Presentation to the Portfolio Committee on Rural Development and Land Reform 12 October 2016 Contents Executive summary Statement of Financial Performance Statement of Financial Position Statement of Changes in NetAssets ID: 616658
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Slide1
Financial Report: 2015-2016 Annual Report of the Department of Rural Development and Land Reform
Presentation to the Portfolio Committee on Rural Development and Land Reform12 October 2016Slide2
ContentsExecutive summaryStatement of Financial PerformanceStatement of Financial PositionStatement of Changes in Net-AssetsCash flow statementDisclosure Notes
Report of the auditor generalAgricultural Land Holdings Account (ALHA)Deeds Registration Trading AccountSlide3
1. Executive SummaryAPPROPRIATIONThe department’s appropriation decrease by 2.7% or R257.9 million from R9, 455 billion in 2014/15 to R9, 197 billion in 2015/16
mainly due by reduction of AENE allocation by National Treasury by R182, 3 million:
R200
million declared unspent funds identified under Agriculture Land Holdings Account (ALHA) was taken away; and
Additional allocation of R17, 7 million for higher than expected salary adjustments.
DEPARTMENTAL REVENUE
The department’s revenue decrease from R87, 4 million in 2014/15 to R54, 6 million in 2015/16.
This recorded actual decrease of R32, 8 million (37.5%)
mainly caused by reduction
of:
Prev
Year
Exp
Recovered in Current Fin Year decreased R39 million or 484.8%, Slide4
2. Statement of Financial Performance
2015/16
2014/15
Note
R'000
R'000
REVENUE
Annual appropriation
1
9
197 361
9 455 305
Departmental revenue
3
54 643
87 439
Aid assistance
4
35 785
30 316
TOTAL REVENUE
9
287 789
9
573 060
EXPENDITURE
Current expenditure
Compensation of employees
5
1
937
159
1 791 559
Goods
and services
6
1
396
265
1 342 464
Interest and rent on land
7
2 109
5 674
Aid assistance
4
22
130
11 605
Total current expenditure
3
357
663
3
151 302
Transfers and subsidies
Transfers and subsidies
9
5
018
423
5
458 275
Total transfers and subsidies
5
018
423
5
458 275 Slide5
Statement of Financial Performance - cont.. 2015/16
2014/15
Note
R'000
R'000
Expenditure for capital assets
Tangible assets
10
758
932
793 721
10
Total expenditure for capital assets
758
932
793 721
Payments for financial assets
8
5 159
4 361
TOTAL EXPENDITURE
9
140
177
9
407 659
SURPLUS/(DEFICIT) FOR THE YEAR
147
612
165 401
Reconciliation of Net Surplus/(Deficit) for the year
Voted Funds
28 061
59 550
Annual appropriation
79
314
59 550
Departmental revenue and NRF Receipts
19
54 643
87 439
Aid assistance
4
13 655
18 412
SURPLUS/(DEFICIT) FOR THE YEAR
147
612
165 401 Slide6
Analysis of movement R’000Slide7
REVENUE
DESCRIPTION 2015/16
2014/15
Increase/
Decrease
R'000
R'000
R'000
%
Annual appropriation
9,197,361
9,455,305
(257,944)
-2.7%
Departmental revenue
54,643
87,439
(32,796)
-37.5%
Aid assistance
35,785
30,316
5,469
18.0%
TOTAL REVENUE
9,287,789
9,573,060
(285,271)
-3.0%Slide8
CURRENT EXPENDITURE
Description 2015/16
2014/15 Increase
/
(Decrease)
R'000
R'000
R'000
%
Current expenditure
Compensation of employees
1,937,159
1,791,559
145,600
8.0%
Goods and services
1,396,265
1,342,464
53,801
4.0%
Interest and rent on land
2,109
5,674
(3,565)
-62.8%
Aid assistance
22,130
11,605
10,525
90.7%
Total current expenditure
3,359,067
3,151,302
207,765
6.6%Slide9
EXPENDITURE
Compensation of EmployeesThe department’s Compensation of Employees increased from R1, 791 billion in 2014/15 to R1, 937 billion in 2015/16.This recorded actual increase of R145,600 million (8.0%)The increase is caused mainly by Cost of Living adjustment (7% - effective 1 April 2015)) and pay progression implementedHeadcount at the 1 April 2014 was 4,508 with 413 people additional to establishment, at 31 March 2016 the headcount was 4,588 with 360 people additional to establishment.Goods & Services
The department’s goods and services increase from R1, 342 billion in 2014/15 to R1, 396 billion in 2015/16.This recorded actual increase of R53,801 million (4.0%)Slide10
EXPENDITURE -
cont…Transfers & SubsidiesThe department’s transfers decreased from R5, 458 billion in 2014/15 to R5, 018 billion in 2015/16.This recorded actual decrease of R439,9 million (8.1%)The reduction in expenditure is an direct correlation between the reduction in budget as discussed against appropriation above. Hence the largest decrease was reflected under Transfer for ALHA amounting to R271, 5 million or 16.8 % year on year under Departmental Agencies.Slide11
3. Statement of Financial Position
2015/16
2014/15
Note
R'000
R'000
ASSETS
Current Assets
265
010
420 056
Cash an cash equivalents
12
249
465
363 368
Prepayments and advances
14
9 573
49 224
Receivables
15
5 972
7 464
Non-Current Assets
31 146
33 923
