AnnuAl report - dhet.gov.za

Higher Education and TrainingDepartment:

REPUBLIC OF SOUTH AFRICA

higher education& training

AnnuAl reportnational skills fund

the national skills fund is proudly part of the department of higher education and training

1

Funding

our nationto skill

national skills fund

NATIONAL SKILLS FUND ANNUAL REPORT : 20132

table of contents

Part a: GEnEraL inForMation ........................... 5

1. PUBLIC ENTITY’S GENERAL INFORMATION ................................................................ 6

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

3. STRATEGIC OVERVIEW ............................................................................................................. 7

3.1. Our Vision ......................................................................................................................... 7

3.2. Our Mission ..................................................................................................................... 7

3.3. Our Values ........................................................................................................................ 7

3.4. Strategic Outcome Orientated Goals ............................................................. 7

4. LEGISLATIVE AND OTHER MANDATES ........................................................................... 7

4.1 Established in terms of the Skills Development Act ............................. 7

4.2 Retention of accumulated surplus ................................................................... 8

4.3 Listed as a Schedule 3A public entity in terms of the PFMA ........... 8

4.4 Key legislation applicable to the NSF ............................................................. 8

5. ORGANISATIONAL STRUCTURE ......................................................................................... 9

5.1. Executive Officer’s Office ....................................................................................... 9

5.2. Strategic Projects.......................................................................................................10

5.3. Sector Skills Support ...............................................................................................11

5.4. Finance and Administration ...............................................................................12

6. FOREWORD BY THE MINISTER ..........................................................................................13

7. FOREWORD BY THE DIRECTOR-GENERAL.................................................................15

8. EXECUTIVE OFFICER’S OVERVIEW ..................................................................................18

Part B: PErForManCE inForMation .............. 21

1. STATEMENT OF RESPONSIBILITY FOR PERFORMANCE INFORMATION ...22

2. AUDITOR’S REPORT: PREDETERMINED OBJECTIVES ...........................................23

3. OVERVIEW OF PUBLIC ENTITY’S PERFORMANCE..................................................24

3.1. Service Delivery Environment ...........................................................................24

3.2. Organisational Evironment .................................................................................25

3.3. Key policy developments and legislative changes..............................25

3.4. Strategic Outcome Oriented Goals ...............................................................26

4. PERFORMANCE INFORMATION BY PROGRAMME ................................................26

4.1. Programme 1: SKILLS DEVELOPMENT (National Skills Development Services).......................................................26

5. SUMMARY OF FINANCIAL INFORMATION ................................................................33

5.1. Revenue Collection .................................................................................................33

5.2. Programme Expenditure ......................................................................................33

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Part C: GoVErnanCE ............................................ 35

1. INTRODUCTION ........................................................................................................................36

2. PORTFOLIO COMMITTEES ..................................................................................................36

3. EXECUTIVE AUTHORITY ........................................................................................................37

4. THE ACCOUNTING AUTHORITY ......................................................................................37

5. RISK MANAGEMENT ...............................................................................................................38

6. INTERNAL CONTROL ..............................................................................................................38

7. INTERNAL AUDIT AND AUDIT COMMITTEES...........................................................38

8. COMPLIANCE WITH LAWS AND REGULATIONS ....................................................41

9. FRAUD AND CORRUPTION .................................................................................................41

10. MINIMISING CONFLICT OF INTEREST ...........................................................................41

11. CODE OF CONDUCT ..............................................................................................................41

12. HEALTH SAFETY AND ENVIRONMENTAL ISSUES ..................................................41

13. SOCIAL RESPONSIBILITY ......................................................................................................41

14. MATERIALITY AND SIGNIFICANCE FRAMEWORK..................................................41

15. AUDIT COMMITTEE REPORT ..............................................................................................42

Part D: HuMan rESourCE ManaGEMEnt ...... 45

1. INTRODUCTION ........................................................................................................................46

2. HUMAN RESOURCE OVERSIGHT STATISTICS ...........................................................47

Part E: FinanCiaL inForMation ....................... 51

1. STATEMENT OF RESPONSIBILITY .....................................................................................52

2. REPORT OF THE EXECUTIVE OFFICER ..........................................................................53

3. REPORT OF THE EXTERNAL AUDITOR ..........................................................................65

4. ANNUAL FINANCIAL STATEMENTS ................................................................................69


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part ageneral information

PART A General information


1. PUBLIC ENTITY’S GENERAL INFORMATION REGISTERED NAME: National Skills Fund

PHYSICAL ADDRESS: 123 Francis Baard Street

PRETORIA

0002

POSTAL ADDRESS: Private Bag X174

PRETORIA

0001

TELEPHONE NUMBER/S: +27 012 312 5911

FAX NUMBER: +27 012 323 0291

WEBSITE ADDRESS: www.dhet.gov.za

EXTERNAL AUDITORS: The Auditor-General of South Africa

Lefika House

300 Middel Street

New Muckleneuk

Pretoria

0001

BANKERS: National Treasury

40 Church Square

Pretoria

0002

First National Bank

215 Francis Baard Street

Pretoria

0002

2. LIST OF ABBREVIATIONS/ACRONYMS

ABET Adult Basic Education and TrainingAGSA Auditor General of South AfricaBBBEE Broad Based Black Economic EmpowermentCFO Chief Financial OfficerDG Director-General of Higher Education and TrainingDHET / Department Department of Higher Education and TrainingDTI Department of Trade and IndustryEO Executive OfficerGEPF Government Employee Pension FundGRAP General Recognised Accounting PracticeHR Human ResourceHRDCSA Human Resource Development Council of South AfricaHRDS / HRDSSA Human Research Development Strategy of South AfricaHSRC Human Science Research CouncilIPAP Industrial Policy Action PlanMTEF Medium Term Expenditure FrameworkNDP National Development PlanNGO Non-governmental OrganisationNSA National Skills AuthorityNSDS National Skills Development StrategyNSF/Fund National Skills Fund, established in terms of section 27(1) of the

Skills Development Act, No. 97 of 1998PAA Public Audit ActPFMA Public Finance Management ActPIC Public Investment CorporationSARS South African Revenue ServicesSCOPA Stranding Committee on Public AccountsSCM Supply Chain ManagementSDA Skills Development Act, No. 97 of 1998SDL Skills Development Levies Act, No. 9 of 1999SETA Sector Education & Training AuthoritySMME Small Medium and Micro EnterprisesTR Treasury RegulationsUN United Nations


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3. STRATEGIC OVERVIEW

3.1. our ViSion

Funding to skill the nation.

3.2. our MiSSion

To provide funding for national skills development towards a capable workforce for an

inclusive growth path.

3.3. our VaLuES

i Integrity

s Service excellence

p Passion

d Development

o Objective

a Accountability

c Collaborative

3.4. StratEGiC outCoME oriEntatED GoaLS

The strategic goal of the NSF is to provide funds to support projects that are national

priorities in the National Skills Development Strategy (NSDS), that advance the Human

Resource Development Strategy (HRDS) of South Africa and that support the National

Skills Authority in its work.

As a result of the National Skills Fund being listed as a Schedule 3A public entity late

during the current financial year, the National Skills Fund’s strategic orientated goals for

the year are contained in the Department of Higher Education and Training’s strategic

and annual performance plans.

4. LEGISLATIVE AND OTHER MANDATES

4.1 EStaBLiSHED in tErMS oF tHE SkiLLS DEVELoPMEnt aCt

The National Skills Fund was established in 1999 in terms of section 27 of the Skills

Development Act, No 97 of 1998.

The money of the Fund may be used for the primary objectives as defined by the

prescripts of the Skills Development Act, namely:

1. To fund projects identified in the National Skills Development Strategy as national

priorities (section 28(1) of the Skills Development Act);

2. To fund projects related to the achievement of the purposes of the Skills

Development Act as the Director-General determines (section 28(1) of the Skills

Development Act);



3. To administer the Fund within the prescribed limit (section 28(3) of the Skills

Development Act). Regulations to prescribe the limit for the administration

of the Fund at 10% of revenue has been approved and published in

Notice No. R.1030, Government Gazette No. 33740 dated 8 November 2010; and

4. To fund any activity undertaken by the Minister to achieve a national standard of

good practice in skills development (section 30B of the Skills Development Act).

The current main revenue sources for the National Skills Fund are:

1. 20 Per cent of the skills development levies as contemplated in the Skills

Development Levies Act; and

2. Interest earned on investments held at the Public Investment Corporation.

The National Skills Fund may also receive revenue from the following sources:

1. The skills development levies collected and transferred to the Fund, in terms of

the Skills Development Levies Act, in respect of those employers or sectors for

which there are no SETAs;

2. Money appropriated by Parliament for the Fund;

3. Donations to the Fund; and

4. Money received from any other source.

4.2 rEtEntion oF aCCuMuLatED SurPLuS

In terms of section 29(3) of the Skills Development Act, the unexpended balance in the

Fund at the end of the financial year must be carried forward to the next financial year

as a credit to the Fund.

4.3 LiStED aS a SCHEDuLE 3a PuBLiC Entity in tErMS oF tHE PFMa

On 12 October 2012, the Minister of Finance listed the National Skills Fund as a Schedule

3A public entity in terms of the Public Finance Management Act, 1999, retrospectively

effective from 1 April 2012 (Notice number 821 in the Government Gazette No. 35759).

Prior to the listing as a public entity, the National Skills Fund operated as a programme

under the Skills Development Branch of the Department of Higher Education and

Training.

4.4 kEy LEGiSLation aPPLiCaBLE to tHE nSF

The following key pieces of legislation are applicable to the NSF:

1. Skills Development Act, 1998 (Act No. 97 of 1998), as amended;

2. Skills Development Levies Act, 1999 (Act No. 9 of 1999), as amended;

3. Public Finance Management Act, 1999 (Act No. 1 of 1999), as amended and

Treasury Regulations; and

4. Public Service Act, 1994 (Act No. 38 of 1994), as amended.


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5. ORGANISATIONAL STRUCTURE

5.1. ExECutiVE oFFiCEr’S oFFiCE

Mrs. E HortonsECREtaRY

Mr. M MacikamaExECutiVE oFFiCEr

Mr. d Matsimaneassistant diRECtoR

Mrs. Ba khumalosEnioR

pRaCtitionER

Mr. tJ sephaisEnioR

pRaCtitionER

VacantsEnioR

pRaCtitionER

Mr. M MsutwanaintERn

Ms. s MakhesaintERn

Ms. M MakinaintERn

VacantsECREtaRY

Mrs. MM Mosehlaassistant diRECtoR

Mr. Mn sitholeassistant diRECtoR

Mr. nE Ramakokovhuassistant diRECtoR

Mrs. B sipenganedd: offiCE adMin

Mrs. kf HlongwanediRECtoR:

pRoVinCial opERations

Mrs. C khambakodd: BuRsaRiEs



5.2. StratEGiC ProjECtS

Mrs. n dlaminisECREtaRY

Mr. M MashabaneDirECtor: SP

Mr. d ZongoContRaCt

Mrs. M MalatjiContRaCt

Mr. H Masemoladd: ClustER 1

Mrs. l Gwebudd: ClustER 2

Mr. k Malulekadd: ClustER 3

Mr. o Molefedd: ClustER 4

Mrs. M Gijimadd: ClustER 5

Mr. p Ramawaassistant diRECtoR

Mr. R Boshieloassistant diRECtoR

Mr. J Magabaneassistant diRECtoR

Mr. J Zuluassistant diRECtoR

Mrs. t Moilaassistant diRECtoR

Mr. t tsotetsipRaCtitionER

Vacantfrozen for Contract

post for sEnioR ClERk

VacantsEnioR

pRaCtitionERfrozen for Contract

post for intern


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5.3. SECtor SkiLLS SuPPort

Mrs. t MadunasECREtaRY

Mr. F StrydomDirECtor: SSP

Mr. s fredericksdd: ClustER 1

Mr. B Mkhizedd: ClustER 2

Mrs. Vs nkiwanedd: ClustER 3

Mr. GG saulsdd: ClustER 4

Mr. G ferreiraassistant diRECtoR

Mrs. C MboyapRaCtitionER

Mrs. H sebopetsapRaCtitionER

Mr. J nchabalengpRaCtitionER

Mr. E Mothlabaneassistant diRECtoR

Mrs. nM Rannyamaassistant diRECtoR

Mrs. J Mahlabato start 1 June 2013

assistant ManaGER



5.4. FINANCE AND ADMINISTRATION

Mr. W MinnieCHiEF FinanCiaL

oFFiCEr

Mr. E sakoassistant diRECtoR:

adMinistRation

Mrs. k tjalepRaCtitionER: supplY CHain

Mr. t Mogotshane sEnioR ClERk:

assEts

Mrs. B BouwersEnioR ClERk: pRoCuREMEnt

Mrs. R koen sEnioR ClERk:

REGistRY

Mrs. R souwitszky sEnioR ClERk:

REGistRY

Mrs. a smitsEnioR

pRaCtitionER: HRM

Mrs. B setuki sEnioR ClERk:

HRM

Ms. C Botha sEnioR ClERk

Mrs. C pieterse sEnioR ClERk

interviewedassistant diRECtoR:

finanCE

Vacantassistant diRECtoR:

finanCE

Vacantfrozen for Contract

post for sEnioR ClERk

VacantsEnioR ClERk

frozen for Contract post for intern

VacantsECREtaRY

frozen for Contract post for intern

Mr. J MogorosEnioR

pRaCtitionER

Mrs. p MalekasEnioR

pRaCtitionER

Mrs. M MonosisEnioR

pRaCtitionER

Mrs. M ferreira dEputY diRECtoR


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6. FOREWORD BY THE MINISTER

Dr BLaDE nZiManDEMINISTER:

HIGHER EDUCATION AND TRAINING

The true value of money is in its ability to build people.The true value of money is in its ability to build people. Funding towards skills

development provides our citizens, especially the financially needy, with an opportunity

to acquire skills through which they can improve their employment possibilities and

increase our country’s productivity and inclusive economic growth.

The third National Skills Development Strategy (NSDS III) envisages a skilled and capable

workforce that shares in, and contributes to, the benefits and opportunities of economic

expansion and an inclusive growth path. In response to the NSDS III, the NSF made it

their mission to increase access to training and skills development opportunities and

achieve the fundamental transformation of inequities linked to class, race, gender, age

and disability in our society.

NSDS III in April 2011 has brought about a significant increase in the NSF’s performance.

For the first time in the NSF’s history, the Fund’s grants disbursements of R2,6 billion

towards skills development is at par with its annual revenue of R2,7 billion, benefitting

over 95 000 learners. The Fund is set to continue serving as a catalyst for key skills

development projects of national priorities in the future. The Fund ‘s current commitment

of R11,4 billion enables it to fund skills development priorities at optimal levels.

I must commend the National Skills Fund for the strategic focus it has adopted since

the launch of the NSDS III. The fund has enabled the post-school system to drive key

skills strategies including building capacity in fields such as research, skills planning and

career guidance. By so doing the Fund has gone beyond the confines of its original

operations.

The NSF was listed as a Schedule 3A public entity during the financial year, with the

Director General of Higher Education and Training as the Accounting Authority of the

Fund in terms of the Skills Development Act. In the near future, the NSF will focus on

improving its internal capacity, structures and operations as a result of the higher grants

disbursement level and the listing of the NSF as a Schedule 3A public entity.



The NSF has received an unqualified audit and this has been the trend for a number of

years. This is proof that the Director-General is hard at work, ensuring good corporate

governance through effective oversight.

I would like to extend my gratitude and appreciation to Mr Gwebinkundla Felix Qonde,

the Director-General, and the accounting authority of the NSF. I would also like to thank

the NSF management and staff for the sacrifices they have made in their quest to ensure

a higher performing and model public entity dedicated towards skilling our nation.

Dr BE Nzimande, MPMinister of Higher Education and Training

Date: 31 May 2013


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7. FOREWORD BY THE DIRECTOR GENERAL

Mr GWEBinkunDLa QonDEDIRECTOR-GENERAL:

HIGHER EDUCATION AND TRAINING

This report highlights the key achievements of the National Skills Fund during the 2nd

year of the NSDS III and also reflects on the key challenges faced by the NSF.

The focus of the Department since the gazetting of the NSDS III has been to address the

historic underperformance of National Skills Fund through increasing the Fund’s grants

disbursement level towards skills development agreed as that of national priority and

priorities identified by the Director-General as critical for the achievement of the Skills

Development Act.

For the second year in a row under the Department of Higher Education and Training,

the NSF’s grants disbursements towards skills development of national priority has

consistently increased year-on-year to the current level of R2,6 billion per annum. This

represents a 357% overall increase in grants disbursements since the gazetting of the

NSDS III in April 2011.

The increase in the NSF’s performance can be attributed to the shifting of functions

with regards to the Skills Development Act from the Department of Labour to the

new Department of Higher Education and Training during the macro reorganisation

of government in 2009. This shift has seen a greater emphasis on an integrated post

school education system being envisioned in the NSDS III, ensuring closer links between

employers, work places and public training institutions and between both of these and

the skills development funders, namely the NSF and the SETAs. These closer links have

seen a greater focus on strengthening the public training institutions within the post

school education system through funding from the NSF, making the system responsive

to sector, local, regional and national skills needs and priorities, as envisioned in the

NSDS III.

Other important projects funded by the NSF include key academia, research and

development projects towards establishing a credible institutional mechanism for skills

planning in an integrated post school education system, this being done in collaboration

with the Human Science Research Council, the HSRC.

For the year ahead, the NSF will continue to fund skills development projects of

national priority, with specific emphasis on strengthening the institutional capacity

of the 50 public FET colleges and 24 universities with a R6,2 billion commitment

towards these institutions. Capacity will be strengthened through increasing funding

towards increasing student intake, as well as through funding the following key skills

infrastructure developments to address scarce and critical skills of the country:



• University of Pretoria

R382 million remains committed towards the University of Pretoria for expanding

the University’s medical and veterinary facilities to increase the number of medical

doctors and veterinaries trained annually. Both skills are scarce and critical skills

for South Africa to address the demands posed by the National Health Insurance

scheme to make health universally accessible to every citizen of the country and

to address an urgent need for food security and general animal health.

• University of Johannesburg

R213 million remains committed towards the University of Johannesburg to

establish work-integrated learning facilities for engineering students, which

includes a training workshop, design centre and industrialisation centre. This

is partly contributing towards resolving lack of graduation in engineering

programme due to lack of work placement opportunities for a large number of

engineering students. This capacity, in the form of a production environment,

will be accessible to engineering students, in need, beyond the University of

Johannesburg.

• Cape Peninsula University of Technology

R106 million remains committed towards the Cape Peninsula University of

Technology for the establishment of renewable energy training facilities for the

production of a set of new skills required for the green economy. This initiative,

being the first of its kind in the country, seeks to respond to the country’s adopted

strategy to promote renewable energy production in order to supplement the

current fossil fuel energy production and gradually reduce the country’s carbon

footprint. The Department has seen it fit to establish this dedicated education

and training capacity for the country to produce high and middle level skills in

the area of renewables.

• 12 new Further Education and Training College Campuses

R1,5 billion is earmarked towards building 12 new FET colleges in areas of high

demand for a public FET college. The 2011 census indicates that there is over

3 million out of school youth of ages between 15 to 25, who are neither

in education, employment nor any kind of training and with less than a

grade 12 qualification. The state and its respective institutions have the ultimate

responsibility, as a last line of defence, to ensure that education and training

opportunities are made available to overcome the skills shortage and high

unemployment in the country.

• National Institute for the Deaf

The National Institute for the Deaf is the only post-school education institute

for deaf people in South Africa and Southern Africa. The NSF funding supports

the construction of additional facilities (hostels and lecture rooms), as well as

addressing curriculum improvements for deaf-friendly skills programmes. The

project will allow for an increased annual intake of deaf students from all over

South Africa and Southern Africa.

The increased grants disbursement level has necessitated the NSF to focus

on improving its internal monitoring and evaluation capacity within the next

financial year. The listing of the NSF as a Schedule 3A public entity also requires

additional capacity with regard to support functions for the Fund.


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Finally, I wish to thank the Minister of Higher Education and Training,

Dr Blade Nzimande, MP and Deputy Minister of Higher Education and Training,

Mr MC Manana, MP for their leadership and guidance in addressing the

challenges that we as the Department, including the NSF, face in serving the

needs of all South African citizens.

I hereby present this report to the Minister of Higher Education and Training,

Dr Blade Nzimande, MP and Deputy Minister of Higher Education and Training,

Mr MC Manana, MP and invite them to table it in Parliament.

Mr GF QondeDirector-General of Higher Education and Training Accounting Authority of the National Skills Fund

Date: 31 May 2013



8. EXECUTIVE OFFICER’S OVERVIEW

Mr MVuyiSi MaCikaMaEXECUTIVE OFFICER:

NATIONAL SKILLS FUND

With the dawn of the third National Skills Development Strategy (NSDS III) on

1 April 2011, a new era has dawned for the Nationals Skills Fund.

Over the last 2 years, since the new NSDS III was launched, the NSF’s

performance has increased significantly

due to deliberate interventions to improve the Fund’s performance under NSDS III.

These deliberate interventions resulted in the Fund becoming more efficient towards

funding the critical skills needs in South Africa. This significant increase in the efficiency

of the NSF can be clearly noted in the NSF’s increase in grants disbursements towards

skills development of national priority under NSDS III:

1) 1st Year of NSDS III (2012 financial year): Grants disbursements increased with

131% from R564 million to R1,3 billion; and

2) 2nd Year of NSDS III (2013 financial year): Grants disbursements increased with

97% from R1,3 billion to R2,6 billion.


towards skills development is on par with its annual revenue of R2,7 billion, including

interest earned on surpluses invested with the Public Investment Corporation, the PIC.

The NSF’s current high level of performance, has seen over 95 000 learners benefiting

from the various skills development projects funded by the NSF during the 2013

financial year.

The majority of these 95 000 learners are still receiving training on on-going courses

during the 2014 financial year as their training courses extend over periods longer than

one year. The NSF remains committed towards funding these learners over their entire

qualification period. This is to ensure a maximum throughput of learners obtaining their

qualifications and preventing a high drop-out of learners from one academic year to the

next due to a lack of funding to continue studies.

Over and above the NSF’s contribution towards skills training projects, the NSF also

played a pivotal role in funding key projects aimed at growing institutional capacity of

the public sector to expand education and skills training opportunities in the country,

coupled with a credible institutional mechanism for skills planning within an integrated

post school education system.


19

These funding contributions include, amongst others, the following:

• Funding the work of the Special Projects Unit within the DHET aimed at ensuring

skills development are an integral part of the National Infrastructure Plan (NIP);

• Funding the development of a single uniform funding and administration model

for artisan development, creating consistency across the post school education

system in so far as training of artisans is concerned;

• Funding the development of a Recognition of Prior Learning model in particular

for artisan aides in order to unleash tremendous potential of many well trained

people who form part of the workforce, but have no skill mobility due to lack of

formal recognition of their skills;

• Funding the development of a prioritisation model for the development of artisan

trades, involving the identification of priority artisan trades for development to

ensure that the current needs in the country are met;

• Funding the development of the career advisory services provided in

collaboration with SAQA; and

• Funding the development of an integrated Higher Education and Training

Management Information System (HETMIS) and the development of the

Labour Market Intelligence System as critical components in building a credible

institutional mechanism for skills planning.

