ANNUAL REPORT 2016/17 - Provincial Government...regulations. We believe that the licensing of...

A N N U A LR E P O R T2016/17

LIMPOPO GAMBLING BOARD | ANNUAL REPORT 2017PB LIMPOPO GAMBLING BOARD | ANNUAL REPORT 2017 1

CONTENTSPART A: GENERAL INFORMATION

1. Foreword by the MEC 3

2. General Information 4

3. List of Abbreviations/Acronyms 5

4. Foreword by Chairperson 6

5. Chief Executive Officer’s Overview 8

6. Statement of Responsibility for the Performance Information 11

7. Strategic Overview 12

8. Legislative and Other Mandates 13

9. Members of the Board 15

10. Organisational Structure 16

PART B: PERFORMANCE INFORMATION

1. Auditor’s Report: Predetermined Objectives 19

2. Situational Analysis 20

3. Performance Information by Programme 31

PART C: GOVERNANCE

1. Introduction 35

2. Portfolio Committees 35

3. Executive Authority 35

4. The Board 36

5. Risk Management 39

6. Internal Control Unit 42

7. Internal Audit and Audit Committees 42

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. Audit Committee Report 46

PART D: HUMAN RESOURCE MANAGEMENT

1. Introduction 49

2. Human Resource Oversight Statistics 49

PART E: FINANCIAL INFORMATION

1. Annual Financial Statements 53

LIMPOPO GAMBLING BOARD | ANNUAL REPORT 20172

GENERAL INFORMATION

PART A


LIMPOPO GAMBLING BOARD | ANNUAL REPORT 20172 LIMPOPO GAMBLING BOARD | ANNUAL REPORT 2017 3

1. Foreword by the MEMBER OF EXECUTIVE

COUNCILHonourable Seaparo C. Sekoati

I am indeed delighted to present the Annual Report of the Limpopo Gambling Board for the 2016/17 financial year to the honourable members of the Limpopo Provincial Legislature as well as to all other interested parties.

While it is a fact that our state owned agencies require more funds to perform their many and varied responsibilities, the Gambling Board has managed to carry out its mandate as enshrined in the Provincial Gambling Act to the best of its abilities despite the budgetary constraints that it faced.

Consequently, the Board managed to license seven Bingo operators in Musina, Senwabarwana, Lephalale, Bela-Bela, Groblersdal, Tzaneen and Phalaborwa without being taken on review by any of the applicants. This is an achievement for which we are filled with enormous pride, as this serves as evidence that the Board exercised its mandate with fairness, objectivity and transparency. While these operations will further create job opportunities, they will unalterably generate more revenue for the Provincial fiscus.

As the term of office of the Board has now come to an end, I seize this opportunity to thank all the Board Members for a job well done. May I also express my sincere gratitude to the Chief Executive of the Board, Mr. Serobi Maja, who reached his retirement age in February 2017. His commitment, dedication and work ethic will forever remain indelible in our minds. The contribution that he made to the regulation of gambling in our Province, in South Africa and in the world as the first black person to become the President of the International Association of Gaming Regulators, as well as having served as the Chairperson of the Gaming Regulators of Africa Forum, will never be forgotten.

Finally, a word of gratitude goes to staff of the Board as well as to the licensed gambling operators for the manner in which they all conducted themselves during the course of the year.

Honourable Seaparo C. Sekoati

MEC for Economic Development, Environment and Tourism



REGISTERED NAME: Limpopo Gambling Board

PHYSICAL ADDRESS: 8 Hans van Rensburg Street, Polokwane, 0699

POSTAL ADDRESS: Private Bag x 9520, Polokwane, 0700

TELEPHONE NUMBERS: (015) 230 2300

EMAIL ADDRESS: [email protected]

WEBSITE ADDRESS: www.lgb.org.za

EXTERNAL AUDITORS: Auditor-General of South Africa

BANKERS: Standard Bank

2. GENERAL INFORMATION


3. LIST OF ABBREVIATIONS/ACRONYMS

AGSA Auditor-General of South Africa

BBBEE Broad Based Black Economic Empowerment

CEO Chief Executive Officer

CFO Chief Financial Officer

IA Internal Audit

LEDET Limpopo Department of Economic Development, Environment and Tourism

LGB Limpopo Gambling Board

LPM Limited Payout Machines

MCS Monitoring and Control Systems

MEC Member of Executive Council

MTEF Medium Term Expenditure Framework

PDI Previously Disadvantaged Individuals

PFMA Public Finance Management Act

RFA Request for Application

RTP Return to Player

SCM Supply Chain Management

SMME Small Medium and Micro Enterprises

TR Treasury Regulations


4. Foreword by the CHAIRPERSON

Mr. Mashile Mokono

It is indeed my singular honour and privilege to express my sincere gratitude to the MEC for Economic Development, Environment and Tourism for the support that we received from his office and the entire

Executive Council of the Province during the course of the year.

As the Board, we continued to license and regulate all forms of legal gambling in the Province without fear or favour as per our laws and regulations. We believe that the licensing of Electronic Bingo sites in Musina, Senwabarwana, Bela-Bela, Lephalale, Groblersdal, Phalaborwa and Tzaneen will serve not only to create job opportunities but will also serve as much needed entertainment facilities for our people. With the addition of two boutique hotels that are to be built in both Lephalale and Tzaneen, we are confident and encouraged that these facilities will also promote tourism in the Province.

While the scourge of illegal online gambling continues to give us sleepless nights, we are indeed hopeful that the plans and strategies that we have put in place will, within the foreseeable future serve to eradicate this menace from our Province.

As gambling in itself has the potential to create an addiction, the Board continued to ensure that campaigns aimed at educating the public to gamble responsibly are conducted throughout the Province. As a result of these efforts, Limpopo continued to have very negligible numbers of problem gamblers that received counselling from the National Responsible Gambling Foundation.

A word of credit goes to all the gambling operators in the Province who continued to comply with the Provincial as well as the National Gambling Acts, Regulations, Rules and their licensing conditions.

As the term of office of the Board came to an end on the 31st of March 2017, I wish to express my sincere gratitude to all the Members of the Board without whose dedication and commitment, we would not have managed to accomplish the many and varied tasks of the Board, which we did.


Furthermore, I wish to express my sincere gratitude to the Chief Executive of the Board, Mr. Serobi Maja, who reached his retirement age in February 2017. The significant role that he played to ensure that the Board never received qualified audit reports from the Auditor-General for over sixteen financial years as well as the contribution he made to the gambling industry in our Province, South Africa and the International world will forever remain indelible in our minds. As the first black President of the International Association of Gaming Regulators and as a former Chairman of the continental Gaming Regulators of Africa Forum, he placed our Province on the world map, and for that and for all else, we wish to thank him most sincerely. With the envisaged appointment of a new Board on 1 April 2017 and the appointment of a new Chief Executive Officer, the Board took the decision in consultation with him to request him to carry on until October 2017 to ensure a smooth transition.

Lastly, we wish to give thanks and appreciation to the management team and all staff of the Board for the excellent work that they continue doing for our Province.

Mashile MokonoChairperson

“While the scourge of illegal online gambling continues to give us sleepless nights, we are indeed hopeful that the plans and

strategies that we have put in place will, within the foreseeable future serve to eradicate this menace from our Province.”


5. Overview by the CHIEF EXECUTIVE

OFFICER Mr. Serobi Maja

As the 2016/17 financial year has now come to an end, it is my singular honour and privilege to present our Annual Report to the Executive Authority of the Board for his information and transmission to the

Limpopo Legislature for their consideration and endorsement.

First and foremost, as the Senior Management and staff of the Board, we wish to give the assurance that the Board continued to ensure that all the licensed gambling operators in the Province complied with the Provincial Gambling Act, Regulations and Rules as well as with the National Gambling Act and all other applicable laws of the Republic of South Africa.

While these licensed gambling operators continued to live up to their expectations with regard to compliance and the payment of applicable levies, the mushrooming of illegal gambling operations continued to be a scourge, not only in our Province but Nationally. Our Law Enforcement Unit continued to be a pain in the neck of these illegal operators. However, much more still needs to be done to ensure that the Province finally delivers a fatal blow to these illegal operators.

Furthermore, despite the budgeting constraints that faced us, we managed to audit and ensure that the licensed gambling operators continued to pay their levies to us for transmission through our Department of Economic Development, Environment and tourism to the Provincial Treasury. For the 2016/17 financial year, an amount of R99, 404, 041.00 was received and R 85, 459, 115.00 was paid over to our Provincial Treasury. This amount will go a long way towards the realisation of the objectives as outlined in the Provincial Development Plan. In addition to the Casinos, Bookmakers, Totalisators and Limited Payout Machine Route Operators, the Board licensed seven Bingo Operators in the Province. These are to be operational in the new financial year at Senwabarwana, Musina, Lephalale, Bela-Bela, Groblersdal, Phalaborwa and Tzaneen. Both the Bingos in Lephalale and Tzaneen will provide boutique hotels, which will serve to provide more job opportunities, while at the same time promoting tourism in the Province. It is also pleasing to note that the Meropa Casino and Entertainment World in Polokwane will, within the 2017/18 financial year, open a new hotel to compliment the Town Lodge on their premises. It is hoped that this new


hotel with modern facilities will serve to attract tourists to the Province, while at the same time providing more job opportunities for the local people.

With the introduction of the concept of Limited Payout Machines, which was designed to empower the previously disadvantaged people in the country, the first Type B Sites were licensed in June 2016 in addition to the more than a thousand two hundred. Type A Limited Payout Machines that were licensed in the Province over the years. More of these Type B Sites will be licensed to provide leisure and entertainment facilities for people of the Province.

