the national skills fund is proudly part of the … · 7 national skills fund annual report · 2014...

Funding To Skill Our Nation

ANNUAL REPORTNATIONAL SKILLS FUND 2013 · 2014

Higher Education and TrainingDepartment:

REPUBLIC OF SOUTH AFRICA

higher education& training

THE NATIONAL SKILLS FUND IS PROUDLY PART

OF THE DEPARTMENT OF HIGHER EDUCATION AND TRAINING

THE NATIONAL SKILLS FUND IS PROUDLY PART OF

THE DEPARTMENT OF HIGHER EDUCATION AND TRAINING

Funding to skill our nation

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PART A: GENERAL INFORMATION ................5

1. PUBLIC ENTITY’S GENERAL INFORMATION ...................................6

2. LIST OF ABBREVIATIONS/ACRONYMS ..........................................7

3. STRATEGIC OVERVIEW ................................................................9

3.1. Our Vision ..........................................................................9

3.2. Our Mission ........................................................................9

3.3. Our 7 Values ......................................................................9

3.4. Strategic Outcome Orientated Goals ..................................9

4. LEGISLATIVE AND OTHER MANDATES ........................................10

4.1 Established in terms of the Skills Development Act ...........10

4.2 Retention of accumulated surplus .....................................10

4.3 Listed as a Schedule 3A public entity in terms of the PFMA .....................................................................10

4.4 Key legislation applicable to the NSF .................................10

5. ORGANISATIONAL STRUCTURE ..................................................11

5.1. Executive Officer’s Office ..................................................11

5.2. Strategic Projects ..............................................................12

5.3. Sector Skills Support .........................................................13

5.4. Finance and Administration ..............................................14

6. FOREWORD BY THE MINISTER ...................................................15

7. FOREWORD BY THE DIRECTOR-GENERAL OF HIGHER EDUCATION AND TRAINING AS THE ACCOUNTING AUTHORITY ........................................................17

8. EXECUTIVE OFFICER’S OVERVIEW ..............................................20

PART B: PERFORMANCE INFORMATION .....23

1. STATEMENT OF RESPONSIBILITY FOR PERFORMANCE INFORMATION ..................................................24

2. AUDITOR’S REPORT: PREDETERMINED OBJECTIVES ....................24

3. OVERVIEW OF PUBLIC ENTITY’S PERFORMANCE ........................25

3.1. Service Delivery Environment ............................................25

3.2. Organisational environment .............................................26

3.3. Key policy developments and legislative changes ..............26

3.4. Strategic Outcome Oriented Goals ...................................27

4. PERFORMANCE INFORMATION BY PROGRAMME ......................28

Programme 1: Skills Development Funding ................................28

Programme 2: NSF Operations ...................................................36

Table of contents

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5. SUMMARY OF FINANCIAL INFORMATION ..................................39

5.1. Revenue Collection ...........................................................39

5.2. Programme expenditure ...................................................40

PART C: GOVERNANCE ..............................41

1. INTRODUCTION .........................................................................42

2. PORTFOLIO COMMITTEES ..........................................................42

3. EXECUTIVE AUTHORITY .............................................................42

4. THE ACCOUNTING AUTHORITY .................................................42

5. RISK MANAGEMENT .................................................................43

6. INTERNAL CONTROL ..................................................................43

7. INTERNAL AUDIT AND AUDIT COMMITTEES ..............................43

8. COMPLIANCE WITH LAWS AND REGULATIONS .........................44

9. FRAUD AND CORRUPTION ........................................................44

10. MINIMISING CONFLICT OF INTEREST..........................................45

11. CODE OF CONDUCT .................................................................45

12. HEALTH SAFETY AND ENVIRONMENTAL ISSUES .........................45

13. SOCIAL RESPONSIBILITY ............................................................45

14. MATERIALITY AND SIGNIFICANCE FRAMEWORK .......................45

15. AUDIT COMMITTEE REPORT ......................................................45

PART D: HUMAN RESOURCE MANAGEMENT 49

1. INTRODUCTION .........................................................................50

2. HUMAN RESOURCE OVERSIGHT STATISTICS ..............................50

PART E: FINANCIAL INFORMATION ............55

1. STATEMENT OF RESPONSIBILITY .................................................56

2. REPORT OF THE EXECUTIVE OFFICER .........................................56

3. REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON THE NATIONAL SKILLS FUND ................................................66

4. ANNUAL FINANICIAL STATEMENTS ............................................70

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NATIONAL SKILLS FUND ANNUAL REPORT · 2014

5 NATIONAL SKILLS FUND ANNUAL REPORT · 2014

PART A General Information

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1. PUBLICENTITY’SGENERALINFORMATION

REGISTERED NAME: National Skills Fund

PHYSICAL ADDRESS: 123 Francis Baard Street

PRETORIA

0002

POSTAL ADDRESS: Private Bag X174

PRETORIA

0001

TELEPHONE NUMBER/S: +27 012 312 5911

FAX NUMBER: +27 012 323 0291

WEBSITE ADDRESS: www.dhet.gov.za

EXTERNAL AUDITORS: The Auditor-General of South Africa

Lefika House

300 Middel Street

New Muckleneuk

Pretoria

0001

BANKERS: National Treasury

40 Church Square

Pretoria

0002

First National Bank

215 Francis Baard Street

Pretoria

0002

2. LISTOFABBREVIATIONS/ACRONYMS

ABET Adult Basic Education and Training

ADEA Association for the Development of Education in Africa

ADTTT Artisan Development Technical Task Team

AET Adult Education and Training

AGSA Auditor-General South Africa

ALCs Adult Learning Centres

ARPL Artisan Recognition of Prior Learning

AU African Union

BAS Basic Accounting System

BNC Bi-National Commission

PART A General Information

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BRICS Brazil, Russia, India, China and South Africa

CAO Centralised Applications Office

CACH Central Applications Clearing House

CAS Career Advice Services

CC Closed Corporation

CD Chief Director

CEM Council of Education Ministers

CEO Chief Executive Officer

CEPD Centre for Education Policy Development

CESM Classification of Educational Subject Matter

CET Community Education and Training

CETA Construction Education and Training Authority

CFO Chief Financial Officer

CHE Council on Higher Education

COL Commonwealth of Learning

COMEDAF Conference of Ministers of Education of the African Union

COSE Collaboration for Occupational Skills Excellence

CPIX Consumer Price Index

CPUT Cape Peninsula University of Technology

CSIR Council for Scientific and Industrial Research

CUT Central University of Technology

DBE Department of Basic Education

DDG Deputy Director-General

DG Director-General

DHET/DEPARTMENT

Department of Higher Education and Training

DIRCO Department of International Relations and Cooperation

DOE Department of Education

DOL Department of Labour

DST Department of Science and Technology

DTI Department of Trade and Industry

ECM Enterprise Content Management

EEP Employment Equity Plan

EFA Education for All

ELRC Education Labour Relations Council

ENE Estimates of National Expenditure

ETQA Education and Training Quality Assurance

EXCO Executive Council

FET Further Education and Training

FETCBU Further Education and Training Colleges Bargaining Unit

FETMISFurther Education and Training Management Information System

FMS&G Financial Management Systems and Guidelines

GENFETQA General and Further Education and Training Quality Assurance

GEPF Government Employee Pension Fund

GETC General Education and Training Certificate

GFETQSFGeneral and Further Education and Training Quality Sub-Framework

GIS Geographical Information System

GITO Government Information Technology Office

GPSSBC General Public Service Sector Bargaining Council

GRAP Generally Recognised Accounting Practices

HE Higher Education

HEAIDS Higher Education HIV/AIDS

HEDCOM Heads of Education Departments Committee

HEI Higher Education Institutions

HEMIS Higher Education Management Information System

HEQF Higher Education Qualifications Framework

HESA Higher Education South Africa

HIV/AIDSHuman Immunodeficiency Virus/Acquired Immunodeficiency Syndrome

HRD Human Resource Development

HRDCSA Human Resource Development Council for South Africa

HRDSA Human Resource Development Strategy for South Africa

HRMIS Human Resource Management Information System

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NSF ALCNational Norms and Standards for Funding Adult Learning Centres

NSF DIS National Skills Fund Disbursement Information System

NSF FETNational Norms and Standards for Funding Further Education and Training Colleges

NSFAS National Student Financial Aid Scheme

OAG Office of the Accountant General

ODA Overseas Development Assistance

OECD Organisation for Economic Cooperation and Development

OFO Organising Framework for Occupations

OQSF Occupational Qualifications Sub-Framework

PALC Public Adult Learning Centre

PED Provincial Education Department

PERSAL Personnel Salary System

PFMA Public Finance Management Act

PIC Public Investment Corporation

PICC Presidential Infrastructure Coordinating Commission

PIVOTAL Professional, Vocational, Technical and Academic Learning

PME Performance Management and Evaluation

PQM Programme Qualification Mix

PSIRA Private Security Industry Regulation Act

PSETA Public Service SETA

QCTO Quality Council for Trades and Occupations

RPL Recognition of Prior Learning

RDG Research Development Grant

SADC Southern African Development Community

SAICA South African Institute of Chartered Accountants

SAIDE South African Institute of Distance Education

SAQA South African Qualifications Authority

SARS South African Revenue Service

SAUS South African Union of Students

SCOPA Standing Committee on Public Accounts

IBSA India-Brazil-South Africa

ICASS Internal Continuous Assessment

ICT Information and Communication Technology

ILO International Labour Organisation

IT Information Technology

ITIL Information Technology Infrastructure Library

INDLELAInstitute for the National Development of Learnerships, Employment Skills and Labour Assessments

IPAP Industrial Policy Action Plan

LAN Local Area Network

MEDUNSA Medical University of South Africa

MIS Management Information System

MLO Media Liaison Officer

MMM Minister’s Management Meeting

MPAT Management Performance Assessment Tool

MTEF Medium Term Expenditure Framework

MTSF Medium Term Strategic Framework

NAMB National Artisan Moderation Body

NASCA National Senior Certificate for Adults

NATED National Accredited Technical Diploma

NC(V) National Certificate (Vocational)

NDP National Development Plan

NGP New Growth Path

NIHE National Institute of Higher Education

NIPF National Industrial Policy Framework

NQF National Qualifications Framework

NRF National Research Foundation

NSA National Skills Authority

NSDS National Skills Development Strategy

NSDSIII National Skills Development Strategy III

NSF/FUND National Skills Fund

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SCM Supply Chain Management

SDA Skills Development Act

SDLA Skills Development Levies Act

SDL Skills Development Levy

SET Science, Engineering and Technology

SETA Sector Education and Training Authority

SIC Standard Industrial Classification

SIP Strategic Integrated Project

SITA State Information Technology Agency

SSP Sector Skills Plan

SPU Sol Plaatje University

SRC Student Representative Council

SSS Student Support Services

TDG Teaching Development Grant

TVET Technical and Vocational Education and Training

TWG Technical Working Group

UCCF University Council Chairs Forum

UIF Unemployment Insurance Fund

UMP University of Mpumalanga

UN United Nations

UNESCO United Nations Educational, Scientific and Cultural Organisation

UoT University of Technology

VCET Vocational and Continuing Education and Training

WAN Wide Area Network

WITS Witwatersrand University

WSU Walter Sisulu University

3. STRATEGIC OVERVIEW

3.1 Our VisiOn

Funding to skill our nation.

3.2 Our MissiOn

To provide funding for national skills development towards a capable workforce for an inclusive growth path.

3.3 Our 7 Values

The National Skills Fund upholds the following 7 values:

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INTEGRITY

PASSION

ACCOUNTABILITY

OBjECTIvE

SERvICE EXCELLENCE

COLLABORATIvE

DEvELOPMENT

3.4 strategic OutcOMe Orientated gOals

The strategic goal of the NSF is to provide funds to support projects that are national priorities in the NSDS, that advance the Human Resource Development Strategy of South Africa and that support the National Skills Authority in its work.

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4. LEGISLATIVEANDOTHERMANDATES

4.1 established in terMs Of the skills deVelOpMent act

The National Skills Fund was established in 1999 in terms of section 27 of the Skills

Development Act, No 97 of 1998.

The money of the Fund may be used for the primary objectives as defined by the

prescripts of the Skills Development Act, namely:

1. To fund projects identified in the National Skills Development Strategy as national priorities (section 28(1) of the Skills Development Act);

2. To fund projects related to the achievement of the purposes of the Skills Development Act as the Director-General determines (section 28(1) of the Skills Development Act);

3. To administer the Fund within the prescribed limit (section 28(3) of the Skills Development Act). Regulations to prescribe the limit for the administration of the Fund at 10% of revenue has been approved and published in Notice No. R.1030, Government Gazette No. 33740 dated 8 November 2010; and

4. To fund any activity undertaken by the Minister to achieve a national standard of good practice in skills development (section 30B. of the Skills Development Act).

The current main revenue sources for the National Skills Fund are:

1. 20% of the skills development levies as contemplated in the Skills Development Levies Act;

2. Interest earned on investments held at the Public Investment Corporation; and

3. Funding received from the SETAs specifically earmarked for TVET infrastructure development.

The National Skills Fund may also receive revenue from the following sources:

1. The skills development levies collected and transferred to the Fund, in terms of the Skills Development Levies Act, in respect of those employers or sectors for which there are no SETA’s;

2. Money appropriated by Parliament for the Fund;

3. Donations to the Fund; and

4. Money received from any other source.

4.2 retentiOn Of accuMulated surplus

In terms of section 29(3) of the Skills Development Act, the unexpended balance in the Fund at the end of the financial year must be carried forward to the next financial year as a credit to the Fund.

4.3 listed as a schedule 3a public entity in terMs Of the pfMa

On 12 October 2012, the Minister of Finance listed the National Skills Fund as a Schedule 3A public entity in terms of the Public Finance Management Act, 1999, retrospectively effective from 1 April 2012 (Notice number 821 in the Government Gazette No. 35759). Prior to the listing as a public entity, the National Skills Fund operated as a programme under the Skills Development Branch of the Department of Higher Education and Training.

4.4 key legislatiOn applicable tO the nsf

The following key pieces of legislation are applicable to the NSF:

1. Skills Development Act, 1998 (Act No. 97 of 1998), as amended;

2. Skills Development Levies Act, 1999 (Act No. 9 of 1999), as amended;

3. Public Finance Management Act, 1999 (Act No. 1 of 1999), as amended and Treasury Regulations; and

4. Public Service Act, 1994 (Act No. 38 of 1994), as amended.

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5. ORGANISATIONALSTRUCTURE

5.1 executiVe Officer’s Office

Mr M MacikamaEXECUTIVE OFFICER

Mrs E HortonSECRETARY

Mr MN SitholeASSISTANT DIRECTOR

Mr TJ SephaiSENIOR

PRACTITIONER

Mrs MM Mosehla ASSISTANT DIRECTOR

Mrs BA KhumaloSENIOR

PRACTITIONER

Mr. NE Ramakokovhu ASSISTANT DIRECTOR

Mr D ZongoSENIOR

PRACTITIONER

Mrs C KhambakoDD:BURSARIES

Mrs B SipenganeDD: OFFICE ADMIN

Vacant SECRETARY

Mr D MatsimaneASSISTANT DIRECTOR

Mrs KF HlongwaneDIRECTOR: PROVINCIAL

OPERATIONS

Ms S MakhesaContract

Mr TT SelepeContract

Ms M MakinaContract

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5.2 strategic prOjects

Mr E MashabaneDIRECTOR: SP

Mrs N DlaminiSECRETARY

Mrs M Gijima DD: CLUSTER 5

Mrs T Moila ASSISTANT DIRECTOR

VacantPRACTITIONER

Mrs M Malatji CONTRACT

Mr K Maluleka DD: CLUSTER 3

Mr J Magabane ASSISTANT DIRECTOR

Mr O MolefeDD: CLUSTER 4

Mr J Zulu ASSISTANT DIRECTOR

Mrs L Gwebu DD: CLUSTER 2

Mr R Boshielo ASSISTANT DIRECTOR

Mr H MasemolaDD: CLUSTER 1

Mr P RamawaASSISTANT DIRECTOR

VacantSENIOR PRACTITIONER

Vacant Frozen for

Contract Post SENIOR CLERK

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5.3 sectOr skills suppOrt

Mr F StrydomDIRECTOR: SSP

Mrs T MadunaSECRETARY

Mr S FredericksDD: CLUSTER 1

Mr G FerreiraASSISTANT DIRECTOR

Mrs C MboyaPRACTITIONER

Mrs VS NkiwaneDD: CLUSTER 3

Mrs NM RannyamaASSISTANT DIRECTOR

Mr J Nchabaleng PRACTITIONER

Mr B MkhizeDD: CLUSTER 2

Mr E MothlabaneASSISTANT DIRECTOR

Mrs H SebopetsaPRACTITIONER

Mr GG SaulsDD: CLUSTER 4

Mrs Z MahlabaASSISTANT MANAGER

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5.4 finance and adMinistratiOn

Mr W MinnieCHIEF FINANCIAL OFFICER

Vacant SECRETARY Frozen for

Contract Post

Mrs P MalekaSENIOR

PRACTITIONER

Mrs B SetukiSENIOR CLERK

Vacant SENIOR CLERK

Frozen for Contract Post

Mrs B BouwerSENIOR CLERK: PROCUREMENT

Ms C BothaSENIOR CLERK

Mr J MogoroSENIOR

PRACTITIONER

Mr T MogotshaneSENIOR CLERK:

ASSETS

Vacant SENIOR CLERK

Frozen for Contract Post

Mrs R SouwitszkyCLERK

Mrs C PieterseSENIOR CLERK

Mrs M MonosiSENIOR

PRACTITIONER

Vacant ASSISTANT DIRECTOR:

FINANCE

Vacant ASSISTANT DIRECTOR:

FINANCE

Mr E SakoASSISTANT DIRECTOR:

ADMINISTRATION

Mrs M FerreiraDEPUTY DIRECTOR

Ms K TjalePRACTITIONER:

SCM

Mrs A SmitSENIOR

PRACTITIONER: HRM

Ms R KoenSENIOR CLERK:

REGISTRY

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The anomaly of high unemployment levels and a simultaneous chronic shortage

persists at a time when state resources have become scarce. The NSF surplus,

although a reflection of past underperformance, present the Post School Education

and Training system with an opportunity to make significant investments and to

make an impact on human resource and skills development. I believe the NSF has

now occupied its rightful place in the post school system, correctly focusing on

national priorities and providing resources to catalyse interventions that unlock

national human resource potential.

The National Development Strategy III (NSDS III) and the White Paper on the

Post School Education and Training both emphasise that the NSF is responsible

for skills development aligned to national development strategies and priorities.

This includes building linkages within the skills system and providing funds for

government strategies such as youth programmes, building small businesses and

cooperatives, and rural development. It also funds research and innovation that is

not confined to a particular sector.

6. FOREWORDBYTHEMINISTER

The Human Resource Development Strategy of South Africa commits us, amongst

other things, to overcome the shortage of people with the skills needed for the

successful implementation of our strategies to achieve accelerated economic

growth. We must increase the number of appropriately skilled people to meet our

economic and social development priorities and help overcome poverty, inequality

and unemployment.

Central to meeting our commitments is an effective and efficient post school

provisioning system of which the National Skills Fund is an integral part. During

the year under review, the NSF continued to make a significant contribution to our

integrated post school education and skills development trajectory by empowering

and developing citizens.

"The National Development Strategy III (NSDS III) and the White Paper on the Post School Education and Training both emphasise that the NSF is responsible for skills development aligned to national development strategies and priorities. "

DR B E NzIMANDE, MP

Minister of Higher Education

and Training

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The high levels of financial commitments by the NSF in this financial year represent

a clear resolve to undertake projects that are in alignment with the National Skills

Development Strategy and support the National Development Plan, the New

Growth Path and the Industrial Policy Action Plan. This involves, among other

things, support for rural development, the green economy and skills development

in education and health.

The NSF has made important strides in improving its internal capacity, structures

and operations. Equally important is the progress made in meeting all compliance

requirements pertaining to a listed Schedule 3A Public Entity. The NSF continued,

once more, to achieve an unqualified audit opinion, as was the case for the past

number of years, indicating good corporate governance through effective oversight

by the Departmental leadership.

I extend my gratitude and appreciation to the Director-General, Mr Gwebinkundla

Qonde, who is the Accounting Authority of the NSF, as well as the NSF management

and staff for their enthusiasm and their hard work in the quest to improve the skills

of our people.

DRBENZIMANDE,MP

MINISTEROFHIGHEREDUCATIONANDTRAINING

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creating a vibrant and responsive post-school education and training system that

will contribute to a growing economy that is appropriately transformed, so that the

benefits of growth are shared by all citizens.

In successive years, the country has seen commendable improvements in the basic

education matric results, including improvements in the pass rates of mathematics

and sciences. This welcome improvement happens against the backdrop of a dire

shortage of critical skills that are required to give a massive boost to economic

development, thereby providing the country with a critical mass of enrolments in

the scarce and critical skills post education programmes.

In response to this overwhelming improvement by the country’s school going youth,

the Department, through the NSF, envisaged the establishment of a dedicated NSF

Bursaries Unit to be the single point of reference for bursary applicants, who will

respond to national priorities as outlined in the National Development Plan, NSDS III

and all other related developmental strategies. The NSF, through the establishment

of a dedicated bursary unit recognised the importance of providing bursary

assistance to financially and academically deserving students who otherwise would

be unable to access funding during their post-schooling year. The NSF is committed

to allocate annual funds for this purpose.

7. FOREWORD BY THE DIRECTOR-GENERAL OFHIGHER EDUCATIONAND TRAININGAS THEACCOUNTINGAUTHORITY

In this report, we seek to highlight the progress and achievements made by the

National Skills Fund during the 3rd year of the implementation of the National Skills

Development Strategy III (NSDS III). Equally important is sharing the challenges that

the organisation faced in its journey towards meeting its vision of skilling the nation.

The Department, inclusive of the NSF, has continued to work from the premise that

economic growth and development, including the creation of decent work on a

large scale and investment in quality education and skills development, are at the

centre of the Government’s strategy. The NSF and its partner institutions within the

Department, collectively, are expected to work towards realization of the goals of

"The support of the NSF has enabled the Human Resource Development Council of South Africa to identity and research blockages that relate to human resource development in South Africa and submit recommendations thereon."

MR GWEBINkUNDLA FELLIX QONDE

Director-General of

Higher Education and Training

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graduate and post-graduate qualifications across the country.

• South African Maritime Safety Authority (SAMSA)

With over 3 000 kilometres of coastal area, South Africa is endowed with a huge economic potential that remains largely untapped, partly due to the lack of appropriate skills and in-depth research. To this end, the Department has entered into a Memorandum of Understanding (MoU) with the South African Maritime Safety Authority for the funding of eligible students pursuing Maritime post-graduate qualifications at the World Maritime University in Sweden. This project currently benefits 27 students pursuing post-graduate qualifications at the United Nations World Maritime University in Malmo, Sweden.

• South African Institute of Chartered Accountants (SAICA)

The SAICA programmes are a culmination of a number of initiatives that focuses on transforming the accounting profession in South Africa and bring about a dispensation in which the profession will fairly represent the current population demographics through the development of qualified accountants with the designation CA (SA). Another essential objective of this project is to build the capacity of selected institutions delivering accountancy programmes in order that these institutions receive accreditation from professional bodies, thereby ensuring that learners in these institutions do not waste their valuable time studying programmes that are below acceptable standards as set out by professional bodies. Affected institutions include the University of Limpopo and University of Fort Hare who have regained accreditation, Walter Sisulu University who is in their second year of capacity building intervention and the University of the Western Cape who has maintained accreditation. This project benefits more than 900 students pursuing accounting under-graduate and post-graduate qualifications at the University of Limpopo, University of Fort Hare and the University of the Western Cape.

The NSF is specifically tasked in the NSDS III to support identified priorities that advance the Human Resource Development Strategy, decided upon in consultation

Some of the projects that have been born out of this initiative and managed by the NSF Bursaries Unit include, but are not limited to:

• National Research Foundation (NRF)

The Department entered into a Memorandum of Understanding (MoU) with the National Research Foundation for the management and disbursement of bursaries to eligible students pursuing various academic programmes linked to scarce and critical skills. This initiative supports the National Skills Development Strategy objectives through the growth in the numbers of well-trained post-graduate researchers and revival of the academic profession. This project benefits 1 056 students pursuing post-graduate qualifications across all higher education institutions in the country.

• International Scholarship

There are a number of international scholarship opportunities currently available to South African students for university programmes and skills development programmes abroad, some of which require co-funding. Foreign missions and agencies have been used by their countries as conduits to facilitate formal contact with South African government departments, and higher education and training institutions. As the Department responsible for post-school education and training, it seeks to develop a coherent framework to coordinate current offers as well as to expand these and create new opportunities for South Africans to study abroad. For the year under review, this project has assisted 40 students to pursue both under-graduate and post-graduate qualifications in China and Russia respectively.

