ANNUAL REPORT 2016 · 2018-07-06 · ANNUAL REPORT 2016. 2 BOARD OF HEATHCARE FNDERS OF SOTHERN...

1BOARD OF HEALTHCARE FUNDERS OF SOUTHERN AFRICA | NPC

ANNUAL REPORT2016

2 BOARD OF HEALTHCARE FUNDERS OF SOUTHERN AFRICA | NPC


CONTENTSANNUAL REPORT

Page 2-3

Page 4-9

Page 10-12

Page 14-27

Page 28-70

Page 72-73

Page 74

Page 75

Page 76

About BHF: Our Vision, Our Values, Our Profile

Chairman’s Report

Chief Financial Officer’s Review

BHF Corporate Governance Report

Annual Financial Statements

Supplementary Information:

Detailed Expenditure – Note 23

Management Team

Attendance of Board of Directors Meetings – 2016

Finance and Audit Committee – 2016


Our Vision

The Board of Healthcare Funders Southern Africa is driven by a strong ambition and desire to enable and support progress towards this vision, as proposed:

1. A patient-centric healthcare system that is affordable and accessible to all.

2. A healthcare funding industry anchored on the principles of:• Social solidarity;• Affordable access;• High-quality care delivery;• Financial sustainability;• Harnessing collective knowledge,

expertise and resources to deliver better value to medical scheme members and healthcare consumers in general.

Back row Left to Right

Mr Selikane Motseko (Lesotho)Ms Antea Fourie-Van ZylMr Ian IsdaleMr Howard Stephens Mr Costadino RaftopoulosDr Osborn MahanjanaDr Thato Moumakwa (Botswana)Dr Mangaliso Mahlaba

Front row Left to Right

Dr Lungi NyathiDr Ali Hamdulay (Acting Chairman)Dr Clarence Mini (Acting Managing Director)Mrs Shylet Sanyanga (Zimbabwe)Mr Callie Schäfer (Namibia)

Absent

Dr Bobby RamasiaDr Vusi MemelaDr Hleli NhlapoMr Thulani NseleDr Guni GoolabAdv Yvonne Mabule

ABOUT BHF


Our Values

As an organisation the BHF is guided by several principles in executing its day-to-day responsibilities.

These include:

1. Integrity2. Inclusivity3. Openness and transparency4. Relevance: understanding the context in which

our clients operate and meeting their needs5. A sustainable health sector6. Constructive working relationships with policy

makers and regulators7. Acting in the best interests of the “health citizens”

at all times

Profile

Serving medical scheme members, BHF is the industry body for medical schemes, administrators and managed care organisations throughout Southern Africa, with members in Southern Africa, Lesotho, Zimbabwe, Swaziland, Mozambique, Nambia and Botswana.

Back row Left to Right

Mr Selikane Motseko (Lesotho)Ms Antea Fourie-Van ZylMr Ian IsdaleMr Howard Stephens Mr Costadino RaftopoulosDr Osborn MahanjanaDr Thato Moumakwa (Botswana)Dr Mangaliso Mahlaba

Front row Left to Right

Dr Lungi NyathiDr Ali Hamdulay (Acting Chairman)Dr Clarence Mini (Acting Managing Director)Mrs Shylet Sanyanga (Zimbabwe)Mr Callie Schäfer (Namibia)

Absent

Dr Bobby RamasiaDr Vusi MemelaDr Hleli NhlapoMr Thulani NseleDr Guni GoolabAdv Yvonne Mabule


CHAIRMAN’S REPORTfor the year ended 31 December 2016

2016 has continued to be a year where the industry has wrestled with the challenge of balancing the aspirations of providing equitable access, high quality care and containing costs. There is a growing, if not urgent, need for healthcare funders within the region to continue to share ideas, knowledge and expertise, for a cohesive approach to private healthcare funding that will ultimately improve access to quality, affordable healthcare across the region. This stance is in keeping with the spirit of the SADC Health Policy Framework, the National Health Insurance (NHI) and resonates with the BHF’s membership. From both a national and regional context, it is clear that finding lasting solutions for these challenges will require a number of significant structural shifts to occur within the health sector.

2016 was the year that the BHF commenced with the implementation of its strategic plan defining its medium-term strategy for 2016-2018. In order to represent the industry in an improved, appropriate and cost-effective manner, the board of directors made the decision in 2015 to review the organisation’s strategic direction, its role, activities and positioning within the industry; and its value proposition to its membership. Taking cognisance of the rapidly changing competitive landscape of private healthcare funding, this strategy guides the BHF’s role in addressing the challenges in the private healthcare sector as well as on national health policy imperatives. As we put action to strategy, it is the BHF’s considered position that this strategic plan captures our commitment to our membership, and the inclusive and collaborative spirit with which the BHF intends to drive the execution of the plan to find lasting solutions to challenges facing the health sector in Southern Africa with a common vision, strong leadership and a number of significant structural shifts and interventions.

2016 in many aspects was a watershed year for the BHF and our industry. As Chairman of the BHF, I am heartened by the progress and efforts of our organisation to put actual measure to our intentions, and move in tangible and meaningful ways with our members towards a collaborative industry, able to navigate the challenges of achieving an equitable and sustainable healthcare framework for Southern Africa.

I believe that much of this progress has been driven by a BHF leadership and board that are extremely focused and aligned to the core needs of our industry and membership, bringing with them a diversity of qualified skills and functions. We also have an organisation that has proven itself sustainable and meaningful despite significant leadership changes in the latter part of 2016.


In October, we said farewell to the late Dr Humphrey Zokufa, our long serving Managing Director, who made a valuable contribution to the healthcare sector in the region. He was appointed as the Chief Executive and Registrar of CMS in November. Dr Zokufa led the BHF for almost 11 years with strong leadership, dedication and passion since 2005. It was with great shock that we learned of his untimely passing in January 2017. As BHF, we express our deepest condolences to Dr Zokufa’s family and are grateful for his immense contribution to the healthcare industry.

During this time, the BHF was led by Dr Clarence Mini who stepped in as the BHF’s acting managing director. I know that I express my sincere thanks and appreciation on behalf of all at the BHF and our members for Dr Mini’s unwavering commitment to steering the ship during this challenging time.

Finally, I see our deeper step into the NHI environment as a historical moment for our industry. It represents an important step towards meaningful healthcare transformation that is premised in uplifting the health of an entire nation. We have strong leadership with many years of experience and deep knowledge, mature thinking, and willingness to collaborate. We must continue to advocate responsible solutioning to our country’s healthcare challenges. As we wrap up on the year that was, let’s sustain our laser-like focus and performance in the months and years ahead, underpinned by a common vision, strong leadership and well-considered negotiations. I am heartened by the events and actions of the last year that we have the will, capacity, the leadership and member support to achieve a sustainable, quality healthcare environment for all South Africans.

Dr Ali HamdulayChairman

“…much of this progress has been driven by a BHF leadership and board that

are extremely focused and aligned to the core

needs of our industry and membership, bringing with

them a diversity of qualified skills and functions”

Dr Ali HamdulayChairman


2016 AT A GLANCE

From 2016-2018, the BHF’s strategic focus areas are defined as follows:

In giving measure to our strategic plan, a number of notable developments featured during 2016.

Unity and Cohesion

• Member engagement and unity were a key focus for the BHF. A number of meetings and seminars for and with members and other key stakeholders helped to drive unity within the industry and provided invaluable insights into how the BHF fulfils on its mandate in a manner that has impact and relevance.

• Our roadmap towards a more sustainable patient-centric health system commenced in May 2016 with the drafting of the terms of reference for an industry Think Tank and various work streams. Projects will be identified at the beginning of 2017 with resources and time allocated to this forum to take the delivery of the roadmap forward.

• The process to find a new Managing Director for the BHF continued during 2016 and in 2017, with a canditate having been identified and an announcement being imminent.

UNITY & COHESION(Within the health sector)

ADVOCACY

THOUGHT LEADERSHIP

1 2

3 4

BHF GOVERNANCE, ORGANISATIONAL SUSTAINABILITY

HEALTH SYSTEM TRANSFORMATION

(Access, Affordability, Accountability)


Advocacy

• The 17th BHF Conference was held from 17-20 July 2016 in Cape Town, drawing over 900 delegates and a world-class line-up of speakers and expert presenters. With the theme ‘A Roadmap to Universal Health’ the conference was supported experts from the World Bank, the World Health Organisation (WHO), the National Development Plan, (NDP) the Financial and Fiscal Commission of SA, academia, the National Department of Health (NDoH) and the funding industry. The BHF Conference continues to attract significant attendance, meaningful and focused media exposure and we are proud of the fact that 83% of delegates indicated they were very satisfied with the conference content and co-ordination. We continue in our efforts to grow on the Conference’s relevance and impact.

• The BHF continued to support the common interests of the industry with representation at various stakeholder events including the likes of Business IQ, Innovative Pharmaceutical association South Africa (IPASA), Association of Healthcare Funders of Zimbabwe (AHFoZ), the Discovery Leadership conference and NDP Vision 2030. In building our strategic alliance partnerships, the BHF supported various initiatives and in turn enjoyed reciprocal engagement from the likes of Health Professions Council of South Africa (HPCSA), South African Medical Association (SAMA), CMS, Nurses in Private Practice, the NDoH, the Foundation for Professional Development and KPMG. It is our firm belief that active engagement is the first step towards closer cooperation and understanding of our shared interests.