Investments
16
16 112
16 112
Receivables
15
15 034
17 811
TOTAL ASSETS
296
156
453 979
LIABILITIES
Current Liabilities
268
615
429 285
Voted funds to be surrendered to the Revenue Fund
18
79
314
59 550
Departmental revenue and NRF Receipts to be surrendered to the Revenue Fund
19
8 810
25 949
Payables
21
166 836
325 374
Aid assistance repayable
4
13 655
18 412
4
TOTAL LIABILITIES
268
615
429 285
NET ASSETS
27 541
24 694
Represented by:
Capitalisation reserve
16 112
16 112
Recoverable revenue
11 429
8 582
TOTAL
27 541
24 694Slide12
Analysis of movement
R’000Slide13
4.Statement of Changes in Net AssetsNET ASSETS
2015/16
2014/15
Note
R'000
R'000
Capitalisation Reserves
Opening balance
16 112
16 112
Closing balance
16 112
16 112
Recoverable revenue
Opening balance
8 582
6 182
Transfers
2
847
2 400 Debts recovered (included in departmental receipts) (2 240) (3 450) Debts raised 5 087 5 850 Closing balance 11 429 8 582
TOTAL 27 541 24 694 Slide14
5. Cash Flow Statement
2015/16
2014/15
Note
R'000
R'000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts
9
286 999
9 572
537
Annual appropriated funds received
1.1
9
197 361
9
455 305
Departmental revenue received
3
38 096
74 873
Interest received3.3 15 757 12 043Aid assistance received4 35 785 30 316 Net (increase)/ decrease in working capital (114 618) 113 801Surrendered to Revenue Fund (131 332) (108 114)Surrendered to RDP Fund/Donor (18 412) (4 563)Current payments (3 355 813) (3 145 812)Interest paid7 (1 608) (5 490)Payments for financial assets (5 159) (4 361)Transfers and subsidies paid
(5 018 423) (5 458 275)Net cash flow available from operating activities23
641 634
959 723Slide15
Cash Flow Statement – Cont...
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for capital assets
10
(758 932)
(793 721)
Proceeds from sale of capital assets
3.4
790
523
Net cash flows from investing activities
(758 384)
(793 198)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase/ (decrease) in net assets
2
847
2 400Net cash flows from financing activities 2 847 2 400Net increase/ (decrease) in cash and cash equivalents (113 903) 168 925Cash and cash equivalents at beginning of period 363 368 194 443Cash and cash equivalents at end of period24 249 465 363 368Slide16
6. Disclosure NotesSlide17
Summary of disclosure notesDescription
2015/16
2014/15
Variance( increase/
(decrease
)
%
Ref
R '000
R '000
R '000
Contingent liabilities
2 958
737
2 237 474
721 263
32.2%
1
Contingent assets
163 847 100 462 63 38563.1%2Commitments 7 655 724 6 540 580 1 115 14417.04%3Accruals 122 743 116 828 5 9155.08%4Payables132 942-132 942100%4Employee Benefits 187 479 173 107 14 372 8.3%Operating Lease Commitments 441 403 460 716 (19 313)4.2%5Finance Lease Commitments 10 510 4 815 5 695118.3%
6Accrued departmental revenue 210 929 153 473
57 456
37.4%
7
Irregular expenditure
4 456
16 489
(12 033)
53.2%
8
Fruitless and wasteful expenditure
27 533
15 677
11 865
75.6%
9
Related party transactions
7 632
2 959
4 673
157.9%
10
Key management personnel
99 411
93 811
5 600
5.97%
Impairment
126 890
99 191
27
699
27.9%
11
Provisions
44 372
22 505
21 867
97.2%
12
Movable Tangible Capital Assets
565 083
515 992
49 091
9.51%
Immovable Tangible Capital Assets
2 229 398
1 468 792
760 606
57.2%
13Slide18
Reason for variance1Contingent Liabilities
The increase of
R721
million is mainly due
to the following
:
An increase of R295 million in the claims against the Department. These are the various
cases that are still before the courts
R346 million contingent liability resulting from the possible rates and taxes outstanding on the Immovable Assets. This amount was not disclosed in the previous year as the information only came to light in the current year
2
Contingent Assets
Contingent assets have increased by
R63
million
due new
cases that have been identified by the AFU
3
Commitments
The increase
of R1.1million is mainly as a result of the disclosure of the commitments that are outstanding on all the contracts that have been awarded by the department and are still active. The department never used to disclose this information, however in light of the Department’s attempts to improve on the accuracy and completeness of the information disclose in the financials it came to light that this information needs to also be disclosed as part of the commitments.Slide19
Reason for variance - cont…
4. A
ccruals
and Payables
Accruals and payables have increased by R139 million. This is also as a result of the Department attempts to improve on the accuracy and completeness of the information recorded in the AFS. The department has in the past struggled with audit findings relating to the understatement of accruals. We have now put measure in place to mitigate this risk, hence the increase.
