RTMC ANNUAL REPORT 2011/12 “SAFE ROADS -THE CHANGE WE WANT TO SEE” PRESENTATION TO PORTFOLIO COMMITTEE 10-11 OCTOBER 2012 ACTING CEO: COLLINS LETSOALO

OUTLINE RTMC Audit Journey Overall Financial Position Statement of Financial Position Statement of Financial Performance Opinion Comparatives Emphasis of Matter Pre-determined Objectives Required Funding for RTMC Mandate

2011/12 – Unqualified Opinion RTMC Audit Journey 2009/10 -Disclaimer 2010/11- Adverse Opinion 2011/12 – Unqualified Opinion

Overall Financial Position Reporting a state of technical insolvency based on material loss of 41m, mainly due to SANRAL debt write off (R26m) and intangible asset write off (R8,1m), leaving the entity with loss of R7m. R7m - a reduction in the loss from 2009/10 loss of R72m. Liabilities exceed assets by R203 million. Main contributor - liability of R200 million relating to irregular use of Transaction Fees in 2009/10 financial year (uncovered and confirmed through the Ministerial Task Team, and an a matter that would resolve the going concern challenge of the Corporation when addressed).

Annual Financial Report: 2011/12 STATEMENT OF FINANCIAL POSITION (B/S) Liabilities Amount Details Reasons Payables R449 million R430 million = Transaction fees due from provinces and payable to DoT R213 million = Transaction fees (Irregularly utilized (R200 M)and balance at bank plus fair value adjustment ) R50million = AARTO infringements Same as in account receivables Mainly transaction fees irregularly utilized in 2009/10 financial year ,these needs to be written off as they recovery is doubtful Infringements fees paid into AARTO national bank account and payable to issuing authorities

Annual Financial Report … Cont. STATEMENT OF FINANCIAL POSITION (B/S) Current assets Amount Details Reasons Cash and bank R130 million AARTO Accounts = R32 million eNaTIS Accounts = R92 million RTMC Main = R5 million AARTO Accounts: Infringement fees for both Gauteng Department of Community Safety, Tshwane Metro (TMPD) and RTIA paid into the AARTO national bank accounts Funds in eNatis account represent transaction fees received by the RTMC from provinces and not yet paid over to the Department of Transport at year end. Trade and other receivables R155 million Transaction fees due from Provinces = R137 million (2011: 125million) AARTO Infringements due from Issuing Authorities = R18 million - Transaction fees receivable from Provinces. 70% of all outstanding debts are within the 90 day period 30% of the total debts is long outstanding (R41 million) R41million of the long outstanding balance is shared amongst the three provinces {Limpopo (R11 million), Mpumalanga (R16 million) and North West (R14 million)} and these relate to the period when issuing authorities were still paying directly to the RTMC Change in accounting principle to account only on cash basis thus these are monies due by RTIA and GDOC that were overpaid in the previous accounting principle. Non-current asset R9 ,2 million PPE = R7,6 million Intangible assets = R1,6 million Intangible asset of R8,1 m written off Assets register developed and 100% compliant

Annual Financial Report … Cont. STATEMENT OF FINANCIAL PERFORMANCE (I/S) INCOME Amount Details Reasons Government grant R77.9 million (2011: 73,6 million) MTEF allocation from Treasury Government grant allocated to the Corporation for 2011/2012 ,the actual requested budget was for R180m Other income R53 million R2. 9 million – contribution by SANRAL for the training of traffic police. Difference relate to other sponsors and sundry income (disposal of asset) R98 million owed by JMPD written-off in the previous financial year (restatements of financials). AARTO R2,5m Collecting agency fees as per AARTO regulation Infringement fees issued by NTP -3% collection fees recognized as income and only amounted to R1,4m in the reporting period -R1m infringement fees issued since September 2011 EXPENDITURE Operating expenditure R178million ( 2011: 161 million) Key drivers: Payroll = R100million Assets written off/ retired = R9,5 million Provision for bad debts= R27million Lease rentals = R11 million Depreciation = R3,8 million Accident investigation = 3,8m Other projects = 9,7million Payroll costs increased by 10% from the previous financial year Accident reporting system valued at R57 million discontinued Impairment of hardware relating to ARS(R8 million impairment) Deficit for the year R41 million ( 2011: 72million) Mainly due to the asset written-off and debt written off amounting to R34m of current loss