• 2016 proved to be a year of successful collaboration with the NDoH as we hosted the 40th IHF World Hospital Congress. The organising committee consisted of leadership from Hospital Association of South Africa (HASA), Steve Biko and King Edward Hospitals, BHF and Government. The BHF raised over R1 million in sponsorship and R5 million in delegate sales for the event on behalf of Government, and was a key role player in the conference logistics and co-ordination.

• Our BHF360 magazine themed “Universal Healthcare” featured Medscheme’s Dr Odwa Mazwai and 15 of our member schemes.

• The BHF implemented a Puplic Relations strategy to further the BHF’s presence in the media on key industry issues. One of the key outcomes of that strategy was a press conference hosted by the BHF and attended by the NDoH and the Honourable Minister Aaron Motsoaledi. The press conference was aimed at addressing some of the misperceptions surrounding NHI. This proved to be an excellent positioning opportunity for the BHF, generating an extraordinary amount of positive media coverage and re-entrenching the BHF’s position as the de facto industry body on guiding how the private sector is able to support and empower the national health policy whilst remaining relevant and sustainable.


Thought Leadership

• The BHF’s Trustee Training Programme was accredited and offered through the Wits Business School. The Trustee Training Programme is now registered at NQF level 7 and accredited for 20 ethics points. The inaugural pilot session was attended by 30 trustees representing three medical schemes. The first SADC country to participate in the Trustee Training Programme was Botswana. BHF hosted this session in June 2016.

• The BHF launched member workshops on escalating private healthcare costs, sharing best practice and case studies on how to manage them.

• The second Annual Titanium Awards recognised and acknowledged excellence in the public and private healthcare sectors in Southern Africa. 30 entries were received and independently judged and audited, with the majority of winners coming from the BHF membership base.

• The BHF sponsored two students to attend the BHF Conference – one a PHD student focussed on the NHI and the other a Masters student researching NHI funding models.

• WHO in partnership with the BHF commenced with a research project on hospital fees for our members in the region, with the aim of creating a knowledge repository for the healthcare industry.

Health System Transformation

• In leading a cohesive approach to managing medical schemes fraud, the the Healthcare Fraud Management Unit (HFMU) unit was merged with the Risk and Compliance unit under the Practice Code Numbering System (PCNS) Operational unit in Quarter 1 of 2016. The aim of the merge was to facilitate a more standardised approach on fraud, waste and abuse.

• The BHF presented at the HAWKS Provincial meeting; requesting the input and support of the National Office in developing a holistic approach to combating healthcare fraud in South Africa.

• There was ongoing engagement with the HPCSA Ombudsman on a Memorandum of Understanding (MoU) which fostered collaboration between the PCNS and the HPCSA inspectorate offices and urging the NDoH to share state healthcare provider information within our network. A new HFMU tool was developed which leverages the PCNS system to capture more details and track outcomes of cases.

• During November 2016, the BHF hosted its annual Healthcare Fraud, Waste and Abuse Indaba, providing anti-fraud professionals with insights and understanding of the legislative framework and regulations related to the healthcare industry. The process of investigations by state agents and analysis on current healthcare industry trends were also explored during the Indaba.


• The BHF continued lobbying for changes to the diagnosis-based Prescribed Minimum Benefits (PMB’s). In 2016, the BHF presented at the Workstream 4 on proposed revised PMB’s, with a significant part of this input reflected in CMS circular 83 of 2016.

• The review of Regulation 8 of the Medical Schemes Act has stalled somewhat, and further developments are awaited from the CMS and NDoH.

• The BHF continued to engage with the Health Market Inquiry on behalf of members, with the preliminary findings from the commission expected in December 2017.

• The BHF made submissions on the NHI white paper in consultation with members, advocating for the role of medical schemes in the NHI environment.

• The BHF continued to engage on the development of a technical framework for scheme tariff modelling and provider engagement. The matter of alternative reimbursement models (ARM) remains a crucial issue and the BHF remains focused on facilitating an environment for the establishment of guidelines in the implementation of such alternative reimbursement models. When one considers that the private sector will play an important role in National Health Insurance (NHI) delivery and can help South Africa’s NHI leapfrog many of the challenges experienced in other geographies, the need for new models of reimbursement that drive quality outcomes and not utilisation is crucial.

2016 was an important year in terms of a re-focus and reinvigoration of BHF’s role and strategic direction. It is clear that the next five years are set to be more challenging than ever before and will require significant industry collaboration and alignment as the next phase of the NHI’s implementation roles out. As BHF, we look forward to greater co-operation between the medical scheme industry and Government over this period, during which time the industry has a real opportunity to re-assert itself as a relevant asset within the current and future health system dispensation. Looking ahead, there is much work to be done to create a preventative and primary care benefit structure that could be applicable between the public and private healthcare sectors. At the same time, we need to leverage our existing healthcare assets such as data analytics, healthcare network arrangements, provider contracting, managed care techniques, transaction management systems and other relevant capabilities, to progressively enhance the affordability of care access and financial risk protection for medical scheme members.


CHIEF FINANCIAL OFFICER’S REVIEWfor the year ended 31 December 2016

Highlights

The year under review finished well after cautious decisions on expenditure were made at mid-year. Some projects were delayed until the last quarter. Significant effort was expended to successfully facilitate the collection of levies in the second half of the year. The levies met budget but expenditure was lower resulting in a larger than expected surplus.

Levy Income

The majority of the company’s revenue is derived from levy income. The levy increase for 2016 was kept at 6.5%

Interest Received

This income comprises an important segment of the BHF’s total income and is affected by any overdue levy income from members. Interest received increased from R1,261,245 to R2,074,597. The average interest rate earned in 2016 was 6.85% compared to 5.87% in 2015.

Tax

No tax was provided for in the current year as a result of taxation exemption status being granted by the South African Revenue Service.

Operating Expenses

Operating expenditure remained level with the previous year. This was attributable to:

• A reduction of R642,040 in agency fees as a result of the appointment of permanent staff to replace temporary staff.

• A R601 458 reduction in the cost of the annual BHF Conference with an equivalent reduction in revenues.• Major informational technology (IT) project work was completed in 2015 and professional fees were

therefore down by 10% in 2016.• Provisions for Doubtful Debts were down by R335 258 due to excellent collection of outstanding debt.


Employment Costs

Employment costs (which comprise 39.8% of total operating expenses) increased over the previous year by 16.3%. This increase was attributable mainly to senior staff appointments replacing temporary staff in the period under review.

Capital Expenditure

There was no capital expenditure in the period under review.

Accounting Standards

For the 2016 period the annual financial statements were prepared in accordance with international financial reporting standards for small and medium sized entities.

“Do not SAVE what is left after

SPENDING but SPEND what

is left after SAVING.”

Dave Ramsey


SUSTAINABILITY

Solvency

The board of directors has recommended that reserves level equal to 50% of the current year’s levy income be achieved. At the end of 2016 this level was 57.2%.

Membership Levy Increases

The company is fully aware that non-healthcare expenditure within the industry is under scrutiny and the fact that membership is voluntary. However, membership expects a certain level of representation by and added value from the BHF. These two factors, together with the need to build reserves, are taken into consideration when recommending annual membership levy increases.

Service Levels

Because the company is a not-for-profit organisation, membership of which is voluntary, service levels are regarded as being of the greatest importance. In pursuit of this we continue with our service excellence interventions.

Howard StephensActing Financial Manager



BHF CORPORATE GOVERNANCE REPORT

The BHF is a non-profit company registered in accordance with the laws of the Republic of South Africa. It is governed by the provisions of the Companies Act 71 of 2008, as amended (“Act”).

The governance structure of the BHF can be depicted as follows:

1. BHF MEMBERS

The BHF is a healthcare funding industry membership organisation and is comprised of medical schemes, administrators and managed healthcare organisations operating in South Africa, Lesotho, Swaziland, Namibia, Botswana and Zimbabwe.

2. BOARD

The Memorandum of Incorporation of the BHF (“MOI”) specifies that the directors are nominated and appointed by the members of the BHF on the following basis:

BHF MEMBERS

BOARD

FINANCE AND AUDIT COMMITTEE

GOVERNANCE COMMITTEE

SADC COMMITTEE

NOMINATIONS COMMITTEE


CONSTITUENCYMAXIMUM NUMBER OF

DIRECTORS THAT CAN BE APPOINTED

Administrators and managed healthcare organisations in South Africa 6

Open medical schemes 7

Restricted membership medical schemes 6

Schemes and administrators in Botswana, Lesotho, Namibia and Zimbabwe 4

The MOI further stipulates that the board shall not comprise less than 11 members and not comprise more than 24 members.