5. Operating
lease commitments
Operating leases has
decreased
by
R19 million
due to the some of the contracts for the office buildings nearing and end and some having ended.
6. Finance
lease commitments
There’s an increase of
R5.7
million
as
a result of new photocopy machines that were acquired
7. Accrued
departmental revenue
The increase of R 57 million is mainly attributable to the increase in the Lease debtors balance as a result of the addition of lease debtors that were managed by ALHA on behalf of the department. These are the leases whereby a section 42D claim ahs been approved, however the land has not yet been transferred to the relevant beneficiary, hence the rental received thereon should still belong o the Department. Slide20
Reason for variance - cont…
8. Irregular expenditure
New cases of Irregular
expenditure have decreased by 53% due to the control measure that have been put in place by the Department to curb the occurrence thereof
9. Fruitless
and wasteful expenditure
The increase of
R 11.9 million
is mainly as a result payments
of stipends to Narysec candidate who were not being utilised. This amounts to R9.8 million. There were however cases that were resolved. These amounted to R6.2 million. They were not taken into account in the current year because they were approved after year end.
10. Related
party transactions
The increase of R 4.6
million is a result of a decrease in the receivable of R 2.9 million and an increase in the payable of R 7.4.
The receivable was the money which was due for Deeds which has been settled
The payable is a result of licence fees that were paid on behalf of the Department by Deeds.
Slide21
Reason for variance - cont…
11. Impairment
The increase of R 28 million is mainly attributable to the increase in the Lease debtors balance as a result of the addition of lease debtors that were managed by ALHA on behalf of the department. These are the leases whereby a section 42D claim has been approved, however the land has not yet been transferred to the relevant beneficiary, hence the rental received thereon should still belong o the Department.
12. Provisions
The increase of R 21.8
million is as a result of the OSD translations and a decrease of R 3.3 million in the provision for cases that are handled by CTH.
13. Immovable
Tangible Assets
The increase of
R 760 million is as a result of identification of additional assets from the RID projects, that were not included in the disclosure in the prior years.
Slide22
7. REPORT OF THE AUDITOR GENERALSlide23
The Department obtained an unqualified audit opinion with the following emphasis of matter items:
Significant uncertaintiesAs disclosed in note 20.1 to the financial statements, claims were instituted against the department amounting to R2 418 million. These claims are subject to the outcome of legal proceedings. The ultimate outcome of these matters cannot be determined at present, with the result that no provision for any liability that may result has been made in the department’s financial statements.As disclosed in note 20.1 to the financial statements, the department has a possible liability towards the claimants in terms of the Restitution of Lands Rights Act, 1994 (Act No. 22 of 1994). The total amount in claims verified and pending approval in terms of section 42D of this act is approximately R194 million which once approved by the minister, will increase the commitment amount disclosed in note 19 to the annual financial statements
. Audit opinionSlide24
Impairments
As disclosed in note 13.1 to the financial statements, provision is made for impairment of an investment of R16 million. This relates to Inala Farms (Pty) Ltd which is in the process of being liquidated and the investment might not be recovered.As disclosed in notes 12.6 and 26.2 to the financial statements, provision was made for impairment of R 111 million, of which R99 million relates to non-recovery of accrued departmental revenue and R12 million relates to provision for doubtful debts.