The NSF’s grants disbursement efficiency is expected to increase over the next

three years until the end of the NSDSIII period (31 March 2016) as the NSF meets its

current contractual commitments of R11,4 billion.

These remaining commitments entail the following:

• R1,6 billion committed towards undergraduate and postgraduate bursaries;

• R2,4 billion committed towards capacity building and expansion of programme

offering beyond the traditional NC(V) and Nated programmes, into skills

programmes, learnerships, apprenticeships, etc. within the 50 public FET

colleges;

• R2,35 billion committed towards skills infrastructure development of national

priority;

• R996 million committed towards 35 projects contributing towards the New

Growth Path;

• R521 million committed towards the Industrial Policy Action Plan implemented

in collaboration with the Department of Trade and Industry;

• R810 million committed towards key Rural Development projects, some

implemented in collaboration with the Department of Rural Development and

Land Reform; AgriSeta and rural-based Cooperatives and Skills development

providers;

• R134 million committed towards Justice and Crime Prevention;

• R372 million committed towards Co-operatives, NGO’s, small enterprises and

others;

• R73 million committed towards Education and Health projects;



• R1,15 billion committed towards the Trainee Lay-off Scheme; and

• R939 million committed towards various key academia, research and broader

skills system development projects aimed at establishing a credible institutional

mechanism for skills planning within an integrated post school education system.

The increase in the NSF’s commitments and number of projects necessitates an increase

in the NSF’s monitoring and evaluation capacity. The monitoring and evaluation capacity

constraints of the NSF were clearly identified as an area for improvement within both

the NSDS III, as well as the Green Paper for Post School Education and Training and to

that end, on-going work is underway to address capacity constraints in this area.

On 12 October 2012, the Minister of Finance listed the National Skills Fund as a national

public entity under Schedule 3 Part A of the Public Finance Management Act. Prior to

the listing as a public entity, the NSF operated as a programme under the Department

of Higher Education and Training (DHET). The listing of the NSF necessitates the need

to establish support capacity for the Fund in the following areas: Finance, Supply Chain

Management, Human Resources Management, Legal Services and IT Management.

These support structures are vital towards ensuring the NSF’s core functions are

operating optimally, efficiently and effectively.

I would like to extend my gratitude and appreciation to the Director-General as the

accounting authority of the NSF, Mr Gwebinkundla Felix Qonde, NSF management and

staff for the sacrifices they have made in their quest to ensure a higher performing and

model public entity dedicated towards skilling our nation.

Finally, I wish to thank the Minister of Higher Education and Training, Dr Blade Nzimande,

MP and Deputy Minister of Higher Education and Training, Mr MC Manana, MP for their

leadership and guidance in addressing the challenges that we as the NSF face in serving

the needs of all South African citizens.

Mr M MacikamaExecutive Officer: National Skills Fund

Date: 31 May 2013

21

performance informationpart b

PART B Performance information


1. STATEMENT OF RESPONSIBILITY FOR PERFORMANCE INFORMATION

StatEMEnt oF rESPonSiBiLity For PErForManCE inForMation For tHE yEar EnDED 31 MarCH 2013

The Executive Officer is responsible for the preparation of the public entity’s performance

information and for the judgements made in this information.

The Executive Officer is responsible for establishing, and implementing a system

of internal control designed to provide reasonable assurance as to the integrity and

reliability of performance information.

In my opinion, the performance information fairly reflects the actual achievements

against planned objectives, indicators and targets as per the strategic and annual

performance plan of the public entity for the financial year ended 31 March 2013.

The National Skills Fund’s performance information for the year ended 31 March 2013

has been examined by the external auditors and their report is presented on page 65.

The performance information of the entity set out on page 23 to page 33 was approved

by the Director-General of Higher Education and Training, as the accounting authority

of the National Skills Fund.


Date: 31 May 2013


23

2. AUDITOR’S REPORT: PREDETERMINED OBJECTIVES

The AGSA currently performs the necessary audit procedures on the performance

information to provide reasonable assurance in the form of an audit conclusion. The

audit conclusion on the performance against predetermined objectives is included

in the report to management, with material findings being reported under the

Predetermined Objectives heading in the Report on other legal and regulatory requirements

section of the Auditor’s Report.

Refer to page 66 for the Report on other legal and regulatory requirements section of the

Auditor’s Report, published as Part E: Financial Information.



3. OVERVIEW OF PUBLIC ENTITY’S PERFORMANCE

3.1. SErViCE DELiVEry EnVironMEnt

On 12 October 2012, the National Skills Fund was listed as a Schedule 3A public entity,

retrospectively effective from 1 April 2012. Prior to the listing, the National Skills Fund

operated as a programme under the Skills Development Branch of the Department

of Higher Education and Training and hence its performance information is provided

within the framework of the Department:

• Quarterly monitoring of performance is derived from the annual work plan of

the NSF and ENE targets and reported via Department of Higher Education and

Training;

• Reports of the NSF are discussed in the Department’s senior management

meetings at various levels including a dedicated review session with the

Executive Authority. The NSF is also part of the Annual Review and planning

workshops, where annual performance is discussed and planning of the new

financial year is undertaken; and

• A committee of the National Skills Authority also provides monitoring with

respect to the contribution of the NSF to the targets of the National Skills

Development Strategy.

As a result of forming part of the Department of Higher Education and Training during the

current financial year prior to the listing, the National Skills Fund’s strategic objectives and

annual targets formed part of the Department’s strategic and annual performance plans.

Thus, the National Skills Fund reports on the applicable targets within the Department’s

annual performance plan in this report.

Since the dawn of the NSDS III the National Skills Fund’s performance has increased significantly

seeing the Fund’s grants disbursements towards skills development increasing to R2,6 billion (2012: R1,3 billion) during the current financial year, benefiting over 95 000 learners. For the first time in the Fund’s history its grants disbursements are on par

with its annual income of R2,7 billion.

The majority of these 95 000 learners are still receiving training on on-going courses

during the next financial year as their training courses extend over periods longer than

one year. The NSF remains committed towards funding these learners over their entire

qualification period. This is to ensure a maximum throughput of learners obtaining their

qualifications and preventing a high drop-out of learners from one academic year to the

next due to a lack of funding to continue studies.

The NSF’s increased performance under NSDS III can be clearly noted below:

• 1st Year of NSDS III (2011/12): Grants disbursements increased with 131% from

R564 million to R1,3 billion; and

• 2nd Year of NSDS III (2012/13): Grants disbursements increased with 97% from

R1,3 billion to R2,6 billion.

Furthermore, the NSF has a remaining commitment of R11,4 billion towards the

various skills development projects of national priority. This high level of commitment has

strategically positioned the Fund to maintain its high level of performance during the next

three years until the end of the NSDS III.

The high level of commitment will also result in the Fund putting both its annual income and historic accumulated surpluses to effective use towards skills development

until the end of the NSDS III period.


25

3.2. orGaniSationaL EnVironMEnt

The key organisational challenges for the National Skills Fund to overcome during the next

financial year relates to following:

• Overcoming capacity constraints with regards to the initiating and monitoring of

skills development projects;

• Overcoming capacity constraints with regards to support functions required to

establish the NSF as a fully-fledged public entity; and

• Improving the efficiency of the NSF’s financial and management information

systems to ensure timely and accurate reporting.

The Fund has embarked on a process of finalising its expanded structures for approval and

securing funding for the additional positions. The filling of the positions will be supported by

an intense recruitment campaign.

The Fund has also started with procurement of expert assistance in the improvement of the

NSF’s processes, including financial and management information systems.

3.3. kEy PoLiCy DEVELoPMEntS anD LEGiSLatiVE CHanGES

Following publication of the National Skills Development Strategy for 2011-2016

(NSDSIII), the Fund has engaged the National Skills Authority to develop the Strategic

Framework and Criteria for the allocation of funding to support NSDS III. This Strategic

Framework document was approved by the Minister and paved the way for the National

Skills Fund to fund projects under the NSDSIII.

The key programmes of the NSF as set out in the Strategic Framework for the allocation

of funding are the following:

1. Supporting the priorities of the Human Resource Development Strategy of

South Africa;

2. Supporting the priorities of the Minister in consultation with the National Skills

Authority;

3. Funding National Skills Development Strategy III priorities in the following areas:

a. New Economic Growth Path;

b. Industrial Policy Action Plan;

c. Skills to support rural development;

d. Skills for a green economy;

e. Skills for education and health; and

f. Skills to support the justice sector.

4. Funding priorities identified by the Director-General supporting the Skills

Development Act in the following areas:

a. Worker Education;

b. Skills System Institution Capacity Building;

c. Trainee Lay-off Scheme; and

d. Academic profession, research and development.



5. Priorities to address skills infrastructure in the following areas:

a. Recapitalisation of public delivery infrastructure;

b. Community Education Centres;

c. Skills Development Institutes; and

d. State-owned enterprises.

On 3 December 2012 the Minister of Higher Education and Training published new SETA grant regulations in terms of section 36 of the Skills Development Act (Government

Gazette 35940 Notice No. 990). As per the new SETA grant regulations, the remaining surplus

of the uncommitted discretionary funds from the SETAs must be paid over by the SETA

by 1 October of each year into the National Skills Fund. This regulation might significantly

increase the income of the National Skills Fund, especially during the first year in

which the applicable section relating to the grant regulations will come into effect namely

2014/15.

The White Paper on Post School Education whose purpose is to set out a vision

for a single, coherent, differentiated and articulated post education and training system

will be finalised in the near future subsequent to the publishing of the Green Paper. The

White Paper will have implications for future mandates and objectives of the NSF and the broader skills levy institutions.

The NSF’s current projects are also aligned to the priorities as set out in the National Development Plan 2030.

3.4. StratEGiC outCoME oriEntED GoaLS

The strategic objective of the National Skills Fund is to provide funds to support

projects that are national priorities in the NSDS III, that advance the Human Resource

Development Strategy (HRDS) of South Africa and that support the NSA in its work. The

National Skills Fund’s high level of performance has resulted in the Fund over-achieving

on its strategic outcome oriented goals.

4. PERFORMANCE INFORMATION BY PROGRAMME

4.1. ProGraMME 1: SkiLLS DEVELoPMEnt (nationaL SkiLLS DEVELoPMEnt SErViCES)

Purpose: National Skills Development Services transfers funds to the National Skills Fund

and manages projects identified in the National Skills Development Strategy as national

priorities and other projects related to achieving the purposes of the Skills Development

Act (1998) as determined by the Director-General of Higher Education and Training.


27

Strategic objectives, performance indicators planned targets and actual achievements

2012/13:

SKILLS DEVELOPMENT (National Skills Development Services)

Strategic objectives

Performance Indicator

Actual Achievement 2011/2012

Planned Target2012/2013

Actual Achievement2012/2013

Deviation from planned

target to Actual Achievement for

2012/2013

Comment on deviations

Provide funds to support projects that are national priorities in the NSDS, that advance the Human Resource Development Strategy (HRDS) of South Africa and that support the NSA in its work.

Amount earmarked to support projects of national priority

N/A. New indicator for 2012/13 financial year and was not used to measure performance for the 2011/12 financial year.

R2,3 billionearmarked tosupport projectsthat are ofnational priority

R8,833 billion R6,533 billion overachievement

The NSF’s high level of performance in committing funds towards skills development projects of national priority during the past financial year lead to the over-achievement.

Number of projects supported by National Skills Fund


262 projectssupported byNational SkillsFund by outerYear

157 projects 105 projects underachievement

The NSF funded projects of higher amounts and learner numbers. Hence the NSF over-achieved on the amounts earmarked target and the number of learners trained even though the number of projects as target was not achieved.

Number of learners trained in NSF projects


32 179 learnerstrained in NSFprojects

95 554 learners 63 375 overachievement

The NSF’s high level of performance of disbursing funds towards skills development projects during the past financial year lead to the over-achievement.

The NSF increased performance under the skills development programme, both with regards to grants disbursements and the number of learners benefitting, contributed towards

the NSF achieving its strategic outcome and mandate to fund skills development of national priority.



2011/12:


STRATEGIC OBJECTIVE ACTIVITY NO.

PERFORMANCE INDICATOR ACTIVITIES PERFORMANCE RESULTS (2011-12) REASONS FOR VARIANCE

1. To provide funds for identified priorities that advances the Human Resource Development Strategy (HRDS).

1.1 List of approved prioritised HRDS projects

List of approved prioritised HRDS projects

The list of HRDSA funding areas have been approved by the Minister.

1.2 Minimum number of projects funded

A minimum of one project is funded

Although funding has been provided for in the NSF budget, projects were slow to get off the ground due to protracted procurement processes.

HRDSA in process of appointing a Fund Management institution. Only concluded in May 2012.

2. To provide funds for priorities identified by the Minister after consultation with the NSA and that support the NSA in its advisory work and building the capacity of the social partners (constituencies) to strengthen their role in and delivery of the NSDS.

2.1 List of NSF funding priorities approved by Minister

List of NSF funding priorities approved by Minister

After detailed consultation the NSF Framework and Criteria for the allocation of funds was approved by the Minister. This includes priority areas for which funding will be allocated for the period of the NSDSIII.

2.2 A framework developed in conjunction with the NSA on building the capacity of the social partners (constituencies) to strengthen their role in the delivery of the NSDS

A framework developed in conjunction with the NSA on building the capacity of the social partners (constituencies) to strengthen their role in the delivery of the NSDS.

The framework for building the capacity of NSA constituencies has been endorsed by the NSA. This has since been translated into application guidelines and criteria that allowed NSA constituencies to access NSF funding.


29

2011/12:




3. To provide funds to support projects identified as national priorities in the context of the National Skills Development Strategy (NSDS) and in support of the strategic objectives of government.

3.1 A report on the wrap up of 224 NSDS II projects

Closure of NSDS II projects The original target of NSDS II projects to be closed was 224. This target was determined during March 2011 and was a preliminary estimation. After the final audit commitment list of 2010/2011 it was found that the total remaining open NSDS II projects were 206. Of the 206 projects, 179 (87%) could be successfully closed.

15 of the projects were moved to NSDS III as a result of these projects long contract duration and contributing to the results of the NSDS III, and the necessary interventions are in process to close the remaining 12 projects.

3.2 5-Year NSF funding report compiled

5-Year NSF funding report compiled

5-Year NSF funding report is available. In process to compile 6-year period report (extended NSDS III period, Apr 2005 – March 2011), but not yet completed.

3.3 Impact study commissioned on NSF funding during NSDS II period

Impact study commissioned on NSF funding during NSDS II period

The report on the impact of NSF funding under NSDSII is incorporated into the 5-year funding report compiled by the HSRC.

3.4 A Strategic Framework & Criteria for allocation of funds under NSDS III developed

A Strategic Framework & Criteria for allocation of funds under NSDS III developed and approved by Minister

NSF Strategic Funding Framework & Criteria was approved by the Minister on 04 Aug 2011.

3.5 Grant regulations published by the Minister

Grant regulations published by the Minister

Not achieved. Capacity challenges within the NSF. NSF currently engaged with DHET legal section to resolve the matter.



2011/12:




3.6 Approved guidelines Application guidelines and operational manuals developed and approved

These guidelines to be based on the NSF Strategic Funding Framework have not been developed.

Capacity challenges within the NSF. NSF to explore possibilities for sourcing additional capacity.

3.7 Number of Skills for Green projects supported

10 Skills for Green projects supported

Not achieved. Much of the work has centred around discussions with relevant partners to finalise implementation policy and mechanisms.

Renewable energy project in process – targeting 2012/13.

3.8 Number of Industrial Policy Action Plan projects supported

10 Industrial Policy Action Plan projects supported

A total of 16 projects have been supported.

3.9 Number of New Growth Path projects supported

10 New Growth Path projects supported


3.10 Number of Skills for Rural Development projects supported

4 Skills for Rural Development projects


3.11 Number of Education and Health projects supported

4 Education and Health projects supported

A total of 4 projects were approved under this programme.


31

2011/12:




4. To provide funds to support other projects that are pertinent to the achievement of the purposes of the Skills Development Act, as determined by the Director-General.

4.1 List of other SDA priorities approved

List of other SDA priorities approved

This list has been incorporated into the broader NSF Framework. It is reported under the funding programme DG priorities.

4.2 Number of implementation reports produced

4 implementation reports produced

A detailed implementation report has not been compiled owing to slow take off of projects in this area.

The NSF will work with relevant DHET units to ensure a comprehensive implementation regime is instituted

5. To provide funds for the operations of the NSF.

5.1 Monthly records of financial transactions, assets and liabilities maintained and available

Monthly records of financial transactions, assets and liabilities maintained and available

Monthly NSF Financial reports are compiled. These include detailed income & investment reports as well as expenditure reports from key programme activities.

5.2 Staff development programme approved.

Staff development programme approved

List of NSF staff attending skills development interventions available.

5.3 Systems audit report with recommendations compiled

Systems audit report with recommendations compiled

Noticeable progress achieved. To date a detailed analysis of our Information System has been compiled.

The NSF still requires to conclude analysis of systems to support M&E and applications processing

5.4 Number of Programme funding reports

4 Programme funding reports compiled

BAS Programme funding reports for quarterly disbursements available.



Strategy to overcome areas of under performance

The NSF will consider reviewing the relevance of the number of projects as an indicator for performance as the indicator does not reflect the true performance of the Fund. The NSF

over-achieved on the number of learners benefitting from the skills development projects and overachieved on the amount earmarked towards skills development projects. This is

due to the fact that NSF funded higher value projects benefitting more learners per project.

Changes to planned targets

No changes were made to planned targets during the 2013 financial year.

Linking performance with budgets

Programme Name

2012/2013 2011/2012

Budget Actual Expenditure (Over)/ Under Expenditure Budget Actual Expenditure (Over)/ Under

Expenditure

R’000 R’000 R’000 R’000 R’000 R’000

Skills Development 4 086 724 2 619 157 1 467 567 2 019 349 1 304 949 714 400

Total 4 086 724 2 619 157 1 467 567 2 019 349 1 304 949 714 400


33

5. SUMMARY OF FINANCIAL INFORMATION

5.1. rEVEnuE CoLLECtion

Sources of revenue

2013/2014 2012/2013

Estimate Actual Amount Collected

(Over)/Under Collection Estimate Actual Amount

Collected(Over)/Under

Collection

R’000 R’000 R’000 R’000 R’000 R’000

Skills Development Levies 2 280 000 2 244 379 35 621 1 829 745 2 012 837 (183 092)

State Contribution - - - 19 934 19 934 -

Finance and Other Income 378 182 393 215 (15 033) 343 802 418 321 (74 519)

Total 2 658 182 2 637 594 20 588 2 193 481 2 451 092 (257 611)

The Skills Development Levies and interest received from investments were on par with the amounts estimated. The actual revenue received is in line with the budgeted revenue.

5.2. ProGraMME ExPEnDiturE

Programme Name

2013/2014 2012/2013

Budget Actual Expenditure

(Over)/Under Expenditure Budget Actual

Expenditure(Over)/

Under Expenditure

R’000 R’000 R’000 R’000 R’000 R’000

Skills Development 4 086 724 2 619 157 1 467 567 2 019 349 1 304 949 714 400

Total 4 086 724 2 619 157 1 467 567 2 019 349 1 304 949 714 400

The actual grant disbursements paid is 36% below budget, mainly due to disbursements towards bursaries of R619,422 million paid shortly after year end. The remaining under

expenditure of R848,145 million can be attributed to delays in projects during the 2013 financial year. These projects have however started and will become due in the next financial

year as the Fund meets its current commitments of R11,4 billion.



35

governancepart c

PART C Governance


Date and Time of presentation

Committee Subject

17 April 2012

09:30 – 12:45

Portfolio Committee

on Higher Education

and Training

Briefing by the Department of

Higher Education and Training

on its Annual Performance Plan

2012/13.

16 May 2012

09:30 – 12:45

Portfolio Committee

on Higher Education &

Training

Briefing by Public Service SETA

and Services SETA on their Budget

and Strategic Plans 2012/13.

13 June 2012

09:30 – 12:45

Portfolio Committee

on Higher Education &

Training



on its 4th quarterly performance

report.

29 August 2012

09h30 – 12h45

Portfolio Committee

on Higher Education

and Training



on progress report in the

establishment of universities in

Mpumalanga and Northern Cape

and its 1st quarterly performance

report.

1. INTRODUCTION

Corporate governance embodies processes and systems by which public entities are

directed, controlled and held to account. In addition to legislative requirements based

on a public entity’s enabling legislation, corporate governance with regard to public

entities is applied through the precepts of the Public Finance Management Act (PFMA)

and run in tandem with the principles contained in the King’s Report on Corporate

Governance.

Parliament, the Executive and the Accounting Authority of the public entity are

responsible for corporate governance.

2. PORTFOLIO COMMITTEES

For the year under review, the National Skills Fund attended Portfolio Committee

engagements as part of the DHET team since it operated, in all material respects, as a

programme within the Department. This has meant that the committee did not single

out the NSF for specific areas of implementation other than what would have been

applicable to the entire Skills Development Branch under which the NSF operated as a

departmental programme.

The following portfolio committee meetings have been attended:

PART C Governance

37

4. THE ACCOUNTING AUTHORITY

introDuCtion

The Director-General of Higher Education and Training is the Accounting Authority of

the National Skills Fund as stipulated in section 29(1) of the Skills Development Act.

The Director General of Higher Education and Training is responsible for the control

of the Fund and ultimately accountable to the Minister and Parliament for the Fund’s

performance, strategic direction and money spent by the Fund.

Within the framework of the Director-General’s delegations of authority, the day-to-day

operations of the NSF are managed by the Executive Officer.

The NSF further reports through the governance structures set by the Department

of Higher Education and Training. These include the Skills Development Branch

Management Meetings, the Senior Management Meetings and the Ministerial

Management Meetings.

The role of the Accounting Authority is as follows:

As Accounting Authority of the National Skills Fund, the Director-General of Higher

Education and Training has amongst others the following responsibilities:

1. To manage the Fund in accordance with the Public Finance Management Act;

2. Keep a proper record of all financial transactions, assets and liabilities of the Fund;

3. Prepare annual financial statements for the Fund in the prescribed form;

Date and Time of presentation

Committee Subject

04 September 2012

09h30 – 13h00

Portfolio Committee

on Women, Children

and People with

Disabilities

Department to respond to the

issues raised at the public hearings

on the implementation of the

UN Convention on the Rights of

Persons with Disabilities; issues

such as: Access to education

remains a major concern for

children, youth and persons with

disabilities. In terms of higher

education institutions, access

to finance (bursaries) to attain a

tertiary qualification was noted as

a major hindrance along with the

lack of assistive technology.

07 November 2012

09h30 – 12h45

Portfolio Committee

on Higher Education

and Training

Briefing by the W&RSETA, CHIETA,

and FP&M SETA on their 2011/12

Annual Report and Financial

Statements.

3. EXECUTIVE AUTHORITY

As per the requirements of the PFMA, the National Skills Fund reported quarterly to the

Minister of Higher Education and Training as the Executive Authority of the Fund. These

quarterly reports entail the reporting on the NSF’s financial status, compliance with the

PFMA and Treasury Regulations and performance information.