2.1 The board of directors

• Mr Selikane Motseko (Lesotho)• Ms Antea Fourie-Van Zyl• Mr Ian Isdale• Mr Howard Stephens • Mr Costadino Raftopoulos• Dr Osborn Mahanjana• Dr Thato Moumakwa (Botswana)• Dr Mangaliso Mahlaba• Dr Lungi Nyathi• Dr Ali Hamdulay (Acting Chairman)• Dr Clarence Mini (Acting Managing Director)• Mrs Shylet Sanyanga (Zimbabwe)• Mr Callie Schäfer (Namibia)• Dr Bobby Ramasia• Dr Vusi Memela• Dr Hleli Nhlapo• Mr Thulani Nsele• Dr Guni Goolab• Adv Yvonne Mabule


2.2 Appointment of directors

Directors are appointed by the members of the BHF at its annual general meeting (“AGM”) which usually coincides with the annual BHF Conference. The directors appointed at the AGM were:

• Antea Fourie-van Zyl

• Guni Goolab

• Ali Hamdulay

• Ian Isdale

• Yvonne Mabule

• Osborn Mahanjana

• Vusi Memela

• Clarence Mini

• Selikane Motseko

• Hleli Nhlapo

• Thulani Nsele

• Costadino Raftopoulos

• Bobby Ramasia

• Shylet Sanyanga

• Howard Stephens


The MOI permits the board to fill vacancies on the board on the basis of nominations received from the constituency in respect of which the nomination arises. Following the Annual General Meeting (AGM), the following vacancies arose and were filled by the following directors:

CONSTITUENCY IN RESPECT OF WHICH THE VACANCY AROSE

DIRECTOR APPOINTED BY THE BOARD

DATE OF APPOINTMENT

Botswana Thato Moumakwa 28 September 2016

Namibia Callie Schafer 28 September 2016

Administrators Lungi Nyathi 30 November 2016

Administrators Mangaliso Mahlaba 30 November 2016

The appointment of these additional directors (as well as any appointed prior to the AGM at meetings held in the 2017 financial year prior to the AGM) will be confirmed at the AGM to be held in July 2017.

2.3 Managing director

The Managing Director of the BHF for the majority of the 2016 financial year was the late Dr Humphrey Zokufa. Dr Zokufa was the Managing Director of the BHF until 31 October 2016.

With effect from 1 November 2016, Dr Clarence Mini was appointed the acting Managing Director and remained in that position for the remainder of the 2016 financial year. During this period, Dr Clarence Mini’s chairmanship of the BHF was relinquished. An arm’s length contract was concluded with Dr Clarence Mini in order to ensure that he was fairly remunerated for his role as the acting Managing Director for the remainder of the 2016 financial year.

2.4 Chairman and deputy chairman

The BHF board meets after the annual general meeting and elects a chairman and a deputy chairman. At the AGM held on 2 September 2016, Dr Clarence Mini was appointed the chairman and Dr Ali Hamdulay was appointed the deputy chairman.

Given the resignation of Dr Humphrey Zokufa with effect from 1 November 2016, Dr Clarence Mini was appointed the acting Managing Director and relinquished his role as chairman of the board. During this period, Dr Ali Hamdulay was appointed the acting Chairman of the board. The board determined that the appointment of an acting deputy chairperson would not be necessary and that, to the extent that the need arose, an acting deputy chairperson would be nominated by the board from among its members. During the 2016 financial year, this need did not arise.


2.5 Board meetings and attendance

During the 2016 financial year, 6 board meetings were held and were attended as follows:

DIRECTOR 8/2/16 15/3/16 7/6/2016 2/9/2016 28/9/2016 30/11/16

H. Zokufa (Managing Director) • • • • • n/a

J. Pretorius (Chairperson) • x x n/a n/a n/a

S. Sanyanga (Deputy Chairperson) • • • • • •

C. Mini (Chairperson) • • • • • •

A. Hamdulay (Deputy Chairperson) • • • • • •

D. Alexander • • • n/a n/a n/a

K. Aron x x • n/a n/a n/a

K. Dreyer x x x n/a n/a n/a

A. Fourie-van Zyl • • • • • •

G. Goolab n/a n/a • x • x

I. Isdale n/a • • x • •

Y. Mabule • x • x x •

O. Mahanjana x • • • x •

G. Mbapaha • • x x x n/a

V. Memela • • x • • •

S. Motseko • • • x • •

T. Moumakwa n/a n/a n/a n/a • •

H. Nlapo x x • x x x

T. Nsele x x x • x x

B. Ramasia x • • x x x

C. Raftopoulos • • x x • •

C. Schafer n/a n/a n/a n/a n/a •

H. Stephens n/a x • • • •

• In attendance

x Apology/not present

n/a Retired/resigned/not appointed


2.6 Director development

During the 2016 financial year, a formal induction session was held for all board directors following the AGM. Given that some of the directors are not South African citizens and do not ordinarily reside in South Africa, the director training was focussed primarily on the requirements of the Act and the fiduciary responsibilities and duties of the directors.

2.7 Retirement of directors

At the AGM held on 2 September 2016, the board was re-elected as it was the view of the board that the re-election of the board would (i) responsibly maintain a mixture of skills and experience relevant to the BHF and ensure the retention of institutional memory and (ii) comply with corporate governance requirements in respect of matters such as the balance of executive and non-executive directors of the board.

Given the resignation of Dr Humphrey Zokufa with effect from 1 November 2016, the board’s combination of skill and experience has proved invaluable to the BHF. In particular, the Chairman, Dr Clarence Mini suspended his chairmanship of the board and entered into an arm’s length contract with the BHF as the acting Managing Director. In addition, given the departure of the former finance manager from the BHF during the course of 2016, Howard Stephens, a non-executive director, concluded an arm’s length contract with the BHF and assisted it from a financial management point of view.

2.8 Board and committee performance assessment

The first director induction session was held in September 2016. In light of this, no performance reviews of board members were conducted during the 2016 financial year.

2.9 Remuneration of directors

Directors of the BHF typically are employed at or affiliated in some way with organisations which are members of the BHF. Accordingly, the MOI provides that save for the Managing Director (who is the only executive director of the BHF and who is employed exclusively by the BHF), no other director is entitled to any remuneration from the BHF. During the 2016 financial year, with the resignation of Dr Humphrey Zokufa, the board identified the need to fill that vacancy as well as the internal vacancy which arose during the 2016 financial year as a result of the departure of the financial manager. Pending a recruitment process overseen by the board, the board agreed to the appointment of the chairman, Dr Clarence Mini as the acting Managing Director and the appointment of Howard Stephens as the acting Financial Manager. Both of these appointments are temporary in nature pending the filling of the vacancy of the Managing Director. The new Managing Director will be presented with the opportunity of appointing a Financial Manager of his choice as part of his team. Both Dr Mini and Mr Stephens will assist the new Managing Director and Financial Manager respectively in transitioning into their new roles. No appointments were made in the 2016 financial year given the short period remaining of that financial year. These positions will be filled in the 2017 financial year.


2.10 Conflict of interest

The board consistently applies the provisions of the Act and requires all board members and all committee members to declare any specific interests they may have at each meeting of every board and committee meeting.

3. BOARD COMMITTEES

The committee of the board has established the following committees:

• Finance and Audit Committee

• Governance Committee

• SADC Committee

• Employee Remuneration Committee

• Managing Director Remuneration Committee

A Nominations Committee was appointed on an ad hoc basis to oversee the recruitment process in order to fill the vacancy in the office of the Managing Director and the Financial Manager respectively.

Various working groups have been established to assist the board in performing its work. These working groups typically report to a specified committee alternatively directly to the board to the extent that the working group has been formed in order to address an industry issue including, for example, NHI.

All Committees have terms of reference. During the 2016 financial year, many of these terms of reference were under review and subject to formal adoption by the board. Many of the terms of reference were adopted during the 2016 financial year with the remainder being adopted during the 2017 financial year.

Committees are all chaired by non-executive directors.


3.1 Finance and Audit Committee

COMMITTEE 2016 FOCUS AREAS MEMBERSHIPFinance and Audit Review of budgets and recommendation

to the board

Oversight provided in terms of:

• internal audit

• external audit

• risk management

• information technology governance

• financial management

Prior to the AGMK. Aron (chair)D. Alexander (deputy chair)G. Newton (independent)H. ZokufaAfter the AGMA. Fourie-van Zyl (chair)H. Stephens (deputy chair) *D. Alexander (Independent)C. Mini **

* Howard Stephens has not acted as the deputy chair of the Finance and Audit Committee during the period that he has acted as the Financial

Manager.

** In his capacity as acting Managing Director and not as Chairman of the board.

The meetings of the Finance and Audit Committee have been attended as follows:

FINANCE AND AUDIT COMMITTEE MEMBER 15/1/16 14/3/16 24/5/16 25/10/16 16/11/16Kevin Aron x x • n/a n/a

Dennis Alexander * • • • • •

Grant Newton • • • n/a n/a

Humphrey Zokufa (Managing Director) • • • x n/a

Antea Fourie-van Zyl n/a n/a n/a • •

Howard Stephens n/a n/a n/a • •

Clarence Mini (acting Managing Director) n/a n/a n/a • •

• In attendance



* Prior to the AGM in his capacity as deputy chair and after the AGM in his capacity as an independent member.


3.2 Governance Committee

COMMITTEE 2016 FOCUS AREAS MEMBERSHIPGovernance Oversight provided in respect of governance including:

• assessment of the existing governance framework

• conducting of a gap analysis

• oversight of the implementation of a governance work plan

Review of committee terms of reference

Review of the MOI

Ian Isdale (chair)

Humphrey Zokufa (Managing Director)

Clarence Mini (acting Managing Director)

Howard Stephens

Yvonne Mabule

GOVERNANCE COMMITTEE MEMBER 28/6/16 16/11/16Ian Isdale (chair) • x

Humphrey Zokufa (Managing Director) • n/a

Clarence Mini (acting Managing Director) n/a •

Howard Stephens • •

Yvonne Mabule • •

• In attendance




3.3 SADC Committee

Director 8 February 15 March 6 June 27 September 30 NovemberD Alexander • • • n/a n/a

GU Mbapaha • • A n/a n/a

S Motseko • • • • •

T Moumakwa n/a n/a n/a • •

B Ntando A A A A A

R Palermo A A A A A

S Sanyanga • • • • •

C Schafer n/a n/a n/a n/a •

ZH Zokufa • • • • n/a

• In attendance



3.4 Remuneration Committee

The Employee Remuneration Committee met on 16 November 2016 in order to consider the remuneration of the employees of the BHF and to consider issues including remuneration increases and. The members of the Remuneration Committee are:

• Clarence Mini (acting Managing Director)

• Ali Hamdulay (acting board chairman)

• Antea Fourie-van Zyl (chairperson of the Finance and Audit Committee)

Given the departure of Dr. Humphrey Zokufa with effect from 1 November 2016, the Managing Director Remuneration Committee was not convened.

