2. PRESENTATION TO PORTFOLIO COMMITTEE ON DMR 2010 / 11 ANNUAL REPORT
18 OCTOBER 2011

3. Presentation Outline 1. Financial performance
- Annual Financial Statements
2. Auditor General’s Report
- Audit Findings
- Report on Material Losses
- Report on Accruals
3. Progress on BRRR Recommendations
4. Section 32 Report

4. APPROPRIATION STATEMENT FOR 2010/2011
PROGRAMME
2010/11
Final Budget
R'000
Actual
Variance
2009/10
R’000
1. Admin
227,865
226,727
1,138
249,253
2. MHS
137,095
137,092 3
138,543
3. MR
188,611
188,608
190,008
4. MPP
442,271
442,270 1
73,724
Total
995,842
994,697
1,145
651,528

5. Analysis of variances
The overall under spending by the Department was R1,145 million which is 0.11 % of the budget
The main reason for the under spending relates to the procurement of goods and services whereby orders were raised during the 2010/2011 financial year but delivery thereof and processing of invoices and payments happened subsequent to that. This was mainly on Programme 1: Administration

6. Analysis of variances
Mine Health and Safety Branch reflected 100% spending. An amount of R4.9 million was re-allocated to other Branches to cater for over expenditure
Although Mineral Regulation Branch reflected 100% spending, an amount of R6.2 million was re-allocated to this Branch from other Branches to cater for higher than anticipated expenditure
Mineral Policy and Promotion Branch reflected 100% spending. An amount of R2 million was re-allocated to other Branches for higher than anticipated expenditure

7. TREND ON UTILISATION OF FUNDS
 Economic
Classification
2010/11
2009/10
2008/09
2006/07
Compensation of Employees
326,457
403,323
330,089
290,561
Goods and services
206,504
263,475
269,408
277,222
Payment for Capex
28,603
48,690
18,855
7,470
Transfer and subsidy
438,120
3,828,303
3,111,061
2,366,512
Theft and losses 50
924
593
5,602
Unspent
1,145
137,288
56,235
27,570
TOTALS (BUDGET)
995,842
4,682,004
3,786,241
2,974,937
% Under Spending
0.11%
2.9%
1.48%
0.93%

8. Analysis of Unspent Fund
Under spending has been consistently below 3% for the last three years
For the year under review, the unspent funds is attributable to the late receipt of invoices and consequent delay in processing payments
However, this is not a true reflection of the matter as there is a huge gap between the unspent amount and the accrual raised which would have had constituted unauthorised expenditure had payment been done in time.

9. Analysis of variance in Statement of Financial Performance
Items
2010/11
2009/10
Variance
% variance
R’000
Compensation of employees
Basic salary
217,268
259,530
(42,262)
(16.28)
Periodic payments
187
1,526
(1,339)
(87.74)
Pension
28,875
33,503
(4,628)
(13.81)
Goods and services
Venues and facilities
2,282
5,454
(3,172)
(58.15)
Advertising
1,661
2,829
(1,168)
(41.28)
Communication
11,181
19,875
(8,694)
(43.75)

10. Analysis of the Statement of Financial Performance
Item
2010/11
2009/10
Variance
% variance
R’000
Travelling
54,667
67,458
(12,791)
(18.96)
Operating leases
64,147
34,231
29,916
87.39
Financial transactions in assets and liabilities 50
925
(875)
(94.00)
Transfers and Subsidies
438,120
3,828,303
(3,390,183)
(88.55)
Tangible capital assets
Buildings and other fixed structures
17,059
26,917
(9,858)
(36.62)
Machinery and equipment
10,404
20,467
(1,063)
(49.16)
Software and other intangible assets
1,140
1,306
(166)
(12.71)

11. Statement of Financial Performance: Variance analysis
The staff cost decreased as a result of the split of Department of Minerals and Energy into Dept of Mineral Resources and Dept of Energy. (1,076 vs 1,272)
The G & S cost is relatively low compared to 2009/10 owing to split of Dept of Minerals and Energy. However the operating lease cost increases due to the relocation of the Head Office and some of the Regional offices
The decrease in Tangible capital assets cost is attributable mostly to the leasehold improvements for Trevenna paid in 2009/10

12. Statement of Financial Performance: Variance analysis
Decrease of 88.55% in transfers and subsidies is due to the fact that most of the transfers for the former DME relate to Dept of Energy
Financial transactions in assets and liabilities went down by 94% due to fewer losses written off during the financial year.