PART C Governance


4. Subject to the laws governing the public service, appoint the Executive Officer

of the Fund, who will, upon such appointment, be in the employ of the public

service;

5. To prescribe a limit for the amount that can be used in the administration of the

Fund; and

6. To submit the annual financial statements to the National Skills Authority for

information as soon as possible after they have been prepared.

Composition of the Accounting Authority

The Director-General of Higher Education and Training, Mr Gwebinkundla Felix Qonde,

is the Accounting Authority of the National Skills Fund as per section 29(1) of the Skills

Development Act.

Remuneration of Accounting Authority

The Director-General of Higher Education and Training does not receive any

remuneration in his capacity as the Accounting Authority of the National Skills Fund.

5. RISK MANAGEMENT

The risk management activities of the NSF are covered within the Department of

Higher Education and Training’s comprehensive risk assessment facilitated by the

Directorate: Internal Audit of the Department of Higher Education and Training.

6. INTERNAL CONTROL

Management has focused on improving internal control through its partnership with the

DHET in terms of the Memorandum of Agreement with the latter as well as assistance

from the Internal Audit Unit in DHET.

7. INTERNAL AUDIT AND AUDIT COMMITTEES

kEy aCtiVitiES anD oBjECtiVES oF intErnaL auDit

The objective of the internal audit function is to provide independent, objective assurance

and consulting services designed to add value and improve the NSF operations. It helps

the NSF accomplish its objectives by bringing a systematic, disciplined approach to

evaluate and improve the effectiveness of risk management, control, and governance

processes.

The main activities of Internal Audit are:

• Compile three year rolling strategic and annual audit plan

• Performing internal audit on the following systems:

- Risk management systems:

- Control systems

- Governance systems

• Report to management and the Audit Committee.

PART C Governance

39

auDit Work

The following activities as per audit plan were completed:

• Corporate Governance

• Compliance with laws and regulations

• Review of quarterly monitoring reports on projects

• Audit of funding windows

• Audit of commitments

Key activities and objectives of the Audit Committee

The objective of the Audit Committee is to assist the Accounting Authority in fulfilling

oversight responsibilities regarding the financial reporting process, the system of internal

control and management of risks, the audit process, and the monitoring of compliance

with laws and regulations.

The main activities are:

• Consider the effectiveness of the internal control systems;

• Understand the scope of internal and external auditor’s review of internal

control over financial reporting, and obtain reports on significant findings and

recommendations together with management’s responses;

• Assess whether the Fund’s assets have been properly safeguarded and used;

• Review the NSF risk profile on an annual basis and ensure management is

effectively managing the risks;

• Review the effectiveness of the system for monitoring compliance with laws

and regulations and the results of management’s investigation and follow-up

(including disciplinary action) of any instances of non-compliance; and

• Review the adequacy, reliability and accuracy of the financial information

provided to management and other users of such information and annually

review the Annual Financial Statements and recommend its approval to the

Director-General.

PART C Governance


The audit committee consists of the members listed below and should meet at least four times per annum as per its approved terms of reference. During the current year four

meetings were held.

Attendance of audit committee meetings:

Name QualificationsInternal/External

memberIf Internal, position

in DepartmentDate

AppointedNumber of meetings

attendedDate Resigned

Prof. DP van der Nest D Tech External N/A 1/11/2010 4 NA

Ms S Padayachy M Comm External N/A 1/11/2010 3 NA

Mr S Makhubu CA (SA) External N/A 6/6/2011 4 NA

Ms G Maaka-Tlokana BA Hons Internal Director 1/11/2010 4 NA

Mr C Mtshisa BA Hons Internal Acting Deputy Director General: Skills Development

1/11/2010 3 NA

PART C Governance

41

8. COMPLIANCE WITH LAWS AND REGULATIONS

The NSF aims to embed compliance with laws and regulations throughout its

organisation as an integral part of all relevant processes.

To assist with compliance monitoring, the NSF uses the DHET’s Compliance Calendar to

ensure compliance with all required documentation in terms of the PFMA and Treasury

Regulations within legislated deadlines.

The NSF also uses the National Treasury template to assess compliance with laws

and regulations on a quarterly basis as part of the quarterly reporting process to the

Executive Authority.

Action plans to address non-compliance are developed and the implementation thereof

monitored regularly.

The NSF also attends various other committee meetings to keep abreast of laws and

regulations that need to be complied with.

9. FRAUD AND CORRUPTION

The activities of the NSF are covered within the Good Governance Policy, which includes

fraud prevention, compiled by the Directorate: Internal Audit of the Department of

Higher Education and Training.

The NSF uses the whistle blowing policy of the DHET while the Memorandum of

Agreement for shared services with DHET exists.

No cases of fraud have become known to the NSF during the last financial year.

10. MINIMISING CONFLICT OF INTEREST

Through the Memorandum of Agreement with the Department of Higher Education

and Training for shared services, the NSF has permission from the Department of Higher

Education and Training to use its bid committees, which follow the Department’s supply

chain management policy.

11. CODE OF CONDUCT

The NSF employees are bound by the Code of Conduct of the DHET as all NSF employees

are currently employed by the Department of Higher Education and Training.

12. HEALTH SAFETY AND ENVIRONMENTAL ISSUES

The NSF is situated in the offices of the DHET. The building is being upgraded to comply

with the necessary Health Safety and Environmental issues. One major concern is limited

parking and unfriendly access to parking.

13. SOCIAL RESPONSIBILITY

Not applicable to the NSF for the 2013 financial year.

14. MATERIALITY AND SIGNIFICANCE FRAMEWORK

The NSF prepared its Materiality and Significance Framework which has been approved

by the Director-General of Higher Education and Training as the Accounting Authority

of the NSF and submitted to the Minister for concurrence.

PART C Governance


15. AUDIT COMMITTEE REPORT

We are pleased to present our report for the financial year ended 31 March 2013.

auDit CoMMittEE rESPonSiBiLity

The Audit Committee reports that it has complied with its responsibilities arising

from Section 51(1)(a)(ii) of the Public Finance Management Act and Treasury

Regulation 27.1. The Audit Committee also reports that it has adopted appropriate formal

terms of reference as its committee charter, has conducted its affairs in compliance with

this charter and has discharged all its responsibilities as contained therein.

tHE EFFECtiVEnESS oF intErnaL ControL

The system of internal control is designed to provide cost-effective assurance that

assets are safeguarded and that liabilities and working capital are effectively managed.

In line with the PFMA requirements, Internal Audit and the Auditor-General South

Africa (AGSA) provide the Audit Committee and management with assurance that the

internal controls are adequate and effective. This is achieved by means of evaluating

the effectiveness of the management of identified risks, as well as the identification of

corrective actions and suggested enhancements to the controls and processes.

The system of internal control was not entirely effective during the year under review,

as several instances of non-compliance with internal controls were reported by both

Internal Audit and the AGSA. It is a concern for the Audit Committee that a number of

the matters raised by the AGSA are repeat findings from one or more previous years.

The Audit Committee will continue to monitor progress against the corrective action

plans implemented by management.

The lack of an integrated financial management system for NSF has resulted in ineffective

control over financial reporting.

tHE QuaLity oF in-yEar ManaGEMEnt anD MontHLy / QuartErLy rEPortS SuBMittED in tErMS oF tHE PFMa

The Audit Committee is satisfied with the content and quality of monthly and quarterly

reports prepared and issued by the Accounting Authority of the National Skills Fund

during the year under review. However, material misstatements were identified in the

financial statements during the audit and corrected by the NSF. There were no findings

on the quality of performance information.

EVaLuation oF FinanCiaL StatEMEntS

The Audit Committee has:

• reviewed and discussed the audited financial statements to be included in the

Annual Report, with the AGSA and the Accounting Officer;

• reviewed the AGSA’s management report and management’s response thereto;

• reviewed changes in accounting policies and practices;

• reviewed the Fund’s compliance with legal and regulatory provisions;

• reviewed significant adjustments resulting from the audit; and

• reviewed information on predetermined objectives to be included in the Annual

Report.

PART C Governance

43

The Audit Committee concurs with, and accepts the AGSA’s conclusions on the

Annual Financial Statements, and is of the opinion that the audited Annual Financial

Statements be accepted and read together with the report of the AGSA. There were very

large misstatements identified during the audit of the financial statements, these were

adjusted by management. Management is urged to expedite the implementation of a

financial management system that will be suitable for the needs of the NSF as the lack

of such a system was a root cause for the misstatements identified.

intErnaL auDit

The Audit Committee is satisfied that the internal audit function is operating effectively

and that it has addressed the risks pertinent to the Fund in its audits. Additional capacity

was obtained for internal audit and they were able to complete all the audits approved

in the coverage plan by the audit committee.

auDitor-GEnEraL SoutH aFriCa

The Audit Committee has met with the Auditor-General South Africa to ensure that

there are no unresolved issues.

ConCLuSion

The Audit Committee congratulates the NSF for achieving an unqualified audit report

for the year under review. Our appreciation is also extended to management, the chief

financial officer and staff for their efforts regarding the financial statements for the year

and to the team from the AGSA for the value they continue to add to the National Skills

Fund. The audit committee will monitor the improvements made by management in

addressing control deficiencies identified by external and internal audit.

Prof D.P. van der nestChairperson of the audit Committee

Date: 31 july 2013

PART C Governance


45

human resource managementpart d

PART D Human resource management


The NSF is embarking on a process to establish itself as a fully-fledged public entity,

whilst at the same time improving its operations. This will entail a review of the entire

organisation to ensure efficient workforce planning, as well as running an intensive

recruitment campaign to attract and recruit a skilled and capable workforce to address

the current capacity constraints.

All employees are required to sign performance agreements with their immediate

supervisors, which is assessed quarterly and annually. The NSF’s performance

management framework will be reviewed as part of improving the Fund’s operations

during the establishment of the Fund as a fully-fledged public entity.

1. INTRODUCTION

The Nationals Skills Fund has a current funded staff establishment of 61 posts of

which 4 posts are vacant. All employees of the NSF are currently employed by the

Department of Higher Education and Training within public service as the NSF

operated as a programme under the Department prior to its listing as a public entity on

12 October 2012. The NSF refunds the Department for the employee costs incurred by

the Department on behalf of the NSF.

The key HR priorities to be addressed during the next financial year are the following:

• Addressing the current capacity constraints with regards the initiating and

monitoring of projects and with regards to the support services required with

the establishment of the NSF as a fully-fledged public entity will be prioritised

within the next financial year; and

• Transferring NSF employees from the Department of Higher Education and

Training to be employed by the NSF as a public entity.


47

2. HUMAN RESOURCE OVERSIGHT STATISTICS

PErSonnEL CoSt By ProGraMME

Programme Total Expenditure for the Entity (R’000)

Personnel Expenditure (R’000)

Personnel Expenditure as a % of total

Expenditure (R’000)Number of Employees Average Personnel Cost

per Employee (R’000)

Skills Development 2 664 330 17 732 0.67% 58 306

PErSonnEL CoSt By SaLary BanD

Level Personnel Expenditure (R’000)

% of Personnel Expenditure to Total Personnel Cost

(R’000)Number of Employees Average Personnel Cost per

Employee (R’000)

Top Management 3 501 19.7% 5 700

Senior Management 5 318 29.0% 12 428

Skilled 8 913 50.3% 41 217

Semi-skilled 0 0% 0 0

TOTAL 17 732 100% 58 306

PErForManCE rEWarDS

Programme Performance Rewards (R’000)

Personnel Expenditure (R’000)

% of Performance Rewards to Total Personnel Cost (R’000)

Top Management 129 3 501 3.7%

Senior Management 180 5 318 3.4%

Skilled 236 8 913 2.6%

Semi-skilled 0 0 0

TOTAL 545 17 732 3.1%



traininG CoStS

Directorate/Business Unit Personnel Expenditure (R’000)

Training Expenditure(R’000)

Training Expenditure as a % of Personnel Cost

NSF staff establishment 17 732 160 0.9%

EMPLoyMEnt anD VaCanCiES

Programme 2012/2013 Number of Employees

2013/2014 Approved Posts

2013/2014Number of Employees

2013/2014 Vacancies

% of Vacancies

Skills Development 42 142 58 84 59%

Programme 2012/2013 Number of Employees

2013/2014 Approved Posts

2013/2014Number of Employees

2013/2014 Vacancies

% of Vacancies

Top Management 4 5 5 0 0%

Senior Management 8 20 12 8 40%

Professional qualified 0 0 0 0 0%

Skilled 30 117 40 76 65%

Semi-skilled 0 0 0 0 0%

Unskilled 0 0 0 0 0%

TOTAL 42 142 57 84 59%


49

EMPLoyMEnt CHanGES

Salary Band Employment at beginning of period Appointments Terminations Employment at end of

the periodTop Management 4 1 0 5

Senior Management 8 4 0 12

Professional qualified 0 0 0 0

Skilled 30 11 0 41

Semi-skilled 0 0 0 0

Unskilled 0 0 0 0

TOTAL 42 16 0 58

rEaSonS For StaFF LEaVinG

Reason Number % of Total Number of Staff Leaving

Death 0 0%

Resignation 0 0%

Dismissal 0 0%

Retirement 0 0%

Ill health 0 0%

Expiry of contract 0 0%

Other 0 0%

TOTAL 0 0%

No staff left during the past financial year.



LaBour rELationS: MiSConDuCt anD DiSCiPLinary aCtion

Nature of disciplinary Action Number

Verbal Warning 0

Written Warning 0

Final Written Warning 0

Dismissal 0

EQuity tarGEt anD EMPLoyMEnt EQuity StatuS

Levels MALE

African Coloured Indian White

Current Current Current Current

Top Management 2 0 0 2


Professional Qualified 0 0 0 0

Skilled 17 0 0 1


Unskilled 0 0 0 0

TOTAL 23 2 0 3

Levels FEMALE

African Coloured Indian White

Current Current Current Current

Top Management 1 0 0 0


Professional Qualified 0 0 0 0

Skilled 16 0 0 7


Unskilled 0 0 0 0

TOTAL 22 0 0 8

Levels Disabled Staff

Male Female

Current Current

Top Management 0 0

Senior Management 0 0

Professional Qualified 0 0

Skilled 0 1

Semi-skilled 0 0

Unskilled 0 0

TOTAL 0 1

51

financial informationpart e

annual financial statements | For the year ended 31 March 2013

NATIONAL SKILLS FUND annual RePORt : 201352

STATEMENT OF RESPONSIBILITY

STATEMENT OF RESPONSIBILITY FOR THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2013

The Accounting Authority is responsible for the preparation of the public entity’s annual

financial statements and for the judgements made in this information.

The Accounting Authority is responsible for establishing, and implementing a system

of internal control designed to provide reasonable assurance as to the integrity and

reliability of the annual financial statements.

In my opinion, the financial statements fairly reflect the operations of the public entity

for the financial year ended 31 March 2013.

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

public entity.

The National Skills Fund’s annual financial statements for the year ended 31 March 2013

have been audited by the external auditors and their report is presented on page 65.

The Annual Financial Statements of the public entity set out on page 69 to page 138

have been approved.

Mr GF Qonde Director-General of Higher Education and Training Accounting Authority of the National Skills Fund

Mr M MacikamaExecutive OfficerNational Skills Fund

Date: 31 May 2013


REPORT OF THE EXECUTIVE OFFICER

53

The efficiency of the National Skills Fund in executing its mandate of funding skills

development of national priority and for the achievement of the Skills Development Act

has increased since the implementation of the NSDSIII. As indicated in the graph, The

NSF’s annual grants disbursement towards skills development has increased significantly

since the launch of the NSDS III:

• 1st Year of NSDS III (2012 financial year): Grants disbursements increased with

131% from R564 million to R1.3 billion; and

• 2nd Year of NSDS III (2013 financial year): Grants disbursements increased with

97% from R1.3 billion to R2.6 billion.

These increases within the respective NSDS III years represent a 357% increase in the

grants disbursement rate under the previous NSDS II and are a clear indication that the

NSF’s performance under NSDS III has increased significantly.


towards skills development is on par with its annual revenue of R2,7 billion.

Spending trends of the public entity, including new and proposed activities

The NSF’s grants disbursement efficiency is expected to increase over the next

three years until the end of the NSDSIII period (31 March 2016) as the NSF meets its

current contractual commitments of R11,4 billion. These commitments entail

commitments towards current skills development projects of national priority.

GENERAL FINANCIAL REVIEW OF THE PUBLIC ENTITY

This report marks the second year of implementation under the new NSDSIII where

the Fund was primarily engaged in increasing skills development funding towards the

skills development projects of national priority as identified in the NSDS III and skills

development projects as identified by the Director-General as priority towards achieving

the Skills Development Act.

Over the last 2 years, since the new NSDS III was launched, the NSF’s performance has increased significantly due to deliberate interventions to improve the Fund’s

performance under NSDS III. These deliberate interventions resulted in the Fund

becoming more efficient towards funding the critical skills needs in South Africa. This

significant increase in the efficiency of the NSF can be clearly noted in the NSF’s increase

in grants disbursements towards skills development of national priority, as illustrated in

the graphs below.

- 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

R Millions Grants Disbursements vs Revenue

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

2012

/13

2013

/14

2014

/15

2015

/16

Grants Disbursements Revenue




As at 31 March 2013, R1,6 billion remains committed towards bursaries until the end of the NSDS III.

The NSF has a R1,3 billion commitment towards funding undergraduate bursaries via

the National Student Financial Aid Scheme (NSFAS) over the remainder of the NSDS III

period. This will result in an annual contribution of approximately R650 million by the

NSF towards the NSFAS. The NSFAS has financially assisted many financially needy, but

eligible students to obtain their qualification in the past.

The NSF has further committed R262 million towards funding postgraduate bursaries via

the National Research Foundation (NRF) over the remainder of the NSDS III period. This

will result in an annual contribution of approximately R106 million by the NSF towards

the NRF. The increase in PhDs will contribute towards the achieving the objectives as

outlined in the New Growth Path, the Industrial Policy Action Plan and The Department

of Science and Technology’s Ten-Year Innovation Plan.

2. r444 MiLLion DiSBurSED toWarDS FEt CoLLEGE SECtor CaPaCity BuiLDinG, WitH r2,4 BiLLion CoMMitMEnt rEMaininG

The NSF has disbursed R444 million towards the FET colleges for expansion of their current capacity as a national priority identified in the NSDS III. As at 31 March 2013, R2,4 billion remains committed towards FET college sector capacity building until the end of the NSDS III.

Funding towards the FET colleges is aimed at expanding their current interventions

(NCV and Report 191), as well as new interventions such as learnerships, internships and

skills programmes.

As these current commitments become due and are met by the NSF over the next three

years, it is expected that the NSF’s accumulated surpluses will gradually decline towards

the end of the NSDS III period, as illustrated in the graph below:

- 1

2

3

4

5

6

7

8

2013/14

2014/15

2015/16

2016/17

Acc

umul

ated

Res

erve

s R

Billi

ons

The NSF’s R2,6 billion grants disbursements towards skills development projects

during the past financial and remaining R11,.4 billion in contractual commitments can be attributed to the following:

1. r1,23 BiLLion DiSBurSED toWarDS BurSariES, WitH a r1,6 BiLLion CoMMitMEnt rEMaininG

The NSF has disbursed R1,23 billion towards undergraduate and postgraduate bursaries as a priority identified by the Director-General in support of the Higher Education and FET College sectors. This support has benefitted 14 661 and 1143 undergraduate and postgraduate students respectively.



55

remaining towards completion of the skills infrastructure development project.

The expansions of the University of Pretoria’s medical and veterinary facilities

are key public delivery infrastructure that will increase the number of medical

doctors and veterinaries trained annually. Both skills are scarce and critical skills

for South Africa to address the demands posed by the National Health Insurance

scheme to make health universally accessible to every citizen of the country and

to address an urgent need for food security and general animal health.

These skills infrastructure development projects at the University of Pretoria have

already begun in the 2013 financial year and will be on-going during the 2014

financial year to be finalised in 2015/16.

• University of Johannesburg

R213 million remains committed towards the University of Johannesburg to

establish work-integrated learning facilities for engineering students, which

includes a training workshop, design centre and industrialisation centre.

These facilities, as key public delivery infrastructure, are critical to improve the

production of quality engineers at the University of Johannesburg. Engineers are

a scarce and critical skill for South Africa, especially taking cognisance of South

Africa’s ratio of engineers to citizens in comparison with other BRICS countries.

This is partly contributing towards resolving lack of graduation in engineering

programme due to lack of work placement opportunities for a large number of

engineering students. This capacity, in the form of a production environment,

will be accessible to engineering students, in need, beyond the University of

Johannesburg.

This skills infrastructure development project at the University of Johannesburg

has begun shortly after the 2013 financial year-end and will be on-going during

the 2014 financial year to be completed in 2015/16.

This is in line with the National Skills Development Strategy (NSDS III) aimed at promoting

growth within the public FET college system that is responsive to sector, local, regional

and national skills needs and priorities.

3. r54 MiLLion DiSBurSED toWarDS SkiLLS inFraStruCturE DEVELoPMEnt oF nationaL Priority, WitH a r2,35 BiLLion CoMMitMEnt rEMaininG

The NSF’s priorities to address skills infrastructure is intended to contribute to the building and revitalisation of the skills infrastructure that will lead to expanded access and delivery of skills funded through the levy system. The following areas have been prioritised:

• Recapitalisation of public delivery infrastructure;

• Community Education Centres;

• Skills Development Institutes; and

• State-owned enterprises.

During the 2013 financial year, the NSF disbursed R54 million towards skills infrastructure development as national priority of government.

As at 31 March 2013, R2,35 billion remains committed towards the following key skills infrastructure development projects of national priority:

• University of Pretoria

R21 million was disbursed towards the University of Pretoria for expanding the

University’s medical and veterinary facilities, with a R382 million commitment




neither in education, employment nor any kind of training and with less than a

grade 12 qualification. The state and its respective institutions have the ultimate

responsibility, as a last line of defence, to ensure that education and training

opportunities are made available to overcome the skills shortage and high

unemployment in the country.

The building of the 12 FET College campuses is due to begin within the 2014

financial year.

• National Institute for the Deaf

The National Institute for the Deaf, as a key community education centre, is the

only post-school education institute for deaf people in South Africa and Southern

Africa. The NSF disbursed R33 million towards the building of hostels and lecture

rooms for deaf students and accommodation for hostel managers at the National

Institute for the Deaf, as well as addressing curriculum improvements for deaf-

friendly skills programmes. R44 million remains committed towards completion

of the skills infrastructure development project. The project will allow for an

increased annual intake of deaf students from all over South Africa and Southern

Africa.

The skills infrastructure development project at the National Institute for the

Deaf has already begun in the 2013 financial year and will be on-going during

the 2014 financial year.

• Cape Peninsula University of Technology

R106 million remains committed towards the Cape Peninsula University of

Technology for the establishment of renewable energy training facilities. These

facilities, as key public delivery infrastructure, are critical in the production of a

set of new skills required for the green economy. This initiative, being the first

of its kind in the country, seeks to respond to the country’s adopted strategy to

promote renewable energy production in order to supplement the current fossil

fuel energy production and gradually reduce the country’s carbon footprint. The

Department has seen it fit to establish this dedicated education and training

capacity for the country to produce high and middle level skills in the area of

renewables. The renewable energy is currently an area of growth within the

South African economy.