Restatement of corresponding figures As disclosed in note 27.7, 28.4, 34.3.1, 34.4.1, 35.3.1 and 37 to the financial statements, the corresponding figures for 31 March 2015 have been restated as a result of errors discovered during 2015/16 financial year in the financial statements of the department at, and for the year ended, 31 March 2015.
Audit opinion -
cont
…Slide25
8.
AGRICULTURAL LAND HOLDINGS ACCOUNT (ALHA)
ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2016Slide26
CONTENTS
Financial performance overviewStatement of Financial PositionStatement of Financial PerformanceStatement of Changes in Net AssetsCash Flow Statement
Other Financial Matters/DisclosuresSlide27
EXECUTIVE SUMMARY
As at 31 March 2016 the consolidated expenditure amounts to R1 410 billion against the annual budget of R1 542 billion, representing 91% of the overall entity budget.Spending at year end R 16.7m (2015: R 5.6m) was spent for planning, management fees and legal fees whereas,
R189.7m was spent on farmers operating expenditure compared to R 256.4m spent in the last financial year, Land acquisition spending for the period under review is R 933m against the annual budget of R850m representing 109% spending of the allocated budgetRecapitalisation and development spending for the year amounted to R463m against R675m representing 69% spending
The overspending in land acquisition was covered through provincial offices transfer and shifting of funds.4.
R152m
was
allocated
for Drought Relief
on PLAS projects, of which R 51m payments were made
,
it
is anticipated that the remaining balance of
R101m
will be paid in the next financial
year. The allocation per province is depicted in the following slide.Slide28
EXECUTIVE
SUMMARY – cont…ALHA has an reported a surplus of R 1.04b in its Statement of Financial Performance for the year ended March 31, 2016 compared to the restated surplus of R1.2 billion in the last financial yearTotal assets exceed its liabilities by R 11.9bThe total cash and cash equivalent amounts to R 181.2 m for the period under
reviewSlide29
S
TATEMENT OF FINANCIAL POSITION 31 MARCH 2016 ASSETS
Current assets
Notes
2016
R’000
2015
R’000
Cash and cash equivalent
1
181 248
249 048
Trade and other receivables from exchange transactions
5
7 511
42 428
Trade and other receivables from non-exchange transactions
6
345 657
75 279
534 416
396 755
Non Current Assets
Property, Plant and Equipment
2
111 217 108
10 298 360
Intangible assets31 4811 907Other Financial Assets4265 424250 17811 484 01310 550 445TOTAL ASSETS120 018 42910 947 200LIABILITIESCurrent LiabilitiesTrade and other payables from exchange transactions107 18446 314Trade and other payables from non-exchange transactions6431 407Total Liabilities107 24877 721NET ASSETS11 911 18110 869 479Slide30
EXPLANATORY NOTES
:STATEMENT OF FINANCIAL POSITIONNote:
Explanation
1
Cash and cash equivalents:
The balance in the bank amounting to R181.2m
comprises of:
Surplus on Grant received
from DRDLR amounts to
R152.7m.
Lease rental received
R3.8m
Interest earned from the bank account
R 23.4m.
2
Property, Plant and Equipment (PPE):
Movement in PPE is due to:
Additions – purchases of R990m which is attributable to:
Agricultural Land of R808.4m and Buildings R127m,
Farm infrastructure R30m,
Agricultural Equipment of R23m and
Motor vehicles of R563 thousand
Total depreciation and impairment for the year amounts to R42.3m and R18.1m respectively.
During the current financial year the Trading entity received a donation of R306 thousand from previous farm owners who sold the property to the State.
The Trading Entity also disposed PPE worth of R11.2m to Greater Tzaneen District Local Municipality for the development of a township in Limpopo.
3Intangible Assets :Movement in Intangible assets is as a result of :Amortization for the year amounts to R221 thousand.4Other financial assets:Consists of: Land Bank fund amounting to R 208m and the accumulated interest earned to date amounts to R57.4m.The cash payment is financial guarantees for distressed farms financed by Land Bank.The increase is attributable to interest earned in the current financial year of R15.2m. No redemption was realised since inception. 1Slide31
STATEMENT
OF FINANCIAL POSITIONNoteExplanation5
Trade and other receivables - Exchange transaction (Includes operating lease receivable)
Movements relates to increase of
R23m interest charged against the outstanding debt and
R3.7m collected during the current financial year.
The impairment loss for the current financial year increased by R60.7m.
