50 893 - 50 893Maleho - - 18 000 18 000 8 810 26 810

568 116 261 558 163 500 993 174 187 634 1 180 808

During the financial year under review, the entity entered into transaction with a company owned by one of the Board members Me.Monyaki, S (Bold Moves 198) R 850 000 - Declaration of interest has been completed by the Board member.

30. Prior-y ear adjustments

Presented below are those items contained in the statement of financial position, statement of financial performance and cashflow statement that have been affected by prior-year adjustments:

Errors

115




R R

30. Prior-y ear adjustments (continued)

Error 1

Statement of Financial Position - Assets Balance beforerestatements

Balance afterrestatement

Net Movement

PPE 10 849 998 (12 497 401) (1 647 403)Intangible Assets 4 752 963 (4 755 164) (2 201)Receivable from non-exchange transactions (2 522 034) 2 408 827 (113 207)Net assets (2 301 206) 4 064 017 1 762 811

- - -

Statement of Financial Position Balancesbefore

restatement

Balance afterrestatement

Net movement

Payable from exchange transactions 17 300 628 (19 852 063) (2 551 435)Payables from from non-exchange transactions (12 039 963) 11 928 881 (111 082)Provisions 3 320 524 (3 699 135) (378 611)Net assets (2 301 206) 5 342 334 3 041 128

6 279 983 - -

Statement of Financial Performance Balancesbefore

restatement

Balances afterrestatement

Net movement

Lease rentals on operating lease 2 867 037 (2 886 938) - - (19 901)Employee related costs 56 293 596 (57 196 856) - - (903 260)Administration 2 724 351 (2 790 842) - - (66 491)General expense 36 482 090 (37 922 277) - - (1 440 187)Finance cost 81 837 (311 024) - - (229 187)Depreciation and Impairment 1 842 539 (1 972 828) - - (130 289)Settlement and losses - (1 100 787) - - (1 100 787)Deficit for the year (6 468 983) 10 359 085 - - 3 890 102

93 822 467 - - - -

ERRORS:

ERROR 1

Certain legal fees were erroneously not captured in the prior year. A was journal was made to account those omittedexpenses. The effect of the adjustment was as follows:

Legal fees - R1 258 965

Payable from exchange transaction - (R1 258 965)

ERROR 2

Certain consultancy fees were erroneously not captured in the prior year. A was journal was made to account those omittedexpenses. The effect of the adjustment was as follows:

Consultancy fees - R29 091

Payable from exchange transaction - (R29 091)

ERROR 3

The labour court ruled in favour of an employee for dispute that existed in the previous financial years. The settlement hadthe following impact:


116




R R


Settlement and losses (IS) R 1 100 787

Salary (IS) (R 65 168)Net assets (BS) (R 1 035 619)

ERROR 4

Certain internet and digital marketing expenses were erroneously not accounted for the in the prior year . A was journal wasmade to account for those omitted expenses. The effect of the adjustment was as follows:

General expense - R 121 000


ERROR 5

Certain travelling and accommodation expenses were erroneously not accounted for the in the prior year . A was journal wasmade to account for those omitted expenses. The effect of the adjustment was as follows:

Travelling and accommodation - R 3 805


ERROR 6

Certain cleaning material expenses were erroneously not accounted for the in the prior year . A was journal was made toaccount for those omitted expenses. The effect of the adjustment was as follows:

Cleaning Materials R3 661

Payable from exchange transaction (R3 661)

ERROR 7

Certain supplier account was erroneously overstated in the prior year. A was journal was made to correct the transaction.The effect of the adjustment was as follows:

Payable from exchange transaction – R10 626

Printing and Copying - (R10 626.)

ERROR 8

Certain travelling and accommodation expenses were erroneously not accounted for the in the prior year . A was journal wasmade to account for those omitted expenses. The effect of the adjustment was as follows:

Travelling and accommodation – R235 963


ERROR 9



Municipality fees - (R8 460)


117




R R


ERROR 10

Certain supplier account payment was erroneously allocated to another flower festival expense instead of debit supplieraccount. A journal was made to correct the transaction. The effect of the adjustment was as follows:

Payable from exchange transaction - R247 980

Flower Festival (R247 980)

ERROR 11

The supplier invoice was omitted during incorporation period. A was journal was made to correct the transaction. The effectof the adjustment was as follows:

Retained Income – R 207 977

Flower Festival (R 207 977)

ERROR 12


Payable from exchange transaction - R5 500

Travel Expenses - Phakisa (R5 500)

ERROR 13


Payable from exchange transaction – R 3 000

Repairs - (R3 000)

ERROR 14


Payable from exchange transaction R 1 030

Stationery - (R1 030)

ERROR 15



Security fees - (R1 291)

ERROR 16



118




R R



Stationery (R1 950)

ERROR 17



Stationery - (R 2 002)

ERROR 18



Copying and Printing - (R 1 972)

ERROR 19



Stationery - (R2 000)

ERROR 20



Rent - (R4 932)

ERROR 21



Catering - (R4 220)

ERROR 22



Consumable Printing - (R 2 855)

