2017/18
FREE STATE LEGISLATURE ANNUAL
REPORT “An Activist Legislature that “ Champions Democracy FREE STATE LEGISLATURE
ANNUAL REPORT For the year ending 31 March 2018
VOTE 2 FREE STATE LEGISLATURE
ANNUAL REPORT For the year ending 31 March 2018
VOTE 2 FREE STATE LEGISLATURE FREE STATE LEGISLATURE
FREE STATE LEGISLATURE ANNUAL REPORT 2017/18
Hon MG Qabathe
Speaker to the Legislature OF CONTENT TABLE
I have the honor of submitting the Annual Report of the Free State Legislature for the period 1 April 2017 to 31 March 2018
______TL Mofokeng Secretary to the Legislature 31 May 2018 FREE STATE LEGISLATURE FREE STATE LEGISLATURE
PART A: GENERAL INFORMATION 07
1. Legislature’s General Information 08
2. List of abbreviations / acronyms 08
3. Foreword by the Speaker 09 FREE STATE LEGISLATURE 4. Report of the Accounting Officer 10 ANNUAL REPORT 4.1 Overview of the operations of the Legislature 10 4.2 Overview of the financial results of the Legislature 10 2017/18 Virements/ roll overs 10 Discontinued activities 10 4.2.3 New or proposed activities 10 4.2.4 Supply chain Management 10 OF CONTENT TABLE 4.2.5 Gifts and donations received in kind from non-related parties 4.2.6 Exemptions and deviations received from the National Treasury 4.2.7 Events after the reporting date 1 4.2.8 Other 11
4.3 Statement of responsibility and confirmation of the accuracy of the Annual Report 12 4.4 Strategic Overview 13 4.4.1 Vision 13 4.4.2 Mission 13 4.4.3 Values 13 Legislative and other mandates 14 4.6 Organisational Structure 19 4.7 Political landscape of the Free State Legislature 20
PART B: PERFORMANCE INFORMATION 5. Delegated Authority 23 5.1 Aim of the Vote 24
5.2 Service Delivery Outcomes 24
5.3 Organisational Environment 24
5.4 Key policy developments and legislation changes 25
5.5 Strategic Outcome Oriented Goals 25
5.6 Performance Information by Programme 26
5.7 Strategic objectives, performance indicators, planned targets and actual achievements 26 FREE STATE LEGISLATURE TABLE OF CONTENT 5.10 5. Priormodificationstoauditreports PROPACResolutions PortfolioCommittees Health,SafetyandEnvironmentalIssues 6.13 6.12 Profiles: AuditCommittee 6.11 6.10 6.9 6.8 6.7 6.6 CodeofConduct 6.5 Minimisingconflictofinterest 6.4 FraudandCorruption 6.3 RiskManagement 6.2 6.1 Introduction 7.5 7.4 7.3 7.2 7.1 PART D:HUMAN RESOURCE MANAGEMENT Progamme1:Administration 5.8 PART C : GOVERNANCE PART E:FINANCIALINFORMATION 9 Utilisation of Consultants Injury on duty development Skills relations Labour Leave utilisation Statement of Financial Position PART E:FINANCIAL INFORMATION Progamme3:ParliamentaryServices Progamme2:FacilitiesandBenefitstoPoliticalParties Internal AuditandCommittee Internal Report oftheAuditCommittee Cash FlowCash Statement Accounting Policies Statement ofcomparison ofBudgetandActualAmounts Accounting Policies Notes tothe AnnualFinancialStatements Statement of changes inNet Assets Statement of Financial Performance ofReport Auditor-General the Control Unit
10 34 33 38 38 8 26 84 8 82 72 70 69 69 64 61 56 44 40 40 39 81 80 38 39 39 40 39 39 39 39 5 3 4
Part A:GeneralInformation FREE STATE LEGISLATURE FREE STATE LEGISLATURE Annual Report 2017/18 PART A GENERAL INFORMATION PART A: GENERAL INFORMATION
1. Legislature’s General Information
Free State Legislature
Physical Address: 41 Charlotte Maxeke Street Bloemfontein 9301
Postal Address: Private Bag X20561 Bloemfontein 9301
051-407 1100
Website address: www.fsl.gov.za
2. List of abbreviations / acronyms
AO Accounting Officer AGSA Auditor-General of South Africa AFS Annual Financial Statements CFO Chief Financial Officer DORA Division of Revenue Act EA Executive Authority HR Human Resources PFMA Public Finance Management Act (Act 29 of 1999) FMPPLA Financial Management of Parliament and Pro- vincial Legislatures Act (Act 10 of 2009) SCOPA Standing Committee on Public Accounts
8 3. Foreword by the Speaker
The Annual Report and Financial Statements of the Free State Legislature for the 2017/2018 financial year provide an overview of the Legislature’s implementation of its core constitutional obligations, and these obligations form the basis of the Legislature’ strategic focus, namely an informed citizenry that participates meaningfully in the programmes of the Legislature and the enhanced accountability of the executive arm of the provincial government. I would like to express my profound appreciation to Members of the Legislature, the Secretary to the Legislature and his management team and all employees of the Legislature for their support during the year under review.
______Hon MG Qabathe Speaker: Free State Legislature
FREE STATE LEGISLATURE Speaker: Hon. M. G. Qabathe
Free State Legislature Annual Report 2017/18 9 4. Report of the Accounting Officer Report by the Accounting Officer to the Executive Authority, the Speaker of the Legislature, and the Free State Legislature for the Annual Financial Statements for the financial year ending 31 March 2018 provides an overview of the financial performance and challenges of the Free State Legislature during the year under review.
4.1 Overview of the operations of the Legislature The operations of the Legislature are driven by its annual programme. Portfolio Committees are responsible to perform an oversight role and a customized oversight model was tabled in the House.
4.2 Overview of the financial results of the Legislature The fifth Legislature provided services in terms of its constitutional mandate. Votes funds of R243,056 were appropriated. The Legislature prepares its annual financial statements in accordance to Generally Recognised Accounting Practices (GRAP). The Legislature recorded a deficit of R6 934 782 and total liabilities exceed its assets by R5 009 254. Whilst statements have been prepared to a going concern, the recorded deficit is a matter which have to be addressed, as the institution would not want to be viewed with doubt on its ability to function effectively. The Legislature is compelled to also report in terms of modified cash principles, in support of consolidation of the provincial government budget. This reporting is disclosed under part B of the Performance Information as well as the statement of budget comparison.
4.2.1 Virements / roll overs A virement of R100,000 was done between Programme 1 : Administration and Programme 3 : Parliamentary Services.
4.2.2 Discontinued activities No activities can be reported as discontinued.
4.2.3 New or proposed activities Activities were performed as per Legislature programme.
4.2.4 Supply Chain Management The high vacancy rate as well as capacity constraints do have a negative bearing on the SCM operations.
4.2.5 Gifts and donations received in kind from non-related parties
No gifts were received.
4.2.6 Exemptions and deviations received from the National Treasury None recorded.
10 4.2.7 Events after the reporting date No events can be reported upon or took place after the reporting date and the date of approval of the annual financial statements that could materially influence the state of financial affairs.
4.2.8 Other Related party transactions in kind refer to the use of the Fourth Raadsaal for convening of sittings of the Legislature. The Department of Public Works is currently responsible for maintenance while the South African Police who provides protection services at the Fourth Raadsaal. The Fourth Raadzaal is a National Key Point. No material fact or circumstances which may have an effect on the understanding of the financial state of affairs can be reported upon. I wish to place on record my appreciation towards the Speaker and Deputy Speaker, Members of the Legislature as well as management and staff who constructively supported the institution throughout the reported period.
APPROVAL The annual financial statements set out on pages 80 to 119 have been approved.
______
TL Mofokeng Secretary to the Legislature
Free State Legislature Annual Report 2017/18 11 4.3 Statement of responsibility and confirmation of the accuracy of the Annual Report To the best of my knowledge and belief, I confirm the following: All information and amounts disclosed throughout the annual report are consistent. The annual report is complete, accurate and is free from any omissions. The Annual Financial Statements have been prepared in accordance with the general recognised accrual principles (GRAP) standard and the relevant frameworks and guidelines issued by the National Treasury. I am responsible for the preparation of the annual financial statements and for the findings made in this information.
The Accounting Officer is responsible for establishing, and implementing a system of internal control that has been designed to provide reasonable assurance as to the integrity and reliability of the performance information, the human resources information and the annual financial statements.
The external auditors are engaged to express an independent opinion on the annual financial statements. In my opinion, the annual report fairly reflects the operations, the performance information, the human resources information and the financial affairs of the Legislature for the financial year ended 31 March 2018.
Yours faithfully
______T L Mofokeng Secretary to the Legislature 31 May 2018
12 4.4. Strategic Overview
4.4.1 Vision A People Centered Legislature that Champions Democracy
4.4.2 Mission A modern institution of democracy that promotes good governance and a culture of human rights through public participation, law-making and oversight that is vigilant, dynamic, proactive and responsive.
4.4.3 Values The work of the Free State Legislature is conducted on a platform of a formalised set of values. The values are the set of beliefs that guide the management of the Legislature. It is the foundation of policies that provide guidance in the implementation of services and projects.
• Integrity (honesty) • Accountability (responsibility) • Loyalty (commitment) • Respect for diversity • Openness and transparency • Fairness • Empowering • Innovation (creativity)
Free State Legislature Annual Report 2017/18 13 4.5 Legislative and other mandates
4.5.1 Constitutional mandate
Section 10 (1) of the Constitution of the Republic of South Africa, 1996, provides that: “The legislative authority of a province is vested in its provincial legislature. Section 114(1) and (2) of the Constitution provide further for the powers of a Provincial Legislature to include; (a) the consideration, passing, amendment or rejection of bills; (b) to initiate or prepare legislation, except money bills; (c) to ensure that all provincial executive organs of state in the province are accountable to it and (d) to maintain oversight of the exercise of provincial executive authority in the province, including the implementation of legislation and any provincial organ of state.
Section 118 (1) and (2) of the Constitution requires the Legislature to: Facilitate public involvement in the legislative and other processes of the legislature and its committees; Conduct its business in an open manner, and hold its sittings, and those of its committees, in public, but reasonable measures may be taken: i) To regulate public access, including access of the media, to the legislature and its committees; and ii) To provide for the searching of any person and, where appropriate, the refusal of entry to, or the removal of, any person.
Subsection 118(2) provides that a provincial legislature may not exclude the public, including the media, from a sitting of a committee unless it is reasonable and justifiable to do so in an open and democratic society.
4.5.2 Legislative mandate
In addition to its constitutional mandate and obligations, the general and specific powers of the Legislature are set out in Rules 127 to 130 of the Standing Rules and Orders.
The key legislative framework relating to the establishment and composition of the Legislature as well as matters relating to elected representatives and political parties and matters incidental thereto of which the Legislature is directly responsible for implementing and managing are-
- The Financial Management of Parliament and Provincial Legislatures Act, 2009 - Independent Commission for the Remuneration of Public Office BearersAct, 1998 - Remuneration of Public Office Bearers Act, 2000 - National Council of Provinces (Permanent Delegates Vacancies Act), 1997 - Determination of Delegates Act, 1998 - Powers, Privileges and Immunities of Parliament and Provincial Legislatures Act, 2004; - Powers, Privileges and Immunities of the Free State Provincial Legislature Act, 2009 - Mandating Procedures of Provinces Act, 2008 - Free State Political Party Fund Act, 2008 - Free State Petitions Act, 2008 - Labour Relations Act, 1995 - Basic Conditions of Employment Act, 1997 - Human Rights Commission Act, 1994
14 - Income Tax Act, 1962 - Legal Deposit Act, 1997 - Pan South African Language Board Act, 1995 - Promotion of Access to Information Act, 2000 - Promotion of Equality and Prevention of Unfair Discrimination Act, 2002 - Public Finance Management Act, 1999 - Public Protector Act, 1994 - Skills Development Act, 1998 - Value Added Tax Act, 1999 - Electoral Act, 1998 - Promotion of Administrative Justice Act, 2000 - Preferential Procurement Framework Act, 2000 - Protected Disclosures Act, 2000 - Intergovernmental Relations Framework Act, 2005 - Local Government: Municipal Finance Management Act, 2003 - Financial and Fiscal Commission Act, 1997 - Occupational Health and Safety Act, 1993 - Compensation for Occupational Injuries and Diseases Act, 1993 - Employment Equity Act, 1998 - Unemployment Insurance Act, 2001 - Unemployment Insurance Contributions Act, 2002 - National Key Points Act, 1980 - Free State Provincial Archives Act, 1999.
4.5.3 Policy mandates The Legislature has developed a range of policies pertaining to elected representatives, political parties, staff and various institutional practices in order to guide and regulate the daily implementation of services and projects. In respect of such policies, the review highlighted the need to ensure that existing shortcomings and weaknesses are identified and that key legislation and good governance frameworks, such as King reports on governance and good business practices, are incorporated into the existing policy framework.
Free State Legislature Annual Report 2017/18 15 The provincial growth and development strategy and the strategies developed by the Executive are the key points of departure that define the priorities for the province. Within this framework, the Legislature has to engage with and identify whether there are any gaps or whether enabling policy is required to support the achievement of provincial goals. The Legislature also has to prioritise how it will meaningfully perform oversight to ensure delivery against the stated strategies. In this regard, it must intelligently assign its resources and tactically form partnerships with civil society.
4.5.4 Executive Authority Section 3 (2) of FMPPLA states: “in such application, a reference in the Act to (c) the Speaker of the National Assembly or the Chairperson of the National Council of Provinces must be construed as a reference to the Speaker of the Provincial Legislature concerned. The Legislature elects a Speaker from amongst its Members in terms of section 111(1) and (2) of the Constitution.
4.5.5 Elected Representatives
a) The Policy on Payment of Benefits, Facilities and Allowances to Members of the Free State Legislature provides for and outlines the conditions under which enabling facilities are made available to elected representatives. This policy addresses enabling facilities such as (i) accommodation and relocation costs, (ii) communication facilities, (iii) travelling facilities, (iv) subsistence allowances, (v) study-aid for elected representatives, (vi) remuneration, (vii) facilities for Members with special needs and (vi) accident insurance. b) Code of Conduct and Ethics for Members of the Legislature (as contained in the Standing Rules and Orders)
4.5.6 Political Parties The Policy on Funding of Political Parties represented in the Free State Legislature that provides for and outlines the conditions under which enabling facilities are made available to elected representatives. This policy addresses enabling facilities such as (i) accommodation and relocation costs, (ii) communication facilities, (iii) travelling facilities, (iv) subsistence allowances, (v) study-aid for elected representatives, (vi) remuneration, (vii) facilities for Members with special needs and (vi) accident insurance.
4.5.7 Administrative policies of the Legislature (a) Financial Code of the Free State Legislature; (b) Code of Conduct for the Disclosure of Financial Interests for Employees of the Free State Legislature (c) Policy on Communication Services (d) Policy on Disciplinary and Grievance Procedures (e) HIV/AIDS (f) Policy on Housing (g) Policy on HR Management (h) Policy on Information Technology (i) Policy on Leave (j) Policy on Overtime (k) Policy on Library Services
16 (l) Policy on Probation (m) Policy on Provision of Uniforms (n) Policy on Salary Advances (o) Policy on Transport (p) Policy on Supply Chain Management (q) Policy on Funding of Political Parties (amended) (r) Server Baseline Policy (s) Patch Management Policy (t) IT Steering Charter (u) Information Systems Security Policy (v) Information Systems Disaster Recovery Plan (w) Account Management Policy
4.5.8 Legislation covering establishment and composition of Legislature as well as matters relating to elected representatives and political parties and matters incidental thereto a) The Financial Management of Parliament and Provincial Legislatures Act, 2009; b) Independent Commission for the Remuneration of Public Officer BearersAct, 1998; c) Remuneration of Public Office Bearers Act, 2000; d) National Council of Provinces (Permanent Delegates Vacancies Act), 1997 e) Determination of Delegates Act, 1998. f) Powers, Privileges and Immunities of the Provincial Legislature Act (Act 3 of 1996), specifically the financial arrangements as set out in the Act);
g) Powers, Privileges and Immunities of Parliament and the Provincial Legislatures Act (Act 4 of 2004 to the extent that it is applicable);
h) Mandating Procedures of Provinces Act, 2008’ i) Free State Political Party Fund Act, 2008 and j) Free State Petitions Act, 2008
4.5.9 Legislation covering inancial and administrative management a) Basic Conditions of Employment Act, 1997; b) Fixing of Remuneration and other conditions of service of staff of the Free State Legislature Act, No 8 of 1994; c) Human Rights Commission Act, 1994; d) Income Tax Act, 1962; e) Labour Relations Act, 1995; f) Legal Deposit Act, 1997; g) Pan South African Language Board Act, 1995;
Free State Legislature Annual Report 2017/18 17 h) Powers, Privileges and Immunities of the Provincial Legislature Act (Act 3 of 1996); i) Promotion of Access to Information Act, No 2 of 2000; j) Promotion of Equality and Prevention of Unfair Discrimination Act, No 52 or 2002; k) Public Finance Management Act (PFMA), Act No 1 of 1999 (as amended by Act 29 of 1999); l) Public Protector Act, 1994; m) Skills Development Act, 1998 n) Value Added Tax Act, 1991
18 4.6 Organisational Structure
The Presiding Officers of the Legislature: The Speaker to the Legislature is hon Qabathe, MG The Deputy Speaker is hon Mbalo, SI The Chair of Chairs is hon Ramokhoase, TRJ
The Secretariat Officials: The Secretary to the Legislature is Mofokeng, TL The Deputy Secretary to the Legislature is Machaka, JM The Chief Financial Officer is Mr Hugo, Q
Free State Legislature Annual Report 2017/18 19 4.7 Political Landscape of the Free State Legislature
4.7.1 Political Parties represented in the Legislature
The seat allocation of the Legislature:
Political Party No of Seats
African National Congress 22 Democratic Alliance 5 Economic Freedom Fighters 2 Freedom Front Plus 1
4.7.2 Determination of Whips to Political Parties a) The Multi-party Whips’ committee performs the functions and responsibilities assigned to it by the Standing Rules and Orders. Such functions and responsibilities relate to both administrative and procedural matters. The Whips are also assigned specific functions by the respective political parties that may relate to Members’ discipline, constituency offices and the administration of funds allocated to political parties in terms of the Policy on Funding of Political Parties in the Legislature. b) The formula for the allocation of Whips to political parties were not reviewed or amended during the financial year under review c) The following Members served as Whips for their respective political parties as at 31 March 2018; i) Chief Whip (ANC and Legislature): Hon. CJ van Rooyen ii) ANC Deputy Chief Whip: Hon. S Moleleki iii) ANC Whip: Hon. MP Buti iv) ANC Whip: Hon. K. Phukuntsi v) ANC Whip: Hon. M. Sechoaro vi) DA Hon. D van Vuuren vii) EFF Hon. M Makesini viii) FF+ Hon. T. Wessels
4.7.3 Official Opposition The Democratic Alliance, holds 5 seats in the Legislature and is the Official Opposition.
4.7.4 Remuneration of Elected Representatives a) The remuneration of political representatives is determined by the Independent Commission on Remuneration that submits its recommendations annually to the President. No salary increases were effected for Members of the Legislature for the 2016/17 financial year. Reference to Government Gazette of November 11, 2016 (No 40422).
20 Public Representatives ANNEXURE ONE Members of the Provincial Legislature as at 31 March 2018 [Excluding Premier and MECs]
Member Political Portfolio
Party
Hon MG Qabathe ANC Speaker
Hon IS Mbalo ANC Deputy Speaker Hon TRJ Ramokhoase ANC Chairperson of Committees Hon CJ van Rooyen ANC Chief Whip
Chairperson: Public Accounts and Finance Hon M Mokotla ANC Chairperson: Cooperative Governance, Traditional Affairs, Office of the Premier, Legislature and Police Hon L Mapena ANC Chairperson: Education, Health and Social Development Chairperson: Public Works, Infrastructure, Roads, Transport and Human Hon S Moleleki ANC Settlement Hon T Meeko ANC Chairperson: Agriculture & Rural Development, Small Business and Sports, Arts, Culture and Recreation
Hon K Phukuntsi ANC Whip
Hon CSK Sechoaro ANC Whip
Hon MP Buti ANC Whip
Hon KZ Morapela EFF Leader of a Minority Party
Hon M Makesini EFF Whip
Hon R Jankielsohn DA Leader: Minority Party Hon D van Vuuren DA Whip : Official Opposition Hon M Pittaway DA Member Hon LM Kleynhans DA Member Hon LJ Letuka DA Member Hon T Wessels, FF Leader: Minority Party
4.7.5 Permanent Delegates to the National Council of Provinces as at 31 March 2018
Member Political Party Hon L Moshodi African National Congress Hon SJ Mohai African National Congress Hon JP Parkies African National Congress Hon MJ Mohapi African National Congress Hon G Michalakis Democratic Alliance Hon LG Mokoena Economic Freedom Fighters
Free State Legislature Annual Report 2017/18 21 4.7.6 Members of the Executive Council as at 31 March 2018
Member Portfolio
Hon Magashule, ES Premier
Hon Malakoane, B MEC: Economic Development, Tourism and Environmental Affairs
Hon Mahasa, LP MEC: Social Development
Hon Makgoe, PHI MEC: Education
Hon Rockman, EC MEC: Treasury
Hon Ntombela, SH MEC: Cooperate Governance, Traditional Affairs & Human Settlement
Hon Leeto NS MEC: Sport, Arts, Culture & Recreation
Hon Khoabane O MEC: Agriculture & Rural Development
Hon S Mashinini MEC: Police, Roads and Transport
Hon D Kotzee MEC: Public Works
Hon Khompela, B MEC: Health
22 FREE STATE LEGISLATURE Annual Report 2017/18 PART B PERFORMANCE INFORMATION
Free State Legislature Annual Report 2017/18 23 PART B: PERFORMANCE INFORMATION
5. Delegated Authority
Executive Authority Speaker Administering Free State Legislature
Entity Accounting Officer Secretary to the Legislature
5.1 Aim of Vote a) The aim of Vote 2: Provincial Legislature is to provide for the procedural and administrative support services required by the Legislature to fulfill its constitutional functions, inter alia, the consideration of legislation, the performance of monitoring and oversight functions, ensuring accountability by the Executive Council as well as facilitating and enhancing public participation in the legislative processes. b) The Vote aims to provide the necessary and required facilities to the House, its Committees and Members and to enable political parties represented in the Legislature to secure administrative support services and to serve constituents. c) The Vote also provides for the remuneration of elected representatives and employees of the Legislature.
Overview of the Legislature’s Performance 5.2 Service delivery environment The Legislature has a constitutional mandate. The strategic plan for the period (2014 – 2019) is supported by the Annual Performance Plan.
5.3 Organisational environment The organizational structure of the Legislature numbers 196 posts. The permanent staff complement was 133 for the reported period, which equates to 71% filling of the structure. Funded vacancies under the Office of the CFO, are Manager : Finance and Manager SCM have been advertised but not yet filled.
5.4 Key policy developments and legislative changes No legislative changes have been made. Financial Regulations have been drafted, but not yet adopted.