The renewable energy skills infrastructure development project at the Cape

Peninsula University of Technology will begin during the 2014 financial year to

be completed in 2016/17.

• 12 new Further Education and Training College Campuses

R1,5 billion is earmarked towards building 12 new FET colleges as key public

delivery infrastructure in areas of high demand for a public FET college. The

locations of the new FET campuses were determined based on the density of

the population within each identified area and the unavailability of sufficient

FET college campuses to meet the demand for further education and training

within the identified areas. It is vital to provide South Africans from these areas

with the opportunity towards further education and training by establishing

sufficient campuses closer to their origin. The 2011 census indicates that

there is over 3 million out of school youth of ages between 15 to 25, who are



57

• Vukani Aviation Project, aimed at training 100 learners on the national aviation

cadet programmes.

5. r43 MiLLion DiSBurSED toWarDS tHE iPaP, WitH r521 MiLLion CoMMitMEnt rEMaininG

The NSF has disbursed R43 million towards skills development projects contributing towards achieving the objectives of the Industrial Policy Action Plan (IPAP) as a national priority identified in the NSDS III. As at 31 March 2013, R521 million remains committed towards the following IPAP skills development projects:

• dti Monyetla Work Readiness Programme, contributing towards training call

centre agents. The dti Monyetla programme has benefitted 3 239 learners during

the past financial year to acquire workplace skills as call centre agents;

• dti Tool and Die Initiative Project, aimed at training 1 610 learners as Tool and

Die makers within the manufacturing sector, who are considered pivotal to the

manufacturing industry; and

• dti Unemployed Graduate Programme, aimed at providing unemployed

graduates with the necessary workplace experience required for permanent

employment.

4. r265 MiLLion DiSBurSED toWarDS tHE nEW GroWtH PatH, WitH r766 MiLLion CoMMitMEnt rEMaininG

The NSF has disbursed R265 million towards skills development projects contributing towards achieving the objectives of the New Growth Path as a national priority identified in the NSDS III. As at 31 March 2013, R766 million remains committed towards the New Growth Path skills development projects.

Amongst the various projects contributing towards achieving the New Growth Path, are

the following:

• TRANSNET Rail Engineering Project, aimed at training 1 000 artisans to work on

the railways of South Africa;

• Agri Seta & Commissioner for Land Rights Restitution Project, aimed at providing

skills development to 4 750 learners linked to land restitution, which includes

amongst others farm management, technical farming skills, governance &

leadership;

• SAICA Municipalities Project, aimed at providing financial skills development to

1 000 municipal finance staff;

• Lepelle Northern Water Project, aimed at developing scarce skills in the water

sector in Limpopo, which includes water & waste treatment reticulation,

plumbing, electrical, mechanical and internship programmes;

• Harry Oppenheimer Diamond Training School Project, with 31 students enrolled

on learnerships to obtain practical skills on top and bottom polishing of

diamonds; and




Amongst these key projects supported are the following:

• Strategic Integrated Projects of the National Infrastructure Plan

Following the launch of the National Infrastructure Plan by the President of

South Africa in February 2012, the Minister of Higher Education and Training,

Dr. Nzimande was allocated the task of developing a skills plan to ensure that skills

were developed both for, as well as through, the projects. As a consequence the

Special Projects Unit was established in the Department in April 2012. The NSF

strengthened the Special Projects Unit technical and general human resource

capacity and information processing capabilities through R1,8 million funding.

The work of the Unit began at a time when the Strategic Integrated Projects (SIPs)

of the National Infrastructure Plan (NIP) were taking shape. As an initial phase the

Unit familiarised themselves with ‘what skills are needed for the SIPs’, secondly

‘when and where are the skills needed’ and finally ‘which of the needed skills are scarce’? An extensive research initiative was undertaken to answer these

questions and results was arrived at by the end of March 2012.

Whilst this work was underway, a process began to conceptualise the framework

within which the demand for skills should be met. In early 2013, a strategy to

meet the demand for skills has been developed.

There is one central initiative underway at this point. The Special Projects Unit

has prepared a project proposal that has been accepted by the European Union

Dialogue Facility. This project will focus on ‘New Skills for New Jobs’ or, because it

is in the context of infrastructure, ‘New Infrastructure Skills for New Infrastructure

Jobs’. This initiative is an investigation into a new way of designing skills that are

anticipated to be needed with the advent of the introduction of new technology.

The Passenger Rail Agency of South Africa (PRASA) will be introducing new

6. r113 MiLLion DiSBurSED toWarDS ruraL DEVELoPMEnt, WitH r810 MiLLion CoMMitMEnt rEMaininG

The NSF has disbursed R113 million towards rural skills development projects as a national priority identified in the NSDS III, with R810 million remaining committed towards the rural skills development projects.

These commitments includes amongst others the following:

• R323 million committed towards the Expanded Public Works Programme (EPWP

Programme) aimed at employing and skilling unemployed people for EPWP

projects until the end of the NSDS III; and

• R79 million committed towards the Sisonke Economic Development Agency

for the provision of skills development programmes to benefit the previously

disadvantaged communities of the Sisonke District Municipality that will alleviate

poverty, reduce unemployment and increase job creation.

7. r165 MiLLion DiSBurSED toWarDS EStaBLiSHinG a CrEDiBLE SkiLLS MECHaniSM WitHin an intEGratED PoSt SCHooL EDuCation SyStEM, WitH r498 MiLLion CoMMitMEnt rEMaininG

The NSF has disbursed R189 million towards various key academia, research and broader

skills system development projects aimed at establishing a credible skills mechanism

within an integrated post school education system, with a remaining commitment of

R939 million as at 31 March 2013.

The investments into the various key projects have taken the process of developing a

credible skills mechanism a long way.



59

• Career advisory services

Through funding the NSF contributed towards the development of career

advisory services provided by SAQA. The project has to date delivered a fully

functional career helpline, specialist software has been deployed to be able to

make call backs to callers, provide a walk-in centre, respond to e-mails and SMSs

and voice interaction. In addition to the above the project has also delivered on

organising a number of career exhibitions notable of which has been the annual

Mandela Day Careers Festival. The DHET through SAQA has also been present

in setting up exhibitions stands organised by various organisers. A substantive

radio project has also been embarked upon using 10 languages and discussing

career related matters through dedicated programming.

• Integrated Higher Education and Training Management Information System

The NSF contributed funding to the development of an integrated Higher

Education and Training Management Information System (HETMIS). This entails

developing HETMIS policy, standards and requirements for the collection,

processing and dissemination of data. The aim of this project to is to replicate

the unit record system of the Higher Education Management Information for

Universities, for the Colleges and SETA sectors. This system will be able to provide

detailed information for the planning and provisioning (supply) of education and

training.

• Labour Market Intelligence System

The NSF funded the development of the Labour Market Intelligence System.

This system will be able to provide strategic demand side information for skills

planning. The HSRC and Wits EPU have been allocated a grant of R 89 million

signalling system and will be using this project to assist them design the skills

required. A second pilot project will be conducted in the Department’s own

infrastructure initiatives. Given that approvals are now in place, the project is due

to commence in July 2013.

There will be much more work required in this space going forward, in particular

in relation to the operation and maintenance of the infrastructure built. There will

also be work required to ensure the skills needed for the economic projects that

flow from the infrastructure are addressed as well as any localisation initiatives

that are established to meet significant input demands. This work lies ahead.

• Single uniform funding and administration model for artisan learners

Through funding, the NSF contributed towards the development of a single

uniform funding and administration model for artisan learners, creating

consistency across the post school education system.

• Recognition of Prior Learning model

Through funding the NSF contributed towards the development of a Recognition

of Prior Learning model in particular for artisan aides.

• Prioritisation model for the development of artisan trades

Through funding the NSF contributed towards the development of a prioritisation

model for the development of artisan trades, involving the identification of

priority artisan trades for development to ensure that the current needs in the

country are met. This has led to the creation of the call centre at the Ekurhuleni

East FET College, which manages this process for the country.




• Single uniform funding and administration model for artisan learners

• Recognition of Prior Learning model

• Prioritisation model for the development of artisan trades

9. r17 MiLLion DiSBurSED toWarDS SuPPortinG tHE Work oF tHE nationaL SkiLLS autHority, WitH r206 MiLLion rEMaininG aS EarMarkED

The successful delivery of the NSDS III relies on the role played by social partners in the delivery of skills. In consultation with the NSA, the Minister has identified a number of priorities that are to support the NSA in its advisory work and build the capacity of the social partners in the implementation of the NSDS III. These are:

• Review the skills development legislative framework to support the integration of education and training with the national priorities of government (inclusive of the NSF framework);

• Develop frameworks on the mobilisation of business, government, community and labour to take full ownership of the NSDS III;

• Post school education and training that encourages society to support and build a developmental state focussing on rural development and state owned entities;

• Strengthen the monitoring and evaluation functions particularly on the NSDS III performance and governance;

and R18 million respectively for the development of the labour market skills

intelligence system.

8. r7 MiLLion DiSBurSED toWarDS SuPPortinG tHE HuMan rESourCE DEVELoPMEnt StratEGy oF SoutH aFriCa, WitH r235 MiLLion rEMaininG aS EarMarkED

The NSF supports the priorities agreed by the Human Resource Development Council of South Africa (HRDCSA), which oversees the implementation of the Human Resource Development Strategy for South Africa for 2030. The priorities agreed by the Council relate to the following:

• To strengthen and support the expansion of FET access;

• The production of intermediate skills (in particular artisans) and professionals;

• The production of academics and stronger industry-university partnerships in research and development;

• Strengthening foundational learning; and

• Address worker education.

The NSF has disbursed R7 million in the 2013 financial year towards supporting the work of the Human Resource Development Council of South Africa, with a further R235 million earmarked towards the work of the Council until the end of the NSDS III.

The following work of the Artisan and Technician Development Technical Task Team was

funded by the NSF and was recommended to and approved by the HRDCSA:



61

A key health project funded by the NSF is a R70 million commitment towards the Nelson

Mandela Children’s Hospital Trust, aimed at training paediatric nurses and doctors for

the new Nelson Mandela Children’s Hospital.

Capacity constraints and challenges facing the Public Entity

The increase in the NSF’s commitments and number of projects requires an increase in

the NSF’s monitoring and evaluation capacity. The monitoring and evaluation capacity

constraints of the NSF were clearly identified as an area for improvement within both

the NSDS III, as well as the Green Paper for Post School Education and Training.

As a result of the NSF’s listing as a Schedule 3A public entity, the NSF needs to establish

the required support structures, which includes establishing capacity within the

following areas: finance, human resource management, supply chain management,

legal services and IT management.

The support services are currently provided by the Department of Higher Education

and Training.

The establishment of these support structures are vital towards ensuring the NSF’s core

functions are operating optimally, efficiently and effectively. The core functions of the

NSF consist of evaluating and initiating skills development projects of national priority

for funding and monitoring the implementation of those skills development projects.

Discontinued activities / activities to be discontinued

Projects under NSDS II was either aligned to NSDS III for continued funding or closed-off

and discontinued during the 2013 financial year.

• Research, development and innovation to promote beneficiation and bursaries enterprise development opportunities; and

• Revitalisation of the academic position.

The NSF disbursed R17 million towards supporting the work of the National Skills

Authority during the 2013 financial year, with R206 million remaining as earmarked

towards the National Skills Authority until the end of the NSDS III.

10. r317 MiLLion DiSBurSED toWarDS otHEr nationaL anD DirECtor-GEnEraL PrioritiES, WitH r1,7 BiLLion CoMMitMEnt rEMaininG

During the 2013 financial year, the NSF disbursed and committed funds towards the

following national priorities as identified in the NSDS III or identified as priority by

Director-General:

• R131 million disbursed towards Justice and Crime Prevention, with a R134 million

commitment remaining;

• R129 million disbursed towards Co-operatives, NGO’s and small enterprises, with

a R372 million commitment remaining;

• R13 million disbursed towards Education and Health, with a R73 million

commitment remaining;

• R5 million disbursed towards worker education, with a R14 million commitment

remaining; and

• R39 million disbursed towards the Trainee Lay-off Scheme, with a R1,14 billion

commitment remaining towards the Scheme.




Branch, the NSF has been fully reliant on DHET SCM policies, processes and systems. The

Memorandum of Agreement was engaged with DHET to assist NSF with SCM functions

including utilisation of Bid committees.

• Challenges experienced and how resolved

With the listing of the NSF as a Schedule 3A public entity, it is envisaged that the NSF

will establish its own Supply Chain Management unit under the office of the NSF’s Chief

Financial Officer.

Audit report matters in the previous year and how would be addressed

Inaccurate and untimely financial and performance reporting resulting in non-

compliance with applicable laws and regulations has been identified as an audit report

matter to be addressed by the NSF.

The root causes resulting in inaccurate and untimely financial reporting can be attributed

towards insufficient financial capacity within the Fund and shortcomings in the current

financial system. Both of these root causes will be addressed in the next financial year

through appointing sufficient financial capacity within the Fund and upgrading the

NSF’s financial systems.

The root cause resulting in inaccurate and untimely performance information reporting

can be attributed towards insufficient projects monitoring capacity within the Fund,

shortcomings in the current performance information system and overreliance on

third parties to provide the performance information accurately and timely. These

root causes will be addressed with the establishment of sufficient internal monitoring

capacity within the Fund and improving the NSF’s projects monitoring process towards

being more automated and real-time.

Requests for roll over of funds

The NSF applied for the retention of the net surplus for the 2013 financial year

(R7,68 billion) in terms of section 53 (3) of the PFMA from National Treasury during

the first quarter of the 2014 financial year. This approval has not yet been granted by

National Treasury.

The request was based on the following reasons:

1. The NSF’s current effective utilisation of skills development resources benefitting

over 95 000 learners;

2. The NSF’s current contractual commitments;

3. To prevent the severe disruption of the over 95 000 learners currently receiving

on-going training, as well as legal backlash for cancelling projects;

4. The increased monitoring and evaluation capacity requirements of the NSF; and

5. The increased capacity required to establish the NSF as a fully-fledged Schedule

3A public entity.

Supply chain management

• Unsolicited bid proposals

No unsolicited bid proposals were concluded during the year.

• SCM processes and systems in place

Due to the NSF forming part of the DHET as a programme under the Skills Development



63

Financial management

The NSF’s financial management is sound and compliant to PFMA and National Treasury

regulations. The financial statements have been prepared in accordance with the

effective Standards of Generally Recognised Accounting Practices (GRAP) including any

interpretations, guidelines and directives issued by the Accounting Standards Board.

Other PFMA requirements

The NSF reports through the structures and processes of the Department of Higher

Education and Training in so far as compliance with the PFMA is concerned, namely:

• Basis of Accounting – The NSF prepared its financial statements for 2013

financial year on an accrual basis as required by the PFMA for Schedule 3A public

entities.

• Quarterly reporting – Quarterly reporting for the 2013 financial year formed

part of the quarterly reporting process on performance against the strategic plan

of the Department of Higher Education and Training. For the 2014 financial year

going forward the quarterly reporting will form part of the reporting process on

performance against the separate strategic plan of the NSF. Furthermore the NSF

submits quarterly reports on its cash-flow to National Treasury in the prescribed

format and timeframes.

• Actual revenue and expenditure projections – The relevant information

that forms part of the MTEF & ENE processes are submitted to National Treasury

via the processes of the Department of Higher Education and Training in the

prescribed format and timeframes.

Outlook for the future to address financial challenges

The NSF has current commitments of R11,4 billion towards skills development

projects of national priority as at the end of the 2013 financial year. These commitments

will become due over the remainder of the NSDS III period until 31 March 2016.

These commitments will be funded through the NSF’s current surpluses of R7,68 billion and through the NSF’s future expected income from skills development

levies and interest received on investments.

The NSF’s levy increased with 12% from the 2012 to the 2013 financial year. It is expected

that the future skills development levies will increase with a minimum of inflation

currently at 5.9% per annum until the end of the NSDS III period, namely 31 March 2016.

Thus, a total of R7,6 billion in skills development levy income is expected for the

remainder of the NSDS III period.

Through improved cash flow management, the NSF has increased its ability to operate

at optimal levels of grants disbursement efficiency, whilst ensuring that the Fund is able

to meet its skills development commitments as it becomes due.

Events after the reporting date

There are no events after reporting date.

Economic Viability

As per the Regulation approved by the Executive Authority, the NSF may utilise 10% of

its income towards administration of the Fund. This allocation towards administrative

costs is sufficient for the NSF to fund its operations.




Exemptions and deviations received from National Treasury

There were no exceptions and deviation received from National Treasury.

Approval

The Annual Financial Statements have been approved by the Accounting Authority.


Date: 31 May 2013

• Annual financial statements – These statements are compiled by the National

Skills Fund and have been submitted timeously for audit purposes.

• Annual report – Information with regard to the NSF are covered within the

Annual Report of the National Skills Fund.

• Completeness of revenue - Skills Development Levy (SDL) transfers are

recognised when it is probable that future economic benefit can be measured

reliably. This occurs when the Department of Higher Education and Training

(DHET) either makes an allocation or payment, whichever comes first, to the

SETAs and NSF, as required by Section 6 (5) of the Skills Development Levies Act,

1999 (Act No.9 of 1999). The SDL Transfer is measured at the fair value of the

consideration received.

Asset Management

The NSF’s assets are currently managed by the Department of Higher Education and

Training as the NSF operated as a sub-programme under the Department.

Irregular expenditure

The NSF did not incur any irregular expenditure during the 2012/13 financial year.

SCOPA resolutions

There were no new SCOPA resolutions affecting the fund during the reporting period.


REPORT OF THE EXTERNAL AUDITOR

65

Auditor-General’s responsibility

3. My responsibility is to express an opinion on these financial statements based on my audit. i conducted my audit in accordance with the public audit act of south africa, 2004 (act no. 25 of 2004) (paa), the general notice issued in terms thereof and international standards on auditing. those standards require that i comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the separate financial statements are free from material misstatement.

4. an audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the separate financial statements. the procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. in making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. an audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

5. i believe that the audit evidence i have obtained is sufficient and appropriate to provide a basis for my audit opinion.

REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON THE NATIONAL SKILLS FUND

rEPort on tHE FinanCiaL StatEMEntS

Introduction

1. i have audited the financial statements of the national skills fund set out on pages 69 to 138, which comprise the statement of financial position as at 31 March 2013, the statement of financial performance, statement of changes in net assets and the cash flow statement for the year then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information.

Accounting authority’s responsibility for the financial statements

2. the accounting authority is responsible for the preparation and fair presentation of these financial statements in accordance with the south african standard of Generally Recognised accounting practice (sa standards of GRap), the requirements of the public finance Management act of south africa, 1999 (act no. 1 of 1999) (pfMa) and the skills development act (sda), 1998 (act no.97 of 1998), and for such internal control as the accounting authority determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.




rEPort on otHEr LEGaL anD rEGuLatory rEQuirEMEntS

9. in accordance with the paa and the general notice issued in terms thereof, i report the following findings relevant to performance against predetermined objectives, compliance with laws and regulations and internal control, but not for the purpose of expressing an opinion.

Predetermined objectives

10. i performed procedures to obtain evidence about the usefulness and reliability of the information in the annual performance report as set out on pages 26 to 32 of the annual report.

11. the reported performance against predetermined objectives was evaluated against the overall criteria of usefulness and reliability. the usefulness of information in the annual performance report relates to whether it is presented in accordance with the national treasury’s annual reporting principles and whether the reported performance is consistent with the planned objectives. the usefulness of information further relates to whether indicators and targets are measurable (i.e. well defined, verifiable, specific, measurable and time bound) and relevant as required by the national treasury Framework for managing programme performance information (fMppi).

the reliability of the information in respect of the selected objectives is assessed to determine whether it adequately reflects the facts (i.e. whether it is valid, accurate and complete).

Opinion

6. in my opinion, the financial statements present fairly, in all material respects, the financial position of the national skills fund as at 31 March 2013, and its financial performance and cash flows for the year then ended in accordance with the sa standards of GRap and the requirements of the pfMa and sda.

Emphasis of matter

7. i draw attention to the matter below. My opinion is not modified in respect of this matter.

Restatement of corresponding figures

8. as disclosed in notes 19, 23.4 and 26 to the financial statements, the corresponding figures for 31 March 2012 have been restated as a result of errors discovered during 31 March 2013 in the financial statements of the public entity at, and for the year ended, 31 March 2012



67

17. the accounting authority did not ensure that the public entity had and maintained effective, efficient and transparent systems of financial and risk management and internal control as required by section 51(1)(a)(i) of the pfMa.

Revenue management

18. the accounting authority did not take effective and appropriate steps to collect all money due, as required by section 51(1)(b)(i) of the pfMa and treasury Regulation 31.1.2(a) and 31.1.2(e).

Internal control

19. i considered internal control relevant to my audit of the financial statements, annual performance report and compliance with laws and regulations. the matters reported below under the fundamentals of internal control are limited to the significant deficiencies that resulted in the findings on compliance with laws and regulations included in this report.

Leadership

20. the accounting authority did not exercise effective oversight over financial and performance reporting, implementation of proper and effective internal controls and compliance with laws and regulations. action plans to address root causes relating to audit findings were not adequately implemented and regularly monitored which resulted in the recurrence of prior year findings.

12. there were no material findings on the annual performance report concerning the usefulness and reliability of the information.

Additional matter

13. although no material findings concerning the usefulness and reliability of the performance information were identified in the annual performance report, i draw attention to the following matter below.

Material adjustments to the annual performance report

14. Material misstatements in the annual performance report were identified during the audit, all (100%) of which were corrected by management

Compliance with laws and regulations

15. i performed procedures to obtain evidence that the entity has complied with applicable laws and regulations regarding financial matters, financial management and other related matters. My findings on material non-compliance with specific matters in key applicable laws and regulations as set out in the general notice issued in terms of the paa are as follows:

Annual financial statements and performance report

16. the financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework as required by section 55(1)(a) and (b) of the pfMa. Material misstatements on deferred expenses, trade and other payables, provisions and commitments were identified by the auditors in the submitted financial statement, which were subsequently corrected resulting in the financial statements receiving an unqualified audit opinion.




Financial and performance management

21. the accounting authority did not prepare accurate and reliable financial and performance reports due to a lack of an adequate accounting and performance information management systems, which resulted in misstatements in the annual financial statements and performance information reported, further resulting in non-compliance with laws and regulations.

pretoria

31 July 2013


69

Annual Financial Statements for the year ended 31 March 2013

The Annual Financial Statements for the year ended 31 March 2013, have been approved by the Accounting Authority in terms of section 55 (1) (c) of the Public Finance Management

Act (PFMA), No 1 of 1999.

