Economic Development Department Annual Financial Statements 2011/12 Presentation to the Portfolio Committee 16 October 2012

Introduction The information presented is based on 2011/12 Audited Annual Financial Statements 2

Presentation Outline Expenditure Overview of Expenditure Context of Expenditure Auditor-General Processes - Auditor-General’s Reports - Meetings with the Auditor-General - Implementation of Commitments and Recommendations Committee on Public Accounts’ Resolutions 2011/12 Budget Process Overall Expenditure Per Programme - Programme 1 - Programme 2 - Programme 3 - Programme 4 - Transfers to Entities Overview of Revenue Payments Conclusion

EXPENDITURE

Overview of Expenditure Expenditure was up by 44%, compared to the previous financial year The total adjusted budget for 2011/12 financial year was R 598.4 million, an increase of 33% compared to the previous financial year Expenditure for 2011/12 was R 577.6 million or 97% of the adjusted appropriation, compared to R400.6 million or 89% in 2010/11 Excluding transfers, expenditure was R 89.6 million or 81% of adjusted appropriation of R 110.4 million, compared to R 44.2 million or 48% in 2010/11 5

Context of Expenditure 2011/12 was EDD’s second full year of operation as a separate vote Still challenges experienced in recruiting suitably qualified and experienced staff Compensation of employees is a major cost driver which accounts for lower expenditure 6

AUDITOR-GENERAL PROCESSES

Auditor-General (AG)’s Report EDD maintained the status of an unqualified audit report AG raised only one non-compliance matter: Material misstatements of expenditure Were subsequently corrected by the Department A reduction from 6 non-compliance in 2010/11 to only 1 in 2011/12 8

AG’s Report (cont.) 2011/12 AG’s report suggests that EDD is free from the following forms of undesirable expenditures: Irregular Expenditure Unauthorised Expenditure Fruitless and Wasteful Expenditure 9

Interactions with the AG: Meetings with the AG Interactions with the AG: With Minister: 1 August 2011 2 July 2012 With the Accounting officer: 18 December 2011 24 March 2012 11 June 2012 3 July 2012 At these meetings commitments were made to address improvements in the internal control environment with the objective of achieving clean administration. 10

Meetings with AG (cont.) With the Audit committee: 14 September 2011 24 March 2012 23 May 2012   Steering Committee Meetings: Every two weeks during the audit process 11

Implementation of Commitments and Recommendations Below is the AG’s assessment of the progress on commitments made by the Minister, accounting officer and audit committee to address audit outcomes in the 2010/11 and 2011/12. 12

COMMITTEE ON PUBLIC ACCOUNTS RESOLUTIONS

Committee on Public Accounts Resolutions EDD has never appeared before the Committee on Public Accounts and there are no resolutions from this Committee for EDD to implement 14

2011/12 BUDGET PROCESS

2011/12 Budget Process A strategic session was held in November 2011 Addressed by the Minister, and Chaired by the former DG Considered strategic priorities of the Department Guided by the National Treasury guidelines on budget and strategic process Analysis of current spending trends was addressed 16

2011/12 Budget Process (cont.) Costing of cost drivers was done Submitted all National Treasury prescribed budget documentation (including the ENE’s final chapter) Based on the Strategic Plan, APP and organisational structure 17

2011/12 Budget Process (cont.) A budget was determined for three years, with line item expenditure projected for: - Staffing - Goods and services - Capital expenditure This became the basis for proposed baseline expenditure for the MTEF Final budget allocation for the EDD was tabled by the Minister of Finance in February 2011 was R 594.5 million 18

EXPENDITURE

Overall expenditure 20

Programme 1 Actual spending for Programme 1 at 31 March 2012 was R 50.8 million or 88% of budget, compared to R 35 million or 78% in 2010/11 Expenditure increased by 46% over 2010/11 Under-spending mainly due to slow spending on capital assets 21

Programme 2 Actual expenditure for Programme 2 amounted to R 12.5 million or 77% of the budget, compared to R 6.6 million or 39% in 2010/11 Expenditure increased by 89% over 2010/11 Slow spending on this programme was due to slow rate of filling posts due to difficulty in employing appropriately skilled staff 22

Programme 3 Financial year expenditure for Programme 3 was R 501 million or 100% of the budget, compared to R 359 million or 95% in 2010/11 Expenditure increased by 40% over 2010/11 R 479.9 million was transferred to EDD’s Public Entities 23

Programme 4 Spending for programme 4 was R 13.3 million or 62% of the budget, compared to R 456 000 or 4% in 2010/11 Expenditure increased more than 20 fold Slow spending on this programme was due to slow rate of filling posts due to difficulty in employing appropriately skilled staff 24

Transfers to Entities The following Public Entities received transfers from EDD in the 2011/12 financial year 25

Transfers to Entities (cont.) The following other Entities received transfers from EDD in the 2011/12 financial year 26

OVERVIEW OF REVENUE

Overview of Revenue Revenue collection for 2011/12 totaled R 592.9 million or 243%, compared to R 547 million or 238% in 2010/11 Main revenue generator for EDD is fines and penalties from the Competition Commission and Dividends from the IDC The collected revenue is not availed for spending by the Department Revenue is promptly surrendered to the National Revenue Fund (fiscal envelope) 28

PAYMENTS

Payments In 2011/12, it took the EDD an average of 15 days to pay its creditors From the date of receipt of invoice to that of payment Maximum is 30 days per Treasury Regulation period The EDD reduced its year-end accruals by 88% from 2010/11 to 2011/12 financial years The Department has made a concerted effort to spend its budget in an economic, effective and efficient manner in view of the mandate of the Department 30

CONCLUSION

Concluding Remarks Executing Authority and Acting DG committed to: Continuous improvements on internal controls Ensuring that EDD obtains a clean audit report Continue to meet the AG on a regular basis Start the interim audit in October 2012 32

Thank you