ANNUAL REPORT 2009/2010 Briefing to the Portfolio Committee, on CGE’s Annual Financial Statements for the year ending 31 March

REPORTING FRAMEWORK: CONVENTIONS AND REGULATIONS GRAP – Generally Recognized Accounting Practices GAAP – Generally Accepted Accounting Principles IFRS – International Financial Reporting Standards PFMA – Public Financial Management Act TR – National Treasury Regulations PPR&R – CGE policies 2

FINANCIAL MANAGEMENT: APPROPRIATION Baseline allocations ( R’ thousand) 2007/ / / / /122012/132013/14 39,745 46,193 49,112 51,949 55,150 57,930 61,116 % growth16%6% 5% 3

STATEMENT OF FINANCIAL PERFORMANCE Transfers received from the National Treasury amounted to R49,112 million Expenditure realized at R51,6 million compared to restated figure of R 57 million Resulting in a reported deficit of R2,5 million ( ; R10,7 million deficit) Key cost drivers : Staff costs due to excessive leave accrual, Administrative expenses, depreciation and amortization Depreciation amounting to R3,7 million is the major contributor to the reported deficit but was off-set by savings on CAPEX(R1.06 million) 4

ACTUAL 3 YEAR INCOME & EXPENDITURE COMPARATIVES 5

STATEMENT OF FINANCIAL POSITION The total net assets situation deteriorated from a positive figure of R420, 485 in 2009 to a negative figure of R2, 03 million in 2010 Current ratio improved from 9 % (PY) to 19% (CY) Cash in bank grew from R271k to R1,6 m (CY) Current Liabilities dropped by 6%, contributing to a favorable current ratio Downward movement in non-current assets due to depreciation write-down (R3,7m) Balance sheet deteriorated mainly by the deficits reported ; (R2,5 m  CY) & (R10,7 m  (PY) 6

STATEMENT OF CHANGES IN NET ASSETS Prior Year error corrections Items effecting the accumulated surplus/(deficit) as at 1 April 2008:R 16.3Accounting for finance leases : Prior years depreciation and interest (1,516,576) 16.3Correcting operating leases: Reversal of prior operating lease expense 2,750, Fixed assets – Useful life reviews and depreciation 2,106, Correcting provision reversals - Leave 1,035,636 Reversal of incorrect accrual – Trade Creditors 1,000,000 Amount disclosed in the statement of changes in net assets 5,376,044 Other than changes in the statement due to net movements from the statement of financial performance, Prior year errors were corrected retrospectively amounting to R5, 376, 044 This resulted in the prior year deficit being restated to R10,7 m against a previously reported figure of R5, 2 m in the AR for The Accumulated surplus in the statement of financial position was restated to R420k, implying a weakening of the balance sheet as a result 7

STATEMENT OF CASH FLOW Cash brought forward from prior year : R271k Cash inflows amounts to R49 million, in the main received from National Treasury Outflows to fund operating activities: to Employees and Suppliers: R47, 5 million Outflows utilized to acquire assets: Expenditure of capital nature: R33k Outflows to service lease installments: R287k Closing cash and cash equivalent balance: R1,6 m which includes cash on hand of R11k 8

AUDIT - OVERVIEW Finalized on 18 th August 2010 Final AR indicates a qualification, consistent with the commitment made in our Turnaround Strategy –Staff Costs, Leave provision, irregular expenditure, Contingent liabilities No opinion expressed on performance information but we noting AGSA comments in the management letter 9

FINANCIAL MANAGEMENT Challenges –Staff Capacity and Competence –Inadequate internal Control systems –History of non-compliance with regulations –Negative audit findings in the recent past Achievements –Dealt with backlog of issues, record keeping, accounting activities e.g. Resolved issues of the Fixed Assets register and related accounting activities –Improved audit opinion on the Annual Financial Statements for the year ended 31 March 2010 –Staffing arrangement improved in the establishments -  New critical positions approved –Geared towards fulfilling the goals set in the Turnaround strategy 10

STRATEGIC FINANCIAL MANAGEMENT Idealized to include two more head count viz. Financial Manager and SCM/Management Accountant, over and above the current structure To implant competence on Financial and management reporting: Compliance to standards; GRAP,GAAP, IFRS and various treasury regulations Improve the control environment: systems descriptions, operating procedures, policies, risk management & internal control Add value by producing timely, accurate, relevant/integrative management reports and advise Management prudently on matters of operations and financial management (linking a/c data to ops, etc) 11

TURN AROUND ACTIVITIES In part to be assisted by staffing changes Systems, process and procedures to be streamlined : simplified model :Procurement  Expenditure management  Reporting Build/document systems and operating procedures(SOP) for all process including operations, develop/update risk assessment register for all critical areas Integrate/interface related functions: VIP(Salaries & leave) to the finance/accounting, document management, etc Generally follow the on TA strategy plus AGSA’s reports and implement key controls 12

BROAD PLAN – TIMELINES/DELIVERABLES Fill the positions in F&A by 31 October 0 to ensure speedy removal of backlog + implement Plenary /FC resolution re: SCM unit and statutory reporting requirements + standard MIS for management Full compliance with NT reports/IYM template and sought condonation concurrently Finalize internal control procedures/documentation thereof by end of Nov 2010 for implementation immediately/sought adoption where appropriate Develop a risk register in consultation with other functional areas by end of December

THANK YOU 14