• National Student Financial Aid Scheme

The Department also entered into a Memorandum of Agreement (MoA) with the National Student Financial Aid Scheme (NSFAS) for the administration and disbursement of funds to all higher education institutions for the full cost of study to eligible students in scarce and critical skills that are of a national priority as determined in the NSDS III and other policy frameworks. This programme benefits over 12 000 students pursuing both under-

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For all the Technical Tasks Teams, the recommendations in resolving the identified blockages were accepted by the HRDC. What remains is for the implementing agencies and/or departments to move forward with implementation, and for the HRDC to continue monitoring progress in this regard.

NSF funding has also made it possible for the HRDC to host for the first time an HRDC Summit which took place in March 2014 with the objective of sharing the findings of the TTTs with its stakeholders thereby strengthening their research findings through participation by the experts and stakeholders.

Finally, I wish to thank the Minister of Higher Education and Training, Dr BE

Nzimande, and the Deputy Minister, Mr M Manana, for continuously challenging

our limits and the boundless enthusiasm with which they lead the Department. I

am equally grateful for their unwavering support in all spheres of our work, as well

as for their leadership in the challenges that we face as the Department serving the

educational and training needs of all South African citizens.

I hereby present this report to the Minister of Higher Education and Training, Dr BE Nzimande, MP, and Deputy Minister, MP, Mr M Manana, and invite them to table it in Parliament.

MRGWEBINKUNDLAFELLIXQONDE

DIRECTOR-GENERALOFHIGHEREDUCATIONANDTRAINING

with the Human Resource Development Council (HRDC). To this end, the HRDC has identified blockages that relate to human resource development and appointed Technical Task Teams (TTTs) to research these blockages and submit recommendations to Council. Funding from NSF has assisted the TTTs to fund research work during the period under review:

• Enabling entrepreneurship

This task team made recommendations which touched on the work of Schools; Universities; Technical and Vocational Education and Training (TVET) colleges and SMMEs, in which they were required to include and improve on the issue of Entrepreneurship in their curriculum or spheres of operation.

• Production of professionals

Some of the recommendations made to the HRDC included, but not limited to the fact that professional councils should play a more active role in enabling individuals to enter professions as well as providing necessary support in improving mathematics and science programmes at schools.

• Alignment of the Human Resource Development Strategy with the New Growth Path

The key recommendation from this task team was that a central demand side mechanism driven by the Department, with a greater role for the economic departments, and a revised role for SETAs should be established. This project is currently being implemented by the Department together with the Economic Development Department (EDD) playing a stronger role and the Presidential Infrastructure Coordinating Committee (PICC) participating as requested.

• Skills System Review

Amongst other recommendations, this task team made a recommendation that supported the development of a new skills system in line with the vision, mission and key fundamentals set out in its report which the Department should implement.

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This trajectory has seen NSF not only increasing its financial commitments

extensively, but also annual disbursements have reached record levels. Over the

last 3 years, since the new NSDS III was launched, the NSF’s performance has

increased significantly due to both deliberate interventions to improve the Fund’s

performance under NSDS III and the resolve to build concrete partnerships with

the entire post school education and training family. These deliberate interventions

resulted in the Fund becoming more efficient towards funding the critical skills

needs in South Africa.

The Fund’s grants disbursements towards skills development increased to

R3,1 billion (2013: R2,6 billion) during the current financial year, benefiting over

77 000 learners.

The majority of these 77 000 learners are still receiving training on on-going

courses during the next financial year as their training courses extend over periods

longer than one year. The NSF remains committed towards funding these learners

over their entire qualification period. This is to ensure a maximum throughput of

learners obtaining their qualifications and preventing a high drop-out of learners

from one academic year to the next due to a lack of funding to continue studies.

8. EXECUTIVEOFFICER’SOVERVIEW

The National Skills Fund has been characterised as a catalytic fund that is expected

to promote strategic partnerships and innovation in project delivery. It is correctly

viewed as a national resource which must be used to both initiate as well as to

respond to national skills priorities. It must be used to target gaps and complement

resource shortages for national priorities. This trajectory, as advocated in the

NSDS III has been a driving force behind the NSF making significant contributions to

the integrated post school education and skills development, in the form of direct

investment in sustainable education and training facilities and equipment and

most importantly, by funding cost of study for thousands of learners taking various

programmes ranging from a security guard to a pilot or an engineer or a doctor.

"The approach adopted by the NSF has been to primarily serve as a “catalytic” fund, aiming to unblock systemic blockages in the Post-School Training System and to unlock skills development funding sitting with other stakeholders, including Government Departments and State Owned Companies."

MR MVUyISI MACIkAMA

ExecutiveOfficer

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later in this annual report, were:

• Priorities identified that advance the Human Resource Strategy as identified and decided by the Human Resource Development Council;

• Priorities identified by the Minister in consultation with the National Skills Authority (NSA) aimed at strengthening the country’s skills development capacity; and

• Projects that are in alignment with the National Skills Development Strategy and support the National Development Plan, the new economic growth path, the Industrial Policy Action Plan, skills to support the Green Economy, Rural Development, and skills development in Education and Health, and that contribute towards capacity building and skills development for institutions operating in the Post School System.

The approach adopted by the NSF has been to primarily serve as a “catalytic”

fund, aiming to unblock systemic blockages in the Post-School Training System

and to unlock skills development funding sitting with other stakeholders, including

Government Departments and State Owned Companies, who shared common

objectives. This was achieved through funding research and development and to

support national strategic training interventions by topping up funding of national,

provincial, local and community priority projects, whose success in attaining its

objectives would otherwise be compromised due to a lack of funding, systems, or

expertise. Other core criteria for selection of projects were its sustainability beyond

the periods of intervention and its envisaged impact on the communities it aims to

serve.

In line with the propositions of the White Paper for Post School Education

and Training, the NSF has prioritised the utilisation of partnerships with other

government departments, public institutions such as Universities, Universities of

Technology, Technical and Vocational Education and Training institutions, Sector

Education and Training Authorities, State Owned Companies, the South African

Qualification Authority, as well as non-government and not for profit organisations,

cooperatives and associations working with persons living with disabilities for the

This significant increase in the efficiency of the NSF can be clearly noted in the NSF’s

increase in grants disbursements towards scarce and critical skills:

1. 1st Year of NSDS III (2011/12): Grants disbursements increased with 131% from R564 million to R1,3 billion; and

2. 2nd Year of NSDS III (2012/13): Grants disbursements increased with 97% from R1,3 billion to R2,6 billion.

3. 3rd Year of NSDS III (2013/14): Grants disbursements increased with 19% from R2,6 billion to R3,1 billion.

The listing of the NSF as an entity together with the implementation of

NSDS III presented the organisation with unique, but exciting challenges as well as

tremendous opportunities. The main challenge that had to be met was to continue

with uninterrupted service delivery whilst at the same time changing the structures

and operations to comply with the legal prescripts demanded of a listed entity.

The NSF has had to embark on a transformation journey that would see it meeting

expectations of its stakeholders both from a compliance angle as well as service

delivery angle. It has presented the organisation with a rear opportunity to critically

interrogate its programmes and self-introspect with the main purpose of introducing

changes that will see the organisation operating effectively and optimally in pursuit

of its vision of funding to skill the nation.

Through this journey, we seek to build an organisation with processes, systems and

structures that truly integrate its value. We seek to infuse integrity in systems and

people behind them, stimulate passion in pursuit of our vision, ensure accountability

among all stakeholders and partners and most importantly, achieve excellence in

service delivery to all our communities.

The robust implementation of our annual plans has also been characterised

by greater alignment between all the National Skills Fund’s activities and

OUTCOME 5 of government’s 12 performance outcomes, namely: A skilled

and capable workforce to support and inclusive growth path. In support of this

outcome, the national priorities that received funding, details of which are outlined

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I would like to extend my sincere gratitude and appreciation to the Minister of

Higher Education and Training, Dr. B E Nzimande, MP, the Deputy Minister of

Higher Education and Training, Mr MC Manana, MP, the Director-General of the

Department of Higher Education and Training, Mr GF Qonde, for your visionary

leadership and guidance, and NSF management and staff for your dedication and

sacrifice to ensuring a higher level of performance by the NSF towards the skilling

of our nation.

MRMVUYISIMACIKAMA

EXECUTIVEOFFICER:NATIONALSKILLSFUND

implementation of its projects. I believe that through partnerships the NSF has not

only greatly improved the sustainability of its interventions, but has also succeeded

in creating greater value for every rand spent of the Fund.

The NSF will continue to strive to improve on the efficiency and effectiveness of

its operations, systems and programmes, however, certain systemic issues need

to be addressed urgently to ensure optimisation of the skills development funds

and maximum benefit to the learners. Systemic issues include amongst others

inadequate research, improvements to the “feeder system,” i.e. the schooling

system with specific reference to the teaching of literacy, maths and science,

unevenness in quality of delivery on the part of providers (both public and private),

progression of learners, articulation, access to approved workplaces for experiential

learning required for certification purposes.

Whilst the NSF has opted for a developmental approach to its work, we still find

that due to the aforementioned systemic issues unacceptable wastage in the

system as learners do not qualify in the optimum time and as such also do not

access employment quick enough to upgrade to a sustainable livelihood. It should

be noted that in the South African context, a sustainable livelihood of one learner

results in improvement of the livelihoods for a number of persons.


PART B Performance Information

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1. STATEMENT OF RESPONSIBILITY FOR PERFORMANCE INFORMATION

stateMent Of respOnsibility fOr perfOrMance infOrMatiOn fOr the year ended 31 March 2014

The Accounting Authority is responsible for the preparation of the public entity’s

performance information and for the judgements made in this information.

The Accounting Authority is responsible for establishing, and implementing a

system of internal control designed to provide reasonable assurance as to the

integrity and reliability of performance information.

The performance information reflects the actual achievements against planned

objectives, indicators and targets as per the strategic and annual performance plan

of the public entity for the financial year ended 31 March 2014.

The performance information of the entity set out on page 23 to page 40 was

approved by the Director-General of Higher Education and Training, as the

accounting authority of the National Skills Fund.

GWEBINKUNDLAFELLIXQONDEDIRECTOR-GENERALOFHIGHEREDUCATIONANDTRAINING

MVUYISIMACIKAMAEXECUTIVEOFFICERNATIONALSKILLSFUND

31 July 2014

PART B Performance Information2. AUDITOR’S REPORT: PREDETERMINED

OBJECTIVES

The AGSA currently performs the necessary audit procedures on the performance

information to provide reasonable assurance in the form of an audit conclusion.

The audit conclusion on the performance against predetermined objectives is

included in the report to management, with material findings being reported under

the Predetermined Objectives heading in the Report on other legal and regulatory

requirements section of the auditor’s report.

Refer to the Report of the Auditor-General to Parliament on the National Skills Fund

(pages 66 to 69), published as Part E: Financial Information.

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The majority of these 77 000 learners are still receiving training on on-going

courses during the next financial year as their training courses extend over periods

longer than one year. The NSF remains committed towards funding these learners

over their entire qualification period. This is to ensure a maximum throughput of

learners obtaining their qualifications and preventing a high drop-out of learners

from one academic year to the next due to a lack of funding to continue studies.

The NSF’s increased performance under NSDS III can be clearly noted below:

• 1st Year of NSDS III (2011/12): Grants disbursements increased with 131% from R564 million to R1,3 billion; and

• 2nd Year of NSDS III (2012/13): Grants disbursements increased with 97% from R1,3 billion to R2,6 billion.

• 3rd Year of NSDS III (2013/14): Grants disbursements increased with 19% from R2,6 billion to R3,1 billion.

Furthermore, the NSF has a remaining commitment of R11,3 billion towards the various skills development projects of national priority. This high level of commitment has strategically positioned the Fund to maintain its high level of performance during the next two years until the end of the NSDS III.

The high level of commitment will also result in the Fund putting both its annual income and historic accumulated surpluses to effective use towards skills development until the end of the NSDS III period.

3. OVERVIEW OF PUBLIC ENTITY’S PERFORMANCE

3.1 serVice deliVery enVirOnMent

On 12 October 2012, the National Skills Fund was listed retrospectively effective

from 1 April 2012.

Since the listing of the National Skills Fund as a Schedule 3A public entity on

12 October 2012, the Fund reports on its performance against its strategic plan and

annual performance plan to relevant stakeholders, who includes, amongst other

the following:

• The Minister and Director-General of Higher Education and Training, through the relevant structures of the DHET. Reports of the NSF are discussed in the Department’s senior management meetings at various levels including a dedicated review session with the Executive Authority. The NSF is also part of the Annual Review and planning workshops, where annual performance is discussed and planning of the new financial year is undertaken;

• Relevant parliamentary portfolio committees; and

• A committee of the National Skills Authority also provides monitoring with respect to the contribution of the NSF to the targets of the National Skills Development Strategy.

These performance reports include, amongst others, quarterly monitoring of

performance, derived from the annual performance plan of the NSF and ENE

targets and reported via Department of Higher Education and Training;

Since the dawn of the NSDS III the National Skills Fund’s performance

has increased significantly seeing the Fund’s grants disbursements towards skills development

increasing to R3,1 billion (2013: R2,6 billion) during the current

financial year, benefiting over 77 000 learners.

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3.3 key pOlicy deVelOpMents and legislatiVe changes

Following publication of the National Skills Development Strategy for 2011-2016

(NSDS III), the Fund has engaged the National Skills Authority to develop the

Strategic Framework and Criteria for the allocation of funding to support NSDS III.

This Strategic Framework document was approved by the Minister and paved the

way for the National Skills Fund to fund projects under the NSD SIII.

The key programmes of the NSF as set out in the Strategic Framework for the

allocation of funding are the following:

1. Supporting the priorities of the Human Resource Development Strategy of South Africa;

2. Supporting the priorities of the Minister in consultation with the National Skills Authority;

3. Funding National Skills Development Strategy III priorities in the following areas:

a. New Economic Growth Path;

b. Industrial Policy Action Plan;

c. Skills to support rural development;

d. Skills for a green economy;

e. Skills for education and health;

f. Skills to support the justice sector; and

g. Support towards artisan development.

4. Funding priorities identified by the Director-General supporting the Skills Development Act in the following areas:

a. Worker Education;

b. Skills System Institution Capacity Building;

c. Trainee Lay-off Scheme; and

d. Academic profession, research and development.

3.2 OrganisatiOnal enVirOnMent

The key organisational challenges for the National Skills Fund to overcome during

the next financial year relates to following:

• Overcoming capacity constraints with regards to the research and analysis towards initiating skills development projects;

• Overcoming capacity constraints to ensure sufficient skills development project support, project financial management and projects monitoring and evaluation;

• Overcoming capacity constraints with regards to support functions to be established required for the NSF as a fully-fledged public entity; and

• Improving the efficiency of the NSF’s financial and performance information processes and systems to ensure timely and accurate reporting.

The Fund has embarked on an integrated initiative aimed at improving the efficiency

and effectiveness of the NSF. This includes amongst others the following:

• Improving alignment of the organisation to its mandate;

• Optimising the NSF’s operations;

• Reviewing and optimising the NSF’s processes;

• Building, sourcing and aligning the NSF’s organisation structure;

• Building, sourcing and improving the NSF’s project support and monitoring and evaluation capability; and

• Building and improving the NSF’s performance management, information and reporting.

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3.4 strategic OutcOMe Oriented gOals

The strategic objective of the National Skills Fund is to provide funds to support

projects that are national priorities in the NSDS III, that advance the Human Resource

Development Strategy (HRDS) of South Africa and that support the NSA in its work.

The National Skills Fund’s high level of performance has resulted in the Fund over-

achieving on its strategic outcome oriented goals.

5. Priorities to address skills infrastructure in the following areas:

a. Recapitalisation of public delivery infrastructure;

b. Community Education Centres;

c. Skills Development Institutes; and

d. State-owned enterprises.

On 3 December the Minister of Higher Education and Training published new SETA

grant regulations in terms of section 36 of the Skills Development Act (Government

Gazette 35940 Notice No. 990). As per new SETA grant regulations, the remaining

surplus of the uncommitted discretionary funds from the SETAs must be paid over

by each SETA by 1 October of each year into the National Skills Fund. This regulation

might significantly increase the income of the National Skills Fund, especially during

the first year in which the applicable section relating to the grant regulations will

come into effect namely 2014/15.

The release of the White Paper on Post School Education and Training set out a vision for a single, coherent, differentiated and articulated

post education and training system. This will result in the review of all post school

education and training legislation and a drive towards a higher degree of integration

with the post school education training system.

The NSF’s current projects are aligned to the priorities as contained in the National Development Plan 2030.

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4. PERFORMANCE INFORMATION BY PROGRAMME

strategic ObjectiVes, perfOrMance indicatOrs planned targets and actual achieVeMents

Programme 1: Skills Development Funding

Purpose: To invest in projects identified in the National Skills Development Strategy (NSDS) as national priorities and invest in projects related to the achievement of the Skills

Development Act as per the discretion of the Director-General.

revised strategic target for the nsdsiii period 2011/12

to 2015/16

performance indicator

actual achievement

2012/13

planned target

2013/14

actual achievement

2013/14

deviation from

planned target

to actual achievement

for 2013/2014

comment on deviations

1 R 14,025 billion contractually committed to fund projects that are of national priority over the NSDS III period.

Amount contractually committed to fund projects of national priority over the stipulated period.

R5,863 billion R2,4 billion R5,377 billion R2,907 billion over-achievement

The National Skills Fund’s high level of performance in committing funds towards skills development projects of national priority during the past financial year lead to the over-achievement. Efficient reprioritisation between sub-objectives ensured that funds are put to efficient use to ensure achievement of the overall objective.

1.1 HRDSA: R 0,253 billion contractually committed to fund projects that are of national priority over the NSDS III period.


R0,055 billion R0,05 billion R0 billion R0,05 billion under-achievement

The Human Resource Development Council of South Africa (HRDCSA) has not fully utilised its previous allocation and was rolled over to the current financial year. Hence no additional allocation was not made available towards the HRDCSA during the current financial year. The saving in funding earmarked towards the HRDCSA was put to efficient use in the NSF’s other objectives.

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to 2015/16


actual achievement

2012/13

planned target

2013/14

actual achievement

2013/14

deviation from

planned target


for 2013/2014


1.2 NSA MINISTERIAL: R 0,221 billion contractually committed to fund projects that are of national priority over the NSDS III period.


R0,037 billion R0,04 billion R0,033 billion R0,014 billion under-achievement

The National Skills Authority (NSA) has not fully utilised its prior year’s allocation and the unspent funds was rolled over to the current financial year and the additional allocation was thus reduced with the unspent funds rolled over. The saving in funding earmarked towards the NSA was put to efficient use in the NSF’s other objectives.

1.3 NSDS III GOVERNMENT PRIORITIES: R 7,661 billion contractually committed to fund projects that are of national priority over the NSDS III period.


R4,289 billion R1,5 billion R0,652 billion R0,847 billion under-achievement

The reprioritisation funding towards the NSFAS shortfall (part of DG priorities) and TVET college infrastructure development has led to the under-achievement on the commitment of funding towards projects categorised under Government Priorities.

1.4 DG PRIORITIES: R 5,305 billion contractually committed to fund projects that are of national priority over the NSDS III period.



The over-achievement can mainly be attributed towards the additional R1 billion allocated towards the NSFAS shortfall.

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to 2015/16


actual achievement

2012/13

planned target

2013/14

actual achievement

2013/14

deviation from

planned target


for 2013/2014


1.5 SkILLS INFRASTRUCTURE: R 0,585 billion contractually committed to fund projects that are of national priority over the NSDS III period.



The over-achievement can mainly be attributed towards the R2,5 billion allocated towards the TVET college infrastructure development.

2 490 projects funded over the NSDS III period by the outer year of the NSDS III period.

Number of projects funded over the relevant NSDS period by the outer year of the relevant NSDS period.

177 projects 350 projects 164 projects 186 projects under-

achieved

The NSF funded projects of higher amounts and learner numbers. Hence the NSF over-achieved on the contractual commitments target and the number of learners funded for training even though the number of projects as target was not achieved.

2.1 HRDSA: 1 project funded over the NSDS III period by the outer year of the NSDS III period.


1 project 1 project 1 project 0 projects over-achieved

Achieved target.

2.2 NSA MINISTERIAL: 39 projects funded over the NSDS III period by the outer year of the NSDS III period.



achieved

Target not achieved due to delays in contracting new NSA constituency capacity building projects. Contracting took place subsequent to year-end.

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to 2015/16


actual achievement

2012/13

planned target

2013/14

actual achievement

2013/14

deviation from

planned target


for 2013/2014


2.3 NSDS III GOVERNMENT PRIORITIES: 309 projects funded over the NSDS III period by the outer year of the NSDS III period.



achieved


2.4 DG PRIORITIES: 128 projects funded over the NSDS III period by the outer year of the NSDS III period.



achieved


2.5 SkILLS INFRASTRUCTURE: 13 projects funded over the NSDS III period by the outer year of the NSDS III period.



achieved


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to 2015/16


actual achievement

2012/13

planned target

2013/14

actual achievement

2013/14

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for 2013/2014


3 200 000 learners funded for training.

Number of learners funded for training.

95 688 learners

40 000 learners

77 913 learners

37 913 learners over-achievement

The National Skills Fund’s high level of performance in committing funds towards skills development projects of national priority during the past financial year lead to the over-achievement.

3.1 NSDS III GOVERNMENT PRIORITIES: 162 250 learners funded for training.


77 714 learners

32 450 learners

46 067 learners



3.2 DG PRIORITIES: 37 750 learners funded for training.


17 974 learners

7 550 learners 31 846 learners



4 Minimum of 70% of grants revenue received during each year disbursed as skills development grants during the year.

Percentage of grants revenue received during each year disbursed as skills development grants during the year.

100% 70% 100% 30% over-achievement

This indicator measures the NSF’s ability to put its revenue received during the financial year to effective use towards skills development grants. The dawn of the new NSDS III has facilitated significant improvement in the NSF resulting in a higher commitment towards skills development projects of national priority, which resulted in improved grant disbursement efficiencies. Not only have the NSF started to put its annual revenue to effective use towards skills development, but also its accumulated reserves.

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to 2015/16


actual achievement

2012/13

planned target

2013/14

actual achievement

2013/14

deviation from

planned target


for 2013/2014


5 Minimum of 95% of skills reserves accumulated during the year contractually committed towards skills development grants at the end of the year.

Percentage of skills reserves accumulated during the year contractually committed towards skills development grants at the end of the year.


This indicator measures the NSF ability to put its surplus accumulated during the year to effective use in the future through its contractual commitments towards skills development at year-end. The dawn of the new NSDS III has facilitated significant improvement in the NSF resulting in a higher commitment towards skills development grants, which resulted in improved grant disbursement efficiencies. Not only have the NSF started to put its annual revenue to effective use towards skills development, but also its accumulated reserves.

6 Minimum of 70% of cumulative grants revenue received over the NSDS period disbursed as skills development grants over the NSDS period by the outer year.

Percentage of cumulative grants revenue received to date over the NSDS period disbursed as skills development grants to date over the NSDS period.


This indicator measures the NSF’s grants disbursements efficiency since the dawn of the NSDS III in April 2011. The new NSDS III has facilitated significant improvement in the NSF resulting in a higher commitment towards skills development grants, which resulted in improved grant disbursement efficiencies. Not only have the NSF started to put its annual revenue to effective use towards skills development, but also its accumulated reserves.

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2012/13

planned target

2013/14

actual achievement

2013/14

deviation from

planned target


for 2013/2014


7 Minimum of 95% of skills reserves accumulated over the NSDS period contractually committed towards skills development grants by the outer year of the NSDS period.

Percentage of skills reserves accumulated to date over the NSDS period contractually committed towards skills development grants at the end of the year.


This indicator measures the NSF ability to put its entire surplus accumulated surplus at year-end (surplus accumulated both in the current and prior years) to effective use in the future through its contractual commitments towards skills development at year-end. The dawn of the new NSDS III has facilitated significant improvement in the NSF resulting in a higher commitment towards skills development grants, which resulted in improved grant disbursement efficiencies. Not only have the NSF started to put its annual revenue to effective use towards skills development, but also its accumulated reserves.

8 Minimum of 95% of remaining skills reserves accumulated at inception of the NSDS period contractually committed towards skills development grants at the end of the NSDS period.

Percentage of remaining skills reserves accumulated at inception of the NSDS period contractually committed towards skills development grants at the end the NSDS period.


This indicator measures the NSF ability to put its surplus accumulated during prior NSDS periods to effective use in the future through its contractual commitments towards skills development at year-end. The dawn of the new NSDS III has facilitated significant improvement in the NSF resulting in a higher commitment towards skills development grants, which resulted in improved grant disbursement efficiencies. Not only have the NSF started to put its annual revenue to effective use towards skills development, but also its accumulated reserves.

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actual achievement

2012/13

planned target

2013/14

actual achievement

2013/14

deviation from

planned target


for 2013/2014


9 Minimum of 50% of skills reserves accumulated at inception of the NSDS period disbursed as skills grants at the end of the NSDS period.