The decrease of R38.847m in carrying amount of operating lease receivable is as a result of an increase in impairment allowance and interest
charged
less the collections.
ALHA didn't bill agricultural leases during the current financial year for lease agreements that did not qualify for billing as per State land Lease and Disposal Policy.
Balance of the lease agreements has not been received due to the process of compiling new business plans that is still underway. An approval has been granted suspending billing until lease agreements have been signed and granted.
The accounting estimates on impairment of lease debtors has changed from assessing consolidated debt to individual assessment of a debtor.
Lease debtors are now classified according to the underlying circumstances that are considered for the purpose of calculating an allowance for provision for doubtful debts. The change resulted to the net change amounting to R36.4m.
6
Trade and other receivables
-
Non exchange transaction:
Included on the R348.4m is:
Gross deferred expenditure account at year end of R638.6m, an impairment loss of R290.3m is provided against the deferred expenditure account for farmers.
The impairment loss increased by R63.8m which is as a result of the non spending by farmers and that less/no expenditure reports are submitted to decrease the outstanding balances over 12 months.
EXPLANATORY NOTES: CONTINUEDSlide32
STATEMENT OF FINANCIAL PERFORMANCE 31 MARCH 2016
REVENUE
Revenue from exchange transactions
Notes
2016
R’000
2015
R’000
Interest received on lease receivable
23
415
20 447
Rental income on servitude
150
435
Rental income on
lease receivable
380
126
Interest on servitude
36
26
Interest received
39
974
43 285Other income3635 023Total revenue from exchange revenue64 31869 342Revenue from non-exchange transactionsTransfer revenueGrant income31 342 0271 613 529Donation received418 1031 627Total revenue from non-exchange revenue1 360 1301 615 156TOTAL REVENUE1 424 4481 684 498Slide33
STATEMENT OF FINANCIAL
PERFORMANCE – REVENUENote:Explanation
9Rental income:No billing for agricultural leases during the current financial year for lease agreements that did not qualify for billing as per State land lease and disposal policy.
The balance of the lease agreements has not been received due to the process of compiling new business plans that is still underway. An approval has been granted suspending billing until lease agreements process have been signed and granted.
10
Interest lease receivable:
Total amount of R23.4m relates
interest charged on outstanding lease receivables.
11
Interest received
bank
:
Total amount
of R39.9mi relates to interest earned from ALHA’s bank account as a result of funds in the bank account of R24.7m and interest earned in land bank amounting to R15.2m.
12
Other income:
The total amount of R363 thousand consist of :
Refunds from attorney’s on acquisition of property.
13
Grant
Income – Non exchange:
The grant refers to the allocation received from DRDLR for the purposes of executing the Proactive Land Acquisition Strategy
14
Donations
The trading entity received donations for movable assets from previous owners on acquisition of property amounting to R306 thousand and R17.7m donations to ALHA.
EXPLANATORY NOTES:Slide34
STATEMENT
OF FINANCIAL POSITIONNote:Explanation
7Trade and other payables from exchange transactions includes:
R4.4m rental received in advance
.
Some farmers paid money without valid lease agreements.
These advances are awaiting finalization of lease agreements.
R107.8m Trade payables.
The total increase is due to the rates and taxes invoices, farmers expenditure and acquisition of land.
8
Trade and other payables from non-exchange transactions :
From the balance of
R31.4m that was reported in the previous financial year, a payment of R13.6m has been made to the Department of Rural Development and Land Reform and approval for donations was granted for ALHA to retain the balance amounting to R17.7m.
EXPLANATORY NOTES: CONTINUEDSlide35
STATEMENT OF FINANCIAL PERFORMANCE
ExpenditureNote2016
R’0002015
R’000
Operating
expenditure (farmers and other operating expenses)
(189 618)
(257 184)
Impairment
(138 582)
(84 621)
Depreciation
(42 797)
(38
098)
Interest Expense
(542)
(849)
TOTAL EXPENDITURE
(371 539)
(380 752)
Operating surplus
1 052 909
1 303 746
Loss on disposal of assets
(11 203)
(10 920)
Surplus for the year1 041 7061 292 826Slide36
STATEMENT OF FINANCIAL
PERFORMANCE - EXPENDITURENote:Explanation
15
Depreciation
and amortization
An amount of R42.3m relates
to depreciation on
Property,
Plant and Equipment and R220 thousand of amortization for intangible assets.
16
Impairment :
Increase on
impairment loss on:
Lease debtors - R56.7m.
Movable and immovable assets – R18.3m.