GENERAL FINANCIAL REVIEW OF THE PUBLIC ENTITY

The appropriated budget for the 2016/17 financial year was R 61, 273, 000.00. The Board’s own revenue amounted to R 98, 296, 645.00. This was in compliance with GRAP as the Board is forbidden to utilise its own revenue. This amount is not appropriated but has to be accounted for in the budget. Own Revenue amounting to R 98, 296, 645.00 which includes fines the Board issued to Licensees amounting to R 640, 000.00, and interest received of R 1, 107, 397.00, gives a total of R 99, 404, 041.00, which has been collected during the financial year. The Board has surrendered levies amounting to R 85, 459, 115.00.

SPENDING TRENDS OF PUBLIC ENTITY

The Board utilised 99% of goods and services. Only 96% of the employee cost was spent, due to resignations and delayed appointments.

HUMAN RESOURCE CONSTRAINTS AND CHALLENGES FACING THE ENTITY

As a result of budgetary constraints, the Entity does not have sufficient personnel to meet its requirements. For example, the Finance Unit is manned by three officials who report to the CFO, as the Senior Manager has been dismissed.

“While these licensed gambling operators continued to live up to their expectations with regard to compliance and the payment of applicable

levies, the mushrooming of illegal gambling operations continued to be a scourge, not only in our Province but Nationally”


This poses a challenge as the Unit cannot comply with the segregation of duties as enshrined in the Public Finance Management Act (PFMA). The Board has one official in the Risk Management component which has to align to the Risk Management Framework.

With the licensing of additional gambling operations, more posts need to be created to improve on the monitoring, inspection and auditing of these additional operations. As a result of the staff shortages, the Board is unable to do the compliance audits of these additional operations as required. The Human Resources Unit is understaffed and requires one additional post, as there are only two people in the Unit.

With regard to Law Enforcement, the Unit is faced with serious challenges, emanating from the mushrooming of illegal online gambling sites which require sophisticated IT skills to investigate and ultimately bring the perpetrators to book. However, with the help of the South African Police Service, much progress was achieved in dealing with this scourge.

There were no discontinued activities, notwithstanding the staff shortages. However, the Board embarked on reviewing its organisational structure to increase its staff and to align to the five year strategic plan. In order to meet the above challenges, the Board engaged the Department of Economic Development, Environmental and Tourism (LEDET) and the budget was increased accordingly. The reviewed organisational structure is not yet approved, as the Limpopo Provincial Government is busy with reviewing whether there is any duplication of duties between LEDET and the Limpopo Gambling Board.

During the financial year under review, both the National and Provincial Treasuries issued far reaching cost containment measures to which, as the Board, every attempt was made to comply. Deviations were reported to the Accounting Authority for approvals. For invoices that were paid after a 30 day period, cogent reasons for not complying were also reported to the Board for ratification. There were no unsolicited bid proposals for the year.

The Supply Chain Policy was approved by the Board, as it has been aligned to the Provincial Treasury Transversal Policies.

Matters emanating from the Audit Report of the previous year were addressed and rectified. In the 2015/16 financial year 18targets were planned and 16 were achieved. In the 2016/17 financial year, 14 targets were planned and 13 were achieved. This represents 93% of the total target achieved.

With regard to plans for the future, the Board will continue to ensure that it complies with all Treasury Regulations and directives. The Board was allocated an additional R 9, 000, 000.00 to cater for building, Investigations and Law Enforcement. There were no events worth reporting after the reporting date.

In conclusion, we wish to express our profound gratitude to the Members of the Board for the unwavering support they gave us during the course of the year. Furthermore we thank most sincerely, the Department of Economic Development, Environmental and Tourism as well as the MEC, Honourable C. Sekoati, for the role he played to ensure that we carry out our mandate despite the financial constraints.

A word of gratitude also goes to Members of the Portfolio Committee, the Standing Committee on Public Accounts and all other stakeholders, for without their support, we would not have realised our objectives.

Credit also goes to the Premier of the Province, Hon. C.S. Mathabatha and all members of the Executive Council for their support and encouragement.

Mr. Serobi MajaChief Executive Officer


6. STATEMENT OF RESPONSIBILITY

STATEMENT OF RESPONSIBILITY FOR PERFORMANCE INFORMATION FOR THE YEAR ENDED 31 MARCH 2017

To the best of my knowledge and belief, I confirm the following:

All information and amounts disclosed in the Annual Report are consistent with the Annual Financial Statements audited by the Auditor-General.

• The Annual Report is complete, accurate and free from any omissions.

• The Annual Report has been prepared in accordance with the guidelines on the Annual Report, as issued by the National Treasury.

• The Annual Financial Statements (Part E) have been prepared in accordance with the GRAP standards applicable to the Board.

• The Board is responsible for the preparation of the Annual Financial Statements and for the judgments made in this information.

The Board is responsible for establishing and implementing a system of internal control and this has been designed to provide reasonable assurance as to the integrity and reliability of the performance information, the human resources information and the Annual Financial Statements.

The External Auditors are engaged to express an independent opinion on the Annual Financial Statements.

In our opinion, the Annual Report fairly reflects the operations, the performance information, the human resources information and the financial affairs of the public entity for the financial year ended 31 March 2017.

Yours faithfully

Mr. Serobi Maja Mr. M.T. Mokono

Chief Executive Officer Chairperson


7. STRATEGIC OVERVIEW

7.1. VISIONTo be the innovative and leading gambling regulator in Africa.

7.2. MISSIONTo regulate the gambling industry in a responsible and ethical manner for the benefit of the people of the Province by ensuring compliance with the Legislation, promoting responsible gambling and facilitating sustainable local economic development.

7.3. VALUES• Integrity

• Responsibility

• Consultation

• Transparency

• Diversity

• Teamwork


8. LEGISLATIVE AND OTHER MANDATES

In terms of the PFMA, the Limpopo Gambling Board is listed as a schedule 3C public entity.

The mandate of the Board is to regulate, control and monitor gambling activities in the Province in accordance with the Limpopo Gambling Act, Act No 3 of 2013.

The pursuit of the vision and the mission above will be regulated and guided by the following broad legislative mandates:

8.1. CONSTITUTIONAL MANDATES

The Constitution of the Republic of South Africa, 1996, (Act No. 108 of 1996), establishes that the casinos, racing, gambling and wagering are matters of concurrent National and Provincial Legislative competence.

8.2. LEGISLATIVE MANDATES

Limpopo Gambling Act, No. 3 of 2013

The Act empowers the MEC to establish and appoint the Board to manage the affairs of the entity on behalf of the Department of Economic Development, Environment and Tourism.

The objectives of the Board are to license, regulate and monitor gambling activities in the Province.

The Limpopo Gambling Act, No. 3 of 2013 came into operation on 1 September 2014 and it consequently repealed the Limpopo Gambling Act, No. 4 of 1996.

National Gambling Act, Act No.7 of 2004 as amended

The Board must comply with national norms and standards during the licensing process.

The Act empowers the Minister to prescribe the maximum number of casino licenses that may be granted in the Republic and in each Province.

The Criminal Procedure Act, No 51 of 1977

The Law Enforcement inspectors of the Board were declared as Peace Officers in terms of section 334 of the abovementioned Act and are now conferred with the following powers:

• Powers conferred upon a Police Official In terms of Chapter 2 of the CPA;

• Powers to arrest a person without a warrant – Section 40(1) of the CPA;

• Powers conferred upon a Peace Officer - Section 41(1) of the CPA ;

• The execution of warrants of arrest - Section 44 of the CPA;

• Powers to issue written notice - Section 56 of the CPA; and

• Powers to issue written notice - Section 341 of the CPA.


Relevant Legislation used to govern illegal gambling

• Limpopo Gambling Act, No 3 of 2013;

• National Gambling Act, No. 7 of 2004;

• National Lotteries Act, No. 57 of 1997;

• Prevention of Organised Crime Act, No. 121 of 1998 ; and

• Prevention and Combating of Fraud and Corruption Act, No. 12 of 2004.

8.3. POLICY MANDATES

The following policy mandates are key to the Board in its endeavour to achieve its legislative mandates:

• Responsible Gambling

The National Responsible Gambling Foundation is a resource that integrates research and monitoring of public education and awareness, training, treatment and counselling.

• Broad Based Black Economic Empowerment

To economically empower the previously marginalised black masses in the main stream economy.

• Limpopo Gambling Regulations

The Regulations to the Limpopo Gambling Act are in the process of being drafted and it is hoped that they will be promulgated by the end of the next financial year.


9. Members ofTHE BOARD

LIMPOPO GAMBLING BOARD | ANNUAL REPORT 2017 15

Mr. M.T. MokonoChairperson

Mr. Serobi MajaChief Executive Officer

Ms. J. MogaleDeputy Chairperson

Mr. K.J. SitholeBoard Member

Ms. B.L. MontjaneBoard Member

Mr. K. S. MaboeaBoard Member

Khosi T.N. MakumbaneBoard Member

Mr. A. MasheleBoard Member


10. Organisational STRUCTURE

J LEGODISCM Officer

O NCHABELENGSCM Officer

M MOLELESCM Officer

L GREEFFSCM Officer

B MABOTJARisk Officer

M LAVHENGWAManager: IT

K BIDZHAIT Officer

E MAKGOBAManager: HR

A KOTZEHR Officer

J THOPOLADriver

T MASEKOAMENGReceptionist

A MOJAPELOOffice Assistant

P MOHODIOffice Assistant

M MAILULAOffice Assistant

P PITSIFacility Officer

A SWANEPOELSwitchboard

VACANTSenior Manager: Finance

D RAMOTUMBUAccountant

M MKHWANAZIPayroll Officer

R KHOMOLABudget Officer

YSM MATHABATHAChief Financial Officer

BOARD

SEROBI MAJAChief Executive Officer

P VENTERSecretary: CFO

C MDHLULIManager: SCM

E MAMABOLOSecretary: Finance

FROZENHR Assistant


R MOLEPOInvestigation Officer

VACANTInvestigation Officer

E HLANGWINIInvestigation Officer

M CHARITYLicensing Officer

N MOLEPOManager:

Licensing & Investigation

S KGAMEInspector

F SCOTTInspector

N MATHABATHAInspector

S WILHASEInspector

L LEGODIInspector

TL RATSHILUMELAInspector

M MALOTHANEAuditor

J MOLELEAuditor

R PHIRIAuditor

A BEETHAAuditor: Horse Racing

MA MOSOTHOAuditor: Horse Racing

I RAMEETSEManager:

Compliance Audits

A TSHABALALAManager:

Gaming Systems

M MACHETESecretary: Legal

JH SINGHSecretary: Compliance

ADV. LINDA GANESSSenior Manager: Legal Service

L MATHAVHANESenior Manager: Compliance

P MASOGO Senior Manager: Law Enforcement

R LEKOTOInspector

D TLOMATSANEInspector

C ELSInspector

S SEHLAPELOInspector

M MAMABOLOInspector

F MALEPENGInspector

A KOEKEMOERPersonal Assistant

VACANTExecutive Secretary

E MAMABOLOSecretary: LEBU

TE MOTHOTSEInspector

FROZENCommunity Liaison Officer

FROZENInspector

FROZENAdmin: Gaming

LIMPOPO GAMBLING BOARD | ANNUAL REPORT 201718 LIMPOPO GAMBLING BOARD | ANNUAL REPORT 201718

PERFORMANCE INFORMATION

PART B


LIMPOPO GAMBLING BOARD | ANNUAL REPORT 201718 LIMPOPO GAMBLING BOARD | ANNUAL REPORT 2017 19LIMPOPO GAMBLING BOARD | ANNUAL REPORT 201718 LIMPOPO GAMBLING BOARD | ANNUAL REPORT 2017

1. AUDITOR’S REPORT: PREDETERMINED OBJECTIVES

The AGSA/auditor 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 page 57 to 61 of the Report of the Auditors Report, published as Part E: Financial Information.


2. SITUATIONAL ANALYSIS

2.1 SERVICE DELIVERY ENVIRONMENT

2.1.1 LAW ENFORCEMENT

The Unit consists of a Senior Manager, seven (7) Inspectors and a secretary.

The Unit’s current priority is the investigation and eradication of illegal online gambling activities. There are currently more than twenty-five (25) illegal dens offering illegal online gambling activities to the public under the guise of Internet Cafés.

The crime has spread to all parts of the Province, including small towns and villages. The worst scenario is in Senwabarwana, where an ATM machine has been installed inside the illegal gambling den.

Between July 2016 and March 2017 five (5) illegal online gambling dens were raided in Polokwane, Groblersdal, two in Bela-Bela and one in Northam. The Northam online gambling shop was the biggest ever found in Limpopo where sixty-four (64) gambling machines were confiscated.

The Unit, together with other stakeholders like, SAPS, NPA, SARS, Home Affairs and Department of Labour are working hard at trying to curb this ever increasing scourge of illegal online gambling within Limpopo Province.

2.1.2 COMPLIANCE

Following the publication of a Request For Applications for Bingo Operator and Site licences in October 2015, the Board received and considered ten (10) Bingo Operator licence applications and twenty nine (29) Bingo Site licence applications. As a result the Board granted five (5) Bingo Operator licences and seven (7) Bingo Site licences to be operated in Musina, Senwabarwana (Bochum), Lephalale, Bela-Bela, Tzaneen, Phalaborwa and Groblersdal.

The Bingo site operated by Galaxy Bingo Limpopo (Pty) Ltd in Senwabarwana (Bochum) was the first Bingo Site to become operational on 29 March 2017 with one hundred (100) Bingo seats. During the construction phase of the Bingo Site forty (40) people were employed, and R 5 773 942 was spent on developing the Bingo Site, fifty two percent (52%) of which was spent on Previously Disadvantaged Local Contractors. Thirty (30) people are currently employed at the Bingo Site, all of whom are local and black. Eighty five percent (85%) of these employees were previously unemployed. Two people are currently employed as Head Office employees.

Seven (7) Bookmaker Sites and two (2) Totalisator Sites became operational during the financial year under review, bringing the number of operational Bookmakers and Totalisators to fifty (52) and twenty five (25) respectively.

Thaba Moshate Casino, which became operational in 2015, has shown improved performance in terms of its Gross Gambling Revenue which increased by 9%, and effectively the levies paid to the Board also increased by 9% between 2015 and 2016.

The first two Type B LPM Sites in the Province became operational from 10 June 2016 in Tzaneen and Phalaborwa with 20 LPMs each. An additional four Type B LPM Sites became operational during the financial year in Mankweng (15 LPMs), Mokopane (30 LPMs), Burgersfort (15 LPMs) and Makhado (20 LPMs).


2.1.2.1 Compliance Statistics

Table 1 – Number of Gambling Machines

CASINO TOTAL

Meropa Casino 417

Khoroni Casino 150

Thaba Moshate Casino 150

Total 717

Table 2 – Gambling Tables

CASINOAMERICAN ROULETTE

BLACKJACK POKERTOUCH BET ROULETTE

BACCARAT TOTAL

Meropa Casino 11 04 01 01 01 18

Khoroni Casino 05 03 00 00 00 08

Thaba Moshate Casino 06 03 01 00 00 10

Total 22 10 02 01 01 36

Table 3 – Number of LPMs and LPM Sites

MUNICIPAL DISTRICTTOTAL NUMBER

OF LPMs TOTAL NUMBER

OF LPM SITES VUKANI LPMs VUKANI SITES GOLDRUSH LPMs GOLDRUSH SITES

Capricorn 228 45 158 33 70 12

Waterberg 158 27 121 20 37 07

Mopani 278 53 165 27 113 26

Sekhukhune 227 46 167 35 60 11

Vhembe 186 35 122 22 64 13

Total 1077 206 733 137 344 69

Table 4 – Bingo

BINGO OPERATOR GAMING MACHINESNUMBER OF GAMBLING

MACHINES TESTED

Galaxy Gaming Limpopo (Bochum) 100 100

Total 100 100


Table 5 – Casino Gambling Machines Tested

CASINONUMBER OF GAMBLING MACHINES

TESTED

Meropa Casino 72

Khoroni Casino 105

Thaba Moshate Casino 87

Total 264

Table 6 – LPM Site Inspections

CAPRICORN WATERBERG MOPANI SEKHUKHUNE VHEMBE TOTAL

Vukani Gaming 26 21 12 20 25 104

Goldrush Gaming 16 15 33 11 13 88

Total 42 36 45 31 38 192

Table 7 – Gambling Machines Distribution

INTO THE PROVINCE OUT OF THE PROVINCE WITHIN THE PROVINCE THROUGH THE PROVINCE TOTAL

675 166 400 326 1567

Table 8 – LOC Approvals

SOFTWARE HARDWARE MCS TOTAL

634 82 12 728

Table 9 – Licensing

CASINOS, LPM ROUTES & LPM SITES

SUN MEROPA CASINO

KHORONI CASINO

THABA MOSHATE

CASINO

VUKANI GAMING

LIMPOPO – LPM ROUTE OPERATOR

VUKANI – LPM SITES

GOLDRUSH GAMING

LIMPOPO – LPM ROUTE OPERATOR

GOLDRUSH – LPM SITES

GALAXY BINGO

TOTAL PER CATEGORY

New Licences: Employees 29 22 62 1 142 7 60 1 324

Renewals: Employees 80 61 0 12 144 2 94 0 393

Total per Licensee 109 83 62 13 286 9 154 1 717


Table 9 – Licensing (continued)

BOOKMAKERS & TOTALISATORS

HOLL

YWOO

D –

BOOK

MAK

ER

BETS

A –

BOOK

MAK

ER

BETT

ING

WOR

LD

– BO

OKM

AKER

PHUM

ELEL

A –

TOTA

LISA

TOR

BETT

A G

AMIN

G –

BOOK

MAK

ER

OCTO

BER

WIN

D

IDAD

A TR

ADIN

G

FORT

WOO

D

PORT

APA

TOTA

L PER

CA

TEGO

RY

New Licences: Key Employees

174 3 20 19 129 62 13 4 11 435

Renewals: Key Employees 20 2 0 3 1 15 0 3 0 44

Total per Licensee 194 5 20 22 130 77 13 7 11 479

Table 10 – Number of Employees

CASINO, BOOKMAKERS AND TOTALISATORS

KHOR

ONI C

ASIN

O

MER

OPA

CASI

NO

THAB

A M

OSHA

TE

CASI

NO

VUKA

NI G

AMIN

G LI

MPO

PO –

LPM

RO

UTE O

PERA

TOR

VUKA

NI –

LPM

SITE

S

GOLD

RUSH

GAM

ING

LIM

POPO

– LP

M

ROUT

E OPE

RATO

R

GOLD

RUSH

– LP

M

SITE

S

PHUM

ELEL

A GA

MIN

G &

LEIS

URE

HOLL

YWOO

D –

BOOK

MAK

ER

BETS

A –

BOOK

MAK

ER

BETT

ING

WOR

LD -

BOOK

MAK

ER

Total employees 207 319 236 19 456 25 476 165 354 33 143

PDI 197 312 236 18 339 22 455 165 354 33 143

Non - PDI 10 7 0 1 117 3 21 0 0 0 0

BETTA GAMING – BOOKMAKER

OCTOBER WIND IDADA TRADING FORTWOOD PORTAPA GALAXY BINGO

PDI 220 141 85 8 83 27

Non - PDI 220 135 85 8 81 25

Total employees 0 6 0 0 2 2

2.1.2.2 Gambling Performance

a. Patronage - Casinos

The estimated number of patrons who visited the two Casino Licensees during the 2015/16 and 2016/17 financial years, amounted to 1 698 919 and 1 645 690 respectively. On a quarterly basis the estimated number of visitors at the Casino Licensees were as follows.