Percentage of skills reserves accumulated at inception of the NSDS period disbursed as skills grants at the end of the current year.

0% 95% 2% 93 % under-achievement

This indicator measures how the NSF started to put its surplus accumulated during prior NSDS periods to effective use during the current financial year. The dawn of the new NSDS III has facilitated significant improvement in the NSF resulting in a higher commitment towards skills development grants, which resulted in improved grant disbursement efficiencies. Not only have the NSF started to put its annual revenue to effective use towards skills development, but also its accumulated reserves. The NSF only started to put its accumulated reserves from prior NSDS periods to effective use within the current financial year and it is expected that the percentage will increase in the next financial year going forward as the NSF meets its high commitments towards skills development.

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Programme 2: NSF Operations

Drive the National Skills Fund towards increased excellence in skills development funding by enhancing the administrative and operational excellence of the National Skills

Fund.

revised strategic target for the nsdsiii period 2011/12 to 2015/16


actual achievement

2012/13

planned target

2013/14

actual achievement

2013/14

deviation from

planned target


for 2013/2014


1 Set at least 3 key administrative and operational goals to achieve per year over the NSDS period.

Number of key administrative and operational goals achieved per year over the NSDS period.

N/A. New indicator for 2013/14 financial year and was not used to measure performance for the 2012/13 financial year.

11 goals 1 goal10 goals under-

achieved

The under-achievement was mainly due a delay in the appointment of a service provider to assist the NSF in establishing itself as a fully-fledged public entity. The appointment has occurred shortly after year-end and the administrative targets will be achieved within the next two years as part of the NSF public entity project. The delay in the appointment of the service provider was mainly due to a delay in the DHET procurement processes.

2 Achieve 17 key administrative and operational goals in total over the NSDS period.

Number of key administrative and operational goals achieved in total over the NSDS period.


11 goals 1 goal10 goals under-

achieved

The under-achievement was mainly due a delay in the appointment of a service provider to assist the NSF in establishing itself as a fully-fledged public entity. The appointment has occurred shortly after year-end and the administrative targets will be achieved within the next two years as part of the NSF public entity project. The delay in the appointment of the service provider was mainly due to a delay in the DHET procurement processes.

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2012/13:

skills deVelOpMent (national skills development services)

strategic objectives


actual achievement 2011/2012

planned target

2012/2013

actual achieve-

ment2012/2013

deviation from

planned target


for 2012/2013


Provide funds to support projects that are national priorities in the NSDS, that advance the Human Resource Development Strategy (HRDS) of South Africa and that support the NSA in its work.

Amount earmarked to support projects of national priority


R 2,2 billion earmarked to support

projects that are of national priority

R8,833 billion R6,633 billion over-achievement

The NSF’s high level of performance in committing funds towards skills development projects of national priority during the past financial year lead to the over-achievement.

Number of projects supported by National Skills Fund


262 projects supported by National Skills Fund by outer

Year

157 projects 105 projects under-

achievement

The NSF funded projects of higher amounts and learner numbers. Hence the NSF over-achieved on the amounts earmarked target and the number of learners trained even though the number of projects as target was not achieved.

Number of learners trained in NSF projects


32 179 learners

trained in NSF projects

95 554 learners

63 375 over- achievement

The NSF’s high level of performance of disbursing funds towards skills development projects during the past financial year lead to the over-achievement.

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Strategy to overcome areas of under performance

The NSF will consider reviewing the relevance of the number of projects as an

indicator for performance as the indicator does not reflect the true performance of

the Fund. The NSF over-achieved on the number of learners benefitting from the

skills development projects and overachieved on the amount earmarked towards

skills development projects. This is due to the fact that NSF funded higher value

projects benefitting more learners per project.

The NSF will continue to implement its current commitments, which will effectively

result in the NSF utilising its accumulated reserves from prior NSDS periods and

therefore contribute towards achieving indicator 9 on Programme 1 – Skills

Development Funding.

The NSF has started with the transformation of the Fund from a directorate within

the Skills Development Branch in the Department of Higher Education and Training

into a fully-fledged public entity.

Changes to planned targets

No changes were made to planned targets during the 2014 financial year.

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Linking performance with budgets

programme name

2013/2014 2012/2013

budget actualexpenditure

(Over)/under expenditure budget actual

expenditure(Over)/

under expenditure

R’000 R’000 R’000 R’000 R’000 R’000

Skills Development 5 662 117 3 594 317 2 067 800 4 086 724 2 619 157 1 467 567

Total 5 662 117 3 594 317 2 067 800 4 086 724 2 619 157 1 467 567

5. SUMMARY OF FINANCIAL INFORMATION

5.1 reVenue cOllectiOn

sources of revenue

2013/2014 2012/2013

estimate actual amount collected

(Over)/under collection estimate actual

amount collected(Over)/

under collection

R’000 R’000 R’000 R’000 R’000 R’000

Skills Development Levies 2 407 603 2 416 365 (8 762) 2 280 000 2 244 379 35 621

Income from SETAs - 514 581 (514 581) - - -

Finance Income 398 982 356 893 42 089 378 182 393 215 (15 033)

Other Income - 34 171 (34 171) - - -

Total 2 806 585 3 322 010 (515 510) 2 658 182 2 637 594 20 588

The Skills Development Levies and interest received from investments were on par with the amounts estimated. The actual revenue received exceeded the budgeted revenue

by 21.7%, mainly due to income received from the SETAs earmarked towards the TVET college infrastructure development initiative that were not budgeted for in the current

year.

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5.2 prOgraMMe expenditure

programme name

2013/2014 2012/2013

budget actual expenditure

(Over)/under

expenditure

budget actual expenditure

(Over)/under

expenditure

R’000 R’000 R’000 R’000 R’000 R’000

Skills Development 5 662 117 3 594 317 2 067 800 4 086 724 2 619 158 1 467 567

NSF Operations 207 631 85 428 117 236 191 675 76 038 115 633

Total 5 869 748 3 679 745 2 190 003 4 278 399 2 695 196 1 583 204

The actual skills development grant disbursements were 36.5% below budget, which can mainly be attributed to the following:

1. Delays in the appointment of construction companies to start construction on the new TVET college campuses resulted in R705,729 million (20% of budget difference) not being disbursed in the current financial year, which will be rolled over to the next financial year;

2. There has been generally slow progress on the implementation of skills development projects with the various TVET colleges, resulting in R361,281 million (10% of budget difference) not being disbursed in the current financial year, which will be rolled over to the next financial year;

3. There has been slow progress in new commitments towards co-operatives, small enterprises, NGO’s & community training initiatives, mainly due to the NSF’s current high level of commitments; and

4. The payment of post-graduate bursaries of R132,916 million towards the National Research Foundation occurred subsequent to year-end and not as budgeted within the current financial year (4% of budget difference).


PART C Governance

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1. INTRODUCTION

Corporate governance embodies processes and systems by which public entities

are directed, controlled and held to account. In addition to legislative requirements

based on a public entity’s enabling legislation, corporate governance with regard to

public entities is applied through the precepts of the Public Finance Management

Act (PFMA) and run in tandem with the principles contained in the King’s Report

on Corporate Governance.

Parliament, the Executive and the Accounting Authority of the public entity are

responsible for corporate governance.

2. PORTFOLIOCOMMITTEES

For the year under review, the National Skills Fund attended Portfolio Committee

engagements as part of the DHET team since it operated, in all material respects,

as a programme within the Department. This has meant that the committee did

not single out the NSF for specific areas of implementation other than what would

have been applicable to the entire Skills Development Branch under which the NSF

operated as a departmental programme.

3. EXECUTIVEAUTHORITY

As per the requirements of the PFMA, the National Skills Fund reported quarterly

to the Minister of Higher Education and Training as the executive authority of the

Fund. These quarterly reports entail the reporting on the NSF’s financial status,

compliance with the PFMA and Treasury Regulations and performance information.

4. THEACCOUNTINGAUTHORITY

intrOductiOn

The Director-General of Higher Education and Training is the accounting authority

of the National Skills Fund as stipulated in section 29(1) of the Skills Development

Act.

The Director General of Higher Education and Training is responsible for the control

of the Fund and ultimately accountable to the Minister and Parliament for the

Fund’s performance, strategic direction and money spent by the Fund. Within

the framework of the Director-General’s delegations of authority, the day-to-day

operations of the NSF are managed by the Executive Officer.

The NSF further reports through the governance structures set by the Department

of Higher Education and Training. These include the Skills Development Branch

Management Meetings, the Senior Management Meetings and the Ministerial

Management Meetings.

the rOle Of the accOunting authOrity is as fOllOws:

As accounting authority of the National Skills Fund, the Director-General of Higher

Education and Training has amongst others the following responsibilities:

1. To manage the Fund in accordance with the Public Finance Management Act;

2. Keep a proper record of all financial transactions, assets and liabilities of the Fund;

3. Prepare annual financial statements for the Fund in the prescribed form;

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7. INTERNALAUDITANDAUDITCOMMITTEES

key actiVities and ObjectiVes Of internal audit

The objective of the internal audit function is to provide independent, objective

assurance and consulting services designed to add value and improve the NSF

operations. It helps the NSF accomplish its objectives by bringing a systematic,

disciplined approach to evaluate and improve the effectiveness of risk management,

control, and governance processes.

The main activities of Internal Audit are:

• Compile three year rolling strategic and annual audit plan

• Performing internal audit on the following systems:

– Risk management systems:

– Control systems

– Governance systems

• Report to management and the Audit Committee.

audit wOrk

The following activities as per audit plan were completed:

• Corporate Governance

• Compliance with laws and regulations

• Review of quarterly monitoring reports on projects

• Audit of funding windows

• Audit of commitments

4. Subject to the laws governing the public service, appoint the executive officer of the Fund, who will, upon such appointment, be in the employ of the public service;

5. To prescribe a limit for the amount that can be used in the administration of the Fund; and

6. To submit the annual financial statements to the National Skills Authority for information as soon as possible after they have been prepared.

cOMpOsitiOn Of the accOunting authOrity

The Director-General of Higher Education and Training, Mr Gwebinkundla Fellix

Qonde, is the accounting authority of the National Skills Fund as per section 29(1)

of the Skills Development Act.

reMuneratiOn Of accOunting authOrity

The Director-General of Higher Education and Training does not receive any

remuneration in his capacity as the accounting authority of the National Skills Fund.

5. RISKMANAGEMENT

The risk management activities of the NSF are covered by the NSF's risk assessment.

6. INTERNALCONTROL

Management has focused on improving internal control through its partnership

with the DHET in terms of the Memorandum of Agreement with the latter as well

as assistance from internal audit.

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8. COMPLIANCEWITHLAWSANDREGULATIONS

The NSF aims to embed compliance with laws and regulations throughout its

organisation as an integral part of all relevant processes.

To assist with compliance monitoring, the NSF uses the DHET’s Compliance Calendar

to ensure compliance with all required documentation in terms of the PFMA and

Treasury Regulations, within legislated deadlines.

The NSF also uses the National Treasury template to assess compliance with laws

and regulations on a quarterly basis as part of the quarterly reporting process to

the executive authority.

Action plans to address non-compliance are developed and the implementation

thereof monitored regularly.

The NSF also attends various other committee meetings to keep abreast of laws

and regulations that need to be complied with.

9. FRAUDANDCORRUPTION

The activities of the NSF are covered within the Good Governance Policy, which

includes fraud prevention, compiled by the Directorate: Internal Audit of the

Department of Higher Education and Training.

The NSF uses the whistle blowing policy of the DHET while the Memorandum of

Agreement for shared services with DHET exists.

No cases of fraud have become known to the NSF during the current financial year.

key actiVities and ObjectiVes Of the audit cOMMittee

The objective of the Audit Committee is to assist the Accounting Authority in

fulfilling oversight responsibilities regarding the financial reporting process, the

system of internal control and management of risks, the audit process, and the

monitoring of compliance with laws and regulations.

The main activities are:

• Consider the effectiveness of the internal control systems;

• Understand the scope of internal and external auditor’ review of internal control over financial reporting, and obtain reports on significant findings and recommendations together with management’s responses;

• Assess whether the Fund's assets have been properly safeguarded and used;

• Review the NSF risk profile on an annual basis and ensure management is effectively managing the risks;

• Review the effectiveness of the system for monitoring compliance with laws and regulations and the results of management’s investigation and follow-up (including disciplinary action) of any instances of non-compliance; and

• Review the adequacy, reliability and accuracy of the financial information provided to management and other users of such information and annually review the Annual Financial Statements and recommend its approval to the Director-General.

Attendance of audit committee meetings:

Name of member Number of meetings attended

Prof. DP van der Nest 5

Ms S Padayachy 4

Mr S Makhubu 5

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15.AUDITCOMMITTEEREPORT

We are pleased to present our report for the financial year ended 31 March 2014.

audit cOMMittee MeMbers and attendance:

The Audit Committee consists of the members listed hereunder and should meet

at least four times per annum as per its approved terms of reference. During the

current year five meetings were held.

Attendance of audit committee meetings:

Name of member Number of meetings attended

Prof. DP van der Nest 5

Ms S Padayachy 4

Mr S Makhubu 5

audit cOMMittee respOnsibility

The Audit Committee reports that it has complied with its responsibilities arising from Section 51(1)(a)(ii) of the Public Finance Management Act and Treasury Regulation 27.1. The Audit Committee also reports that it has adopted appropriate formal terms of reference as its committee charter, has conducted its affairs in compliance with this charter and has discharged all its responsibilities as contained therein.

the effectiVeness Of internal cOntrOl

The system of internal control is designed to provide cost-effective assurance that assets are safeguarded and that liabilities and working capital are effectively managed. In line with the PFMA requirements, internal audit and the Auditor-General South Africa (AGSA) provide the Audit Committee and management with assurance that the internal controls are adequate and effective. This is achieved by

10.MINIMISINGCONFLICTOFINTEREST

Through the Memorandum of Agreement with the Department of Higher Education

and Training for shared services, the NSF has permission from the Department

of Higher Education and Training to use its bid committees, which follow the

Department’s supply chain management policy.

11.CODEOFCONDUCT

The NSF employees are bound by the Code of Conduct of the DHET as all NSF

employees are currently employed by the Department of Higher Education and

Training.

12.HEALTHSAFETYANDENVIRONMENTALISSUES

The NSF is situated in the offices of the DHET. The building is being upgraded

to comply with the necessary Health Safety and Environmental issues. One major

concern is limited parking and unfriendly access to parking.

13.SOCIALRESPONSIBILITY

Not applicable to the NSF for the 2014 financial year.

14.MATERIALITYANDSIGNIFICANCEFRAMEWORK

The NSF prepared its Materiality and Significance Framework which has been

approved by the Director-General of Higher Education and Training as the

Accounting Authority of the NSF and submitted to the Minister for concurrence.

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• reviewed the AGSA’s management report and management’s response

thereto;

• reviewed changes in accounting policies and practices;

• reviewed the NSF compliance with legal and regulatory provisions;

• reviewed significant adjustments resulting from the audit; and

• reviewed information on predetermined objectives to be included in the

annual report.

The Audit Committee concurs with, and accepts the AGSA’s conclusions 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 AGSA. There

were material misstatements identified during the audit of the financial statements,

these were adjusted by management.

internal audit

The Audit Committee is satisfied that the internal audit function is operating

effectively and that it has addressed the risks pertinent to the National Skills Fund

in its audits. Additional capacity was obtained for internal audit and they were able

to complete all the audits approved in the coverage plan by the Audit Committee.

auditOr-general sOuth africa

The Audit Committee has met with the Auditor-General South Africa to ensure that

there are no unresolved issues.

means of evaluating the effectiveness of the management of identified risks, as

well as the identification of corrective actions and suggested enhancements to the

controls and processes.

The system of internal control was not entirely effective during the year under

review, as several instances of non-compliance with internal controls were reported

by both Internal Audit and the AGSA. It is a concern for the Audit Committee that

a number of the matters raised by the AGSA are repeat findings from one or more

previous years. The Audit Committee will continue to monitor progress against the

corrective action plans implemented by management.

The system of control over the generation, collation and reporting of performance

information requires improvement. This continues to be an area of concern to the

Audit Committee.

The lack of an integrated financial management system for NSF has resulted in

ineffective control over financial reporting.

the quality Of in-year ManageMent and MOnthly/quarterly repOrts subMitted in terMs Of the pfMa

The Audit Committee is satisfied with the content and quality of monthly and

quarterly reports prepared and issued by the Accounting Authority of the National

Skills Fund during the year under review.

The reporting of performance information against set objectives continues to be a

cause for concern.

eValuatiOn Of financial stateMents

The Audit Committee has:

• reviewed and discussed the audited financial statements to be included in

the annual report, with the AGSA and the Accounting Officer;


cOnclusiOn

The Audit Committee congratulates the National Skills Fund for achieving an

unqualified audit report for the year under review. Our appreciation is also extended

to management, the Chief Financial Officer and staff for their efforts regarding the

financial statements for the year and to the team from the AGSA for the value they

continue to add to the NSF. The Audit Committee will monitor the improvements

made by management in addressing control deficiencies identified by external and

internal audit.

PROFD.P.VANDERNESTCHAIRPERSONOFTHEAUDITCOMMITTEE31 July 2014

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PART D Human Resource Management

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1. INTRODUCTION

The Nationals Skills Fund has a current funded staff establishment of 144 posts of which 87 posts are vacant. All employees of the NSF are currently employed by the Department of Higher Education and Training within the public service as the NSF operated as a programme under the Department prior to its listing as a public entity on 12 October 2012. The NSF refunds the Department for the employee costs incurred by the Department on behalf of the NSF.

The key HR priorities to be addressed during the next financial year are the following:

Addressing the current capacity constraints in the Fund, with specific reference to the following:

• capacity constraints experienced in relation to the initiation, support, monitoring and evaluation and financial management of projects;

• capacity constraints experienced with regards to financial management of the Fund; and

• capacity constraints experienced with regards to support services required with the establishment of the NSF as a fully-fledged public entity.

PART D Human Resource Management

These capacity constraints will be prioritised within the next two financial years.

The NSF is embarking on a process to establish itself as a fully-fledged public entity, whilst at the same time improving its efficiency and effectiveness.

All employees are required to sign performance agreements with their immediate supervisors, which is assessed quarterly and annually. The NSF’s performance management framework will be reviewed as part of improving the Fund’s efficiency during the establishment of the Fund as a fully-fledged public entity.

2. HUMANRESOURCEOVERSIGHTSTATISTICSPersonnel Cost by programme

ProgrammeTotal Expenditure for the

entity (R’000)Personnel Expenditure

(R’000)

Personnel Expenditure. as a % of total

expenditure (R’000)Number of employees

Average personnel cost per employee (R’000)

Skills Development 3 233 871 24 307 0.75% 58 419

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Personnel cost by salary band

Level Personnel Expenditure (R’000)% of Personnel Expenditure to total personnel cost (R’000)

Number of employeesAverage personnel cost per

employee (R’000)Top Management 4 422 18.2% 5 884Senior Management 8 055 33,2% 12 671Skilled 11 830 48.6% 41 289Semi-skilled 0 0% 0 0TOTAL 24 307 100% 58 419

Performance Rewards

Programme Performance rewards (R’000) Personnel Expenditure (R’000)% of performance rewards to total

personnel cost (R’000)Top Management 0 4 422 0%Senior Management 180 8 055 2.2%Skilled 236 11 830 2.0%Semi-skilled 0 0 0%TOTAL 593 24 307 2.4%

Training Costs

Directorate/Business Unit Personnel Expenditure (R’000)Training Expenditure

(R’000)Training Expenditure as a % of

Personnel Cost

NSF staff establishment 24 307 103 0.4%

Employment and vacancies

Programme2012/2013

Number of Employees2013/2014 Approved

Posts2013/2014

Number of Employees

2013/2014

Vacancies% of vacancies

Skills Development 42 144 58 86 60%

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Programme

20

12

/2013

Num

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of

Empl

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20

13/2

014

App

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20

13

/2014

Num

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Empl

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20

13/2

014

Vaca

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% of vacancies

Top Management

4 6 5 1 17%

Senior Management

8 21 12 9 43%

Professional qualified

0 0 0 0 0%

Skilled 30 117 41 76 65%

Semi-skilled 0 0 0 0 0%

Unskilled 0 0 0 0 0%

TOTAL 42 144 58 86 60%

Employment changes

Salary BandEmployment at beginning

of periodAppointments Terminations

Employment at end of the

periodTop Management

5 0 0 5

Senior Management

12 0 0 12

Professional qualified

0 0 0 0

Skilled 40 2 1 41

Semi-skilled 0 0 0 0

Unskilled 0 0 0 0

Total 57 2 1 58

Reasons for staff leaving

Reason Number % of total number of staff leaving

Death 0 0%

Resignation 0 0%

Dismissal 0 0%

Retirement 0 0%

Ill health 0 0%

Expiry of contract 0 0%

Other 1 1.7%

Total 0 0%

No staff left during the past financial year.

Labour Relations: Misconduct and disciplinary action

Nature of disciplinary Action Number

Verbal Warning 0

Written Warning 0

Final Written warning 0

Dismissal 0

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Equity Target and Employment Equity Status

Levels

MALE

African Coloured Indian White

Current Current Current Current

Top Management 2 0 0 2

Senior Management 4 2 0 0

Professional qualified 0 0 0 0

Skilled 17 0 0 1


Unskilled 0 0 0 0

TOTAL 23 2 0 3

Levels

FEMALE

African Coloured Indian White

Current Current Current Current

Top Management 1 0 0 0

Senior Management 5 0 0 1

Professional qualified 0 0 0 0

Skilled 16 0 0 7


Unskilled 0 0 0 0

TOTAL 22 0 0 8

Levels

Disabled Staff

Male Female

Current Current

Top Management 0 0

Senior Management 0 0

Professional qualified 0 0

Skilled 0 1

Semi-skilled 0 0

Unskilled 0 0

TOTAL 0 1

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PART E Financial Information

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1. STATEMENTOFRESPONSIBILITY

stateMent Of respOnsibility fOr the annual financial stateMents fOr the year ended 31 March 2014

The Accounting Authority is responsible for the preparation of the public entity’s annual financial statements and for the judgements made in this information.

The Accounting Authority is responsible for establishing and implementing a system of internal control designed to provide reasonable assurance as to the integrity and reliability of the annual financial statements.

In my opinion, the financial statements fairly reflect the operations of the public entity for the financial year ended 31 March 2014.

The external auditors are engaged to express an independent opinion on the AFS of the public entity.

The Annual Financial Statements of the public entity set out on page 70 to page 135 have been approved.

GWEBINKUNDLAFELLIXQONDEDIRECTOR-GENERALOFHIGHEREDUCATIONANDTRAINING

MVUYISIMACIKAMAEXECUTIVEOFFICERNATIONALSKILLSFUND

31 July 2014

2. REPORTOFTHEEXECUTIVEOFFICER

general financial reView Of the public entity

This report marks the third year of implementation under the new NSDS III. As with

the previous two years under NSDS III, the Fund continued to increase its grants

disbursements towards skills development projects of national priority as identified

in the NSDS III and skills development projects as identified by the Director-General

as priority towards achieving the Skills Development Act.

With the move of the NSF to the DHET in 2010, the deliberate interventions of

the DHET towards improving the performance of the NSF can be clearly noted in

the NSF’s consistent increase in skills development grants disbursements, as illustrated in the graph below.

Years

NSDS I NSDS II NSDS III NSDS IV

Current Position (2013/14): Grants disbursements of R3,594 billion exceeding total revenue of R3,322 billion by R0,272 billion.

Skills Development Grants vs Revenue R'000

Skills Development Grants Revenue

R'0

00

1,000,000 -

2,000,000 3,000,000 4,000,000 5,000,000 6,000,000

2004/05

2005/06

2006/07

2007/08

2008/09

2009/10

2010/11

2011/12

2012/13

2013/14

2014/15

2015/16

2016/17

2017/18

2018/19

PART E Financial Information

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1,000,000 -

2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 9,000,000

R'0

00

Years

NSDS I NSDS II NSDS III NSDS IV

Decline in Accumulated Surplus

2004

/05

2005

/06

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

2012

/13

2013

/14

2014

/15

2015

/16

2016

/17

2017

/18

2018

/19

Current Position (2013/14): Grants disbursements of R3,594 billion exceeding total revenue of R3,322 billion by R0,272 billion,

resulting in the decline in accumulated surplus.

The Funds improved capability to manage higher levels of grants disbursements

has laid a solid foundation for continued improvement in skills development funding under the next NSDS IV.

The NSF’s R3,1 billion grants disbursements towards skills

development projects during the past financial and remaining R11,3 billion in contractual commitments can be attributed to the following:

1. R1,776 BILLION DISBURSED TOWARDS BURSARIES, WITH A R1,715 BILLION COMMITMENT REMAINING

The NSF has disbursed R1,776 billion towards undergraduate and postgraduate bursaries as a priority identified by the Director-General in support of the Higher Education sectors. This support has benefitted 29 136 undergraduate and 1 026 postgraduate students respectively. As at 31 March 2014, R1,715 billion remains committed towards bursaries until the end of the NSDS III.