24 5.5 Strategic Outcome Oriented Goals Strategic outcome oriented goals of the institution
Strategic Goal 1 Ensure efficient strategic management in the FS Legislature Goal Statement To develop an effective and efficient institution through improvement of institutional governance and policies, imple- mentation of modern systems and technologies, as well as the development of human resource. Justification Deepening parliamentary democracy, separation of powers and checks and balances is possible only with a compe- tent administration built on skills and sound governance, policies and systems. Links Improvement of service delivery
Maximising efficiency and value for money
Customer satisfaction, responsiveness and all other Batho Pele principles Strategic Goal 2 Improve support to political representatives To increase the capacity of members and political parties to carry out their representative roles
Goal Statement
Members must be empowered to fulfill their responsibilities as such and political parties play an important role in the political representation Justification Building a dynamic and vibrant democracy
Links This will further strengthen engagement with constituents Strategic Goal 3 Quality Oversight and accountability over the Executive Enhancement of the quality of oversight and accountability of the performance of provincial organs of state and the mechanisms for their accountability Goal Statement Increasing the compliance of the Executive with the constitutional obligations of accountability and pursuing concrete results through the oversight process Justification Accountability, openness and transparency are cardinal principles that permeate the constitution and underpin a society envisaged therein Links Strategic Goal 4 Increased public education and participation, communication and marketing To build an activist Legislature by proactively maximizing public education and participation, timeous handling of peti- tions and transparency in its processes and pursue fundamental social transformation and Nation - building Goal Statement The constitution demands of the Legislature to conduct its business openly and to ensure that the people are involved in its process. It is in the context of this goal that the legislature will seek to promote and protect the rights and free- Justification doms of its citizens. This goal is linked to the broader national goal of deepening participatory democracy and contribute to building a dynamic and vibrant democracy in the country Links Strategic Goal 5 Transformative law-making.
Transformative Law-making that contributes to the attainment of rights enshrined in the Constitution by all the people of the Free State Goal Statement
Exercise constitutional legislative authority geared at positively impacting of socio-economic conditions of people and the attainment of basic human rights Justification The main service delivery challenges are essentially linked to the development and nurturing of the democratic pro- cesses and practices of a developmental society. Links
Free State Legislature Annual Report 2017/18 25 5.6 Performance Information by Programme The Annual Performance Plan forms the basis of reporting on performance. Quarterly reports have been produced to assess the Legislature’s achievements and challenges. The following report is based on the revised APP whereby the outcomes of quarterly assessments have been incorporated. 5.7 Strategic objectives, performance indicators, planned targets and actual achievements The performance plan of the Legislature listed 14 strategic objectives and 14 performance indicators, recorded an achievement rate of 93% on performance indicators.
Programmes Number of Achieved Not achieved Comment performance indicators
Administration 9 8 1
Facilities & benefits for Members 1 1 - and Political Parties
Parliamentary Services 4 4 -
Total 14 13 1
5.8 Programme 1: Administration
a) Programme 1: Administration provides for the core political and administrative management of the institution through the Office of the Speaker and the Office of the Secretary whilst also delivering a support service to other programmes in the budget vote through the Finance and Corporate Services divisions. It facilitates the legislative and oversight functions through the programmes of the Household - and Portfolio Committees and provides institutional support and corporate services.
b) The sub-programme structure comprises of the following:
i) The Office of the Speaker includes all activities of the Office of the Presiding Officers, including the funding of programmes and activities of Household – and Portfolio Committees; ii) The Office of the Secretary to the Legislature includes (a) Strategic Management Directorate, (b) the Internal Audit unit, (c) Security Unit and (d) Communication and Marketing Unit; iii) The Office of the Deputy Secretary includes: (a) Public Participation Directorate, (b) Policy and Research Unit; iv) The Finance Division includes the (a) Financial Management Directorate, (b) Supply Chain Management Directorate v) The Corporate Services Division includes (a) the Human Resources Directorate and (b) the Institutional Support Directorate.
26 5.8.1 Programme Performance The evaluation of performance, is based on the number of performance indicators which have been achieved or not (fractions permitted). Programme 1: Administration recorded overall achievement of its listed performance indicators.
Subprogramme Number of perfor- Achieved Not achieved Comment mance indicators
Office of the Speaker 2 1 1 -
Office of the Secretary 3 3 -
Finance 2 2 -
Corporate 2 2 -
Total 9 8 1
5.8.2 Office of the Speaker
Direct support services are rendered to ensure that the Office is able to meet its objectives and requirements. These include political, administrative and operational matters. The sub-programme also provides for the activities of Household – and Portfolio Committees to ensure that both institutional governance priorities as well as key responsibilities for oversight and accountability are addressed. Facilitation and interaction with the Executive Council and local government are also accommodated in the office.
Programme 1 : Administration
Sub-programme : Office of the Speaker Strategic Actual Planned target Actual Deviation Comment on Objectives Achievement Achievement from Planned Deviations 2016/17 2017/18 2017/18 Target to Actual Achievement 2017/18 To provide Execu- Strengthened In-year reporting Achieved No Deviation None tive Leadership and divisional strate- (monthly financial Management in the gic and financial statements) must be Legislature management submitted to the Ex- functions ecutive Authority and Provincial Treasury None
Free State Legislature Annual Report 2017/18 27 Actual Achieve- Deviation Comment on ment 2017/18 from Planned Deviations Performance Indi- Actual Planned target Target to Actual cators Achievement Achievement 2016/17 2017/18 2017/18
Enhanced business Strengthened In-year reporting Achieved No Deviation None systems of the divisional strate- (monthly financial Legislature through gic and financial statements) must be sound financial man- management submitted to the Ex- agement, account- functions ecutive Authority and ability, professional Provincial Treasury ethics and effective management of resources
Strategic Objec- Actual Planned target Actual Achieve- Deviation Comment on Devi- tives Achievement ment 2017/18 from Planned ations 2016/17 2017/18 Target to Actual Achievement 2017/18 Stakeholder relation Convene Pro- Provincial Speakers Not Achieved Deviation management and vincial Speak- Forum meetings (2) to communication ers Forum be held -
Performance Actual Planned target Actual Deviation Comment on Devi- Indicators Achievement Achievement from Planned ations 2016/17 2017/18 2017/18 Target to Actual Achievement 2017/18 Provincial Speakers Convene Pro- Provincial Speakers Not Achieved Deviation During the 2nd Quar- Forum and any rele- vincial Speak- Forum meetings (2) to ter Speakers Forum vant structures ers Forum be held Meeting not held due to National Speakers Forum Meeting post- ponement and Inter- national Women’s Conference. During the 4th Quarter peri- od Speakers Forum postponed due to Official Opening and State of the Province Address followed by Budget Speech and Votes.
Performance Indi- Actual Planned target Actual Achieve- Deviation Comment on Devi- cators Achievement ment 2017/18 from Planned ations 2016/17 2017/18 Target to Actual Achievement 2017/18 Develop working re- Meetings Develop working Achieved No deviation None lations with Chapter convened with relations. 9 and 10 institutions Chapter 9 institutions and SALGA.
28 5.8.3 Office of the Secretary a) The Office of the Secretary bears responsibility for the overall effective and efficient management and administration of the Legislature. The accounting officer is responsible for all aspects relating to the provision of support services, i.e. corporate, financial, procedural and legal, to create an enabling environment in which the Legislature effective and efficiently executes its constitutional mandate and functions. b) The Public Participation and Education Unit supports the Secretary to the Legislature in the implementation of the core function of the Legislature to facilitate public participation and involvement in the Legislature’s processes. c) The Internal Audit Unit supports the Secretary to the Legislature to ensure compliance with relevant provisions of the Finance Act which regulates the financial administration of the institution as well as with the standards and practices of the Institute of Internal Auditors. The role of the unit is not only limited to the execution of audits and ensuring fraud and corruption prevention, but also ensures that the Legislature receives maximum value from expended resources. d) The Security Unit assists the Secretary to the Legislature to comply with the MISS as directed by the national cabinet. The unit is also responsible for the security of users and property of the Legislature and is responsible for the development of appropriate policies and procedures in this regard. The unit ensures cooperation and interaction with government and private security service providers.
Programme 1 : Administration
Sub-programme: Office of the Secretary Strategic Actual Planned target Actual Deviation from Comment on Devi- Objectives Achievement Achievement Planned Target to ations 2016/17 2017/18 2017/18 Actual Achieve- ment 2017/18
Provide Monitoring of im- Oversee Achieved No deviation None strategic direction plementation of implementation of and leadership to House Resolutions resolutions the Legislature
Programme per- Actual Achieve- Planned target Actual Achieve- Deviation from Comment on Devi- formance indica- ment 2016/17 ment 2017/18 Planned Target to ations tors 2017/18 Actual Achieve- ment 2017/18 Free State Legis- Monitoring of imple- Oversee imple- Achieved No deviation None lature resolutions mentation of House mentation of implementation Resolutions resolutions report
Free State Legislature Annual Report 2017/18 29 Strategic Actual Planned target Actual Deviation from Comment on Devi- Objectives Achievement Achievement Planned Tar- ations 2016/17 2017/18 2017/18 get to Actual Achievement 2017/18 Increase public District based As per Legislature Achieved No deviation The Focus area interest and aware- public education programme in Quarter 2 was ness in the legis- programme im- dedicated to the 2 lative and other plemented in five districts as per the processes through districts programme of the communication Legislature and and effective con- NCOP for the period stituency offices under review. 4th Quarter period pre- sented the Official and State of the Province Address 2018 Programme per- Actual Achieve- Planned target Actual Achieve- Deviation from Comment on Devi- formance indica- ment 2016/17 ment 2017/18 Planned Target to ations tors 2017/18 Actual Achieve- ment 2017/18 District based District based public As per Legislature Achieved No deviation The Focus area public education education pro- programme in Quarter 2 was and participation gramme implement- dedicated to the 2 workshops ed in five districts districts as per the programme of the Legislature and NCOP for the period under review. 4th Quarter period pre- sented the Official and State of the Province Address 2018
Strategic Objec- Actual Achieve- Planned target Actual Achieve- Deviation from Comment on Devi- tives ment 2016/17 ment 2017/18 Planned Target to ations 2017/18 Actual Achieve- ment 2017/18 To ensure effective Ensure compliance Security report by Achieved No deviation None protection services to National Key Joint Provincial Points Act Committee Programme per- Actual Achieve- Planned target Actual Achieve- Deviation from Comment on Devi- formance indica- ment 2016/17 ment 2017/18 Planned Target to ations tors 2017/18 Actual Achieve- ment 2017/18 Ensure compliance Ensure compliance Security report by Achieved No deviation None to National Key to National Key Joint Provincial Points Act Points Act Committee Performance Actual Achieve- Planned target Actual Achieve- Deviation from Comment on Devi- Indicators ment 2016/17 ment 2017/18 Planned Target to ations 2017/18 Actual Achieve- ment 2017/18 Security and Not achieved Assessment Achieved No Deviation None access control of security and system reporting access system reports
30 Finance Division
Programme 1: Administration
Finance
Strategic Ob- Actual Achieve- Planned target Actual Achieve- Deviation from Comment on Devia- jectives ment 2016/17 ment 2017/18 Planned Target to tions 2017/18 Actual Achieve- ment 2017/18 Rendering of an Objective to Preparation, adop- Achieved No deviation None effective and ef- achieve unquali- tion and tabling of ficient Financial fied audit opinion, budget according Management achievement of to the approved Service fiscal discipline budget process for the MTEF period
Programme Actual Achieve- Planned target Actual Achieve- Deviation from Comment on Devia- performance ment 2016/17 ment 2017/18 Planned Target to tions indicators 2017/18 Actual Achieve- ment 2017/18 Performs Objective to Preparation, adop- Achieved No deviation None budget process achieve unquali- tion and tabling of through adopted fied audit opinion, budget according cycle achievement of to the approved fiscal discipline budget process for the MTEF period
Programme 1 Administration
Supply Chain Management
Strategic Objec- Actual Achieve- Planned target Actual Achieve- Deviation from Comment on Devi- tives ment 2016/17 ment 2017/18 Planned Target to ations 2017/18 Actual Achieve- ment 2017/18 To facilitate the Improve on SCM Ensure efficient Achieved No deviation None efficient rendering services and rendering of supply of an integrated procurement chain management supply chain processes that are management economic, credible, improve admin- istrations of core functions of SCM
Free State Legislature Annual Report 2017/18 31 Programme Actual Planned target Actual Deviation from Comment on Devi- performance Achievement Achievement Planned Target to ations indicators 2016/17 2016/17 2016/17 Actual Achieve- ment 2016/17 To facilitate the Improve on SCM Ensure efficient Achieved No deviation None efficient rendering services and rendering of supply of supply chain procurement chain management management processes that are economic, credible, improve admin- istrations of core functions of SCM
Programme 1: Administration
Human Resource Management Strategic Objec- Actual Achieve- Planned target Actual Achieve- Deviation from Comment on tives ment 2016/17 ment 2017/18 Planned Target to Deviations 2017/18 Actual Achieve- ment 2017/18 Provide effective Report on resourc- Produce reports Achieved No deviation None Human Resource ing and develop- as per prescribed Management and ment of the Legis- legislation Organizational lature. Training of Development staff and capacity building for Mem- bers. Evaluation of HR Strategy. Implementation of performance management
Programme 1: Administration
Institutional Support Services
Strategic Objec- Actual Achieve- Planned target Actual Achieve- Deviation from Comment on tives ment 2016/17 ment 2017/18 Planned Target to Deviations 2017/18 Actual Achieve- ment 2017/18 Providing Informa- Provide a com- Ensure timely back- Achieved No deviation None tion Communication prehensive ICT ups and reports Technology System services and and Household infrastructure Services to the through a review Legislature, Provide of ICT systems, Members Support tools, strategy and related report to be compiled
Programme perfor- Actual Achieve- Planned target Actual Achieve- Deviation from Comment on mance indicators ment 2016/17 ment 2017/18 Planned Target to Deviations 2017/18 Actual Achieve- ment 2017/18 Data management Provide a Ensure timely back- Achieved No deviation None comprehensive ups and reports ICT services and infrastructure through a review of ICT systems, tools, strategy and related report to be compiled
32 5.9 Programme 2: Facilities and Benefits to Political Parties
Facilities and Benefits to Members and political parties provide for the rendering of direct support services and facilities to elected representatives of the Free State Legislature as per the Policy on Payments, Facilities and Benefits of Members of the Legislature and grants payable in respect of the Political Party Fund Act (4 of 2008). b) The sub-programme structure provides for the rendering of services according to two key policy documents of the Legislature, namely; i) Policy on Facilities, Benefits and Payments to Members of the Legislature that provides for; . Accommodation and relocation . Communication Facilities • Travelling Facilities • Subsistence Allowances • Study aid • Remuneration • Facilities for Members with special needs • Accidents and death
ii) Policy on funding of Political Parties represented in the Legislature that provides for;
i) Payment of Office Allocation to Political Parties (including research allowance) and ii) Payment of constituent Allowance to Political Parties represented in the Legislature. iii) Payment of grant in respect of the Political Party Fund Act (4 of 2008)
Subprogramme Number of Achieved Not achieved Comment Performance indicators
Facilities & Benefits to Members & 1 1 - - Political Parties
Free State Legislature Annual Report 2017/18 33 Programme 2: Facilities and Benefits to Members and political parties
Strategic Actual Planned target Actual Deviation from Comment on Objectives Achievement Achievement Planned Tar- Deviations 2016/17 2017/18 2017/18 get to Actual Achievement 2017/18 Ensure effective and Payment to politi- Payment to political Achieved No deviation None efficient adminis- cal parties accord- parties according trative support to ing to timeframes, timeframes and leg- political parties legislation and pol- islation and policies icies, e.g. monthly, constituent, office, research and politi- cal party funding Programme perfor- Actual Achieve- Planned target Actual Deviation from Comment on mance indicators ment 2016/17 Achievement Planned Target to Deviations 2017/18 2017/18 Actual Achieve- ment 2017/18 Ensure payments to Payment to politi- Payment to political Achieved No deviation None hon Members and cal parties accord- parties according Political Parties in ing to timeframes, timeframes and leg- accordance to legis- legislation and pol- islation and policies lation and policies icies, e.g. monthly, constituent, office, research and politi- Achieved No deviation None cal party funding
5.10 Programme 3: Parliamentary Services a) Programme 3: Parliamentary Services provides for the rendering of overall procedural, administrative, information and language support services to the Legislature. The sub-programme structure provides for the rendering of; i) Procedural Services through the Table Services Unit and the Hansard Directorate ii) Legislation and Oversight Directorate including Committee, Research, NCOP and Library Services, and iii) Legal Services b) The key policy developments with regard to Programme 3 are as follows;
i) A review of the current working procedures and systems regarding National Council of Provinces (NCOP) processes, including voting mandates and conferral of voting authority, may result in amendments to the current provisions of the Standing Rules and Orders and work processes;
ii) A review of the rendering of language services, in line with national and provincial policy guidelines and with a specific view towards improving accessibility to the records of the proceedings of the Legislature, may result in the expansion of current services rendered;
iii) The review of oversight and accountability models may impact on the current work processes and procedures of the administrative support services rendered to Portfolio Committees.
34 Parliamentary services a) Parliamentary Services is responsible for the rendering of support services in respect of the legislative, oversight and accountability functions of the House and its Committees. These services are rendered through the: i. Legislation and Oversight Directorate. ii. Table Services Unit, iii. Hansard Directorate and iv. Legal Services The evaluation of performance is based on the number (fractions permitted) of strategic objectives which have been achieved or not. Programme 3: Parliamentary Services achieved 100% of its listed performance indicators.
Subprogramme Number of Perfor- Achieved Not achieved Comment mance indicators
Parliamentary Services 4 4 - -
Programme 3: Parliamentary Services
Sub-programme : Legislation & Oversight Strategic Actual Achieve- Planned target Actual Deviation from Comment on Objectives ment 2016/17 Achievement Planned Tar- Deviations 2017/18 2017/18 get to Actual Achievement 2017/18 Improve the aver- Revised objective House papers Achieved No deviation None age turnaround time on the day of the for the provision of sitting, within 10 procedural advice, days & within 3 days content advise, research products, minutes and reports to the House, Committees and Members
Programme perfor- Actual Achieve- Planned target Actual Achieve- Deviation from Comment on mance indicators ment 2016/17 ment 2017/18 Planned Target to Deviations 2017/18 Actual Achieve- ment 2017/18 House papers, Re- Revised objective House papers on Achieved No deviation None search advice and the day of the sit- Minutes of Commit- ting, within 10 days tees & within 3 days
Free State Legislature Annual Report 2017/18 35 Programme 3 : Parliamentary Services
Sub-programme : Hansard
Strategic Objec- Actual Achieve- Planned target Actual Achieve- Deviation from Comment on tives ment 2016/17 ment 2017/18 Planned Target to Deviations 2017/18 Actual Achieve- ment 2017/18 Provide in-house Providing of lan- Provide language Achieved No deviation None language services guage services, and interpretation to the Members, production of services House and its com- Hansard records, mittees development of parliamentary terminology
Programme perfor- Actual Achieve- Actual Achieve- Deviation from Comment on mance indicators ment 2016/17 ment 2017/18 Planned Target to Deviations Planned target Actual Achieve- ment 2017/18 2017/18 Language Services Providing of lan- Provide language Achieved No deviation None guage services, and interpretation production of services Hansard records, development of parliamentary terminology
Programme 3 : Parliamentary Services
Sub-programme : Legal Services Strategic Actual Planned target Actual Deviation from Comment on Devi- Objectives Achievement Achievement Planned Tar- ations 2016/17 2017/18 2017/18 get to Actual Achievement 2017/18 Ensuring effec- To provide legal Provide legal ser- Achieved No deviation None tive participation advice to commit- vices to committees by the Legisla- tees and members on Provincial, NCOP ture in the law on National and bills and internation- making process Provincial Bills al instruments Ensuring effec- New Measure Provide legal advice Achieved No deviation None tive participation to the Secretary and by the Legisla- Speaker on corpo- ture in the law rate matters making process Programme Actual Planned target Actual Deviation Comment on performance Achievement Achievement from Planned Deviations indicators 2016/17 2017/18 2017/18 Target to Actual Achievement 2017/18 Provision of To provide legal Provide legal Achieved No deviation None legal services to advice to commit- services to committees in tees and members committees on on National and respect of provin- Provincial, NCOP Provincial Bills cial and national Bills legislation Provision of New Measure Provide legal advice Achieved No deviation None legal advice on to the Secretary corporate matters and Speaker on corporate matters
36 Free State Legislature Annual Report 2017/18 37 FREE STATE LEGISLATURE Annual Report 2017/18 PART C GOVERNANCE
38 PART C: GOVERNANCE
6. GOVERNANCE 6.1 Introduction The link between governance principles and institutional strengthening is important to highlight. The Legislature supports the principles of good governance, accountability and ethics
6.2 Risk Management The Audit Committee coordinates an annual risk review. The internal auditor performed a risk review and presented the outcome to the Audit Committee, who in turn facilitates correcting areas of concern, through the Secretary and his management team. A risk review commenced during the reported period, but was not completed by end of March 2018.
6.3 Fraud and Corruption A fraud and prevention plan is in place. Amendments have been made and presented to the Audit Committee for inputs. A fraud risk review has been performed and the outcome presented to the Secretariat, Joint Management and the Audit Committee
6.4 Minimising conflict of interest FREE STATE LEGISLATURE The Legislature maintains a system to manage potential conflict of interest of employees and / or Annual Report 2017/18 Members through requiring compliance with: Code of Conduct for Disclosure of Financial Interests of Staff PART C Code of Conduct and Ethics for Members of the Free State Legislature; and Requiring potential service providers to complete prescribed declaration of interest forms The relationship between management and the representative trade union, Nehawu, is governed by a formalized recognition agreement.
6.5 Code of Conduct GOVERNANCE Legal Services of the Legislature maintains code of conduct processes applicable to Members and staff. 6.6 Health Safety and Environmental Issues Members and employees are housed at 41 Charlotte Maxeke Street, as well as at the Fourth Raadsaal in Bloemfontein. No concerns can be reported upon health, safety and environment.
6.7 Portfolio Committees The Legislature appeared before the Portfolio Committee on Public Accounts and Finance, the Portfolio Committee on Cooperative Governance, Office of the Premier and Legislature, the Portfolio Committee on Education, Health and Social Development, the Portfolio Committee on Public Works, Infrastructure, Roads, Transport and Human Settlement and the Portfolio Committee on Agriculture & Rural Development, Small Business and Sports, Arts, Culture and Recreation.
Free State Legislature Annual Report 2017/18 39 6.8 PROPAC Resolutions
Resolution no Subject Details Response by the Resolved Yes / No Legislature The Portfolio Vacancies have been No, appointments Committee raised advertised and long have been concluded 4/2017 Capacity constraints concern regarding listing was done by the non-appointment Human Resources of SCM Management and Accountant GRAP posts and must be prioritised Policies and The Portfolio Amendments have Amendments Procedures Committee raised been done with to policies and concern that not institutional policies procedures should all policies and and adopted by the be viewed as procedures have Rules and Orders ongoing as proposed been updated Committee amendments to FMPPLA has been introduced Procurement The Portfolio Management can Committee raised confirm that services concern that not all linked to SCM are Yes procurement is done done through SCM through SCM unit unit
6.9 Prior modifications to audit reports No modifications can be reported upon.
6.10 Internal Control Unit The organizational structure of the Legislature does not provide for a separate internal control unit.
6.11 Internal Audit and Audit Committee The Internal Audit has been outsourced to PWC Auditors to complement the current internal audit structure. A number of assignments were issued by the Audit Committee to Internal Audit and reported under the Report of the Audit Committee. The Audit Committee meets quarterly and operates with a formal terms of reference. The Audit Committee has also adopted an Audit Charter for the period under review.