Table 11 – Casino Patronage

QUARTER ENDED JUNE SEPTEMBER DECEMBER MARCH TOTAL

2015/16 394 800 404 400 454 548 445 171 1 698 919

2016/17 434 619 439 843 417 215 354 013 1 645 690

Variance 39 819 35 443 -37 333 -91 158 -53 229

Variance% 10% 8% -8% -20% -3%


b. Patronage Spend Per Visit - Casinos

Punters’ average spend per quarter and per day during the 2015/16 and 2016/17 financial years were as follows:

Table 12 – Patronage spend per visit

JUNE SEPTEMBER DECEMBER MARCH

2015/16 4 744 4 136 4 004 3 267

2016/17 4 686 3 872 4 361 3 639

Variance -58 -263 356 371

Variance % -1% -6% 9% 11%

Punters 434 619 439 843 4 17215 3 54013

Turnover 2 036 702 1 703 210 1 819 638 1 288 265

Table 13 - Average spend per Punter per Day

QUARTER ENDED JUNE SEPTEMBER DECEMBER MARCH

2015/16 52 45 43 36

2016/17 51 42 47 40

Variance -0 -2 3 -22

Variance % -1% -6% 8% -35%

Average spend per Punter per Quarter

4 686 3 872 4 361 3 639

Days per Quarter 91 91 92 90

c. Total Money Wagered - Casinos

The total money wagered at the Licensees during the 2015/16 and 2016/17 financial year was as follows:

Table 14 – Total Money wagered - Casinos

JUNER‘000

SEPTEMBERR‘000

DECEMBERR‘000

MARCHR‘000

2015/16 1 873 315 1 672 656 1 820 201 1 454 408

2016/17 2 036 702 1 703 210 1 819 638 1 288 265

Variance 163 386 30 554 -563 -166 142

Variance % 9% 2% 0% -11%


d. Gross Gaming Revenue (GGR)

• Casinos

The GGR generated by the Casino Licensees during the 2015/16 and 2016/17 financial years amounted to R450 028 880 and R 453 916 745 respectively. The monthly GGR generated by the Licensees was as follows:

Table - 15 Casino GGR

MONTH APR MAY JUNE JULY AUG SEPT OCT NOV DEC JAN FEB MAR

2015/16 9% 7% 7% 9% 7% 9% 8% 8% 11% 8% 7% 10%

2016/17 8% 8% 9% 8% 9% 9% 7% 7% 6% 13% 7% 9%

• Limited Payout Machines (LPMs)

The GGR generated by the LPM Licensees during the 2015/16 and 2016/17 financial years amounted to R 187 827 805 and R 20 238 741 respectively. The monthly GGR generated by the Licensees was as follows:

Table 16 - LPM GGR


2015/16 9% 7% 7% 10% 8% 10% 8% 7% 10% 7% 7% 10%

2016/17 7% 8% 9% 8% 8% 9% 8% 8% 6% 12% 8% 10%

e. Return to Player Percentage(RTP**)

Casino Licensees’ RTP percentage, for the 2015/16 and 2016/17 financial years were as follows:

Table 17 – Casino RTP


2015/16 94% 94% 94% 94% 94% 94% 94% 94% 94% 94% 94% 94%

2016/17 94% 94% 94% 94% 94% 93% 94% 94% 93% 94% 94% 94%

Casinos Average RTP %: 2016/17 = 94% (2015/16 = 94%)

The prescribed minimum RTP for casinos is 80 %

The LPM Route Operators’ RTP percentage, for the 2015/16 and 2016/17 financial years was as follows:

Table 18 – LPM RTP


2015/16 91% 91% 91% 91% 91% 91% 91% 91% 91% 91% 91% 91%

2016/17 91% 91% 91% 91% 91% 91% 91% 91% 91% 91% 91% 91%

LPMs Average RTP %: 2016/17 = 91% (2015/16 = 91%)

The prescribed minimum RTP for LPMs is 75 %

** RTP Formula = 100 % less (Gross Gaming Revenue ÷ money wagered)


f. Levies Collected Per Month from Licensees

Table 19 - Total levies generated by the licensed Casinos and LPM Route Operators - 2015/16 and 2016/17

CASINO LEVIES 2015/16

R’000

CASINO LEVIES 2016/17

R’000

VARIANCE

R’000

VARIANCE

%

LPMs LEVIES 2015/16

R’000

LPMs LEVIES 2016/17

R’000

VARIANCE

R’000

VARIANCE

%

April 3 544 3 029 -515 -15% 1 746 1 405 -341 -20%

May 2 630 2 960 329 13% 1 300 1 523 223 17%

June 2 723 3 731 1008 37% 1 390 1 858 467 34%

July 3 503 3 015 -487 -14% 1 837 1 596 -240 -13%

August 2 570 3 345 774 30% 1 429 1 569 140 10%

September 3 603 3 700 97 3% 1 820 1 903 82 5%

October 2 963 2 902 -61 -2% 1 417 1 549 132 9%

November 3 042 2 884 -157 -5% 1 352 1 559 207 15%

December 4 150 2 369 -1 781 -43% 1 958 1 275 -683 -35%

January 2 872 4 939 2 066 72% 1 338 2 478 1 140 85%

February 2 824 2 773 -51 -2% 1 362 1 535 173 13%

March 3 822 3 645 -177 -5% 1 829 1 982 153 8%

TOTAL 38 252 39 296 1 044 3% 18 782 20 238 1 455 8%

N.B: The increase in Casino levies can partly be attributed to the increase in the number of punters who visited the Casinos and the increase in punter spending during the first and second quarters of the financial year; whereas the increase in LPM levies can partly be attributed to the 7% increase in the number of LPMs rolled out during the financial year.

Table 20 - Total levies generated by the licensed Totalisators and Bookmakers - 2015/16 and 2016/17

TOTALISATOR 2015/16

R

TOTALISATOR 2016/17

R

VARIANCE

R

VARIANCE

%

BOOKMAKERS 2015/16

R

BOOKMAKERS 2016/17

R

VARIANCE

R

VARIANCE

%

April 347 357 10 3% 1 228 1 416 188 15%

May 412 424 11 3% 980 1 073 93 10%

June 317 293 -23 -8% 756 1 913 1 156 153%

July 330 401 71 22% 1 431 1 647 216 15%

August 453 324 -128 -28% 1 032 1 056 23 2%

September 371 344 -26 -7% 1 706 2 144 438 26%

October 360 452 91 25% 1 199 1 655 456 38%

November 460 331 -128 -28% 1 292 1 628 335 26%

December 399 203 -195 -49% 1 821 1 005 -816 -45%

January 482 496 13 3% 1 234 2 271 1 036 84%

February 353 348 -5 -1% 1 026 1 852 825 80%

March 383 345 -38 -10% 1 847 2 211 364 20%

TOTAL 4 673 4 325 -348 -7% 15 558 19 877 4 318 28%

N.B: The increase in bookmaker levies may be mainly attributable to the additional seven (7) Bookmakers Sites added in the current period, number of punters, turnover and gross gambling revenue; whereas, the decrease in Totalisators levies can mainly be attributed to a decrease in turnover and gross gambling revenue and an increase in punters winnings.


g. Unclaimed Dividend

Unclaimed dividend levy for 2015/16 and 2016/17 was R 389 379 and R 396 891 respectively.

Table 21 – Unclaimed dividend

UNCLAIMED DIVIDEND LEVY 2015/16

R

UNCLAIMED DIVIDEND LEVY 2016/17

RVARIANCE

RVARIANCE

%

April 30 814 32 022 1 208 4%

May 39 871 29 067 -10 804 -27%

June 29 349 27 765 -1 584 -5%

July 27 766 40 290 12 524 45%

August 27 212 35 657 8 444 31%

September 33 942 32 966 -975 -3%

October 32 335 44 033 11 698 27%

November 27 066 28 624 1 558 5%

December 30 234 36 201 5 967 16%

January 36 009 26 028 -9 981 -38%

February 37 732 29 392 -8 340 -28%

March 37 044 34 840 -2 204 -6%

TOTAL 389 379 396 891 7 512 2%

N.B: The levy on Unclaimed dividends increased by R 7 512 (2%) compared to the previous financial year. The small percentage increase in unclaimed dividends shows that more punters claimed their dividends from the Totalisator timeously in line with the Totalisator Rules.

All levies are paid over to Limpopo Provincial Treasury.

The split of Gross Gambling Revenue and Levies between gambling slot machines, gambling tables and Limited Payout Machines was as follows:

Table 22 – GGR

GAMBLING MACHINES GAMBLING TABLES LPMs TOTAL

2015/16 391 548 525 58 480 355 187 827 805 637 856 686

2016/17 392 688 199 69 624 362 202 387 413 664 699 974

Variance 1 139 674 11 144 007 14 559 607 26 843 288

% Variance 0% 19% 8% 4%


The total levies paid by Licensees for the financial years 2015/16 & 2016/17 are as follows:

40 000 000

35 000 000

30 000 000

25 000 000

20 000 000

15 000 000

10 000 000

5 000 000

0Casinos LPMs Bookmakers Totalizators

2015/16 2016/17

2.2 ORGANISATIONAL ENVIRONMENT

The Board has a low vacancy rate. One Senior Manager’s position is vacant, due to dismissal. The Board has four (4) Business Units namely; Legal, Finance, Compliance and Law Enforcement. The Legal Unit is under the CEO’s Business Unit with one (1) Senior Manager for Legal Services. The Finance Unit is headed by the CFO with one (1) Senior Manager (the post is currently vacant) and three (3) Managers namely IT, Supply Chain and Human Resources. The Compliance Business Unit is headed by the Senior Manager Compliance with three (3) Managers namely; Investigations, Gaming Control and Audit. The Law Enforcement Business Unit is headed by the Senior Manager Law Enforcement.