The NSF has a R1,399 billion commitment towards funding undergraduate

bursaries via the National Student Financial Aid Scheme (NSFAS) over the remainder

As indicated in the graph, The NSF’s annual grants disbursement towards skills

development has been increasing consistently year-on-year since the launch of the

NSDS III:

1. 1st Year of NSDS III (2011/12 year): Grants disbursements increased with 131% from R564 million to R1,3 billion; and

2. 2nd Year of NSDS III (2012/13): Grants disbursements increased with 97% from R1,3 billion to R2,6 billion.

3. 3rd Year of NSDS III (2013/14): Grants disbursements increased with 19% from R2,6 billion to R3,1 billion.

These increases within the respective NSDS III years represent a 430% increase in

the average grants disbursement rate under the previous NSDS II and are a clear

indication that the NSF’s performance under NSDS III has increased significantly.

Spending trends of the Fund, including new and proposed activities

It is expected that the NSF will maintain its systematic increase in grants

disbursements over the next two years until the end of the NSDS III period

(31 March 2016) as the NSF meets its current contractual commitments of R11,3 billion towards skills development. As these current commitments become due, it is expected that

the NSF’s accumulated surpluses will gradually decline towards the end of the NSDS

III period, as illustrated in the graph below:

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3. R457 MILLION DISBURSED TOWARDS SKILLS INFRASTRUCTURE DEVELOPMENT OF NATIONAL PRIORITY, WITH A R3,061 BILLION COMMITMENT REMAINING

TheNSF’sprioritiestoaddressskillsinfrastructureisintendedtocontributetothebuildingandrevitalisationof theskills infrastructure thatwill lead toexpandedaccessanddeliveryofskillsfundedthroughthelevysystem.Thefollowingareashavebeenprioritised:

• Recapitalisationofpublicdeliveryinfrastructure;

• CommunityEducationCentres;

• SkillsDevelopmentInstitutes;and

• State-ownedenterprises.

During the2014financialyear, theNSFdisbursedR457million towardsskillsinfrastructuredevelopmentasnationalpriorityofgovernment.

Asat31March2014,R3,061billionremainscommittedtowardsthefollowingkeyskillsinfrastructuredevelopmentprojectsofnationalpriority:

• University of Pretoria

R106 million was disbursed towards the University of Pretoria for expanding

the University’s medical and veterinary facilities, with a R344 million

commitment remaining towards completion of the skills infrastructure

development project. The expansions of the University of Pretoria’s medical

and veterinary facilities are key public delivery infrastructure that will increase

the number of medical doctors and veterinaries trained annually. Both

skills are scarce and critical skills for South Africa to address the demands

posed by the National Health Insurance scheme to make health universally

accessible to every citizen of the country and to address an urgent need for

food security and general animal health.

of the NSDS III period. This will result in an annual contribution of approximately R466 million by the NSF towards the NSFAS. The NSFAS has financially assisted many financially needy, but eligible students to obtain their qualification in the past.

The NSF has further committed R310 million towards funding postgraduate bursaries via the National Research Foundation (NRF) over the remainder of the NSDS III period. This will result in an annual contribution of approximately R103,3 million by the NSF towards the NRF. The increase in PhD’s will contribute towards the achieving the objectives as outlined in the National Development Plan, the New Growth Path, the Industrial Policy Action Plan and the Department of Science and Technology’s Ten-Year Innovation Plan.

2. R480 MILLION DISBURSED TOWARDS TVET COLLEGE SECTOR EXPANSION, WITH R1,702 BILLION COMMITMENT REMAINING

The NSF has disbursed R480 million towards the TVET colleges for expansion of their current student intake and building of the colleges’ capacity as a national priority identified in the NSDS III. This support has benefitted an additional 25 850 learners within the TVET college sector. As at 31 March 2014, R1,702 billion remains committed towards expansion of the TVET college sector until the end of the NSDS III.

Funding towards the TVET colleges is aimed at expanding the colleges’ student intake into technical and vocational education and training programmes (e.g. NCV and Report 191 programmes), as well as new skills development interventions aimed at work integrated learning such as learnerships, internships and work integrated skills programmes. The increased learner intake into the TVET college sector contributes towards increasing the number of artisans and technicians developed annually.

This is in line with the National Development Plan and the National Skills Development Strategy (NSDS III) aimed at increasing the number of artisans and technicians developed annually and promoting growth within the public TVET college system that is responsive to sector, local, regional and national skills needs

and priorities.

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energy production and gradually reduce the country’s carbon footprint. The

Department has seen it fit to establish this dedicated education and training

capacity for the country to produce high and middle level skills in the area

of renewable energy, which is currently an area of growth within the South

African economy.

The renewable energy skills infrastructure development project at the Cape

Peninsula University of Technology has begun during the current financial

year and is well on course according to plan for completion in the 2016/17

financial year.

• 12 new TvET College Campuses and refurbishment of 4 existing TvET College Campuses

R223,073 million disbursed towards planning the development and

refurbishment of the 16 TVET college campuses (12 new and 4 existing

campuses), with a R2,438 billion commitment remaining. The TVET college

campuses are developed in geographical areas close to communities in high

demand for post school education facilities, based on the density of the

population within each identified area and the unavailability of sufficient

school education and training facilities within the region. It is vital to provide

these South Africans communities from these geographical locations with

the opportunity towards acquiring a skill, relevant to the workplace, by

establishing sufficient campuses closer to their communities. The 2011

census indicates that there is over 3 million out of school youth of ages

between 15 to 25, who are neither in education, employment nor any

kind of training and with less than a grade 12 qualification. The state and

its respective institutions have the ultimate responsibility, as a last line of

defence, to ensure that education and training opportunities are made

available to overcome the skills shortage and high unemployment in the

country.

The physical construction of the new 12 TVET college campuses is due to

begin within the 2014/2015 financial year.

These skills infrastructure development projects at the University of Pretoria

have already begun in the 2013 financial year and are well on course

according to plan for finalisation in the 2015/16 financial year.

• University of johannesburg

R96 million was disbursed towards the University of Johannesburg and

R159 million remains committed towards establishing work-integrated

learning facilities for engineering students, which includes a training

workshop, design centre and industrialisation centre. These facilities, as key

public delivery infrastructure, are critical to improve the production of quality

engineers for the entire university sector. Engineers are a scarce and critical

skills for South Africa, especially taking cognisance of South Africa’s ratio of

engineers to citizens in comparison with other BRICS countries. This shortage

of engineers can be partly contributed towards the lack of work integrated

learning for a large number of engineering graduates as a result of the lack

of workplace opportunities. The work-integrated learning facilities at the

University of Johannesburg aim to overcome this challenge. These facilities,

in the form of a production environment, will be accessible to all engineering

students in need of work integrated learning, irrespective of the university

or origin.

This skills infrastructure development project at the University of

Johannesburg have already begun in the 2013 financial year and is well on

course according to plan for finalisation in the 2015/16 financial year.

• Cape Peninsula University of Technology

R8,492 million was disbursed towards the Cape Peninsula University

of Technology and R101,88 million remains committed towards the

establishment of renewable energy training facilities. These facilities, as key

public delivery infrastructure, are critical in the production of a set of new

skills required for the green economy. This initiative, being the first of its kind

in the country, seeks to respond to the country’s adopted strategy to promote

renewable energy production in order to supplement the current fossil fuel

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• Harry Oppenheimer Diamond Training School Project, with 31 students enrolled on learnerships to obtain practical skills on top and bottom polishing of diamonds.

5. R65 MILLION DISBURSED TOWARDS THE IPAP, WITH R301 MILLION COMMITMENT REMAINING

The NSF has disbursed R65 million towards skills development projects contributing towards achieving the objectives of the Industrial Policy Action Plan (IPAP) as a national priority identified in the NSDS III. As at 31 March 2014, R301 million remains committed towards IPAP skills development projects.

Amongst the various projects contributing towards achieving the IPAP, is the DTI

Tool and Die Initiative, aimed at training 1 610 learners as Tool and Die makers

within the manufacturing sector, who are considered pivotal to the manufacturing

industry.

6. R103 MILLION DISBURSED TOWARDS RURAL DEVELOPMENT, WITH R605 MILLION COMMITMENT REMAINING

The NSF has disbursed R103 million towards rural skills development projects as a national priority identified in the NSDS III, with R605 million remaining committed towards the rural skills development projects.

These commitments includes amongst others the following:

• R194 million committed towards the Expanded Public Works Programme (EPWP Programme) aimed at employing and skilling unemployed people for EPWP projects until the end of the NSDS III;

• R161 million committed towards the NARYSEC Project, aimed at skills development amongst rural youth on a variety of skills development programmes;

• R79 million committed towards the Sisonke Economic Development Agency for the provision of skills development programmes to benefit the previously

4. R304 MILLION DISBURSED TOWARDS THE NEW GROWTH PATH, WITH R488 MILLION COMMITMENT REMAINING

The NSF has disbursed R304 million towards skills development projects contributing towards achieving the objectives of the New Growth Path as a national priority identified in the NSDS III. As at 31 March 2014, R488 million remains committed towards the New Growth Path skills development projects.

Amongst the various projects contributing towards achieving the New Growth

Path, are the following:

• TRANSNET Rail Engineering Project, aimed at training 1 000 artisans to work on the railways of South Africa;

• SAMSA Project, aimed at developing 420 learners in a variety of maritime skills programmes, which includes cadetships, maritime engineers and workplace training programmes. The project also aims to increase the capacity of the TVET college sector to be more responsive to the maritime industry. The objective of the project is to increase South Africa’s maritime skills capacity and thereby increasing South Africa’s participation in the global seafarer job market.

• Agriseta & Commissioner for Land Rights Restitution Project, aimed at providing skills development to 4 750 learners linked to land restitution, which includes amongst others farm management, technical farming skills, governance & leadership;

• Vukani Aviation Project, aimed at training 100 learners on the national aviation cadet programme;

• SAICA Municipalities Project, aimed at providing financial skills development to 1 000 municipal finance staff;

• Lepelle Northern Water Project, aimed at developing scarce skills in the water sector in Limpopo, which includes water & waste treatment reticulation, plumbing, electrical, mechanical and internship programmes; and

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• Developing a skills plan for the Strategic Integrated Projects of the National Infrastructure Plan

• Prioritisation model for the development of artisan trades

Through funding the NSF contributed towards the development of a

prioritisation model for the development of artisan trades, involving the

identification of priority artisan trades for development to ensure that the

current needs in the country are met. This has led to the creation of the call

centre at the Ekurhuleni East TVET College, which manages this process for

the country.

8. R107 MILLION DISBURSED TOWARDS STRENGTHENING THE TVET COLLEGE SECTOR

The NSF has disbursed R92 million towards various key interventions and initiatives

aimed at strengthening the TVET college sector, with a remaining commitment of

R49 million as at 31 March 2014.

Amongst these key interventions and initiatives funded are the following:

• TVET college improvement projects for all Limpopo TVET colleges and all Eastern Cape TVET colleges. The objectives of the improvement projects are to:

a. strengthen or establish effective management and governance;

b. support colleges to develop structured and relevant policies, strategies and procedures;

c. improve teaching and learning capacity in the colleges;

d. improve capacity to support students in colleges;

e. develop and implement clear monitoring, evaluation and reporting framework and capacity in colleges; and

f. develop a capitalization plan for colleges and the capacity to manage their implementation.

disadvantaged communities of the Sisonke District Municipality that will alleviate poverty, reduce unemployment and increase job creation.

7. R25 MILLION DISBURSED TOWARDS ESTABLISHING A CREDIBLE SKILLS PLANNING MECHANISM WITHIN AN INTEGRATED POST SCHOOL EDUCATION SYSTEM

The NSF has disbursed R25 million towards various key academia, research and

broader skills system development projects aimed at establishing a credible skills

planning mechanism within an integrated post school education system, with a

remaining commitment of R117 million as at 31 March 2014.

The investments into the various key projects have taken the process of developing

a credible skills mechanism a long way.

Amongst these key projects funded are the following:

• Labour Market Intelligence System

The NSF funded the development of the Labour Market Intelligence System.

This system will be able to provide strategic demand side information for

skills planning. The system is developed in partnership with the HSRC, Wits

EPU and ADRS.

• Integrated Higher Education and Training Management Information System

The NSF contributed funding to the development of an integrated Higher

Education and Training Management Information System (HETMIS). This

entails developing HETMIS policy, standards and requirements for the

collection, processing and dissemination of data. The aim of this project to

is to replicate the unit record system of the Higher Education Management

Information for Universities, for the Colleges and SETA sectors. This system

will be able to provide detailed information for the planning and provisioning

(supply) of education and training.

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• The establishment of a central application service.

• The establishment of good governance and administration at identified universities.

11. SUPPORTING THE HUMAN RESOURCE DEVELOPMENT STRATEGY OF SOUTH AFRICA

The NSF supports the priorities agreed by the Human Resource Development Council of South Africa (HRDCSA), which oversees the implementation of the Human Resource Development Strategy for South Africa for 2030. The priorities agreed by the Council relate to the following:

• To strengthen and support the expansion of TVET college access;

• The production of intermediate skills (in particular artisans) and professionals;

• The production of academics and stronger industry-university partnerships in research and development;

• Strengthening foundational learning; and

• Address worker education.

The following work of the Artisan and Technician Development Technical Task Team

was funded by the NSF and was recommended to and approved by the HRDCSA:

• Single uniform funding and administration model for artisan learners

• Recognition of Prior Learning model

• Prioritisation model for the development of artisan trades

12. R18 MILLION DISBURSED TOWARDS SUPPORTING THE WORK OF THE NATIONAL SKILLS AUTHORITY

The successful delivery of the NSDS III relies on the role played by social partners in the delivery of skills. In consultation with the NSA, the Minister has identified a number of priorities that are to support the NSA in its advisory

• The provision of Chartered Accountants (SA) as support CFO’s for all colleges through SAICA to assist in implementing stability in sound financial management at the TVET colleges.

9. R2 MILLION DISBURSED TOWARDS STRENGTHENING THE ARTISAN DEVELOPMENT SYSTEM

The NSF has disbursed R2 million towards key interventions aimed at strengthening

the artisan development system, with a remaining commitment of R110 million as

at 31 March 2014.

Amongst these key interventions funded are the following:

• The implementation of a single national artisan development strategy and system based on scientific artisan development data analysis implemented through an integrated national artisan development management process. This intervention is implemented through the National Artisan Moderation Body (NAMB).

• Developing a single uniform funding and administration model for artisan learners.

• Recognition of prior learning model in particular for artisan aides.

10. R17 MILLION DISBURSED TOWARDS STRENGTHENING THE UNIVERSITY SECTOR

The NSF has disbursed R17 million towards key interventions and initiatives aimed

at strengthening the university sector, with a remaining commitment of R41 million

as at 31 March 2014.

Amongst these key interventions and initiatives funded are the following:

• The development of academic scholarships amongst previously disadvantaged graduates to attain equity in the academic establishment of teaching, research and publications. The initiative is implemented in partnership with the University of KwaZulu Natal.

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• R9 million disbursed towards worker education, with a R22 million commitment remaining;

• R14 million disbursed towards skills system capacity building, with a R60 million commitment remaining; and

• R17 million disbursed towards the Trainee Lay-off Scheme, with a R15 million commitment remaining towards the Scheme.

A key health project funded by the NSF is a R70 million commitment towards the

Nelson Mandela Children’s Hospital Trust, aimed at training paediatric nurses and

doctors for the new Nelson Mandela Children’s Hospital.

capacity cOnstraints and challenges facing the fund

The increase in the NSF’s commitments and number of projects requires an increase

in the NSF’s project support, project financial management and project monitoring

and evaluation capacity. The capacity constraints of the NSF were clearly identified

as an area for improvement within the NSDS III.

As a result of the NSF’s listing as a Schedule 3A public entity, the NSF needs to

establish the required core and support structures, which includes establishing

capacity within the following areas: research and analysis, finance, human resource

management, supply chain management, legal services, compliance and risk

management and ICT management.

The support services are currently provided by the Department of Higher Education

and Training.

The establishment of these core and support structures are vital towards ensuring

the NSF operates optimally at the highest levels of efficiency and effectiveness.

work and build the capacity of the social partners in the implementation of the NSDS III. These are:

• Review the skills development legislative framework to support the integration of education and training with the national priorities of government (inclusive of the NSF framework);

• Develop frameworks on the mobilisation of business, government, community and labour to take full ownership of the NSDS III;

• Post school education and training that encourages society to support and build a developmental state focussing on rural development and state owned entities;

• Strengthen the monitoring and evaluation functions particularly on the NSDS III performance and governance;

• Research, development and innovation to promote beneficiation andbursariesenterprisedevelopmentopportunities;and

• Revitalisationoftheacademicposition.

The NSF disbursed R18 million towards supporting the work of the National Skills

Authority during the 2014 financial year.

13. R317 MILLION DISBURSED TOWARDS OTHER NATIONAL PRIORITIES, WITH R1,7 BILLION COMMITMENT REMAINING

During the 2014 financial year, the NSF disbursed and committed funds towards

the following national priorities as identified in the NSDS III:

• R56 million disbursed towards Justice and Crime Prevention, with a R1,136 million commitment remaining;

• R131 million disbursed towards Co-operatives, NGO’s and small enterprises, with a R274 million commitment remaining;

• R8 million disbursed towards education and health, with a R85 million commitment remaining;

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• Challenges experienced and how resolved

With the listing of the NSF as a Schedule 3A public entity, it is envisaged

that the NSF will establish its own Supply Chain Management unit under the

office of the NSF’s Chief Financial Officer.

audit repOrt Matters in the preViOus year and hOw it wOuld be addressed

Inaccurate and untimely financial and performance reporting resulting in non-

compliance with applicable laws and regulations has been identified as an audit

report matter to be addressed by the NSF.

The root causes resulting in inaccurate and untimely financial reporting can be

attributed towards insufficient financial capacity within the Fund and shortcomings

in the current financial system. Both of these root causes are currently being

addressed through appointing sufficient financial capacity within the Fund and

upgrading the NSF’s financial systems from cash base to accrual base.

The root cause resulting in inaccurate and untimely performance information

reporting can be attributed towards insufficient projects monitoring capacity

within the Fund, shortcomings in the current performance information system and

overreliance on third parties to provide the performance information accurately

and timely. These root causes are currently being addressed with the establishment

of sufficient internal monitoring capacity and improved monitoring systems and

practices within the Fund.

OutlOOk fOr the future tO address financial challenges

The NSF has current commitments of R11,3 billion towards skills

development projects of national priority as at the end of the 2014 financial year.

Most of these commitments will become due over the remainder of the NSDS III

period until 31 March 2016.

discOntinued actiVities/actiVities tO be discOntinued

Projects under NSDS II was either aligned to NSDS III for continued funding or

closed-off and discontinued during the 2013 financial year.

requests fOr rOll OVer Of funds

The NSF applied for the retention of the net surplus for the 2014 financial year

(R8,462 billion) in terms of section 53(3) of the PFMA from National Treasury during

the first quarter of the 2015 financial year. This approval has not yet been granted

by National Treasury.

The request was based on the following reasons:

1. the NSF’s current effective utilisation of skills development resources benefitting over 77 000 learners;

2. The NSF’s current contractual commitments;

3. To prevent the severe disruption of the +- 77 000 learners currently receiving on-going training, as well as legal backlash for cancelling projects;

4. The increased capacity requirements of the NSF.

supply chain ManageMent

• Unsolicited bid proposals

No unsolicited bid proposals were concluded during the year.

• SCM processes and systems in place

Due to the NSF forming part of the DHET as a programme under the Skills

Development Branch, the NSF has been fully reliant on DHET's SCM policies,

processes and systems. The Memorandum of Agreement was engaged

with DHET to assist NSF with SCM functions including utilisation of Bid

committees.

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Other pfMa requireMents

The NSF reports through the structures and processes of the Department of Higher

Education and Training in so far as compliance with the PFMA is concerned, namely:

• Basis of Accounting – The NSF prepared its financial statements for 2014 financial year on an accrual basis as required by the PFMA for Schedule 3A public entities.

• Quarterly reporting – The quarterly reporting for the 2013/14 financial year formed part of the reporting process on performance against the NSF’s strategic plan and annual performance plan. Furthermore the NSF submits quarterly reports on its financial and performance information to National Treasury in the prescribed format and timeframes.

• Actual revenue and expenditure projections – The relevant information that forms part of the MTEF & ENE processes are submitted to National Treasury via the processes of the Department of Higher Education and Training in the prescribed format and timeframes.

• Annual Financial Statements – These statements are compiled by the National Skills Fund and have been submitted timeously for audit purposes.

• Annual report – Information with regard to the NSF are covered within the Annual Report of the National Skills Fund.

• Completeness of revenue - Skills Development Levy (SDL) transfers are recognised when it is probable that future economic benefit can be measured reliably. This occurs when the Department of Higher Education and Training (DHET) either makes an allocation or payment, whichever comes first, to the SETAs and NSF, as required by Section 6(5) of the Skills Development Levies Act, 1999 (Act No.9 of 1999). The SDL Transfer is measured at the fair value of the consideration received.

These commitments will be funded through the NSF’s current surpluses of R8,461 billion and through the NSF’s future expected income from skills

development levies and interest received on investments.

The NSF’s levy increased with 11.6% from the 2013 to the 2014 financial year. It

is expected that the future skills development levies will increase with a minimum

of inflation currently at 6% per annum until the end of the NSDS III period, namely

31 March 2016. Thus, a total of R5,593 billion in skills development levy income is expected for the remainder of the NSDS III period.

Through improved cash flow management, the NSF has increased its ability to

operate at optimal levels of grants disbursement efficiency, whilst ensuring that the

Fund is able to meet its skills development commitments as it becomes due.

eVents after the repOrting date

There are no events after reporting date.

ecOnOMic Viability

As per the Regulation approved by the Executive Authority, the NSF may utilise

10% of its income towards administration of the Fund. This allocation towards

administrative costs is sufficient for the NSF to fund its operations.

financial ManageMent

The NSF’s financial management is sound and compliant to PFMA and National

Treasury regulations. The financial statements have been prepared in accordance

with the effective Standards of Generally Recognised Accounting Practices (GRAP)

including any interpretations, guidelines and directives issued by the Accounting

Standards Board.

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3. REPORTOFTHEAUDITOR-GENERALTOPARLIAMENTONTHENATIONALSKILLSFUND

repOrt On the financial stateMents

Introduction

1. I have audited the financial statements of the National Skills Fund (NSF) set out on pages 70 to 135, which comprise the statement of financial position as at 31 March 2014, statement of financial performance, statement of changes in net assets and cash flow statement for the year then ended, as well as the notes, comprising a summary of significant accounting policies and other explanatory information.

Accounting authority’s responsibility for the financial statements

2. The accounting authority is responsible for the preparation and fair presentation of these financial statements in accordance with the South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) and the requirements of the Public Finance Management Act of South Africa, 1999 (Act No. 1 of 1999) (PFMA) and the Skills Development Act of South Africa, 1998 (Act No. 97 of 1998) (SDA), and for such internal control as the accounting authority determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor-general’s responsibility

3. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA), the general notice issued in terms thereof and International Standards on Auditing. Those standards require that I comply with ethical requirements, and plan and perform the audit to obtain reasonable assurance about whether the financial statements

asset ManageMent

The NSF’s assets are currently managed by the Department of Higher Education and

Training as the NSF operated as a sub-programme under the Department.

irregular expenditure

The NSF did not incur any irregular expenditure during the 2013/14 financial year.

scOpa resOlutiOns

There were no new SCOPA resolutions affecting the fund during the reporting

period.

exeMptiOns and deViatiOns receiVed frOM natiOnal treasury

There were no exceptions and deviation received from National Treasury.

apprOVal

The Annual Financial Statements have been approved by the Accounting Authority.

MVUYISIMACIKAMA

EXECUTIVEOFFICER

NATIONALSKILLSFUND

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Restatement of corresponding figures

8. As disclosed in note 27 to the financial statements, the corresponding figures for 31 March 2013 have been restated as a result of errors discovered during the year ended 31 March 2014 in the financial statements of the NSF at, and for the year ended, 31 March 2013.

repOrt On Other legal and regulatOry requireMents

9. In accordance with the PAA and the general notice issued in terms thereof, I report the following findings on the reported performance information against predetermined objectives for selected programmes presented in the annual performance report, non-compliance with legislation as well as internal control. The objective of my tests was to identify reportable findings as described under each subheading but not to gather evidence to express assurance on these matters. Accordingly, I do not express an opinion or conclusion on these matters.