6.12 Profiles : Audit Committee
Name Qualifications Internal or Date appointed Date resigned No of meetings external attended member Adv J Lubbe B Juris LLB Chairperson April 2017 (appointment Not applicable SC valid for remainder of Professional quali- term) 6 fications: Advocate of the High Court of South Africa Adv N van Bachelor of Arts – External April 2017 Not applicable Heerden BA (1989) Member (appointment valid for 3 Bachelor of Laws – remainder of term) LLB (1991)
40 B Comm (Account- External April 2017 Not applicable 4 ing) (2000) – UCT Member (appointment valid for Postgraduate remainder of term) Diploma in Accounting (PGDA) Mr J Besnaar (2001)
UCT Qualified Chartered Accountant (2004)
6.13 Report of the Audit Committee
We are pleased to present our report for the financial year ended 31 March 2018.
Audit Committee Members and Attendance
The Audit Committee consists of the members listed hereunder and is required to meet four times per annum as per its approved terms of reference. The Audit Committee convened six times during the financial year. The Chairperson also attended sessions between the Auditor-General and Legislature, Provincial Government and Joint Portfolio Committee.
Name of Member Number of Meetings Attended
Adv J Lubbe SC (Chairperson) 6
Mr J Besnaar 4
Adv N van Heerden 3
Audit Committee Responsibility
The Audit Committee reports, that in terms of Section 48 (1)(a)(i) of FMPPLA, it has adopted appropriate formal terms of reference as its Audit Charter, has regulated its affairs in compliance with this charter and has discharged all its responsibilities as contained therein.
The Effectiveness of Internal Control
The following internal audit work was completed during the year under review: Audit Name Number of Report Reports presented to the Audit Risk Review (Risk register) 1 Committee Fraud Risk Review (Fraud Risk register) 1 Action Plan (PAAP) and Progress Report 3 Annual Operating & 3-year rolling plan 2 Terms of Reference of Audit Committee 1 Internal Audit Charter 1 Internal Audit Documents still in progress (presented but being Internal Audit Policy 1 revised) Quality Assurance and Improvement 1 Program (QAIP) Compliance Checklist 1 Fraud Prevention Policy 1 Action Plan (PAAP) and Progress Report 1 Internal Audit Assignments still in Budget Review 1 progress Heritage Assets Review 1 Assets Review 1 GRAP Financial Statements Review 1 Free State Legislature Annual Report 2017/18 41 The following are areas which management must prioritise :
. Filling of critical vacancies identified at Finance and SCM
. Assets
. Provision of Office Accommodation
In-Year Management, Monthly/Quarterly and mid-term reports
The Legislature has reported, in terms of Sections 51 – 53 of the Financial Management of Parliament and Provincial Legislatures Act, 2009 (Act No 10 of 2009), monthly, quarterly and mid-term to the Executive Authority.
Presentation of Financial Statements – Political Parties
Financial statements of all represented political parties in terms of constituents, office and political party funding have been presented and considered by the Audit Committee.
Evaluation of Financial Statements
We have evaluated the annual financial statements prepared by the Legislature.
Auditor-General’s Report
We have reviewed the Legislature’s action plan for audit issues raised in the previous year and we are satisfied that the matters have been adequately resolved.
The Audit Committee concurs and accepts the conclusions of the Auditor-General on the annual financial statements and is of the opinion that the audited annual financial statements be accepted and read together with the report of the Auditor-General.
______Adv J Lubbe SC Chairperson of the Audit Committee Free State Legislature May 31, 2018
42 Free State Legislature Annual Report 2017/18 43 PART D : Human Resource Management Personnel related expenditure Table 7.1.1 Personnel expenditure by programme for the period 1 April 2017 and 31 March 2018 Programme Total ex- Personnel Training Profes- Personnel ex- Average personnel penditure expen- expendi- sional and penditure as cost per employee (R’000) diture ture special a % of total (R’000) (R’000) services expenditure expen- diture (R’000) Programme 1 71 679 71 579 108 0 68% 688
Programme 2 0 0 0 0 0 0
Programme 3 33 550 33 643 106 0 32% 886
Total 105 229 105 222 214 0 100% 1 574
Table 7.1.2 Personnel costs by salary band for the period 1 April 2017 and 31 March 2018 Salary band Personnel % of total No. of Average personnel cost FREEexpenditure STATE personnelLEGISLATURE employees per employee (R’000) (R’000) cost Annual Report 2017/18 Lower skilled (Levels 6-9) 10 642 6% 28 380 Skilled (level 10-12) 44 565 27% 48 928 Highly skilled production(levels 48 350 PART29% D 40 1 209 13-14) Highly skilled supervision (levels 27 290 17% 15 1 819 15-16) Senior Hand Top UmanagementMAN35 227 RE21%SOU11 RCE3 S202 (levels 17-23)
Total 166 074 100% 142 7 538
Table 7.1.3 Salaries, Overtime, Home Owners Allowance and Medical Aid by programme for the period 1MANAGEMENT April 2017 and 31 March 2018 Salaries Overtime Home Medical Aid Owners
Allow- ance Sal- Overtime Amount HOA Medi- Programme aries as a % of as a cal aid as a person- (R’000) as a Amount % of nel costs % of per- per- sonnel % of per- (R’000 son- costs sonnel nel costs costs Programme 1 40 546 68% 536 63% 2 590 72% 4 814 65% Programme 2 0 0 0 0 0 0 0 0 Programme 3 19 430 32% 318 37% 1 032 28% 2 611 35%
Total 59 976 100% 854 100% 3 622 7 425 100%
44 Table 7.1.4 Salaries, Overtime, Home Owners Allowance and Medical Aid by salary band for the period 1 April 2017 and 31 March 2018 Salaries Overtime Home Owners Medical Aid
Allowance
Salary band Amount Salaries Amount Over- Amount HOA Amount Medical as a % time as a aid as a (R’000 of per- (R’000) as a % (R’000) (R’000) sonnel of per- % of % of costs sonnel person- costs nel personnel costs
Skilled (level 5 674 10% 71 8% 515 14% 1 404 18% 6-9) Skilled (level 14 431 24% 218 26% 1 269 34% 2 451 32%
10-12) Highly 18 221 31% 363 42% 1 160 32% 2 152 28% skilled production (levels 13- 14) Highly 9 257 16% 192 22% 403 11% 911 12% skilled supervision (levels 15-16 Senior 11 374 19% 136 2% 335 9% 751 10% manage- ment (level 17-23) Total 58 957 100% 980 100% 368 100% 766 100%
7.2. Employment and Vacancies Table 7.2.1 Employment and vacancies by programme as on 31 March 2018 Programme Number of Num- Vacancy Rate Number of employees posts on ber of additional to the approved posts establishment establishment filled Programme 1 142 101 71% 3
Programme 2 0 0 0 0
Programme 3 52 38 73% 0
Total 194 139 72% 3
Free State Legislature Annual Report 2017/18 45 Table 7.2.2 Employment and vacancies by salary band as on 31 March 2018 Salary band Number of Number of Vacancy Rate Number of posts on posts filled employees approved additional to the establish- establishment ment
Lower skilled ( 6-9) 36 22 61 2 Skilled(10-12) 74 50 67 1 Highly skilled 51 39 76 0 production (13-14) Highly skilled supervision 20 16 8 0 (15-16) Senior management 13 12 2 0 (17-23) Total 194 139 71 3
7.3. Filling of Secretariat and Joint Management Posts Table 7.3.1 SMS post information as on 31 March 2018 SMS Level Total Total % of SMS Total number % of SMS number number of posts of of SMS posts filled vacant funded posts SMS posts SMS filled vacant posts Salary Level 23 1 1 100% 0 0% Salary Level 21 1 0 0% 0 0% Salary Level 20 1 1 100% 0 0% Salary Level 19 1 1 100% 0 0% Salary Level 18 3 3 100% 0 0% Salary Level 17 6 5 83% 1 17% Total 13 11 84% 2 15%
Table 7.3.2 SMS post information as on 30 September 2017 SMS Level Total Total % of SMS Total number of % of SMS number number posts of of SMS posts filled SMS posts vacant funded posts vacant SMS filled posts Secretary to 1 1 100% 0 0% the Legislature
Salary Level 23 Salary Level 21 1 0 0% 0 0% Salary Level 20 1 1 100% 0 0% Salary Level 19 1 1 100% 0 0% Salary Level 18 3 3 100% 0 0% Salary Level 17 6 5 83% 1 17% Total 13 11 84% 2 15%
46 Table 7.3.3 Advertising and filling of SMS posts for the period 1 April 2017 and 31 March 2018 SMS Level Total Total % of SMS Total number of % of SMS posts vacant number number of fund- of SMS posts filled SMS posts vacant ed SMS posts posts filled Level 23 1 1 100% 1 100%
Total 1 1 100% 1 100%
Table 3.3.4 Reasons for not having complied with the filling of funded vacant SMS - Advertised within 6 months and filled within 12 months after becoming vacant for the period 1 April 2017 and 31 March 2018
Reasons for vacancies not advertised within six months
The post of the Deputy Secretary was advertised and filled on the 01st April 2018.
Table 7.3.5 Disciplinary steps taken for not complying with the prescribed timeframes for filling SMS posts within 12 months for the period 1 April 2017 and 31 March 2018 Reasons for vacancies not advertised within six months Treasury Advisor is a new post and not budgeted. Reasons for vacancies not filled within six months The post was not budgeted.
7.4. Job Evaluation Table 7.4.1 Job Evaluation by Salary band for the period 1 April 2017 and 31 March 2018 Salary band Number of Number % of posts Posts Upgraded Posts downgraded posts on of Jobs evaluated by approved Evaluat- salary bands Number % of Number % of posts establish- ed posts evaluated ment evaluat- ed Lower skilled 36 0 0% 0 0 0 0 (6-9) Skilled(10-12) 74 0 0% 0 0 0 0
Highly 51 0 0% 0 0 0 0 skilled production (13-14) Highly skilled 20 0 0% 0 0 0 0 supervision (15-16)
Senior 13 0 0% 0 0 0 0 management
(17-23) Total 194 0 0% 0 0 0 0
Free State Legislature Annual Report 2017/18 47 Table 7.4.2 Profile of employees whose positions were upgraded due to their posts being upgraded for the period 1 April 2017 and 31 March 2018 Gender African Asian Coloured White Total Female 0 0 0 0 0 Male 0 0 0 0 0 Total 0 0 0 0 0 Comments:
Table 7.4.3 Employees with salary levels higher than those determined by job evaluation by occupation for the period 1 April 2017 and 31 March 2018 Occupation Number of Job evaluation Remuneration level Reason for deviation employees level
Deputy Editor 01 15 16 The salary of the Hansard incumbent was higher (R750 474 even prior the job evaluation though it is not exactly aligned to the sub-level of 16)
Librarian 01 14 16 The salary of the incumbent was higher (R734 138 even prior the job evaluation though it is not exactly aligned to the sub-level of 16)
Asset & Fleet 01 11 12 The salary of the Officer incumbent was higher R422 161 even prior the job evaluation though it is not exactly aligned to the sub-level of 12) Table Officer 01 10 15 The salary of the incumbent was higher R603 993 even prior the job evaluation though it is not exactly aligned to the sub-level of 15)
Budget Officer 01 12 14 The salary of the incumbent was higher (R540 425) prior the job evaluation
Total number of employees whose salaries exceeded the level determined by job 5 evaluation Percentage of total employed 4%
48 Table 7.4.4 Profile of employees who have salary levels higher than those determined by job evaluation for the period 1 April 2017 and 31 March 2018 Gender African Asian Coloured White Total Female 1 0 0 1 2 Male 3 0 0 0 3 Total 4 0 0 1 5
Employees with a disability 0
Notes
Total number of Employees whose salaries exceeded the grades determine by job evaluation (05) Five
7.5 Employment Changes Table 7.5.1 Annual turnover rates by salary band for the period 1 April 2017 and 31 March 2018 Salary band Number of Appointments and Terminations and Turnover employees at transfers into the transfers out of the rate beginning of department department period-1
April 2017 Lower skilled ( 6-9) 24 6 1 4% Skilled(10-12) 44 4 1 2% Highly skilled 39 4 2 5% production (13-14) Highly skilled supervision 13 1 0 0%
(15-16) Senior management 11 0 0 0% (17-23) Total 131 15 4 3%
Table 7.5.3 Reasons why staff left the department for the period 1 April 2017 and 31 March 2018 Termination Type Number % of Total Resignations Death 1 1% Resignation 3 2% Expiry of contract 0 0% Dismissal – operational changes 0 0% Dismissal – misconduct 0 0% Dismissal – inefficiency 0 0% Discharged due to ill-health 0 0% Retirement 0 0% Transfer to other Public Service Departments 0 0% Other 0 0% Total 4 Total number of employees who left as a % 3% of total employment
Free State Legislature Annual Report 2017/18 49 Table 7.5.5 Promotions by salary band for the period 1 April 2017 and 31 March 2018 Salary Band Employees Promo- Salary Progres- Notch progression as a % tions to bands sions to an- 1 April another promotions other notch of salary as a % of within 2017 level employees employees by salary by salary a salary bands level level Lower skilled ( 24 2 8% 2 8% 6-9) Skilled(10-12) 44 5 11% 9 20% Highly 39 1 3% 5 13% skilled production (13-14) Highly skilled 13 2 14% 4 29% supervision (15-16)
Senior manage- 11 2 18% 0 0% ment (17-23)
Total 131 12 9% 20 15% Table 7.6.1 Total number of employees (including employees with disabilities) in each of the following occupational categories as on 31 March 2018 Occupa- tional category Male Female Total
African Coloured Indian White African Coloured Indian White Legislators, senior 1 0 0 1 0 0 0 0 2 officials and managers
Professionals 6 0 0 0 2 0 0 1 9 Technicians and associate 7 0 0 1 5 1 0 1 15 professionals
Clerks 19 0 0 1 15 3 0 2 40
Service and sales 21 0 0 1 19 2 0 2 45 workers Skilled agriculture and fishery 15 0 0 0 16 0 0 0 31 workers
Total 69 0 0 4 57 6 0 6 142 Employees with disabilities 3 0 0 0 1 0 0 0 4
50 Table7.6.2 Total number of employees (including employees with disabilities) in each of the following occupational bands as on 31 March 2018 Total
Occupational Male Female band
African Coloured Indian White African Coloured Indian White
Top 1 0 0 1 0 0 0 0 2
Management
Senior 6 0 0 0 2 0 0 1 9
Management
Professionally qualified and 7 0 0 1 5 1 0 1 15 experienced specialists and mid-management
Skilled technical and academically qualified workers, junior 19 0 0 1 15 3 0 2 40 management, supervisors, foreman and superintendents
Semi-skilled and 21 0 0 1 19 2 0 2 45 discretionary decision making
Unskilled and 15 0 0 0 16 0 0 0 31 defined decision making
69 0 0 4 57 6 0 6 142 Total
Free State Legislature Annual Report 2017/18 51 Table 7.6.3 Promotions for the period 1 April 2017 to 31 March 2018
Occupational band Male Female Total
African Coloured Indian White African Coloured Indian White
Top Management 0 0 0 0 0 0 0 0 0
Senior Management 0 0 0 0 0 0 0 0 0
Professionally qualified and experienced 0 0 0 0 1 0 0 0 1 specialists and mid- management
Skilled technical and academically qualified workers, junior management, 1 0 0 0 3 0 0 0 4 supervisors, foreman and superintendents
Semi-skilled and discretionary 3 0 0 0 1 0 0 0 4 decision making
Unskilled and defined decision 2 0 0 0 4 0 0 0 6 making
6 0 0 0 9 0 0 0 15 Total
Employees 0 0 0 0 0 0 0 0 0 with disabilities
52 Table 7.6.4 Terminations for the period 1 April 2017 to 31 March 2018
Occupational Male Female Total band
African Coloured Indian White African Coloured Indian White
0 0 0 0 0 0 0 0 0
Top Management 0 0 0 0 0 0 0 0 0
Senior Management Professionally 0 0 0 0 0 0 0 0 0 qualified and experienced specialists and mid- management
Skilled technical 1 0 0 0 1 0 0 0 2 and academically qualified workers, junior management, supervisors, foreman and superintendents Semi-skilled and 1 0 0 0 0 0 0 0 1 discretionary decision making Unskilled and 0 0 0 0 1 0 0 0 1 defined decision making
Total 2 0 0 0 2 0 0 0 4
Employees with 0 0 0 0 0 0 0 0 0
Disabilities
Free State Legislature Annual Report 2017/18 53 Table 7.6.5 Disciplinary action for the period 1 April 2017 to 31 March 2018
Disciplinary Male Female Total action
African Coloured Indian White African Coloured Indian White Written warning 2 0 0 0 0 0 0 0 2 for failure to perform duties, abscondment and fraudulent travelling claim
Table 7.6.6 Skills development for the period 1 April 2017 to 31 March 2018
Occupa- Male Female Total tional catego- ry African Coloured Indian White African Coloured Indian White
Legislators, 9 0 0 0 5 1 0 2 17 senior officials and managers
Professionals 6 0 0 0 6 0 0 0 12
Technicians 8 0 0 0 4 1 0 0 13 and associate professionals
Clerks 9 0 0 0 13 1 0 0 23
Service and 2 0 0 0 5 0 0 0 7 sales workers
Total 34 0 0 33 3 0 2 72
Employees 0 0 0 0 0 0 0 0 0 with disabilities
54 7.7. Signing of Performance Agreements by Members of Secretariat Table 7.7.1 Signing of Performance Agreements by Members of Secretariat as on 31 May 2017 SMS Level Total number of Total number of Total number Signed performance funded SMS posts of signed agreements as % of SMS members performance total number of SMS agreements members Secretary to the 1 1 0 0% Legislature
Level 23
Deputy Secretary to 1 0 0 0% the Legislature
Level 21
Chief Financial 1 1 0 0% Officer
Level 20 Director 1 1 0 0%
Level 19 Director 3 3 0 0%
Level 18 Director 5 5 0 0%
Level 17 12 12 0 0%
Total
Table 7.7.2 Reasons for not having concluded Performance agreements for Members of Joint Management as on 31 March 2018
Reasons
The draft Performance Management Development System policy is not approved.
Notes
Table 7.7.3 Disciplinary steps taken against SMS members for not having concluded Performance agreements as on 31 March 2018
Reasons There are no disciplinary steps taken against SMS members who have not concluded
performance agreement.
The Speaker, MG Qabathe during one of the sittings of the House
Free State Legislature Annual Report 2017/18 55 7.10. Leave utilisation Table 7.10.1 Sick leave for the period 1 January 2017 to 31 December 2018
Salary band Total % Days Number of % of total Average Estimated days with Employees employees days per Cost Medical using sick using sick employee (R’000) leave leave certification Lower Skills (Level 6-9) 174 99% 28 14% 5.29 84
Skilled (levels10-12) 356 98% 48 13% 6.92 130
Highly skilled production 137 94% 40 28% 6.32 140
(levels 13-14) Highly skilled supervision 50 100% 15 28% 3.74 62
(levels 15-16) Top and Senior 54 92% 11 20% 3.31 54 management (levels 17-23)
771 20% 142 103% 25.58 470
Total
Table 7.10.3 Annual Leave for the period 1 January 2017 to 31 December 2018
Salary band Total days taken Number of Employees Average per using annual leave employee Lower skilled (Levels 6-9) 206 28 14.35
Skilled Levels 10-12) 405 48 20.12
Highly skilled production 422 40 20.54 (Levels
13-14) Highly skilled 141 15 11.87 supervision (Levels 15-16)
Senior management (Levels 91 11 9.53 17-23)
1265 142 76.41
Total
56 Table 7.10.4 Capped leave for the period 1 January 2017 to 31 December 2018
Salary band Total days of Number of Average number Average capped capped leave Employees using of days taken per leave per taken capped leave employee employee as on
31 March 2016 Lower skilled (Levels 478 28 5 253.29
6-9) 356 48 6.7 713.83
Skilled Levels 10-12) 137 40 6.24 550.35
Highly skilled production (Levels 13-14) 50 15 3.74 203.40
Highly skilled super- vision (Levels 15-16)
54 11 3.31 221
Senior management
(Levels 17-23) 1075 142 24.99 1941
Total
The following table summarise payments made to employees as a result of leave that was not taken.
Table 7.10.5 Leave payouts for the period 1 April 2017 and 31 March 2018
Reason Total amount Number of Average per employees employee (R’000) (R’000)
2906718 141 1704
Leave encashment for 2017/18 0 0 0
Capped leave payouts on termination of service for 2016/17 0 0 0
Current leave payout on termination of service for
2016/17 2906718 141 1704
Total
Free State Legislature Annual Report 2017/18 57 Table 7.11.1 Steps taken to reduce the risk of occupational exposure
Units/categories of employees identified to be at high Key steps taken to reduce the risk risk of contracting HIV & related diseases (if any) None Not applicable
Table 7.11.2 Details of Health Promotion and HIV/AIDS Programmes (tick the applicable boxes and provide the required information) Question Yes No Details, if yes 1. Has the legislature designated a member of Director: Human Resources the SMS to implement the provisions contained Management in Part Vl of Chapter 1 of the Public Service Regulations, 2001? If so, provide his/her posi- tion.
2. Does the legislature have a dedicated unit The FSL has employed a or has it designated specific staff member Coordinator: Employee to promote health and wellness of your Wellness who is responsible employees? If so, indicate the number of for implementation of employees involved in this task and the annual Employee health and wellness budget that is available for this purpose? programmes in the institution.
There’s only 1 person doing Employee Wellness Programmes
There is no specified budget for this programme
58 3. Has the legislature introduced an Employee FSL Employee Wellness Assistance or Health Promotion Programme Programme covers the 4 for your employees? If so, indicate elements/ Pillars of Employee Health and services Wellness Strategic Framework:
1. Occupational Health
HIV/AIDS and TB Manage- ment-emphasis on HIV/ AIDS information session, Lay Counselors Training- re- duction of number of infec- tions
Health and Productivity Management
Reduction of burden of dis- eases in the workplace.
Health Risk Assessments: Glu- cose testing, Cholesterol, BMI, Blood Pressure
2.Quality of Work life
SHERQ Management
Safety in the workplace is emphasized
Employees have been trained on matters of safe- ty management
Wellness Management
Addressing individual and organizational wellness in a proactive manner includ- ing physical wellness of the employees (Sports and Recreation)
Individual counselling and group i.e During bereave- ment- Debriefing and Diffusion
Referral of employees to other different places for treatment e.g. ( Aurora Drug and Rehabilitation Centre)
4. Has the legislature established (a) No committee has been committee(s) as contemplated in Part established as yet because iv E.5 e of Chapter 1 of Public Service FSL EAP Policy is still in its Regulations,2001? If so, please provide the draft form names of members of the Committee and the stakeholders that the represent
Free State Legislature Annual Report 2017/18 59 5. Has the legislature reviewed its employment HIV/AIDS Workplace policies and practices to ensure that these do Policy not unfairly discriminate against employees on the basis of their HIV status? If so, list the Free State Legislature employment policies/practices so reviewed. Policy on HIV/AIDS Draft EAP Policy
6. Has the legislature introduced measures Adjustment of policies: to protect HIV-positive employees or those perceived to be HIV- positive from E.g. Leave policy-Special discrimination? If so, list key element of these leave with regard to employee measures. who suffer from terminal illness; time-off for Clinic appointments and changes in hours of work and in start/ finish time.
Labour Relations Act: Code of Good Practice; aspects on HIV/ AIDS and Employment
Application of the Medical Aid Schemes Act no 131 of 1998
7. Does the legislature encourage its employ- The EAP unit tries by all means ees to undergo Voluntary counseling and Test- to encourage people to go ing? If so, list the results you have achieved for HIV/Aids Counseling and Testing (HCT). Only a few people go for testing even though benefits for testing are always explained.