Opinion Comparison FINDING 2010/11 Finding 2011/12 Audit Opinion 2011/12 WAYFORWARD 1. Trade and other receivables ,audit procedure could not be performed 1.Trade receivables reconciled and audit procedure performed Unqualified Audit opinion Continuous management of receivables to ensure audit opinion sustainable 2.Property Plant and Equipment no proper review of asset useful life and residual value 2.PPE asset useful life reviewed and assets damaged written off proper asset management implemented Continuous management of PPE and appointment of competent asset management staff to ensure continuous monitoring 3.Intangible Assets not assessed for impairment 3.Intangible assets assessed for impairment leading to the R8,1m write off and adjustment of the intangible asset register Continuous management of intangible and appointment of competent asset management staff to ensure continuous monitoring 4.RTIA information included in RTMC comparative figures RTIA data removed from all comparative figures Continuous review of RTMC data to ensure compliance with accounting principles

Pre-determined Objectives FINDING ROOT CAUSE MITIGATION WAYFORWARD 30% Achievement of planed targets Lack of strategy based funding Lobbying of various stakeholders including the private sector to fund some of the programs DOT and Treasury to assist in increasing the budget of RTMC from R82m to R240 this will ensure that the budget is aligned to strategy. Annual financial statement and performance reports Inadequate financial controls due to lack of skilled staff Recruitment process reviewed to ensure only competent and skilled finance staff are appointed Qualified and Competency based appointment in finance department Non Compliance with the RTMC act No agreed meetings of the shareholders committee Facilitation of advanced agreed meeting where member quorate DOT should develop a stringent process compelling MEC to attend ,through the mayors of the variance provinces Inefficient Internal Control process Lack of monitoring of performance management Monthly review of the monitoring process. Review of monthly and quarterly report. Internal audit to review evidence and report on deficiencies Implementation of approved policies and development of policies

Emphasis of Matter FINDING ROOT CAUSE MITIGATION WAYFORWARD 1.Going Concern Asset write n off due the inability to bring the assets into use Inadequate funding of the RTMC as highlighted by ministerial task team 1.Approval by the shareholders committee to write off those assets, Approval by the minister to condone the write off 2.Unsuccessful request to Treasury to increase grant Submission to treasury to write off the debt so as to allow the Statement of Financial Performance and Position to be positive thus eliminating the solvency matter 2.Material loss 1.Irregularly procured call centre system of written off R8,1m 2.ANRAL debt written of R26m Proper case study performed prior to procuring any IT equipment to ensure sustainable maintenance and adherence to supply chain procedures. Continuous management of internal control process to ensure continued adherence to supply chain process 3.Financial Misstatements Lack of skilled finance staff in asset management, lack of reconciliation skills in revenue management AARTO accounted on a cash basis to provide an accurate disclosure Revaluation of asset done twice annually Maintenance of accurate asset register Continuous reconciliation of AARTO account to avoid misstatements Quarterly preparation of financial statement to avoid misstatements Implementation of policies.

Pre-determined Objectives … Cont. FINDING ROOT CAUSE MITIGATION WAYFORWARD Leadership Lack of communication platforms to create awareness of approved policies and procedures All approved policies and procedures are circulated a circular and placed on a shared drive An intranet has been developed internally ,all policies will be placed on the web to ensure easy access for new staff members and old staff members. Financial and performance management Lack of financial staff to administer records management A finance staff has been delegated with the role of record management, separate lockable are created to safe keep all finance records. The senior manage finance will review all finance records to ensure completeness, Internal audit to conduct a audit of al finance process to ensure completeness of finance records Governance Lack of agreed review dates with governvenace stakeholders Agreed dates with stakeholders to review financial information on a quarterly basis as well as performance information Monthly review of financial information ,and monthly review of performance information

THANK YOU THE RTMC SUPPORTS THE DECADE OF ACTION TO ROAD SAFETY 2011 -2020, and is a Member of the United Nations Road Safety Collaboration (UNRSC)