Predetermined objectives

10. I performed procedures to obtain evidence about the usefulness and reliability of the reported performance information for the following selected programmes presented in the annual performance report of the public entity for the year ended 31 March 2014:

– Programme 1: skills development funding on pages 28 to 35

11. I evaluated the reported performance information against the overall criteria of usefulness and reliability.

12. I evaluated the usefulness of the reported performance information to determine whether it was presented in accordance with the National Treasury’s annual reporting principles and whether the reported performance was consistent with the planned programmes. I further performed tests to determine whether indicators and targets were well defined, verifiable, specific, measurable, time bound and relevant, as required by the National Treasury’s Framework for managing programme performance information (FMPPI).

are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

5. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Opinion

6. In my opinion, the financial statements present fairly, in all material respects, the financial position of the NSF as at 31 March 2014 and its financial performance and cash flows for the year then ended, in accordance with SA Standards of GRAP and the requirements of the PFMA and the SDA.

Emphasis of matter

7. I draw attention to the matter below. My opinion is not modified in respect of this matter.

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corrected only some of the misstatements, I raised material findings on the reliability of the reported performance information.

Compliance with legislation

20. I performed procedures to obtain evidence that the public entity had complied with applicable legislation regarding financial matters, financial management and other related matters. My findings on material non-compliance with specific matters in key legislation, as set out in the general notice issued in terms of the PAA, are as follows:

Annual financial statements, performance and annual reports

21. The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework as required by section 55(1)(b) of the PFMA. Material misstatements in other income, grant expenditure, accounts receivables from non-exchange transactions, cash and cash equivalents, trade payables, provisions, and disclosure notes, identified by the auditors were subsequently corrected resulting in an unqualified audit opinion.

Internal control

22. I considered internal control relevant to my audit of the financial statements, the annual performance report and compliance with legislation. The matters reported below are limited to the significant internal control deficiencies that resulted in the findings on non-compliance with legislation included in this report.

Leadership

23. The finance and performance management units are not capacitated with individuals with the appropriate skills. As a result, there was over-reliance on the chief financial officer.

13. I assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete.

Usefulness of reported performance information

14. I did not raise any material findings on the usefulness of the reported performance information for the selected programme.

Reliability of reported performance information

15. The material findings in respect of the selected programme is as follows:

16. The FMPPI requires auditees to have appropriate systems to collect, collate, verify and store performance information to ensure valid, accurate and complete reporting of actual achievements against planned objectives, indicators and targets. Two significantly important targets were not reliable when compared to the source information or evidence provided. This was due to a lack of standard operating procedures for the recording and monitoring of performance, monitoring of the completeness of source documentation in support of actual achievements, and frequent review of the validity of reported achievements against source documentation.

Additional matters

17. I draw attention to the following matters :

Achievement of planned targets

18. Refer to the annual performance report on pages 23 to 40 for information on the achievement of planned targets for the year. This information should be considered in the context of the material finding on the reliability of the reported performance information in paragraph 16 of this report.

Material adjustments to the annual performance report

19. I identified material misstatements in the annual performance report submitted for auditing on the reported performance information of programme 1: skills development funding. As management subsequently

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24. The NSF’s standard operating procedures for performance information had not been updated to include the current procedures and processes for recording data, validation of data, data approval, data storage and security, protection of confidential data.

25. Senior management did not hold individuals accountable for their roles and responsibilities.

26. The NSF developed an action plan to address internal and external audit findings. However, not all of the actions included in the action plan were implemented within the committed timelines. This resulted in repeat findings.

Financial and performance management

27. The NSF did not have a proper record and information management system for financial and performance reporting.

28. Daily and monthly processing and reconciling of transactions were performed on a cash basis and not an accrual basis.

Pretoria

31 July 2014

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ANNUAL FINANCIAL STATEMENTS • for the year ended 31 March 2014

NationalSkillsFund FinancialStatements

fortheyearended31March2014

The Annual Financial Statements for the year ended 31 March 2014 have been

approved by the Accounting Authority in terms of section 55(1)(c) of the Public

Finance Management Act (PFMA), No 1 of 1999.

MR.GWEBINKUNDLAFELLIXQONDE

DIRECTORGENERALOFHIGHEREDUCATIONANDTRAINING

ACCOUNTINGAUTHORITYOFTHENATIONALSKILLSFUND

31 July 2014

TABLEOFCONTENTS PAGE

1. STATEMENT OF FINANCIAL PERFORMANCE 71

2. STATEMENT OF FINANCIAL POSITION 72

3. STATEMENT OF COMPARISON OF BUDGET AGAINST ACTUAL AMOUNTS 73

4. STATEMENT OF CHANGES IN NET ASSETS 75

5. CASH FLOW STATEMENT 76

6. ACCOUNTING POLICIES TO THE ANNUAL FINANCIAL STATEMENTS 77-90

7. NOTES TO THE ANNUAL FINANCIAL STATEMENTS 91-135

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ANNUAL FINANcIAL STATEmENTS • for the year ended 31 March 2014

STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 31 MARCH 20142013/14 2012/13

RestatedNotes R’000 R’000

reVenue

REVENUEFROMNON-EXCHANGETRANSACTIONS 3 619 910 2 270 797

Skills development levies 2 2 514 907 2 254 020

Income from SETAs 3 1 104 809 -

Other income 4 194 16 777

REVENUEFROMEXCHANGETRANSACTIONS 391 064 428 112

Finance income 5 356 893 389 517

Other income 6 34 171 38 595

TOTALREVENUE 4 010 974 2 698 909

expenses

SKILLSDEVELOPMENTGRANTDISBURSEMENTS 7 3 138 491 2 575 125

ADMINISTRATIVEEXPENSES 95 380 84 795

Employee costs 8 24 307 17 732

Operating expenses 9 19 949 16 401

Management fees and bank charges 10 2 092 2 008

Collection costs to SARS 48 745 48 631

Depreciation 11 287 23

TOTALEXPENSES 3 233 871 2 659 920

NETSURPLUSFORTHEYEAR ** 777 103 38 989

** The National Skills Fund's mandate is to fund skills development as outlined in the Skills Development Act. Hence, the nature of the Fund is developmental and not profit-driven. The Fund's purpose is not to accumulate large reserves for investment, but to put its funds to effective use towards skills development and thereby contribute towards unlocking the human potential of South Africa's citizens. Since the dawn of the NSDS III, the National Skills Fund's performance in skills development grants disbursements has increased consistently and significantly. The National Skills Fund started to put both its annual income and accumulated reserves to effective use towards funding skills development.

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STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 20142013/14 2012/13


assets

Non-current assets 990 102 Property, plant and equipment 11 765 102 Intangible assets 12 225 -

Current assets 9 910 456 9 132 545 Deferred expenditure on skills development grant disbursements 13 2 303 998 1 734 703 Cash and cash equivalents 14 1 161 912 4 845 Investments 15 5 797 841 7 346 649 Trade and other receivables from non-exchange transactions 16 646 705 46 348

tOtal assets 9 911 446 9 132 647

Current liabilities 1 449 654 1 447 961 Trade and other payables from non-exchange transactions 17.1 981 182 830 845 Trade and other payables from exchange transactions 17.2 25 422 14 724 Provisions 18 443 050 602 392

tOtal liabilities 1 449 654 1 447 961

tOtal net assets 8 461 792 7 684 686

funds cOntributed by:

Capital and reservesAccumulated surplus 6 015 205 7 684 686 TVET college infrastructure development reserve 2 446 587 -

tOtal capital and reserVes ** 8 461 792 7 684 686

** As at year-end the NSF has committed and earmarked its entire reserves of R8,462 billion towards skills development projects.

The National Skills Fund’s mandate is to fund skills development as outlined in the Skills Development Act. Hence, the nature of the Fund is developmental and not profit-driven. The Fund’s purpose is not to accumulate large reserves for investment, but to put its funds to effective use towards skills development and thereby contribute towards unlocking the human potential of South Africa’s citizens. Since the dawn of the NSDS III, the National Skills Fund’s performance in skills development grants disbursements has increased consistently and significantly. The National Skills Fund started to put both its annual income and accumulated reserves to effective use towards funding skills development. The NSF improved performance can be clearly noted through its high level of commitments towards skills development. Please refer to note 20.

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STATEMENT OF COMPARISON OF BUDGET AGAINST ACTUAL AMOUNTS

reVenue approved and final budget *

actual amounts on accrual basis

adjustments to cash basis

actual amounts on cash basis

(under)/Over budget

(under)/Over budget

Notes R’000 R’000 R’000 R’000 R’000 %

reVenue frOM nOn-exchange transactiOns 30.1 2 407 603 3 619 910 (688 879) 2 931 031 523 428 22%Skills development levies 2 407 603 2 514 907 (98 542) 2 416 365 8 762 0%Income from SETAs - 1 104 809 (590 228) 514 581 514 581 100%Other income - 194 (109) 85 85 100%

reVenue frOM exchange transactiOns 30.2 398 982 391 064 - 391 064 (7 918) (2%)Finance income 398 982 356 893 - 356 893 (42 089) (11%)Other income - 34 171 - 34 171 34 171 100%

tOtal reVenue 2 806 585 4 010 974 (688 879) 3 322 095 515 510 18.4%

* The budget was prepared on the cash basis and there are no changes between the approved and final budget.

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STATEMENT OF COMPARISON BUDGET AGAINST ACTUAL AMOUNTS

expenses approved and final budget *

actual amounts on accrual basis

adjustments to cash basis

actual amounts on cash basis

(under)/Over budget

(under)/Over budget

Notes R’000 R’000 R’000 R’000 R’000 %

skills deVelOpMent grant disburseMents

nsds ii - - (810) (810) (810) 100%Discretionary and Innovation - - (37) (37) (37) 100%Strategic Projects - - (773) (773) (773) 100%

nsds iii 5 662 117 3 170 586 424 541 3 595 127 (2 066 990) (37%)HRDSA 62 501 19 833 (19 833) - (62 501) (100%)NSA Ministerial 62 397 15 172 2 810 17 982 (44 415) (71%)Government Priorities 2 080 000 1 308 720 (157 312) 1 151 408 (928 592) (45%)DG Priorities 2 296 343 1 523 696 444 955 1 968 651 (327 692) (14%)Skills Infrastructure 1 160 876 303 165 153 921 457 086 (703 790) (61%)

tOtal skills deVelOpMent grant disburseMents

30.3 5 662 117 3 170 586 423 731 3 594 317 (2 067 800) (37%)

adMinistratiVe expenses

Employee costs 30.4 45 710 24 307 (278) 24 029 (21 681) (47%)Operating expenses 30.5 36 921 19 949 (10 420) 9 529 (27 392) (74%)Management fees and bank charges 30.6 2 253 2 092 - 2 092 (161) (7%)Collection costs to SARS 30.7 114 647 48 745 19 48 764 (65 883) (58%)Depreciation - 287 (287) - - 100%Capital expendiure 30.8 8 100 888 126 1 014 (7 086) (88%)

tOtal adMinistratiVe expenses 207 631 96 268 (10 840) 85 428 (122 203) (59%)

net surplus fOr the year (3 063 163) 744 120 (1 101 770) (357 650) 2 705 513 (88%)

* The budget was prepared on the cash basis and there are no changes between the approved and final budget.

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STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDED 31 MARCH 2014tVet college infrastructure development

reserve

accumulated surplus

tOtal capital and reserVes

Notes R’000 R’000 R’000

Balance as at 1 April 2012 - 7 645 697 7 645 697

Net surplus per Statement of Financial Performance - 38 992 38 992

As originally stated - 34 582 34 582

Prior period correction 27 - 4 410 4 410

Balance at 31 March 2013 - 7 684 689 7 684 689

Accumulated surplus earmarked for TVET college infrastructure development 1 500 000 (1 500 000) -

Net surplus per Statement of Financial Performance 946 587 (169 484) 777 103

Total revenue 1 104 809 2 906 165 4 010 974

Total expenses (158 222) (3 075 649) (3 233 871)

Balance at 31 March 2014 * ** 2 446 587 6 015 205 8 461 792

** As at year-end the NSF has committed and earmarked its entire reserves of R8,462 billion towards skills development projects.

The National Skills Fund’s mandate is to fund skills development as outlined in the Skills Development Act. Hence, the nature of the Fund is developmental and not profit-driven. The Fund’s purpose is not to accumulate large reserves for investment, but to put its funds to effective use towards skills development and thereby contribute towards unlocking the human potential of South Africa’s citizens. Since the dawn of the NSDS III, the National Skills Fund’s performance in skills development grants disbursements has increased consistently and significantly. The National Skills Fund started to put both its annual income and accumulated reserves to effective use towards funding skills development. The NSF improved performance can be clearly noted through its high level of commitments towards skills development. Please refer to note 20.

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CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2014

2013/14 2012/13Notes R’000 R’000

cash flOws frOM Operating actiVitiesOperating activitiesCash receipts from stakeholders 2 931 140 2 338 898

Levies, interest and penalties received 2 416 365 2 338 898 Other cash receipts from stakeholders 514 775 -

Cash paid to stakeholders, suppliers and employees (3 678 602) (2 691 263)Skills development grant payments (3 594 400) (2 614 796)Employee costs (23 836) (14 759)Payments to suppliers and other (60 366) (61 708)

Cash generated from operations 19 (747 462) (352 365)Finance income 356 893 389 517

Netcash(out)/inflowfromoperatingactivities (390 569) 37 152

cash flOw frOM inVesting actiVitiesWithdrawals from/(additions to) investments 1 548 811 (149 991)Additions to property, plant and equipment and intangible assets (1 175) (118)

Netcashoutflowfrominvestingactivities 1 547 636 (150 109)

Net increase in cash and cash equivalents 1 157 067 (112 957)Cash and cash equivalents at the beginning of the year 4 844 117 801 Cash and cash equivalents at the end of the year 14 1 161 912 4 844

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AccOUNTiNg POLiciEs TO THE ANNUAL FiNANciAL sTATEMENTs

1.1 basis Of preparatiOn

The financial statements have been prepared in accordance with the effective Standards of Generally Recognised Accounting Practices (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board. The financial statements are presented in South African rands which is the functional reporting currency for the National Skills Fund and all values are rounded off to the nearest thousands (R’000). The financial statements have been prepared on the accrual basis, except for assets which are revalued. The financial statements have been prepared on the going concern basis and the accounting policies have been consistently applied to all the years presented.

The Accounting Framework of the entity, based on the preceding paragraph, is therefore as follows:• GRAP 1: Presentation of financial statements• GRAP 2: Cash flow statements• GRAP 3: Accounting policies, changes in accounting estimates and errors• GRAP 9: Revenue from exchange transactions • GRAP 12: Inventories • GRAP 13: Leases• GRAP 14: Events after reporting date • GRAP 17: Property, plant and equipment • GRAP 19: Provisions, contingent liabilities and contingent assets• GRAP 21: Impairment of Non-cash-generating Assets• GRAP 23: Revenue from Non-exchange Transactions • GRAP 24: Presentation of Budget Information in the Financial Statements• GRAP 25: Employee Benefits• GRAP 26: Impairment of Cash-generating Assets• GRAP 100: Non-current assets held for sale and discontinued operations • GRAP 104: Financial Instruments

Directives issued and effective:• Directive 1: Repeal of existing transitional provisions in, and consequential

amendments to, standards of GRAP• Directive 2: Transitional provisions for the adoption of standards of GRAP

by Public Entities,Trading Entities, Municipal Entities and Constitutional Institutions

• Directive 5: Determining the GRAP reporting framework• Directive 7: The application of deemed cost on the adoption of standards

of GRAP

Interpretations of the Standards of GRAP approved:• IGRAP 1: Applying the probability test on the initial recognition of

exchange revenue• IGRAP 2: Changes in existing decommissioning, restoration and similar

liabilities• IGRAP 3: Determining whether an arrangement contains a lease• IGRAP 4: Rights to interest arising from decommissioning, restoration and

environmental rehabilitation funds• IGRAP 5: Applying the restatement approach under the standard of GRAP

on financial reporting in hyperinflationary economies• IGRAP 6: Loyalty programmes• IGRAP 8: Agreements for the construction of assets from exchange

transactions• IGRAP 9: Distributions of non-cash assets to owners• IGRAP 10: Assets received from customers• IGRAP 13: Operating leases - Incentives• IGRAP 14: Evaluating the substance of transactions involving the legal

form of a lease

Approved guidelines of standard of GRAP:• Guide 1: Guideline on Accounting for Public Private Partnerships

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1.3 critical judgeMents, estiMatiOns and assuMptiOns

In the application of the NSF accounting policies management is required to make judgements, estimations and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on past experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Property, plant and equipment

Management has made certain estimations with regards to the determination of estimated useful lives and residual values of items of property, plant and equipment, as discussed further in note 1.10.1

Leases

Management has applied its judgement to classify all lease agreements that the company is party to as operating leases, as they do not transfer substantially all the risks and rewards of ownership to the company. Furthermore, as the operating lease in respect of office equipment is only for a relatively short period of time, management has made a judgement that it would classify the agreement in its entirety as an operating lease.

1.4 gOing cOncern assuMptiOn

These financial statements have been prepared on the going concern basis. In assessing whether the NSF is a going concern, the Accounting Authority has considered the fact that the power to collect skills development levies will enable the NSF to be considered as a going concern for at least the next twelve months. The NSF surplus reserves of R8,462 billion to enable it to continue operating as going concern.

Effective accrual based IPSASs: • IPSAS 20: Related parties disclosure

Effective IFRSs and IFRICs that are applied:• IAS 19 (AC 116): Employee benefits

1.2 changes in accOunting pOlicies, estiMates and errOrs

The accounting policies applied are consistent with those used to present the previous year’s financial statements, unless explicitly stated otherwise.

The entity changes an accounting policy only if the change:

• Is required by a standard of GRAP; or

• Results in the Annual Financial Statements providing reliable and more relevant information about the effects of transactions, other events or conditions, on the performance or cash flow.

Changes in accounting policies that are affected by management have been applied retrospectively in accordance with GRAP 3 requirements, except to the extent that it is impracticable to determine the period-specific effects or the cumulative effect of the change in policy. In such cases the entity restated the opening balances of assets, liabilities and net assets for the earliest period for which retrospective restatement is practicable.

Changes in accounting estimates are applied prospectively in accordance with GRAP 3 requirements. Details of changes in estimates are disclosed in the notes to the Annual Financial Statements where applicable.

Correction of errors is applied retrospectively in the period in which the error has occurred in accordance with GRAP 3 requirements, except to the extent that it is impracticable to determine the period-specific effects or the cumulative effect of the error. In such cases the entity shall restate the opening balances of assets, liabilities and net assets for the earliest period for which retrospective restatement is practicable.

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Accounting policy 1.8.1 on revenue from non-exchange transactions and accounting policy 1.8.2 on revenue from exchange transactions describes the conditions under which revenue will be recorded by the management of the entity.

In making their judgement, the management considered the detailed criteria for recognition of revenue as set out in GRAP 9 (revenue from exchange transactions). The management of the entity is satisfied that recognition of the revenue in the current year is appropriate.

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 end of the reporting period.

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 associated with the transaction will flow to the entity;

• the stage of completion of the transaction at the end of the reporting period 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 shall be 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 end of the reporting period.

Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for services provided in the normal course of business, net of value added tax.

1.5 Offsetting

Assets, liabilities, revenues and expenses have not been offset except when offsetting is required or permitted by the standard.

1.6 cOMparatiVe infOrMatiOn

Budget information in accordance with GRAP 1 has been provided in the notes to the financial statements for the current financial year only, and forms part of the audited annual financial statements. (Refer to note 30 for more detail).

When the presentation or classification of items in the annual financial statements is amended, prior period comparative amounts are restated. The nature and reason for the reclassification is disclosed. Where accounting errors have been identified in the current year, the correction is made retrospectively as far as is practicable, and the prior year comparatives are restated accordingly. Where there has been a change in accounting policy in the current year, the adjustment is made retrospectively as far as is practicable, and the prior year comparatives are restated accordingly.

1.7 eVents after repOrting date

Events after the 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. Events after reporting date that are classified as adjusting events have been accounted for in the annual financial statements. Events after reporting date that have been classified as non-adjusting events have been disclosed in the disclosure notes to the annual financial statements.

1.8 reVenue recOgnitiOn

Revenue is recognised when its probable that future economic benefits or service potential will flow to the entity and the entity can measure the benefits reliably.

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According to section 28(2) of the Skills Development Act, 1998, the Accounting Authority approved the utilisation of 10% of the money allocated to the fund in terms of section 8(3)(a) of the Skills Development Levies Act to administer the fund. The utilisation of the 10% allocation may be applied for short term employee benefits as well as other operating expenses.

1.8.1.2 State contributions

State contributions represents unconditional grants received from the Department of Higher Education and Training (DHET) and are measured at fair value of the consideration received.

1.8.1.3 Income from SETAs towards TVET College Infrastructure Development

Skills Development Circular No 08/2013 stipulates the role of SETAs with regards to the TVET College infrastructure development. In terms of the Circular, each SETA's contribution towards the TVET College infrastructure development is a fixed amount, which was based on 4.8% of the SETA's estimated Discretionary Grant.

1.8.2 reVenue frOM exchange transactiOns

Revenue from exchange transactions refers to revenue that accrued to the entity directly in return for services rendered/goods sold, the value of which approximates the consideration received or receivable.

1.8.2.1 Finance income

Finance income represents interest earned on investments and is accrued on a time proportion basis, taking into account the principal amount outstanding and the effective interest rate over the period to maturity.

1.8.1 reVenue frOM nOn-exchange transactiOnsRevenue from non-exchange transactions refers to transactions where the entity received revenue from another entity without directly giving approximately equal value in exchange. Revenue from non-exchange transactions is generally recognised to the extent that the related receipt or receivable qualifies for recognition as an asset and there is no obligation or condition to repay the amount.

1.8.1.1 Skills development levy (SDL) income

Skills development levy (SDL) transfers are recognised when it is probable that future economic benefits can be measured reliably, and occurs when the Department of Higher Education and Training (DHET) makes the allocation or the payment, whichever event comes first, to the National Skills Fund (NSF) as required by section 8 of the Skills Development Levies Act, 1999 (Act No.9 of 1999). SDL income is measured at fair value of the consideration received and is based on the information supplied by DHET.

In terms of section 3(1) and 3(4) of the Skills Development Levies Act, 1999 (Act No. 9 of 1999), registered member companies pay a skills development levy of 1% of the total payroll cost to the South African Revenue Services (SARS), who collects the levies on behalf of the Department of Higher Education and Training. 20% of the skills development levies are paid over to the NSF and 80% to the SETAs.

National Skills Fund SDL income is set aside in terms of the Skills Development Act, 1998 (Act No. 97 of 1998) as amended for the purpose of:

2013/14 2012/13Employee costs and other operating expenditure of the NSF

10% 10%

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1.9.3 shOrt terM eMplOyee benefits

Short term employee benefits comprise of salaries, paid annual leave, paid sick leave, thirteenth cheques, performance bonuses and non-monetary benefits such as medical care, housing and car allowances. The cost of short term employee benefits are charged to the Statement of Financial Performance as employee cost in the year to which they relate, except for non-accumulating benefits which are only recognised when the specific event occurs.

Short term employee benefits that give rise to a present legal or constructive obligation are included in the Statement of Financial Position as accruals in the year to which they relate.

1.9.4 skills deVelOpMent grant disburseMents

Skills development grant disbursements comprise:

• costs that relate directly to the specific contract;

• costs that are attributable to contract activity in general and can be allocated to the project; and

• such other costs as are specifically chargeable to the NSF under the terms of the contract.

Skills development grant disbursements are recognised as expenses in the period in which they are incurred.

Skills development grant disbursements includes the following:

1.9.4.1 Payments for training of unemployed people

The training of unemployed people is undertaken by selected training contractors on a basis of a predetermined course fee per day. Upon completion of the training, certified claims are submitted by training contractors upon which payments are made.

1.8.2.2 Other income

Other income represents interest received by the training providers on the advance payments affected by NSF based on the approved memorandum of agreement entered into between the parties. This interest received by the training providers are utilised to incur project expenditure on behalf of NSF.

Other income is accrued on a time proportion basis, taking into account the principal amount outstanding and the effective interest rate over the period to maturity.

1.9 expenditure

1.9.1 cOllectiOn cOsts paid tO sars

In terms of section 10(2) of the Skills Development Levies Act, 1999 (Act. No. 9 of 1999), the Accounting Authority must, on a monthly basis as may agreed between SARS and the Accounting Authority, settle the costs of collection by SARS from the levies paid into the National Skills Fund. The total amount of the collection costs, may not exceed 2% of the total amount of the levies collected by SARS.

1.9.2 nsf 10% eMplOyee cOsts and Other Operating expenses

According to section 28(2) of the Skills Development Act, 1998, the Accounting Authority approved the utilisation of 10% of the money allocated to the fund in terms of section 8(3)(a) of the Skills Development Levies Act to administer the Fund. The utilisation of the 10% allocation may be applied for short term employee benefits as well as other operating expenses.

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1.10 assets

1.10.1 prOperty, plant and equipMent

The Director-General of the Department of Higher Education and Training is the Accounting Authority of the Fund in terms of the PFMA and must control the Fund. Property, plant and equipment comprise mainly of computer equipment, as all other property, plant and equipment utilised are owned, controlled and disposed of by the Department of Higher Education and Training. Property, plant and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Depreciation is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

• Computer equipment: 3 years

• Office Equipment: 5 years

• Office Furniture: 5 years

• Office Appliances: 5 years

The assets’ residual values and useful lives are reviewed, and adjusted, if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within net surplus/deficit in the Statement of Financial Performance.