In 2017, May only 07 (seven) people tested for HIV/AIDS during Wellness Campaign held for the employees of FSL
8. Has the legislature developed measures to Attendance registers are monitor and evaluate the impact of its health kept during health promotion promotion programme? If so list these mea- sessions to evaluate the sures. impact of the programme and check views of the participants on what should or can be added to improve the programme. E.g. Flu Vaccine and our Employee Wellness Sports Day
60 7.12. Labour Relations
Table 7.12.1 Collective agreements for the period 1 April 2017 and 31 March 2018
Subject Date matter Wage settlement for 2017/18 13th July 2017 Notes
Total number of Collective agreements One
The following table summarises the outcome of disciplinary hearings conducted within the department for the year under review.
Table 7.12.2 Misconduct and disciplinary hearings finalized for the period 1 April 2017 and 31 March 2018
Outcomes of disciplinary hearings Number % of total
0 0% Correctional counselling
0 0% Verbal warning
02 2% Written warning
01 1% Final written warning
0 0% Suspended without pay
01 1% Fine
0 0% Demotion
0 0% Dismissal
0 0% Not guilty
0 0 Case withdrawn
04 3% Total
Notes
Total number of Disciplinary hearings finalised One
Free State Legislature Annual Report 2017/18 61 Table 7.12.3 Types of misconduct addressed at disciplinary hearings for the period 1 April 2017 and 31 March 2018
Type of misconduct Number % of total
Absence from duty without authorization 2 1%
Failure to perform duties 1 1%
Fraudulent travelling claim 1 1%
4 3%
Total
Table 7.12.4 Grievances logged for the period 1 April 2017 and 31 March 2018
Grievances Number % of Total
0 0
Number of grievances resolved 0 0
Number of grievances not resolved
0 0
Total number of grievances lodged
Table 7.12.5 Disputes logged with Councils for the period 1 April 2017 and 31 March 2018
Disputes Number % of Total
3 2%
Number of disputes upheld
1 1%
Number of disputes dismissed
3 2%
Total number of disputes lodged
Table 7.12.6 Strike actions for the period 1 April 2017 and 31 March 2018 Total number of persons working days lost 0
Total costs working days lost 0
Amount recovered as a result of no work no pay (R‟000) 0
62 Table 7.12.7 Precautionary suspensions for the period 1 April 2017 and 31 March 2018
0
Number of people suspended 0
Number of people who‟s suspension exceeded 30 days 0
Average number of days suspended
R0.00
Cost of suspension(R‟000)
7.13. Skills development This section highlights the efforts of the legislature with regard to skills development. Table 7.13.1 Training needs identified for the period 1 April 2017 and 31 March 2018
Occupational category Gender Number of Training needs identified at start of the reporting period employees as at 1 Learner Skills Other Total April ships forms of Programmes training 2017 & other short
courses
Legislators, senior Female 6 0 Supply Chain Management 0 6 officials and managers Research & Strategy Skills Language Terminology Speed Reading Editing Change Management Initiating, Chairing & Investigation Apple Product Policy Implementation Leadership Management Job Description, Job Analysis Monitoring and Evaluation
Male 9 0 Development 0 9 communication Supply Chain Management Research & Strategy Skills Language Terminology Speed Reading Editing Organizational Strategy Planning Change Management Initiating, Chairing & Investigation Apple Products Leadership Management Policy Implementation Job Description, Job Analysis Monitoring and Evaluation Fraud & Risk Management
Free State Legislature Annual Report 2017/18 63
Professionals Female 19 0 · Organizational Strategy 0 19 Planning · Change Management · Language Terminology · Speed Reading · Editing · Job Analysis and Job Evaluation · Events management · Speed Reading · Editing · Language terminology · Change Management · Research Skills · Apple Product · Job Description, Job Analysis · Monitoring and Evaluation · Fraud & Risk Management
Male 15 0 · Research & Strategy 0 15 Planning · Change Management · Language Terminology · Speed Reading · Editing · Job Description, Job Analysis · Apple Product · Events Management · Research Skills · Job Description, Job Analysis · Monitoring and Evaluation
0 · Supply Chain Management 0 13 Technicians and Female 13 · Development associate professionals Communication · Events Management · Job Description, Job Analysis · Research & Strategy Planning · Job Description, Job Analysis · Fraud & Risk Management
Male 12 0 · Supply Chain Management 0 12 · Development Communication · Events Management · Job Description, Job Analysis · Research & Strategy Planning · Job Description, Job Analysis · Fraud & Risk Management
9 0 · ABET Levels 0 9 Clerks Female · Matric · Events Management
· Security Training
71
64 Male 4 0 · ABET Levels 0 4 · Matric · Events Management
Service and sales Female 7 0 · ABET Levels 0 7 workers · Matric · Security Training
Male 3 0 · ABET Levels 0 3 · Matric
Sub Total Female 54 0 0 54 0 0 43 Male 43 Total 97 0 97
Table 7.13.2 Training provided for the period 1 April 2017 and 31 March 2018 Occu- Gen- Number of Training provided within the reporting period pa- der employees tion- as at 1 April Learnership Skills Other Total al forms of cate- 2017 Programmes training gory & other short courses Legislators, Female 8 • Advanced Microsoft 8 senior officials Excel and managers • Project Management
• Managing Workplace Discipline and Incapacity
• Fire Drill & Evacuation
Male 9 • Certified Fraud examin- 9 ers Training
• Project Management
• Managing Workplace Discipline and Incapacity
• Fire Drill & Evacuation
72
Free State Legislature Annual Report 2017/18 65 Professionals Female 6 • MCSE 6
• Advanced Microsoft Excel
• Project Management
• Managing Workplace D Time & Stress Manage- ment
• Discipline and Incapacity
• Fire Drill & Evacuation
• Fire Drill & Evacuation
Male 6 • Managing Workplace 6 Discipline and Incapacity
• Project Management
• Public Sector Training
• Knowledge Management
• Time & Stress Manage- ment
• Fire Drill & Evacuation
66 Techni- Female 6 • Advanced Microsoft 6 cians and Excel associate profes- • Project Management sionals • Managing Workplace Discipline and Incapacity
• Fire Drill & Evacuation
• Knowledge Management
• Time & Stress Manage- ment
• Fire Drill & Evacuation
Male 7 • COBIT 7
• Advanced Microsoft Excel
• Project Management
• Managing Workplace Discipline and Incapacity
• Knowledge Management
• Time & Stress Manage- ment
Free State Legislature Annual Report 2017/18 67 Clerks Female 14 • Advanced Microsoft 14 Excel
• Managing Workplace
Discipline and Incapacity
• Time & Stress Manage- ment
• Dealing with Confidential- ity at the Workplace
• Fire Drill & Evacuation
Male 9 • Advanced Microsoft 9 Excel
• ABET Levels Assess- ment
• Time & Stress Manage- ment
• Dealing with Confidential- ity at the Workplace Service Female 5 • ABET Levels Assess- 5 and sales ment workers • Time & Stress Manage- ment
• Dealing with Confidential- ity at the Workplace
• Fire Drill & Evacuation
Male 2 • ABET Levels Assess- 2 ment
• Time & Stress Manage- ment
• Dealing with Confidential- ity at the Workplace Sub Total Female Male Total 72 72
7.14. Injury on duty The following tables provide basic information on injury on duty. Table 7.14.1 Injury on duty for the period 1 April 2017 and 31 March 2018
Nature of injury on duty Number % of total Required basic medical attention only Temporary Total Disablement 1 1% Permanent Disablement 0 0% Fatal 0 0% Total 0 0% 1 1%
68 7.15. Utilisation of Consultants
The following tables relates information on the utilisation of consultants in the department. In terms of the Public Service Regulations “consultant‟ means a natural or juristic person or a partnership who or which provides in terms of a specific contract on an ad hoc basis any of the following professional services to a department against remuneration received from any source: (a) The rendering of expert advice; (b) The drafting of proposals for the execution of specific tasks; and (c) The execution of a specific task which is of a technical or intellectual nature, but excludes an employee of a department.
Table 7.15.1 Report on consultant appointments using appropriated funds for the period 1 April 2017 and 31 March 2018
Project title Total number of consul- Dura- Contract value in tants that worked on tion project Rand (work days) Leave accruals 2017/18 0 0 R0.00
Correction of leave days 0 0 R0.00
Reverse duplicate leave 0 0 R0.00 credits
7.16 Severance Packages
Table 7.16.1 Granting of employee initiated severance packages for the period 1 April 2017 and 31 March 2018
Salary band Number Number of Number of appli- Number of pack- of appli- applications cations supported ages approved cations referred to by MPSA by department received the MPSA Senior 0 0 0 0 management
(17-23) Highly skilled 0 0 0 0 supervision
(15-6) Highly skilled 0 0 0 0 production
(13-14)
Skilled 0 0 0 0
(10-12)
Lower skilled 0 0 0 0 ( 6-9)
Free State Legislature Annual Report 2017/18 69 Senior manage- 0 0 0 0 ment
(17-23) Total 0 0 0 0
FREE STATE LEGISLATURE Annual Report 2017/18 PART E FINANCIAL INFORMATION
70 Free State Legislature Vote 2 Annual Financial Statements for the year ended 31 March 2018 INDEX Page
Report of the Auditor-General 72
Statement of Financial Position 80
Statement of Financial Performance 81
Statement of Changes in Net Assets 82
Cash Flow Statement 83
Statement of Comparison of Budget and Actual Amounts 84
Accounting Policies 85
Notes to the Annual Financial Statements 104
Abbreviations
GRAP Generally Recognised Accounting Practice
UIF Unemployment Insurance Fund
FMPPLA Financial Management of Parliament and Provincial Legislatures Act, 2009
IPSAS International Public Sector Accounting Standards
The financial statements set out on pages 3 to 49, which have been prepared on the going concern basis, were approved by the accounting officer on 31 May 2018.
TLLT Mofokeng SecretarySecretary to to the the Legislature Legislature Bloemfontein 31 May 2018 Bloemfontein 31 May 2018
3
Free State Legislature Annual Report 2017/18 71 FREE STATE LEGISLATURE
FREE STATE LEGISLATURE
AUDITOR GENERAL REPORT
Vote 2 - Free State Legislature 31 March 2018
72 80 119,
Free State Legislature Annual Report 2017/18 73 74 33 - 34
Free State Legislature Annual Report 2017/18 75 34 - 36
24 42
76 34 - 36
Free State Legislature Annual Report 2017/18 77 78 Free State Legislature Annual Report 2017/18 79 Free State Legislature Vote 2 Annual Financial Statements for the year ended 31 March 2018
Statement of Financial Position 2018 2017 Restated* R Note(s) R
Assets Current Assets Cash and cash equivalents 3 17,476,458 15,524,499
Receivables from exchange transactions 4 72,039 78,237 Receivables from non-exchange transactions 5 58,000 107,441 Prepayments 6 12,535 18,256 Inventories 7 245,907 195,500 17,864,939 15,923,933
Non-Current Assets Property, plant and equipment 8 10,314,584 12,010,956 Intangible assets 9 848,503 1,090,503 Heritage assets 10 3,472,605 3,472,605 14,635,692 16,574,064 Non-Current Assets 14,635,692 16,574,064 Current Assets 17,864,939 15,923,933 Total Assets 32,500,631 32,497,997
Liabilities Current Liabilities Finance lease obligation 26 69,108 22,100 Payables from exchange transactions 11 14,793,651 15,550,788 Operating lease liability 12 4,334,371 155,090 Unspent conditional grants and receipts 1,925,463 1,695,656 Employee benefit obligation 13 926,000 798,000 22,048,593 18,221,637
Non-Current Liabilities Finance lease obligation 26 31,292 8,836 Employee benefit obligation 13 15,430,000 12,342,000 15,461,292 12,350,836 Non-Current Liabilities 15,461,292 13,350,836 Current Liabilities 22,048,593 18,221,637 Total Liabilities 37,509,885 30,572,473 Assets 32,500,631 32,497,997 Liabilities (37,509,885) (30,572,473) Net Assets (5,009,254) 1,925,524
Accumulated deficit (5,009,254) 1,925,524
3
80 Free State Legislature Vote 2 Annual Financial Statements for the year ended 31 March 2018
Statement of Financial Performance 2018 2017 Restated* R Note(s) R
Revenue Revenue from exchange transactions Sale of Goods 15 1,556,919 146,131 Interest received - investment 16 1,157,504 1,000,361 Total revenue from exchange transactions 2,714,423 1,146,492
Revenue from non-exchange transactions Donations received 30 - 257,597 Transfer revenue Government grants and subsidies 17 232,118,537 226,536,344 Total revenue from non-exchange transactions 232,118,537 226,793,941 Total revenue 30 234,832,960 227,940,433
Expenditure Employee related costs 18 (95,625,042) (87,881,531) Members remuneration 19 23,724,717) (22,734,698) Debt Impairment 14 (75,666) (70,612) Transfers and subsidies 20 (61,132,183) (58,145,998) Operating Lease Payments (678,414) (611,549) Depreciation and Amortisation (4,389,329) (3,583,831) Travel & Subsistence 31 (12,576,375) (11,159,193) Property Payments 27 (20,438,274) (15,333,376) General expenses 23 (19,955,541) (22,600,978) Finance Costs 22 (1,124,000) (1,165,000) Loss/(gain) Assets (538,201) (665,929) Total expenditure (240,257,742) (223,952,695) - - Operating (deficit) surplus (5,424,782) 3,987,738
Actuarial losses 13 (1,510,000) 1,823,000
(Deficit) surplus for the year (6,934,782) 5,810,738
4
Free State Legislature Annual Report 2017/18 81 Free State Legislature Free State Legislature Vote 2 Vote 2 Annual Financial Statements for the year ended 31 March 2018 Annual Financial Statements for the year ended 31 March 2018
Statement of Changes in Net Assets Cash Flow Statement 2018 2017 Accumulated Total net Restated* R surplus assets Note(s) R R R
Balance at April 01, 2016 (3,885,213) (3,885,213) Cash flows from operating activities Revaluation of Heritage Assets (3,471,195) (3,471,195) Receipts Other income 1,606,360 1,164,090 Revaluation of Heritage (3,471,195) (3,471,195) Grants 232,348,344 228,232,000 Assets Interest income 1,157,504 1,000,361 2,339,542 2,339,542 Surplus for the year 235,112,208 230,396,451 Total recognized income and expenses for the year (1,131,653) (1,131,653) Change in Accounting Policy 6,942,390 6,942,390 Total Changes 5,810,737 5,810,737 Payments Employee costs (97,226,156) (86,047,958) Opening Balance as previously Reported 1,925,528 1,925,528 Members remuneration (23,724,717) (22,734,698) Restated* Balance at April 01, 2017 1,925,528 1,925,528 Suppliers (48,436,852) (49,992,635)
Deficit for the year (6,934,782) (6,934,782) Transfers and subsidies (61,132,183) (58,648,348) Total changes (6,934,782) (6,934,782) (230,519,908) (217,423,639) Balance at March 31, 2018 (5,009,254) (5,009,254) Total receipts 235,112,208 230,396,451 Total payments (230,519,908) (217,423,639) Net cash flows from operating activities 24 4,592,300 12,972,812
Cash flows from investing activities
Purchase of property, plant and equipment 8 (2,616,040) (3,066,291) Proceeds / (outflow) from sale of property, plant and equipment 8 710,260 (637,402)
Purchase of other intangible assets 9 (390,394) (94,952) Proceeds from sale of other intangible assets 9 264,780 2,852 Net cash flows from investing activities (2,031,394) (3,795,792)
Cash flows from financing activities
Finance lease payments (608,951) (580 613)
Net increase/(decrease) in cash and cash equivalents 1,951,955 8,596,406 Cash and cash equivalents at the beginning of the year 15,524,499 6,928,093 Cash and cash equivalents at the end of the year 3 17,476,458 15,524,499
5 6
82 Free State Legislature Vote 2 Annual Financial Statements for the year ended 31 March 2018
Cash Flow Statement 2018 2017 Restated* R Note(s) R
Cash flows from operating activities
Receipts Other income 1,606,360 1,164,090 Grants 232,348,344 228,232,000 Interest income 1,157,504 1,000,361
235,112,208 230,396,451
Payments Employee costs (97,226,156) (86,047,958) Members remuneration (23,724,717) (22,734,698) Suppliers (48,436,852) (49,992,635) Transfers and subsidies (61,132,183) (58,648,348)
(230,519,908) (217,423,639) Total receipts 235,112,208 230,396,451 Total payments (230,519,908) (217,423,639) Net cash flows from operating activities 24 4,592,300 12,972,812
Cash flows from investing activities
Purchase of property, plant and equipment 8 (2,616,040) (3,066,291) Proceeds / (outflow) from sale of property, plant and equipment 8 710,260 (637,402)
Purchase of other intangible assets 9 (390,394) (94,952) Proceeds from sale of other intangible assets 9 264,780 2,852 Net cash flows from investing activities (2,031,394) (3,795,792)
Cash flows from financing activities
Finance lease payments (608,951) (580 613)
Net increase/(decrease) in cash and cash equivalents 1,951,955 8,596,406 Cash and cash equivalents at the beginning of the year 15,524,499 6,928,093 Cash and cash equivalents at the end of the year 3 17,476,458 15,524,499
6
Free State Legislature Annual Report 2017/18 83 Free State Legislature Vote 2 Annual Financial Statements for the year ended 31 March 2018 Statement of Comparison of Budget and Actual Amounts Budget on Cash Basis Approved budget Adjustments Final Budget Actual amounts Difference Reference on comparable basis between final budget and actual
R R R R R Statement of Financial Performance Revenue Revenue from exchange transactions Sale of goods - - - 1,429,169 1,429,169 Note 42 Interest, dividends and rent on - - 1,157,183 land 1,157,183 Total revenue from exchange - - - 2,586,352 2,586,352 nOT transactions
Revenue from non-exchange transactions Transfer revenue Government grants & subsidies Appropriation 208,394,000 9,012,000 217,406,000 208,394,000 - Direct Charge 25,650,000 - 25,650,000 25,650,000 - Government grants & subsidies 234,044,000 243,056,000 234,044,000 (9,012,000)
Total revenue 234,044,000 - 243,056,000 236,630,352 (6,425,648)
Expenditure Personnel 129,819,000 (7,983,000) 121,836.000 116,581,388 (5,254,612) Note 28
Goods and services 49,310,000 4,218,000 53,528,000 49,577,115 (3,950,885) Note 28
Transfer payments - Other 52,705,000 9,364,000 62,069,000 61,384,914 (684.086) Note 28 Payment for Capital 2,210,000 3,413,000 5,623,000 2,557,710 (3,065,290) Note 28 Total expenditure 234,044,000 9,012,000 243,056,000 230,101,127 ( 12,954,873) -- - - Reconciliation between MCS - - -
and Accrual figures Payable : Treasury - - - (1,925,463) - Note 41 Depreciation - - - (4,389,329) Note 41 Loss Gain on assets - - - (538,201) Note 41 Financial Leases/Operating - - - (3,796,597) Note 41 Lease Actuarial gains/losses - - - (1,510,000) Note 41 Assets Capitalised - - - 890,303 Note 41 Staff Provision/Members - - - (1,070,720) Note 41 Provision Finance Cost (1,124,000) Note 41
84 Free State Legislature Vote 2 Annual Financial Statements for the year ended 31 March 2018 Accounting Policies
1. Presentation of Annual Financial Statements
The annual financial statements have been prepared in accordance with the Standards of Generally Recognised Accounting Practice (GRAP), including any interpretations, guidelines and directives, issued by the Accounting Standards Board in accordance with the Financial Management of Parliament and Provincial Legislatures Act, 2009(Act 10 of 2009), hereafter referred as FMPPLA..
These annual financial statements have been prepared on an accrual basis of accounting and are in accordance with the historical cost convention as the basis of measurement, unless specified otherwise. They are presented in South African Rand. All figures have been rounded to the nearest Rand.
A summary of the significant accounting policies are disclosed below.
1.1 Going concern assumption
These annual financial statements have been prepared based on the expectation that the L will continue to operate as a going concern for at least the next 12 months.
1.2 Significant judgements and sources of estimation uncertainty
In preparing the annual financial statements, management is required to make estimates and assumptions that affect the amounts represented in the annual financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the annual financial statements. Significant judgements include:
Receivables
The Legislature assesses its receivables for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in surplus or deficit, the Legislature makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset.
The impairment for receivables is calculated on a portfolio basis, based on historical loss ratios, adjusted for national and industry-specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These annual loss ratios are applied to balances in the portfolio and scaled to the estimated loss emergence period.
Impairment testing
The recoverable (service) amounts of cash-generating units and individual assets have been determined based on the higher of value-in-use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably possible that the assumptions may change which may then impact our estimations and may then require a material adjustment to the carrying value of tangible assets.
Value in use of non-cash generating assets:
The Legislature reviews and tests the carrying value of staff debt when events or changes in circumstances suggest that the carrying amount may not be recoverable. If there are indications that impairment may have occurred, the remaining service potential of the asset is determined. The most appropriate approach selected to determine the remaining service potential is dependent on the availability of data and the nature of the impairment.
Provisions
Provisions are raised and management determines an estimate based on the information available. Additional disclosure of these estimates of provisions are included in note 11 Payables from exchange transactions.
Useful lives of property, plant and equipment and other assets
The Legislature’s management determines the estimated useful lives and related depreciation charges for property, plant and equipment and other assets. This estimate is based on industry norm. This estimate is based on the pattern in which an asset's future economic benefits or service potential are expected to be consumed by the legislature.
8 Free State Legislature Annual Report 2017/18 85 Free State Legislature Vote 2 Annual Financial Statements for the year ended 31 March 2018 Accounting Policies
1.2 Significant judgements and sources of estimation uncertainty continued)
Effective interest rate
The Legislature uses the government bond rate to discount future cash flows.
Allowance for impairment
For receivables an impairment loss is recognized in surplus and deficit when there is objective evidence that it is impaired. The impairment is measured as the difference between the receivables carrying amount and the present value of estimated future cash flows discounted at the effective interest rate, computed at initial recognition.
Post-retirement benefits
The present value of the post retirement obligation depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) include the discount rate. Any changes in these assumptions will impact on the carrying amount of post retirement obligations.
The Legislature determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. The most appropriate discount rate that reflects the time value of money is with reference to market yields at the reporting date on government bonds. Where there is no deep market in government bonds with a sufficiently long maturity to match the estimated maturity of all the benefit payments, the Legislature uses current market rates of the appropriate term to discount shorter term payments, and estimates the discount rate for longer maturities by extrapolating current market rates along the yield curve.
Other key assumptions for pension obligations are based on current market conditions. Additional information is disclosed in Note 13.
1.3 Property, plant and equipment
Property, plant and equipment are tangible non-current assets (including infrastructure assets) that are held for use in the production or supply of goods or services, rental to others, or for administrative purposes, and are expected to be used during more than one reporting period.
The cost of an item of property, plant and equipment is recognised as an asset when: it is probable that future economic benefits or service potential associated with the item will flow to the Legislature; and The cost or fair value of the item can be measured reliably.
Property, plant and equipment are initially recognized at cost.
The cost of an item of property, plant and equipment is the purchase price and other costs attributable to bring the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Trade discounts and rebates are deducted in arriving at the cost.
Where an asset is acquired at no cost, or for a nominal cost, its cost is its fair value as at date of acquisition.
Where an item of property, plant and equipment is acquired in exchange for a non-monetary asset or monetary assets, or a combination of monetary and non-monetary assets, the asset acquired is initially measured at fair value (the cost), unless the fair value of neither the asset received nor the asset given up is reliably measurable. If the acquired item is not measured at fair value, its cost is measured at the carrying amount of the asset given up.
When significant components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses.
Property, plant and equipment are depreciated on a straight line basis over their expected useful lives to their estimated residual value.
Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses.
