FINANCE PRESENTION EMT LELGOTLA 3 5 FEBRUARY 2020 Nkosana Makate - - PowerPoint PPT Presentation

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FINANCE PRESENTION

EMT LELGOTLA 3 – 5 FEBRUARY 2020 Nkosana Makate Acting CFO

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PRESENTATION OUTLINE

• 1. Audited Annual Financial Statements as at 2018/19
• 2. Actual Revenue & Expenditure growth – 5 years
• 1. Financial Risks
• 2. Budget Process

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2018/19 FINANCIAL STATEMENTS

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2018/19 PERFORMANCE DASHBOARD

The number seven represent

• completeness
• change after an

accomplished cycle and of a positive renewal

98% 98%

Achievement of performance targets

7

• Unqualified audit
• pinion with no

findings

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• “In my opinion, the financial statements present fairly, in all

material respects, the financial position of the South African Local Government Association as at 31 March 2019, and its financial performance and cash flows for the year then ended in accordance with Standards of Generally Recognised Accounting Practice (Standards of GRAP) and the requirements of the PFMA)”.

• Requirements of the clean audit
• Financials
• Performance information
• Compliance
• Controls

AUDIT OPINION

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MANAGEMENT LETTER – AG’s PERSPECTIVE ON SALGA

7.

SALGA has maintained a clean audit outcome for the 7th year in a row. The annual financial statements submitted for audit as well as the performance information were of a high quality and no material non-compliance matters were identified. This is as a result of SALGA’s commitment to ensure continuous effective functioning of the internal control environment. There were however two instances of control deficiencies noted relating to procurement and the information technology governance and system controls however; such matters reported were not material. Furthermore, the assurance providers provided assurance that assisted the public entity to obtain an unqualified audit opinion with no material findings. SALGA should maintain its best practices to ensure that the strengthened control environment is maintained resulting in continuous favourable audit outcomes. OVERALL MESSAGE

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LRA SECTION 98(2)(b)(i) AUDIT REPORT OPINION

‘’Reasonable Assurance Opinion In our opinion, the South African Local Government Association complied with the requirements of Section 98(2)(b)(i) of the Labour Relations Act , 66 of 1995 for the year ended 31 March 2018, in all material respects, and in accordance with the [SALGA] constitution.’’ The above audit was conducted by an independent firm of auditors: MVB AUDIT AND ADVISORY

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REQUIREMENTS FOR ATTAINING CLEAN AUDIT

The following pillars implemented by SALGA to main its ‘’CLEAN AUDIT’’

• 1. Stable and Strong leadership in all critical areas of the organisation
• 2. Functional Audit and Risk Committee
• 3. Functional Remuneration Panel(REMPANEL)
• 4. Robust SCM processes that are independent of outside interference
• 5. Stickler to organisational policies and controls
• 6. Professional and highly skilled personnel
• 7. Continuous training of staff in their area of responsibility
• 8. Conscientious and meticulous planning for the Audit process
• 9. Adequate Reporting throughout the year - to all governance structures
• 10. Management Audit Steering Committee to manage the audit

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Key Financial Highlights

• Net assets have increased by 8.2 percent from R 161.8 million in 2018 to

R 175.2 million in 2019.

• Total assets have increased by 6.6 percent from R 271.4 million in 2018 to

R 289.4 million in 2019. Total assets are comprised by current assets and non-current assets which both have increased year-on-year by 7.4 percent and 3.8 percent respectively.

• Cash and cash equivalents have increased by 24 percent from R 89.1 million in 2018

to R 110.4 million in 2019.

• Trade and other receivables have decreased by 4.4 percent to R 119.0 million in

2019.

• Membership levy Payment levels for the year under review have remained steady at

86 percent (2018: 87 percent).

• Membership levy Payment levels inclusive of opening balances has remained steady at

78 percent (2018: 79 percent).

• Trade and other receivables as a percentage of revenue have decreased by

2.4 percent when compared to the prior year to 18.2 percent in 2019.

• Total revenue has increased by 8.2 percent to R 655.3 million in 2019 from

R 605.6 million in 2018.

• Operating surplus for the year is R 13.3 million representing an increase of 62.8 percent

from the prior year.

• In terms of liquidity, the organisation is liquid with current assets worth R 2.11 for each

R 1 of current liabilities. An improvement of 0.9 percent when compared to prior year.

• In regard to solvency, the organisation is solvent with an asset coverage rate of 34 times

representing an increase of 46.3 percent when compared to the prior year. Further, the

• rganisation had 253 cents for every 100 cents of liabilities representing an

improvement of 2.3 percent.

• Debtors days have worsened to 124 days versus 115 days in 2018 representing an

increase of 8.4 percent.

• Creditors days have improved to 22 days versus 33 days in 2018 representing a

34.4 percent decrease.