13. Analysis of variances: Statement of Financial Position
Item
2010/11
2009/10
Variance
%variance
R’000
Current Assets
Cash and cash equivalents
37,493
192,279
(154,786)
(80)
Prepayments and Advances 40
5,902
(5,862)
(99)
Receivables
20,663
14,580
6,083 41
Current Liabilities
Voted Funds to be surrendered
1,145
137,288
(136,143)
Revenue to be surrendered
2,482
74,344
(71,862)
(96)

14. Analysis of variances: Statement of Financial Position
Item
2010/11
2009/10
Variance
%variance
R’000
Net Assets
Recoverable Revenue
1,052
1,062 10
0.94

15. Details of Transfers and Subsidies
Recipient
2010/11
Purpose of transfer payment
Actual transfer
R'000
SBT Trust and Council for Geoscience
35,671
Assistance to marginal mines in the form of pumping subsidies (R3m) and research to prevent ingress of water into underground holdings (CGS:R32.7m)
Council for Geoscience
136,505
Core funding in terms of establishing act
Council for Mineral Technology Research
195,840
R165.8 million -Core funding in terms of establishing act and R30 million - Mine Rehabilitation projects
South African Diamond and Precious Metals Regulator
40,643
Mine Health and Safety Council
5,358
Industrial Development Corporation of SA (Small scale mining)
23,609
Small scale mining projects

16. Audit Findings and action plan: 2009/2010 v 2010/2011
AG Finding 2009/10
AG Finding 2010/11
Comment
1. Receivable for Departmental Revenue – incomplete, inconsistent and inaccurate
Receivable for Departmental Revenue – application of the Royalty Act and interest calculation
The database issue raised in 2009/10 has been resolved. Allocation and interest calculation are new issues
Action plan to address 2009/10 finding:
Status as at 31 March 2011:
Proposed action plan to address 2010/11 finding:
review revenue registers monthly
Conduct review sessions monthly
Appoint staff with Finance knowledge and experience at Regional offices
Develop Rev Management system
Implemented since August 2010 – ongoing
Resource commenced on 01 February 2011
Not finalised as priority was given to the SAMRAD online
Finalise the development of the Revenue Management model in SAMRAD

17. Audit Findings and action plan: 2009/2010 v 2010/2011
AG Finding 2009/2010
AG Finding 2010/2011
Comment
2. Invoices not paid within 30 days or receipt
Invoices not paid within 30 days of receipt
This is a repeat finding
Action plan to address 2009/2010 finding
Status as at 31 March 2011
Proposed Action Plan to address 2010/11 finding
Communicate centralisation of invoices
monthly report on contract versus order
Review process to confirm payments
Implemented 31 July 2010
Maintain action plans already in place
Enhance expediting of orders and monitor progress on a monthly basis

18. Audit Findings and action plan: 2009/2010 v 2010/2011
AG Finding 2009/10
AG Finding 2010/11
Comment
3. Irregular expenditure incurred not reported in the disclosure notes -
Action plan to address 2009/10 finding:
Status as at 31 March 2011
Proposed action plan to address 2010/11 finding:
Adjust 2009/10 financials and report irregular expenditure
Implement corrective measures against transgressors
Adjusted in June 2010
Irregular Expenditure register updated monthly
Branches are notified or irregular expenditure as it occurs for investigation and remedial action
n/a – will just be maintained

19. Audit Findings and action plan: 2009/2010 v 2010/2011
AG Finding 2009/10
AG Finding 2010/11
Comment -
Contingent Liability – obligation for the rehabilitation of derelict and ownerless mines not provided for
New finding
Action Plan to address the finding
Due date
Appoint Council for Geosciences to finalise the quantification of priority sites and estimated cost thereof
28 February 2012

20. Audit Findings and action plan: 2009/2010 v 2010/2011
AG Finding 2009/10
AG Finding 2010/11
Comment
4. Accruals – exceeded funds to be surrendered and would have constituted unauthorised expenditure had payment be made in time
Accruals – exceeded funds to be surrendered and would have constituted unauthorised expenditure had payment be made in time
This is a repeat query
Action plan to address the finding
Action plan to address the finding
Due date
Motivate for additional funding
Introduce further cost containment measures on Good and Services
Done in July 2011
By 01 April 2012

21. Report on Material Losses - Assets: Category and Value
Quantity
Purchase Value
Book Value
1. Assets that could not be verified for two or more consecutive financial years
485
R2,070,189.17
R 75,400.48
2. Assets that went missing during the relocation
614
R3,332,165.68
R489,301.25
3. Assets that could not be moved (fixtures) 34
R 245,404.07
4. Leased Assets 21
R ,200.00
5. Reported Losses 10
R 145,691.67
R262,264.93
Total
1 164
R5,839,651.59
R826,966.66

22. Report on Material Losses - Assets: Root Cause and Action Plan
Category
Root Cause
Action Plan
1. Assets that could not be verified for two or more consecutive years
Duplication in the Assets Register
Tag replacement process during verification has been defined in 2010/2011
Process for the IT equipment replacement/movement has been developed for implementation by 30 November 2011
2. Assets that went missing during the relocation
Poor synchronisation of activities involved in the relocation
Capacity challenges
Project management for relocation will include all aspects that have impact on the relocation

23. Report on Material Losses - Assets: Root Cause and Action Plan
Category
Root Cause
Action Plan
3. Assets that could not be moved (fixtures)
Lack of distinct method to record fixtures on the Asset Register
To record them distinctively so that they can be written off immediately after relocation
4. Leased Assets
Recording of Leased Assets distinctively started during the 2010/11 financial year
5. Reported Losses
Assets Lost by Officials
To review the processes of reporting and recording losses
Implement the Loss Management Strategy