Deferred expenditure – R63.7m
17
Operating expenditure
for farmers/ strategic partners :
Constitutes spending by farmers that is recognized upon receipt of expenditure reports. The decrease on spending during the current financial year is as a result of the slow process of requesting/collection of spending reports from farmers.
18
Other
o
perating expenditure:
Refers
to expenditure such as bank charges, professional fees paid on contractors and consultants, business planning costs, rates & taxes and management fees.
19
DisposalThe disposal refers to property donated to Greater Tzaneen Local Municipality for the development of a township during the current financial year.EXPLANATORY NOTES – CONT…Slide37
STATEMENT OF CHANGES IN NET ASSETS
ExpenditureNoteAccumulated surplusTotal net assets
Opening balance as previously reported
9 692 290
9 692 290
Prior
year adjustments
(115 637)
(115 637)
Balance at April 1,
20114 restated
9 576 653
9 576 653
Changes in net assets
Surplus for the year
1 292 826
1 292 826
Restated balance at 1 April 2015
10 869 479
10 869 479
Surplus for the year
1
041 706
1
041 706
Balance at 31 march 2016
11 911 185
11 911 185Slide38
STATEMENT OF CASH FLOWS AS AT 31 MARCH 2016
Cash flow from operating activities2016R’000
2015R’000
Sale of goods and services
3 601
2 548
Grant income
1 342 027
1 613 529
Interest income
39 974
43 285
Other operating revenue
2 836
(9 600)
1 388 438
1 649 762
Cash paid to suppliers
Suppliers and other payables
(496 166)
(264 199)
Net cash flows from operating activities
892 272
1 385 563
Cash flows from investing activities
(990 072)
1 230 021
Purchase of property, plant and equipment5 682Proceeds from sale of shares(1 025)Purchase of other intangible assets (share on packaging rights(990 072)(1 198 364)Net cash flow form investing activitiesNet increase?(decrease) in cash and cash equivalents(97 800)187 199Cash and cash equivalents at the beginning of the year279 04891 849Cash and cash equivalents at the end of the year181 248279 048Slide39
STATEMENT OF CASH FLOWS AS AT 31 MARCH 2016 - CONTINUED
Cash generated from operations2016 R’000
2015R’000
Surplus
1 041 706
1 292 826
Adjustments for:
Depreciation and amortisation
42 797
38 098
Interest Land bank
(15 246)
(13 489)
Profit on disposal of assets
(1 470)
Loss on disposal of assets
11 203
10 920
Adjust for donations
(306)
(1 337)
Impairment of assets
18 053
23 697
Other
non-cash items
321
Changes in working capitalTrade and other receivables from exchange transactions34 917(6 518)Other receivables from non-exchange transactions(270 378)13 421 Trade and other payables exchange transactions60 86924 456Trade and other payables from non-exchange(31 343)4 638892 2721 385 563Slide40
Item
ExplanationRelated PartiesControlling state entity: Department: Rural Development and Land Reform
The trading entity is a related party to other state departments and other state owned entities. The trading entity does not separately disclose related parties unless there are transactions or balances between the trading entity and the related parties and, in accordance with IPSAS 20: Related Parties, those transactions were not on normal terms and practice for the sector.
Risk Management
Liquidity risk – The Trading
Entity
still has the ability to meet its debt obligations, current and future cash flow and collateral needs, both expected and unexpected, without materially affecting its daily operations or overall financial condition or without incurring unacceptably large losses
.
Interest rate risk - As the trading entity has no significant interest-bearing assets, the trading entity’s income and operating cash flows are substantially independent of changes in market interest rates.
Credit risk
- consists
mainly of cash deposits, cash equivalents, and trade receivables. The
Trading
E
ntity
only deposits cash with major banks with high quality credit standing and limits exposure to any one counter‑party.
Services in kind
The Agricultural Land Holdings Account falls under the administration of the Department of Rural Development and Land Reform. The executives of the department spend some of their time on the affairs of the trading entity. Furthermore, the department provides the services of internal audit function, information technology and staff training. There is no cost charged by the department in this regard
.
Fruitless
and Wasteful
Expenditure R0;
R35 (2014)
The expenditure relates to interest paid on late payment on the acquisition of land, this amount will be recorded as an asset in the statement of financial position.
OTHER FINANCIAL MATTERS/DISCLOSURES FOR THE PERIOD ENDED 31 MARCH 2016Slide41
OTHER FINANCIAL MATTERS / DISCLOSURES FOR THE PERIOD ENDED 31 MARCH 2016
ItemExplanation
Commitments R395 920; R346 424 (2015)
At end of the year the Trading Entity had commitments relating contracted recapitalisation projects of R258m ,Guarantees on land acquisitions of R99m, Project management of R9m and Open Orders of R28m for normal goods and services procured by the entity.