4. RISK MANAGEMENT

Following the board strategy session, a completely revised high level risk assessment was conducted in order to identify any risks facing the BHF.

The process adopted is as follows:

• risks are identified and aligned with their ultimate risk source;


• the pure risk has been evaluated by management;

• based on this rating of pure risk, an assessment has been conducted in order to determine what existing controls are in place to mitigate this risk;

• the effectiveness of these controls are then evaluated in order to result in a residual risk score;

• a determination is made by management as to how the risk should be treated and the actions to be taken by management in order to futher reduce the risk.

5. INFORMATION TECHNOLOGY GOVERNANCE During the year under review we implemented the first steps in our journey to take advantage of “Cloud computing” whilst retaining the security of all of our systems. We upgraded our software to Windows 10 and then implemented Microsoft Office 365 with the intention of using “Sharepoint” to enhance information flows.

In terms of the infrastructure, we upgraded the office printers and implemented a new PABX system. We continue to ensure that our data is protected from outside attack.

6. INTERNAL AUDIT

6.1 Role of internal audit

Internal audit is conducted in terms of a contract concluded with Outsourced Risk and Compliance Assessment (Pty) Ltd.

During the 2016 financial year, the internal auditors conducted the following audits:

• Corporate governance, risk and compliance

• Operational functions

• Information technology *

• Financial management

* Report tabled at the Finance and Audit Committee meeting held on 8 May 2017

In addition, the internal auditors undertook a follow-up audit of the internal audit findings.


6.2 Independence of the internal auditors

The internal auditors are appointed in terms of an arm’s length agreement with the BHF. Internal audit is free to meet with the chairperson of the Finance and Audit Committee from time to time.

6.3 Internal audit plan

The internal audit plan is developed by internal audit in consultation with management and subject to the input of the chairperson of the Finance and Audit Committee. The internal audit plan is submitted to the Finance and Audit Committee for approval.

7. STAKEHOLDER ENGAGEMENT

The BHF has a number of stakeholders including:

7.1 Members

The BHF’s members comprise medical schemes, administrators and managed healthcare organisations in South Africa and in the South African Development Community (SADC) region. The BHF engages with its members through:

• the appointment of directors that represent the various constituencies of the BHF membership to the board of directors in order to provide strategic guidance and direction as well as oversight to the management of the BHF

• the hosting of the renowned BHF Conference that identifies topical issues influencing the industry as a whole

• the convening of regional meetings with members in order to gauge the understanding of industry issues that arise spontaneously as well as in response to policy changes within the SADC region

• regular communications to the membership of the BHF as to topical issues which affect the membership of the BHF

• the convening of an AGM with members to enable members to raise concerns and/or issues with the board and gain detailed insight into the operations of the BHF including elements of governance and financial management


7.2 Medical scheme members

Medical schemes are non-profit organisations with the aim of providing benefits to medical scheme members who are then ultimately stakeholders of the BHF. The BHF constantly engages with the private healthcare funding industry in an attempt to reduce private healthcare cost to medical scheme members.

7.3 Government

The BHF engages with Government proactively as well as in response to Government requests both in South Africa as well as in the SADC region. This engagement is not only restricted to policy issues but the engagement with the healthcare industry regulators in order to provide the private healthcare funding industry’s perspective on action taken by Government from a regulatory perspective.

During the 2016 financial year, the BHF engaged with various Government departments in South Africa in order to reduce the financial burden on students originating from other countries within the SADC region and who were de-pendants on medical schemes registered in those countries requiring separate private healthcare funding in South Africa as a prerequisite for obtaining student visa’s in South Africa.


7.4 BHF Organogram 2017

MANAGING DIRECTOR

EXECUTIVE ASSISTANT: MD’S OFFICE

MANAGER:FINANCE

HEAD: BENEFIT AND RISK

MANAGER: OPERATIONS

MGR: BRAND COMMS &

MARKETING

LAN ADMINISTRATOR

SENIOR DEVELOPER

MANAGER: ACCOUNTS

DEBTORSCONTROLLER

ADMINISTRATOR PCNSMARKETING

OFFICER

MARKETING ADMINISTRATOR ASSISTANT

ACCOUNTANT

ADMINISTRATOR: ACCOUNTS

ADMINISTRATOR: OFFICE MGT

OFFICE ATTENDANT

MANAGER: OPERATIONS

FRONT DESK ADMIN

ADMINISTRATOR:HFMU

APPLICATIONS SPECIALIST

CONSULTANT: PCNS ADMIN (3)

SECTION HEAD: CONTACT CENTRE

ADMINISTRATOR:PCNS IT SUPPORT

ISABELLA

SECTION HEAD: PCNS FINANCE

PROJECT SPECIALIST

SECTION HEAD: RISK & COMPLIANCE

CONSULTANT: CONTACT

CENTRE (4)

PCNS FINANCE CLERK

ADMINISTRATOR: COMPLIANCE


ANNUAL FINANCIAL STATEMENTSfor the Year ended 31 December 2016

COUNTRY OF INCORPORATION AND DOMICILE

South Africa

NATURE OF BUSINESS “To promote the interests of its members as medical schemes and administrators with a view to efficient access of their subscribing members to healthcare benefits.”

DIRECTORS C Mini (Open Schemes) (Managing Director)

A Hamdulay (Administrators) (Acting Chairman)

A Fourie-van Zyl (Open Schemes)

G Goolab (Restricted Schemes)

I Isdale (Restricted Schemes)

Y Mabule (Restricted Schemes)

O Mahanjana (Administrators)

V Memela (Open Schemes)

S Motseko (SADC) (Lesotho)

T Moumakwa (SADC) (Botswana)

H Nhlapo (Administrators)

T Nsele (Restricted Schemes)

C Raftopolous (Restricted Schemes)

B Ramasia (Open Schemes)

S Sanyanga (SADC) (Zimbabwe)

C Schafer (SADC) (Namibia)

H Stephens (Restricted Schemes)


SECRETARY Michelle BenekeLetsema Consulting & Advisory (Pty) Ltd

COMPANY REGISTRATION NUMBER 2001/003387/08

REGISTERED OFFICE Lower Ground FloorSouth Tower1Sixty Jan SmutsJan Smuts Avenue cnr Tyrwhitt AvenueRosebank 2196

POSTAL ADDRESS PO Box 2324Parklands2121

ATTORNEYS Hogan Lovells (South Africa)Incorporated as Routledge Modise Inc.

BANKERS Nedbank Limited

AUDITORS Ernst & Young Inc.Registered Auditors



CONTENTSFINANCIAL STATEMENTS

Finance and Audit Committee Report

Directors Responsibilities and Approval

Report of the Independent Auditors

Directors’ Report for the Year Ended 31 December 2016

Statement of Comprehensive Income for the Year Ended 31 December 2016

Statement of Financial Position for the Year Ended 31 December 2016

Statement of Changes in Funds and Reserves for the Year Ended 31 December 2016

Statement of Cash Flows for the Year Ended 31 December 2016

Accounting Policies

Notes to the Annual Financial Statements

Page 32-34

Page 36-37

Page 38-40

Page 42-44

Page 46

Page 47

Page 48

Page 49

Page 50-57

Page 58-70


Composition of the Finance and Audit Committee

Owing to the small size of the company, the Board of Directors resolved not to appoint an audit committee that will undertake additional functions. All of these functions are undertaken by the Finance and Audit Committee.

The Finance and Audit Committee also manages risk that would typically fall under the auspices of a risk committee. A risk register was compiled and is reviewed on a regular basis. These risks are monitored by this Committee. As at 31 December 2016, the membership of the Finance and Audit Committee comprised:

• Non-executive director who is the chairperson of the Committee

• Non-executive director who is the chairperson of the Board and, given the departure of the Managing Director with effect from 1 November 2016, is the acting Managing Director; his chairmanship of the Board being suspended during this period

• An independent member; and

• Non-executive director who, with effect from 1 October 2016 is consulting to the Company as an acting Finance Manager pending the appointment by the incoming Managing Director of a Finance Manager.

The Chairperson, or in her absence, at least one member of the Finance and Audit Committee, attends the AGM.

Functions of the Finance and Audit Committee

The Finance and Audit Committee performs the duties laid upon it by Section 94(7) of the Companies Act 71 of 2008 by holding meetings with the key role players on a regular basis and by the unrestricted access granted to external auditors. In the current year, four meetings were held by the Finance and Audit Committee. The details of membership and attendance are set out on page 75.

The Terms of Reference of the Finance and Audit Committee are reviewed on a regular basis to ensure that they remain effective.