1.9.4.2 Funds allocated to training providers for skills development training

The NSF allocates funds in respect of skills development to training providers in terms of approved memorandum of agreements entered into between the parties. Funds not spend by the training providers at year-end are accounted for as deferred expenditure in the financial statements of the NSF until the related eligible project expense are incurred by the training providers and the relating expenditure recognised. If eligible expenses are not incurred, the amount allocated to the training providers should be refunded to the NSF including any accrued interest.

1.9.5 fruitless and wasteful expenditure

Fruitless and wasteful expenditure means expenditure that was made in vain and would have been avoided had reasonable care been exercised.

Fruitless and wasteful expenditure is recognised as expenditure in the Statement of Financial Performance according to the nature of the payment and not as a separate line item on the face of the statement. If the expenditure is recoverable it is treated as an asset until it is recovered from the responsible person or written off as irrecoverable in the Statement of Financial Performance.

1.9.6 irregular expenditure

Irregular expenditure comprises expenditure, other than unauthorised expenditure, incurred in contravention of or that is not in accordance with a requirement of any applicable legislation, including: the Public Finance Management Act, Act No. 1 of 1999 (as amended by Act 29 of 1999); the State tender Board Act, 1968 (Act No. 86 of 1968, or any regulation made in terms of that Act); or any provincial legislation providing for the procurement procedures in that provincial government.

Irregular expenditure is recognised as expenditure in the Statement of Financial Performance. If the expenditure is not condoned by the relevant authority it is treated as an asset until it is recovered or written off as irrecoverable.

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1.10.4 deferred expenditure On skills deVelOpMent grant disburseMents

Deferred expenditure represents grant disbursement made in advance to training providers based on the signed memorandum of agreement between the parties. Deferred expenditure paid reflects the outstanding capital amounts as well as accrued interest received by the training providers at financial year end. NSF will only be entitled to the unspent funds, including any accrued interest, at the end of the project term.

Deferred expenditure is initially recognised at cost and subsequently measured at fair value less any provision for impairment.

1.10.5 trade and Other receiVables frOM nOn-exchange transactiOns

Trade and other receivables from non-exchange transactions are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. The provision is made in accordance with GRAP 104.64 whereby the recoverability of the outstanding advance is assessed individually and then collectively after grouping the assets in financial assets with similar credit risks characteristics.

1.10.6 cash and cash equiValents

Cash includes cash on hand (including petty cash) and cash with banks (including call deposits). Cash equivalents are short-term highly liquid investments, readily convertible into known amounts of cash, that are held with registered banking institutions with maturities of three months or less and are subject to an insignificant risk of change in value.

In terms of section 29(2) of the Skills Development Act, 1998 (Act No.97 of 1998) any money in the fund not required for immediate use should be invested with the Public Investment Corporation (PIC). Cash and cash equivalents are measured at fair value.

For purposes of the Cash Flow Statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks and investments in financial instruments.

1.10.2 prOperty, plant and equipMent acquired by prOject iMpleMenting agencies fOr nsf special prOjects

Property, plant and equipment acquired by project implementing agencies for NSF special projects are capitalised in the financial statements of the respective agencies, as the agencies control such assets for the duration of the project. Such assets could however, only be disposed of in terms of an agreement and specific written instructions by the NSF.

1.10.3 intangible assets

The Director-General of the Department of Higher Education and Training is the Accounting Authority of the Fund in terms of the PFMA and must control the Fund. Intangible comprise mainly of computer software. Intangible assets are stated at historical cost less accumulated amortisation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Amortisation is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

• Computer equipment: 3 years

• Computer Software: 3 years

The assets’ residual values and useful lives are reviewed, and adjusted, if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within net surplus/deficit in the Statement of Financial Performance.

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AccOUNTiNg POLiciEs TO THE ANNUAL FiNANciAL sTATEMENTsThe liability for leave pay is based on the total accrued leave days at year-end and is shown as an accrual in the Statement of Financial Position. The entity recognises the expected cost of performance bonuses only when the entity has a present legal or constructive obligation to make such payment and a reliable estimate can be made. No accrual is made for post retirement benefits, as the NSF does not provide for such benefits for its employees.

1.11.3 accrual fOr prOjects

No accrual is made for projects approved at year-end, unless the service in terms of the contract has been delivered or the contract is of an onerous nature. Where a project has been approved, but has not been accrued for or provided for, it is disclosed as commitments in the notes to the financial statements.

1.11.4 prOVisiOns

In terms of GRAP 19 a provision is defined as a liability of uncertain timing or amount. Provisions can be distinguished from other liabilities such as payables and accruals because there is uncertainty about the timing or amount of the future expenditure required in settlement.

Provision for skills development grant expenditure

Due to the nature of the NSF operations, numerous contracts exists that requires management estimation and judgement to determine the provision amount at financial year-end relating to possible services rendered on these contracts not yet invoiced/claimed by the training providers.

Provision for projects are estimated on an annual basis. These estimates and underlying assumptions are reviewed on an ongoing basis. For purposes of the provision calculations management deems the training be rendered equally over the original contract term. These estimates are based on the remaining portion of the contract for a specific year that has not been invoiced/claimed by the training providers. Actual results may differ from these estimates. Provisions recognised for the relevant financial year is deducted from the remaining contract commitment.

1.11 liabilities

1.11.1 defined cOntributiOn plans

A defined contribution plan is a plan under which the entity pays fixed contributions into a separate entity. The entity has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to service in the current or prior periods.

The NSF provides for retirement benefits for all its permanent employees through a defined contribution scheme that is subject to the Pension Funds Act, 1956 as amended. In terms of the Pension Funds Act, the fund is not required to be actuarially valued. Contributions are at a rate of 13% of pensionable emoluments. The entity’s contributions to the defined contribution scheme are established in terms of the rules governing the scheme.

Contributions are recognised in the Statement of Financial Performance in the period in which the service is rendered by the relevant employees. The entity has no further payment obligations once the contributions have been paid.

1.11.2 leaVe and bOnus accruals

The entity has opted to treat its provision for leave and bonus pay as an accrual.

The cost of all short-term employee benefits is recognised during the period in which the employee renders the related service. Employee entitlements are recognised when they accrue to employees. An accrual is recognised for the estimated liability as a result of services rendered by employees up to the reporting date. Accruals related to employee benefits included in the Statement of Financial Position includes annual leave, capped leave, thirteenth cheque as well as performance bonus commitments at year-end (based on current salary rates).

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1.12.1 financial assets - classificatiOn

A financial asset is any asset that is a cash or contractual right to receive cash. The entities principle financial assets as reflected on the face of the Statement of Financial Position are classified as follows:

• Cash and cash equivalents;

• Investments; and

• Trade and other receivables.

In accordance with GRAP 104 the financial assets of the entity are classified as follows into the categories as allowed by the standard:

type of financial asset classification in terms of grap 104

Cash and cash equivalents Financial assets at fair valueInvestments Financial assets at amortised costTrade and other receivables Financial assets at cost

Cash includes cash on hand (including petty cash) and cash with banks (including call deposits). Cash equivalents are short-term highly liquid investments, readily convertible into known amounts of cash, that are held with registered banking institutions with maturities of three months or less and are subject to an insignificant risk of change in value. For purposes of the Cash Flow Statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks and investments in financial instruments. The entity categorises cash and cash equivalents as financial assets: Loans and receivables.

Financial assets at fair value are financial assets that meet either of the following conditions:

• They are classified as held for trading; or

• Upon initial recognition they are designated as at fair value through the Statement of Financial Performance.

Provision for levies less than threshold

Section 4(b) of the Skills Development Levies Act, No. 9 of 1999, stipulates that employers with a total yearly remuneration expense of below R500,000 are exempt from contributing skills development levies. In practice it does happen that some of these exempted employers contribute skills development levies. As a result, they are entitled to claim their contributions back. There is uncertainty over the timing and amount of the provision for levies paid below threshold, as the NSF does not know the amount or time of contributions that will be claimed back in the future. For purposes of calculating the provision management expects the future claims to be in line with the historic levies less than threshold claimed back. The historic levies less than threshold claimed back in comparison with total skills development levies received is used as a basis for estimating the provision.

Provision for performance bonuses

Performance bonuses are provided for based on the NSF’s past practice to pay annual performance bonuses. Uncertainty exists over the amount and the timing of the performance bonuses as NSF has not yet completed the performance assessments at year-end and determined the performance bonus payable. Management estimates the performance bonus payable to be in line with the prior period’s performance bonus paid with an average increase for inflation.

1.12 financial instruMents

The entity has various types of financial instruments and these can be broadly categorised as either financial assets or financial liabilities. The classification of financial assets and liabilities into categories, is based on judgement by management.

Financial assets and financial liabilities are recognised on the Statement of Financial Position when the NSF becomes a party to the contractual provisions of the instrument.

Financial instruments are initially measured at fair value. Subsequent to initial recognition these instruments are measured as set out below.

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1.12.3 initial and subsequent MeasureMent

1.12.3.1 Financial Assets: Financial assets at fair value through surplus/deficit

Money market financial instruments are initially and subsequently measured at fair value. It is the policy of NSF to account for changes in the fair value of monetary securities classified at fair value, through the Statement of Financial Performance. The fair value adjustment is calculated between the difference of the market value at the end of the reporting period and the cost of the investment. These investments are revaluated once a year at the end of the reporting period.

1.12.3.2 Financial Assets: Trade and other receivables

Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

1.12.3.3 Financial liabilities: Trade and other payables

Trade and other payable financial instruments are measured at amortised cost using the effective interest rate method. Accruals represent goods/services that have been received together with an accompanied invoice, but final authorisation to affect payment has not been effected. Accruals are recognised in the Statement of Financial Position as trade and other payables.

1.12.4 iMpairMent Of financial assets

Financial assets, other than those at fair value through surplus or deficit, are assessed for indicators of impairment at each reporting date. Financial assets are impaired where there is objective evidence of impairment of Financial Assets (such as the probability of insolvency or significant financial difficulties of the debtor). If there is such evidence the recoverable amount is estimated and an impairment loss is recognised in accordance with GRAP 104.

Financial assets at amortised cost are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than twelve months, which are classified as non-current assets. Loans and receivables are initially measured at cost which represents fair value. After initial recognition financial assets are measured at amortised cost, using the effective interest method less provision for impairment.

1.12.2 financial liabilities - classificatiOn

A financial liability is a contractual obligation to deliver cash or another financial asset to another entity, or exchange financial assets or financial liabilities under conditions that are potentially unfavourable to the entity. The entities principal financial liabilities relates to accounts payable which are classified as follows on the face of the Statement of Financial Position:

• Trade and other payables.

There are two main categories of financial liabilities, the classification based on how they are measured. Financial liabilities may be measured at:

• Fair value through surplus or deficit; or

• At amortised cost using the effective interest method.

Financial liabilities at fair value are financial liabilities that are essentially held for trading (i.e. purchased with the intention to sell or repurchase in the short term; derivatives other than hedging instruments or are part of a portfolio of financial instruments where there is recent actual evidence of short-term profiteering or are derivatives). Financial liabilities that are measured at fair value through surplus or deficit are stated at fair value, with any resulted gain or loss recognised in the Statement of Financial Performance.

Any other financial liabilities are classified as other financial liabilities and are initially measured at fair value. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

In accordance with GRAP 104 the Financial Liabilities of the entity are all classified as “other financial liabilities”.

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1.12.6 derecOgnitiOn Of financial assets

A financial asset or a portion thereof is derecognised when the NSF realises the contractual rights to the benefits specified in the contract, the rights expire, the NSF surrenders those rights or otherwise loses control of the contractual rights that comprise the financial asset. On derecognition, the difference between the carrying amount of the financial asset and the sum of the proceeds receivable and any prior adjustment to reflect the fair value of the asset that had been reported in capital and reserves is included in net surplus or deficit for the period.

If the entity neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the entity recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the entity retains substantially all the risks and rewards of ownership of a transferred financial asset, the entity continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

1.12.7 derecOgnitiOn Of financial liabilities

A financial liability or a part thereof is derecognised when the obligation specified in the contract is discharged, cancelled, or expires. On derecognition, the difference between the carrying amount of the financial liability, including related unamortised costs, and the amount paid for it is included in net surplus or deficit for the period.

1.12.8 fair Value cOnsideratiOns

The fair values at which financial instruments are carried at the reporting date have been determined using available market values. Where market values are not available, fair values have been calculated by discounting expected future cash flows at prevailing interest rates. The fair values have been estimated using available market information and appropriate valuation methodologies, but are not necessarily indicative of the amounts that the NSF could realise in the normal course of business. The carrying amounts of financial assets and financial liabilities with a maturity of less than one year are assumed to approximate their fair value due to the short-term trading cycle of these items.

Accounts receivable are initially valued at cost, which represents fair value, and subsequently carried at amortised cost using the effective interest rate method. An estimate is made for a provision for impairment based on past default experience of all outstanding amounts at year-end. Bad debts are written off the year in which they are identified as irrecoverable. Amounts receivable within 12 months from the date of reporting are classified as current.

A provision for impairment of accounts receivable is established when there is objective evidence that NSF will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is based on long outstanding non-active supplier contracts where the recovery of the outstanding amount is uncertain as no new contracts exist for the recovery of the outstanding balance. Based on past default experience it is the policy of the entity to provide for 50% of non-active contracts between 180 days and 270 days outstanding and 100% of non-active contracts exceeding 270 days.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in the Statement of Financial Performance. When the receivable is uncollectable, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to the Statement of Financial Performance.

1.12.5 iMpairMent and gains and lOsses frOM subsequent MeasureMent

A gain or loss arising from a change in the fair value of a financial asset or financial liability measured at fair value shall be recognised in surplus or deficit.

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.

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1.13 related parties

1.13.1 related party transactiOns

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions or if the related party entity and another entity are subject to common control.

Related party transactions are classified by the entity as those transactions between related parties other than transactions that would occur within a normal supplier or client/recipient relationship on terms and conditions no more or less favourable than those which it is reasonable to expect the entity would have adopted if dealing with that individual or entity at arm’s length in the same circumstances. Only transactions with related parties not at arm’s length or not in the ordinary course of business are disclosed.

1.13.2 key ManageMent persOnnel

Key management personnel is defined as being individuals with the authority and responsibility for planning, directing and controlling the activities of the entity, including those charged with the governance of the entity 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 management in their dealings with the entity.

The Executive Officer (EO) of NSF on post level 14 is currently regarded as being at key management level including employees on level 13 or below acting in the position of the EO. Transactions conducted with key management, as well as with close family members of key management, is regarded as related party transactions. Only transactions with related parties not at arm’s length or not in the ordinary course of business are disclosed.

1.12.9 risk ManageMent Of financial assets and liabilities

It is the policy of the entity to disclose information that enables the user of its financial statements to evaluate the nature and extent of risks arising from financial instruments to which the entity is exposed on the reporting date.

Risks and exposure are disclosed as follows:

1.12.9.1 Credit risk:

• Each class of financial instrument is disclosed separately.• Maximum exposure to credit risk not covered by collateral is specified.• Financial instruments covered by collateral are specified.

1.12.9.2 Liquidity risk:

• A maturity analysis for financial assets and liabilities that shows the remaining contractual maturities.

• Liquidity risk is managed by ensuring that all assets are reinvested at maturity at competitive interest rates in relation to cash flow requirements. Liabilities are managed by ensuring that all contractual payments are met on a timeous basis and, if required, additional new arrangements are established at competitive rates to ensure that cash flow requirements are met.

• A maturity analysis for financial liabilities (where applicable) that shows the remaining undiscounted contractual maturities is disclosed in note 21 to the annual financial statements.

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• GRAP 20: Related party Disclosure

Standard is to ensure that a reporting entity’s 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 related parties and by transactions and outstanding balances with such parties.

• GRAP 32: Service Concession Arrangements: Grantor

The Standard prescribes the accounting for service concession arrangements by the grantor, a public sector entity.

• GRAP 105: Transfer of functions between entities under common control (Effective date: Not announced)

The Standard establishes accounting principles for the acquirer and transferor in a transfer of functions between entities under common control.

• GRAP 106: Transfers of functions between entities not under common control (Effective date: Not announced)

The Standard establishes accounting principles for the acquirer in a transfer of functions between entities not under common control.

• GRAP 107: Mergers (Effective date: Not announced)

The Standard establishes accounting principles for the combined entity and combining entities in a merger.

• GRAP 108: Statutory Receivables

The Standard prescribes accounting requirements for the recognition, measurement, presentation and disclosure of statutory receivables.

Application of all of the above GRAP standards will be effective from the date as announced by the Minister of Finance. Currently not all of these dates have been announced.

1.14 cOMMitMents

Commitments include expenditure approved and contracted as well as expenditure approved, but not yet contracted. Approved and contracted commitments includes expenditure that has been approved and the contract has been awarded at the reporting date. Approved, but not yet contracted commitments includes expenditure that has been approved and the contract has yet to be awarded or is awaiting finalisation at the reporting date.

1.15 cOntingent assets and cOntingent liabilities

Management judgement is obtained through the services of legal counsel when disclosing contingent assets and liabilities. The probability that an inflow or outflow of economic resources will occur due to past events, which will only be confirmed by the occurrence or non-occurrence of one or more future events as well as any possible financial impact is disclosed based on management estimation in the disclosure notes.

1.16 new standards and interpretatiOns (igrap) issued, but nOt yet effectiVe as at 31 March 2014:

The following GRAP standards have been issued, but are not yet effective and have not been early adopted by the entity:

• GRAP 18: Segment reporting: (Effective date: Not Announced)

The Standard is to establish principles for reporting financial information by segments. The disclosure of this information will:

(a) Enable users of the financial statements to better understand the entity’s past performance, to evaluate the nature and financial effects of the activities in which it engages and the economic environments in which it operates;

(b) Identify the resources allocated to support the major activities of the entity and assist in making decisions about the allocation of resources; and

(c) Enhance the transparency of financial reporting and enable the entity to better discharge its accountability obligations.

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The following interpretations (IGRAP) have been issued but not yet effective and have not been early adopted by the entity:

• IGRAP 7: The limit on defined benefit asset, minimum funding requirements and their interaction

• IGRAP11: Consolidation - Special Purpose Entities

• IGRAP 12: Jointly Controlled Entities – Non Monetary Contributions by Venturers

• IGRAP17: Interpretation of the Standard of GRAP on Service Concession Arrangements Where a Grantor Controls a Significant Residual Interest in an Asset

Management has considered all of the above-mentioned GRAP standards issued (both effective and not effective) and anticipates that the adoption of these standards will not have a significant impact on the financial performance, financial position or cash flows of the entity.

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS

2013/14 2012/13Notes R’000 R’000

2. skills deVelOpMent leVies (nOn-exchange reVenue)

In terms of the Skills Development Act and the Skills Development Levies Act, the total levy income per the Statement of Financial Performance is as follows:

Percentage of payroll payable as Skills Development Levy 1% 1%

Skills Development Levies received from SARS (20%):

Skills Development Levies received 2 510 885 2 338 898 Skills Development Levies collected by SARS 12 554 444 11 694 493 Less: Amount withheld by the Department of Higher Education and Training and paid to the SETAs (80%) (10 043 559) (9 355 595)Movement in Provision for levies less than threshold 18.2 4 022 9 642 Less: Accrual for UIF contribution to NSF 17.1 - (94 520)

Total 2 514 907 2 254 020

3. incOMe frOM setas (nOn-exchange reVenue)

Income from SETAs towards TVET College Infrastructure Development 1 104 809 -

4. Other incOMe (nOn-exchange reVenue)

Provision for impairment reversed 16.3 - 16 777 Bad debts recovered 194 -

194 16 777

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2013/14 2012/13Notes R’000 R’000

5. finance incOMe (exchange reVenue)

Finance income from investments at the Public Investment Corporation (PIC) 15 354 612 388 786 Interest income from other commercial banks 2 281 731

Total 356 893 389 517

Finance income from investments at the Public Investment Corporation (PIC) is disclosed net of realised fair value profits of R80,415 million (2013: R0 million) relating to financial assets that matured during the current financial year.

6. Other incOMe (exchange reVenue)

Interest received from advance payments 34 171 38 595

Total 34 171 38 595

Interest received is from advance payments made by the NSF to skills development project providers in terms of the agreed Memorandum of Agreements between the parties. In terms of these agreements the interest may be applied to incur training expenditure on behalf of the Fund. On contract finalisation, any remaining accrued interest should be returned to the Fund.

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS2013/14 2012/13

RestatedR’000 R’000

7. skills deVelOpMent grant disburseMents

NSA Ministerial 15 172 17 303 National Public Dialogue and Advocacy 4 179 3 134 Constituency Capacity Building 8 432 14 169 Skills Marketing and Communication 578 -Provincial Skills Development Forums 351 -Capacity Building 1 632 -

Government Priorities 1 308 720 1 091 354 New Growth Path 428 456 223 775 Industrial Policy Action Plan 64 800 43 385 Rural Development 101 008 113 017 Education and Health 5 920 12 593 Justice and Crime Prevention 106 151 131 032 Co-operatives and Small Enterprises 107 354 129 294 Public Sector Capacity 495 031 438 258

DG Priorities 1 523 696 1 447 469 Worker Education 9 433 4 584 Skills System Capacity Building 11 888 (2 511)Training Lay-off 17 091 39 483 Academia, Research and Development - 390 Bursaries 1 272 200 1 238 398 DHET Projects for Academia, Research and Development 213 084 167 125

Skills Infrastructure 303 165 53 951 Public Delivery Infrastructure 275 061 32 838 Community Education Centres 28 104 21 113

HRDSA 19 833 6 665 Research 19 833 6 665

NSDSII (32 095) (41 617)Critical Skills Support (32 095) (4 980)Industry Support Programme * - (3 280)Discretionary and Innovation * - (993)Strategic Projects * - (32 444)ABET * - 24 Social Development * - 56

Total 3 138 491 2 575 125

* These negative amounts refer to over provisions relating to projects during the previous 2011/12 and 2012/13 financial years.

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2013/14 2012/13Notes R’000 R’000

8. eMplOyee cOsts

Salaries and wages 21 288 15 481 Basic salaries 17 399 12 357 Performance awards 259 504 Service bonuses 1 247 968 Other non-pensionable allowances 2 097 1 418 Overtime 8 -Net movement: Leave accrual 116 131 Net movement: Service bonus accrual 162 103

Social contributions 3 019 2 251 Provident fund contributions: defined contribution plans 25 2 140 1 529 Medical aid contributions 876 719 Bargaining council 3 3

Total 24 307 17 732

Average number of employees 57 58

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2013/14 2012/13Notes R’000 R’000

9. Operating expenses

Consultancy and service provider fees * 4 572 3 778 External Auditor’s remuneration 2 816 2 612 Internal Auditor’s remuneration - 1 029 Bad debts written off 26 - Telephone and Fax 389 284 Travel and subsistence 4 252 3 233 Printing and Publications 102 - Entertainment 10 9 Operating Leases 86 140 Catering 28 (60)Venues and Facilities 28 8 Stationery 464 310 Computer consumables 5 45 Cleaning services - 2 Training and development 103 160 Repairs and maintenance 1 36 Education and training practices SETA - 10 Courier and delivery 4 1 Laundry Services - 1 Bursaries 189 - Other 1 - DHET Shared Services Charge 6 873 4 804

Total 19 949 16 401

* The consulting and service provider fees relates to services provider to assist with the execution of the cash to accrual conversion, including the implementation of an accrual accounting system.

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2013/14 2012/13Notes R’000 R’000

10. ManageMent fees and bank charges

Bank charges paid to banks 13 11 Management fees paid to Public Investment Corporation (PIC) 15 2 079 1 997

Total 2 092 2 008

11. prOperty, plant and equipMent 2013/14computer equipment total

R’000 R’000At 31 March 2014

Reconciliation of cost to net book valueCost 1 020 1 020 Accumulated depreciation (255) (255)

Carrying value at 31 March 2014 765 765

For the year ended 31 March 2014

Reconciliation of opening and closing net book valueOpening carrying value 102 102 Additions 896 896 Depreciation (233) (233)

Closing carrying value at 31 March 2014 765 765

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11. prOperty, plant and equipMent (cOntinued) 2012/13Computer equipment

Total

R’000 R’000At 31 March 2013

Reconciliation of cost to net book valueCost 125 125 Accumulated depreciation (23) (23)



Reconciliation of opening and closing net book valueOpening carrying value 7 7 Additions 118 118 Depreciation (23) (23)


Computer equipment relates to printers, CPUs, notebooks and monitors.