Contingent
Assets
During the
2011
financial year, the Trading Entity determined that a farmer had unlawfully removed movable assets to the value of R
1.6m
from
the farm. As a result the Trading Entity took legal action against the farmer to recover the
loss
of assets.
Change in accounting
estimates
Management
changed its impairment on lease debtors from assessing consolidated debt to individual assessment of debtor. Lease debtors are now classified according to the underlying circumstances that are considered for the purpose of calculation of lease impairment
Contingent
liabities
Subsequent to the rates and taxes assessment,
communication was done with municipalities to submit the invoices and statements that relates to AHLA land billed. The entity has not received all accounts linked to the asset register, therefore there is a probable that the amount is payable to the municipality but the amount and timing as well as certainty of the liability is unknown.Slide42
9.
DEEDS REGISTRATION TRADING ACCOUNT
ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2016
42Slide43
CONTENTS 1. Statement of Financial Position
2. Statement of Financial Performance 3. Statement of Changes in Net Assets
4
. Cash Flow
Statement
5. Notes
6. Material Audit Findings
43Slide44
Statement of Financial Position
for the year ended 31 March 2016
Note2016
2015
Variance
Variance
R'000
R'000
R'000
%
Assets
Current Assets
392 081
355 099
39 982
11%
Inventories
1
3 971
3 283
688
21%
Prepayments
2
1 149
5 770
(4 621)
-80%Receivables from exchange transactions353 77853 2275511%Cash and cash equivalents4333 183289 81943 36415%Non-current Assets310 766311 476(710)-0.2%Property, Plant and Equipment5168 445171 426(2 981)-1.7%Intangible Assets6141 966140 0501 9162%Prepayments3325-325100%TOTAL ASSETS702 817663 57539 2425.9%44Slide45
Explanatory notes
Statement of Financial Position
Note:Explanation
1
Inventories (+21%)
Increase is due to the normal price
escalation (CPIX) and slow movement in issuing of inventories.
2
Prepayments
(-80%)
:
The prepayment relates to payments to Gijima amounting to R 50 112 039 for the scanning of microfilm images at the average price of R0.48 per image,
Gijima
therefore agreed to work back the prepayment.
During financial year 2014/15 an amount of R22 222 000 was worked back
During financial
year 2015/16 an amount of R6 165 000 was worked back
The outstanding
balance is Rnil. An amount of R2 721 000 previously impaired has been reversed.
The balance was impaired
3
Receivables from exchange transactions (+ 1%):
Increase in “current” billing due to increase in schedule of fees effective from 2 May 2015.
45Slide46
Explanatory notes
Statement of Financial Position
Note:Explanation
4
Cash
and cash equivalents (+15%):
Higher closing bank balance is mainly due to interest that was received in 2015/2016.
There was an increase in the amount of interest received in 2015/2016 due to higher bank balance due to the unutilised E- Cadastre grant in the current year.
5
PPE (-1.7%):
The
1.7% reduction in PPE is due to the fact that assets were decommissioned from WIP to Cost categories and depreciation began as the assets were available for use
6
Intangible Assets (2%) :
The amount relates to the development costs for the e-Cadastre project.
The asset is regarded as having an indefinite useful life based on the fact that there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows or service potential.
46Slide47
Statement of Financial Position
As at 31 March 2016
Note2016
2015
Variance
Variance
R'000
R'000
R'000
%
Liabilities
Current Liabilities
148 396
164 598
(16 202)
-10%
Finance Lease Obligations
8
867
1 007
(140)
-14%
Payables from exchange
transactions
9
79 571
71 669
7 90211%Unspent conditional grants and receipts1063 02791 922(28 895)-31%Provisions114 931-4 931100%Non-current Liabilities13 50215 638(2 136)-14%Finance Lease Obligations8454903
(449)-50%Provisions
11
13 048
14 735
(1 687)
-11%
Total Liabilities
161 898
180 236
(18 338)
-11%
Net Assets
540 919
483 339
57 580
12%
Accumulated surplus
540 919
483 341
57 580
12%
47Slide48
Explanatory notes
Statement of Financial Position
Note:Explanation
7
Finance lease obligations (-14%)
Finance leases are relevant to photocopy machines. Fluctuations are as a result of the number of machines on contract.
8
Payables from exchange transactions (+11%):
The increase
is due to an amount of R12 600 000 for an investigation on E-cadastre.