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Item Average useful life Furniture and fixtures 10 years Motor vehicles 5 years IT equipment 3-5 years Office Equipment 5 years Computer Software 5 years
1.4 Intangible assets
An asset is identifiable if it either: is separable, i.e. is capable of being separated or divided from the Legislature and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, identifiable assets or liability, regardless of whether the Legislature intends to do so; or arises from binding arrangements (including rights from contracts), regardless of whether those rights are transferable or separable from the Legislature or from other rights and obligations.
A binding arrangement describes an arrangement that confers similar rights and obligations on the parties to it as if it were in the form of a contract.
An intangible asset is recognised when: it is probable that the expected future economic benefits or service potential that are attributable to the asset will flow to the Legislature; and the cost or fair value can be measured reliably.
Intangible assets are initially recognised at cost.
Where an intangible asset is acquired at no cost, or for a nominal cost, its cost is its fair value as at the date of acquisition.
Expenditure on research (or on the research phase of an internal project) is recognised as an expense when it is incurred. An intangible asset arising from development (or from the development phase of an internal project) is recognised when: it is technically feasible to complete the asset so that it will be available for use or sale; there is an intention to complete and use or sell it; there is an ability to use or sell it; it will generate probable future economic benefits or service potential; there are available technical, financial and other resources to complete the development and to use or sell the asset; and the expenditure attributable to the asset during its development can be measured reliably.
1.5 Heritage assets
Heritage assets are assets that have a cultural, environmental, historical, natural, scientific, technological or artistic significance and are held indefinitely for the benefit of present and future generations.
Recognition
The Legislature recognises a heritage asset as an asset when it is probable that future economic benefits or service potential associated with the asset will flow to the entity, and the cost or fair value can be measured reliably.
Where the Legislature holds a heritage asset, but on initial recognition it does not meet the recognition criteria because it cannot be reliably measured, information on such a heritage asset is disclosed in note 10 Heritage assets.
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1.5 Heritage assets (continued)
Initial measurement
Heritage assets are initially recognized cost.
Where a heritage asset is acquired at no cost, or for a nominal cost, its cost is its fair value as at the date of acquisition.
Subsequent measurement
Subsequent to initial measurement heritage assets, whose fair value can be measured reliably, are carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent impairment losses.
If a heritage asset’s carrying amount is increased as a result of a revaluation, the increase is credited directly to a revaluation surplus. However, the increase is recognised in surplus or deficit to the extent that it reverses a revaluation decrease of the same heritage asset previously recognised in surplus or deficit.
If a heritage asset’s carrying amount is decreased as a result of a revaluation, the decrease is recognised in surplus or deficit. However, the decrease is debited directly to a revaluation surplus to the extent of any credit balance existing in the revaluation surplus in respect of that heritage asset.
Transfers
Transfers from heritage assets are only made when the particular asset no longer meets the definition of a heritage asset.
Transfers to heritage assets are only made when the asset meets the definition of a heritage asset.
Derecognition
Heritage assets are derecognised on disposal, or when no future economic benefits or service potential are expected from its use or disposal.
The gain or loss arising from the derecognition of a heritage asset is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the heritage asset. Such a difference is recognised in surplus or deficit when the heritage asset is derecognised.
1.6 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one Legislature and a financial liability or a residual interest of another Legislature.
Classification
The Legislature has the following types of financial assets (classes and category) as reflected on the face of the statement of financial position or in the notes thereto: `
Class Category Receivables from exchange transactions cost Financial asset measured at amortised cost Receivables from non exchange transactions cost Financial asset measured at amortised cost Cash and cash equivalents Financial asset measured at amortised cost
The Legislature has the following types of financial liabilities (classes and category) as reflected on the face of the statement of financial position or in the notes thereto:
`
Class Category Payables from exchange transactions Financial liability measured at amortised cost Payables from non exchange transactions Financial liability measured at amortised cost Operating Liability Financial liability measured at amortised cost
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1.7 Financial instruments (continued)
Initial recognition
The Legislature recognized a financial asset or a financial liability in its statement of financial position when the Legislature becomes a party to the contractual provisions of the instrument.
The Legislature recognized financial assets using trade date accounting.
Initial measurement of financial assets and financial liabilities
The Legislature measures a financial asset and financial liability, other than those subsequently measures at fair value, initially at its fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. The Legislature measures all other financial assets and financial liabilities initially at fair value.
The Legislature first assesses whether the substance of a concessionary loan is in fact a loan. On initial recognition, the Legislature analyses a concessionary loan into its component parts and accounts for each component separately. The Legislature accounts for that part of a concessionary loan that is: a social benefit in accordance with the Framework for the Preparation and Presentation of Financial Statements, where it is the issuer of the loan; or Non-exchange revenue, in accordance with the Standard of GRAP on Revenue from Non-exchange Transactions (Taxes and Transfers), where it is the recipient of the loan.
Subsequent measurement of financial assets and financial liabilities
The Legislature measures all financial assets and financial liabilities after initial recognition using the following categories: Financial instruments at fair value. Financial instruments at amortised cost. Financial instruments at cost.
All financial assets measured at amortised cost, or cost, are subject to an impairment review. The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative 12ecognized12n using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) for impairment or uncollectibility in the case of a financial asset.
Fair value measurement considerations
The best evidence of fair value is quoted prices in an active market. If the market for a financial instrument is not active, the Legislature establishes fair value by using a valuation technique. The objective of using a valuation technique is to establish what the transaction price would have been on the measurement date in an arm’s length exchange motivated by normal operating considerations. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models. If there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, the Legislature uses that technique. The chosen valuation technique makes maximum use of market inputs and relies as little as possible on Legislature-specific inputs. It incorporates all factors that market participants would consider in setting a price and is consistent with accepted economic methodologies for pricing financial instruments. Periodically, the Legislature calibrates the valuation technique and tests it for validity using prices from any observable current market transactions in the same instrument (i.e. without modification or repackaging) or based on any available observable market data.
Short-term receivables and payables are not discounted where the initial credit period granted or received is consistent with terms used in the public sector, either through established practices or legislation. Gains and losses
A gain or loss arising from a change in the fair value of a financial asset or financial liability measured at fair value is recognized in surplus or deficit.
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For financial assets and financial liabilities measured at amortised cost or cost, a gain or loss is recognised in surplus or deficit when the financial asset or financial liability is derecognised or impaired, or through the amortisation process.
Impairment and uncollectibility of financial assets
The Legislature assesses at the end of each reporting period whether there is any objective evidence that a financial asset or group of financial assets is impaired.
For amounts due to the Legislature, significant financial difficulties of the receivable, probability that the receivable will enter bankruptcy and default of payments are all considered indicators of impairment.
Financial assets measured at amortised cost:
If there is objective evidence that an impairment loss on financial assets measured at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. The amount of the loss is recognised in surplus or deficit.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed by adjusting an allowance account. The reversal does not result in a carrying amount of the financial asset that exceeds what the amortised cost would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in surplus or deficit.
Where financial assets are impaired through the use of an allowance account, the amount of the loss is recognised in surplus or deficit within operating expenses. When such financial assets are written off, the write off is made against the relevant allowance account. Subsequent recoveries of amounts previously written off are credited against operating expenses.
Financial assets measured at cost:
If there is objective evidence that an impairment loss has been incurred on an investment in a residual interest that is not measured at fair value because its fair value cannot be measured reliably, the amount of the impairment loss is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed.
Derecognition
Financial assets
The Legislature derecognises financial assets using trade date accounting.
The Legislature derecognises a financial asset only when: the contractual rights to the cash flows from the financial asset expire, are settled or waived; the Legislature transfers to another party substantially all of the risks and rewards of ownership of the financial asset; or the Legislature, despite having retained some significant risks and rewards of ownership of the financial asset, has transferred control of the asset to another party and the other party has the practical ability to sell the asset in its entirety to an unrelated third party, and is able to exercise that ability unilaterally and without needing to impose additional restrictions on the transfer. In this case, the Legislature: - derecognises the asset; and - recognises separately any rights and obligations created or retained in the transfer.
The carrying amount of the transferred asset is allocated between the rights or obligations retained and those transferred on the basis of their relative fair values at the transfer date. Newly created rights and obligations are measured at their fair values at that date. Any difference between the consideration received and the amounts recognised and derecognised is recognised in surplus or deficit in the period of the transfer.
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1.6 Financial instruments (continued) 1.6 Financial instruments (continued)
For financial assets and financial liabilities measured at amortised cost or cost, a gain or loss is recognised in surplus or received is recognised in surplus or deficit. deficit when the financial asset or financial liability is derecognised or impaired, or through the amortisation process.
Impairment and uncollectibility of financial assets Financial liabilities The Legislature assesses at the end of each reporting period whether there is any objective evidence that a financial asset or The Legislature removes a financial liability (or a part of a financial liability) from its statement of financial position when it is group of financial assets is impaired. extinguished - i.e. when the obligation specified in the contract is discharged, cancelled, expires or waived. For amounts due to the Legislature, significant financial difficulties of the receivable, probability that the receivable will enter An exchange between an existing borrower and lender of debt instruments with substantially different terms is accounted for as bankruptcy and default of payments are all considered indicators of impairment. having extinguished the original financial liability and a new financial liability is recognised. Similarly, a substantial modification of the terms of an existing financial liability or a part of it is accounted for as having extinguished the original financial liability and Financial assets measured at amortised cost: having recognised a new financial liability. If there is objective evidence that an impairment loss on financial assets measured at amortised cost has been incurred, the The difference between the carrying amount of a financial liability (or part of a financial liability) extinguished or transferred to amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest surplus or deficit. Any liabilities that are waived, forgiven or assumed by another Legislature by way of a non-exchange rate. The carrying amount of the asset is reduced through the use of an allowance account. The amount of the loss is recognised transaction are accounted for in accordance with the Standard of GRAP on Revenue from Non-exchange Transactions (Taxes in surplus or deficit. and Transfers).
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event 1.7 Leases occurring after the impairment was recognised, the previously recognised impairment loss is reversed by adjusting an allowance account. The reversal does not result in a carrying amount of the financial asset that exceeds what the amortised cost would A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership. recognised in surplus or deficit. When a lease includes both land and building elements, the Legislature assesses the classification of each element separately. Where financial assets are impaired through the use of an allowance account, the amount of the loss is recognised in surplus or deficit within operating expenses. When such financial assets are written off, the write off is made against the relevant allowance Operating leases - lessee account. Subsequent recoveries of amounts previously written off are credited against operating expenses. Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between Financial assets measured at cost: the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset or liability.
If there is objective evidence that an impairment loss has been incurred on an investment in a residual interest that is not The aggregate benefit of incentives is recognised as a reduction of rental expense over the lease term on a straight-line basis measured at fair value because its fair value cannot be measured reliably, the amount of the impairment loss is measured as over the lease term. the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed. Any contingent rents are recognised separately as an expense in the period in which they are incurred.
Derecognition 1.8 Inventories
Financial assets Inventories are initially measured at cost except where inventories are acquired at no cost, or for a nominal cost, then their costs are their fair value as at the date of acquisition. The Legislature derecognises financial assets using trade date accounting. The cost of inventories comprises of all costs of purchase, costs of conversion and other costs incurred in bringing the The Legislature derecognises a financial asset only when: inventories to their present location and condition. the contractual rights to the cash flows from the financial asset expire, are settled or waived; the Legislature transfers to another party substantially all of the risks and rewards of ownership of the financial asset; or The cost of inventories is assigned using weighted average cost formula. The same cost formula is used for all inventories the Legislature, despite having retained some significant risks and rewards of ownership of the financial asset, has having a similar nature and use to the Legislature. transferred control of the asset to another party and the other party has the practical ability to sell the asset in its entirety to an unrelated third party, and is able to exercise that ability unilaterally and without needing to impose additional restrictions on the transfer. In this case, the Legislature: - derecognises the asset; and - recognises separately any rights and obligations created or retained in the transfer.
The carrying amount of the transferred asset is allocated between the rights or obligations retained and those transferred on the basis of their relative fair values at the transfer date. Newly created rights and obligations are measured at their fair values at that date. Any difference between the consideration received and the amounts recognised and derecognised is recognised in surplus or deficit in the period of the transfer.
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1.9 Impairment of cash-generating assets
Cash-generating assets are those assets held by the Legislature with the primary objective of generating a commercial return. When an asset is deployed in a manner consistent with that adopted by a profit-orientated Legislature, it generates a commercial return.
Identification
When the carrying amount of a cash-generating asset exceeds its recoverable amount, it is impaired.
The Legislature assesses at each reporting date whether there is any indication that a cash-generating asset may be impaired. If any such indication exists, the Legislature estimates the recoverable amount of the asset.
Irrespective of whether there is any indication of impairment, the Legislature also tests a cash-generating intangible asset with an indefinite useful life or a cash-generating intangible asset not yet available for use for impairment annually by comparing its carrying amount with its recoverable amount. This impairment test is performed at the same time every year. If an intangible asset was initially recognised during the current reporting period, that intangible asset is tested for impairment before the end of the current reporting period.
Value in use
Value in use of a cash-generating asset is the present value of the estimated future cash flows expected to be derived from the continuing use of an asset and from its disposal at the end of its useful life.
When estimating the value in use of an asset, the Legislature estimates the future cash inflows and outflows to be derived from continuing use of the asset and from its ultimate disposal and the Legislature applies the appropriate discount rate to those future cash flows.
Discount rate
The discount rate is a pre-tax rate that reflects current market assessments of the time value of money, represented by the current risk-free rate of interest and the risks specific to the asset for which the future cash flow estimates have not been adjusted.
Recognition and measurement (individual asset)
If the recoverable amount of a cash-generating asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. This reduction is an impairment loss.
An impairment loss is recognised immediately in surplus or deficit.
After the recognition of an impairment loss, the depreciation (amortisation) charge for the cash-generating asset is adjusted in future periods to allocate the cash-generating asset’s revised carrying amount, less its residual value (if any), on a systematic basis over its remaining useful life.
Cash-generating units
If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Legislature determines the recoverable amount of the cash-generating unit to which the asset belongs (the asset's cash-generating unit).
If an active market exists for the output produced by an asset or group of assets, that asset or group of assets is identified as a cash-generating unit, even if some or all of the output is used internally. If the cash inflows generated by any asset or cash- generating unit are affected by internal transfer pricing, the Legislature uses management's best estimate of future price(s) that could be achieved in arm's length transactions in estimating:
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1.9 Impairment of cash-generating assets (continued) 1.9 Impairment of cash-generating assets
Cash-generating assets are those assets held by the Legislature with the primary objective of generating a commercial return. the future cash inflows used to determine the asset's or cash-generating unit's value in use; and When an asset is deployed in a manner consistent with that adopted by a profit-orientated Legislature, it generates a commercial the future cash outflows used to determine the value in use of any other assets or cash-generating units that are return. affected by the internal transfer pricing.
Identification Cash-generating units are identified consistently from period to period for the same asset or types of assets, unless a change is justified. When the carrying amount of a cash-generating asset exceeds its recoverable amount, it is impaired. The carrying amount of a cash-generating unit is determined on a basis consistent with the way the recoverable amount of the The Legislature assesses at each reporting date whether there is any indication that a cash-generating asset may be impaired. cash-generating unit is determined. If any such indication exists, the Legislature estimates the recoverable amount of the asset. An impairment loss is recognised for a cash-generating unit if the recoverable amount of the unit is less than the carrying amount Irrespective of whether there is any indication of impairment, the Legislature also tests a cash-generating intangible asset with of the unit. The impairment is allocated to reduce the carrying amount of the cash-generating assets of the unit on a pro rata an indefinite useful life or a cash-generating intangible asset not yet available for use for impairment annually by comparing its basis, based on the carrying amount of each asset in the unit. These reductions in carrying amounts are treated as impairment carrying amount with its recoverable amount. This impairment test is performed at the same time every year. If an intangible losses on individual assets. asset was initially recognised during the current reporting period, that intangible asset is tested for impairment before the end of the current reporting period. In allocating an impairment loss, the Legislature does not reduce the carrying amount of an asset below the highest of: 1.9.1 its fair value less costs to sell (if determinable); 1.9.2 its value in use (if determinable); and Value in use 1.9.3 zero.
Value in use of a cash-generating asset is the present value of the estimated future cash flows expected to be derived from the The amount of the impairment loss that would otherwise have been allocated to the asset is allocated pro rata to the other cash- continuing use of an asset and from its disposal at the end of its useful life. generating assets of the unit.
When estimating the value in use of an asset, the Legislature estimates the future cash inflows and outflows to be derived from continuing use of the asset and from its ultimate disposal and the Legislature applies the appropriate discount rate to those future Where a non-cash-generating asset contributes to a cash-generating unit, a proportion of the carrying amount of that non- cash- cash flows. generating asset is allocated to the carrying amount of the cash-generating unit prior to estimation of the recoverable amount of the cash-generating unit. Discount rate
The discount rate is a pre-tax rate that reflects current market assessments of the time value of money, represented by the Reversal of impairment loss current risk-free rate of interest and the risks specific to the asset for which the future cash flow estimates have not been adjusted. The Legislature assesses at each reporting date whether there is any indication that an impairment loss recognised in prior Recognition and measurement (individual asset) periods for a cash-generating asset may no longer exist or may have decreased. If any such indication exists, the Legislature estimates the recoverable amount of that asset. If the recoverable amount of a cash-generating asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. This reduction is an impairment loss. An impairment loss recognised in prior periods for a cash-generating asset is reversed if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of the An impairment loss is recognised immediately in surplus or deficit. asset is increased to its recoverable amount. The increase is a reversal of an impairment loss. The increased carrying amount of an asset attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined After the recognition of an impairment loss, the depreciation (amortisation) charge for the cash-generating asset is adjusted in (net of depreciation or amortisation) had no impairment loss been recognised for the asset in prior periods. future periods to allocate the cash-generating asset’s revised carrying amount, less its residual value (if any), on a systematic basis over its remaining useful life. A reversal of an impairment loss for a cash-generating asset is recognised immediately in surplus or deficit. After a reversal of an impairment loss is recognised, the depreciation (amortisation) charge for the cash-generating asset is Cash-generating units adjusted in future periods to allocate the cash-generating asset’s revised carrying amount, less its residual value (if any), on a systematic basis over its remaining useful life. If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Legislature determines the recoverable amount of the A reversal of an impairment loss for a cash-generating unit is allocated to the cash-generating assets of the unit pro rata with cash-generating unit to which the asset belongs (the asset's cash-generating unit). the carrying amounts of those assets. These increases in carrying amounts are treated as reversals of impairment losses for individual assets. No part of the amount of such a reversal is allocated to a non-cash-generating asset contributing service If an active market exists for the output produced by an asset or group of assets, that asset or group of assets is identified as a potential to a cash-generating unit. cash-generating unit, even if some or all of the output is used internally. If the cash inflows generated by any asset or cash- generating unit are affected by internal transfer pricing, the Legislature uses management's best estimate of future price(s) that In allocating a reversal of an impairment loss for a cash-generating unit, the carrying amount of an asset is not increased above could be achieved in arm's length transactions in estimating: the lower of: its recoverable amount (if determinable); and The carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior periods.
The amount of the reversal of the impairment loss that would otherwise have been allocated to the asset is allocated pro rata to the other assets of the unit.
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1.10 Employee benefits
Short-term employee benefits
Short-term employee benefits are employee benefits (other than termination benefits) that are due to be settled within 12 months after the end of the period in which the employees render the related service.
Short-term employee benefits include items such as: wages, salaries and social security contributions; short-term compensated absences (such as paid annual leave and paid sick leave) where the compensation for the absences is due to be settled within 12 months after the end of the reporting period in which the employees render the related employee service; bonus, incentive and performance related payments payable within 12 months after the end of the reporting period in which the employees render the related service; and non-monetary benefits (for example, medical care, and free or subsidised goods or services such as housing, cars and cellphones) for current employees.
When an employee has rendered service to the Legislature during a reporting period, the Legislature recognises the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service: as a liability (accrued expense), after deducting any amount already paid. If the amount already paid exceeds the undiscounted amount of the benefits, the Legislature recognises that excess as an asset (prepaid expense) to the extent that the prepayment will lead to, for example, a reduction in future payments or a cash refund; and as an expense, unless another Standard requires or permits the inclusion of the benefits in the cost of an asset.
The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in the case of non-accumulating absences, when the absence occurs. The Legislature measures the expected cost of accumulating compensated absences as the additional amount that the Legislature expects to pay as a result of the unused entitlement that has accumulated at the reporting date.
The Legislature recognises the expected cost of bonus, incentive and performance related payments when the Legislature has a present legal or constructive obligation to make such payments as a result of past events and a reliable estimate of the obligation can be made. A present obligation exists when the Legislature has no realistic alternative but to make the payments.
Actuarial assumptions
Actuarial assumptions are unbiased and mutually compatible.
Financial assumptions are based on market expectations, at the reporting date, for the period over which the obligations are to be settled.
The rate used to discount post-employment benefit obligations (both funded and unfunded) reflects the time value of money. The currency and term of the financial instrument selected to reflect the time value of money are consistent with the currency and estimated term of the post-employment benefit obligations.
Post-employment benefit obligations are measured on a basis that reflects: estimated future salary increases; the benefits set out in the terms of the plan (or resulting from any constructive obligation that goes beyond those terms) at the reporting date; and estimated future changes in the level of any state benefits that affect the benefits payable under a defined benefit plan, if, and only if, either: those changes were enacted before the reporting date; or past history, or other reliable evidence, indicates that those state benefits will change in some predictable manner, for example, in line with future changes in general price levels or general salary levels.
Assumptions about medical costs take account of estimated future changes in the cost of medical services, resulting from both inflation and specific changes in medical costs.
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Accounting Policies Accounting Policies 1.10 Employee benefits (continued) 1.10 Employee benefits Other long-term employee benefits Short-term employee benefits The Legislature’s liability is based on an actuarial valuation. The Projected Unit Credit Method is used to value the liabilities. Short-term employee benefits are employee benefits (other than termination benefits) that are due to be settled within 12 Actuarial gains and losses on the long-term service awards are recognised in the statement of financial performance. months after the end of the period in which the employees render the related service. The amount recognised as a liability for long-term service awards is the net total of the following amounts: Short-term employee benefits include items such as: the present value of the defined benefit obligation at the reporting date; wages, salaries and social security contributions; minus the fair value at the reporting date of plan assets (if any) out of which the obligations are to be settled short-term compensated absences (such as paid annual leave and paid sick leave) where the compensation for the directly. absences is due to be settled within 12 months after the end of the reporting period in which the employees render the related employee service; The Legislature recognises the net total of the following amounts as expense or revenue, except to the extent that another bonus, incentive and performance related payments payable within 12 months after the end of the reporting Standard requires or permits their inclusion in the cost of an asset: period in which the employees render the related service; and current service cost; non-monetary benefits (for example, medical care, and free or subsidised goods or services such as housing, interest cost; cars and cellphones) for current employees. the expected return on any plan assets and on any reimbursement right recognised as an asset; actuarial gains and losses, which is recognised immediately; When an employee has rendered service to the Legislature during a reporting period, the Legislature recognises the past service cost, which is recognised immediately; and undiscounted amount of short-term employee benefits expected to be paid in exchange for that service: the effect of any curtailments or settlements. as a liability (accrued expense), after deducting any amount already paid. If the amount already paid exceeds the undiscounted amount of the benefits, the Legislature recognises that excess as an asset (prepaid expense) to the extent that the prepayment will lead to, for example, a reduction in future payments or a cash refund; and as an expense, unless another Standard requires or permits the inclusion of the benefits in the cost of an asset. 1.11 Provisions and contingencies
The expected cost of compensated absences is recognised as an expense as the employees render services that increase their Provisions are recognised when: entitlement or, in the case of non-accumulating absences, when the absence occurs. The Legislature measures the expected the Legislature has a present obligation as a result of a past event; cost of accumulating compensated absences as the additional amount that the Legislature expects to pay as a result of the it is probable that an outflow of resources embodying economic benefits or service potential will be required to unused entitlement that has accumulated at the reporting date. settle the obligation; and a reliable estimate can be made of the obligation. The Legislature recognises the expected cost of bonus, incentive and performance related payments when the Legislature has a present legal or constructive obligation to make such payments as a result of past events and a reliable estimate of the The amount of a provision is the best estimate of the expenditure expected to be required to settle the present obligation at obligation can be made. A present obligation exists when the Legislature has no realistic alternative but to make the payments. the reporting date.
