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

FINANCE PRESENTION EMT LELGOTLA 3 – 5 FEBRUARY 2020 Nkosana Makate Acting CFO www.salga.org.za

PRESENTATION OUTLINE 1. Audited Annual Financial Statements as at 2018/19 2. Actual Revenue & Expenditure growth – 5 years 1. Financial Risks 2. Budget Process www.salga.org.za

31 2018/19 FINANCIAL STATEMENTS www.salga.org.za

2018/19 PERFORMANCE DASHBOARD 7 Unqualified audit • opinion with no findings The number seven represent • completeness 98% 98% • change after an accomplished Achievement of cycle and of a performance positive renewal targets www.salga.org.za

AUDIT OPINION • “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 o Financials o Performance information o Compliance o Controls www.salga.org.za

21 MANAGEMENT LETTER – AG’s PERSPECTIVE ON SALGA OVERALL MESSAGE SALGA has maintained a clean audit outcome for the 7th year in a row. The 7. annual financial statements submitted for audit as well as the performance information were of a high quality and no material non-compliance matters were This is as a result of SALGA’s commitment to ensure continuous identified. 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. www.salga.org.za

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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 www.salga.org.za

39 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 www.salga.org.za

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. Statement of financial position % change R million 2019 2018 1 year • Total assets have increased by 6.6 percent from R 271.4 million in 2018 to Current Assets R 229.4 R 213.6 7.4% R 289.4 million in 2019. Total assets are comprised by current assets and non-current Non-current Assets R 59.9 R 57.8 3.8% assets which both have increased year-on-year by 7.4 percent and 3.8 percent Total Assets R 289.4 R 271.4 6.6% respectively. Current Liabilities R 108.9 R 102.3 6.5% • Non-current Liabilities R 5.3 R 7.3 (27.1%) Cash and cash equivalents have increased by 24 percent from R 89.1 million in 2018 Total Liabilities R 114.2 R 109.5 4.3% to R 110.4 million in 2019. Net Assets R 175.2 R 161.8 8.2% • Trade and other receivables have decreased by 4.4 percent to R 119.0 million in 2019. Included in assets is the following: Cash and cash equivalents R 110.4 R 89.1 24.0% • Membership levy Payment levels for the year under review have remained steady at 86 percent (2018: 87 percent). Trade and other receivables R 119.0 R 124.5 (4.4%) • Membership levy Payment levels inclusive of opening balances has remained steady at Financial performance: 78 percent (2018: 79 percent). Total revenue R 655.3 R 605.6 8.2% • Trade and other receivables as a percentage of revenue have decreased by Surplus for the period R 13.3 R 8.2 62.8% 2.4 percent when compared to the prior year to 18.2 percent in 2019. Key financial ratios: • Total revenue has increased by 8.2 perc ent to R 655.3 million in 2019 from Trade and other receivables as % of Revenue 18.2% 20.6% 2.4% R 605.6 million in 2018. • Operating surplus for the year is R 13.3 million representing an increase of 62.8 percent Membership levy Payment levels rate (current year) 86% 87% (1.0%) from the prior year. Membership levy Payment levels rate (overall) 78% 79% (1.0%) • In terms of liquidity, the organisation is liquid with current assets worth R 2.11 for each Current ratio 211% 209% 0.9% 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 Asset coverage rate 34 23 46.3% representing an increase of 46.3 percent when compared to the prior year. Further, the organisation had 253 cents for every 100 cents of liabilities representing an Total assets over total liabilities (No. of times) 2.53 2.48 2.3% improvement of 2.3 percent . Days sales outstanding (Debtors days) 124 115 (8.4%) • Debtors days have worsened to 124 days versus 115 days in 2018 representing an Days expenditure outstanding (Creditors days) 22 33 34.4% increase of 8.4 percent . • Creditors days have improved to 22 days versus 33 days in 2018 representing a 10 34.4 percent decrease.

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% 11

31 INCOME AND EXPENDITURE GROWTH (FIVE YEARS) www.salga.org.za

Revenue Growth 5 years Revenue - % Growth 17% 8% Percentage % 4% -1% - Financial years 2014/15 2015/16 2016/17 2017/18 2018/19 % Percentage www.salga.org.za

Expenditure Growth 5 years Expenditure - % Growth 20% Percentage % 7% 2% 0% - 2014/15 2015/16 2016/17 2017/18 2018/19 www.salga.org.za

31 FINANCIAL RISKS & REVENUE CONCENTRATION www.salga.org.za

Financial & Credit Risks SUMMARY Financial Health Indicator - Financial Health Indicator - Financial Health Indicator - Financial Health Indicator - Audit Outcome - 30 June 2014 Audit Outcome - 30 June 2015 Audit Outcome - 30 June 2017 Audit Outcome - 30 June 2018 Bankrupt 6 4 7 9 Insolvent 96 92 99 98 Solvent - Unable to Pay Creditors 27 32 28 39 Constraint Liquidity Ratio 20 11 12 8 Short To Medium Term Viability 126 123 103 96 Insufficient Reporting 3 16 8 7 278 278 257 257 Increased number of municipalities regarding the following; 57% of SALGA • Municipalities in financial distress from 128 (of the 278) in 2015/16 to 146 (of the 257), revenue at risk • 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. Source: National Treasury Treasury’s State of Local Government Report www.salga.org.za