Mr GF QondeDirector General of Higher Education and TrainingAccounting Authority of the National Skills Fund

Date: 31 May 2013



table of contents

1. STATEMENT OF FINANCIAL PERFORMANCE ........................................................................................................................................................................................................................................................... 71

2. STATEMENT OF FINANCIAL POSITION ......................................................................................................................................................................................................................................................................... 72

3. STATEMENT OF COMPARISON OF BUDGET AGAINST ACTUAL AMOUNTS ....................................................................................................................................................................................... 73

4. STATEMENT OF CHANGES IN NET ASSETS ............................................................................................................................................................................................................................................................... 75

5. CASH FLOW STATEMENT ...................................................................................................................................................................................................................................................................................................... 76

6. ACCOUNTING POLICIES TO THE ANNUAL FINANCIAL STATEMENTS ........................................................................................................................................................................................... 77 - 91

7. NOTES TO THE ANNUAL FINANCIAL STATEMENTS ................................................................................................................................................................................................................................ 92 - 138

71


STATEMENT OF FINANCIAL PERFORMANCE

2012/13 2011/12Restated

Notes r’000 r’000

REVENUE FROM NON-EXCHANGE TRANSACTIONS 2 270 798 2 032 771 Skills development levies 2 2 254 021 2 012 837 State contribution 3 - 19 934 Other income 4 16 777 -

rEVEnuE FroM ExCHanGE tranSaCtionS 428 113 418 321 Finance income 5 389 518 409 601 Other income 6 38 595 8 720

totaL rEVEnuE 2 698 910 2 451 092

ExPEnSES 2 664 330 1 387 617 Grant disbursements 7 2 579 535 1 304 949 Employee costs 8 17 732 14 051 Operating expenses 9 16 402 18 259 Management fees and bank charges 10 2 008 2 018 Collection costs to SARS 48 631 48 339 Depreciation 11 22 1

nEt SurPLuS For tHE yEar ** 34 580 1 063 475

** The National Skills Fund’s mandate is to fund skills development as outlined in the Skills Development Act. Hence, the nature of the Fund is developmental and not profit-driven. Therefore, the decrease in the National Skills Fund’s net surplus due to an increase in grants disbursements is a clear indication of the Fund’s increased performance in efficient funding towards skills development.

72 NATIONAL SKILLS FUND ANNUAL REPORT : 2013

annual Financial statements | As at year-end 31 March 2013

STATEMENT OF FINANCIAL POSITION

2012/13 2011/12Restated

Notes r’000 r’000aSSEtS

non-current assets 102 6 Property, plant and equipment 11 102 6

Current assets 9 150 206 8 627 646 Deferred expenditure 12 1 721 463 1 309 360 Cash and cash equivalents 13 4 845 117 801 Financial assets at fair value through surplus / (deficit) 14 7 346 649 7 196 658 Trade and other receivables from non-exchange transactions 15 77 249 3 827

totaL aSSEtS 9 150 308 8 627 652

Current liabilities 1 470 030 981 955 Trade and other payables from non-exchange transactions 16.1 830 845 788 687 Trade and other payables from exchange transactions 16.2 14 724 6 496 Provisions 17 624 461 186 772

totaL LiaBiLitiES 1 470 030 981 955

totaL nEt aSSEtS 7 680 278 7 645 697

FunDS ContriButED By:

Capital and reservesAccumulated surplus 7 680 278 7 645 697

totaL CaPitaL anD rESErVES * 7 680 278 7 645 697

* As at year-end the NSF has committed and earmarked its entire accumulated surpluses of R7,680 billion. Through improved performance the NSF has committed and earmarked R3,746 billion against future income, over and above the commitment against the historic accumulated surpluses. Please refer to note 19.

73


STATEMENT OF COMPARISION OF BUDGET AGAINST ACTUAL AMOUNTS

approved and Final budget *

actual amounts on accrual basis

adjustments to cash basis

actual amounts on cash basis

(under) / over budget


Notes r’000 r’000 r’000 r’000 r’000 %

rEVEnuE FroM non-ExCHanGE tranSaCtionS 27.1 2 280 000 2 254 021 84 878 2 338 899 58 899 3%Skills development levies 2 280 000 2 254 021 84 878 2 338 899 58 899 3%

rEVEnuE FroM ExCHanGE tranSaCtionS 27.2 378 182 444 890 (51 675) 393 215 15 033 4%Finance income 378 182 389 518 - 389 518 11 336 3%Other income - 55 372 (51 675) 3 697 3 697 100%

totaL rEVEnuE 2 658 182 2 698 910 33 204 2 732 114 73 932 5%

ExPEnSESGrant disbursementsNSDS II 100 000 (41 566) 46 217 4 651 (95 349) -95%NSDS III 3 986 724 2 621 101 (6 594) 2 614 507 (1 372 217) -34%

HRDSA 55 226 6 665 19 435 26 100 (29 126) -53%NSA Ministerial 55 612 17 303 (853) 16 450 (39 162) -70%Government Priorities 2 177 886 1 095 713 558 622 1 654 335 (523 551) -24%DG Priorities 1 620 000 1 447 469 (597 055) 850 414 (769 586) -48%Skills Infrastructure 78 000 53 950 13 258 67 208 (10 792) -14%

Total grant disbursements 27.3 4 086 724 2 579 535 39 623 2 619 158 (1 467 566) -36%

Employee costs 27.4 39 280 17 732 (2 977) 14 755 (24 525) -62%Salaries and wages 22 000 13 428 (2 277) 11 151 (10 849) -49%Performance awards 23 504 (79) 425 402 1748%Leave paid 534 131 (131) - (534) -100%Other non-pensionable allowances 8 119 1 418 (159) 1 259 (6 860) -84%Bargaining Council 4 3 (1) 2 (2) -50%Medical aid contributions 2 500 719 (173) 546 (1 954) -78%Pension fund contributions 6 000 1 529 (157) 1 372 (4 628) -77%Overtime 100 - - - (100) -100%

74



STATEMENT OF COMPARISION OF BUDGET AGAINST ACTUAL AMOUNTS

approved and Final budget *

actual amounts on accrual basis

adjustments to cash basis

actual amounts on cash basis



Notes r’000 r’000 r’000 r’000 r’000 %

Operating expenses 27.5 38 376 16 402 (1 823) 14 579 (23 797) -62%Management fees and bank charges 2 128 2 008 - 2 008 (120) -6%Collection costs to SARS 27.6 98 791 48 631 (4 053) 44 578 (54 213) -55%Depreciation - 22 (22) - - Capital expendiure 27.7 13 100 - 118 118 (12 982) -99%

nEt SurPLuS For tHE yEar (1 620 217) 34 580 2 338 36 918 1 657 135 -102%

* The budget was prepared on the cash basis and there are no changes between the approved and final budget.

75


STATEMENT OF CHANGES IN NET ASSETS

accumulated surplus

Notes r’000

Balance as at 1 april 2011 6 582 222

Net surplus per Statement of Financial Performance 1 063 475

As originally stated 1 135 100

Prior period correction 26.4 (71 625)

Balance at 31 March 2012 7 645 697

Net surplus per Statement of Financial Performance 34 580

Balance at 31 March 2012 * * 7 680 278

* As at year-end the NSF has committed and earmarked its entire accumulated surpluses of R7,681 billion. Through improved performance the NSF has committed and earmarked R3,746 billion against future income, over and above the commitment against the historic accumulated surpluses. Please refer to note 19.

76



CASH FLOW STATEMENT

2012/13 2011/12Restated


CaSH FLoWS FroM oPEratinG aCtiVitiES

operating activitiesCash receipts from stakeholders 2 338 898 2 032 493

Levies, interest and penalties received 2 338 898 2 012 559 Other cash receipts from stakeholders - 19 934

Cash paid to stakeholders, suppliers and employees (2 691 262) (1 286 244)Project payments (2 614 796) (1 204 941)Employee costs (14 758) (13 683)Payments to suppliers and other (61 708) (67 620)

Net (increase) / decrease in working capital - (404 469)Cash generated from operations 18 (352 364) 341 780 Finance income 389 518 409 601

net cash inflow from operating activities 37 154 751 381

CaSH FLoW FroM inVEStinG aCtiVitiESAdditions to financial assets at fair value through surplus / (deficit) (149 991) (627 876)Additions to property, plant and equipment (118) (7)

net cash outflow from investing activities (150 109) (627 883)

net (decrease)/increase in cash and cash equivalents (112 955) 123 498 Cash and cash equivalents at beginning of year 117 801 (5 697)Cash and cash equivalents at end of year 13 4 845 117 801


ACCOUNTING POLICIES

77

1.1 BaSiS oF PrEParation

The financial statements have been prepared in accordance with the effective Standards

of Generally Recognised Accounting Practices (GRAP) including any interpretations,

guidelines and directives issued by the Accounting Standards Board.

The Accounting Framework of the entity, based on the preceding paragraph, is therefore

as follows:

Standards of GRAP approved and effective:

• GRAP 1: Presentation of financial statements (revised);

• GRAP 2: Cash flow statements (revised);

• GRAP 3: Accounting policies, changes in accounting estimates and errors

(revised);

• GRAP 4: The effects in changes in foreign exchange rates (revised);

• GRAP 5: Borrowing costs ;

• GRAP 6: Consolidated and separate financial statements (revised);

• GRAP 7: Investments in associates (revised);

• GRAP 8: Investments in joint ventures (revised);

• GRAP 9: Revenue from exchange transactions (revised);

• GRAP 10: Financial reporting in hyperinflationary economies (revised);

• GRAP 11: Construction contracts (revised);

• GRAP 12: Inventories (revised);

• GRAP 13: Leases (revised);

• GRAP 14: Events after reporting date (revised);

• GRAP 16: Investment property (revised);

• GRAP 17: Property, plant and equipment (revised);

• GRAP 19: Provisions, contingent liabilities and contingent assets (revised);

• GRAP 21: Impairment of Non-cash-generating Assets;

• GRAP 23: Revenue from Non-exchange Transactions (Taxes and Transfers);

• GRAP 24: Presentation of Budget Information in the Financial Statements;

• GRAP 26: Impairment of Cash-generating Assets;

• GRAP 100: Non-current assets held for sale and discontinued operations

(revised);

• GRAP 101: Agriculture;

• GRAP 102: Intangible assets;

• GRAP 103: Heritage Assets; and

• GRAP 104: Financial Instruments.


ACCOUNTING POLICIES


• IGRAP 8: Agreements for the construction of assets from exchange

transactions.

• IGRAP 9: Distributions of non-cash assets to owners.

• IGRAP 10: Assets received from customers.

• IGRAP 13: Operating leases - Incentives.

• IGRAP 14: Evaluating the substance of transactions involving the legal form of a

lease.

Approved guidelines of standard of GRAP:

• Guide 1: Guideline on Accounting for Public Private Partnerships.

Effective accrual based IPSASs:

• IPSAS 20: Related parties disclosure.

Effective IFRSs and IFRICs that are applied:

• IFRS 4 (AC 141): Insurance contracts.

• IFRS 6 (AC 143): Exploration for and evaluation of mineral resources.

• IAS 12 (AC 102): Income taxes.

• IAS 19 (AC 116): Employee benefits.

• SIC - 21 (AC 421): Income taxes: Recovery of revalued non-depreciable

assets.

Directives issued and effective:

• Directive 1: Repeal of existing transitional provisions in, and consequential

amendments to, standards of GRAP.

• Directive 2: Transitional provisions for the adoption of standards of GRAP by

Public Entities, Municipal Entities and Constitutional Institutions.

• Directive 5: Determining the GRAP reporting framework.

• Directive 7: The application of deemed cost on the adoption of standards of

GRAP.

Interpretations of the standards of GRAP approved:

• IGRAP 1: Applying the probability test on the initial recognition of exchange

revenue.

• IGRAP 2: Changes in existing decommissioning, restoration and similar

liabilities.

• IGRAP 3: Determining whether an arrangement contains a lease.

• IGRAP 4: Rights to interest arising from decommissioning, restoration and

environmental rehabilitation funds.

• IGRAP 5: Applying the restatement approach under the standard of GRAP on

financial reporting in hyperinflationary economies

• IGRAP 6: Loyalty programmes


ACCOUNTING POLICIES

79

Correction of errors is applied retrospectively in the period in which the error has occurred

in accordance with GRAP 3 requirements, except to the extent that it is impracticable to

determine the period-specific effects or the cumulative effect of the error. In such cases

the entity shall restate the opening balances of assets, liabilities and net assets for the

earliest period for which retrospective restatement is practicable.

1.3 CritiCaL juDGEMEntS, EStiMationS anD aSSuMPtionS

In the application of the NSF accounting policies management is required to make

judgements, estimations and assumptions about the carrying amounts of assets and

liabilities that are not readily apparent from other sources. The estimates and associated

assumptions are based on past experience and other factors that are considered to be

relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions

to accounting estimates are recognised in the period in which the estimate is revised

if the revision affects only that period, or in the period of the revision and future

periods if the revision affects both current and future periods. Refer to note 25 for more

detail.

1.4 PrESEntation CurrEnCy

These financial statements are presented in South African rand which is the functional

currency of the entity. Figures have been rounded of to the nearest thousand Rand

(R’000).

1.5 GoinG ConCErn aSSuMPtion

These financial statements have been prepared on the going concern basis. In assessing

whether the NSF is a going concern, the Accounting Authority has considered the fact

• SIC - 25 (AC 425): Income taxes: Changes in the tax status of an entity or its

shareholders.

• SIC - 29 (AC 429): Service concession arrangements: Disclosures.

• IFRIC 12 (AC 445): Service concession arrangements.

1.2 CHanGES in aCCountinG PoLiCiES, EStiMatES anD ErrorS

The accounting policies applied are consistent with those used to present the previous

year’s financial statements, unless explicitly stated otherwise.

The entity changes an accounting policy only if the change:

• Is required by a standard of GRAP; or

• Results in the Annual Financial Statements providing reliable and more relevant

information about the effects of transactions, other events or conditions, on the

performance or cash flow.

Changes in accounting policies that are affected by management have been applied

retrospectively in accordance with GRAP 3 requirements, except to the extent that it

is impracticable to determine the period-specific effects or the cumulative effect of

the change in policy. In such cases the entity restated the opening balances of assets,

liabilities and net assets for the earliest period for which retrospective restatement is

practicable.

Changes in accounting estimates are applied prospectively in accordance with GRAP 3

requirements. Details of changes in estimates are disclosed in the notes to the Annual

Financial Statements where applicable.


ACCOUNTING POLICIES


1.9 rEVEnuE rECoGnition

Revenue is recognised when it’s probable that future economic benefits or service

potential will flow to the entity, and the entity can measure the benefits reliably.

Accounting policy 1.9.1 on revenue from non-exchange transactions and accounting

policy 1.9.2 on revenue from exchange transactions describes the conditions under

which revenue will be recorded by the management of the entity.

In making their judgement, the management considered the detailed criteria for

recognition of revenue as set out in GRAP 9 (revenue from exchange transactions). The

management of the entity is satisfied that recognition of the revenue in the current year

is appropriate.

1.9.1 Revenue from non-exchange transactions

Revenue from non-exchange transactions refers to transactions where the entity

received revenue from another entity without directly giving approximately equal value

in exchange. Revenue from non-exchange transactions is generally recognised to the

extent that the related receipt or receivable qualifies for recognition as an asset and

there is no obligation or condition to repay the amount.

1.9.1.1 Skills development levy (SDL) income

Skills development levy (SDL) transfers are recognised when it is probable that future

economic benefits can be measured reliably, and occurs when the Department of

Higher Education and Training (DHET) makes the allocation or the payment, whichever

event comes first, to the National Skills Fund (NSF) as required by section 8 of the Skills

Development Levies Act, 1999 (Act No.9 of 1999). SDL income is measured at fair value

of the consideration received and is based on the information supplied by DHET.

that the power to collect skills development levies will enable the NSF to be considered

as a going concern for at least the next twelve months.

1.6 oFFSEttinG

Assets, liabilities, revenues and expenses have not been offset except when offsetting is

required or permitted by the standard of GRAP, IPSAS or GAAP.

1.7 CoMParatiVE inForMation

When the presentation or classification of items in the Annual Financial Statements is

amended, prior period comparative amounts are restated. The nature and reason for the

reclassification is disclosed. Where accounting errors have been identified in the current

year, the correction is made retrospectively as far as is practicable, and the prior year

comparatives are restated accordingly. Where there has been a change in accounting

policy in the current year, the adjustment is made retrospectively as far as is practicable,

and the prior year comparatives are restated accordingly.

1.8 EVEntS aFtEr rEPortinG DatE

Events after the reporting date are those events, both favourable and unfavourable,

that occur between the reporting date and the date when the financial statements are

authorised for issue. Events after reporting date that are classified as adjusting events

have been accounted for in the Annual Financial Statements. Events after reporting date

that have been classified as non-adjusting events have been disclosed in the disclosure

notes to the Annual Financial Statements.


ACCOUNTING POLICIES

81

1.9.2.2 Other income

Other income represents interest received by the training providers on the advance

payments affected by NSF based on the approved memorandum of agreement entered

into between the parties. This interest received by the training providers is utilised to

incur project expenditure on behalf of NSF.

Other income is accrued on a time proportion basis, taking into account the principal

amount outstanding and the effective interest rate over the period to maturity.

1.10 ExPEnDiturE

1.10.1 Collection costs paid to SARS

In terms of section 10(2) of the Skills Development Levies Act, 1999 (Act. No. 9 of 1999),

the Accounting Authority must, on a monthly basis as may agreed between SARS and

the Accounting Authority, settle the costs of collection by SARS from the levies paid into

the National Skills Fund. The total amount of the collection costs, may not exceed 2% of

the total amount of the levies collected by SARS.

1.10.2 NSF 10% employee costs and other operating expenses

According to section 28(2) of the Skills Development Act, 1998, the Accounting Authority

approved the utilisation of 10% of the money allocated to the fund in terms of section

8(3)(a) of the Skills Development Levies Act to administer the Fund. The utilisation of

the 10% allocation may be applied for short term employee benefits as well as other

operating expenses.

In terms of section 3(1) and 3(4) of the Skills Development Levies Act, 1999 (Act No. 9 of

1999), registered member companies pay a skills development levy of 1% of the total

payroll cost to the South African Revenue Services (SARS), who collects the levies on

behalf of the Department of Higher Education and Training.

20% of the skills development levies are paid over to the NSF and 80% to the SETAs.

National Skills Fund SDL income is set aside in terms of the Skills Development Act, 1998

(Act No. 97 of 1998) as amended for the purpose of:

2012/13 2011/12Employee costs and other operating expenditure of the NSF 10% 10%

1.9.1.2 State contributions

State contributions represents unconditional grants received from the Department of

Higher Education and Training (DHET) and are measured at fair value of the consideration

received.

1.9.2 Revenue from exchange transactions

Revenue from exchange transactions refers to revenue that accrued to the entity

directly in return for services rendered / goods sold, the value of which approximates

the consideration received or receivable.

1.9.2.1 Finance income

Finance income represents interest earned on investments and is accrued on a time

proportion basis, taking into account the principal amount outstanding and the

effective interest rate over the period to maturity.


ACCOUNTING POLICIES


1.10.4.1 Payments for training of unemployed people

The training of unemployed people is undertaken by selected training contractors on a

basis of a predetermined course fee per day. Upon completion of the training, certified

claims are submitted by training contractors upon which payments are made.

1.10.4.2 Funds allocated to training providers for skills development training

The NSF allocates funds in respect of skills development to training providers in terms

of approved memorandum of agreements entered into between the parties. Funds not

spend by the training providers at year-end are accounted for as pre-paid expenditure

in the financial statements of the NSF until the related eligible project expense are

incurred by the training providers and the relating expenditure recognised. If eligible

expenses are not incurred, the amount allocated to the training providers should be

refunded to the NSF including any accrued interest.

1.10.5 Fruitless and wasteful expenditure

Fruitless and wasteful expenditure means expenditure that was made in vain and would

have been avoided had reasonable care been exercised.

Fruitless and wasteful expenditure is recognised as expenditure in the Statement of

Financial Performance according to the nature of the payment and not as a separate

line item on the face of the statement. If the expenditure is recoverable it is treated as an

asset until it is recovered from the responsible person or written off as irrecoverable in

the Statement of Financial Performance.

1.10.3 Short term employee benefits

Short term employee benefits comprise of salaries, paid annual leave, paid sick leave,

thirteenth cheques, performance bonuses and non-monetary benefits such as medical

care, housing and car allowances. The cost of short term employee benefits are charged

to the Statement of Financial Performance as employee cost in the year to which they

relate, except for non-accumulating benefits which are only recognised when the

specific event occurs.

Short term employee benefits that give rise to a present legal or constructive obligation

are included in the Statement of Financial Position as accruals in the year to which they

relate.

1.10.4 Grant disbursements

Grant disbursements comprise:

• costs that relate directly to the specific contract;

• costs that are attributable to contract activity in general and can be allocated to

the project; and

• such other costs as are specifically chargeable to the NSF under the terms of the

contract.

Grant disbursements are recognised as expenses in the period in which they are incurred.

Grant disbursements includes the following:


ACCOUNTING POLICIES

83

1.11 aSSEtS

1.11.1 Property, plant and equipment

The Director-General of the Department of Higher Education and Training is the

Accounting Authority of the Fund in terms of the PFMA and must control the Fund.

Property, plant and equipment comprise mainly of computer equipment, as all other

property, plant and equipment utilised are owned, controlled and disposed of by the

Department of Higher Education and Training. Property, plant and equipment are stated

at historical cost less depreciation. Historical cost includes expenditure that is directly

attributable to the acquisition of the items.

Depreciation is calculated using the straight-line method to allocate their cost to their

residual values over their estimated useful lives, as follows:

Computer equipment 3 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at

the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the

asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the

carrying amount and are recognised within net surplus/(deficit) in the Statement of

Financial Performance.

1.10.6 Irregular expenditure

Irregular expenditure comprises expenditure, other than unauthorised expenditure,

incurred in contravention of or that is not in accordance with a requirement of any

applicable legislation, including: the Public Finance Management Act 1 of 1999 (as

amended by Act 29 of 1999); the State tender Board Act, 1968 (Act No. 86 of 1968, or

any regulation made in terms of that Act); or any provincial legislation providing for the

procurement procedures in that provincial government.

Irregular expenditure is recognised as expenditure in the Statement of Financial

Performance. If the expenditure is not condoned by the relevant authority it is treated

as an asset until it is recovered or written off as irrecoverable.

1.10.7 Unauthorised expenditure

Unauthorised expenditure is the overspending of a vote or a main division within a vote;

or expenditure that was not made in accordance with the purpose of a vote or, in the

case of a main division, not in accordance with the purpose of the main division.

When unauthorised expenditure is discovered it is recognised as an asset in the

Statement of Financial Position until such time that the expenditure is either approved

by the relevant authority, recovered from the responsible person or written off as

irrecoverable in the Statement of Financial Performance.

Unauthorised expenditure approved with funding is recognised in the Statement of

Financial Performance when the unauthorised expenditure is approved and the related

funds are received. Where the amount is approved without funding it is recognised

as expenditure, subject to the availability of savings, in the Statement of Financial

Performance on the date of approval.


ACCOUNTING POLICIES


1.11.5 Cash and cash equivalents

Cash includes cash on hand (including petty cash) and cash with banks (including call

deposits). Cash equivalents are short-term highly liquid investments, readily convertible

into known amounts of cash, that are held with registered banking institutions with

maturities of three months or less and are subject to an insignificant risk of change in

value.