Actuarial assumptions Where the effect of time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation. Actuarial assumptions are unbiased and mutually compatible. The discount rate is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to Financial assumptions are based on market expectations, at the reporting date, for the period over which the obligations are to the liability. be settled. Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the The rate used to discount post-employment benefit obligations (both funded and unfunded) reflects the time value of money. reimbursement is recognised when, and only when, it is virtually certain that reimbursement will be received if the Legislature The currency and term of the financial instrument selected to reflect the time value of money are consistent with the currency settles the obligation. The reimbursement is treated as a separate asset. The amount recognised for the reimbursement does and estimated term of the post-employment benefit obligations. not exceed the amount of the provision.
Post-employment benefit obligations are measured on a basis that reflects: Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Provisions are reversed if it is estimated future salary increases; no longer probable that an outflow of resources embodying economic benefits or service potential will be required, to settle the the benefits set out in the terms of the plan (or resulting from any constructive obligation that goes beyond those obligation. terms) at the reporting date; and estimated future changes in the level of any state benefits that affect the benefits payable under a defined benefit Where discounting is used, the carrying amount of a provision increases in each period to reflect the passage of time. This plan, if, and only if, either: increase is recognised as an interest expense. those changes were enacted before the reporting date; or past history, or other reliable evidence, indicates that those state benefits will change in some predictable A provision is used only for expenditures for which the provision was originally recognised. Provisions manner, for example, in line with future changes in general price levels or general salary levels. are not recognised for future operating expenditure. Assumptions about medical costs take account of estimated future changes in the cost of medical services, resulting from both inflation and specific changes in medical costs. If the Legislature has a contract that is onerous, the present obligation (net of recoveries) under the contract is recognised and measured as a provision.
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Accounting Policies 1.11 Provisions and contingencies (continued)
A constructive obligation to restructure arises only when the Legislature: has a detailed formal plan for the restructuring, identifying at least: - the activity/operating unit or part of a activity/operating unit concerned; - the principal locations affected; - the location, function, and approximate number of employees who will be compensated for services being terminated; - the expenditures that will be undertaken; and - when the plan will be implemented; and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it.
A restructuring provision includes only the direct expenditures arising from the restructuring, which are those that are both: necessarily entailed by the restructuring; and not associated with the ongoing activities of the Legislature
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Legislature.
A contingent liability: a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or a present obligation that arises from past events but is not recognised because: - it is not probable than an outflow of resources embodying economic benefits or service potential will be required to settle the obligation; - the amount of the obligation cannot be measured with sufficient reliability.
Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 43.
1.12 Revenue from exchange transactions
Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net assets, other than increases relating to contributions from owners.
An exchange transaction is one in which the Legislature receives assets or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of goods, services or use of assets) to the other party in exchange.
Measurement
Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and volume rebates.
Sale of goods
Revenue from the sale of goods is recognised when all the following conditions have been satisfied: the Legislature has transferred to the purchaser the significant risks and rewards of ownership of the goods; the Legislature retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; the amount of revenue can be measured reliably; it is probable that the economic benefits or service potential associated with the transaction will flow to the Legislature; and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
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Accounting Policies 1.12 Revenue from exchange transactions (continued)
Rendering of services
When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the reporting date. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied: the amount of revenue can be measured reliably; it is probable that the economic benefits or service potential associated with the transaction will flow to the Legislature; the stage of completion of the transaction at the reporting date can be measured reliably; and the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.
When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.
Service revenue is recognised by reference to the stage of completion of the transaction at the reporting date. Stage of completion is determined by surveys of work performed.
Interest, royalties and dividends
Revenue arising from the use by others of municipal assets yielding interest, royalties and dividends or similar distributions is recognised when: it is probable that the economic benefits or service potential associated with the transaction will flow to the Legislature; and the amount of the revenue can be measured reliably.
Interest is recognised, in surplus or deficit, using the effective interest rate method.
1.13 Revenue from non-exchange transactions
Revenue comprises gross inflows of economic benefits or service potential received and receivable by the Legislature, which represents an increase in net assets, other than increases relating to contributions from owners.
Conditions on transferred assets are stipulations that specify that the future economic benefits or service potential embodied in the asset is required to be consumed by the recipient as specified or future economic benefits or service potential must be returned to the transferor.
Non-exchange transactions are transactions that are not exchange transactions. In a non-exchange transaction, the Legislature either receives value from another Legislature without directly giving approximately equal value in exchange, or gives value to another Legislature without directly receiving approximately equal value in exchange.
Restrictions on transferred assets are stipulations that limit or direct the purposes for which a transferred asset may be used, but do not specify that future economic benefits or service potential are required to be returned to the transferor if not deployed as specified.
Stipulations on transferred assets are terms in laws or regulation, or a binding arrangement, imposed upon the use of a transferred asset by entities external to the Legislature.
Transfers are inflows of future economic benefits or service potential from non-exchange transactions, other than taxes.
Recognition
An inflow of resources from a non-exchange transaction recognised as an asset is recognised as revenue, except to the extent that a liability is also recognised in respect of the same inflow.
As the Legislature satisfies a present obligation recognised as a liability in respect of an inflow of resources from a non-exchange transaction recognised as an asset, it reduces the carrying amount of the liability recognised and recognises an amount of revenue equal to that reduction.
Revenue received from conditional grants, donations and funding are recognised as revenue to the extent that the Legislature has complied with any of the criteria, conditions or obligations embodied in the agreement. To the extent that the criteria, conditions or obligations have not been met a liability is recognised.
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Accounting Policies
1.13 Revenue from non-exchange transactions (continued)
Measurement
Revenue from a non-exchange transaction is measured at the amount of the increase in net assets recognised by the Legislature.
When, as a result of a non-exchange transaction, the Legislature recognises an asset, it also recognises revenue equivalent to the amount of the asset measured at its fair value as at the date of acquisition, unless it is also required to recognise a liability. Where a liability is required to be recognised it will be measured as the best estimate of the amount required to settle the obligation at the reporting date, and the amount of the increase in net assets, if any, recognised as revenue. When a liability is subsequently reduced, because the taxable event occurs or a condition is satisfied, the amount of the reduction in the liability is recognised as revenue.
Transfers
Apart from services in kind, which are not recognised, the Legislature recognises an asset in respect of transfers when the transferred resources meet the definition of an asset and satisfy the criteria for recognition as an asset.
Transferred assets are measured at their fair value as at the date of acquisition.
Gifts and donations, including goods in-kind
Gifts and donations, including goods in kind, are recognised as assets and revenue when it is probable that the future economic benefits or service potential will flow to the Legislature and the fair value of the assets can be measured reliably.
Services in-kind
Services in-kind that are significant to the legislature's operations and/or service delivery objectives are recognised as revenue and as assets when it is probable that future economic benefits or service potential will flow to the legislature and the fair value of the assets can be measured reliably.
For services in-kind that are not significant to the legislature’s operations and/or service delivery objectives and/or do not satisfy the criteria for recognition, the nature and type received during the reporting period are disclosed. Services in- kind are recognised as revenue and as assets.
1.14 Borrowing costs
Borrowing costs are interest and other expenses incurred by the Legislature in connection with the borrowing of funds. Borrowing costs are recognized as an expense in the period in which they are incurred.
1.15 Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand and highly liquid interest-bearing securities with maturities of three months or less.
1.16 Unauthorised expenditure
Unauthorised expenditure means:
overspending of a vote or a main division within a vote; and Expenditure not in accordance with the purpose of a vote or, in the case of a main division, not in accordance with the purpose of the main division.
All expenditure relating to unauthorised expenditure is recognised as an expense in the statement of financial performance in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and where recovered, it is subsequently accounted for as revenue in the statement of financial performance.
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Accounting Policies Accounting Policies
1.13 Revenue from non-exchange transactions (continued) 1.17 Fruitless and wasteful expenditure
Fruitless expenditure means expenditure which was made in vain and would have been avoided had reasonable care been exercised. Measurement All expenditure relating to fruitless and wasteful expenditure is recognised as an expense in the statement of financial Revenue from a non-exchange transaction is measured at the amount of the increase in net assets recognised by the performance in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the Legislature. expense, and where recovered, it is subsequently accounted for as revenue in the statement of financial performance.
When, as a result of a non-exchange transaction, the Legislature recognises an asset, it also recognises revenue equivalent to Fruitless and wasteful expenditure recoverable is to be recognised as a receivable in the statement of financial position, until the amount of the asset measured at its fair value as at the date of acquisition, unless it is also required to recognise a liability. received or written off. Where a liability is required to be recognised it will be measured as the best estimate of the amount required to settle the obligation at the reporting date, and the amount of the increase in net assets, if any, recognised as revenue. When a liability is 1.18 Irregular expenditure subsequently reduced, because the taxable event occurs or a condition is satisfied, the amount of the reduction in the liability is recognised as revenue. Irregular expenditure as defined in section 1 of the FMPPLA is expenditure other than unauthorised expenditure, incurred in contravention of or that is not in accordance with a requirement of any applicable legislation, including - Transfers (a) this Act; or any regulations made in terms of the Act; or (b) the State Tender Board Act, 1968 (Act No. 86 of 1968), or any regulations made in terms of the Act; or Apart from services in kind, which are not recognised, the Legislature recognises an asset in respect of transfers when the transferred resources meet the definition of an asset and satisfy the criteria for recognition as an asset. All expenditure relating to irregular expenditure is recognised as an expense in the statement of financial performance in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and where Transferred assets are measured at their fair value as at the date of acquisition. recovered, it is subsequently accounted for as revenue in the statement of financial performance.
Gifts and donations, including goods in-kind Irregular expenditure recoverable is to be recognised as a receivable in the statement of financial position, until received or written off. Gifts and donations, including goods in kind, are recognised as assets and revenue when it is probable that the future economic benefits or service potential will flow to the Legislature and the fair value of the assets can be measured reliably. 1.19 Accumulated surplus
Services in-kind The accumulated surplus represents the net difference between the total assets and the total liabilities of the Legislature. Any surpluses and deficits realised during a specific financial year are credited/debited against accumulated surplus/deficit. Prior Services in-kind that are significant to the legislature's operations and/or service delivery objectives are recognised as revenue year adjustments, relating to income and expenditure, are debited/credit against accumulated surplus when retrospective and as assets when it is probable that future economic benefits or service potential will flow to the legislature and the fair value adjustments are made. of the assets can be measured reliably. 1.20 Commitments For services in-kind that are not significant to the legislature’s operations and/or service delivery objectives and/or do not satisfy the criteria for recognition, the nature and type received during the reporting period are disclosed. Services in- kind are Items are classified as commitments when the Legislature has committed itself to future transactions that will normally result in recognised as revenue and as assets. the outflow of cash.
Disclosures are required in respect of unrecognized contractual commitments, which are disclosed in note 27. 1.14 Borrowing costs Commitments for which disclosure is necessary to achieve a fair presentation are disclosed if both the following criteria are met: Borrowing costs are interest and other expenses incurred by the Legislature in connection with the borrowing of funds. Borrowing costs contracts are non-cancellable or only cancellable at significant cost (for example, contracts for computer or are recognized as an expense in the period in which they are incurred. building maintenance services); and Contracts relate to something other than the routine, steady, state business of the Legislature – therefore salary 1.15 Cash and cash equivalents commitments relating to employment contracts or social security benefit commitments are excluded. Cash and cash equivalents include cash at bank and in hand and highly liquid interest-bearing securities with maturities of three months or less. 1.21 Grants in aid
1.16 Unauthorised expenditure The Legislature transfers money to individuals, organisations and other sectors of government from time to time. When making these transfers, the Legislature does not: Unauthorised expenditure means: receive any goods or services directly in return, as would be expected in a purchase or sale transaction; expect to be repaid in future; or expect a financial return, as would be expected from an investment. overspending of a vote or a main division within a vote; and Expenditure not in accordance with the purpose of a vote or, in the case of a main division, not in accordance These transfers are recognised in the statement of financial performance as expenses in the period that the events giving with the purpose of the main division. raise to the transfer occurred.
1.22 Budget information All expenditure relating to unauthorised expenditure is recognised as an expense in the statement of financial performance in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and The approved budget is prepared on the modified cash basis and presented by economic classification linked to performance where recovered, it is subsequently accounted for as revenue in the statement of financial performance. outcome objectives.
The approved budget covers the fiscal period from 1/4/2017 to 31/3/2018. 21 22 Free State Legislature Annual Report 2017/18 99 Free State Legislature
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Accounting Policies 1.22 Budget information (continued)
The annual financial statements and the budget are not on the same basis of accounting. The actual financial statement information is therefore presented on a comparable basis to the budget information. The comparison and reconciliation between the statement of financial performance and the budget for the reporting period have been included in the Statement of comparison of budget and actual amounts.
1.23 Related parties
A related party is a person or an entity with the ability to control or jointly control the other party, or exercise significant influence over the other party, or vice versa, or an entity that is subject to common control, or joint control.
Management are those persons responsible for planning, directing and controlling the activities of the Legislature, including those charged with the governance of the Legislature in accordance with legislation, in instances where they are required to perform such functions.
Close members of the family of a person are considered to be those family members who may be expected to influence, or be influenced by, that management in their dealings with the Legislature.
Only transactions with related parties not at arm’s length or not in the ordinary course of business are disclosed.
1.24 Events after reporting date
Events after reporting date are those events, both favourable and unfavourable, that occur between the reporting date and the date when the financial statements are authorised for issue. Two types of events can be identified: those that provide evidence of conditions that existed at the reporting date (adjusting events after the reporting date); and Those that are indicative of conditions that arose after the reporting date (non-adjusting events after the reporting date).
The Legislature adjusts the amount recognised in the financial statements to reflect adjusting events after the reporting date once the event occurred.
The Legislature discloses the nature of the event and an estimate of its financial effect or a statement that such estimate cannot be made in respect of all material non-adjusting events, where non-disclosure could influence the economic decisions of users taken on the basis of the financial statements.
2. New standards and interpretations
2.1 Standards and interpretations effective and adopted in the current year
In the current year, the entity has adopted the following standards and interpretations that are effective for the current financial year and that are relevant to its operations:
GRAP 108: Statutory Receivables
The objective of this Standard is: to prescribe accounting requirements for the recognition, measurement, presentation and disclosure of statutory receivables.
It furthermore covers: Definitions, recognition, derecognition, measurement, presentation and disclosure, transitional provisions, as well as the effective date.
The effective date of the standard is not yet set by the Minister of Finance.
The entity expects to adopt the standard for the first time when the Minister sets the effective date for the standard. It is unlikely that the standard will have a material impact on the entity's annual financial statements.
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Accounting Policies Accounting Policies 1.22 Budget information (continued)
The annual financial statements and the budget are not on the same basis of accounting. The actual financial statement information is therefore presented on a comparable basis to the budget information. The comparison and reconciliation between 2.2 Standards and interpretations issued, but not yet effective (continued) the statement of financial performance and the budget for the reporting period have been included in the Statement of comparison of budget and actual amounts. The entity has not applied the following standards and interpretations, which have been published and are mandatory for the Entity’s accounting periods beginning on or after April 01, 2018 or later periods: 1.23 Related parties GRAP 20: Related parties A related party is a person or an entity with the ability to control or jointly control the other party, or exercise significant influence over the other party, or vice versa, or an entity that is subject to common control, or joint control. The objective of this standard is to ensure that a reporting entity’s annual financial statements contain the disclosures necessary to draw attention to the possibility that its financial position and surplus or deficit may have been affected by the existence of Management are those persons responsible for planning, directing and controlling the activities of the Legislature, including related parties and by transactions and outstanding balances with such parties. those charged with the governance of the Legislature in accordance with legislation, in instances where they are required to perform such functions. An entity that prepares and presents financial statements under the accrual basis of accounting (in this standard referred to as the reporting entity) shall apply this standard in: Close members of the family of a person are considered to be those family members who may be expected to influence, or identifying related party relationships and transactions; be influenced by, that management in their dealings with the Legislature. identifying outstanding balances, including commitments, between an entity and its related parties; identifying the circumstances in which disclosure of the items in (a) and (b) is required; and Only transactions with related parties not at arm’s length or not in the ordinary course of business are disclosed. determining the disclosures to be made about those items.
1.24 Events after reporting date This standard requires disclosure of related party relationships, transactions and outstanding balances, including commitments, in the consolidated and separate financial statements of the reporting entity in accordance with the Standard of GRAP on Events after reporting date are those events, both favourable and unfavourable, that occur between the reporting date and Consolidated and Separate Financial Statements. This standard also applies to individual annual financial statements. the date when the financial statements are authorised for issue. Two types of events can be identified: those that provide evidence of conditions that existed at the reporting date (adjusting events after the reporting Disclosure of related party transactions, outstanding balances, including commitments, and relationships with related parties date); and may affect users’ assessments of the financial position and performance of the reporting entity and its ability to deliver agreed Those that are indicative of conditions that arose after the reporting date (non-adjusting events after the reporting services, including assessments of the risks and opportunities facing the entity. This disclosure also ensures that the reporting date). entity is transparent about its dealings with related parties.
The Legislature adjusts the amount recognised in the financial statements to reflect adjusting events after the reporting date The standard states that a related party is a person or an entity with the ability to control or jointly control the other party, or once the event occurred. exercise significant influence over the other party, or vice versa, or an entity that is subject to common control, or joint control. As a minimum, the following are regarded as related parties of the reporting entity: The Legislature discloses the nature of the event and an estimate of its financial effect or a statement that such estimate cannot A person or a close member of that person’s family is related to the reporting entity if that person: be made in respect of all material non-adjusting events, where non-disclosure could influence the economic decisions of users - has control or joint control over the reporting entity; taken on the basis of the financial statements. - has significant influence over the reporting entity; - is a member of the management of the entity or its controlling entity. 2. New standards and interpretations An entity is related to the reporting entity if any of the following conditions apply: - the entity is a member of the same economic entity (which means that each controlling entity, controlled 2.1 Standards and interpretations effective and adopted in the current year entity and fellow controlled entity is related to the others); - one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of In the current year, the entity has adopted the following standards and interpretations that are effective for the current an economic entity of which the other entity is a member); financial year and that are relevant to its operations: - both entities are joint ventures of the same third party; - one entity is a joint venture of a third entity and the other entity is an associate of the third entity; - the entity is a post-employment benefit plan for the benefit of employees of either the entity or an entity GRAP 108: Statutory Receivables related to the entity. If the reporting entity is itself such a plan, the sponsoring employers are related to the entity; - the entity is controlled or jointly controlled by a person identified in (a); and - a person identified in (a)(i) has significant influence over that entity or is a member of the management of The objective of this Standard is: to prescribe accounting requirements for the recognition, measurement, presentation and that entity (or its controlling entity). disclosure of statutory receivables. The standard furthermore states that related party transaction is a transfer of resources, services or obligations between the It furthermore covers: Definitions, recognition, derecognition, measurement, presentation and disclosure, transitional provisions, reporting entity and a related party, regardless of whether a price is charged. as well as the effective date. The standard elaborates on the definitions and identification of: The effective date of the standard is not yet set by the Minister of Finance. Close member of the family of a person; Management; The entity expects to adopt the standard for the first time when the Minister sets the effective date for the standard. It Related parties; Remuneration; and is unlikely that the standard will have a material impact on the entity's annual financial statements. Significant influence
The standard sets out the requirements, inter alia, for the disclosure of: Control; Related party transactions; and Remuneration of management
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Accounting Policies
2.2 Standards and interpretations issued, but not yet effective (continued)
The effective date of the standard is not yet set by the Minister of Finance.
The entity expects to adopt the standard for the first time when the Minister sets the effective date for the standard. It is unlikely that the standard will have a material impact on the entity's annual financial statements.
GRAP 109: Accounting by Principals and Agents
The objective of this Standard is to outline principles to be used by an entity to assess whether it is party to a principal-agent arrangement, and whether it is a principal or an agent in undertaking transactions in terms of such an arrangement. The Standard does not introduce new recognition or measurement requirements for revenue, expenses, assets and/or liabilities that result from principal-agent arrangements. The Standard does however provide guidance on whether revenue, expenses, assets and/or liabilities should be recognised by an agent or a principal, as well as prescribe what information should be disclosed when an entity is a principal or an agent.
It furthermore covers Definitions, Identifying whether an entity is a principal or agent, and Accounting by a principal or agent, Presentation, Disclosure, Transitional provisions and Effective date.
The effective date of the standard is not yet set by the Minister of Finance.
The entity expects to adopt the standard for the first time when the Minister sets the effective date for the standard. It is unlikely that the standard will have a material impact on the entity's annual financial statements.
GRAP 18: Segment Reporting
Segments are identified by the way in which information is reported to management, both for purposes of assessing performance and making decisions about how future resources will be allocated to the various activities undertaken by the entity. The major classifications of activities identified in budget documentation will usually reflect the segments for which an entity reports information to management.
Segment information is either presented based on service or geographical segments. Service segments relate to a distinguishable component of an entity that provides specific outputs or achieves particular operating objectives that are in line with the entity’s overall mission. Geographical segments relate to specific outputs generated, or particular objectives achieved, by an entity within a particular region.
This Standard has been approved by the Board but its effective date has not yet been determined by the Minister of Finance. The effective date indicated is a provisional date and could change depending on the decision of the Minister of Finance.
Directive 2 - Transitional provisions for public entities, municipal entities and constitutional institutions, states that no comparative segment information need to be presented on initial adoption of this Standard.
Directive 3 - Transitional provisions for high capacity municipalities states that no comparative segment information need to be presented on initial adoption of the Standard. Where items have no been recognised as a result of transitional provisions under the Standard of GRAP on Property, Plant and Equipment, recognition requirements of this Standard would not apply to such items until the transitional provision in that Standard expires.
Directive 4 – Transitional provisions for medium and low capacity municipalities states that no comparative segment information need to be presented on initial adoption of the Standard. Where items have not been recognised as a result of transitional provisions un the Standard of GRAP on Property, Plant and Equipment and the Standard of GRAP on Agriculture, the recognition requirements of the Standard would not apply to such items until the transitional provision in that standard expires.
The effective date of the standard is not yet set by the Minister of Finance.
The entity expects to adopt the standard for the first time when the Minister sets the effective date for the standard. It is unlikely that the standard will have a material impact on the entity's annual financial statements.
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Accounting Policies Accounting Policies 2.2 Standards and interpretations issued, but not yet effective (continued
2.2 Standards and interpretations issued, but not yet effective (continued) GRAP 105: Transfers of functions between entities under common control
The effective date of the standard is not yet set by the Minister of Finance. The objective of this Standard is to establish accounting principles for the acquirer and transferor in a transfer of functions between entities under common control. It requires an acquirer and a transferor that prepares and presents financial statements The entity expects to adopt the standard for the first time when the Minister sets the effective date for the standard. It under the accrual basis of accounting to apply this Standard to a transaction or event that meets the definition of a transfer of is unlikely that the standard will have a material impact on the entity's annual financial statements. functions. It includes a diagram and requires that entities consider the diagram in determining whether this Standard should be applied in accounting for a transaction or event that involves a transfer of functions or merger. GRAP 109: Accounting by Principals and Agents It furthermore covers Definitions, Identifying the acquirer and transferor, Determining the transfer date, Assets acquired or The objective of this Standard is to outline principles to be used by an entity to assess whether it is party to a principal-agent transferred and liabilities assumed or relinquished, Accounting by the acquirer and transferor, Disclosure, Transitional provisions arrangement, and whether it is a principal or an agent in undertaking transactions in terms of such an arrangement. The Standard as well as the Effective date of the standard. does not introduce new recognition or measurement requirements for revenue, expenses, assets and/or liabilities that result from principal-agent arrangements. The Standard does however provide guidance on whether revenue, expenses, assets and/or The effective date of the standard is for years beginning on or after April 01, 2019. liabilities should be recognised by an agent or a principal, as well as prescribe what information should be disclosed when an entity is a principal or an agent. The entity expects to adopt the standard for the first time in the 2020 annual financial statements.
