SOUTH AFRICAN DIAMOND AND PRECIOUS METALS REGULATOR (SADPMR)

PRESENTATION TO THE PORTFOLIO COMMITTEE ON

SADPMR’s ANNUAL REPORT FOR THE 2011/ 2012 FINANCIAL YEAR

PRESENTATION OUTLINE

1. Introduction

2. Outstanding Audit matters from 2010/2011 financial year

3. Annual Financial Statements

4. Achievements

5. Challenges

6. Closure

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INTRODUCTION

The audit report for the year under review was for the period 2011/2012,

policies have been reviewed and aligned to the PFMA requirements and

relevant financial systems and controls have been established and are

correctly implemented

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AUDIT MATTERS RAISED FROM 2010/2011 FINANCIAL YEAR

FINDING 1:Procurement and contract management - Sufficient appropriate audit evidence could not be obtained that goods and services with transaction value between R10 000 and R500 000 were procured by inviting at least three written price quotation from prospective suppliers as per the requirements of TR 16A6.1 and National Treasury Practice note 8 of 2007/8.

OUTCOME: Addressed

FINDING 2: Procurement and contract management– Goods and services with a transaction value of over R500 000 were not procured by means of a competitive bidding process as per the requirements of TR16A6.1, TR16A6.4 and National Treasury Practice Note 8 of 2007/2008.

OUTCOME: Addressed

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AUDIT MATTERS RAISED FROM 2010/2011 FINANCIAL YEAR

FINDING 1: 2:Expenditure management - The accounting authority did not take effective and appropriate steps to prevent irregular expenditure as per the requirements of TR16A6.1, TR16A6.4 and National Treasury Practice Note 8 of 2007/2008.

OUTCOME: Addressed

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ANNUAL REPORT FOR THE 2011/12 FINANCIAL YEAR

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AUDIT OPINION

• UNQUALIFIED AUDIT OPINION ISSUED

FINANCIAL PERFORMANCE- AUDIT REPORT

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Emphasis of matters

Matters reported

1. Restatement of corresponding figures – As disclosed in note 24 to the financial statement, the corresponding figures for 31 March 2011 were restated as a result of an error discovered during 31 March 2012 in the financial statements of the SADPMR for the year ended 31 March 2011.

Action taken

• The financial statements were revised accordingly. Internal controls to prevent recurrence of similar error are in place.

FINANCIAL PERFORMANCE- AUDIT REPORT

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Report on other legal and regulatory requirements

None

• Predetermined objectives

No material findings concerning the usefulness and reliability of the information

FINANCIAL PERFORMANCE- AUDIT REPORT

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ANNUAL FINANCIAL STATEMENTS

• OVERVIEW.

• The Regulator submitted the budget of R 68.6 million to National Treasury via the Department of Mineral Resources.

• The final allocation was R39.4 million which left the Regulator with a shortfall of R29.2 million.

• The budget and the classification of funds were adjusted in accordance with the final allocation.

• In order to enable the Regulator to respond to its mandate, National Treasury was requested to grant permission to the Regulator to retain accumulated surplus of R23.1 million in order to address the shortfall and other capital projects. National Treasury’s approval was obtained.

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ANNUAL FINANCIAL STATEMENTS

Revenue

• The actual revenue was R 47.4 million (incl. Transfer Payment of R39.4 million).

• The in-house generated revenue decreased by 0.1% to R7.978 million from R 8.811 million.

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ANNUAL FINANCIAL STATEMENTS

Expenditure

• The actual expenditure for the year under review was R60.3 million.

• The major contributing expenditures were as follows:• Compensation of employees: R40.9 million• Other operating expenditure: R15.6 million

• Various expenditure in delivering the mandate was kept within the budgeted expenditure.

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ANNUAL FINANCIAL STATEMENTS• Transfer payment has been capped at R39.800 million for the last three years.

Grant received from DMR versus budget approved by the Board has been as follows:

  2011/12 2010/11 2009/10

R’000 R’000 R’000

Approved budget 68 607 55 533 48 557

Grant received 39 374 40 643 39 412   Add: Actual in house revenue 7 978 8 811 8 968

less: Expenditure 60 280 52 882 42 961

Surplus/ (deficit) * (12 928) * (3 428) 5 419

  (* excluding accumulated funds retained as per National Treasury’s approval)

 

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ANNUAL FINANCIAL STATEMENTS• Trend on utilization of funds

Major cost items 2011/12 2010/11 2009/10

R’000 R’000 R’000

Compensation of employees 40 912 34 270 26 093

Other operating expenses 15 559 14 657 13 584

Payment for Capex 9 323 1 045 2 767

• The employees head count has increased as a result of the committed expansion, review of the organizational structure and cost of living adjustment.

• The operating expense has increased to ensure delivery of predetermined objectives enshrined on the annual performance plan.

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REPORT AS AT 30 SEPTEBMER 2012

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REPORT AS AT 30 SEPTEBMER 2012

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ACHIEVEMENTSSADPMR new buildingThe new building has increased the space, the number of viewing rooms increased from 10 to 30;Facilitation of tenders can now be conducted for all producers simultaneously.

Generation of Revenue

Service charges were reintroduced with effect from 01 May 2012;Revenue generated (R10.4 million:2012 September) which will assist in augmenting budget deficit for the Regulator.

Introduction of marketing of polished diamonds

Consultation with industry was conducted;Interest from industry was encouraging;Planned tenders for polished diamonds will be held during the 4th quarter

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ACHIEVEMENTSStrengthened stakeholder relations Engagements with the diamond and precious metals clients have

improved; Industries have access to the Regulator and CEO

Improved organizational performance The performance of the Regulator has improved during the 2011/2012

financial year; By end of March 2011, 78% of the SADPMR strategic objectives were

achieved

Appointment of Chief Financial Officer The post of the Chief Financial Officer was filled.

Improved inspections for diamonds and precious metal Inspections within the diamonds and precious metals industries has

improved significantly

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CHALLENGES

• Over the past three years the grant has been capped at R39.8 million per annum whilst the cost of operations have been increasing in order to meet the service delivery demands.

• Funding from DMR has not increased to cover operational costs• Access to funding for emerging businesses is still a problem• Access to rough diamonds is dominated by financially strong buyers• Access to markets for polished diamonds by small beneficiators is limited

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THANK YOU

&

DISCUSSIONS

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