ERROR 23


119




R R


Certain travelling and accommodation expenses were erroneously not accounted for the in the prior year . A journal wasmade to account for those omitted expenses. The effect of the adjustment was as follows:

Investigation Expenses - R 9 271


ERROR 24Under employee costs - leave provision was adjusted because daily rate of each employees was corrected . A journal wasmade to account for those corrections. The effect of the adjustment was as follows:Employees costs expenses - R 378 611Provision - (R 378 611)

ERROR 25

During asset verification process some assets were found which did not appear on the fixed assets register and theybelonged to former FSTA

PPE R 908 141

Net Assets (R 908 141)

ERROR 26

During asset verification process some assets were identified which did not appear on the fixed assets register

PPE R 1 284 630

Net assets (R 1 284 630)

ERROR 27

Bonus payments for employees whose birthdays months were from January to March 2018, were paid in May 2018 and -subsequently allocated in the financial year 2018/19 instead of financial year 2017/18. The transaction was adjusted andhad the following impact:

Salary - Bonus (IS) R 589 818

Bonus accruals (BS) (R 589 818)

ERROR 28

The legal fees invoices were incorrectly recorded in the financial year 2018/19 instead of the financial year 2017/18. Theadjustment was made and it had the following impact:

Legal fees R 388 736

Payables from exchange transactions (R 388 736)


120




31. Risk management and Financial Instruments

Measurement

Financial instruments are measured at fair value with the change in carrying value being recognised to the profit and loss inthe finacial year which they relate to. All financial assets and liabilities of the Authority are current.

Cash and cash equivalentOpening balance bank 10 950 117 9 780 677Movement 4 741 568 1 169 440

15 691 685 10 950 117

Trade and other receivablesOpening balance 3 694 398 1 676 215Movement 156 058 2 018 183

3 850 456 3 694 398

LiabilitiesOpening balance (35 594 731) (21 353 572)Movement 4 139 785 (14 241 159)

(31 454 946) (35 594 731)

Liquidity risk

Liquidity risk is the risk that the entity will be unable to meet a financial commitment. This risk is minimized through theholding of cash balances and sufficient borrowing facilities. In addition, detailed cash flow forecast are regularly preparedand future commitments and credit balances are reviewed on an ongoing basis.

The exposure of the entity's financial liabilities to liquidity risk are as follows:

Less than one year 31 454 946 35 594 731

Interest rate risk

The authority manages its interest rate risk by investing in current and short term deposit accounts. These accounts areheld with well established financial institution of high quality credit standing and the accounts bear interest at prevailingmarket rates.

Credit risk

Potential concetration of credit risk consists mainly of accounts receivable and cash and cash equivalents.

The Authority places its cash and short term deposits with established financial institutions of high credit standing.

Credit risk with respect to accounts receivables is limited due to the nature of the Authority's business and its reliance ongovernment grant as the main source of funding.

Financial assets exposed to credit risk at year end were as follows:

`

Financial instrument 2019 2018Cash and cash equivalents 15 691 685 10 950 117Receivables from exchange transactions 3 856 456 3 694 398

32. Going concern

We draw attention to the fact that at 31 March 2019, the entity had an accumulated surplus (deficit) of R 3 163 553 and that theentity's total liabilities exceed its assets by R 3 163 553.


121




32. Going concern (continued)

The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. Thisbasis presumes that the transfers of grant from DESTEA will be available in the next MTEF period 2019/20 to 2020/21 tofinance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitmentswill occur in the ordinary course of business.

The ability of the entity to continue as a going concern is dependant on a number of factors, the most significant of these is thatthe Accounting Officer to continue to solicit funds to ensure core function of the entity is operational i.e. South African Tourismfunding for marketing initiatives of R 4 000 000 as at 31 March 2019.

The entity is also dependant on transfer of equitable share from the department as per the allocated budget.

The entity’s asset exceeds the liabilities by R 3 163 553 therefore making the entity solvent for the year under review.

The cash flow has improved compared to the previous financial year. The entity had a positive cash balance of R 15 691 685As at 31 March 2019.

Trade and other payables for the current year is R 31 454 031 compared to previous year is R 35 594 731

The surplus for the current year is R 6 612 238 compared to previous year ’s deficit of R 10 359 085 .

33. Fruitless and wasteful expenditure

Opening balance 2 338 690 241 634Current year 1 760 030 259 056Transfer from former FSTA - 1 838 000Prior year expenditure identified in the current year 1 100 787 -

5 199 507 2 338 690

34. Irregular expenditure

Opening balance 83 533 302 9 540 226Add: Irregular Expenditure - current year 16 561 262 28 727 923Add: Transfer from former FSTA - 38 377 259Add: Irregular expenditure - current year due to actual expenditure exceeded allocatedbudget

- 6 887 894

100 094 564 83 533 302

The full extent of irregular expenditure is still in the process of being determined.

35. Settlement and other losses

Court JudgementLabour settlements 1 283 097 1 100 787Legal costs due to litigations 709 856 -

1 992 953 1 100 787

Labour settlements - The cost relates to labour cases lost at Labour Court

Legal costs due to litigations - The cost relates to liquor applications where the court ruled against the Entity


122


123