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12. intangible assets 2013/14computer software total

R’000 R’000

At 31 March 2014

Reconciliation of cost to net book value

Cost 279 279

Accumulated depreciation (54) (54)



Reconciliation of opening and closing net book value

Opening carrying value - -

Additions 279 279

Depreciation (54) (54)


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2012/13Computer equipment

Total

R’000 R’000

At 31 March 2013

Reconciliation of cost to net book value

Cost - -

Accumulated depreciation - -

Carrying value at 31 March 2013 - -

Year ended 31 March 2013

Reconciliation of opening and closing net book value

Opening carrying value - -

Additions - -

Depreciation - -

Closing carrying value at 31 March 2013 - -

Computer software relates to off-the-shelf software packages.

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2013/14 2012/13Restated

Notes R’000 R’00013. deferred expenditure On skills deVelOpMent grant disburseMents

NSA Ministerial - 2 131 Constituency Capacity Building - 2 131

Government Priorities 784 940 1 087 790 New Growth Path 178 021 251 071 Industrial Policy Action Plan 16 716 11 253 Rural Development 71 034 63 558 Education and Health 4 687 636 Justice and Crime Prevention - 69 642 Co-operatives and Small Enterprises 63 059 56 720 Public Sector Capacity 451 423 634 910

DG Priorities 1 313 144 585 227 Worker Education 2 588 2 259 Skills System Capacity Building 8 209 6 752 Bursaries 1 302 347 554 541 DHET Projects for Academia, Research and Development - 21 675

Skills Infrastructure 205 114 39 521 Public Delivery Infrastructure 200 002 26 904 Community Education Centres 5 112 12 617

HRDSA 800 20 034 Research 800 20 034

Total 2 303 998 1 734 703

Deferred expenditure represents skills development grant disbursements paid or payable in advance to skills development project providers based on the signed memorandum of agreement between the parties.

Deferred expenditure reflects the outstanding capital amounts including accrued interest received by the skills development project providers at financial year-end. NSF will only be entitled to the unspent funds, including any accrued interest, at the end of the project term.

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2013/14 2012/13Notes R’000 R’000

14. cash and cash equiValents

Cash at bank 1 161 912 4 845

Cash and cash equivalents at year-end 1 161 912 4 845

As required in Treasury Regulation 31.2, National Treasury approved the banks where the NSF bank accounts are held. The weighted average interest rate on short term bank deposits was 5.32% for the financial year (2013: 5.51%).

Cash includes cash with commercial banks. Cash equivalents are short term, highly liquid investments that are held with registered banking institutions with maturities of three months or less and that are subject to an insignificant risk of change in value.

For purposes of the Cash Flow Statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks, net of bank overdrafts.

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2013/14 2012/13Notes R’000 R’000

15. inVestMents

It is the policy of NSF to account for changes in the fair value of monetary securities classified as held for trading through the Statement of Financial Performance. The fair value adjustment is calculated as the difference between the market value at the end of the reporting period and the cost of the investment. These investments are revalued once a year at the end of the reporting period by the Public Investment Corporation (PIC). The latest revaluation was performed on 31 March 2014.

Composition at fair valueInvestments with the Public Investment Corporation (PIC) 5 797 841 7 346 649

Financialassetsatfairvaluethroughsurplus/(deficit)canbereconciledasfollows:

Balance at the beginning of the year 7 346 649 7 196 658 Invested during the year 3 498 659 1 853 202 Interest received and capitalised 5 354 612 388 786 Management fees 10 (1 903) (1 997)Expenses for the period 10 (176) - Withdrawal (5 400 000) (2 090 000)

Closingbalanceatendoftheyear(Noneofthefinancialassetsareimpaired) 5 797 841 7 346 649

The NSF has committed its entire investment balance as at year-end. Refer to note 20.

NSF assesses at each reporting date whether there is objective evidence that a financial asset or group financial assets are impaired. None of the financial assets at fair value through surplus/(deficit) are impaired on reporting date.

The Skills Development Act Regulations state that the NSF may, if not otherwise specified by the Public Finance Management Act, invest the moneys in accordance with the approved NSF investment policy.

Treasury Regulation 31.3 requires that, unless exempted by the National Treasury, the NSF as a public entity, that is listed in Schedule 3A of the Public Finance Management Act, must invest surplus funds with the Corporation for Public Deposits. The NSF obtained exemption from National Treasury to invest surplus funds with the Public Investment Corporation (PIC) in accordance the NSF’s investment policy.

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2013/14 2012/13Restated

Notes R’000 R’00016. trade and Other receiVables frOM nOn-exchange transactiOns

The carrying and fair value of trade and other receivables are as follows:

Receivables from skills development projects 16.1 56 477 46 348 Carrying amount 67 916 57 787 Less: Provision for impairment 16.3 (11 439) (11 439)

Advances to training providers for payment of allowances 16.2 - - Carrying amount - 5 180 Less: Provision for impairment 16.3 - (5 180)

SETA receivables for TVET college infrastructure development 16.1 590 228 - Carrying amount 590 228 - Less: Provision for impairment 16.3 - -

Total 646 705 46 348

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS16. trade and Other receiVables frOM nOn-exchange transactiOns (cOntinued)

16.1 ageing Of trade and Other receiVables

Trade and other receivables are all considered for impairment. Based on past default experience it is the policy of the entity to provide for 50% of non-active contracts between 180 days and 270 days outstanding and 100% of non-active contracts exceeding 270 days.

At 31 March 2014, R41,226 million (2013:R77 million) were more than 180 days past due but not impaired due to the fact that these contracts are still active. The ageing of trade and other receivables not impaired is as follows:

2014 2014 2014 2014 2014

current 31 to 180 days 181 to 270 days Over 270 days total

R’000 R’000 R’000 R’000 R’000

Receivables from skills development projects 4 679 11 230 1 718 22 074 39 701 Advances to training providers for payment of allowances - - - - - SETA receivables for TVET college infrastructure development 590 228 - - - 590 228

Total 594 907 11 230 1 718 22 074 629 929

2013 2013 2013 2013 2013Restated Restated Restated Restated RestatedCurrent 31 to 180 days 181 to 270 days Over 270 days TotalR’000 R’000 R’000 R’000 R’000

Receivables from skills development projects 2 231 44 391 - 13 638 60 260 Advances to training providers for payment of allowances - - - - - SETA receivables for TVET college infrastructure development - - - - -

Total 2 231 44 391 - 13 638 60 260

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS16. trade and Other receiVables frOM nOn-exchange transactiOns (cOntinued)

16.2 ageing Of trade and Other receiVables iMpaired

As at 31 March 2014, gross trade and other receivables of R28,215 million (2013: R33,395 million) were impaired and provided for. The amount of the provision is R11,439 million as at 31 March 2014 (2013: R16,619 million). The ageing of the gross impaired trade and other receivables (net R16,776 million, 2013: R16,776 million) is stipulated as follows:

2014 2014 2014 2014 2014current 31 to 180 days 181 to 270

daysOver 270 days total

R’000 R’000 R’000 R’000 R’000

Receivables from skills development projects - - - 28 215 28 215 Advances to training providers for payment of allowances - - - - - SETA receivables for TVET college infrastructure development - - - - -

Total - - - 28 215 28 215

2013 2013 2013 2013 2013Current 31 to 180 days 181 to 270 days Over 270 days TotalR’000 R’000 R’000 R’000 R’000

Receivables from skills development projects - - - 28 215 28 215 Advances to training providers for payment of allowances - - - 5 180 5 180 SETA receivables for TVET college infrastructure development - - - - -

Total - - - 33 395 33 395

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2013/14 2012/13Restated

Notes R’000 R’000

16. trade and Other receiVables frOM nOn-exchange transactiOns (cOntinued)

16.3 recOnciliatiOn Of prOVisiOn fOr iMpairMent

Opening balance 16 619 33 396 (Utilised)/Provided during the year 9 (5 180) - Provision reversed during the year - (16 777)

Total 11 439 16 619

Current year provision attributable to:

Advances to training providers for payment of allowances - 5 180 Opening balance 5 180 5 180 (Utilised)/Provided during the year (5 180) -

Receivables from skills development projects 11 439 11 439 Opening balance 11 439 28 216 (Utilised)/Provided during the year - - Provision reversed during the year - (16 777)

Total 11 439 16 619

Trade and other receivables are individually impaired when there is objective evidence that the asset is impaired. The creation and release of the provision for impaired receivables have been included in operating expenses (note 9) in the Statement of Financial Performance. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable as mentioned above.

Credit quality of trade and other receivables

Management considers that all of the above financial assets are of good credit quality, excluding a portion of the PSETA’s debt: R11,439 million from the PSETA’s trade receivables are not considered recoverable. The maximum exposure to credit risk at reporting date is the fair value of each class of receivables as mentioned above.

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17. trade and Other payables

17.1 trade and Other payables frOM nOn-exchange transactiOns

Payables to skills development projects 981 182 736 325 SARS accrual: UIF to be refunded - 94 520

981 182 830 845

17.2 trade and Other payables frOM exchange transactiOns

Other administrative payables 87 2 058 SARS Payable 4 034 4 054 Administrative payables due to the Department of Higher Education and Training (DHET) 19 901 7 490 Leave and bonus accruals 17.3 1 400 1 122

Total 25 422 14 724

17.3 leaVe and bOnus accrual

Balance at the beginning of the year 1 122 889 Amounts utilised during the year (1 122) ( 889) Amount recognised during the year 1 400 1 122

Closing carrying amount 1 400 1 122

Leave and bonus accrual composition:

Current

Leave accrual 797 681 Bonus accrual (Thirteenth cheque) 603 441

Total 1 400 1 122

Leave is calculated based on leave days outstanding at year-end and quantified in terms of total cost of employment per employee. The bonus accrual relates to thirteenth cheque commitments owed to NSF employees at financial year-end.

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18. prOVisiOns

Provision for skills development grant expenditure 18.1 438 731 594 244 Provision for levies less than threshold 18.2 3 622 7 644 Performance bonus provision 18.3 697 504

Total 443 050 602 392

18.1 prOVisiOn fOr skills deVelOpMent grant expenditure

Objectives (2013/14)

carrying value at the beginning of

year

additional provisions

utilised during the year

carrying value at the end of

year

restatedR’000 R’000 R’000 R’000

NSDS IIINSA Ministerial 3 212 332 (3 212) 332 Constituency Capacity Building 3 212 332 (3 212) 332

Government Priorities 546 757 396 577 (546 757) 396 577 New Growth Path 75 135 124 136 (75 135) 124 136 Industrial Policy Action Plan 6 384 11 407 (6 384) 11 407 Rural Development 19 849 24 615 (19 849) 24 615 Education and Health 472 2 045 ( 472) 2 045 Justice and Crime prevention 38 484 17 165 (38 484) 17 165 Co-operatives and Small Enterprises 44 103 28 997 (44 103) 28 997 Public Sector Capacity 362 330 188 212 (362 330) 188 212

DG Priorities 18 468 6 472 (18 468) 6 472 Worker Education 1 208 1 670 (1 208) 1 670 Skills System Capacity Building 6 690 4 251 (6 690) 4 251 DHET Projects for Academia, Research and Development 10 570 551 (10 570) 551

Skills Infrastructure 25 807 35 350 (25 807) 35 350 Public Delivery Infrastructure 17 637 30 238 (17 637) 30 238 Community Education Centres 8 170 5 112 (8 170) 5 112

Total 594 244 438 731 (594 244) 438 731

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS18. prOVisiOns (cOntinued)

18.1 prOVisiOn fOr skills deVelOpMent grant expenditure (cOntinued)

Objectives (2012/13)Carrying value

at the beginning of year

Additional provisions

Utilised during the year

Carrying value at the end of

yearRestated Restated

R'000 R'000 R'000 R'000NSDS IIINSA Ministerial - 3 212 - 3 212

NSA Constit Capacity Building - 3 212 - 3 212

Government Priorities 115 311 546 757 (115 311) 546 757 New Growth Path 74 537 75 135 (74 537) 75 135 Industrial Policy Action Plan 1 156 6 384 (1 156) 6 384 Rural Development 27 675 19 849 (27 675) 19 849 Education and Health 1 060 472 (1 060) 472 Justice and Crime prevention 3 390 38 484 (3 390) 38 484 Co-operatives and Small Enterprises 7 493 44 103 (7 493) 44 103 Public Sector Capacity - 362 330 - 362 330

DG Priorities 11 335 18 468 (11 335) 18 468 Worker Education 6 1 208 (6) 1 208 Skills System Capacity Building 6 617 6 690 (6 617) 6 690 Training lay-off 1 871 - (1 871) - Academia, Research and Development 2 841 - (2 841) - DHET Projects - 10 570 - 10 570

Skills Infrastructure - 25 807 - 25 807 Public Delivery Infrastructure - 17 637 - 17 637 Community Education Centres 68 8 170 (68) 8 170

NSDS II 42 347 - (42 347) - Critical Skills Support 2 707 - (2 707) - Industry Support Programme 3 340 - (3 340) - Discretionary and Innovation 1 402 - (1 402) - Strategic Projects 34 898 - (34 898) -

Total 168 993 594 244 (168 993) 594 244

As at 31 March 2014, a provision for skills development grant expenditure amounting to R438,731 million (2013: R606,831 million) was recognised. Provision for skills development grant expenditure is estimated on an annual basis. For purposes of the provision calculations management deems the skills development activities to be rendered equally over the original contract term. These estimates are based on the remaining portion of the contract for a specific year which has not been invoiced/claimed by the training providers. The provisions recognised for the relevant financial year is deducted from the remaining contractual commitments.

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2013/14 2012/13Notes R’000 R’000

18. prOVisiOns (cOntinued)

18.2 prOVisiOn fOr leVies less than threshOld

Balance at the beginning of the year 7 644 17 286 Levies less than threshold provision realised for the year (4 022) (9 642)

Closing carrying amount 3 622 7 644

18.3 perfOrMance bOnus prOVisiOn

Balance at the beginning of the year 504 425 Performance bonus provision unutilised (449) - Performance bonus paid during the year (55) (425)Performance bonus provision for the year 697 504

Closing carrying amount 697 504

As at 31 March 2014, the performance bonus provision amounting to R697 000 (2013: R504 000) was recognised.

Performance bonuses accrue to staff on an annual basis subject to the achievement of predetermined performance standards. The provision is an estimate of the amount due to staff in the service of the NSF at the reporting date.

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2013/14 2012/13Notes R’000 R’000

19. recOnciliatiOn Of net cash flOw frOM Operating actiVities tO net surplus/(deficit)

Netsurplus/(deficit)asperStatementofFinancialPerformance 777 103 34 580 Adjusted for non-cash items:

Depreciation 287 22 Increase/(decrease) in provisions:

Relating to employment 471 312 Relating to impairment (5 180) (16 777)Relating to grant disbursement provisions (155 513) 552 612 Relating to levy provisions 2 & 18.2 (4 022) (9 642)

Adjusted for items separately disclosed:Finance income (356 893) (389 518)

Adjusted for working capital changes: (1 003 715) (523 954)(Increase)/decrease in trade and other receivables (595 177) (56 645)(Increase)/decrease in deferred expenditure (569 295) (517 462)Increase/(decrease) in trade and other payables 160 757 50 153

Cash generated from operations (747 462) (352 365)

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20. cOMMitMents and earMarked funds

As at year-end the NSF has committed and earmarked its entire reserves of R8,462 billion towards skills development projects.

The National Skills Fund’s mandate is to fund skills development as outlined in the Skills Development Act. Hence, the nature of the Fund is developmental and not profit-driven. The Fund’s purpose is not to accumulate large reserves for investment, but to put its funds to effective use towards skills development and thereby contribute towards unlocking the human potential of South Africa’s citizens. Since the dawn of the NSDS III, the National Skills Fund’s performance in skills development grants disbursements has increased consistently and significantly. The National Skills Fund started to put both its annual income and accumulated reserves to effective use towards funding skills development. The NSF’s improved performance can be clearly noted through its high level of commitments towards skills development.

2013/14Notes R’000

tOtal capital and reserVes as at year-end 8 461 792

cOMMitted and earMarked tOwards:

Approved and contracted projects 20.1 & 20.5 7 861 462 Approved, not yet contracted projects 20.2 432 750 Earmarked for recommended projects 20.3 764 373 Earmarked for constructive annual recurring commitments 20.4 2 273 740

Total future expenditure 11 332 325

OVercOMMitMent ** 2 870 533

** The NSF will be able to meet its commitments as it becomes due through effective cash flow management.

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS20. cOMMitMents (cOntinued)

20.1 Approved and contracted projects are commitments where the NSF has a contractual obligation to fund the skills development projects or administrative projects. With a contractual obligation there is a written agreement with specific terms between the NSF and the third party, whereby the third party undertakes to perform certain deliverables as outlined in the agreement. Performance on these deliverables will obligate the NSF to make payment.

20.2 Approved, not yet contracted projects, are skills development projects that have been approved by the Director General of Higher Education and Training, but have not yet been contracted at year-end. Contracting will take place subsequent to approval after year-end.

20.3 Earmarked for recommended projects, are skills development projects that have been recommended to the Director General of Higher Education and Training for approval before year-end. Approval and contracting will take place after year-end.

20.4 Fund earmarked for constructive annual recurring commitments are commitments whereby the NSF commits funds annually towards ongoing skills development projects. Due to this established pattern of past practice the NSF has created a valid expectation on the part of the third parties, that it will continue to fund these skills development projects, until the end of the NSDS III period. Constructive commitment towards these ongoing skills development projects consist of:

2013/14R’000

1. Commitment towards bursaries* 1 082 514 2. Commitment towards training of workers under the Expanded Public Works Programme* 240 385 3. Commitment towards training of workers under the dti Monyetla Programme* 155 690 4. Commitment towards National Artisan Development* 520 183 5. Commitment to support the Human Resource Development Council of South Africa 137 006 6. Commitment to support the National Skills Authority 137 962

2 273 740

* These commitments are limited toward the NSDS III strategic period and are expected to increase annually by inflation, currently estimated at 5.9%. Although the commitments above are limited to the NSDS III period, it can be reasonably expected that the commitments may continue during NSDS IV.

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20. cOMMitMents (cOntinued)

20.5 expenditure cOntracted fOr at balance sheet date, which will be financed thrOugh Ordinary trading OperatiOns, but nOt recOgnised in the financial stateMents is as fOllOws:

NSDS IIINSA Ministerial 38 662 21 326

Constituency Capacity Building 5 413 10 071 National Public Dialogue and Advocacy 4 493 7 925 Skills Marketing and Communication 4 422 - Provincial Skills Development Forums 1 649 - Capacity Building 3 598 3 330 Good Practice in Skills Development 150 - Skills Legislation Research and Review 18 937 -

Government Priorities 3 457 677 4 134 204 New Growth Path 488 128 836 262 Industrial Policy Action Plan 301 503 22 860 Rural Development 604 641 444 341 Education and Health 85 257 2 724 Justice and Crime Prevention 1 136 124 063 Co-operatives, Small Enterprises and NGO’s 274 679 357 968 Public Sector Capacity 1 702 333 2 345 986

DG Priorities 1 274 420 734 731 Worker Education 22 310 14 276 Skills System Capacity Building 60 279 72 167 Training Lay-off Scheme 14 851 5 550 Bursaries 632 394 68 121 DHET Projects for Academia, Research and Development 544 586 574 617

Skills Infrastructure 3 061 401 532 257 Public Delivery Infrastructure 3 043 075 488 209 Community Education Centres 18 326 44 048

HRDSA 29 302 49 134 Research 29 302 49 134

Administrative commitments - 2 759

Total 7 861 462 5 474 411

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS21. financial instruMents - financial risk ManageMent

Exposure to currency, commodity, interest rate and credit risk arise in the normal course of the operations. This note presents information about the exposure to each of the above risks, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout these financial statements.

Fair values

Set out below, is a comparison by class of the carrying amounts and fair value of the financial instruments.

carrying amount fair value

R’000 R’000Financial assets

2014

Cash and cash equivalents 1 161 912 1 161 912 Financial assets at fair value through surplus/(deficit) 5 797 841 5 797 841 Trade and other receivables 646 705 646 705

7 606 458 7 606 458

2013

Cash and cash equivalents 4 845 4 845 Financial assets at fair value through surplus/(deficit) 7 346 649 7 346 649 Trade and other receivables 46 348 46 348

7 397 842 7 397 842

Financial liabilities

2014

Trade and other payables 1 006 604 1 006 604 1 006 604 1 006 604

2013

Trade and other payables 845 569 845 569 845 569 845 569

The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation.

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS21. financial instruMents - financial risk ManageMent (cOntinued)

The following methods and assumptions were used to estimate the fair values:

Cash and cash equivalentsCash and cash equivalents comprise of cash on hand and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value. The carrying amount of cash and cash equivalents approximate fair value due to the relatively short-term maturity of these financial assets.

Financial assets at fair value through surplus/(deficit)Fair value of financial assets is derived from quoted market prices in active markets, if available.

Trade and other receivablesTrade and other receivables are subsequently measured at amortised cost using the effective interest rate method, less any impairment losses. The carrying amount of accounts receivable, net of allowances for bad debt, approximates fair value due to the relatively short-term maturity of these financial assets.

Trade and other receivablesTrade and other payables are stated at amortised cost, which approximates their fair value due to the relatively short-term maturity of these financial liabilities.

Fair value hierarchyThe NSF uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: Quoted (unadjusted) prices in active markets for identical assets and liabilities.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as price) or indirectly (i.e., derived from prices).

Level 3: Techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

As at 31 March 2014, NSF held the following financial instruments measured at fair value:

level 1 level 2 level 3 R’000 R’000 R’000 R’000

Investments with the Public Investment Corporation (PIC) 5 797 841 5 797 841 - - 5 797 841 5 797 841 - -

During the reporting period ending 31 March 2014, there were no transfers between level 1 and level 2 fair value measurements.

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21. financial instruMents - financial risk ManageMent (cOntinued)

As at 31 March 2013 NSF held the following financial instruments measured at fair value:

Level 1 Level 2 Level 3 R’000 R’000 R’000 R’000

Investments with the Public Investment Corporation (PIC) 7 346 649 7 346 649 - - 7 346 649 - 7 346 649 - -

During the reporting period ending 31 March 2013, there were no transfers between level 1 and level 2 fair value measurements.

credit risk

Financial assets, which potentially subject NSF to concentrations of credit risk, consist primarily of cash and cash equivalents, investments and accounts receivable. Credit risk arises from the risk that a counterparty may default or not meet its obligations timeously.

NSF management limits its treasury counter-party exposure by only dealing with well-established financial institutions approved by National Treasury through the approval of their investment policy in terms of the Treasury Regulations.

Credit risk with respect to levy paying employers is limited due to the nature of the income received. NSF does not have any material exposure to any individual or counter-party. NSF’s concentration of credit risk is limited to the industry in which the NSF operates. No events occurred in the industry during the financial year that may have an impact on the recovery of trade and other receivables.

Before training advances are paid to service suppliers, provider vetting, as well as site visits, are conducted by the NSF. A list of successful providers are compiled and approved by the Project Grants Committee (PGC) prior to the disbursement of any funds. The risk of non-performance by these counter parties are also mitigated through the application of a reconciliation process which initiates the clearing of an outstanding provider advance before a second advance will be granted.

The carrying amount of the financial assets represent the maximum credit exposure. The maximum exposure to credit risk as at 31 March 2014 :

rated non-rated totalR’000 R’000 R’000

Cash and cash equivalents 1 161 912 1 161 912 Investments 5 797 841 5 797 841 Trade and other receivables 646 705 646 705

Total 6 444 546 1 161 912 7 606 458

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liquidity risk

Liquidity risk is the risk of the NSF not being able to meet its obligations as they fall due. The NSF manages the liquidity risk through proper management of working capital, capital expenditure and actual vs. forecasted cash flows. Adequate reserves and liquid resources are also maintained.

Forecast Liquidity reserve as of 31 March 2014 is as follows:

2014 2015 2016R’000 R’000 R’000

Opening balance for the period 6 959 754 4 705 664 4 775 883 Operating proceeds 3 247 890 3 385 723 3 771 223 Operating outflow (5 855 206) (3 577 762) (3 296 119)Cash flow from investments 353 226 262 258 198 580

Closing balance for the period 4 705 664 4 775 883 5 449 567

The table below analyses the financial liabilities that will be settled on net basis into the relevant maturity groupings based on the remaining period at financial statement date to the contractual maturity date:

less than 1 year total

At 31 March 2014 R’000 R’000

Trade and other payables 1 006 604 1 006 604 1 006 604 1 006 604

Less than 1 year Total

At 31 March 2013 R’000 R’000

Trade and other payables 845 569 845 569 845 569 845 569

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Market risk

Interest rate sensitivity analysis

Financial assets

NSF is sensitive to the movements in the money market repo rate which is the primary rate to which the investment portfolios are exposed. The rates of sensitivity are based on management’s assessment of possible changes to the interest rates and is formulated on a 100 basis point movement.

If the weighted average interest rate as at 31 March 2014 had been 100 basis higher or lower the interest income would have been affected as follows:

increase/decrease in basis point

effect on the surplus/deficit

R’0002014Financial assetsInvestments - PIC +100 65 918

-100 (65 918)

Increase/Decrease in basis point

Effect on the surplus/deficit

R’0002013Financial assetsInvestments - PIC +100 65 918

-100 (65 918)

Foreign exchange risk

NSF does not initiate any transactions with international parties and is therefore not exposed to any exchange risk due to currency fluctuations. All transactions are denominated in South African Rand with local vendors.