In terms of section 29(2) of the Skills Development Act, 1998 (Act No.97 of 1998)

any money in the fund not required for immediate use should be invested with the

Public Investment Corporation (PIC). Cash and cash equivalents are measured at fair

value.

For purposes of the Cash Flow Statement, cash and cash equivalents comprise cash on

hand, deposits held at call with banks and investments in financial instruments.

1.12 LiaBiLitiES

1.12.1 Defined contribution plans

A defined contribution plan is a plan under which the entity pays fixed contributions

into a separate entity. The entity has no legal or constructive obligation to pay further

contributions if the fund does not hold sufficient assets to pay all employees the benefits

relating to service in the current or prior periods.

The NSF provides for retirement benefits for all its permanent employees through a

defined contribution scheme that is subject to the Pension Funds Act, 1956 as amended.

In terms of the Pension Funds Act, the fund is not required to be actuarially valued.

Contributions are at a rate of 13% of pensionable emoluments. The entity’s contributions

1.11.2 Property, plant and equipment acquired by project implementing agencies for NSF special projects

Property, plant and equipment acquired by project implementing agencies for NSF

special projects are capitalised in the financial statements of the respective agencies,

as the agencies control such assets for the duration of the project. Such assets could

however, only be disposed of in terms of an agreement and specific written instructions

by the NSF.

1.11.3 Deferred expenditure

Deferred expenditure represents grant disbursement made in advance to training

providers based on the signed memorandum of agreement between the parties.

Deferred expenditure can be classified as either paid (cash flow payments were made)

or incurred based on the stipulations contained in the memorandum of agreements.

Deferred expenditure paid reflects the outstanding capital amounts as well as accrued

interest received by the training providers at financial year-end. NSF will only be

entitled to the unspent funds, including any accrued interest, at the end of the project

term.

Deferred expenditure is initially recognised at cost and subsequently measured at fair

value less any provision for impairment.

1.11.4 Advances

Amounts advanced are initially recognised at fair value and subsequently measured

at amortised cost using the effective interest method, less provision for impairment.

The provision is made in accordance with IAS 39.64 whereby the recoverability of the

outstanding advance is assessed individually and then collectively after grouping the

assets in financial assets with similar credit risks characteristics.


ACCOUNTING POLICIES

85

has been approved, but has not been accrued for or provided for, it is disclosed as

commitments in the notes to the financial statements.

1.12.4 Provisions

In terms of GRAP 19 a provision is defined as a liability of uncertain timing or amount.

Provisions can be distinguished from other liabilities such as payables and accruals,

because there is uncertainty about the timing or amount of the future expenditure

required in settlement.

1.12.4.1 Provision for projects

Due to the nature of the NSF operations, numerous contracts exists that requires

management estimation and judgement to determine the provision amount at financial

year-end relating to possible services rendered on these contracts not yet invoiced /

claimed by the training providers.

Provision for projects are estimated on an annual basis. These estimates and underlying

assumptions are reviewed on an ongoing basis. For purposes of the provision calculations

management deems the training be rendered equally over the original contract term.

These estimates are based on the remaining portion of the contract for a specific year

that has not been invoiced / claimed by the training providers. Actual results may differ

from these estimates. Provisions recognised for the relevant financial year is deducted

from the remaining contract commitment.

1.12.4.2 Provision for levies paid below threshold

Section 4(b) of the Skills Development Levies Act, No. 9 of 1999, stipulates that

employers with a total yearly remuneration expense of below R500 000 are exempt from

contributing skills development levies. In practice it does happen that some of these

to the defined contribution scheme are established in terms of the rules governing the

scheme.

Contributions are recognised in the Statement of Financial Performance in the period

in which the service is rendered by the relevant employees. The entity has no further

payment obligations once the contributions have been paid.

1.12.2 Leave and bonus accruals

The entity has opted to treat its provision for leave and bonus pay as an accrual.

The cost of all short-term employee benefits is recognised during the period in which

the employee renders the related service. Employee entitlements are recognised

when they accrue to employees. An accrual is recognised for the estimated liability as

a result of services rendered by employees up to the reporting date. Accruals related

to employee benefits included in the Statement of Financial Position includes annual

leave, capped leave, thirteenth cheque as well as performance bonus commitments at

year-end (based on current salary rates).

The liability for leave pay is based on the total accrued leave days at year-end and is

shown as an accrual in the Statement of Financial Position. The entity recognises the

expected cost of performance bonuses only when the entity has a present legal or

constructive obligation to make such payment and a reliable estimate can be made.

No accrual is made for post retirement benefits, as the NSF does not provide for such

benefits for its employees.

1.12.3 Accrual for projects

No accrual is made for projects approved at year-end, unless the service in terms of the

contract has been delivered or the contract is of an onerous nature. Where a project


ACCOUNTING POLICIES


1.13.1 Financial assets - classification

A financial asset is any asset that is a cash or contractual right to receive cash. The entities

principle financial assets as reflected on the face of the Statement of Financial Position

are classified as follows:

• Cash and cash equivalents;

• Financial assets at fair value through surplus / (deficit); and

• Trade and other receivables.

In accordance with GRAP 104 the financial assets of the entity are classified as follows

into the categories as allowed by the standard:

Type of financial asset Classification in terms of GRAP 104

Cash and cash equivalents Loans and receivables

Financial assets at fair value through

surplus or deficitHeld at fair value through surplus or deficit

Trade and other receivables Loans and receivables

Cash includes cash on hand (including petty cash) and cash with banks (including call

deposits). Cash equivalents are short-term highly liquid investments, readily convertible

into known amounts of cash, that are held with registered banking institutions with

maturities of three months or less and are subject to an insignificant risk of change in

value. For purposes of the Cash Flow Statement, cash and cash equivalents comprise

cash on hand, deposits held at call with banks and investments in financial instruments.

The entity categorises cash and cash equivalents as financial assets: Loans and

receivables.

exempted employers contribute skills development levies. As a result, they are entitled

to claim their contributions back. There is uncertainty over the timing and amount of

the provision for levies paid below threshold, as the NSF does not know the amount or

time of contributions that will be claimed back in the future. For purposes of calculating

the provision management expects the future claims to be in line with the historic levies

less than threshold claimed back. The historic levies less than thresshold claimed back in

comparison with total skills development levies received is used as a basis for estimating

the provision.

1.12.4.3 Provision for performance bonuses

Performance bonuses are provided for based on the NSF’s past practice to pay annual

performance bonuses. Uncertainty exists over the amount and the timing of the

performance bonuses as NSF has not yet completed the performance assessments at

year-end and determined the performance bonus payable. Management estimates the

performance bonus payable to be in line with the prior period’s performance bonus

paid with an average increase for inflation.

1.13 FinanCiaL inStruMEntS

The entity has various types of financial instruments and these can be broadly

categorised as either financial assets or financial liabilities. The classification of financial

assets and liabilities, into categories, is based on judgement by management.

Financial assets and financial liabilities are recognised on the NSF Statement of

Financial Position when the NSF becomes a party to the contractual provisions of the

instrument.

Financial instruments are initially measured at fair value. Subsequent to initial recognition

these instruments are measured as set out below.


ACCOUNTING POLICIES

87

Financial liabilities that are measured at fair value through profit or loss are financial

liabilities that are essentially held for trading (i.e. purchased with the intention to sell

or repurchase in the short term; derivatives other than hedging instruments or are part

of a portfolio of financial instruments where there is recent actual evidence of short-

term profiteering or are derivatives). Financial liabilities that are measured at fair value

through profit or loss are stated at fair value, with any resulted gain or loss recognised in

the Statement of Financial Performance.

Any other financial liabilities are classified as Other Financial Liabilities and are initially

measured at fair value. Other Financial Liabilities are subsequently measured at

amortised cost using the effective interest method, with interest expense recognised

on an effective yield basis.

In accordance with IAS 39.09 the Financial Liabilities of the entity are all classified as

“Other Financial Liabilities”.

1.13.3 Initial and subsequent measurement

1.13.3.1 Financial Assets: Financial assets at fair value through surplus/deficit

Money market financial instruments are initially and subsequently measured at fair value.

It is the policy of NSF to account for changes in the fair value of monetary securities

classified at fair value, through the Statement of Financial Performance. The fair value

adjustment is calculated between the difference of the market value at the end of the

reporting period and the cost of the investment. These investments are revaluated once

a year at the end of the reporting period.

Financial assets at fair value through surplus or deficit are financial assets that meet

either of the following conditions:

• They are classified as held for trading; or

• Upon initial recognition they are designated as at fair value through the

Statement of Financial Performance.

Loans and receivables are non-derivative financial assets with fixed or determinable

payments that are not quoted in an active market. They are included in current assets,

except for maturities greater than twelve months, which are classified as non-current

assets. Loans and receivables are initially measured at cost which represents fair value.

After initial recognition financial assets are measured at amortised cost, using the

effective interest method less provision for impairment.

1.13.2 Financial liabilities - classification

A financial liability is a contractual obligation to deliver cash or another financial asset

to another entity. The entity’s principal financial liabilities relates to accounts payable

which are classified as follows on the face of the Statement of Financial Position:

• Trade and other payables.

There are two main categories of financial liabilities, the classification based on how

they are measured. Financial liabilities may be measured at:

• Fair value through profit or loss; or

• At amortised cost using the effective interest method.


ACCOUNTING POLICIES


A provision for impairment of accounts receivable is established when there is objective

evidence that NSF will not be able to collect all amounts due according to the original

terms of the receivables. The amount of the provision is based on long outstanding non-

active supplier contracts where the recovery of the outstanding amount is uncertain

as no new contracts exist for the recovery of the outstanding balance. Based on past

default experience it is the policy of the entity to provide for 50% of non-active contracts

between 180 days and 270 days outstanding and 100% of non-active contracts

exceeding 270 days.

The carrying amount of the financial asset is reduced by the impairment loss directly for

all financial assets with the exception of trade receivables, where the carrying amount

is reduced through the use of an allowance account. Changes in the carrying amount

of the allowance account are recognised in the Statement of Financial Performance.

When the receivable is uncollectable, it is written off against the allowance account.

Subsequent recoveries of amounts previously written off are credited to the Statement

of Financial Performance.

1.13.5 Impairment and gains and losses from subsequent measurement

With the exception of Available-for-Sale equity instruments, if, in a subsequent

period, the amount of the impairment loss decreases and the decrease can be related

objectively to an event occurring after the impairment was recognised, the previously

recognised impairment loss is reversed through the Statement of Financial Performance

to the extent that the carrying amount of the investment at the date the impairment is

reversed does not exceed what the amortised cost would have been had the impairment

not been recognised.

1.13.3.2 Financial Assets: Trade and other receivables

Trade and other receivables are initially recognised at fair value and subsequently

measured at amortised cost using the effective interest method, less provision for

impairment.

1.13.3.3 Financial liabilities: Trade and other payables

Trade and other payable financial instruments are measured at amortised cost using

the effective interest rate method. Accruals represent goods/services that have been

received together with an accompanied invoice, but final authorisation to affect

payment has not been effected. Accruals are recognised in the Statement of Financial

Position as trade and other payables.

1.13.4 Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for

indicators of impairment at each balance sheet date. Financial assets are impaired where

there is objective evidence of impairment of Financial Assets (such as the probability of

insolvency or significant financial difficulties of the debtor). If there is such evidence the

recoverable amount is estimated and an impairment loss is recognised in accordance

with GRAP 104.

Accounts receivable are initially valued at cost, which represents fair value, and

subsequently carried at amortised cost using the effective interest rate method. An

estimate is made for a provision for impairment based on past default experience of

all outstanding amounts at year-end. Bad debts are written off the year in which they

are identified as irrecoverable. Amounts receivable within 12 months from the date of

reporting are classified as current.


ACCOUNTING POLICIES

89

1.13.8 Fair value considerations

The fair values at which financial instruments are carried at the balance sheet date have

been determined using available market values. Where market values are not available,

fair values have been calculated by discounting expected future cash flows at prevailing

interest rates. The fair values have been estimated using available market information

and appropriate valuation methodologies, but are not necessarily indicative of the

amounts that the NSF could realise in the normal course of business. The carrying

amounts of financial assets and financial liabilities with a maturity of less than one year

are assumed to approximate their fair value due to the short-term trading cycle of these

items.

1.13.9 Risk management of financial assets and liabilities

It is the policy of the entity to disclose information that enables the user of its financial

statements to evaluate the nature and extent of risks arising from financial instruments

to which the entity is exposed on the reporting date.

Risks and exposure are disclosed as follows:

1.13.9.1 Credit risk:

• Each class of financial instrument is disclosed separately.

• Maximum exposure to credit risk not covered by collateral is specified.

• Financial instruments covered by collateral are specified.

Gains and losses arising from a change in the fair value of available-for-sale financial

assets are recognised in equity, until the investment is disposed of or is determined to

be impaired, at which time the net profit or loss is included in the net profit or loss for

the period.

1.13.6 Derecognition of financial assets

A financial asset or a portion thereof is derecognised when the NSF realises the

contractual rights to the benefits specified in the contract, the rights expire, the NSF

surrenders those rights or otherwise loses control of the contractual rights that comprise

the financial asset. On derecognition, the difference between the carrying amount of

the financial asset and the sum of the proceeds receivable and any prior adjustment

to reflect the fair value of the asset that had been reported in equity is included in net

profit or loss for the period.

If the entity neither transfers nor retains substantially all the risks and rewards of

ownership and continues to control the transferred asset, the entity recognises its

retained interest in the asset and an associated liability for amounts it may have to pay.

If the entity retains substantially all the risks and rewards of ownership of a transferred

financial asset, the entity continues to recognise the financial asset and also recognises

a collateralised borrowing for the proceeds received.

1.13.7 Derecognition of financial liabilities

A financial liability or a part thereof is derecognised when the obligation specified in the

contract is discharged, cancelled, or expires. On derecognition, the difference between

the carrying amount of the financial liability, including related unamortised costs, and

the amount paid for it is included in net profit or loss for the period.


ACCOUNTING POLICIES


with related parties not at arm’s length or not in the ordinary course of business are

disclosed.

1.14.2 Key management personnel

Key management personnel is defined as being individuals with the authority and

responsibility for planning, directing and controlling the activities of the entity, including

those charged with the governance of the entity in accordance with legislation, in

instances where they are required to perform such functions. Close members of the

family of a person are considered to be those family members who may be expected to

influence or be influenced by management in their dealings with the entity.

The Executive Officer of NSF on post level 14 is currently regarded as being at

key management level including senior management on level 13 within the NSF.

Transactions conducted with key management, as well as with close family members

of key management, is regarded as related party transactions. Only transactions

with related parties not at arm’s length or not in the ordinary course of business are

disclosed.

1.15 CoMMitMEntS

Commitments include expenditure approved and contracted as well as expenditure

approved but not yet contracted. Approved and contracted commitments includes

expenditure that has been approved and the contract has been awarded at the reporting

date. Approved but not yet contracted commitments includes expenditure that has

been approved and the contract has yet to be awarded or is awaiting finalisation at the

reporting date.

1.13.9.2 Liquidity risk:

• A maturity analysis for financial assets and liabilities that shows the remaining

contractual maturities.

• Liquidity risk is managed by ensuring that all assets are reinvested at maturity

at competitive interest rates in relation to cash flow requirements. Liabilities are

managed by ensuring that all contractual payments are met on a timeous basis

and, if required, additional new arrangements are established at competitive

rates to ensure that cash flow requirements are met.

• A maturity analysis for financial liabilities (where applicable) that shows the

remaining undiscounted contractual maturities is disclosed in note 20 to the

Annual Financial Statements.

1.14 rELatED PartiES

1.14.1 Related party transactions

Parties are considered to be related if one party has the ability to control the other party

or exercise significant influence over the other party in making financial and operating

decisions or if the related party entity and another entity are subject to common

control.

Related party transactions are classified by the entity as those transactions between

related parties other than transactions that would occur within a normal supplier or

client/recipient relationship on terms and conditions no more or less favourable than

those which it is reasonable to expect the entity would have adopted if dealing with

that individual or entity at arm’s length in the same circumstances. Only transactions


ACCOUNTING POLICIES

91

Application of all of the above GRAP standards will be effective from the date as

announced by the Minister of Finance. Currently not all of these dates have been

announced.

Management has considered all of the above-mentioned GRAP standards issued (both

effective and not effective) and anticipates that the adoption of these standards will

not have a significant impact on the financial performance, financial position or cash

flows of the entity since the principals are similar to those already applied under the

equivalent Statements of SA GAAP and embodied into the financial statements.

1.16 ContinGEnt aSSEtS anD ContinGEnt LiaBiLitiES

Management judgement is applied when measuring and disclosing contingent assets

and liabilities. The probability that an inflow or outflow of economic resources will occur

due to past events, which will only be confirmed by the occurrence or non-occurrence

of one or more future events as well as any possible financial impact is disclosed based

on management estimation in the disclosure notes.

1.17 CoMParatiVE FiGurES

Where necessary, comparative figures have been adjusted to conform to changes in

presentation in the current financial year.

1.18 StanDarDS anD aMEnDMEntS to StanDarDS iSSuED But not yEt EFFECtiVE

The following GRAP standards have been issued but are not yet effective and have not

been early adopted by the entity:

• GRAP 18: Segment reporting;

• GRAP 25: Employee benefits (Effective date: Not announced);

• GRAP 105: Transfer of functions between entities under common control

(Effective date: Not announced);

• GRAP 106: Transfers of functions between entities not under common control

(Effective date: Not announced); and

• GRAP 107: Mergers (Effective date: Not announced).

92


NOTES TO THE ANNUAL FINANCIAL STATEMENTS


2012/13 2011/12Notes r’000 r’000

2. SkiLLS DEVELoPMEnt LEViES (non-ExCHanGE rEVEnuE)

In terms of the Skills Development Act and the Skills Development Levies Act, the total levy income per the Statement of Financial Performance is as follows:

Percentage of payroll payable as Skills Development Levy 1% 1%

Skills Development Levies received from SarS (20%):

Skills Development Levies received 2 338 899 2 003 839 Skills Development Levies collected by SARS 11 694 493 10 037 394 Less: Amount withheld by the Department of Higher Education and Training and paid to the SETAs (80%) (9 355 595) (8 033 555)Movement in Provision for levies less than threshold 9 642 8 998 Less: Accrual for UIF contribution to NSF 16.1 (94 520) -

total 2 254 021 2 012 837

3. StatE ContriBution (non-ExCHanGE rEVEnuE)

Transfer payments received from the Department of Higher Education and Training (DHET) - 19 934

4. otHEr inCoME (non-ExCHanGE rEVEnuE)

Provision for impairment reversed 25.2 16 777 -

5. FinanCE inCoME (ExCHanGE rEVEnuE)

Interest incomeInvestments - Public Investment Corporation (PIC) 14 388 786 409 252 Interest - other 731 349

total 389 518 409 601

Finance income from the Public Investment Corporation (PIC) is disclosed net of realised fair value profits of R0,00 million (2012: R0,00 million) relating to financial assets that matured during the current financial year.

93



2012/13 2011/12Restated

Notes r’000 r’0006. otHEr inCoME (ExCHanGE rEVEnuE)

Interest received from advance payments 38 595 8 720

Interest received is from advance payments made by the NSF to skills development project providers in terms of the agreed Memorandum of Agreements between the parties. In terms of these agreements the interest may be applied to incur training expenditure on behalf of the Fund. On contract finalisation, any remaining accrued interest should be returned to the Fund.

7. Grant DiSBurSEMEntS

nSa Ministerial 17 303 2 922 National Public Dialogue and Advocacy 3 134 2 922 NSA -Constituency Capacity Building 14 169 -

Government Priorities 1 095 713 314 579 New Growth Path 222 087 166 347 Industrial Policy Action Plan 43 385 2 154 Rural Development 113 017 30 163 Education and Health 12 593 26 524 Justice and Crime Prevention 131 032 50 439 Co-operatives and Small Enterprises 129 246 38 952 Public Sector Capacity 444 353 -

DG Priorities 1 447 469 829 823 Worker Education 4 584 1 789 Skills System Capacity Building (2 511) 10 793 Training Lay-off 39 483 10 336 Academia, Research and Development 390 7 706 Bursaries 1 238 398 799 199 DHET Projects 167 125 -

Skills infrastructure 53 950 1 068 Community Education Centres 32 838 1 068 Public Delivery Infrastructure 21 113

HrDSa 6 665 - Research 6 665 -

94




2012/13 2011/12Restated

Notes r’000 r’0007. Grant DiSBurSEMEntS (continued)

nSDSii (41 566) 156 557 Critical Skills Support (4 980) 51 186 Industry Support Programme * (3 280) 2 597 Informal Sector Support - 12 156 Discretionary and Innovation (993) 30 736 Strategic Projects * (32 394) 66 384 ABET * 24 (476)Constituency Capacity Building and Advocacy * - (2 699)Social Development * 56 (3 327)

total 2 579 535 1 304 949

* These negative amounts refer to over-provisions relating to projects during the previous 2010/11 and 2011/12 financial year.

Included in the amount for the current financial year is an amount of R5,906 million (2012: R2,152 million) affected through a change in an accounting estimate. Refer to note 25 for more detail.

95



2012/13 2011/12Notes r’000 r’000

8. EMPLoyEE CoStS

Salaries and wages 15 481 12 094 Basic salaries 12 357 9 781 Performance awards 504 445 Service bonuses 968 739 Other non-pensionable allowances 1 418 1 184 Net movement: Leave accrual 131 (88)Net movement: Service bonus accrual 103 33

Social contributions 2 251 1 957 Provident fund contributions: defined contribution plans 24 1 529 1 356 Medical aid contributions 719 599 Bargaining council 3 2

total 17 732 14 051

Average number of employees 56 37

96




2012/13 2011/12Restated


9. oPEratinG ExPEnSES

Consultancy and service provider fees * 3 778 5 757 External Auditor’s remuneration 2 612 3 846 Internal Auditor’s remuneration 1 029 - Provision for impairment 15.4 - 995 Telephone and Fax 284 500 Travel and subsistence 3 233 2 606 Printing and Publications - 8 Entertainment 9 - Operating Leases 140 107 Catering (60) 194 Venues and Facilities 4 812 3 919 Stationery 310 259 Office furniture purchases <R5,000 - 39 Computer equipment purchases <R5,000 45 13 Cleaning services 2 2 Training and development 160 14 Repairs and maintenance 36 -Education and training practices SETA 10 -Courier and delivery 1 -Laundry Services 1 -

-total 16 402 18 259

* The consulting and service provider fees relates to services provider to assist with the execution of the cash to accrual conversion, including the implementation of an accrual accounting system.