Statement of financial position % change R million 2019 2018 1 year Current Assets R 229.4 R 213.6 7.4% Non-current Assets R 59.9 R 57.8 3.8% Total Assets R 289.4 R 271.4 6.6% Current Liabilities R 108.9 R 102.3 6.5% Non-current Liabilities R 5.3 R 7.3 (27.1%) Total Liabilities R 114.2 R 109.5 4.3% Net Assets R 175.2 R 161.8 8.2% Included in assets is the following: Cash and cash equivalents R 110.4 R 89.1 24.0% Trade and other receivables R 119.0 R 124.5 (4.4%) Financial performance: Total revenue R 655.3 R 605.6 8.2% Surplus for the period R 13.3 R 8.2 62.8% Key financial ratios: Trade and other receivables as % of Revenue 18.2% 20.6% 2.4% Membership levy Payment levels rate (current year) 86% 87% (1.0%) Membership levy Payment levels rate (overall) 78% 79% (1.0%) Current ratio 211% 209% 0.9% Asset coverage rate 34 23 46.3% Total assets over total liabilities (No. of times) 2.53 2.48 2.3% Days sales outstanding (Debtors days) 124 115 (8.4%) Days expenditure outstanding (Creditors days) 22 33 34.4%

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Statement of surplus or deficit and other comprehensive income

Figures in Rand

2019 2018 Revenue 574,407,010 531,036,059 Rendering of services - membership levies 563,848,319 525,092,041 Event recoveries 10,558,691 5,944,018 Capacity building programmes revenue

• Direct expenditure – Programme cost

(349,342,623) (355,827,281) Municipal advisory and support service cost (232,168,233) (246,754,573) OLG Mandate implementation cost (110,835,320) (102,921,026) IGR Participation & mandating cost (Councillors) (6,339,070) (6,151,682) Gross margin 225,064,387 175,208,778 Gross margin percentage 39% 33% Other revenue 50,575,468 48,141,750 Other revenue 1,479,285 2,143,969 Government grant – executive authority 33,100,000 31,300,000 Other grants – donors 12,859,661 12,806,818 Sponsorship and donations 3,136,522 1,890,963 Contribution to overheads 275,639,855 223,350,528 Staff cost (100,380,204) (83,072,187) Administration costs (113,391,074) (82,670,444) Depreciation and amortisation (7,167,253) (8,127,231) Other operational expenditure (70,274,679) (66,605,534) Operating surplus or (deficit) before finance charges (15,573,355) (17,124,868) Interest revenue 30,310,996 26,452,705 Finance cost (1,408,466) (1,139,500) Surplus for the year 13,329,175 8,188,337 Other comprehensive income:

• Total comprehensive surplus for the year

13,329,175 8,188,337 Net surplus percentage 2.1% 1.4%

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INCOME AND EXPENDITURE GROWTH (FIVE YEARS)

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Revenue Growth 5 years

• 4%

17%

• 1%

8% 2014/15 2015/16 2016/17 2017/18 2018/19

Percentage % Financial years

Revenue - % Growth

% Percentage

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Expenditure Growth 5 years

• 2%

20% 0% 7% 2014/15 2015/16 2016/17 2017/18 2018/19

Percentage %

Expenditure - % Growth

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FINANCIAL RISKS & REVENUE CONCENTRATION

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Source: National Treasury Treasury’s State of Local Government Report

Financial & Credit Risks

Financial Health Indicator - Audit Outcome - 30 June 2014 Financial Health Indicator - Audit Outcome - 30 June 2015 Financial Health Indicator - Audit Outcome - 30 June 2017 Financial Health Indicator - Audit Outcome - 30 June 2018 6 4 7 9 96 92 99 98 27 32 28 39 20 11 12 8 126 123 103 96 3 16 8 7 278 278 257 257 Bankrupt Insolvent Solvent - Unable to Pay Creditors Constraint Liquidity Ratio Short To Medium Term Viability Insufficient Reporting SUMMARY

Increased number of municipalities regarding the following;

• Municipalities in financial distress from 128 (of the 278) in 2015/16 to 146 (of the 257),
• Negative cash positions from 40 in 2017/18 to 45 (of the 257),
• Adopting unfunded budgets (i.e. revenue projections are not credible and do not match planned expenditure)

increased from 83 in 2017/18 to 113 in 2018/19.

57% of SALGA revenue at risk

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Key Financial Indicators

Collections 2014/15 2015/16 2016/17 2017/18 2018/19 as at Jan 2020 2019/20 Opening Balance 33,157,104 54,200,391 82,579,858 77,777,928 129,548,839 159,015,230 % increase/ decrease 63% 52%

• 6%

67% 23% 380% Overall Collection 408,542,609 436,148,370 502,703,273 488,897,350 552,160,294 540,732,133 % increase/ decrease 7% 15%

• 3%

13%

• 2%

Overall Collection Rate 88% 85% 87% 79% 78% 69% Levies as % of total Revenue 88% 91% 84% 91% 90% 93% Salary cost as % of Total cost 56% 59% 56% 55% 52% 60%

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Membership Levy Collections (5 Years)

87,88% 85,07% 87,92% 85,11% 84,90% 80,71% 76,00% 78,00% 80,00% 82,00% 84,00% 86,00% 88,00% 90,00% 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20

Membership Levy Collections %

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Financial & Credit Risks (Continued)

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BUDGETING PROCESS

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Budgeting Process

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THANK YOU INPUT DISCUSSION