24. Report on Accruals
The R1,1 million unspent funds to be surrendered would not have been sufficient to cover the accrual raised at the end of the year and this seem to be a growing trend.
Records show a trend between accruals and unspent funds for the past two financial periods as follows:
2009/2010:
R19,6 million vs R11,5 million (deficit of R8,1 million)
2010/2011:
R37,7 million vs R3,8 million (deficit of R33,9 million)
The unauthorised expenditure that would have been incurred by the Department as shown by the deficit above is an indication that there are serious challenges in the allocation of budget for Goods and Services

25. Progress on BRRR Recommendations
Recommendation: The Minister needs to ensure that capacity within the department is built and therefore avail/provide for the necessary resources including financial budget DMR Response: Funding problems have always been the challenge as illustrated in the next slide. This has a negative impact on performance as limited funding inhibits achievements of some of the set objectives thereby affecting service delivery

26. Progress on BRRR Recommendations DMR Response Cont’d
Financial Year
Additional Funding Requested
Additional Funding Allocated
Variance
2010/2011
R281,234
R10 996
R270,238
2011/2012
R452,324
R10,136
R462,460

27. Progress on BRRR Recommendations
In order to ensure the DMR’s contribution to the process of creating decent jobs and ensuring sustainable livelihood for the people the Minister of Mineral Resources needs to speed up the process of completing the beneficiation and small scale mining strategies

28. Progress on BRRR Recommendations Cont’d
DMR Response:
The Beneficiation strategy was adopted as the country’s policy by Cabinet on the 8th of June 2011.
-Process of developing implementation plans for the five pilot value chains as outlined in the strategy.
-Two value chains are being finalized for presentation to Cabinet - the iron and steel and the energy commodities value chains .
-The rest of the value chains will be developed during the next financial .
The small scale mining strategy – Draft strategy has been completed and going through the internal approval processes.

29. Progress on BRRR Recommendations
The department should ensure capacity is created to enforce the compliance with legislation
DMR Response:
The Department has provided for the establishment of a compliance unit under the Mineral Regulation Branch however the posts remain unfunded and the Branch will continue to motivate for the necessary funding

30. Progress on BRRR Recommendations
The Director General should ensure the Committee receives the organogram of the new DMR
DMR Response:
A high level organogram and schedule of current vacancies are attached to this presentation

31. SECTION 32 REPORT: EXPENDITURE ANALYSIS
Economic Classification
Year to Date
% Variance
Projected Expenditure
Actual Expenditure
Variance on Projected vs. Actual Expenditure
Compensation of employees
190,576
180,094
10,482
5.50%
Goods and Services
121,557
110,861
10,696
8.80%
Capital payments
5,129
4,188
941
18.35%
Financial Transactions - 14
-14
0.00%
Transfer Payments
266,683
223,934
42,749
16.03%
TOTALS
583,945
519,091
64,854
11.11%
Year to date analysis (per economic classification)

32. EXPENDITURE ANAYSIS
The Department has, as at 30 September 2011, disbursed R519.1 million which represents 50.10% of the total budget allocation of R1.036 billion for the 2011/12 financial year.
This was R64.9 million (11.11%) lesser than the projected expenditure of R583.9 million

33. SLOW SPENDING AREAS
Transfer Payments
The year to date transfer payments totalling R42.7 million which mostly includes:
R23 million in respect of IDCSA for Small Scale Mining
R9 million for assistance to mines
R9.3 million in respect of Mintek rehabilitation of ownerless and derelict mines projections were changed during the year

34. SLOW SPENDING AREAS (CONT)
2. Goods and Services
The underspending in this category is mainly due to the outstanding payments totalling R6.6.million in respect of office accommodation to the Department of Public Works which accounts for 61.4% of the under spending
Other contributing factor are vacancies as a result of the Department’s inability to attract professional bands and the time frame associated with filling of the posts

35. REMEDIAL ACTIONS
Fast track the finalisation of the Strategy, MoA and other processes that are prerequisite to the transfer of funds

36. SECTION 32 REPORT: REVENUE ANALYSIS
Year to date analysis
ITEM DESCRIPTION
Projected Revenue
Revenue collection as at 30/09/2011
Variance on projected vs Revenue collected
% Variance
DEPARTMENTAL REVENUE
(9,691)
(28,851)
19,160
-198%

37. REVENUE ANALYSIS
The year to date revenue recoveries mainly consist of prospecting fees and royalty payments which represents 53.37% and 39.09% respectively of the total revenue received totalling R28.9 million
The revenue projections were based on historical information

38. REMEDIAL ACTIONS
1. Underestimated Revenue
- The revenue projections were increased during the 2011 AENE and the monthly projections will be adjusted after the 2011 AENE is tabled in Parliament

39. THANK YOU