FINANCE AND AUDIT COMMITTEE REPORTfor the Year ended 31 December 2016


In these Terms of Reference the main responsibilities are:

• Considering the appointment of the external auditors, assessing their independence and making appropriate recommendations, through the Board, to external members for consideration at the AGM;

• Discussing, with the external auditors, the auditors’ engagement letter;

• Recommending to the Board the external audit fee and pre-approving any non-audit services;

• Ensuring that the provision of non-audit services does not impair the external auditors’ independence or objectivity;

• Reviewing the annual financial statements prior to Board submission;

• Reviewing policies and processes;

• Enquiring of the external auditors about significant financial risks or exposure;

• Reviewing with the internal auditors the internal audit process;

• Reviewing and monitoring corporate governance practices from a financial perspective. The responsibility for reviewing and monitoring corporate governance practices resting with the Governance Committee and

• Reviewing the company’s risk management practices.


Statement of Internal Control

Based on the assessment by the Finance and Audit Committee of the results of the internal audit of the company’s system of internal controls and risk management, (including the design, implementation and effectiveness of the internal financial controls and considering information and explanations given by management and discussions with both the internal and external auditors on the results of their audits), nothing has come to the attention of the Finance and Audit Committee that caused it to believe that the company’s system of internal controls and risk management is not effective and that the internal financial controls do not form a sound basis for the preparation of reliable financial statements. The opinion of the Finance and Audit Committee has been recommended to the board for approval.

Annual Financial Statements

The Finance and Audit Committee has evaluated the annual financial statements for the year ended 31 December 2016 and concluded that they comply, in all material aspects, with the requirements of the Act and the International Financial Reporting Standards (IFRS) for Small and Medium-sized Entities. The Finance and Audit Committee therefore recommended the approval of the annual financial statements to the board. The financial statements for the current year have been prepared in accordance with IFRS.

Internal Audit

Outsourced Risk and Assessment (Pty) Ltd were re-appointed as internal auditors during 2016.

External Auditor

The external auditors are engaged to provide members with an independent opinion as to whether or not the annual financial statements fairly present, in all material aspects, the financial position of the company and its financial performance and cash flows.

The Finance and Audit Committee is provided with a management letter by the external auditors.

A Fourie-van ZylChairperson: Finance and Audit CommiteeJohannesburg

8 May 2017



The directors are required by the Act, to maintain adequate accounting records and are responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is their responsibility to ensure that the annual financial statements fairly present the state of affairs of the company as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with IFRS for SMEs. The external auditors are engaged to express an independent opinion on the annual financial statements.

The annual financial statements are prepared in accordance with the IFRS for SMEs and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgments and estimates.

The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the company and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the Board sets standards for internal control aimed at reducing the risk of error or loss in a cost-effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the company and all employees are required to maintain the highest ethical standards in ensuring the company’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the company is on identifying, assessing, managing and monitoring all known forms of risk across the company. While operating risk cannot be fully eliminated, the company endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.

The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.

DIRECTORS’ RESPONSIBILITIES AND APPROVAL


The directors have reviewed the company’s cash flow forecast for the year to 31 December 2017 and, in the light of this review and the current financial position, they are satisfied that the company has or has access to adequate resources to continue in operational existence for the foreseeable future.

The external auditors are responsible for reporting whether the annual financial statements are fairly presented in accordance with the applicable financial reporting framework. The annual financial statements have been examined by the company’s external auditors and their report is presented on pages 38-40.

The annual financial statements set out on pages 46-70 which have been prepared on the going concern basis, were approved by the Board on 9 May 2017 and were signed on its behalf by:

DR A HAMDULAY DR C MINIActing Chairman of the Board Acting Managing DirectorJohannesburg

9 May 2017


Opinion

We have audited the financial statements of Board of Healthcare Funders of Southern Africa NPC set out on pages 46-70 which comprise the statement of financial position as at 31 December 2016, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the financial statements present fairly, in all material respects, the financial position of Board of Healthcare Funders of Southern Africa NPC as at 31 December 2016, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards for Small and Medium-sized Entities and the requirements of the Companies Act 71 of 2008; as amended.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the company in accordance with the Independent Regulatory Board for Auditors Code of Professional Conduct for Registered Auditors (IRBA Code), the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA code) and other independence requirements applicable to performing the audit of Board of Healthcare Funders of Southern Africa NPC. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code, IESBA Code, and in accordance with other ethical requirements applicable to performing the audit of Board of Healthcare Funders of Southern Africa NPC. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other Information

The directors are responsible for the other information. The other information comprises the Directors’ Report as required by the Companies Act of 71 of 2008; as amended. The other information does not include the financial statements and our auditors’ report thereon.

Our opinion on the financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.

TO THE MEMBERS OF THE BOARD OF HEALTHCARE FUNDERS OF SOUTHERN AFRICA NPC

REPORT OF THE INDEPENDENT AUDITORS


In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the Financial Statements

The directors are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards for Small and Medium-sized Entities and the requirements of the Companies Act 71 of 2008; as amended, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with 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 the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.


• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Ernst & Young Inc

Myhandra Ramana Naidoo

Registered Auditor

Chartered Accountant (SA)

26 May 2017

Ernst & Young Inc

102 Rivonia Road

Sandton



The Directors present their report for the year ended 31 December 2016

Main Business and Operations

The Company promotes the interest of its members as medical schemes and administrators with a view to efficient access of their subscribing members to health care benefits.

The operating results state of affairs of the company are set out in the attached financial statements and do not, in our opinion, require any further comment.

DIRECTORS’ REPORTfor the Year ended 31 December 2016


Directors

NAME DATE OF APPOINTMENT

DATE OF RESIGNATION

NATIONALITY

D Alexander 26 August 2014 2 September 2016 Botswana

K Aron 6 March 2014 1 July 2016 South Africa

K Dreyer 11 November 2015 2 September 2016 South Africa

A Fourie-van Zyl 8 February 2016 South Africa

G Goolab 7 June 2016 South Africa

A Hamdulay 19 August 2015 South Africa

I Isdale 8 February 2016 South Africa

Y Mabule 26 November 2015 South Africa

O Mahanjana 28 July 2015 South Africa

GU Mbapaha 19 August 2015 28 July 2016 Namibia

V Memela 8 February 2016 South Africa

S Motseko 26 November 2015 Lesotho

T Moumakwa 28 September 2016 Botswana

H Nhlapo 28 July 2015 South Africa

T Nsele 26 August 2014 South Africa

JJ Pretorius 26 August 2014 18 July 2016 South Africa

C Raftopolous 26 August 2014 South Africa

B Ramasia 26 August 2014 South Africa

S Sanyanga 19 August 2015 Zimbabwe

C Schafer 28 September 2016 Namibia

H Stephens 8 February 2016 Great Britain

CM Mini (Acting Executive) 26 August 2014 South Africa

HZ Zokufa (Executive Director) 15 November 2005 31 October 2016 South Africa


Accounting Framework

The financial statements for the current year have been prepared in accordance with IFRS.

Taxation

Prior to its incorporation as a section 21 company,The Board of Healthcare Funders of Southern Africa NPC was an unincorporated association, exempt from income tax. After incorporation under Section 21 of the previous Companies Act 61 of 1973; as amended, the company had to reapply for a tax exemption certificate. The exemption certificate was approved on 22 March 2012 without an effective date. However, all amounts owed to the company have been refunded in full. For the current year, no taxation has been provided as a result of the tax exemption status granted by the South African Revenue Service.

Practice Code Numbering System

On 18 March 2014, the Council for Medical Schemes (CMS) wrote to the company advising that the tender for the administration of PCNS had not been awarded to the company. The company then launched legal proceedings contesting the legality of the tender award. An arrangement was also reached with the CMS that the company would continue to administer PCNS pending the outcome of the legal proceedings. There has been no progress in terms of these legal proceedings in the current year and no legal costs have been incurred in respect of this matter. The only known exposure is any future potential legal costs incurred to close out on this matter. Further engagement occurred during 2016 but no further progress was made.

Going Concern

The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern.

This basis presumes that funds will be available to finance future operations and the realisation of assets and settlement of liabilities, contingent obligations and commitments that will occur in the ordinary course of business.

Auditors

Ernst & Young Inc. continued as external auditors for a three-year term which ended in 2015 and was extended for a further year.