2.3 STRATEGIC OUTCOME ORIENTED GOALS

The strategic outcome oriented goal is to regulate and monitor gambling activities in the Province in line with the Limpopo Gambling Act, Act No 3 of 2013.

To achieve this goal, the Board issued twenty six (26) corporate licences, four (4) of which are Type B LPM Site licences, eight (8) Type A LPM Sites, two (2) Totalisator Sites, five (5) Bingo Operator licences and seven (7) Bingo Site licences. Further, the Board conducted forty four (44) Compliance inspections and forty one (41) Audits to ensure that the Licensees comply with the Limpopo Gambling Act, the National Gambling Act, the Financial Intelligence Centre Act, the Broad Based Economic Empowerment Act and other relevant Legislations.

2.4 STRATEGIC OBJECTIVES OF THE BOARD

OBJECTIVE 1: SOCIAL AWARENESS AND UPLIFTMENT

To promote responsible gambling and contribute towards the upliftment of the disadvantaged communities within the Province.

YEAR CASINOS LPMS BOOKMAKERS TOTALISATORS TOTAL

2015/16 38,252,454.85 18,782,780.59 15,558,822.00 5,673,635.83 78,267,693.27

2016/17 39,296,000.00 20,238,741.30 19,877,301.17 4,325,563.30 83,737,605.77


OBJECTIVE 2: FINANCIAL SUSTAINABILITY

To maintain an effective and efficient financial management system through compliance with PFMA Legislation, Regulations and Practice Notes.

OBJECTIVE 3: ENFORCEMENT OF LEGISLATION.

To ensure that all gambling activities conducted within the Province are compliant with Legislation.

OBJECTIVE 4: CAPABLE AND WELL GOVERNED ORGANISATION

To strengthen and effectively manage the system and procedures to ensure sound practices are adhered to.

OBJECTIVE 5: SKILLED, COMPETENT AND INNOVATIVE WORKFORCE.

To provide adequate, focused training opportunities to ensure competent, skilled and innovative staff.

REVIEWING OF THE APP

According to the National Treasury Framework Guideline of 2008 on preparation of the APP, the Board needs to amend the following Performance Indicators:

PART B: Programmes and Sub-Programmes

• Strategic objective annual targets 2012-2019

The following sub-programmes of the actual strategic objectives for 2013/14 were erroneously not included on the tables:

STRATEGIC OBJECTIVE ANNUAL TARGETS 2012-2019 2013/14

PROGRAMME 2: FINANCESUB-PROGRAMME 2.1: CFO

2.1.1 Financial and administrative support to all (4) Programmes 12 reports produced and submitted to LEDET

PROGRAMME 3: COMPLIANCE

3.1.1Ensured a regulated equitable and socially responsible

gambling environment

Regulated 100% of gambling industry, issued 35 Licenses and

performed 3 Audits

PROGRAMME 3: LAW ENFORCEMENT

4.1.1 Reduced illegal gambling throughout the province 360 investigations of illegal gambling activities


• Programme performance indicators and annual targets 2012-2019

The following sub-programmes of the performance indicators for 2013/14 were erroneously not included on the tables:

STRATEGIC OBJECTIVE ANNUAL TARGETS 2012-2019 2013/14

PROGRAMME 2: FINANCESUB-PROGRAMME 1: CFO

2.1.1 Number of in-year reports submitted to Provincial Treasury and LEDET 12

PROGRAMME 2: FINANCESUB-PROGRAMME 2: INFORMATION TECHNOLOGY

2.2.1 Number of IT reports produced Not measured

PROGRAMME 2: FINANCESUB-PROGRAMME 3: HUMAN RESOURCES

2.3.1 Number of human resources reports produced Not measured

PROGRAMME 3: COMPLIANCESUB-PROGRAMME 3.1

3.1.1 Number of responsible gambling campaigns16 responsible gambling

campaigns

3.1.2 Number of corporate licences issued 17

3.1.3 Number of compliance inspection reports produced Not measured

3.1.4 Number of compliance audit reports produced 52

3.1.5 Number of levy audits produced 30

3.1.6 Number of monitoring reports produced 2


4.1.1 Number of awareness campaigns conducted308 illegal gambling awareness

campaigns

4.1.2 Number of investigations on illegal gambling activities conducted 360

• PROGRAMME 2: FINANCE

4.2.3 Quarterly targets for 2012-2019

SUB-PROGRAMME 2.3: HUMAN RESOURCES MANAGEMENT

In the 2016/17 APP, there was an error in the annual and quarterly targets, which was indicated as “12” annual and “3” quarterly, instead of “4” and “1” respectively. This has been corrected as follows:

PROGRAMME PERFORMANCE INDICATORREPORTING

PERIODANNUAL TARGET

QUARTERLY TARGET

QUARTER 1 QUARTER 2 QUARTER 3 QUARTER 4

2.3.1Number of Human Resources reports

producedQuarterly 4 1 1 1 1


3. PERFORMANCE INFORMATION BY PROGRAMME

PERFORMANCE INDICATORACTUAL

ACHIEVEMENTS 2015/16

PLANNED TARGET 2016/17

ACTUAL ACHIEVEMENT

2016/17

DEVIATION FROM PLANNED TARGET

TO ACTUAL ACHIEVEMENT

2016/17

COMMENTS ON DEVIATIONS

PROGRAMME 1: GOVERNANCEThe purpose of this programme is to provide executive and strategic direction to the Board.

Number of Internal Audit Coverage Plans Produced

2 1 1 0 None

Number of Risk Reports Produced 4 4 4 0 None

Number of Quarterly Performance Reports submitted to LEDET

4 4 4 0 None

PROGRAMME 1: GOVERNANCEBUDGET

2016/2017R’000

ACTUAL2016/2017

R’000

VARIANCE2016/2017

R’000

BUDGET2015/2016

R’000

ACTUAL2015/2016

R’000

VARIANCE2015/2016

R’000

Capital Budget 291 169 122 30 23 7

Personnel Budget 5 213 4 801 412 4 872 4 175 697

Operational Budget 6 066 5 958 108 7 335 3 933 3 402




ACTUAL ACHIEVEMENT

2016/17



2016/17


PROGRAMME 2: FINANCEThe purpose of this programme is to provide financial and administrative support to all (04) programmes.

Number of In-year reports submitted to Provincial Treasury and LEDET

12 12 12 0 None

Number of IT Reports Produced 9 12 12 0 None

Number of Human Resources Reports Produced 4 4 4 0 None

PROGRAMME 2: FINANCEBUDGET

2016/2017R’000

ACTUAL2016/2017

R’000

VARIANCE2016/2017

R’000

BUDGET2015/2016

R’000

ACTUAL2015/2016

R’000

VARIANCE2015/2016

R’000

Capital Budget 324 316 8 216 171 45


Operational Budget 2 289 3 381 -1 092 1 750 2 891 -1 141


PROGRAMME 2: FINANCESUB-PROGRAMME: IT

BUDGET2016/2017

R’000

ACTUAL2016/2017

R’000

VARIANCE2016/2017

R’000

BUDGET2015/2016

R’000

ACTUAL2015/2016

R’000

VARIANCE2015/2016

R’000

Capital Budget 307 132 175 500 284 216

Personnel Budget 1 522 1 321 201 1391 1 215 176

Operational Budget 360 346 14 906 389 517

PROGRAMME 2: FINANCESUB-PROGRAMME: HR

BUDGET2016/2017

R’000

ACTUAL2016/2017

R’000

VARIANCE2016/2017

R’000

BUDGET2015/2016

R’000

ACTUAL2015/2016

R’000

VARIANCE2015/2016

R’000

Capital Budget 99 99 0 0 0 0


Operational Budget 558 397 161 490 461 29

PERFORMANCE INDICATOR

ACTUAL ACHIEVEMENTS

2015/16


ACTUAL ACHIEVEMENT

2016/17



2016/17


PROGRAMME 3: COMPLIANCEThe purpose of this programme is to promote responsible gambling through visibility and awareness and also to ensure that gambling activities are compliant with

relevant Legislations.

Number of Responsible Gambling Campaigns

3 4 5 1The deviation was due to a Responsible Gambling campaign conducted during the opening week of the first Bingo Site in Bochum.

Number of Corporate licenses issued

9 20 26 6

The target was exceeded due to more LPM Sites and Totalisator Site Licence applications received and processed than anticipated.

The finalised licence applications include the five Bingo Operator and seven Bingo Site Licence Applications which were received in July 2015 and finalised during the financial year.

Number of Compliance Inspection Reports Produced

16 44 44 0 None

Number of Compliance Audit Reports Produced

13 24 23 1The draft report for Supabets was prepared, but before it could be finalised, the Board revoked their Licence and Supabets ceased operations.

Number of Levy Audits Conducted

10 18 18 0 None

Number of Monitoring Reports Produced

2 2 2 0 None


PROGRAMME 3: COMPLIANCEBUDGET

2016/2017R’000

ACTUAL2016/2017

R’000

VARIANCE2016/2017

R’000

BUDGET2015/2016

R’000

ACTUAL2015/2016

R’000

VARIANCE2015/2016

R’000

Capital Budget 1 376 1 335 41 0 0 0

Personnel Budget 12 529 10 420 2 109 11 879 9 891 1 988

Operational Budget 2 814 5 413 -2 599 876 1 199 323




ACTUAL ACHIEVEMENT

2016/17



2016/17


PROGRAMME 4: LAW ENFORCEMENTThe purpose of this programme is to reduce illegal gambling throughout the Province.

Number of Awareness Campaigns Conducted

85 68 76 8Exceeded plan due to the mushrooming of illegal online gambling within Limpopo Province.