It furthermore covers Definitions, Identifying whether an entity is a principal or agent, and Accounting by a principal or agent, It is unlikely that the amendment will have a material impact on the entity's annual financial statements. Presentation, Disclosure, Transitional provisions and Effective date. GRAP 106: Transfers of functions between entities not under common control The effective date of the standard is not yet set by the Minister of Finance. The objective of this Standard is to establish accounting principles for the acquirer in a transfer of functions between entities not The entity expects to adopt the standard for the first time when the Minister sets the effective date for the standard. It under common control. It requires an entity that prepares and presents financial statements under the accrual basis of accounting to apply this Standard to a transaction or other event that meets the definition of a transfer of functions. It includes a diagram is unlikely that the standard will have a material impact on the entity's annual financial statements. and requires that entities consider the diagram in determining whether this Standard should be applied in accounting for a transaction or event that involves a transfer of functions or merger. GRAP 18: Segment Reporting It furthermore covers Definitions, Identifying a transfer of functions between entities not under common control, The acquisition Segments are identified by the way in which information is reported to management, both for purposes of assessing performance method, Recognising and measuring the difference between the assets acquired and liabilities assumed and the consideration and making decisions about how future resources will be allocated to the various activities undertaken by the entity. The major transferred, Measurement period, Determining what is part of a transfer of functions, Subsequent measurement and accounting, classifications of activities identified in budget documentation will usually reflect the segments for which an entity reports Disclosure, Transitional provisions as well as the Effective date of the standard. information to management. The effective date of the standard is for years beginning on or after April 01, 2019. Segment information is either presented based on service or geographical segments. Service segments relate to a distinguishable component of an entity that provides specific outputs or achieves particular operating objectives that are in line The entity expects to adopt the standard for the first time in the 2020 annual financial statements. with the entity’s overall mission. Geographical segments relate to specific outputs generated, or particular objectives achieved, by an entity within a particular region. It is unlikely that the amendment will have a material impact on the entity's annual financial statements.
This Standard has been approved by the Board but its effective date has not yet been determined by the Minister of Finance. GRAP 107: Mergers The effective date indicated is a provisional date and could change depending on the decision of the Minister of Finance. The objective of this Standard is to establish accounting principles for the acquirer in a transfer of functions between entities not Directive 2 - Transitional provisions for public entities, municipal entities and constitutional institutions, states that no under common control. It requires an entity that prepares and presents financial statements under the accrual basis of accounting comparative segment information need to be presented on initial adoption of this Standard. to apply this Standard to a transaction or other event that meets the definition of a transfer of functions. It includes a diagram and requires that entities consider the diagram in determining whether this Standard should be applied in accounting for a transaction or event that involves a transfer of functions or merger. Directive 3 - Transitional provisions for high capacity municipalities states that no comparative segment information need to be presented on initial adoption of the Standard. Where items have no been recognised as a result of transitional provisions under the Standard of GRAP on Property, Plant and Equipment, recognition requirements of this Standard would not apply to such It furthermore covers Definitions, Identifying a transfer of functions between entities not under common control, The acquisition items until the transitional provision in that Standard expires. method, Recognising and measuring the difference between the assets acquired and liabilities assumed and the consideration transferred, Measurement period, Determining what is part of a transfer of functions, Subsequent measurement and accounting, Directive 4 – Transitional provisions for medium and low capacity municipalities states that no comparative segment information Disclosure, Transitional provisions as well as the Effective date of the standard. need to be presented on initial adoption of the Standard. Where items have not been recognised as a result of transitional provisions un the Standard of GRAP on Property, Plant and Equipment and the Standard of GRAP on Agriculture, the recognition The effective date of the standard is for years beginning on or after April 01, 2019. requirements of the Standard would not apply to such items until the transitional provision in that standard expires. The entity expects to adopt the standard for the first time in the 2020 annual financial statements. The effective date of the standard is not yet set by the Minister of Finance. It is unlikely that the amendment will have a material impact on the entity's annual financial statements. The entity expects to adopt the standard for the first time when the Minister sets the effective date for the standard. It is unlikely that the standard will have a material impact on the entity's annual financial statements.
25 26 Free State Legislature Annual Report 2017/18 103 Free State Legislature Vote 2 Annual Financial Statements for the year ended 31 March 2018 Notes to the Financial Statements
2018 2017 Figures in Rand R R
3. Cash and cash equivalents
Cash and cash equivalents consist of:
Cash on hand 7,053 1,732 Bank balances 10,159,684 8,661,118 FNB Investment 7,309,721 6,861,649 17,476,458 15,524,499
Credit quality of cash at bank and short term deposits, excluding cash on hand
The credit quality of cash at bank and short term deposits, excluding cash on hand that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or historical information about counterparty default rates:
Account number/ Description Bank Statement Balances Cashbook Balances
31/03/2018 31/03/2017 31/03/2016 31/03/2018 31/03/2017 31/03/2016 FNB BANK-Corporate 10,159,684 8,661,118 155,615 10,159,684 8,661,118 155,615 Cheque Account - 62113191796 FNB BANK-Call 7,309,721 6,861,649 6,765,977 7,309,720 6,861,649 6,765,977 Account-62345381248 Petty Cash - - - 7,054 1,732 6,501 Subtotal 17,469,405 15,522,767 6,921,592 17,476,458 15,524,499 6,928,093 17,469,405 15,522,767 6,921,592 17,476,458 15,524,499 6,928,093
4. Receivables from exchange transactions
Employee costs in advance - 23,503 Staff debt 72,039 54,734 72,039 78,237
Credit quality receivables from exchange transactions
The credit quality of receivables that are neither past nor due nor impaired can be assessed by reference to external credit ratings (if available) or historical information about counterparty default rates.
Receivables from exchange transactions impaired from exchange transactions
The ageing of the impairment is as follows:
Over 6 months 70,581 52,585
Reconciliation of provision for impairment for receivables from exchange transaction
Opening balance (52,585) (52,571) (17,996) Unused amounts reversed - (14) Unwinding of discount - (70,581) (52,585)
5. Receivables from non-exchange transactions
Recoverable expenditure 58,000 107,441 27 104 Free State Legislature Free State Legislature Vote 2 Annual Financial Statements for the year ended 31 March 2018 Vote 2 Notes to the Financial Statements Annual Financial Statements for the year ended 31 March 2018 Notes to the Financial Statements Figures in Rand 2018 2017 R R
2018 2017 5. Receivables from non-exchange transactions (continued) Figures in Rand R R Credit quality of receivables from non-exchange transactions 3. Cash and cash equivalents The credit quality of other receivables from non-exchange transactions are neither past due nor due. None Cash and cash equivalents consist of: of the financial assets that are fully performing have been renegotiated in the last year. Cash on hand 7,053 1,732 Bank balances 10,159,684 8,661,118 Receivables from non-exchange transactions impaired FNB Investment 7,309,721 6,861,649 The ageing of these receivables are as follows: 17,476,458 15,524,499 Over 6 months 57,670 201,873 Credit quality of cash at bank and short term deposits, excluding cash on hand Reconciliation of allowance for impairment The credit quality of cash at bank and short term deposits, excluding cash on hand that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or historical information about counterparty default rates: Opening balance - 201,873 Provision for impairment 57,670 (201,873) Account number/ Description Bank Statement Balances Cashbook Balances 57,670 - 31/03/2018 31/03/2017 31/03/2016 31/03/2018 31/03/2017 31/03/2016 FNB BANK-Corporate 10,159,684 8,661,118 155,615 10,159,684 8,661,118 155,615 6. Prepayments Cheque Account - 62113191796 Travel and subsistence FNB BANK-Call 7,309,721 6,861,649 6,765,977 7,309,720 6,861,649 6,765,977 At the beginning of the year 18,256 47,516 Account-62345381248 Advance 10,622 18,256 Petty Cash - - - 7,054 1,732 6,501 Repayments (18,256) (47,516) Political Party advance payment 1,913 - Subtotal 17,469,405 15,522,767 6,921,592 17,476,458 15,524,499 6,928,093 12,535 18,256 17,469,405 15,522,767 6,921,592 17,476,458 15,524,499 6,928,093 7. Inventories
Consumables 245,907 205,066 4. Receivables from exchange transactions Inventories (write -downs) - (9,566) Employee costs in advance - 23,503 245,907 195,501 Staff debt 72,039 54,734 72,039 78,237 245,907 195,501
Credit quality receivables from exchange transactions Inventories recognized as an expense during the year 605,741 547,501
The credit quality of receivables that are neither past nor due nor impaired can be assessed by reference to external credit Inventory pledged as security ratings (if available) or historical information about counterparty default rates. None of the inventories were pledged as security. Receivables from exchange transactions impaired from exchange transactions
The ageing of the impairment is as follows:
Over 6 months 70,581 52,585
Reconciliation of provision for impairment for receivables from exchange transaction
Opening balance (52,585) (52,571) Unused amounts reversed (17,996) - (14) Unwinding of discount - (70,581) (52,585)
5. Receivables from non-exchange transactions
Recoverable expenditure 58,000 107,441 27 28 Free State Legislature Annual Report 2017/18 105 Free State Legislature
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Annual Financial Statements for the year ended 31 March 2018 Notes to the Financial Statements
8. Property, plant and equipment
2018 2017 Cost / Valuation Accumulated Carrying value Cost / Accumulated Carrying value depreciation Valuation depreciation and and accumulated accumulated impairment impairment Furniture and fixtures 6,069,332 (3,542,909) 2,526,423 5,939,124 (2,346,614) 3,592,510 IT equipment 2,771,852 (942,612) 1,829,240 2,433,042 (268,234) 2,164,807 Motor vehicles 6,877,980 (2,814,677) 4,063,303 6,442,551 (2,358,085) 4,088,671 Office equipment 3,814,215 (1,918,597) 1,895,618 3,409,750 (1,244,782) 2,164,968 Total 19,533,379 (9,218,795) 10,314,584 18,228,671 (6,217,715) 12,010,956
Reconciliation of property, plant and equipment - 2018
Opening Additions Disposals Other changes, Depreciation Total balance movements Furniture and fixtures 3,592,510 130,208 (772) - (1,195,523) 2,526,423 IT equipment 2,164,807 377,270 (38,460) - (674,377) 1,829,240 Motor vehicles 4,088,671 1,610,870 (1,198,901) 965,907 (1,403,244) 4,063,303 Office equipment 2,164,968 497,692 (10,328) - (756,714) 1,895,618 12,010,956 2,616,040 (1,248,461) 965,907 (4,029,858) 10,314,584
Reconciliation of property, plant and equipment - 2017
Opening Additions Disposals Depreciation Total balance Furniture and fixtures 4,691,037 74,780 - (1,173,307) 3,592,510 IT equipment 2,565,716 231,884 (23,695) (609,098) 2,164,807 Motor vehicles 2,535,127 2,732,586 (1,179,042) 4,088,671 Office equipment 2,765,144 27,041 (4,832) (622,385) 2,164,968 12,557,024 3,066,291 (28,527) (3,583,832) 12,010,956
Pledged as security
None of the above property, plant and equipment have been pledged as security.
Depreciation rates Item Depreciation method Average useful life
Furniture and fixtures Straight line 10 years Motor vehicles Straight line 5 years Office equipment Straight line 5 years IT equipment Straight line 3-5 years Computer software Straight line 5 years
A register containing the information required by section 30 of the FMPPLA is available for inspection at the registered office of the Legislature.
29 106 Free State Legislature Free State Legislature Vote 2 Vote 2 Annual Financial Statements for the year ended 31 March 2018 Annual Financial Statements for the year ended 31 March 2018 Notes to the Financial Statements Notes to the Financial Statements
8. Property, plant and equipment 9. Intangible assets 2018 2017 Cost / Valuation Accumulated Carrying value Cost / Accumulated Carrying value 2018 2017 depreciation Valuation depreciation Cost / Accumulated Carrying value Cost / Accumulated Carrying value and and Valuation amortisation Valuation amortisation accumulated accumulated and accumulated impairment and impairment impairment accumulated Furniture and fixtures 6,069,332 (3,542,909) 2,526,423 5,939,124 (2,346,614) 3,592,510 impairment IT equipment 2,771,852 (942,612) 1,829,240 2,433,042 (268,234) 2,164,807 Computer software, 1,709,959 (861,456) 848,503 1,728,939 (638,436) 1,090,503 Motor vehicles 6,877,980 (2,814,677) 4,063,303 6,442,551 (2,358,085) 4,088,671 Total 1,709,959 (861,456) 848,503 1,728,939 (638,436) 1,090,503 Office equipment 3,814,215 (1,918,597) 1,895,618 3,409,750 (1,244,782) 2,164,968 Total 19,533,379 (9,218,795) 10,314,584 18,228,671 (6,217,715) 12,010,956 Reconciliation -2018 Reconciliation of property, plant and equipment - 2018 Opening Balance Additions Disposals Amortisation Total Opening Additions Disposals Other changes, Depreciation Total balance movements Computer software 1,090,503 390,394 (264,780) (367,614) 848,503 Furniture and fixtures 3,592,510 130,208 (772)- (1,195,523) 2,526,423 IT equipment 2,164,807 377,270 (38,460) - (674,377) 1,829,240 Reconciliation 2017 Motor vehicles 4,088,671 1,610,870 (1,198,901) 965,907 (1,403,244) 4,063,303 Office equipment 2,164,968 497,692 (10,328) - (756,714) 1,895,618 Opening Additions Disposals Amortisation Total 12,010,956 2,616,040 (1,248,461) 965,907 (4,029,858) 10,314,584 balance Computer software 1,317,621 94,952 (2,852) (319,218) 1,090,503 Reconciliation of property, plant and equipment - 2017
Opening Additions Disposals Depreciation Total Pledged as security balance Furniture and fixtures 4,691,037 74,780 - (1,173,307) 3,592,510 None of the above intangible assets have been pledged as security. IT equipment 2,565,716 231,884 (23,695) (609,098) 2,164,807 Motor vehicles 2,535,127 2,732,586 (1,179,042) 4,088,671 A register containing the information required by section 30 of the FMPPLA is available for inspection at the registered office of Office equipment 2,765,144 27,041 (4,832) (622,385) 2,164,968 the Legislature. 12,557,024 3,066,291 (28,527) (3,583,832) 12,010,956 10. Heritage Assets Pledged as security 2018 2017 Cost/Valu Accumulated Carrying value Cost/Valuation Accumulated Carrying Value None of the above property, plant and equipment have been pledged as security. ation impairment Impairment Losses losses Depreciation rates Antiques 3,472,605 - 3,472,605 3,472,605 - 3,472,605 Item Depreciation method Average useful life
Furniture and fixtures Straight line 10 years Motor vehicles Straight line 5 years Reconciliation 2018 Opening Balance Total Office equipment Straight line 5 years Antiques at Fourth Raadsaal 3,472,605 3,472,605 IT equipment Straight line 3-5 years Computer software Straight line 5 years Reconciliation 2017
Opening Balance Total Antiques at Fourth Raadsaal 3,472,605 3,472,605 A register containing the information required by section 30 of the FMPPLA is available for inspection at the registered office of the Legislature.
Pledged as security None of the above intangible assets have been pledged as security.
30 29 Free State Legislature Annual Report 2017/18 107 Free State Legislature
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Annual Financial Statements for the year ended 31 March 2018 Notes to the Financial Statements 2018 2017 Figures in Rand R R
11. Payables from exchange transactions
Trade payables 1,966,848 3,821,083 Accrued bonus provision 2,634,946 2,124,220 Accrued leave pay 4,306,878 3,746,884 Accrued payroll expense 4,721,806 4,143,017 Long service leave accrual 915,781 1,573,757 Salary suspense 1,600 1,600 Social club 69,701 27,301 Sport club 139,832 77,132 Unallocated Deposits 36,259 35,794 14,793,651 15,550,788
12. Operating lease liability
Current liabilities 4,334,376 155,090
The Free State Legislature’s significant operating lease arrangements include: - Rental of the Southern Life Plaza from ROBS Properties; - Rental of office space for the National Council of Provinces (NCOP) employees from MOWANA ; - Operating leases of the buildings were straight lined over the lease term.
The total of the lease liability of R4, 334,371 is the difference between the actual amount and the straight lined amount.
MOVEMENT IN LEASE LIABILITY IN THE FOLLOWING 2017 2016 (4,346,860) 155,090 FINANCIAL YEAR MOVEMENT IN LEASE LIABILITY AFTER ONE YEAR 8,681,232 - 4,334,372 155,090
13. Employee benefit obligations
The Legislature only performs one actuarial valuation for employee benefits per annum. It is not regarded as a cost effective business process to obtain two actuarial valuations per annum as the difference in assumptions and valuation techniques are not expected to differ materially in a six month period since the previous valuation.
31 108 Free State Legislature Free State Legislature
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Annual Financial Statements for the year ended 31 March 2018 Annual Financial Statements for the year ended 31 March 2018 Notes to the Financial Statements Notes to the Financial Statements 2018 2017 2018 2017 Figures in Rand R R Figures in Rand R R
13. Employee benefit obligations (continued) 11. Payables from exchange transactions The amounts recognised in the statement of financial position are as follows: Trade payables 1,966,848 3,821,083 Carrying value Accrued bonus provision 2,634,946 2,124,220 Present value of the defined (13,140,000) (13,621,000) Accrued leave pay 4,306,878 3,746,884 Present value of the defined benefit obligation-partly or wholly funded (3,216,000) 481,000 Accrued payroll expense 4,721,806 4,143,017 Long service leave accrual 915,781 1,573,757 (16,356,000) (13,140,000) Salary suspense 1,600 1,600 Social club 69,701 27,301 Non-current liabilities: Employee benefit obligation (15,430,000) (12,342,000) Sport club 139,832 77,132 Current liabilities: Employee benefit obligation (926,000) (798,000) Unallocated Deposits 36,259 35,794 (16,356,000) (13,140,000) 14,793,651 15,550,788
Changes in the present value of the employee benefit obligation are as follows: 12. Operating lease liability Opening balance 13,140,000 13,621,000 Current liabilities 4,334,376 155,090 Other 2,793,000 (481,000) 15,933,000 13,140,000 The Free State Legislature’s significant operating lease arrangements include: - Rental of the Southern Life Plaza from ROBS Properties; - Rental of office space for the National Council of Provinces (NCOP) employees from MOWANA ; Net expense recognised in the statement of financial performance - Operating leases of the buildings were straight lined over the lease term. Current service cost 1,380,000 936,000 Interest Cost 1,124,000 1,165,000 The total of the lease liability of R4, 334,371 is the difference between the actual amount and the straight lined amount. Acturial (gains)/loss 1,510,000 (1,823,000) Expected Payments (797,000) (759,000) 3,217,000 (481,000)
Key assumptions used
Assumptions used at the reporting date: MOVEMENT IN LEASE LIABILITY IN THE FOLLOWING 2017 2016 (4,346,860) 155,090 Pre-retirement mortality: Males and females: SA85-90 (light) FINANCIAL YEAR MOVEMENT IN LEASE LIABILITY AFTER ONE YEAR 8,681,232 - Discount rate used 7.51 % 8.30 % Price Inflation 4.98 % 5.17 % 4,334,372 155,090 Salary Inflation 5.98 % 6.17 % Withdrawal age 20 15.00 % 15.00 % Withdrawal age 25 10.00 % 7.00 % Withdrawal age 35 4.00 % 4.00 % 13. Employee benefit obligations Withdrawal age 40 2.00 % 2.00 % Proportion of employees opting for early retirement - % 4.00 % Expected increase in healthcare costs - % 2.00 % The Legislature only performs one actuarial valuation for employee benefits per annum. It is not regarded as a cost effective business process to obtain two actuarial valuations per annum as the difference in assumptions and valuation techniques are Future changes in maximum state healthcare benefits - % - % not expected to differ materially in a six month period since the previous valuation. Summary of membership data Number of Males 65 68 Number Females 61 61 Average age of males 45 44 Average age of females 45 43 Average past service cost of males 10 10 Average past service cost for females 11 11 Total Monthly salaries males 32,419,859 27,293,000 Total monthly salaries females 25,370,085 20,381,000
31 32 Free State Legislature Annual Report 2017/18 109 Free State Legislature
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Annual Financial Statements for the year ended 31 March 2018 Notes to the Financial Statements Employee benefit obligations
Other assumptions The defined benefit obligation is particularly sensitive to the financial assumption. In the following table we have illustrated the sensitivity of the defined benefit obligation to changes in the discount rate and salary inflation assumptions as at 31 March 2018.` One percentage One point increase percentage point - decrease Effect on the aggregate of the service cost and interest cost 12,909,000 Effect on defined benefit obligation - 13,933,000
14. Debt impairment
Receivables - allowance for impairment movement 75,666 70,612
15. Sale of Goods Sales of goods and services 1,429,169 75,813 Sundry 127,750 70,318 1,556,919 146,131
16. Investment revenue Interest revenue Bank 1,157,504 1,000,361
17. Government grants and subsidies Operating grants Annual appropriation 208,394,000 203,803,000 Statutory appropriation 23,725,000 22,733,344 232,118,537 226,536,344
Statutory appropriation Balance unspent at beginning of year 1,695,656 1,695,656
Current-year receipts 25,650,179 9,968,719
Conditions met - transferred to revenue (23,724,716) (9,968,719)
TREAURY Direct Refund (1,695,656) 1,925,463 1,695,656 18. Employee related costs
Accrual leave expense 559,994 466,361 Accrual service bonus 510,726 (63,058) Acting allowances 6,172 13,509 Basic 60,705,011 56,508,760 Bonus 5,306,251 4,794,064 Car allowance 3,839,142 3,990,260 Cellphone allowances 657,603 664,173 Defined contribution plans 10,161,774 9,585,479 Head of department allowances 216,413 199,220 Housing benefits and allowances 3,604,273 3,383,602 Leave payments 2,906,718 2,744,393 Long-service awards paid (6,295) 233,267 Long-service leave expense 1,380,000 936,000 Medical aid – company contributions 3,857,475 3,544,752 33 110 Free State Legislature Free State Legislature
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Annual Financial Statements for the year ended 31 March 2018 Annual Financial Statements for the year ended 31 March 2018 Notes to the Financial Statements Notes to the Financial Statements 13. Employee benefit obligations (continued)
18. Employee related costs (continued) Other assumptions The defined benefit obligation is particularly sensitive to the financial assumption. In the following table we have illustrated the Gratuity 313,802 - sensitivity of the defined benefit obligation to changes in the discount rate and salary inflation assumptions as at 31 March 2018.` Non-Pensionable Allowance 492,353 - One percentage One Overtime payments 857,881 631,022 point increase percentage Unemployment insurance fund contribution 236,749 234,397 point Uniform allowance 19,000 15,330 - decrease Effect on the aggregate of the service cost and interest cost 12,909,000 95,625,042 87,881,531 Effect on defined benefit obligation - 13,933,000
14. Debt impairment 19. Member’s remuneration Receivables - allowance for impairment movement 75,666 70,612 Basic salary 11,949,858 11,369,132 Non-pensionable allowance 2,857,782 2,760,159 Car allowance 2,080,677 2,077,891 15. Sale of Goods POB allowance 2,280,000 2,270,000 Medical Allowance 1,354,682 1,183,336 Sales of goods and services 1,429,169 75,813 Political Pension Fund 3,201,718 3,074,180 Sundry 127,750 70,318 1,556,919 146,131 23,724,717 22,734,698 16. Investment revenue Interest revenue Remuneration of the Speaker Bank 1,157,504 1,000,361 Annual Remuneration 1,066,677 1,021,035 Car Allowance 447,188 434,101 Public Office Bearer Allowance 120,000 120,000 17. Government grants and subsidies Medical And Pension Fund 343,930 326,589 Operating grants 1,977,795 1,901,725 Annual appropriation 208,394,000 203,803,000 Statutory appropriation 23,725,000 22,733,344 Remuneration of the Secretary 232,118,537 226,536,344 Annual Remuneration 1,293,959 1,255,409 Car Allowance 408,496 309,974 HOD Allowance 216,413 194,127 Contributions UIF; Medical Provident Fund 261,805 29,758 Statutory appropriation Cellphone Allowance 28,200 29,758 Balance unspent at beginning of year 1,695,656 1,695,656 Housing Allowance 37,176 34,470 Bonus 107,664 100,433 Current-year receipts 25,650,179 9,968,719 2,353,713 1,953,929 Conditions met - transferred to revenue (23,724,716) (9,968,719) Remuneration of the Deputy Secretary TREAURY Direct Refund (1,695,656) Annual Remuneration 182,868 1,205,193 Car Allowance 48,706 360,054 1,925,463 1,695,656 Contributions UIF; Medical Provident Fund 26,939 239,968 18. Employee related costs Cellphone Allowance 4,100 24,600 Housing Allowance 6,196 34,680 Accrual leave expense 559,994 466,361 Bonus - 100,433 Accrual service bonus 510,726 (63,058) Acting Allowance 6,172 - Acting allowances 6,172 13,509 Basic 60,705,011 56,508,760 274,981 1,964,928 Bonus 5,306,251 4,794,064 Car allowance 3,839,142 3,990,260 Remuneration the Chief Financial Officer Cellphone allowances 657,603 664,173 Annual Remuneration 1,291,968 1,205,193 Defined contribution plans 10,161,774 9,585,479 Car Allowance 385,978 360,054 Head of department allowances 216,413 199,220 Contribution UIF; Medical Provident Fund 264,649 247,108 Housing benefits and allowances 3,604,273 3,383,602 Cellphone Allowance 24,600 24,600 Leave payments 2,906,718 2,744,393 Housing Allowance 36,552 34,680 Long-service awards paid (6,295) 233,267 Bonus 107,664 100,433 Long-service leave expense 1,380,000 936,000 Medical aid – company contributions 3,857,475 3,544,752 2,111,411 1,972,068 33 34 Free State Legislature Annual Report 2017/18 111 Free State Legislature
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Annual Financial Statements for the year ended 31 March 2018 Notes to the Financial Statements
20. Transfers and subsidies
Political Party Fund 29,917,430 29,610,472 Constituent Allowances 12,775,241 12,029,760 Office Allowance 15,161,140 13,418,244 Study Allowance 225,122 212,000 Research Allowance 3,053,250 2,875,522 61,132,183 58,145,998
21. Finance lease payments
The Legislature is not required to recognise finance lease assets / liabilities in their financial statements in relation to those assets that have not been measured as a result of applying the transitional provision as per Directive 8.