Transforminghealthcare in

southern Africa

COVER: Dr Odwa Mazwai, General Manager – Gems Fund Management p. 16-17

JULY 2016

into healthcareinto healthcareBHF360°


STATEMENT OF COMPREHENSIVE INCOMEfor the Year ended 31 December 2016

NOTES 2016 2015R R

Revenue 3 33,575,364 31,306,069

Other Income 4 8,236,654 10,266,655

Operating expenses 23 (38,074,766) (37,677,555)

OPERATING SURPLUS 5 3,737,252 3,895,169

Investment revenue 6 2,074,597 1,261,245

TOTAL SURPLUS FOR THE YEAR 5,811,849 5,156,414 OTHER COMPREHENSIVE INCOME - AMOUNTS THAT WILL NOT SUBSEQUENTLY BE RECLASSIFIED TO SURPLUS

Actuarial losses 14 (3,299) (2,999)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 5,808,550 5,153,415


STATEMENT OF FINANCIAL POSITIONfor the Year ended 31 December 2016

NOTES 2016 2015R R

ASSETS

Non-current assets 2,023,491 1,987,880

Property, plant and equipment 8 2,001,389 1,935,166

Intangible asset 9 22,102 52,714

Current assets 28,619,065 21,144,338

Trade and Other receivables 10 1,307,919 1,889,794

Taxation 11 - 2,123,584

Cash and cash equivalents 12 27,311,146 17,130,960

TOTAL ASSETS 30,642,556 23,132,218

FUNDS AND RESERVES

Reserves 24,231,614 18,423,064

Accumulated funds 13 19,746,887 15,343,282

PCNS reserve 17 4,498,485 3,090,241

Actuarial losses (13,758) (10,459)

Non-current liabilities

Employee benefit liability 14 36,295 32,995

Current liabilities 6,374,647 4,676,159

Trade and other payables 15 6,003,337 4,126,174

Provision for leave pay 16 371,310 549,985

TOTAL FUNDS RESERVES AND LIABILITIES 30,642,556 23,132,218


STATEMENT OF CHANGES IN FUNDS AND RESERVES for the Year ended 31 December 2016

ACCUMULATED FUNDS

ACTUARIAL LOSSES

PCNS RESERVE

TOTAL

R R R R

Balance at 31 December 2014 10,009,862 (7,460) 3,267,247 13,269,649

Surplus for the year 5,156,414 - - 5,156,414

Other comprehensive loss for the year

- (2,999) - (2,999)

Transfer from PCNS reserve 177,006 - (177,006) -


Surplus for the year 5,811,849 - - 5,811,849

Other comprehensive loss for the year

- (3,299) - (3,299)

Transfer to PCNS reserve (1,408,244) - 1,408,244 -



STATEMENT OF CASH FLOWSfor the Year ended 31 December 2016

NOTES 2016 2015R R

CASH FLOWS FROM OPERATING ACTIVITIES 10,507,217 4,683,610

Cash receipts from customers / members 44,498,010 40,183,416

Cash paid to suppliers and employees (36,065,390) (36,673,782)

Cash generated by operating activies 20 8,432,620 3,509,634

Interest received 2,074,597 1,173,976

CASH FLOWS FROM INVESTING ACTIVITIES (327,031) (782,533)

Replacement of property, plant and equipment (382,213) (791,900)

Replacement of intangible assets (1,579) -

Proceeds on disposal of property, plant and equipment 56,761 9,367

Net increase in cash and cash equivalents 10,180,186 3,901,077

Cash and cash equivalents at the beginning of the year 12 17,130,960 13,229,883

Cash and cash equivalents at the end of the year 12 27,311,146 17,130,960


ACCOUNTING POLICIES1 CORPORATE INFORMATION

The financial statements of Board of Healthcare Funders of Southern Africa NPC (the “company”) for the year ended 31 December 2016 were authorised for issue in accordance with a resolution of the directors on 9 May 2017. The company is incorporated and registered a non-profit company in terms of Section 10 of the Companies Act 71 of 2008 incorporated and domiciled in South Africa with its membership comprising administrators, medical schemes and societies in South Africa, Botswana, Lesotho, Mozambique, Namibia, Swaziland and Zimbabwe.

2 PRESENTATION OF ANNUAL FINANCIAL STATEMENTS

The financial statements set out on pages 46 to 70 have been prepared in accordance with the International Financial Reporting Standards (IFRS) for Small and Medium-sized Entities (SMEs) and in accordance with the Companies Act 71 of 2008, as amended.

These financial statements are presented in Rands which also represents the functional currency of the entity. No rounding is applied.

2.1 Property, plant and equipment

Property, plant and equipment are stated at cost, excluding the costs of day-to-day servicing, less accumulated depreciation and any accumulated impairment in value. Such cost includes the cost of replacing part of such property, plant and equipment when the cost is incurred if the recognition criteria are met. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets to their residual values.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the surplus or deficit in the year the asset is derecognised.

The assets’ residual values, useful lives and depreciation methods are reviewed on an annual basis and adjusted if appropriate, if there is any indication of changes in these.


When each major inspection is performed, its cost is recognised in the carrying amount of property and equipment as a replacement if the recognition criteria are satisfied.

2.1 Property, plant and equipment

The useful life of the assets is estimated as follows:

Furniture and fittings: 6 to 20 yearsOffice equipment: 2 to 15 yearsComputer equipment: 2 to 12 yearsLeasehold improvements: 8 yearsMotor vehicles: 4 years

2.2 Intangible assets

Intangible assets acquired separately are measured on initial recognition cost. The cost of intangible assets acquired in a business combination is fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.

Internally generated intangible assets are not capitalised and expenditure is charged against surpluses in the year in which the expenditure is incurred. The useful life of the PCNS intangible asset is assessed to be finite and has been impaired to R1 in prior periods (Refer to Note 9).

The useful life of the assets is estimated as follows:

Computer software 3 to 15 years

PCNS software 3 to 15 years

Research costs

Research costs are expensed as incurred.

2.3 Impairment of assets

The company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, the company makes an estimate of the asset’s recoverable amount. An asset’s or cash generating unit’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use and is determined for an individual asset, unless that asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. The difference between the carrying


value and recoverable amount is recorded in surplus or deficit. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal. The best evidence of the fair value less costs to sell of an asset is a price in a binding sale agreement in an arm’s length transaction or a market price in an active market.

If there is no binding sale agreement or active market for an asset, fair value less costs to sell is based on the best information available to reflect the amount that an entity could obtain, at the reporting date, from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties, after deducting the costs of disposal. In determining this amount, an entity considers the outcome of recent transactions for similar assets within the same industry.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount.

That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in surplus or deficit. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over the remaining useful life.

2.4 Financial instruments

Initial recognition and measurement

All financial instruments are recognised at the trade date. Trade date is the date at which the entity committed to purchase the asset. Financial instruments are initially recognised when the company becomes party to the contractual terms of the instruments and are measured at the transaction price. Financial liabilities and equity instruments are classified according to the substance of the contractual agreement on initial recognition. Transaction costs are included in the initial measurement of the financial instrument. Subsequent to initial recognition these instruments are measured as set out below.


Financial assets

Accounts receivable

Trade receivables are recognised and carried at the undiscounted amount less an allowance for any impairment. Provision is made when there is objective evidence that the company will not be able to collect the debts. Bad debts are written off when identified. Trade receivables are non-interest bearing and are generally settled within 30 – 90 days.

Cash and cash equivalents

The accounting policy for cash and cash equivalents is set out in 2.5 below.

Financial liabilities

The company’s principal financial liabilities are non-interest bearing debt and trade and other payables. These are categorised under “other liabilities”.

Trade and other payablesTrade and other payables are carried at the undiscounted amount. Trade payables are non-interest bearing and are normally settled on 60 day terms. Other payables are non-interest bearing and have an average term of six months.

Derecognition

Financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

• the rights to receive cash flows from the asset have expired;

• the company retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a “pass through” arrangement; or

• the company has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.


When the company has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the company’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the company could be required to repay.

When continuing involvement takes the form of a written and/or purchased option (including a cash settled option or similar provision) on the transferred asset, the extent of the company’s continuing involvement is the amount of the transferred asset that the company may repurchase, except that in the case of a written put option (including a cash settled option or similar provision) on an asset measured at fair value, the extent of the company’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

Derecognition

Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability and the difference in the respective carrying amounts is recognised in profit or loss.

Fair value methods and assumptions

The carrying amount of financial assets and liabilities with a maturity of less than one year is assumed to approximate their fair value.

2.5 Cash and cash equivalents

Cash equivalents are short-term, highly liquid investments held to meet short-term cash commitments rather than for investment or other purposes. Therefore, an investment normally qualifies as a cash equivalent only when it has a maturity of, say, three months or less from the date of acquisition. For the purpose of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held on call and investments in money market instruments all of which are available for use by the company unless otherwise stated.

Cash and short-term deposits in the statement of financial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less.


2.6 Provisions

Provisions are recognised when the company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of that amount of the obligation. Where the company expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the surplus or deficit net of any reimbursement.

2.7 Post employment benefits

Post-retirement benefits are made up of those obligations which the company has towards retired employees.

Defined contribution fundContributions in respect of defined contribution plans are recognised as an expense in the year to which the related service is rendered.

Post-retirement medical benefitsThe company operates a defined medical benefit plan which requires contributions to be made to a separately administered fund. The cost of providing benefits under the defined benefit plan is determined separately using the projected unit credit actuarial valuation method. Actuarial gains and losses are recognised in other comprehensive income.

2.8 Leases

The determination of whether an arrangement is, or contains a lease based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

Company as a LesseeOperating Lease

Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.


2.9 Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured. Revenue is recognised at the fair value of the consideration received or receivable excluding discount rebates and other SARS taxes and duty. The following specific recognition criteria must also be met before revenue is recognised:

PCNS provider income

PCNS income from providers is accounted for on the cash basis when payment is received.

Levy income

Levy income from members and user income from the Practice Code Numbering System is accounted for on the accrual basis where there is reasonable assurance that the levy will be received.

Sale of goods

Revenue from the sale of ICD-10 compact discs is recognised when the significant risks and rewards of ownership are transferred to the buyer.

Interest income

Interest is recognised using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument, or a shorter period, where appropriate, on a time proportion basis that takes into account the effective yield on the asset.

All other income is accounted for on the accrual basis.

2.10 Taxes

Value added tax

Revenues, expenses and assets are recognised net of the amount of value added tax except where the value-added tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the value-added tax is recognised as part of the cost of acquisition of the asset, or as part of the expense item, as applicable. The net amount of VAT recoverable from, or payable to, is included as part of receivables or payables in the statement of financial position.