Number of Investigations on Illegal Gambling activities conducted

380 360 360 0 None


BUDGET2016/2017

R’000

ACTUAL2016/2017

R’000

VARIANCE2016/2017

R’000

BUDGET2015/2016

R’000

ACTUAL2015/2016

R’000

VARIANCE2015/2016

R’000

Capital Budget 550 452 98 0 452 -452


Operational Budget 1 180 1 032 148 300 411 -111

LINKING PERFORMANCE WITH BUDGET

LGBBUDGET

2016/2017R’000

ACTUAL2016/2017

R’000

VARIANCE2016/2017

R’000

BUDGET2015/2016

R’000

ACTUAL2015/2016

R’000

VARIANCE2015/2016

R’000

Capital Budget 3 974 3 531 443 500 216 284

Personnel Budget 35 673 31 324 4 349 34 415 26 977 7 438

Operational Budget 28 058 30 747 -2 689 13 644 9 285 4 359


GOVERNANCEPART C


LIMPOPO GAMBLING BOARD | ANNUAL REPORT 201734 LIMPOPO GAMBLING BOARD | ANNUAL REPORT 2017 35LIMPOPO GAMBLING BOARD | ANNUAL REPORT 2017

1. INTRODUCTION

The Board is mandated by LEDET to regulate and monitor gambling activities in the Province and, in particular, to ensure the eradication of unlawful gambling activities, promoting responsible gambling and to collect gambling revenue from licensed gambling establishments.

Annually the Board enters into a Performance Agreement with the MEC of LEDET.

The Performance Agreement out-lines that the Board’s mandate shall:-

Take full responsibility in the preparation, finalisation and compiling of Business Plans of the Board.

• Ensure that such Business Plans are aligned with the overall objectives of LEDET.

• Ensure that such Business Plans have been submitted to the MEC for approval prior to the implementation of these plans in line with the PFMA requirements.

• The Board undertakes to schedule and hold regular quarterly meetings with the MEC to ensure the MEC is kept informed of developments within the Board.

The Parties agree to conduct their relationship on the principles of transparency, mutual respect, bona fides, integrity and trust.

Where the MEC issues the Board with directives that have not been approved in the Board Business Plans, the MEC shall provide the Board with sufficient information and additional resources to carry out such directives within thirty (30) days of receipt of such directives.

The Board received funding from LEDET to the amount of R61 230 million.

The Board shall submit written reports on the projects and the status of funds to LEDET quarterly on stipulated dates.

The Department agreed with the Board that levies collected must be transferred monthly to the Department of Treasury, as the mandate of the Board is to collect taxes on their behalf.

2. PORTFOLIO COMMITTEES

The Board gave presentations to the Portfolio Committee on the following dates:

• 21 April 2016

• 25 August 2016

• 15 November 2016

• 08 December 2016

3. EXECUTIVE AUTHORITY

The Board submitted the following reports to the Executive Authority, monthly and quarterly. The Acting General Manager came to the Board quarterly to discuss the reports submitted to the Department. The Revenue Unit of LEDET came monthly to reconcile the levies transferred to the Department against the audited information done by the Compliance Business Unit. Management made presentations of their reviewed reports to the MEC.


SCHEDULE AND SECTION/REG

REPORTNO. OF REPORTS

PER ANNUMNO. OF REPORTS

SUBMITTEDDATE DATE SUBMITTED

2,3/s54(1)Public Entity (IYM

Report)12 12 15th of each month

We only submitted to Treasury in July 2016 and not on a monthly basis for the 1st Quarter. From the 2nd to the 4th quarters, submissions were done to Treasury monthly, but not to LEDET. Submissions to LEDET were only done in March 2017.

CHALLENGES FROM FINANCE

NO. SECTION: SLA SECTION: SLA SECTION: SLA SECTION: SLA

31 4.8 Procurement Plan 30 April 2016 19 April 2016

2 4A.1 Levies Monthly

Revenue was transferred monthly

as of 06 October 2016, due to the

interpretation of the PFMA Act.

3 8.1

Progress report of the projects and status of funds

First quarter 30 July 2016 28 July 2016

Second quarter 31 October 2016 25 October 2016

Third quarter 31 January 2017 02 February 2017

Fourth quarter 28 April 2017 26 April 2017

4. THE BOARD

4.1 INTRODUCTION

The Limpopo Gambling Board was established in terms of Section 2 of the Limpopo Gambling Act, Act No. 4 of 1996, as amended (hereinafter referred to as “The Act”).

Section 3 of the Act governs the powers and functions of the Board and it states as follows:

1. The Board shall:

(a) exercise such powers and perform such functions-

(i) assigned to it in terms of this Act;

(ii) assigned to it in terms of any other Act;

(b) advise the responsible Member or furnish a report or recommendations to the responsible Member on any matter referred to the Board by the responsible member for consideration or arising from the application of this Act relating to the control over gambling and racing in the Province.

2. The Board may, with the approval of the responsible Member and if an Act of any other Province provide therefore, exercise such powers and perform such functions and duties in terms of such Act in respect of persons and matters in the said Province as the Board may in terms of this Act exercise and perform in this Province.


3. The Board may, notwithstanding anything to the contrary in another Act contained; pay a reward to any person who has furnished information relating to an alleged contravention of a provision of this Act.

4. Notwithstanding anything to the contrary contained in this Act, the responsible Member may, in the absence of a Board, exercise and perform the powers and functions of the Board, excluding the granting and revocation of licences.

In addition to this section, the Board must take cognisance of section 49(2) of the Public Finance Management Act, Act 29 of 1999 (PFMA), which states that:

“If the public entity-

(a) has a board or other controlling body, that board or controlling body is the accounting authority for that entity.”

4.2 THE ROLE OF THE BOARD IS AS FOLLOWS

• To promote a culture of responsible gambling in the Province.

• To ensure the eradication of all forms of illegal gambling in the Province.

• To ensure the creation of an organisation capable of recruiting, retaining, continuously developing its workforce, and aiming at enhancing its effectiveness and employee well-being.

• To ensure the availability of real-time information using technology in support of decision making processes.

• To ensure that the Board has and maintains an appropriate procurement and provisioning system which is fair, equitable, transparent, competitive and cost effective.

• To ensure that the Board establishes, implements, and maintains good principles of corporate governance, accounting practices, and sound systems of internal control.

• To ensure that the Board plans and utilises limited resources economically, efficiently and effectively.

4.3 COMPOSITION OF THE BOARD

NAME DESIGNATIONDATE

APPOINTED

DATE OF EXPIRY OF

TERMQUALIFICATIONS

AREA OF EXPERTISE

BOARD DIRECTORSHIPS OTHER COMMITTEES

NO. OF MEETINGS ATTENDED

2016/17

Mr. M.T. Mokono

Chairperson of the Board

11.03.2013 Extended until 31 March 2017

• B.Proc • Law• Business

• LGB Board - 7 of 8

Ms. J. Mogale

Deputy Chairperson of

the Board


• MBA• BSc Hon Status• Postgraduate

Diploma in Health Management

• National Higher Diploma Med. Tech

• Med Technology Diploma x2

• Business• Financial

Management• Strategic

Leadership

• LGB Board• Marubini Holdings• Metso Minerals & Mining• Ububele Capital• ThyssenKrupp Industrial

Solutions South Africa• Cygnimart Investments• Tirisano Trust• David Brown• NINAFOR• Oudtshoorn Ostrich and Game• Klein Karoo Leather Training

Centre• JTL Properties• Tokheim South Africa• Klein Karoo Akademie

3 of 8


NAME DESIGNATIONDATE

APPOINTED

DATE OF EXPIRY OF

TERMQUALIFICATIONS

AREA OF EXPERTISE

BOARD DIRECTORSHIPS OTHER COMMITTEES


2016/17

Mr. J.K. Sithole

Member 09.12.2008Re-

appointed 11.03.2013

Extended until 31 March 2017

• CA (SA)• B Com• Honours B Compt

• Accountancy • LGB Board • LGB Audit Committee• Audit committee of

Mpumalanga Tourism Authority

• Audit Committee of Mpumalanga Gaming Board

• Chairman of Audit Committee of Financial & Fiscal Commission

• Member of Audit Committee of Dept. of Public Enterprises

5 of 8

Khosi T.N. Makumbane

Member 11.03.2013 Extended until 31 March 2017

• Executive Leadership Development Programme

• Tribal Authority • LGB Board • HR & Remuneration Committee

6 of 8

Ms. B.L. Montjane

Member 11.03.2013 Extended until 31 March 2017

• B.IURIS• Certificate in

Debt Counselling• Certificate in

Mediation

• Law• Debt

Counselling• Legal Costs &

Mediation

• LGB Board• Lucetta Legal Consultancy

• HR & Remuneration Committee

• Monitoring Committee

8 of 8

Mr. A.V.K. Mashele

Departmental Representative

(Treasury)


• Bachelor of Accounting Science

• Finances• SCM

• LGB Board • Audit Committee 5 of 8

Mr. K. S. Maboea

Departmental Representative

(LEDET)


• B.IURIS• LLB• LLM• Admitted

Attorney of the High Court of S.A.