However the disclosure requirements included in the standard of GRAP 13 insofar these assets / liabilities have been identified are required. Refer to note 27 - Lease commitments, for the disclosure of the finance lease.
Details of Finance lease commitments:
The Free State Legislature’s finance leases include: - Leasing of cell phones from Vodacom and Nashua Mobile. - After the contract expires, the cell phones become the property of the Free State Legislature. - There is no escalation clause in the contract and the duration of the contract is 2 years.
22. Finance costs
Interest cost - Employee benefit obligation 1,124,000 1,165,000
23. General expenses
Advertising 954,805 1,495,463 Assets expensed 272,738 346,500 Auditors remuneration 4,700,563 3,895,228 Bank charges 109,100 79,953 Catering 1,943,050 1,654,748 Cleaning 3,358 1,370 Communications 1,041,580 1,149,610 Computer expenses 67,032 1,191 Conferences and seminars - 1,783 Consulting and professional fees 3,563,523 5,626,058 Consumables 2,582,226 1,921,207 Performers & Artists 402 351,870 Maintenance and Repairs 5,236 3,069 Flowers 11,343 2,084 Fuel and oil 220 1,500 Legislature events 252,732 907,919 Maintenance cost 223,118 249,013 Printing and publications 9,048 15,259 Members Transfer Cost Protective clothing 98,444 13,560 Reallocation cost - 36,220 Rental: equipment and facilities 529,686 588,072 License and Subscription 95,586 105,007 Study aid 415,478 785,616 Subscriptions and membership fees 1,491,593 1,675,229 Telephone and fax 862,702 912,937 Training 376,242 48,686 Transport and freight 345,736 731,826 19,955,541 22,600,978 35 112 Free State Legislature Free State Legislature
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Annual Financial Statements for the year ended 31 March 2018 Annual Financial Statements for the year ended 31 March 2018 Notes to the Financial Statements Notes to the Financial Statements
2018 2017 Figures in Rand R R
20. Transfers and subsidies
Political Party Fund 29,917,430 29,610,472 24. Cash generated from operations Constituent Allowances 12,775,241 12,029,760 (6,934,782) 5,810,738 Office Allowance 15,161,140 13,418,244 (Deficit) surplus Study Allowance 225,122 212,000 Adjustments for: Depreciation and amortisation Research Allowance 3,053,250 2,875,522 4,389,329 3,583,831 Profit/Loss assets 538,201 665,929 61,132,183 58,145,998 Post Retirement 3,216,000 (481,000) Finance Cost Movement 678,414 611,549 21. Finance lease payments Leave Pay Provision 559,994 466,361 Heritage Valuation 510,726 (63,060) The Legislature is not required to recognise finance lease assets / liabilities in their financial statements in relation to those Accrued Payroll 578,789 200,654 assets that have not been measured as a result of applying the transitional provision as per Directive 8. Long Service Leave (657,976) 581,491 Other non Cash (957,764) (522,319) However the disclosure requirements included in the standard of GRAP 13 insofar these assets / liabilities have been Debt Impairment 75,666 70,612 identified are required. Refer to note 27 - Lease commitments, for the disclosure of the finance lease. Movement Operating Lease & Accruals 4,179,281 (686,448)
Details of Finance lease commitments: Changes in working capital: Inventories (50,406) (48,331) The Free State Legislature’s finance leases include: Receivables from exchange transactions 6,198 (17,669) - Leasing of cell phones from Vodacom and Nashua Mobile. Debt Impairment (75,666) (70,612) - After the contract expires, the cell phones become the property of the Free State Legislature. Receivables: non-exchange transactions 49,441 760,362 - There is no escalation clause in the contract and the duration of the contract is 2 years. Prepayments and advances 5,721 29,258 Unspent conditional grant 229,806 1,695,656 22. Finance costs Trade Payables (1,748,672) 46,622 Payables: Transfers (502,350) Interest cost - Employee benefit obligation 1,124,000 1,165,000 Operating Leases 4,592,300 12,972,812 23. General expenses 25. Commitments Advertising 954,805 1,495,463 Assets expensed 272,738 346,500 Operating Leases Auditors remuneration 4,700,563 3,895,228 Within one year 12,466,168 10,962,782 Bank charges 109,100 79,953 Later than one year, but not later than 5 years 57,726,738 51,449,472 Catering 1,943,050 1,654,748 Later than five years 81,513,000 96,465,725 Cleaning 3,358 1,370 Communications 1,041,580 1,149,610 151,705,906 158,877,979 Computer expenses 67,032 1,191 Conferences and seminars - 1,783 Consulting and professional fees 3,563,523 5,626,058 Consumables 2,582,226 1,921,207 The Free State Legislature’s significant operating lease arrangements include: Performers & Artists 402 351,870 Maintenance and Repairs 5,236 3,069 - Rental of the Southern Life Plaza from ERIS Properties (termination date 31 May 2017) (previously) Flowers 11,343 2,084 - Rental of the Southern Life Plaza from Robbs Investment (currently) Fuel and oil 220 1,500 - Rental of office space for the National Council of Provinces (NCOP) employees from Mowana Legislature events 252,732 907,919 - Rental of printers and photocopy machines from Katlego Solutions (previously); and Maintenance cost 223,118 249,013 - Rental of printers and photocopy machines from Gerox (currently). Printing and publications 9,048 15,259 - Operating leases of the buildings were straight lined over the lease term. Members Transfer Cost - The escalation percentage for the rental agreement TRuzen is an average of 8% Protective clothing 98,444 13,560 - The lease term was for 3 years and expired in May 2017. Reallocation cost - 36,220 - The escalation percentage for the rental agreements with Robs of 8.5%. Rental: equipment and facilities 529,686 588,072 - The lease term is for 9 years 11 months and expires in 31 May 2027. License and Subscription 95,586 105,007 Study aid 415,478 785,616 A new contract is already in existence. Subscriptions and membership fees 1,491,593 1,675,229 . Telephone and fax 862,702 912,937 There is no escalation clause in the rental agreement with Gerox. The assets are not transferred to the Legislature after Training 376,242 48,686 expiry of the contract. There is an option for renewal. Transport and freight 345,736 731,826 19,955,541 22,600,978 35 36 Free State Legislature Annual Report 2017/18 113 Free State Legislature
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Annual Financial Statements for the year ended 31 March 2018 Notes to the Financial Statements
Finance leases
Minimum lease payments due - within one year - 36,055
The total future minimum sublease payment expected to be received under non-cancellable sublease - 36,055
Details of Finance lease commitments
The Free State Legislature’s finance leases include: - Leasing of cell phones from Vodacom and Nashua Mobile. - After the contract expires, the cell phones become the property of the Free State Legislature. - There is no escalation clause in the contract and the duration of the contracts are for 2 years.
26. Finance lease obligation
Minimum lease payments due - within one year 75,595 24,008 - in second to fifth year inclusive 32,785 9,300 108,380 33,308 less: future finance charges (7,981) (2,372) Present value of minimum lease payments 100,399 30,936
Present value of minimum lease payments due - within one year 69,107 22,100 - in second to fifth year inclusive 31,292 8,836 100,399 30,936
Non -current liabilities 31,292 8,836 Current liabilities 69,107 22,100 100,399 30,936
The Legislature leases certain equipment (cellphones) under finance leases. The average lease term is 2 years and the average effective borrowing rate was 10.25% (2017:10.25%) Interest rates are linked to Government’s borrowing rates.
27. Property Payments
Garden Services 95,982 69,976 Insurance 664,423 471,874 Municipal Services 4,084,190 4,512,672 Office Rent 15,593,679 10,278,854 20,438,274 15,333,376
37 114 Free State Legislature Free State Legislature
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Annual Financial Statements for the year ended 31 March 2018 Annual Financial Statements for the year ended 31 March 2018 Notes to the Financial Statements Notes to the Financial Statements 28. Budget Differences Finance leases
Minimum lease payments due - within one year - 36,055 Material differences between budget (cash basis) and actual amounts: 5% variance on Goods & Services can be attributed to the fact that there were changes in the Legislature’s Programme, as The total future minimum sublease payment expected to be received under budget votes were held during April 2018. non-cancellable sublease - 36,055 Payment of Capital Assets: Process in awarding tenders not finalized.
Details of Finance lease commitments 29. Financial instruments disclosure
The Free State Legislature’s finance leases include: Categories of financial instruments - Leasing of cell phones from Vodacom and Nashua Mobile. - After the contract expires, the cell phones become the property of the Free State Legislature. 2018 - There is no escalation clause in the contract and the duration of the contracts are for 2 years. Financial assets 26. Finance lease obligation At amortised Total Minimum lease payments due cost - within one year 75,595 24,008 Cash and cash equivalents 17,476,458 17,476,458 - in second to fifth year inclusive 32,785 9,300 Receivables from exchange transactions 72,039 72,039 108,380 33,308 Receivables from non-exchange transactions 58,000 58,000 less: future finance charges (7,981) (2,372) 17,606,497 17,606,497 Present value of minimum lease payments 100,399 30,936 Financial liabilities Present value of minimum lease payments due - within one year 69,107 22,100 At amortised - in second to fifth year inclusive 31,292 8,836 cost Total 100,399 30,936 Finance lease obligation 100,400100,400 100,400 Payables from exchange transactions 14793,651 14,793,651 Non-current liabilities 31,292 8,836 Unspent Conditional Grant 1,925,463 1,925,463 Current liabilities 69,107 22,100 16,819,514 16,819,514 100,399 30,936 2017
Financial assets
At amortised Total The Legislature leases certain equipment (cellphones) under finance leases. The average lease term is 2 years and the average cost effective borrowing rate was 10.25% (2017:10.25%) Interest rates are linked to Government’s borrowing rates. Cash and cash equivalents 15,524,499 15,524,499 Receivables from exchange transactions 78,237 78,237 Receivables from non-exchange transactions 107,441 107,441 27. Property Payments 15,710,177 15,710,177 Garden Services 95,982 69,976 Insurance 664,423 471,874 Financial liabilities Municipal Services 4,084,190 4,512,672 Office Rent 15,593,679 10,278,854 At amortised Total 20,438,274 15,333,376 cost Finance lease obligation 30,936 30,936 Payables from exchange transactions 15,550,788 15,550,788 Unspent conditional grants and receipts 1,695,656 1,695,656 17,277,382 17,277,382
37 38 Free State Legislature Annual Report 2017/18 115 Free State Legislature
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Annual Financial Statements for the year ended 31 March 2018 Notes to the Financial Statements 30. Donations Received
Donations Received - 257,597
31. Travel and Subsistence
Travel-Local 11,262,469 10,502,622 Travel Abroad 1,313,905 646,571 12,576,374 11,149,193
32. Auditors' remuneration
Fees 4,700,563 3,895,228
33.. Prior period errors
Below is a summary of the total effect that the prior period errors, changes in accounting policies and reclassifications of comparatives had on the amounts previously disclosed in the annual financial statements, followed by a description of each individual prior period error with the amounts involved.
Statement of Financial Performance Expenses Balance as previously Change in Prior Period Reclassified Total Reported Accounting Error Notes 34 Policy
Depreciation and - (3,583,831) - (3,583,831) - amortisation - Finance Lease 611,549 - - (611,549) 611,549 Operating Lease - - - 611,549 Interest Paid 1,165,000 - - (1,165,000) - Finance Cost - - 594,000 1,165,000 1,165,000 General expenses 22,570,043 30,935 - 22,600,978 24,346,592 (3,552,896) 594,000 - 21,387,696 Statement of Financial Position Non-Current assets Property, plant and 18,545,357 (6,534,401) - - 12,010,956 equipment Intangible Assets 1,462,087 (371,584) - - 1,090,503 Heritage assets 1,410 3,471,195 - - 3,472,605 20,008,854 (3,434,790) - 16,574,064
Statement of Financial Position (continued) Current liabilities Balance as previously Change in Prior Period Reclassified Total Reported Accounting Error Notes Policy Finance Lease Liability 22,100 - 22,100 - 0.00 22,100 - - 22,100
Non-Current liabilities Finance lease obligation - 8,836 - - 8,836 39 116 Free State Legislature Free State Legislature
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Annual Financial Statements for the year ended 31 March 2018 Annual Financial Statements for the year ended 31 March 2018 Notes to the Financial Statements Notes to the Financial Statements 30. Donations Received
34. Comparative figures
Donations Received - 257,597 Certain comparative figures have been reclassified.
31. Travel and Subsistence Finance leases as disclosed in the 2016-17 Performance Statement, corrected to Operating Leases. Interest paid renamed to Finance Cost. Travel-Local 11,262,469 10,502,622 Travel Abroad 1,313,905 646,571
12,576,374 11,149,193 35. Risk management Financial 32. Auditors' remuneration risk management
Fees 4,700,563 3,895,228 The Legislature’s activities expose it to a variety of financial risks: credit risk and liquidity risk and market risk.
Liquidity risk 33.. Prior period errors The Legislature’s risk to liquidity is a result of the funds available to cover future commitments. The Legislature manages Below is a summary of the total effect that the prior period errors, changes in accounting policies and reclassifications of liquidity risk through an ongoing review of future commitments and credit facilities. comparatives had on the amounts previously disclosed in the annual financial statements, followed by a description of each individual prior period error with the amounts involved. The table below analyses the Legislature’s financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual Statement of Financial undiscounted cash flows. Balances due within twelve months equal their carrying balances as the impact of discounting is not Performance significant. Expenses Balance as previously Change in Prior Period Reclassified Total At March 31, 2018 Less than 1 Between 1 and Between 2 and Over 5 years Reported Accounting Error Notes 34 year 2 years 5 years Policy Payables from exchange transactions 14,118,499 - - - Depreciation and - (3,583,831) Payables from non-exchange 127,750 - - - - (3,583,831) - amortisation - Finance Lease 611,549 - - (611,549) 611,549 At March 31, 2017 Less than 1 Between 1 and Between 2 and Over 5 years Operating Lease - - - 611,549 year 2 years 5 years Interest Paid 1,165,000 - - (1,165,000) - Finance Cost - - 594,000 1,165,000 1,165,000 Payables from Exchange Transactions 15,550,790 - - - General expenses 22,570,043 30,935 - 22,600,978 24,346,592 (3,552,896) 594,000 - 21,387,696 Credit risk Statement of Financial Credit risk consists mainly of cash deposits, cash equivalents and receivables. The Legislature only deposits cash with major Position banks with high quality credit standing and limits exposure to any one counter-party. Non-Current assets Property, plant and 18,545,357 (6,534,401) - - 12,010,956 Receivables comprise mainly of staff debt which is recovered monthly from salary deductions. equipment Intangible Assets 1,462,087 (371,584) - - 1,090,503 Financial assets exposed to credit risk at year end were as follows: Heritage assets 1,410 3,471,195 - - 3,472,605 ` Financial instrument 2018 2017 20,008,854 (3,434,790) - 16,574,064 Cash and cash equivalents 17,476,458 15,524,499 Receivables from exchange transaction 72,039 78,237 Receivables from non-exchange transactions 58,000 107,441
Statement of Financial Position (continued) Current liabilities Balance as previously Change in Prior Period Reclassified Total Reported Accounting Error Notes Policy Finance Lease Liability 22,100 - 22,100 - 0.00 22,100 - - 22,100
Non-Current liabilities Finance lease obligation - 8,836 - - 8,836 39 40 Free State Legislature Annual Report 2017/18 117 Free State Legislature
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Annual Financial Statements for the year ended 31 March 2018 Notes to the Financial Statements Figures in Rand 2018 2017 36. Contingencies
Contingent liabilities 1. Nkhahle t-Case JR42/45 211,586 - 2. MEC Police, Roads & Transport 14,996 14,996 3. Mangaung Metro Municipality 421,035 564,074 4.3 CCMA Case 367,800 367,800 1,015,417 946,870
Claims against the legislature
1. Nkhahle T-Case JR42/15:
Litigation is in the process against the Legislature relating to a dispute with a dismissed employee for misconduct on 15 May 2015, for which the CCMA ruled in the employee favour during December 2014. The legislature has applied for review of the CCMA arbitration award at Labour Court. The quotation of the legal fees amount to R211 586. Police, Roads & Transports / Vehicle accident case: 2. The driver of the former Speaker has agreed to meet with the State Attorneys with a view to resolving the matter. The process is still not resolved.
3. Mangaung Metro Municipality (MMM):
This is a ongoing dispute concerning the overcharged water account of the 4th Raadsaal by the municipality, which latter undertook to further investigate, but no progress can be reported.
4. Two employees of the Legislature declared dispute regarding car allowance benefit. The matter is still at CCMA and a sit down arbitration is expected in June 2018.
37. Related parties
` Relationships Hon Qabathe (Speaker) L Mofokeng (Secretary to the Legislature) Q Hugo (Chief Financial Officer) Adv J Machaka (Deputy Secretary)
The Free State Legislature makes use of the Fourth Raadsaal building, which is the property of the Department of Public Works. No consideration is paid to the Department of Public Works for the use of the building.
Key Management Information Refer to note 19
Class Name Number of individuals Speaker to the Legislature 1 Secretary to the Legislature 1 Deputy Secretary 1 Chief Financial Officer 1
38. Events after the reporting date
No events took place after the reporting date.
39. Fruitless and wasteful expenditure
2018 2017 Opening Balance 12,556 3,756 Identified in current year: Current year 49,739 8,800 Amounts written off (8,800) - 53,495 12,556 41 118 Free State Legislature Free State Legislature
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Annual Financial Statements for the year ended 31 March 2018 Annual Financial Statements for the year ended 31 March 2018 Notes to the Financial Statements Notes to the Financial Statements Figures in Rand 2018 2017 41 Going concern 36. Contingencies We draw attention to the fact that at March 31, 2018, the Legislature had accumulated deficit of R5,009,254 and that the Contingent liabilities entity's total liabilities exceed its assets by R5.009.254 1. Nkhahle t-Case JR42/45 211,586 - 2. MEC Police, Roads & Transport 14,996 14,996 Operating Expenditure exceeded the revenue by R6,934,782, this is mainly due to accrual accounting. 3. Mangaung Metro Municipality 421,035 564,074 4.3 CCMA Case 367,800 367,800 The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of 1,015,417 946,870 liabilities, contingent obligations and commitments will occur in the ordinary course of business.
Claims against the legislature The ability of the legislature to continue as a going concern is dependent on a number of factors. The most significant of there is that the Legislature continue to be funded for the ongoing operations of the institution. 1. Nkhahle T-Case JR42/15:
Litigation is in the process against the Legislature relating to a dispute with a dismissed employee for misconduct on 15 May 42. Revenue detail 2015, for which the CCMA ruled in the employee favour during December 2014. The legislature has applied for review of the Revenue received from disposal of assets, relates to insurance pay out of write-off vehicle. Revenue received from credit CCMA arbitration award at Labour Court. The quotation of the legal fees amount to R211 586. balances in investment and current account of the Legislature. Police, Roads & Transports / Vehicle accident case: 2. The driver of the former Speaker has agreed to meet with the State Attorneys with a view to resolving the matter. The process is still not resolved.
3. Mangaung Metro Municipality (MMM):
This is a ongoing dispute concerning the overcharged water account of the 4th Raadsaal by the municipality, which latter undertook to further investigate, but no progress can be reported.
4. Two employees of the Legislature declared dispute regarding car allowance benefit. The matter is still at CCMA and a sit down arbitration is expected in June 2018.
37. Related parties
` Relationships Hon Qabathe (Speaker) L Mofokeng (Secretary to the Legislature) Q Hugo (Chief Financial Officer) Adv J Machaka (Deputy Secretary)
The Free State Legislature makes use of the Fourth Raadsaal building, which is the property of the Department of Public Works. No consideration is paid to the Department of Public Works for the use of the building.
Key Management Information Refer to note 19
Class Name Number of individuals Speaker to the Legislature 1 Secretary to the Legislature 1 Deputy Secretary 1 Chief Financial Officer 1
38. Events after the reporting date
No events took place after the reporting date.
39. Fruitless and wasteful expenditure
2018 2017 Opening Balance 12,556 3,756 Identified in current year: Current year 49,739 8,800 Amounts written off (8,800) - 53,495 12,556 41 1 Free State Legislature Annual Report 2017/18 119 2017/18
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