2.11 Foreign currencies

Transactions in foreign currencies are initially recorded in the functional currency ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date.

2.12 Significant accounting judgements and estimates

Estimation of uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets within the next financial year are discussed below:

Property, plant and equipment

Estimation is used in approximating the useful lives and residual values of property, plant and equipment. These assessments are made on an annual basis and use historical evidence and current economic factors to estimate the values (see note 8).

Trade receivables

Estimation is used in approximating the recoverability of debtors. These assessments are made on an annual basis and use management best estimates based on current economic factors and historical experience with debtors (see note 10).

Post-retirement medical benefits

As the provision for post-retirement medical benefits is considered immaterial, it was based on management estimations. Management determined that the assumptions used are reasonable. The details of the post-retirement medical benefits are listed in note 14.


NOTES TO THE ANNUAL FINANCIAL STATEMENTS

2016 2015R R

3 REVENUE

Revenue comprises

Levy income 13,849,772 13,629,614

Practice Code Numbering System Income 19,725,592 17,676,455

33,575,364 31,306,069

4 OTHER INCOME

Conference income and sponsorship 7,454,116 8,183,919

Trustee Training Income 164,403 8,000

Foreign Exchange Gains - 332

Sundry Income 618,135 665,525

Refund from SARS - 1,408,879

8,236,654 10,266,655

5 OPERATING SURPLUS

Operating surplus is stated after:

- Depreciation and amortisation 310,869 295,957

- Operating leases - equipment 63,218 32,604

- Operating leases - premises 1,225,120 1,458,875

- Salaries and wages 15,160,693 13,032,699

- Internal audit services 271,311 162,788

17,031,211 14,982,923

6 INVESTMENT REVENUEInterest received on cash and short-term deposits

2,074,597 1,173,976

SARS interest - 87,269

2,074,597 1,261,245


8 PROPERTY, PLANT AND EQUIPMENTMOTOR

VEHICLESFURNITURE & FITTINGS

OFFICE EQUIPMENT &

TEXT BOOKS

COMPUTER EQUIPMENT

LEASHOLD IMPROVE-

MENTS

CAPITAL WORK IN

PROGRESS

TOTAL

Cost R R R R R R R

At 1 Jan 2015 128,916 653,134 719,758 1,144,432 904,309 3,550,549

Additions 47,015 365,097 75,910 52,150 251,728 791,900

Disposals - (19,744) (244,776) (576,251) (14,990) - (855,761)

Adjustments - 130,945 70,034 111,998 70 - 313,047

At 31 Dec 2015 128,916 811,350 910,113 756,089 941,539 251,728 3,799,735

Additions - 105,184 177,417 99,612 - - 382,213

Disposals (128,916) (33,700) (106,864) (64,584) - (334,064)

Transfer 251 728 (251,728) -

At 31 Dec 2016 - 882,834 1,232,394 791,117 941,539 - 3,847,884

2016 2015R R

7 AUDITORS REMUNERATION

External audit fees 366,500 213,000

366,500 213,000


8 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

MOTOR VEHICLES

FURNITURE & FITTINGS

OFFICE EQUIPMENT &

TEXT BOOKS

COMPUTER EQUIPMENT

LEASHOLD IMPROVE-

MENTS

CAPITAL WORK IN

PROGRESS

TOTAL

Accumulated Depreciation:

R R R R R R R

At 1 Jan 2015 90,127 440,749 621,919 902,321 68,320 - 2,123,436

Depreciation charge for the year

19,394 19,503 38,082 82,918 117,341 - 277,238

Adjustments - 117,750 146,892 44,581 (152) - 309,071

Disposals - (17,650) (244,770) (567,767) (14,989) - (845,176)

At 31 December 2015

109,521 560,352 562,123 462,053 170,520 - 1,864,569

Depreciation charge for the year

11,313 25,895 59,084 78,639 117,342 - 292,273

Disposals (120,834) (28,676) (103,971) (56,854) - (310,335)

At 31 December 2016 - 557,571 517,236 483,838 287,862 - 1,846,507

Net book value:

At 31 December 2016 - 325,260 715,158 307,278 653,693 - 2,001,389At 31 December 2015 19,395 250,998 347,990 294,036 771,019 251,728 1,935,166


2016 2015R R

9 INTANGIBLE ASSETS

Computer SoftwareCost

As at 1 January 2016 184,870 454,834

Additions 1,579 -

Disposal (116,722) (224,041)

Adjustment - (45,923)

At 31 December 2016 69,727 184,870

Accumulated Amortisation

At 1 January 2016 132,157 383,384

Amortisation charge for the year 18,595 18,719

Disposal (103,157) (224,026)

Adjustment 30 (45,920)

At 31 December 2016 47,625 132,157

Net Book Value 22,102 52,713

PCNS CopyrightThe carrying value is determined as follows:

Cost 2,850,000 2,850,000

Accumulated impairment (2,849,999) (2,849,999)

Carrying value at end of year 1 1

The PCNS copyright was purchased from Bestmed Medical Scheme, in terms of an out of court settlement. The Council for Medical Schemes, which accredits BHF with the administration of PCNS stipulated that no profit may be derived from PCNS. The excess PCNS income over the actual expenditure is placed in a specific reserve for the maintenance of PCNS.


2016 2015R R

9 INTANGIBLE ASSETS (continued)

PCNS Copyright (continued)

The impairment was assessed on the date of acquisition of the copyright and represents the generating recoverable amount. The recoverable amount was determined at the PCNS cash-unit level and was based on the value in use of zero, as no profit may be derived from the PCNS administration.

Total Intangible Assets 22,103 52,714

10 TRADE AND OTHER RECEIVABLES

Trade receivables 1,428,034 1,259,130

Provision for credit allowances (362,244) (876,711)

1,065,790 382,419

Other receivables 4,000 4,000

Prepayments 156,436 112,340

South African Revenue Services - VAT 81,693 1,391,035

1,307,919 1,889,794

Provision for impairmentBalance at the beginning of the year 876,711 588,360

Arising during the year 4,819,114 1,677,217

Utilised - (22,001)

Unused amounts reversed (5,333,581) (1,366,865)

Balance at end of year 362,244 876,711


10 TRADE AND OTHER RECEIVABLES (continued)

Age analysis of financial assets that are past due but not impaired

0-30 DAYS 31-60 DAYS 61-90 DAYS 91+ DAYS TOTAL

R R R R RTrade Receivables 1,024,649 15,919 - 25,222 1,065,790

As at 31 December 2016 1,024,649 15,919 - 25,222 1,065,790

Trade Receivables 259,059 22,007 18,108 83,245 382,419

As at 31 December 2015 259,059 22,007 18,108 83,245 382,419

Trade and other receivables are non-interest bearing and are generally on 30-90 day terms. Trade and other receivables that are not past due nor impaired are considered to be fully recoverable.

Due to the short-term nature of the instruments their fair value approximates the carrying amounts.

The maximum exposure to credit risk at the reporting date is the carrying amount of the financial statements of each class of trade and other receivables mentioned above. The company does not hold any collateral as security.

2016 2015R R

11 TAXATION

Opening Balance 1 January 2,123,584 627,437

Receipt/Refund from SARS (2,123,584) 1,496,147

- 2,123,584

The taxation refund arose as a result of a back dated tax-exempt status being awarded to the BHF in 2012 after BHF had already paid 2010 to 2012 income taxes.


2016 2015% %

Medical contribution escalation rate 10.0 10.0

The liability has not been discounted at all as it is believed that the effects of any discounting would be immaterial

13 ACCUMULATED FUNDS

In terms of the Companies Act 71 of 2008; as amended these funds are not distributable to constituent members in the normal course of business but can be used to create a specific reserve

14 EMPLOYEE BENEFIT LIABILITY

Defined contribution fund:

The company continues to contribute to the Board of Healthcare Funders Momentum Funds at Work Pension Fund, a defined contribution plan. The fund is registered under and governed by the Pension Funds Act. 1956. 75% (2015-59%) of the company’s employees belongs to the defined contribution fund.

Post-retirement medical benefits

The principal assumptions used in determining the post-employment medical benefit obligations are:

2016 2015R R

12 CASH & CASH EQUIVALENTS

Cash and cash equivalents comprise:

Cash on hand 6,119 6,763

Bank balances 671,899 734,426

Short term deposits 26,633,128 16,389,771

27,311,146 17,130,960


14 EMPLOYEE BENEFIT LIABILITY (continued)

Post-retirement medical benefit net expense recognised in Other Comprehensive Income:

2016 2015

R R

Estimated loss 3,299 2,999

Net benefit expense 3,299 2,999

Post retirement medical benefit obligation:Present value of obligation 36,295 32,995

Movements in the benefit obligation during the year as followsOpening net obligations 32,995 29,996

Actuarial loss 3,299 2,999

36,295 32,995

15 TRADE AND OTHER PAYABLESTrade payables 362,084 206,247

Accruals 1,637,470 1,117,073

Other payables 2,747,551 2,313,998

PCNS over payments 363,662 485,475

Employee related payables 892,568 3,381

6,003,335 4,126,174

Other payables comprise the following items:

Accrual for audit fees 358,000 442,489

Debtors with credit balances 2,385,270 1,854,199

Other 4,281 17,310

2,747,551 2,313,998


15 TRADE AND OTHER PAYABLES (continued)

Terms and conditions of the above financial liabilities Trade payables are non-interest bearing and are normally settled on 60-day terms Accruals and other payables are non-interest bearing and have on average a term of six months

PCNS overpayments occur as a result of practitioners paying excess amounts over and above current year subscriptions fees.