• Administration• Law

• LGB Board • Monitoring Committee 5 of 8

4.4 AUDIT COMMITTEE

NAME OF MEMBERS DESIGNATION NO. OF MEETINGS ATTENDED TERM ENDED DATE APPOINTED

Mr. A. Mashele Chairperson 2 of 2 Extended until 31 March 201710 February 2014 as

Chairperson of the Committee

Mr. J.K. Sithole Member 1 of 2 Extended until 31 March 2017 11 March 2013

Mr. E.M. Makwela Member (External) 0 of 2 Extended until 31 March 2017 11 March 2013

4.5 REMUNERATION AND HUMAN RESOURCE COMMITTEE


Khosi T.N. Makumbane Chairperson 1 of 1 Extended until 31 March 2017 11 March 2013

Ms. B.L. Montjane Member 1 of 1 Extended until 31 March 2017 10 February 2014


4.6 LICENSING AND COMPLIANCE COMMITTEE


Ms. B.L. Montjane Chairperson 1 of 1 Extended until 31 March 201710 February 2014 as

Chairperson of the Committee

Mr. K. Maboea Member 1 of 1 Extended until 31 March 2017 10 February 2014

4.7 REMUNERATION OF BOARD MEMBERS

NAME ALLOWANCE TRAVELLINGTOLL FEES & OTHER

ALLOWANCECLAIMS AGAINST INVESTIGATIONS

OVERSEAS SUBSISTENCE

TOTAL

Mr. M.T. Mokono 444 671 637 0 0 13 422 458 731

Ms. J. Mogale 444 671 6 985 432 0 0 452 088

Mr. J.K Sithole 89 720 11 717 0 2 422 0 103 859

Khosi T.N. Makumbane 89 720 5 874 420 18 861 0 114 876

Ms. B.L. Montjane 89 720 28 180 3 206 22 090 5 804 149 002

TOTAL 1 158 502 53 395 4 058 43 374 19 227 1 278 558

5. RISK MANAGEMENT

5.1 OF RISK MANAGEMENT

Risk Management defined

Risk management is a continuous, comprehensive and systematic approach effected by an organisation’s management and other personnel, aimed at identifying, measuring and controlling an organisation’s exposure to accidental loss, theft and liability involving human, financial, physical and natural resources.

The Accounting Officer provides guidance by supporting Enterprise Risk Management and allocating human and financial resources towards the implementation thereof.

The Risk Management function of the Limpopo Gambling Board, which is within the Finance Business Unit, has in place the Risk Management Strategy, Policy and Charter that ensures adherence to the PFMA section 38(1) (a)(i).

The Risk Management Committee meets quarterly during the year to monitor the progress in the implementation of the mitigation strategies.

The Limpopo Gambling Board has continued to cultivate a culture of risk management throughout the entity by ensuring:

• Compliance with Section 38 of the Public Finance Management Act;

• Compliance with Section 27.2 of the Treasury Regulations;

• The promotion and entrenchment of risk management as value creation;


• Improvement of the LGB’s risk maturity from a defensive risk management position to a responsive risk management position; and

• To embed risk management into LGB’s business operations to support decision making and thereby increasing the likelihood of achieving the LGB’s strategic objectives.

5.2 RISK MANAGEMENT PROCESS

The approach that was adopted in the execution of the entity-wide LGB risk assessment process is presented below:

Limpopo Gambling Board has a Risk Profile which is updated on a quarterly basis and revised on an annual basis for approval by the Board, following a process whereby the Risk Management Officer would have discussed the previous year’s risk profile with the risk owners at the Risk Committee Meeting by identifying new and emerging risks and further reassessing the previous year’s risk register. The profile was then consolidated and reported to an independent Risk facilitator from Shumba Inc. who then facilitated the Risk Assessment Workshop with all Business Units for consolidation of the final risk profile for the Limpopo Gambling Board for both strategic and operational risks. The report indicates mitigation measures that were compiled by management and are monitored on a quarterly basis for implementation by the Risk Management Committee and further verified by the Risk Management Officer. The Risk Committee has met 3 (three) times during the year, and has submitted quarterly monitoring reports to the Chief Executive Officer, who further recommends them for submission to the audit Committee.There were only two (2) Audit Committee Meetings for the 2016/17 financial year, of which one was a special meeting. During the third quarter the risk reports were submitted directly to the Board as opposed to the normal process of being submitted to the Audit Committee first, since there was no Audit Committee Meeting held during the quarter.

As LGB operates in an unstable environment being influenced by various risk factors, its exposure to related risks is significantly increased. LGB’s management thus ensures accountability and responsibility in relation to an effective risk management structure and principles that are established and maintained.

5.3 RISK ASSESSMENT PARTICIPANTS AND QUALITY OF RESULTS

The following LGB Business Units participated in the Strategic Assessment Workshops held in December 2016 and the Operational Risk Assessment Workshops held in January 2017:

TASK DESCRIPTION UNIT DETAILS

Strategic Risks Strategic and Operational Support (Senior & Middle Managers)

Operational Risks:

1 Finance Unit

2 Compliance Unit

3 Law Enforcement Unit

4 Legal Services Unit

5 Risk Management (within Finance Unit)

6 Human Resources Unit

7 Supply Chain Management Unit

8 Information Technology Unit


The aforementioned risk assessment resulted in the achievement of the following objectives:

• Identification of strategic and operational risks, based on the relevant objectives of the Board;

• Consideration and evaluation of the risk impact and the likelihood ratings per risk were identified;

• The identification of risk mitigation strategies to reduce risk exposure;

• Consideration of any additional risks where necessary;

• The update of the risk profiles.

5.4 PROGRESS MADE IN ADDRESSING RISKS IDENTIFIED

Fourteen (14) of the twenty three (23) strategic risks were prioritised for the 2016/17 financial year. Of the Fourteen (14) that were prioritised nine (9) have been mitigated to acceptable levels. Internal Audit provided reasonable assurance that the control design is adequate and effective for the achievement of organisational objectives. The Board will, therefore, ensure enhanced controls in 2017/18 that will assist in mitigating the remaining five (5) prioritised risks mitigation plans that are partially implemented.

Mitigation Status on Prioritised Risks

10

8

6

4

2

0Fully implemented Partially implemented

Partially Implemented Mitigation as depicted in the graph above is elaborated below:


1. Increased illegal gambling activities within the Province.

Mushrooming of illegal gambling of which the highest contributing type is online gambling. There is currently no license for this type of gambling in South Africa and therefore it cannot be regulated. The mode of operation of illegal online gambling operators makes it difficult for Law Enforcement Officers to investigate this crime. Therefore investigation is done through a spoliation application to the High Court and the other challenge is the introduction of a Constitutional Court Judgment which declares warrantless Search and Seizure unconstitutional.

The Board will therefore strengthen the partnership with South African Police Services, Department of Justice and the South African Receiver of Revenue. Our inspectors will undergo training on cyber & forensic investigations in the 2017/18 financial year.

2. Abuse and misuse of owned and leased LGB assets.

Lack of Capacity and skill within the Board regarding drafting of internal processes to ensure efficient safeguarding of assets is a challenge. Development of processes will be finalised in the 2017/18 financial year through consultancy.



3. Structure not aligned to meet strategy plan of the Board.

Awaiting the finalisation of the reviewed structure by the Department Of Public Service and Administration that is done through the Department of Economic Development, Environment and Tourism. Follow up with the Departments will continue in the 2017/18 financial year.

4. Inadequate Legislation to assist the LGB to carry out its mandate and strategies.

Awaiting the Department of Economic Development, Environment and Tourism and Office of the Premier to finalise the promulgation process. Process anticipated to be finalised in the new financial year.

5. ICT not geared towards business requirements.The Board does not have an offsite back-up to date. We are currently researching the requirements needed to establish the site and implementation is planned for the 2018/19 financial year.

6. INTERNAL CONTROL UNIT

LGB has no Internal Control Unit in place; hence the CFO’s Unit ensures there are processes in place. Upon the receipt of the Auditor-General 2016 Final Report, the Limpopo Gambling Board Management developed action plans on the template recommended by Treasury to ensure that the findings do not recur in future. The template was submitted to Treasury on a quarterly basis to indicate the progress of the action plans. The Internal Audit has provided assurance regarding the status core of the action plans report.

7. INTERNAL AUDIT AND AUDIT COMMITTEES

OBJECTIVE AND ROLE OF INTERNAL AUDIT

The Internal Audit of the Board is outsourced to Shumba Inc.

Internal Audit (IA) is an independent, objective assurance and consulting activity designed to add value and improve LGB’s operations. The objective of the IA function is to assist LGB to accomplish its objectives by bringing a systematic and disciplined approach to evaluating and improving the effectiveness of risk management, control and governance processes.

The Internal Audit function reviews the following:

• The reliability and integrity of financial and operational information;

• Compliance with laws, regulations, policies and contracts;

• Safeguarding of assets;

• The economical and efficient use of resources;

• Establishment of operational goals and objectives; and

• Appropriateness of processes for the achievement of objectives.

The primary role of the IA function is to assist the Board, Audit Committee, and Executive Management in the effective discharge of their duties and responsibilities.

The IA, through engagement with the internal stake holders, formulated a three year rolling plan incorporating an annual plan which was approved by the Audit Committee. The IA head reports at each Audit Committee meeting.


A) PROGRESS REPORT FOR THE YEAR

1st Quarter Progress

PLANNED ACTIVITY PLANNED EXECUTION DATE ACTUAL RESULTS

Internal Audit Coverage Plan (3 Year Plan) April 2016 Done

Review of Financial Statements May 2016 Done

2nd Quarter Progress


SCM Follow up Review August 2016 Done

Finance Follow up Review September 2016 Done

3rd Quarter Progress


Audit Of Predetermined Objectives (AOPO) November 2016 Done

AG Action Plan Follow up November 2016 Done

4th Quarter Progress


Risk Assessment Report January 2017 Done

AG Action Plan Review February 2017 Done

IA Coverage Plan (2017/2018) March 2017 Done

Internal Audit Charter Review March 2017 Done

Key activities and objectives of the Audit Committee

The Limpopo Gambling Board has established the Audit Committee as a Sub-Committee of its controlling body (“Board”) to assist the Board in discharging its duties relating to the safeguarding of assets, the operation of adequate systems, control processes and the preparation of accurate financial reporting and statements in compliance with all applicable legal requirements and accounting standards. The Committee shall not perform any management functions or assume any management responsibilities. It provides a forum for discussing business risk and control issues for developing relevant recommendations for consideration by the Board. The Committee shall mainly make recommendations to the Board for its approval or final decision. The membership, resources, responsibilities and authorities (composition, functions and operation) of the Committee to perform its role effectively, is stipulated in these Terms of Reference, which may be amended by the Board from time to time. The Committee is constituted in terms of the requirements of sound corporate governance practices and operates within that framework.