9
Unspent conditional grants and receipts (-31%):
This
amount represents the
unspent
portion of grants received from the Department for E- cadastre.
10
Provisions (-11%):
The decrease
in the capped leave provision is due to retirements and deaths occurring in the current year. This account cannot increase and can only decrease as capped leave no longer accrues to employees in public service.
48Slide49
Statement of Financial
Performancefor the year ended 31 March 2016
Note
2016
2015
Variance
Variance
R'000
R'000
R'000
%
Revenue
Revenue from exchange transactions
604 811
536 728
68 083
13%
Registration of Deeds and Sale of Information
586 020
521 549
64 471
12%
Other Income
4 503
2
793
1 710
61%Interest received 1414 28812 3861 90215%Transfer revenueGovernment grants50 308185 272 (134 964)-73%Public contributions and donations281-281100%Total revenue13655 400
722 000(66 660)-9%Slide50
Explanatory notes
Statement of Financial Performance
Note:Explanation
11
Registration of Deeds and Sale of Information (+12%):
Increase in schedule of fees effective from 2 May 2015
12
Other income (+61%
):
53% increase in
other income is due to the reversal of impairment of the prepayment relating to
Gijima
13
Interest Received (+15%):
Interest received on positive bank balance and increased interest rates and high bank balance:
14
Government grants (-73%):
This amount represents the revenue recognised from grants received.
50Slide51
Statement of Financial
Performancefor the year ended 31 March 2016
AFS
Restated
Note
2016
2015
Variance
Variance
R'000
R'000
R'000
%
Expenditure
(597 529)
(613 863)
(16 334)
-2.7%
Employee costs
(428 800)
(411 717)
17 083
4%
Depreciation and amortisation
(29 902)
(20
364)
9 53847%Impairment loss(447)(26 235)-25 788-98%Finance costs15(138)(177)-39-22%Bad Debts(6)(586)-580-99%Repairs and maintenance(20 326)(44 730)-24 404-55%General expenses(117 910)
(110 054)(7 856)7%%
Total revenue
655 400
722
000
Total expenditure
(597 529)
(613
863)
Operating surplus
57 871
108 137
Loss on disposal of assets and liabilities
(294)
(549)
Surplus
for the year
57 577
107 588
51Slide52
Explanatory notes
Statement of Financial Performance
Note:Explanation
15
Employee Costs (+4%)
The main cost drivers was a increase in employees costs relating to inflation:
Annual salary increment
Other Operating Expenses (various)
The remainder of the operating expenses have decreased due to unavailability of funds and austerity measures which resulted in less spending in items such as repairs and maintenance.
General Expenses (+7%)
The increase in general expenses is directly linked to inflationary increases and can be attributed to economic changes.
16
Finance costs (-22%)
Interest calculations relate to finance leases and the decrease is due to the decreased number of leased photocopy machines due to the ending and non renewal of the lapsed leases.
52Slide53
Statement of
Changes in Net Assetsfor the year ended 31 March 2016
AFS
Accumulated
Total net
Note
Surplus
assets
R'000
R'000
Balance
at 01 April 2014
375 752
375 752
Change in net assets
Surplus for the year
107 589
107 589
Total changes
107 589
107 589
Restated*
Balance at 01 April 2015
483 341
483 341
Change in net assets
Surplus for the year
57 57657 576Total changes57 57657 576Balance at 31 March 2016540 917540 91753Slide54
Cash Flow Statement
for the year ended 31 March 2016
AFS
Restated
Restated
Note
2016
2015
R'000
R'000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts
623 337
662 875
Registration of Deeds and sale of information
588 143
537 295
Grants
21 413
113 194
Interest income
13 633
12 386
Other Income
148
-
Payments
(559 441)(528 663)Employee costs(409 681)(411 717)Suppliers(149 760)(116 946)Net cash flows from operating activities1963 896134 21254Slide55
Cash Flow Statement
for the year ended 31 March 2016
AFS
Restated
Restated
Note
2016
2015
R'000
R'000
CASH FLOWS FROM
INVESTING ACTIVITIES
(18 979)
(124 846)
Purchase of Property, Plant and Equipment
6
(18 992)
(124 889)
Proceeds from sale of property, plant and equipment
6
13
43
CASH FLOWS FROM FINANCING ACTIVITIES
(1 554)
288
Finance
lease payments
(1 554)288NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS43 3639 654Cash and cash equivalents at the beginning of the year289 819280 165CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR5333 182289 81955Slide56
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