97



2012/13 2011/12Notes r’000 r’000

10. ManaGEMEnt FEES anD Bank CHarGES

Bank charges paid to commercial banks 11 7 Management fees paid to Public Investment Corporation (PIC) 14 1 997 2 011

total 2 008 2 018

11. ProPErty, PLant anD EQuiPMEnt Computer

equipment total

r’000 r’000

at 31 March 2013reconciliation of cost to net book value

Cost 125 125 Accumulated depreciation (23) (23)

Carrying value at 31 March 2013 102 102

year ended 31 March 2013reconciliation of opening and closing net book value

Opening carrying value 6 6 Additions 118 118 Depreciation (22) (22)

Closing carrying value at 31 March 2013 102 102

98




11. ProPErty, PLant anD EQuiPMEnt (continued)

Computer equipment

total

restated restatedr’000 r’000

at 31 March 2012reconciliation of cost to net book value

Cost 7 7 Accumulated depreciation (1) (1)

Carrying value at 31 March 2012 6 6

year ended 31 March 2012reconciliation of opening and closing net book value

Opening carrying value - - Additions 7 7 Depreciation (1) (1)

Closing carrying value at 31 March 2012 6 6

Computer equipment relates to printers, CPUs, notebooks and monitors.

99



2012/13 2011/12Restated


12. DEFErrED ExPEnDiturE

SETA Deferred expenditure - paid 12.1 7 109 43 335 SETA Deferred expenditure - incurred 12.2 - 3 994 Other project deferred expenditure - paid 1 227 099 673 412 Other project deferred expenditure - incurred 487 255 588 619

1 721 463 1 309 360

Deferred expenditure represents grant disbursement made in advance to training providers based on the signed memorandum of agreement between the parties. Deferred expenditure can be classified as either paid (cash flow payments were made) or incurred based on the stipulations contained in the memorandum of agreements.

Deferred expenditure paid reflects the outstanding capital amounts as well as accrued interest received by the training providers at financial year-end. NSF will only be entitled to the unspent funds, including any accrued interest, at the end of the project term.

12.1 SEta Deferred expenditure at financial year end - paid

MERSETA - Artisan Project 1 973 - MERSETA - Training lay-off 2 519 35 403 FP&M SETA - 1 260 MICT SETA - 348 AGRISETA & Commissioner for Land Rights Restitution 2 617 1 643 PSETA - 4 681

total 7 109 43 335

100




2012/13 2011/12Notes r’000 r’000

12.2 SEta Deferred expenditure at financial year end - incurred

FP&M SETA - 514 MERSETA - Artisan Project - 3 480

total - 3 994

13. CaSH anD CaSH EQuiVaLEntS

Cash at bank 4 845 117 801

Cash and cash equivalents at year-end 4 845 117 801

As required in Treasury Regulation 31.2, National Treasury approved the banks where the NSF bank accounts are held. The weighted average interest rate on short term bank deposits was 5.51% for the financial year (2012: 5.79%).

Cash includes cash with commercial banks. Cash equivalents are short term, highly liquid investments that are held with registered banking institutions with maturities of three months or less and that are subject to an insignificant risk of change in value.

For purposes of the Cash Flow Statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks, net of bank overdrafts.

101



2012/13 2011/12Notes r’000 r’000

14. FinanCiaL aSSEtS at Fair VaLuE tHrouGH SurPLuS / (DEFiCit)

It is the policy of NSF to account for changes in the fair value of monetary securities classified as held for trading through the Statement of Financial Performance. The fair value adjustment is calculated as the difference between the market value at the end of the reporting period and the cost of the investment. These investments are revalued once a year at the end of the reporting period by the Public Investment Corporation (PIC). The latest revaluation was performed on 31 March 2012.

Composition at fair valueInvestments with the Public Investment Corporation (PIC) 7 346 649 7 196 658

Financial assets at fair value through surplus / (deficit) can be reconciled as follows:

Balance at the beginning of the year 7 196 658 6 568 782 Invested during the year 1 853 202 1 870 635 Interest received and capitalised 5 388 786 409 252 Management fees 10 (1 997) (2 011)Withdrawal (2 090 000) (1 650 000)

Closing balance end of year (none of the financial assets are impaired) 7 346 649 7 196 658

The NSF has committed its entire invesment balance as at year-end. Refer to note 19.

NSF assesses at each reporting date whether there is objective evidence that a financial asset or group financial assets are impaired. None of the financial assets at fair value through surplus / (deficit) are impaired on reporting date.

The Skills Development Act Regulations state that the NSF may, if not otherwise specified by the Public Finance Management Act, invest the moneys in accordance with the approved NSF investment policy.

Treasury Regulation 31.3 requires that, unless exempted by the National Treasury, the NSF as a public entity that is listed in Schedule 3A of the Public Finance Management Act must invest surplus funds with the Corporation for Public Deposits. The NSF obtained exemption from National Treasury to invest surplus funds with the Public Investment Corporation (PIC) in accordance the NSF’s investment policy.

102




2012/13 2011/12Notes r’000 r’000

15. traDE anD otHEr rECEiVaBLES FroM non-ExCHanGE tranSaCtionS

Current

the carrying and fair value of trade and other receivables are as follows:

SETA debtors 15.1 & 15.3 33 703 1 388 Carrying amount 45 142 29 604 Less: Provision for impairment 15.4 (11 439) (28 216)

Advances to training providers for payment of allowances 15.4 - - Carrying amount 5 180 5 180 Less: Provision for impairment 15.4 (5 180) (5 180)

Trade debtors 15.2 43 546 2 439

total 77 249 3 827

15.1 SEta debtors at financial year end

MQA 3 326 1 085 MERSETA (Artisan project) 4 4 ETDP SETA 54 54 FOODBEV 245 245 MAPPPSETA (MICT SETA) 36 - PSETA 30 038 -

total 33 703 1 388

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15.2 ageing of trade and other receivables

Trade and other receivables are all considered for impairment. Based on past default experience it is the policy of the entity to provide for 50% of non-active contracts between 180 days and 270 days outstanding and 100% of non-active contracts exceeding 270 days. At 31 March 2013, R77 thousand (2012: R69 thousand) were more than 180 days past due but not impaired due to the immateriality of the amounts as well as the possibility of recovery of these debtors. The ageing is stipulated as follows:

2013 2013 2013 2013 2013Current 31 to 180 days 181 to 270 days over 270 days total

r’000 r’000 r’000 r’000 r’000

Trade debtors 2 231 41 238 - 77 43 546

total 2 231 41 238 - 77 43 546


r’000 r’000 r’000 r’000 r’000

Trade debtors 2 369 - 27 43 2 439

total 2 369 - 27 43 2 439

104




15.3 ageing of trade and other receivables impaired

As at 31 March 2013, gross trade and other receivables of R45,142 million (2012: R34,783 million) were impaired and provided for. The amount of the provision is R16,619 million as at 31 March 2013 (2012: R33,396 million). The ageing of the impaired trade and other receivables (net R33,703 million, 2012: R1,388 million) are stipulated as follows:


r’000 r’000 r’000 r’000 r’000

SETA debtors 3 477 - 13 146 17 080 33 703

total 3 477 - 13 146 17 080 33 703


r’000 r’000 r’000 r’000 r’000

SETA debtors 1 143 - - 245 1 388 Advances to training providers for payment of allowances - - - - -

Total 1 143 - - 245 1 388

105



2012/13 2011/12Notes r’000 r’000

15.4 reconciliation of provision for impairment

Opening balance 33 396 32 401 (Utilised) / Provided during the year 9 - 995 Provision reversed during the year 4 & 25.2 (16 777) -

total 16 619 33 396

Current year provision attributable to:

Social Development training allowances:Opening balance 5 180 4 185 (Utilised) / Provided during the year - 995 Balance at year-end 5 180 5 180 SEta Debtors: PSEta 11 439 28 216 Opening balance 28 216 28 216 (Utilised) / Provided during the year - - Provision reversed during the year (16 777) -

total 16 619 33 396

Trade and other receivables are individually impaired when there is objective evidence that the asset is impaired. The creation and release of the provision for impaired receivables have been included in operating expenses (note 9) and other income (note 4) in the Statement of Financial Performance. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable as mentioned above.

Credit quality of trade and other receivables

Management considers that all of the above financial assets are of good credit quality. Trade receivables from the SETAs, excluding a portion of the PSETA’s debt, are considered recoverable and of good credit quality. R11,439 million from the PSETA’s trade receivables are not considered recoverable. The maximum exposure to credit risk at reporting date is the fair value of each class of receivables as mentioned above.

106




2012/13 2011/12Notes r’000 r’000

16. traDE anD otHEr PayaBLES

16.1 traDE anD oHEr PayaBLES FroM non-ExCHanGE tranSaCtionS

Trade payables 699 257 720 631 SETA payables 16.3 37 068 68 056 SARS accrual: UIF to be refunded 94 520 -

830 845 788 687

16.2 traDE anD oHEr PayaBLES FroM ExCHanGE tranSaCtionS

Trade payables 2 058 1 536 SARS Payable 4 054 - Other payables due to Department of Labour (DoL) - 661 Other payables due to Department of Higher Education and Training (DHET) 7 490 3 410 Leave and bonus accruals 16.4 1 122 889

total 14 724 6 496

16.3 SEta payables at financial year end

SERVICES SETA 37 068 37 068 FP&M SETA - 1 543 MERSETA - Training Lay-off - 27 907 MICT SETA - 145 AGRISETA & Commissioner for Land Rights Restitution - 1 314 ETDPSETA - 79

total 16.1 37 068 68 056

107



2012/13 2011/12Notes r’000 r’000

16.4 Leave and bonus accrual

Balance at the beginning of the year 889 944 Amounts utilised during the year (889) (88) Amount recognised during the year 1 122 33

Closing carrying amount 16.2 1 122 889

Leave and bonus accrual composition:

Current

Leave accrual 681 550 Bonus accrual (Thirteenth cheque) 441 339

total 16.2 1 122 889

Leave is calculated based on leave days outstanding at year-end and quantified in terms of total cost of employment per employee. The bonus accrual relates to thirteenth cheque commitments owed to NSF employees at financial year-end.

17. ProViSionS

Contract expenditure provisions 17.1 616 313 169 061 Provision for levies less than threshold 17.2 7 644 17 286 Performance bonus provision 17.3 504 425

total 624 461 186 772

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objectives (2012/13)Carrying value

at the beginning of year

additional provisions

utilised during the year

Carrying value at the end of

yearr’000 r’000 r’000 r’000

17.1 Contract expenditure provisions

nSDS iiinSa Ministerial - 3 212 - 3 212

NSA Constit Capacity Building - 3 212 - 3 212 National-Public Dialogue & Advocacy - - - -

Government Priorities 115 311 568 825 (115 311) 568 825 New Growth Path 74 537 88 233 (74 537) 88 233 Industrial Policy Action Plan 1 156 6 384 (1 156) 6 384 Rural Development 27 675 19 849 (27 675) 19 849 Education and Health 1 060 472 (1 060) 472 Justice and Crime prevention 3 390 38 484 (3 390) 38 484 Co-operatives and Small Enterprises 7 493 46 978 (7 493) 46 978 Public Sector Capacity - 368 425 - 368 425

DG Priorities 11 335 18 469 (11 335) 18 469 Worker Education 6 1 208 (6) 1 208 Skills System Capacity Building 6 617 6 690 (6 617) 6 690 Training lay-off 1 871 - (1 871) - Academia, Research and Development 2 841 - (2 841) - Bursaries - - - - DHET Projects - 10 571 - 10 571

Skills infrastructure 68 25 807 (68) 25 807 Community Education Centres 68 8 170 (68) 8 170 Public Delivery Infrastructure - 17 637 - 17 637

109








yearr’000 r’000 r’000 r’000

17.1 Contract expenditure provisions (continued)

HrDSa - - - - Research - - - -

nSDS ii 42 347 - (42 347) - Social Development Funding Window - - - - ABET Funding Window - - - - Critical Skills Support 2 707 - (2 707) - Industry Support Programme 3 340 - (3 340) - Informal Sector Support - - - - Constituency Capacity Building and Advocacy - - - - Discretionary and Innovation 1 402 - (1 402) - Strategic Projects 34 898 - (34 898) -

total 169 061 616 313 (169 061) 616 313

110









yearr’000 r’000 r’000 r’000


nSDS iii

Government Priorities - 115 311 - 115 311

New Growth Path - 74 537 - 74 537

Industrial Policy Action Plan - 1 156 - 1 156

Rural Development - 27 675 - 27 675

Education and Health - 1 060 - 1 060

Justice and Crime prevention - 3 390 - 3 390

Co-operatives and Small Enterprises - 7 493 - 7 493

DG Priorities - 11 335 - 11 335

Worker Education - 6 - 6

Skills System Capacity Building - 6 617 - 6 617

Training lay-off - 1 871 - 1 871

Academia, Research and Development - 2 841 - 2 841

Skills infrastructure - 68 - 68

Community Education Centres - 68 - 68

111








yearr’000 r’000 r’000 r’000


nSDS ii 69 054 42 347 (69 054) 42 347

Social Development Funding Window 9 105 - (9 105) -

ABET Funding Window 476 - (476) -

Critical Skills Support - 2 707 - 2 707

Industry Support Programme 3 727 3 340 (3 727) 3 340

Informal Sector Support 3 684 - (3 684) -

Constituency Capacity Building and Advocacy 2 804 - (2 804) -

Discretionary and Innovation - 1 402 - 1 402

Strategic Projects 49 258 34 898 (49 258) 34 898

total 69 054 169 061 (69 054) 169 061

As at 31 March 2013, contract expenditure provisions amounting to R616,313 million (2012: R169,061 million) were recognised. Provisions for projects are estimated on an annual basis. For purposes of the provision calculations management deems the training to be rendered equally over the original contract term. These estimates are based on the remaining portion of the contract for a specific year which has not been invoiced / claimed by the training providers. Provisions recognised for the relevant financial year are deducted from the remaining contractual commitments.

112




2012/13 2011/12Notes r’000 r’000

17.2 Provision for levies less than threshold

Balance at the beginning of the year 17 286 26 284 Levies less than threshold provision / (realised) for the year (9 642) (8 998)

Closing carrying amount 7 644 17 286

17.3 Performance bonus provision

Balance at the beginning of the year 425 - Performance bonus paid during the year (425) - Performance bonus provision for the year 504 425

Closing carrying amount 504 425

113



2012/13 2011/12Restated


18. rEConCiLiation oF nEt CaSH FLoW FroM oPEratinG aCtiVitiES to nEt SurPLuS / (DEFiCit)

net surplus / (deficit) as per Statement of Financial Performance 34 580 1 063 475 Adjusted for non-cash items:

Depreciation 22 1 Increase / (decrease) in provisions:

Relating to employment 312 370 Relating to impairment (16 777) 995 Relating to grant disbursement provisions 552 612 100 007 Relating to levy provisions (9 642) (8 998)

Adjusted for items separately disclosedFinance income (389 518) (409 601)

Adjusted for working capital changes: (523 954) (404 469)(Increase) / decrease in trade and other receivables (56 645) 4 140 (Increase) / decrease in deferred expenditure (517 462) (1 095 025)Increase / (decrease) in trade and other payables 50 153 686 416

Cash generated from operations (352 364) 341 780

114




2012/13Notes r’000

19. CoMMitMEntS anD EarMarkED FunDS

As at year-end the NSF has committed and earmarked its entire accumulated surpluses of R7,680 billion. Through improved performance the NSF has committed and earmarked R3,746 billion against future income, over and above the commitment against the historic accumualted surpluses.

Approved and contracted 19.1 & 19.7 5 418 640 Approved, not yet contracted 19.2 608 108 Earmarked for recommended projects, approved subsequent to year-end 19.3 437 641 Earmarked for constructive annual recurring commitments 19.4 2 274 768 Earmarked for FET College skills infrastructure development not yet contracted 19.5 1 500 000 Earmarked for Trainee Lay-off Scheme 19.6 1 137 221

total future expenditure 11 376 378

19.1 Approved and contracted commitments are commitments where the NSF has a contractual obligation to fund the skills development projects. With a contractual obligation there is a written agreement with specific terms between the NSF and the third party, whereby the third pary undertakes to perform certain deliverables as outlined in the agreement. Performance on these deliverables will obligate the NSF to make payment.

19.2 Approved, not yet contracted projects, are skills development projects that have been approved by the Director General of Higher Education and Training before year-end of which contracting will take place subsequent to approval after year-end.

19.3 Earmarked for recommended projects, approved subsequent to year-end are skills development projects that the Project Evaluation Committee has recommended to the Director General of Higher Education and Training for approval before year-end, which the Director-General has approved subsequent to year-end. Hence, contracting will take place after year-end.

115



19.4 Funds earmarked for constructive annual recurring commitments are commitments whereby the NSF commits funds anually towards ongoing skills development projects. Due to this established pattern of past practice the NSF has created a valid expectation on the part of the third parties, that it will continue to fund these skills development projects, until the end of the NSDS III period. Constructive commitment towards these ongoing skills development projects consist of:

2012/13Notes r’000

1. Commitment towards bursaries* 1 506 253 2. Commitment towards training of workers under the Expanded Public Works Programme* 239 853 3. Commitment towards training of workers under the dti Monyetla Programme* 155 346 4. Commitment to support the Human Resource Development Council of South Africa 186 008 5. Commitment to support the National Skills Authority 187 308

2 274 768

* These commitments are limited toward the NSDS III strategic period and are expected to increase annually by inflation, currently estimated at 5.9%.

19.5 The Department of Higher Education and Training has earmarked R1,5 billion from the NSF towards funding skills infrastructure development for the FET Colleges. Contracting will take place after year-end.

19.6 The NSF has initially earmarked R1,2 billion towards the Trainee Lay-off Scheme, of which R1,137 billion are still to be utilised through this Scheme.

116




2012/13 2011/12Restated


19. CoMMitMEntS anD EarMarkED FunDS (continued)

19.7 Expenditure contracted for at balance sheet date, which will be financed through ordinary trading operations, but not recognised in the Financial Statements is as follows:

objective (2012/13)

nSDS iiinSa Ministerial 18 764 -

NSA Constit Capacity Building 10 057 - National-Public Dialogue & Advocacy 4 378 - Capacity Building 4 330 -

Government Priorities 4 167 654 749 952 New Growth Path 834 166 414 291 Industrial Policy Action Plan 22 851 44 509 Rural Development 444 305 77 076 Education & Health 2 719 10 472 Justice and Crime Prevention 124 063 108 378 Co-operatives, Small Enterprises and NGO’s 372 399 36 783 Public Sector Capacity 2 367 151 58 443

DG - Priorities 646 579 126 944 Worker Education 14 276 16 786 Skills System Capacity Building 72 167 - Training Lay-off 5 550 6 312 Academia, Research & Development - 711 Bursaries 56 668 10 636 DHET Projects 497 918 92 499

117



2012/13 2011/12Restated


19. CoMMitMEntS anD EarMarkED FunDS (continued)

Skills infrastructure 531 731 - Community Education Centres 43 729 - Public Delivery Infrastructure 488 002 -

HrDSa 48 535 - Research 48 535 -

nSDS ii 2 618 2 148 Critical Skills Support 2 618 - Industry Support Programme - 2 148 Discretionary and Innovation - - Strategic Projects - -

administrative commitments 2 759 6 537

Total 5 418 640 885 581

118




2012/13 2011/12Restated


20. FinanCiaL inStruMEntS

Categories of financial instruments

Except as detailed in the following table, NSF management considers that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate their fair values:

Current financial assetsCarrying amount 7 428 743 7 318 286

Cash and cash equivalents 13 4 845 117 801 Financial assets at fair value through surplus / (deficit) 14 7 346 649 7 196 658 Trade and other receivables 15 77 249 3 827

Current financial liabilitiesCarrying amount 845 569 795 183

Trade and other payables 16 845 569 795 183

Current financial assetsFair value 7 428 743 7 318 286

Cash and cash equivalents 13 4 845 117 801 Financial assets at fair value through surplus / (deficit) 14 7 346 649 7 196 658 Trade and other receivables 15 77 249 3 827

Current financial liabilitiesFair value 845 569 795 183

Cash and cash equivalents 13 - - Trade and other payables 16 845 569 795 183

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20. FinanCiaL inStruMEntS (continued)

Fair valuesAs indicated above NSF’s financial instruments consist mainly of cash and cash equivalents, investments at fair value, trade and other receivables and trade and other payables. No financial instruments were carried at an amount in excess of its fair value and fair values could be reliably measured for all financial instruments.

Financial assets and financial liabilities are recognised on the entities Statement of Financial Position when the entity becomes party to the contractual provisions of the instrument. The following methods and assumptions are used to determine the fair value of each class of financial instruments:

Cash and cash equivalentsCash and cash equivalents comprise of cash on hand and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value. The carrying amount of cash and cash equivalents approximate fair value due to the relatively short-term maturity of these financial assets.

Financial assets at fair value through surplus / (deficit)Held for trading financial instruments are initially recorded at fair value plus transaction costs and subsequently measured at fair value through surplus or deficit.

Accounts receivableTrade and other receivables are subsequently measured at amortised cost using the effective interest rate method, less any impairment losses. The carrying amount of accounts receivable, net of allowances for bad debt, approximates fair value due to the relatively short-term maturity of these financial assets.

Accounts payableTrade and other payables are stated at amortised cost, which approximates their fair value due to the relatively short-term maturity of these financial liabilities.

Financial instrument riskIn the course of the NSF operations it is exposed to market, interest rate, credit and liquidity risk. NSF developed a comprehensive risk strategy in order to monitor and control these risks. The risk management process relating to each of these risks are discussed under the headings below:

Market riskForeign exchange riskNSF does not initiate any transactions with international parties and is therefore not exposed to any exchange risk due to currency fluctuations. All transactions are denominated in South African Rand with local vendors.

120





Price riskNSF is exposed to equity securities price risk because of investments held and classified as financial assets at fair value through surplus / (deficit) on the Statement of Financial Position. These financial assets are classified as held for trade. NSF is not exposed to commodity price risk.

To manage its price risk arising from equity securities NSF diversifies its portfolio with the Public Investment Corporation (PIC). Diversification of the portfolio is done in accordance with limits set and agreed with PIC.

Cash flow and fair value interest rate riskAs NSF has significant interest bearing assets, the revenue and operating cash flows are substantially depended on changes in market interest rates. As NSF does not have significant interest bearing liabilities, the expenses and cash flows are not substantially dependent on changes in market interest rates.

The NSF exposure to interest rate risk and effective interest rates on financial instruments at reporting date are as follows:

Effective interest rate

Subject to interest rate movement:

Floating

non-interest bearing

r’000

totalr’000

r’000 r’000 r’000year ended 31 March 2013Current financial assets 5.51% 7 346 649 82 094 7 428 743 Cash and cash equivalents n/a - 4 845 4 845 Financial assets at fair value through surplus / (deficit) 5.51% 7 346 649 - 7 346 649 Trade and other receivables n/a - 77 249 77 249

Current financial liabilities n/a - 845 569 845 569 Trade and other payables n/a - 845 569 845 569

121




Effective interest rate

Subject to interest rate movement:

Floating

non-interest bearing

r’000

totalr’000

r’000 r’000 r’000year ended 31 March 2012Current financial assets 5.79% 7 196 658 121 628 7 318 286 Cash and cash equivalents N/A - 117 801 117 801 Financial assets at fair value through surplus / (deficit) 5.79% 7 196 658 - 7 196 658 Trade and other receivables N/A - 3 827 3 827

Current financial liabilities N/A - 795 183 795 183 Cash and cash equivalents N/A - - - Trade and other payables N/A - 795 183 795 183

Interest rate sensitivityNSF is sensitive to the movements in the money market repo rate which is the primary rate to which the investment portfolios are exposed. The rates of sensitivity are based on management’s assessment of possible changes to the interest rates and is formulated on a 100 basis point movement. If the Money Market Repo increased and decreased at year-end by 100 basis points (2012:100 basis points) respectively, then the income from investments would have increased by R70,470 million (2012: R70,630 million) and decreased by R 70,470 million (2012: R70,630 million) respectively.