Due to the short-term nature of the instruments their carrying amounts approximate their fair value

Leave pay

A provision is recognised for the estimated value of the outstanding leave entitlement for all members of staff but not yet taken.

The outflow of benefits will occur as the leave is taken. There are no cash flow implications unless the employment is terminated

17 PCNS RESERVE

During the 2014 year the accounting treatment of the PCNS was reviewed. No profit may be derived from PCNS (note 9) and in prior years excess PCNS income over actual expenditure was refunded to subscribers. This treatment was changed for the excess PCNS income over expenditure to be transferred to a specific reserve for the maintenance of PCNS. During the 2016 Financial year R1 408 244 surplus was transferred from accumulated funds to PCNS Reserve (2015; R177 006 deficit)

16 PROVISION FOR LEAVE PAY 2016 2015R R

Provision for leave pay 549,985 768,612

Provision raised during year 1,070,885 936,792

Provision utilised during year (1,249,560) (1,155,419)

371,310 549,985


2016 2015

18 BHF CONFERENCE R R

Other Income and operating expenses are stated after:

Conference income and sponsorship (included in other income - note 4) 7,454,116 8,183,919

Conference expenses (included in operating expenses) (7,450,419) (8,051,877)

Conference Surplus 3,697 132,042

19 COMMITMENTS AND CONTINGENCIES

Operating lease commitments:

The company has entered into leases on property and an office machine. The leases have an average life of eight years and five years respectively. There are no restrictions placed upon the lessee by entering into the lease Future minimum rentals payable under non-cancellable operating lease agreements at year-end are as follows:

2016 2015

Up to one year 1,463,408 1,302,502

After one year but more than five years 8,223,283 6,490,209

More than five years - 3,017,832

9,686,691 10,810,543


20 NOTES TO THE STATEMENT OF CASH FLOWS

Reconciliation of net surplus before taxation to cash generated by operations

Net surplus 5,811,849 5,156,414

Adjustments:

Depreciation 292,274 277,238

Amortisation on intangible assets 18,595 18,719

(Profit)/Loss on disposal of property, plant and equipment (19,467) 1,218

Foreign Exchange gains - (332)

Interest received (2,074,597) (1,173,976)

Interest Accrued - (87,269)

Other non-cash items 19 (3,625)

Taxation Refund/(Accrual) 2,123,584 (1,408,879)

(Decrease) in provisions (178,675) (218,626)

5,973,582 2,560,882

Decrease in working capital 2,459,038 948,752

Decrease in trade and other receivables 581,875 19,571

Increase in trade and other payables 1,877,163 929,181

Cash generated by operating activities 8,432,620 3,509,634


21 DIRECTOR'S EMOLUMENTS

Executive 2016 2015

Short term employee benefits-emoluments received by director 2,544,350 2,904,101

Post-employment pension benefits - contributions paid by director 144,022 162,400

Medical Aid benefit plan 24,424 28,872

Non-board related activities 645,000 -

3,357,796 3,095,373

Only the Managing Director is an executive director. The Managing Director’s service contract is a permanent contract, with no time lines applicable, other than notice periods. Non – board activities refer to the employment contracts for the acting Managing Director and acting Finance Manager.

22 FINANCIAL INSTRUMENTS

Financial risk management objectives and policies

The company’s principal financial instruments comprise cash and short term deposits. The main purpose of these financial instruments is to raise finance for the company’s operations. The company has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.

Credit risk

Receivables balances are monitored on an ongoing basis. The maximum exposure is the carrying amount as disclosed in note 10. There is the possibility for a concentration of credit risk within the provision for impairment of trade receivables, the majority of which is for a resigned member’s levies and may be the subject of litigation.

With respect to credit risk arising from the other financial assets of the company, which comprise cash and cash equivalents, the company’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.


22 FINANCIAL INSTRUMENTS (continued)

The company only deposits cash surpluses with financial institutions with a credit rating of not less than the equivalent of B+ with Global Credit Rating Company Limited at the reporting date.

The company trades only with recognised, creditworthy third parties. In addition, receivable balances are monitored on an ongoing basis with the result that the company’s exposure to bad debts is not significant.

The maximum credit risk exposure arises from trade and other receivables and cash and bank balances.

There are no significant concentrations of credit risk.

Liquidity risk

The company monitors its risk to a shortage of funds using a recurring liquidity planning tool. This tool considers the maturity of both its financial liabilities and financial assets (e.g. accounts receivable) and projected cash flows from operations.

The company has not entered into any loan arrangements and does not have any overdraft facilities. Capital management

The primary objective of the company’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business.

No changes were made in the objectives, policies or processes during the years ending 31 December 2016 and 31 December 2015.



2016 2015

R R

OPERATING EXPENSES

Advertising 279,165 65,634

Agency Fees 392,448 1,034,488

Auditors remuneration 366,500 213,000

Bad debt written off - 22,001

Bank charges 284,374 269,828

Cleaning 57,289 57,192

Computer expenses 216,742 280,959

Conference 7,450,419 8,051,877

Consumables 45,708 41,165

Data base expenses - 169,000

Depreciation & Amortization 310,869 295,969

Electricity, water and rates 830,703 784,084

Entertainment 4,998 12,057

Inspection fees 518,152 379,739

Insurance 151,433 146,201

Internal auditor's remuneration 271,311 162,788

Legal expenses 158,928 373,873

Loss on disposal of property and equipment - 1,218

Maintenance 83,699 61,573

Meetings 610,303 646,036

Motor vehicle expenses 56,280 45,664

Operating lease expenses - equipment 63,218 32,604

Operating lease expenses - premises 1,225,120 1,458,875

Postage and courier 79,105 24,082

Printing and stationery 110,027 138,447

Professional services 7,277,011 8,088,458

SUPPLEMENTARY INFORMATIONDETAILED EXPENDITURE – NOTE 23


DETAILED EXPENDITURE – NOTE 23 (continued)

2016 2015

R R

Provision for doubtful debts (43,308) 291,950

Recruitment costs 241,687 97,132

Staff remuneration 15,160,693 13,029,699

Statutory levies 135,033 122,263

Subscriptions 341,253 301,532

Sundry expenses 33,081 19,308

Telephone 320,161 294,624

Training and welfare costs 193,601 245,205

Travel and accommodation 848,763 419,029

Total 38,074,766 37,677,555


MANAGEMENT TEAM

• Clarence Mini – Acting Managing Director

• Lamees Scholtz – Head: PCNS Department

• Rajesh Patel – Head: Benefit & Risk

• Zola Mtshiya – Head: Marketing and Communications

• Howard Stephens – Acting Financial Manager


ATTENDANCE OF BOARD OF DIRECTORS MEETINGS - 2016DIRECTOR 8 FEBRUARY 15 MARCH 7 JUNE 2 SEPTEMBER 28 SEPTEMBER 30 NOVEMBER

D Alexander • • • • • n/a

K Aron X A • n/a n/a n/a

K Dreyer X A A n/a n/a n/a

A Fourie-van Zyl • n/a n/a • • •

G Goolab n/a n/a • A • A

A Hamdulay • • • • • •

I Isdale n/a n/a n/a A • •

Y Mabule • A • A A •

O Mahanjana X • • • A •

G Mbapaha • • A A n/a n/a

V Memela • • A • • •

S Motseko • • • A • •

T Moumakwa n/a n/a n/a n/a • •

H Nhlapo X • • A • •

T Nsele X A A • A A

C Raftopoulos • • A A • •

B Ramasia X • • A A A

S Sanyanga • • • • • •

C Schafer n/a n/a n/a n/a n/a •

H Stephens n/a n/a n/a • • •

C Mini • • • • • •

J Pretorius • A A n/a n/a n/a

ZH Zokufa • • • • n/a n/a

• : attending meetingA: Apologies given n/a: not a member of the Board


FINANCE AND AUDIT COMMITTEE - 2016

• The role of the Audit Committee is fulfilled by the Finance and Audit Committee.

• Finance and Audit Meetings

DIRECTOR15 JANUARY (MEETING

CANCELLED)14 MARCH 24 MAY 25 OCTOBER 16 NOVEM-

BER

D Alexander Independent - • • • •

K Aron (Chairman until 1 July 2016) - A • n/a n/a

A Fourie-van Zyl (Chairperson from 2 September 2016)

- n/a n/a • •

C Mini - n/a n/a • •

H Stephens - n/a n/a • •

GS Newton Independent - • • n/a n/a

HZ Zokufa - n/a • • n/a

• : attending meetingA: Apologies given n/a: not a member of the Board

Supplementary schedule not forming part of the Annual Financial Statements


Lower Ground Floor 160 Jan Smutscnr Jan Smuts Avenue and Tyrwhitt Avenue, Rosebank

PO Box 2324 Parklands 2121

Client services: 0861 30 20 10Switchboard: +27 11 537 0200

email: [email protected]: www.bhfglobal.com

SERVING MEDICAL SCHEME MEMBERS

Date post:	13-Jul-2020
Category:	Documents
Upload:	others
View:	0 times
Download:	0 times

ANNUAL REPORT 2016 · 2018-07-06 · ANNUAL REPORT 2016. 2 BOARD OF HEATHCARE FNDERS OF SOTHERN...

Documents