Price Risk

NSF is exposed to equity securities price risk because of investments held and classified as financial assets at fair value through surplus/(deficit) on the Statement of Financial Position. These financial assets are classified as held for trade. NSF is not exposed to commodity price risk.

To manage its price risk arising from equity securities NSF diversifies its portfolio with the Public Investment Corporation (PIC). Diversification of the portfolio is done in accordance with limits set and agreed with PIC.

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Cash flow and fair value interest rate risk

As NSF has significant interest bearing assets, the revenue and operating cash flows are substantially depended on changes in market interest rates. As NSF does not have significant interest bearing liabilities, the expenses and cash flows are not substantially dependent on changes in market interest rates.

effective interest rate

subject to interest rate movement:

floating

non-interest bearing total

Year ended 31 March 2014 % R’000 R’000 R’000

Currentfinancialassets 5.32% 5 797 841 3 617 234 5 797 841 Cash and cash equivalents N/A 1 161 912 1 161 912Investments 5.32% 5 797 841 5 797 841 Trade and other receivables N/A 646 705 646 705

Current Liabilities - 1 006 604 1 006 604 Trade and other payables N/A - 1 006 604 1 006 604

Effective interest rate

Subject to interest rate movement:

Floating

Non-interest bearing

Total R’000

% R’000 R’000 R’000Year ended 31 March 2013Currentfinancialassets 5.51% 7 346 649 7 449 035 7 397 842 Cash and cash equivalents N/A - 4 845 4 845 Investments 5.51% 7 346 649 - 7 346 649 Trade and other receivables N/A - 46 348 46 348

Currentfinancialliabilities - 845 569 845 569 Trade and other payables N/A - 845 569 845 569

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2013/14 2012/13

Notes R’000 R’000

22. cOntingent liabilities

The following contingent liabilities exist:

Legal claims instituted against the NSF 22.1 1 739 1 808

Application to retain accumulated surplus as at year-end 22.2 8 461 792 7 684 686

SERVICE SETA creditor 11 312

ESETA creditor 1 236

22.1 legal claiMs instituted against the nsf

The legal claims instituted against the National Skills Fund relates to five cases against services providers who rendered skills development training on behalf of the Fund. These claims relates to alleged breach of contract by the NSF. The legal processes is still ongoing to determine the final outcome of the claims.

22.2 applicatiOn tO retain accuMulated surplus as at year-end

The NSF will be applying for the retention of the 31 March 2014 accumulated surplus in terms of section 53(3) of the PFMA from National Treasury during the first quarter of the 2014/15 financial year. The accumulated surplus as at year-end is therefore disclosed as a contingent liability until the approval has been obtained.

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2013/14 2012/13Notes R’000 R’000

23. cOntingent assets

Legal claims instituted by NSF 23.1 663 411 Uncommitted surplus funds of SETAs to be transferred to the NSF 23.2 1 651 120 -

Total 1 651 783 411

23.1 legal claiMs instituted by nsf

The legal claims instituted by the National Skills Fund relates to six cases against services providers who rendered skills development training on behalf of the Fund. These claims relates to service providers failing to deliver the service/training as per contract. The relevant state attorneys have issued summons to the respective service providers. The legal processes is still ongoing to determine the final outcome of the claims.

23.2 uncOMMitted surplus funds Of setas tO be transferred tO the nsf

On 3 December 2012, the Minister of Higher Education and Training published the new SETA grant regulations in terms section 36 of the Skills Development Act, 1998 (No 97 of 1998), in Government Gazette No. 35940 to be effective from 1 April 2013. In terms of new SETA grant regulation 3(12), the uncommitted surpluses of the SETAs as at each year-end must be paid over by each SETA to the National Skills Fund by 1 October of each year. However, the SETA is allowed in terms of grant regulation 3(11) to retain a maximum of 5% of the uncommitted surpluses to be carried over to the next financial year. The SETA may also in terms of SETA grant regulation 3(12) submit a business case to the Minister requesting approval to carry over the surpluses where exceptional circumstances have led to projected under-spending.

Great uncertainty exists over the a reasonable estimate for the contingent asset to be received from the SETA uncommitted surpluses as at the current year-end, due to reasonably accurate information not being readably available with regards each SETA’s uncommitted surplus and with regards to the specific interpretation of the new SETA grant regulations. Also, no information is available as to whether the Minister of Higher Education and Training will allow the SETAs to retain their surpluses.

The SETAs’ uncommitted surpluses can only be more reasonable estimated once the audit process have been completed for each SETA closer to the end of July of each year and once an indication has been obtained as to whether the Minister of Higher Education and Training will grant the SETAs approval to retain their surpluses. However, the contingent asset was estimated based on the prior year uncommitted surpluses of the SETAs on the assumption that the Minister will not approve any SETA to retain their surpluses.

24. related party transactiOns

The National Skills Fund reports to the Minister of Higher Education and Training. Accordingly the NSF transact with a number of related parties within the Department of Higher Education and Training.

All related party transactions that occurred during the current financial year were at arm’s-length and in the normal course of business, in accordance with the mandate of the National Skills Fund.

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24. related party transactiOns (cOntinued)

24.1 realatiOnships

Department Department of Higher Education and Training

Advisory body within the Department National Skills Authority

Entities under the Department• Qualification Council for Trades and Occupations

(QCTO)• Education Training and Development Practices SETA

(EDTP SETA)• Manufacturing, Engineering and Related Services SETA

(MERSETA)• South African Qualifications Authority (SAQA) • Energy and Water SETA (EWSETA) • Media, Information and Communication Technologies

SETA (MICT SETA)• National Student Financial Aid Scheme (NSFAS) • Finance and Accounting Services SETA (FASSET) • Mining Qualifications Authority (MQA)• Agricultural SETA (AGRISETA) • Food and Beverages SETA (FOODBEV) • Public Sector SETA (PSETA)• Bank SETA • Fibre Processing and Manufacturing SETA (FP&M SETA) • Safety and Security SETA (SASSETA)• Culture, Arts, Tourism and Hospitality SETA (CATHSETA) • Health and Welfare SETA (HWSETA) • Services SETA• Construction Education and Training Authority (CETA) • Insurance SETA (INSETA) • Transport Education and Training Authority (TETA)• Chemical Industries Education and Training Authority

(CHIETA)• Local Government SETA (LGSETA) • Wholesale and Retail SETA (W&RSETA)

TvET Colleges under the Department• Motheo TVET College • False Bay TVET College • Northern Cape Rural TVET College • Vuselela TVET College • South Cape TVET College • Western Gauteng TVET College• Taletso TVET College • West Coast TVET College • Tswane South TVET College• Orbit TVET College • Majuba TVET college • Ikhala TVET College• South West Gauteng TVET College • Umgungundlovu TVET College • Ingwe TVET College• Ekurhuleni East TVET College • Elanzeni TVET College • Central Johannesburg TVET College• Ekurhuleni West TVET College • Elangeni TVET College • Lephalale TVET College• Sekhukhune TVET College • Mnambithi TVET College • Northern Cape Urban TVET College• Vhembe TVET College • Thekwini TVET College • East Cape Midlands TVET College• Mopani South East TVET College • Mthashana TVET College • Lovedale TVET College• Waterberg TVET College • Nkangala TVET College • Esayidi TVET College• Sedibeng TVET College • Gert Sibande TVET College • Coastal TVET College• Capricorn TVET College • Umfolozi TVET College • King Sabata TVET College• Maluti TVET College • Buffalo City TVET College • Port Elizabeth TVET College• Goldfields TVET College • Flavius Mareka TVET College• Boland TVET College • Letaba TVET College• North Link TVET College • King Hintsa TVET College• College of Cape Town TVET College • Tswane North TVET College

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS24. related party transactiOns (cOntinued)

24.1 relatiOnships (cOntinued)

Members of senior management• Executive Officer• Chief Financial Officer• Director Strategic Projects• Director Skills Support Program• Director Provincial Operations

24.2 related party transactiOns and balances - Operating expenses

Operating expenses

accruals balance at

31 March 2014 R'000 R'000

DHET - Shared Services 6 873 3 729 DHET - Reimbursed Goods and Services N/A 16 172

6 873 19 901

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24.3 related party transactiOns and balances - skills deVelOpMent prOjects

related party

income from setas towards tVet college infrastructure development

Other income - interest received

skills development

grant disbursement

expense

accruals balance at 31 March

2014

provision for skills

development expense

balance at 31 March

2014

deferred expense

balance at 31 March

2014

receivables balance at 31 March

2014

R’000 R’000 R’000 R’000 R’000 R’000 R’000Department of Higher Education and Training 371 438 121 843 64 852 National Skills Authority 10 994 1 903 National Student and Financial Aid Scheme (NSFAS) 17 156 1 059 120 708 920 596 381 South African Qualification Authority (SAQA) 204 37 064 Quality Council for Trades Occupations (QCTO) - 280 280 280 AGRISETA 24 844 13 328 3 421 Bank SETA 71 827 CATHSETA 24 543 CETA 49 696 CHIETA 43 170 ETDP SETA 33 128 54 EWSETA 23 221 FASSET 39 272 FOODBEV 25 087 245 FP&M SETA 29 869 6 688 HWSETA 31 748 INSETA 33 924 LGSETA 41 517 10 403 MERSETA 114 530 600 (432) 551 1 543 MICT SETA 60 590 (1)MQA 88 655 3 326 PSETA 355 8 107 1 969 5 204 28 216 SASSETA 21 724 Services SETA 162 786 (32 095) 4 974 TETA 55,831 W&RSETA 128 847 False Bay TVET College 42 18 678 5 443 10 514 374

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24.3 related party transactiOns and balances - skills deVelOpMent prOjects (cOntinued)

related party



skills development

grant disbursement

expense


2014


development expense

balance at 31 March

2014

deferred expense

balance at 31 March

2014


2014

R’000 R’000 R’000 R’000 R’000 R’000 R’000Umgungundlovu TVET College 83 21 038 2 498 2 498 Gert Sibande TVET College 20 321 4 796 4 796 Motheo TVET College 17 869 29 574 29 574 Vuselela TVET College 16 400 410 5 000 Taletso TVET College 1 719 5 564 5 564 Orbit TVET College (10 109) 1 12 204 South West Gauteng TVET College 410 (8 896) 2 186 16 122 Ekurhuleni East TVET College 4 (6 325) 21 14 072 Ekurhuleni West TVET College 616 (10 151) 4 387 29 198 Sekhukhune TVET College 185 (949) 3 419 8 930 Vhembe TVET College 43 45 323 2 230 2 230 Mopani South East TVET College 11 18 428 5 471 5 471 Waterberg TVET College 122 7 732 2 269 4 913 Sedibeng TVET College 121 (3 883) 544 4 548 Capricorn TVET College 394 29 710 1 638 1 638 Maluti TVET College (6 009) 17 309 Goldfields TVET College 11 636 1 222 1 222 Boland TVET College 133 28 067 8 539 8 539 North Link TVET College 67 48 686 7 797 11 923 College of Cape Town TVET College 219 24 170 3 833 7 424 South Cape TVET College 35 9 793 4 264 8 076 West Coast TVET College 105 16 141 5 855 11 867 Majuba TVET college 2 26 251 9 393 9 393 Elanzeni TVET College 3 669 3 669 Elangeni TVET College 439 16 717 6 254 6 254 Mnambithi TVET College 158 (8,161) 693 16,240 Thekwini TVET College 448 11,720 735 735

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related party



skills development

grant disbursement

expense


2014


development expense

balance at 31 March

2014

deferred expense

balance at 31 March

2014


2014

R’000 R’000 R’000 R’000 R’000 R’000 R’000Mthashana TVET College 1 18 747 2 250 2 250 Nkangala TVET College 50 1 526 1 529 1 529 Umfolozi TVET College 4 67 134 20 963 20 963 Buffalo City TVET College 117 3 124 978 4 164 Flavius Mareka TVET College - 11 462 Letaba TVET College 163 (5 327) 912 12 323 King Hintsa TVET College 21 (4 625) 273 15 230 Tshwane North TVET College 19 (20 478) 348 20 846 Northern Cape Rural TVET College 504 20 565 13 737 17 915 Western Gauteng TVET College 1 (8 227) 6 14 966 Tshwane South TVET College 22 4 987 736 3 592 Ikhala TVET College 43 2 108 839 1 086 Ingwe TVET College 69 3 975 33 33 Central Johannesburg TVET College 45 (6 776) 698 13 233 Lephalale TVET College 145 (3 080) 653 3 878 Northern Cape Urban TVET College 5 18 916 988 988 East Cape Midlands TVET College 378 6 707 11 997 24 919 Lovedale TVET College 3 018 431 431 Esayidi TVET College (12 480) 4 24 649 Coastal KZN TVET College 651 22 359 8 313 8 313 King Sabata TVET College 29 3 179 642 642 Port Elizabeth TVET College 1 10 616 1 1

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24.4 key ManageMent persOnnel

number of individuals 2013/14 2012/13

R’000 R’000Shorttermemployeebenefits

Postlevel14:ExecutiveOfficer 1Basic salary and social contributions 681 644 Bonuses and performance related payments - 87 Other short term employee benefits 323 285

Postlevel13:ChiefFinancialOfficer 1Basic salary and social contributions 645 154 Bonuses and performance related payments - - Other short term employee benefits 155 34

Post level 13: Director Strategic Projects 1Basic salary and social contributions 656 596 Bonuses and performance related payments - - Other short term employee benefits 323 243

Post level 13: Director Skills Support Program 1Basic salary and social contributions 749 704 Bonuses and performance related payments - - Other short term employee benefits 124 100

Post level 13: Director Provincial Operations 1Basic salary and social contributions 655 545 Bonuses and performance related payments - 42 Other short term employee benefits 120 67

Total 4,431 3,501

Personnel remuneration is paid by the Department of Higher Education and Training and claimed back as part of the 10% administration fee. No transactions were conducted with any family members of key management personnel during the current or previous period under review.

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS25. defined cOntributiOn plan

The NSF provides for retirement benefits for all its permanent employees through a defined contribution scheme to the GEPF that is subject to the Pension Funds Act, 1956 as amended. In terms of the Pension Funds Act, the fund is not required to be actuarially valued.

The NSF’s liability is limited to its considerations made.

2013/14 2012/13Notes R’000 R’000

Contributions for the year included in employee cost 8 2 140 1 529

26. change in accOunting estiMate

As defined in GRAP 3, a change in an accounting estimate is an adjustment of the carrying amount of an asset or liability, or the amount of periodic consumption, resulting from reassessing the present status of, and the expected future benefits and obligations associated with, the asset or the liability. Changes in accounting estimates result from new information or new developments and accordingly are not corrections of errors.

Due to the nature of NSF operations, registered project claims undergo a verification process before the actual payments are made. During the verification process the validity and accuracy of the claims are confirmed, recalculated and communicated with the training providers. Changes identified through this process are accounted for as a change in accounting estimate in terms GRAP 3 in relation to previous year registered accruals included in trade and other payables.

26.1 The impact of these adjustments on the Statement of Financial Performance and the Statement of Financial Position for the year ending 31 March 2014 are as follows:

grant disburseMents - 5 906

Public Sector Capacity - 10 Skills System Capacity Building - 6 Justice and Crime Prevention - 105 Training Lay-off Scheme - 899 Discretionary and Innovation - 31 Bursaries - 4 908 Industrial Policy Action Plan - (74) New Growth Path - 25 Co-operatives, Small Enterprises and NGO’s - (28) ABET - 24

The effect of the changes have no impact on the opening balance of deferred expenditure (2013: decrease from R664,6 million to R658,547 million), no impact on the opening balance of trade and other receivables (2013: decrease from R 2,439 million to R2,415 million) and no impact on the opening balance of trade and other payables from non-exchange transactions (2013: decrease from R794,295 million to R794,124 million).

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS26. change in accOunting estiMate (cOntinued)

26.2 During the prior financial year it became evident that the PSETA will be able to provide the NSF with appropriate supporting evidence to substantiate the expenditure incurred under the PSETA project previously funded by the NSF. This is due to substantial efforts from the PSETA to obtain the required information during the current financial year. Once the expenses are verified with the new supporting evidence, the full debtor balance will no longer be refundable by the PSETA to the NSF. The changes identified through the new information from PSETA are accounted for as a change in accounting estimate in terms of GRAP 3 in relation to previous year’s SETA debtors and the related provision for impairment included in trade and other receivables. Changes identified through this verification process are also accounted for as a change in accounting estimate in terms GRAP 3 in relation to previous year registered accruals included in trade and other payables.

The impact of these adjustments on the Statement of Financial Performance and the Statement of Financial Position for the year ending 31 March 2014 are as follows:

2013/14 2012/13Notes R’000 R’000

Other incOMe (nOn-exchange) 16.3 - 16 777 Provision for impairment reversed - 16 777

The effect of the changes have no impact on the opening balance of deferred expenditure (2013: no effect), no effect on the opening balance of trade and other receivables and in reversal of impairment as indicated above (2013: R3,827 million increase to R77,249 million).

27. priOr periOd cOrrectiOn

27.1 cOMMitMents incOMplete and inaccurate in the priOr periOd

The following prior period errors occurred with regards to commitments:

1. Reductions in skills development project budgets in the prior year were not taken into consideration in determining the commitment balance at year-end.

2. Additional commitments in the prior year were not taken into consideration in determining the commitment balance at year-end.

3. Deferred expenses, debtors and provisions were incorrectly recognised with regards to projects that have closed or were inaccurately calculated.

The net effect of the above errors resulted in the commitment balance being understated by R55,771 million. The prior period commitment balance was restated to reflect the correct commitment balance as at the prior period year-end. This prior period error does not impact on the Statement of Financial Position, Statement of Financial Performance and Cash Flow Statement.

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27. priOr periOd cOrrectiOn (cOntinued)

27.2 prOVisiOn fOr skills deVelOpMent grants expenditure inaccurately calculated

The provision for skills development grants expenditure was inaccurately calculated in the 2013 financial year resulting in the provision and the related grants disbursement expense being overstated by R22,068 million.

27.3 incOrrect classificatiOn between deferred expenditure On skills deVelOpMent grant disburseMents and trade and Other receiVables frOM nOn-exchange transactiOns

Receivables and deferred expenditure relating to skills development projects amounting to R13,247 million (net) were incorrectly classified between deferred expenditure and trade and other payables in the 2013 financial year.

27.4 deferred expenditure and receiVables relating tO skills deVelOpMent prOjects were inaccurately and incOrrectly recOgnised

Deferred expenditure and receivables relating to skills development projects amounting to R17,658 million (net) were inaccurately and incorrectly recognised in the 2013 financial year resulting in the deferred expenditure and receivables (cumulative) being overstated by R17,658 million and the related grants disbursement expense being understated by R17,658 million.

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS27. priOr periOd cOrrectiOn (cOntinued)

27.5 iMpact Of priOr periOd cOrrectiOn On the financial stateMents

2012/13Notes R’000

STATEMENT OF FINANCIAL PERFORMANCE

expenses 27.2 & 27.4 2 659 921 As originally stated 2 664 331 Prior period correction (4 410)

skills deVelOpMent grant disburseMents 27.2 & 27.4 2 575 125 As originally stated 2 579 535 Prior period correction (4 410)

net surplus fOr the year 27.2 & 27.4 38 989 As originally stated 34 579 Prior period correction 4 410

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS27. priOr periOd cOrrectiOn (cOntinued)

27.5 iMpact Of priOr periOd cOrrectiOn On the financial stateMents (cOntinued)

2012/13Notes R’000

STATEMENT OF FINANCIAL POSITION

current assets 27.3 & 27.4 9 132 545 As originally stated 9 150 203 Prior period correction (17 658)

deferred expenditure On skills deVelOpMent grant disburseMents 27.3 & 27.4 1 734 705 As originally stated 1 721 463 Prior period correction 13 242

trade and Other receiVables frOM nOn-exchange transactiOns 27.3 & 27.4 46 349 As originally stated 77 249 Prior period correction (30 900)

tOtal assets 9 132 647 As originally stated 9 150 305 Prior period correction (17 658)

current liabilities 27.2 1 447 961 As originally stated 1 470 029 Prior period correction (22 068)

prOVisiOns 27.2 602 392 As originally stated 624 460 Prior period correction (22 068)

capital and reserVes 27.2 & 27.3 & 27.4

7 684 686

As originally stated 7 680 276 Prior period correction 4 410

accuMulated surplus 27.2 & 27.3 & 27.4

7 684 688

As originally stated 7 680 278 Prior period correction 4 410

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R’000 R’00028. Operating lease rentals

NSF as lesseeFuture lease payments under non-cancellable operating leases:

Photocopy machines

Due within one year 34 56Due within two to five years 54 5Later than five years - -

88 61

Minimum lease payments recognized as an expense during the period amount to R79 273 (2013: R 56 404). Leased machinery are contracted for the remaining periods of one and four years, with renewal options available in certain instances.

29. eVents after the repOrting periOd

There are no material adjusting events after the reporting date.

30. nOtes tO the stateMent Of cOMparisOn Of budget against actual aMOunts

30.1 reVenue frOM nOn-exchange transactiOns

The actual revenue received from non-exchange transactions exceeded the budgeted revenue by 21.7%. The increase can be attributed to the income received from the SETAs earmarked towards the TVET college infrastructure development initiative that was not budgeted for in the current financial year.

30.2 reVenue frOM exchange transactiOns

The actual revenue received from exchange transactions remained in line with the budgeted revenue. The actual revenue is 2% slightly below the budget revenue, which is expected due to the decline in the NSF’s investments as a result of the NSF’s high commitments towards funding skills development projects.

30.3 skills deVelOpMent grant disburseMents

The actual skills development grant disbursements was 36.5% below budget, which can mainly be attributed to the following:

1. Delays in the appointment of construction companies to start construction on the new TVET college campuses resulted in R705,729 million (20% of budget difference) not being disbursed in the current financial year, which will be rolled over to the next financial year;

2. There has been generally slow progress on the implementation of skills development projects with the various TVET colleges, resulting in R361,281 million (10% of budget difference) not being disbursed in the current financial year, which will be rolled over to the next financial year;

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NOTES TO THE ANNUAL FINANCIAL STATEMENTS3. There has been slow progress in new commitments towards co-operatives, small enterprises, NGO’s & community training initiatives, mainly due to the NSF’s current high level

of commitments; and

4. The payment of post-graduate bursaries of R132,916 million towards the National Research Foundation occurred subsequent to year-end and not as budgeted within the current financial year (4% of budget difference).

30.4 eMplOyee cOsts

The actual employee costs are 47% below the budgeted employee costs. This is mainly due to the delay in implementing the “Project Monitoring and Evaluation Structure”, which would have entailed appointing 59 new employees. The delay was deemed necessary as a result of the listing of the National Skills Fund as a schedule 3A public entity. It is expected that the additional posts will be filled within the next two years with the implementation of the NSF’s organisational improvement and transformation initiative that the Fund is currently engaged with.

30.5 Operating expenses

The actual operating expenses are 74% below the budgeted operating expenses. This saving is driven by the lower than budgeted employee costs mainly due to the delay in implementing the “Project Monitoring and Evaluation Structure”, which would have entailed appointing 59 new employees. The delay was deemed necessary as a result of the listing of the National Skills Fund as a schedule 3A public entity. It is expected that the additional posts will be filled within the next two years with the implementation of the NSF’s organisational improvement and transformation initiative that the Fund is currently engaged with.

30.6 ManageMent fees and bank charges

The decline in management fees and bank charges is mainly due to a decline in management fees charged by the PIC on the management of investments. This is expected as the PIC’s management fees are based on the NSF’s investment balances with the PIC. As the NSF’s investments decline it is expected that the PIC management fees will also decline.

30.7 cOllectiOn cOsts tO sars

There was a saving of R65,883 million on the actual SARS collection costs for the year in comparison to the costs budgeted for the year. SARS is allowed to charge up to 2% as collection costs but have historically only charged 1%, which is the amount budgeted for. SARS invoices the NSF on a monthly basis for the actual costs incurred to collect skills development levies, which were about 0.4%.

30.8 capital expenditure

The actual capital expenditure is below budget as the capital expenditure projects (Accounting system, Payroll system, HR system, Supply Chain system, Performance Information and Management System etc) are still in the planning and design phase, and is due for roll out and implemetation within the next two financial years with the implementation of the efficiency and effectiveness improvement initiative.

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NOTES

Annual Report 2014ISBN: 978-0-621-43067-7 • RP291/2014

NATIONAL SKILLS FUND · Funding To Skill Our Nation

THE NATIONAL SKILLS FUND IS PROUDLY PART

OF THE DEPARTMENT OF HIGHER EDUCATION AND TRAININGHigher Education and TrainingDepartment:

REPUBLIC OF SOUTH AFRICA

higher education& training

the national skills fund is proudly part of the … · 7 national skills fund annual report · 2014...

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