Credit riskFinancial assets, which potentially subject NSF to concentrations of credit risk, consist primarily of cash and cash equivalents, investments and accounts receivable. Credit risk arises from the risk that a counterparty may default or not meet its obligations timeously.

NSF management limits its treasury counter-party exposure by only dealing with well-established financial institutions approved by National Treasury through the approval of their investment policy in terms of the Treasury Regulations.

Credit risk with respect to levy paying employers is limited due to the nature of the income received. NSF does not have any material exposure to any individual or counter-party. NSF’s concentration of credit risk is limited to the industry in which the NSF operates. No events occurred in the industry during the financial year that may have an impact on the recovery of trade and other receivables.

122





Before training advances are paid to service suppliers, provider vetting, as well as site visits, are conducted by the NSF. A list of successful providers are compiled and approved by the Bid Adjudication Committee (BAC) prior to the disbursement of any funds. The risk of non-performance by these counter parties are also mitigated through the application of a reconciliation process which initiates the clearing of an outstanding provider advance before a second advance will be granted.

The Fund’s maximum exposure to credit risk is equal to the total value of the following assets:

rated non-rated total

2013 r’000 r’000 r’000

Cash and cash equivalents - 4 845 4 845 Financial assets at fair value through surplus / (deficit) 7 346 649 - 7 346 649 Trade and other receivables 77 249 - 77 249

total 7 423 898 4 845 7 428 743

2012Cash and cash equivalents - 117 801 117 801 Financial assets at fair value through surplus/(deficit) 7 196 658 - 7 196 658 Trade and other receivables 3 827 - 3 827

total 7 200 485 117 801 - 7 318 286

Liquidity riskNSF manages liquidity risk through proper management of working capital, capital expenditure and actual vs. forecasted cash flows. Adequate reserves and liquid resources are also maintained.

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Forecast liquidity reserve as of 31 March 2013 is as follows:

2014 2015 2016r’000 r’000 r’000

Opening balance for the period 7 351 494 7 060 902 6 381 862 Operating proceeds 2 026 901 2 156 278 2 283 092 Operating outflow (2 716 475) (3 259 767) (3 803 010)Cash flow from investments 398 982 424 449 447 836

Closing balance for the period 7 060 902 6 381 862 5 309 780

The table below analyses the financial liabilities that will be settled on a net basis into the relevant maturity groupings based on the remaining period at balance sheet date to the contractual maturity date:

Less than 1 year totalat 31 March 2013 r’000 r’000

Trade and other payables 845 569 845 569

Less than 1 year totalr’000 r’000

at 31 March 2012

Trade and other payables 795 183 795 183

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2012/13 2011/12Notes r’000 r’000

21. ContinGEnt LiaBiLitiES

The following contingent liabilities exist:

Legal claims instituted against the NSF 21.1 1 808 1 882 Application to retain accumulated surplus as at year-end 21.2 7 680 278 7 645 697 SERVICE SETA creditor 21.3 11 312 11 312 ESETA creditor 21.4 1 236 1 236

7 694 634 7 660 127

21.1 The legal claims instituted against the NSF relates to six cases instituted by service providers who rendered skills development training on behalf of the NSF. These claims have been lodged against the Department for failing to grant the service providers permission to proceed with training, breach of contracts as well as alleged inadequate training provided by the service providers. All claims are being investigated by the relevant state attorney.

21.2 The NSF will be applying for the retention of the 31 March 2013 accumulated surplus in terms of section 53 (3) of the PFMA from National Treasury during the first quarter of the 2013/14 financial year. The accumulated surplus as at year-end is therefore disclosed as a contingent liability until the approval has been obtained.

21.3 Services Seta submitted a close-out report on 29 May 2012 in relation to the Artisan project that was approved during 2008. This report is claiming for an additional amount of R11,312 million (2012: R37,068 million included in SETA Payables. Refer to note 16.3). To date, the NSF has not received any corroborative documentation to effect payment on the initial payable recognised, nor supporting documentation to substantiate the additional claim. The NSF will only recognise the additional amount as an accrual as soon as the claim has been verified during the new 2013/14 financial year.

21.4 An amount of R1,236 million is disclosed by ESETA as an contingent asset relating to expenditure incurred for the execution of the critical skills support project for unemployed learners which expired on 31 December 2007. At the reporting date the NSF has not received any formal communication, supporting documentation or any quarterly reports from ESETA supporting this claim. ESETA was in process of re-evaluation of the NSF project as part of the applied administration process. This claim will only be recognise as an accrual as soon as the claim has been substantiated and verified by the NSF.

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22. ContinGEnt aSSEtS

2012/13 2011/12Notes r’000 r’000

Legal claims instituted by NSF 22.1 411 526

total 411 526

The following contingent assets exists:

22.1 Legal claims instituted by nSF

The legal claims instituted by the National Skills Fund relates to five cases against services providers who rendered skills development training on behalf of the Fund. These claims relates to service providers failing to deliver the service / training as per contract. The relevant state attorneys have issued summons to the respective service providers and are in the process of being collected.

23. rELatED Party tranSaCtionS

The National Skills Fund reports to the Minister of Higher Education and Training. Accordingly the NSF transact with a number of related parties within the Department of Higher Education and Training.

All related party transactions that aoccurred during the current financial year were at arm’s-length and in the normal course of business, in accordance with the mandate of the National Skills Fund.

126




23.1 rELationSHiPS

- Department Department of Higher Education and Training

- Entities under the Department Qualification Council for Trades and Occupations (QCTO) Public Services (PSETA)Agriculture (AGRISETA) Services (SERVICES SETA)Food and Beverages (FOODBEV) Fibre Processing and Manufacturing (FP&M SETA)Media, Information and Communication Technologies (MICTS SETA) National Student Financial Aid Scheme (NSFAS)Manufacturing, Engineering and Related Services (MERSETA) South African Qualifcations Authority (SAQA)

- FEt Colleges under the department Motheo FET College Boland FET College Western Gauteng FET CollegeVuselela FET College North Link FET College Tswane South FET CollegeTaletso FET College College of Cape Town FET College Ikhala FET CollegeOrbit FET College False Bay FET College Ingwe FET CollegeSouth West Gauteng FET College South Cape FET College Central Johannesburg FET CollegeEkurhuleni East FET College Mthashana FET College Lephalale FET CollegeEkurhuleni West FET College Nkangala FET College Northern Cape Urban FET CollegeSekhukhune FET College Gert Sibande FET College East Cape Midlands FET CollegeVhembe FET College Umfolozi FET College Lovedale FET CollegeMopani South East FET College Buffalo City FET College Esayidi FET CollegeWaterberg FET College Flavius Mareka FET College Coastal FET CollegeSedibeng FET College Letaba FET College King Sabata FET CollegeCapricorn FET College King Hintsa FET College Port Elizabeth FET CollegeMaluti FET College Tswane North FET CollegeGoldfields FET College Northern Cape Rural FET College

- Members of senior management Executive OfficerChief Financial OfficerDirector Strategic ProjectsDirector Skills Support ProgramDirector Provincial Operations

127



23.2 rELatED Party tranSaCtionS anD BaLanCES - ProjECtS

related party other income - interest received

Grants disbursement

expense

accruals Balance at 31 March

2013

Provisions balance at 31 March 2013

Deferred expense balance

at 31 March 2013

AGRISETA - 948 - 2 617 2 617 MICT SETA - 159 - - - MERSETA 60 53 122 - 4 496 4 492 NSFAS 3 308 1 021 193 475 818 - 383 999 PSETA - 12 743 - 2 274 - QCTO - - - - - SERVICES SETA - - 37 068 - - SAQA 246 29 903 - 7 185 15 870 FP&M SETA - 3 894 - - - Motheo FET College - 11 705 - 11 705 29 574 Vuselela FET College - 6 113 - 6 113 6 845 Taletso FET College - 3 845 - 3 845 5 564 Orbit FET College - 10 110 - 10 110 12 204 South West Gauteng FET College 160 11 082 - 11 082 15 712 Ekurhuleni East FET College 1 6 346 - 6 346 14 068 Ekurhuleni West FET College 524 14 538 - 14 538 28 582 Sekhukhune FET College 19 8 727 - 8 727 13 105 Vhembe FET College 23 15 034 - 15 034 27 296 Mopani South East FET College - 12 957 - 12 957 21 119 Waterberg FET College 117 7 810 - 7 810 11 373 Sedibeng FET College 21 4 428 - 4 428 4 428 Capricorn FET College 423 14 043 - 14 043 26 609 Maluti FET College - 8 352 - 8 352 17 309 Goldfields FET College - 4 533 - 4 533 10 213 Boland FET College 64 11 203 - 4 401 11 554 North Link FET College - 3 964 - 3 964 3 964 College of Cape Town FET College - 1 898 - 1 898 7 360 False Bay FET College - 26 343 - 5 127 13 622

128





Grants disbursement

expense


2013



at 31 March 2013

23.2 rELatED Party tranSaCtionS anD BaLanCES - ProjECtS (continued)

South Cape FET College - 4 463 - 4 463 8 887 West Coast FET College 44 3 536 - 3 536 7 902 Majuba FET college - 23 401 - 23 401 25 322 Umgungundlovu FET College 4 13 363 - 6 542 7 532 Elanzeni FET College - 3 669 - 3 669 3 669 Elangeni FET College 6 1 744 - 1 744 1 744 Mnambithi FET College 22 8 854 - 8 854 16 082 Thekwini FET College 105 7 709 - 7 709 18 918 Mthashana FET College - 9 706 - 9 706 12 339 Nkangala FET College 16 3 930 - 3 930 3 930 Gert Sibande FET College 4 5 019 - 5 021 4 513 Umfolozi FET College - 17 737 - 17 737 17 737 Buffalo City FET College - 1 390 - 1 390 2 285 Flavius Mareka FET College - 2 828 - 2 828 7 145 Letaba FET College 74 6 239 - 6 239 12 160 King Hintsa FET College 50 14 961 - 9 805 20 057 Tshwane North FET College 71 20 827 - 20 827 20 827 Northern Cape Rural FET College 23 25 776 - 4 541 16 245 Western Gauteng FET College 0 8 233 - 8 233 14 965 Tshwane South FET College - - - - - Ikhala FET College 13 3 606 - 3 606 3 606 Ingwe FET College 57 1 900 - 1 900 4 857 Central Johannesburg FET College 136 7 474 - 7 474 13 188 Lephalale FET College 24 3 732 - 3 732 3 732 Northern Cape Urban FET College 1 6 952 - 6 952 19 660 East Cape Midlands FET College - 9 685 - 5 290 24 541

129




Grants disbursement

expense


2013



at 31 March 2013

23.2 rELatED Party tranSaCtionS anD BaLanCES - ProjECtS (continued)

Lovedale FET College - 1 331 - 1 331 3 363 Esayidi Fet College 1 12 485 - 12 485 24 649 Coastal FET College 253 21 421 - 21 421 22 757 King Sabata FET College 19 1 122 - 1 122 2 853 Port Elizabeth FET College - - - - - DHET Projects 415 151 072 74 356 10 570 21 675

6 307 1 709 158 587 243 397 645 1 054 620

23.3 rELatED Party tranSaCtionS anD BaLanCES - oPEratinG ExPEnSES

operating Expenses


2013

DHET - Shared Services 2 169 2 635 DHET - Reimbursed Goods and Services n/a 6 962

2 169 9 597

130




23.4 kEy ManaGEMEnt PErSonnEL

number of individuals 2012/13 2011/12

r’000 r’000Short term employee benefits

Post level 14: Executive officer 1Basic salary and social contributions 644 565 Bonuses and performance related payments 87 24 Other short term employee benefits 285 227

Post level 13: Chief Financial officer 1Basic salary and social contributions 154 Not filled in 2012 Bonuses and performance related payments - - Other short term employee benefits 34 -

Post level 13: Director Strategic Projects 1Basic salary and social contributions 596 559 Bonuses and performance related payments - - Other short term employee benefits 243 232

Post level 13: Director Skills Support Program 1Basic salary and social contributions 704 577 Bonuses and performance related payments - - Other short term employee benefits 100 188

Post level 13: Director Provincial operations 1Basic salary and social contributions 545 Not filled in 2012 Bonuses and performance related payments 42 - Other short term employee benefits 67 -

total 3 501 2 372

131



23.4 kEy ManaGEMEnt PErSonnEL (continued)

Personnel remuneration is paid by the Department of Higher Education and Training and claimed back as part of the 10% administration fee. No transactions were conducted with any family members of key management personnel during the current or previous period under review.

The Chief Financial Officer was appointed 1 January 2013, thus the total remuneration only includes disclosure for 3 months of the 2013 financial year. The Director Provincial Operations were promoted to this posistion on 1 January 2013, the total disclosure includes the total remuneration for 12 months for the 2013 financial year.

24. DEFinED ContriBution PLan

The NSF provides for retirement benefits for all its permanent employees through a defined contribution scheme to the GEPF that is subject to the Pension Funds Act, 1956 as amended. In terms of the Pension Funds Act, the fund is not required to be actuarially valued.

The NSF’s liability is limited to its considerations made. There are 56 employees who are members of the GEPF in which the NSF contribute 13% in every Rand contributed by the employees towards the GEPF.

2012/13 2011/12Notes r’000 r’000

Contributions for the year included in employee cost 8 1 529 1 356

132




25. CHanGE in aCCountinG EStiMatE

As defined in GRAP 3 a change in an accounting estimate is an adjustment of the carrying amount of an asset or liability, or the amount of periodic consumption, resulting from reassessing the present status of, and the expected future benefits and obligations associated with, the asset or the liability. Changes in accounting estimates result from new information or new developments and accordingly are not corrections of errors.

25.1 Due to the nature of NSF operations, registered project claims undergo a verification process before the actual payments are made. During the verification process the validity and accuracy of the claims are confirmed, recalculated and communicated with the training providers. Changes identified through this process are accounted for as a change in accounting estimate in terms GRAP 3 in relation to previous year registered accruals included in trade and other payables.

The impact of these adjustments on the Statement of Financial Performance and the Statement of Financial Position for the year ending 31 March 2013 are as follows:

2012/13 2011/12Notes r’000 r’000

Grant DiSBurSEMEntS 7 5 906 (2 152)

Social Development - (709)Industry Support Programme - (1 219)Informal Sector Support - (224)Public Sector 10 - Skills System Capacity Building 6 - Justice and Crime Prevention 105 - Training Layoff 899 - Discretionary and Innovation 31 - Bursaries 4 908 - Industrial Policy Action Plan (74) - New Growth Path 25 - Co-operatives, SMMES (28) - ABET 24 -

The effect of the changes have no impact on the opening balance of deferred expenditure (2012: R0,00million), a decrease on the opening balance of trade and other receivables from R 2,439 million to R2,415 million (2012: R0,00 million), a decrease on the opening balance of trade and other payables from non-exchange transactions from R 794,295 million to R794,124 million (2012: R93,244 million to R91,093 million) as well as a decrease on the opening balance of pre-paid expenses from R 664,600 million to R 658,547 million (2012: R0,00 million) in project expenditure as indicated above.

133



25. CHanGE in aCCountinG EStiMatE (continued)

25.2 During the current financial year it became evident that the PSETA will be able to provide the NSF with appropriate supporting evidence to substantiate the expenditure incurred under the PSETA project previously funded by the NSF. This is due to substantial efforts from the PSETA to obtain the required information during the current financial year. Once the expenses are verified with the new supporting evidence, the full debtor balance will no longer be refundable by the PSETA to the NSF. The changes identified through the new information from PSETA are accounted for as a change in accounting estimate in terms of GRAP 3 in relation to previous year’s SETA debtors and the related provision for impairment included in trade and other receivables. Changes identified through this verification process are also accounted for as a change in accounting estimate in terms GRAP 3 in relation to previous year registered accruals included in trade and other payables.

The impact of these adjustments on the Statement of Financial Performance and the Statement of Financial Position for the year ending 31 March 2013 are as follows:

2012/13 2011/12Notes r’000 r’000

otHEr inCoME (non-ExCHanGE) 4 16 777 - Provision for impairment reversed 16 777 -

The effect of the changes have no impact on the opening balance of deferred expenditure (2012: no effect), an increase on the opening balance of trade and other receivables from R3,827 million to R20,604 million (2012: no effect) in reversal of impairment as indicated above.

26. Prior PErioD CorrECtion

26.1 Property, plant and equipment expensed that should have been capitalised

As defined in GRAP 17 property, plant and equipment are tangible items that are held for use in the production of goods and services and are expected to be used during more than one reporting period. Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. During the 2013 financial year it was noted that property, plant and equipment was expensed in 2012, where in fact it should have been capitalised. This also resulted in no depreciation being written off of the the property, plant and equipment acquired in 2012.

Based on the requirements of GRAP 17, the NSF has calculated the impact of the capitalisation and depreciation of property, plant and equipment acquired in 2012 and recognised the items accordingly.

134




26. Prior PErioD CorrECtion (continued)

26.2 Expenditure incorrectly disclosed as irregular expenditure in the prior periods

Expenditure amounting to R 174,035 million was incorrectly disclosed as irregular expenditure in 2012 (2011: R 48,408 million). Expenditure incurred does not constitute a contravention of any legislation or regulation, and as such was incorrectly disclosed as irregular expenditure. The prior period error does not impact on the Statement of Financial Position, Statement of Financial Performance and Cash Flow Statement.

26.3 Deferred expenditure recognised that should have been expensed

Grant disbursement expenses amounting to R123,777 million was incorrectly recognised as deferred expenditure in the 2012 financial year. The nature of these grant disbursements are contributions to training providers for the academic year, and as such the value of contributions relating to the months of January 2012 to March 2012 should have been expensed.

Pre-paid expenditure amounting to R 52,147 million was incorrectly recognised and disclosed as grant disbursement expenses in the 2012 financial year. The R 52,147 million was in fact an advance payment that was never recorded as a pre-payment.

26.4 impact of prior period corrections on the financial statements

The impact of the capitalisation and depreciation correction as stated above does render an impact on the Cash Flow Statement, Statement of Financial Performance as well as the Statement of Financial Position for the year ending 31 March 2012. This corrections and the relevant impact is indicated below:

2011/12Notes r’000

CaSHFLoW StatEMEnt

CaSH FLoWS FroM oPEratinG aCtiVitiES

Cash paid to stakeholders, suppliers and employees (1 214 613)As originally stated (1 214 620)Prior period correction 26.1 7

Payments to suppliers and other (67 620)As originally stated (67 627)Prior period correction 26.1 7

135




2011/12Notes r’000

CaSH FLoW FroM inVEStinG aCtiVitiES

Additions to property, plant and equipment (7)As originally stated - Prior period correction 26.1 (7)

StatEMEnt oF FinanCiaL PErForManCE

ExPEnSESDepreciation 1 As originally stated - Prior period correction 26.3 1

Operating expenses 18 259 As originally stated 18 266 Prior period correction (7)

ExPEnSESGrant disbursements 1 304 949 As originally stated 1 233 318 Prior period correction 71 631

nEt SurPLuS For tHE yEar 1 063 475 As originally stated 1 135 100 Prior period correction 26.1 & 26.3 (71 625)

136





2011/12Notes r’000

StatEMEnt oF FinanCiaL PoSition

non-CurrEnt aSSEtS 6 As originally stated - Prior period correction 26.1 6

ProPErty, PLant anD EQuiPMEnt 6 As originally stated - Prior period correction 26.1 6

CurrEnt aSSEtS 8 627 646 As originally stated 8 699 277 Prior period correction 26.3 (71 631)

DEFErrED ExPEnDiturE 1 309 360 As originally stated 1 380 991 Prior period correction 26.3 (71 631)

totaL aSSEtS 8 627 652 As originally stated 8 699 277 Prior period correction 26.1 & 26.3 (71 625)

137




2011/12Notes r’000

CaPitaL anD rESErVES 7 645 697 As originally stated 7 717 322 Prior period correction 26.1 & 26.3 (71 625)

aCCuMuLatED SurPLuS 7,645,697 As originally stated 7,717,322 Prior period correction 26.1 & 26.3 (71,625)

27. notES to tHE StatEMEnt oF CoMPariSon oF BuDGEt aGainSt aCtuaL aMountS

27.1 rEVEnuE FroM non-ExCHanGE tranSaCtionS

The actual revenue received from non-exchange transactions exceeded the budgeted revenue by 3%, mainly due to an incorrect allocation from SARS between Skills Development Levies collected and Unemployment Insurance Fund levies collected. This resulted in an overpayment of R 94,549 million with regards to Skills Development Levies towards the National Skills Fund.

27.2 rEVEnuE FroM ExCHanGE tranSaCtionS

Th actual revenue received from exchange transactions exceeded the budgeted revenue, mainly due to actual interest of R 35,582 million received from advance payments to training providers that was not budgeted for.

27.3 Grant DiSBurSEMEntS

The actual grant disbursements paid were 36% below budget, partly due to bursaries disbursements of R619,422 million paid shortly after year-end instead of during the year and partly due to projects worth R752,796 million being delayed to the 2013/2014 financial year. In both instances, delays were as a result of reporting delays caused by training providers.

138




27. notES to tHE StatEMEnt oF CoMPariSon oF BuDGEt aGainSt aCtuaL aMountS (continued)

27.4 EMPLoyEE CoStS

The actual employee costs are 62% below the budgeted employee costs. This is mainly due to the delay in implementing the “Project Monitoring and Evaluation Structure”, which would have entailed appointing 59 new employees. The delay was deemed necessary as a result of the listing of the National Skills Fund as a schedule 3A public entity. It was decided to re-work the entire organisation structure before any appointments were made.

27.5 oPEratinG ExPEnSES

The actual operating expenses are 62% below the budgeted operating expenses. This saving is driven by the lower than budgeted employee costs, mainly due to the delay in expediting the project monitoring and evaluation structures from the result of the listing of the National Skills Fund as a schedule 3A public entity. The expected structures will be adjusted to address the entire organisation before implementation during the 2013/14 financial year.

27.6 CoLLECtion CoStS to SarS

There was a saving of R50,160 million on the actual SARS collection costs for the year in comparison to the costs budgeted for the year. SARS is allowed to charge up to 2% as collection costs, but have historically only charged 1%, which is the amount budgeted for. SARS invoices the NSF on a monthly basis for the actual costs incurred to collect skills development levies, which were about 0.4%.

27.7 CaPitaL ExPEnDiturE

The actual capital expenditure is below budget as the capital expenditure projects are due for the next financial year with the transition of the NSF from a programme under the Department to a fully fledged public entity.

139

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140 NATIONAL SKILLS FUND ANNUAL REPORT : 2013

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ISBN: 978-0-621-42199-6RP278/2013

AnnuAl report : 2013

national skills fund

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