Audit Committee Members Information

NAME QUALIFICATIONSINTERNAL OR

EXTERNAL

IF INTERNAL, POSITION IN THE PUBLIC ENTITY

DATE APPOINTED EXPIRY TERM OF OFFICE


2016/17

Mr. A Mashele • Bachelor of Accounting Science ExternalChairperson

N/A 10 February 2014 Extended until 31 March 2017

2 of 2

Mr J Sithole • CA(SA)• B Com• Honours B Compt

External Board member

N/A 11 March 2013 Extended until 31 March 2017

1 of 2

Mr M Makwela • B.IURIS• LLB• LL.M

External Member N/A 11 March 2013 Extended until 31 March 2017

0 of 2

8. COMPLIANCE WITH LAWS AND REGULATIONS

Management submitted reports to the Board. Provincial Treasury held Quarterly Bi-Laterals with the entity.

9. FRAUD AND CORRUPTION

The Limpopo Gambling Board has a Risk, Fraud and Corruption Prevention Committee in place that has met three (3) times during the year. The Limpopo Gambling Board has a zero tolerance stance on Fraud and Corruption. The annual Fraud Risk Awareness Workshop was presented on the 8th of December 2016. LGB further ensures that the planned mitigation of identified fraud risks is implemented throughout the organisation.

The Limpopo Gambling Boards Fraud and Corruption Prevention Plan comprises two areas, namely education and communication.

CREATING AWARENESS

• Employee awareness Formal awareness presentations were conducted for employees of Limpopo Gambling Board during the Fraud

and Corruption Prevention Awareness Workshop. The ongoing creation of awareness amongst all employees is, however, the responsibility of all managers.

• Communication The objective of communication is further to create awareness amongst employees, the public and other

stakeholders of the plan, in order to facilitate a culture where all stakeholders strive to contribute towards making it a success.

• Progress made (Education and Communication) During the 2016/17 financial year, Limpopo Gambling Board conducted an Awareness Fraud and Corruption

Prevention Workshop to all staff.

• Internal Audit plan A robust Internal Audit plan, which focuses on the prevalent high fraud and corruption risks, serves as an effective

preventative measure. The audit plan was executed as planned.

• Disclosure of interests All staff members of the Limpopo Gambling Board were required to disclose their specific personal assets and

business interests on an annual basis.


• Progress made Disclosure of interest was made and was facilitated by Human Resources in the form of circulars to remind staff.

• Whistle Blowing There are mechanisms in place to report fraud and corruption and how these operate, for instance, our Whistle

Blowing Policy - The need for officials to make factual confidential disclosures about fraud and corruption they might be aware of.

The Limpopo Gambling Board has a Whistle Blowing Policy in place which is aligned to the Protected Disclosure Act. No 26 of 2000.

• How these cases are reported and what action is taken Where a case is reported the following process will be followed:

Action taken by LGB will depend on the nature of the concern and the possible actions to the matters raised may, among others, be to:-

- investigate internally by the Risk Management Officer; and/or

- refer to the SAPS or other relevant law enforcement agency.

No cases were reported with regard to fraud and corruption during the 2016/17 financial year.

10. MINIMISING CONFLICT OF INTEREST• All staff members of the Limpopo Gambling Board are required to disclose their specific personal assets and

business interests on appointment.

• Every year the Human Resources Unit issues a circular reminding officials to disclose any new business interests.

• The Senior Managers complete financial disclosure forms which are submitted to the Executive Authority annually.

• Suppliers are required to complete an SBD4 for declaration of interest purposes prior to engagement of business activities with LGB, and the centralised supplier database (CSD), introduced by National Treasury, also assists in minimising the risk of disloyal suppliers.

11. CODE OF CONDUCTThe growth and success of the gambling industry in the Limpopo Province is dependent on public confidence and trust that is conducted honestly.

The Board considers it desirable to provide further guidance to its members and employees to assist them in gaining a clear picture of the behaviour expected in the execution of their various functions.

These standards apply to all members and employees of the Board, as well as consultants engaged by the Board.

All newly appointed employees are made aware of the Board’s code of conduct during induction.

If a member or employee becomes aware of, anticipates, or suspects, corrupt conduct on the part of an organisation, a member of the public, or another Board Member or employee, he or she must report this matter to the Chairperson or the CEO without delay.

12. HEALTH SAFETY AND ENVIRONMENTAL ISSUESThe Board has an Occupational Health and Safety Committee and a Health and Safety Policy, which is geared towards providing and maintaining a safe and healthy workplace for employees of the Board.

13. SOCIAL RESPONSIBILITYThe Board does not have any social responsibility programmes, this is done by the Licensees of the Board.


14. AUDIT COMMITTEE REPORT

14.1 INTRODUCTION

We are pleased to present our report for the financial year ended 31 March 2017. The Limpopo Gambling Board has an Audit Committee which operates in terms of the Board’s approved Audit Committee Charter.

The Audit Committee consists of the members listed hereunder and meets at least two (02) times per annum as per the Audit Committee Charter. During the year one (01)scheduled and one (01) special Audit Committee Meeting was held.

NAME OF MEMBERS DESIGNATION NO. OF MEETINGS ATTENDED DATE APPOINTED

Mr. A Mashele Chairperson 2 of 2 10 February 2014

Mr J Sithole Member 1 of 2 11 March 2013

Mr M Makwela Member 0 of 2 11 March 2013

14.2 AUDIT COMMITTEE RESPONSIBILITIES

We report that we have complied with our responsibilities arising from Section 51(1)(a)(i)-(iv) of the Public Finance Management Act and Treasury Regulation 3.1.13. We also report that we have adopted appropriate formal Terms of Reference as incorporated in our Audit Committee Charter. The Audit Committee Charter has regulated its affairs in compliance with this Charter and has discharged all its responsibilities as contained therein.

14.3 THE EFFECTIVENESS OF INTERNAL CONTROL

We are of the opinion, based on the information and explanations given by Management, the Internal Audit, and discussions with the External Auditors (AGSA) on the results of its audits, that the internal accounting controls are operating to ensure that the financial records may be relied upon for preparing the Annual Financial Statements, and accountability for assets and liabilities is maintained.

From the carious reports from the Internal Auditors, the audit report on the Annual Financial Statements as the Management Letter of the Auditor-General, it was noted that no significant or material non-compliance with prescribed policies and procedures have been reported. We can report that the system of internal control for the period under review was effective, although it requires improvements.

Our review of the findings of the Internal Audit work, which was based on the risk assessments conducted, revealed certain weaknesses which were then raised with the Board.

The internal control weaknesses identified and reported by External Auditors were not adequately addressed. The review processes will have to be intensified from the Audit Committee down to Internal Audit and Management.


14.4 IN-YEAR MANAGEMENT AND MONTHLY/QUARTERLY REPORT

LGB has submitted monthly and quarterly reports to the Department of Economic Development, Environment and Tourism.

14.5 EVALUATION OF FINANCIAL STATEMENTS

We have reviewed the Financial Statements for the year ended 31 March 2017 and we are satisfied that the matters have been adequately resolved.

We concur and accept the conclusions of the External Auditors on the Financial Statements and are of the opinion that the Audited Financial Statements must be accepted and read together with the Report of the Auditor-General.

Mr. A Mashele

Chairperson of the Audit Committee

Limpopo Gambling Board


HUMAN RESOURCE MANAGEMENT

PART D



1. INTRODUCTION

The Human Resources Unit aims to assist and support other Business Units with any matters pertaining to the daily running of the business affecting its employees.

A workforce planning framework and key strategies are in place to attract and recruit a skilled and capable workforce. The success of the Limpopo Gambling Board in delivering on its operational and developmental goals depends primarily on the efficiency and effectiveness wherein employees carry out their duties. Managing performance is therefore a key Human Resources Management Tool.

1.1 POLICY DEVELOPMENT

• Highlight achievements

- We had 5% staff turnover.

• Organisational review

- The aim is to review the structure of the Board to promote efficiency and to ensure that the objectives of the Board are met.

- There is shortage of personnel.

• Policy review

- To ensure that policies are reviewed so as to keep abreast with updates and changes in various laws and Acts.

• Staff development

- Providing training for staff to ensure that our staff are furnished and equipped with the necessary skills to enable them to perform their jobs in a way which will enhance productivity.

• Challenges

- None.

2. HUMAN RESOURCE OVERSIGHT STATISTIC

The public entity must provide the following key information on Human Resources. All the financial amounts must agree with the amounts disclosed in the Annual Financial Statements.

2. PERSONNEL COST BY PROGRAMME

PROGRAMMETOTAL EXPENDITURE FOR

THE ENTITY(R’000)

PERSONNEL EXPENDITURE(R’000)

PERSONNEL EXPENDITUREAS A % OF TOTAL

EXPENDITURE(R’000)

NO. OF EMPLOYEESAVERAGE PERSONNEL COST

PER EMPLOYEE(R’000)

CEO

61 023

4 801 8 4 1200

Finance 5 294 9 8 661

IT 1 333 2 2 666

Supply Chain 2 281 4 5 456

Human Resources 2 803 5 9 311

Compliance 10 472 17 19 551

Law Enforcement 4 055 7 9 450


2.2 TRAINING COSTS

DIRECTORATE/BUSINESS UNIT PERSONNEL EXPENDITURE

(R’000)TRAINING EXPENDITURE

(R’000)

TRAINING EXPENDITURE AS A % OF PERSONNEL

COST(%

NO. OF EMPLOYEES TRAINED

AVERAGE TRAINING COST PER EMPLOYEE

(R’000)

CEO 4 081 3 0% 0 0

Finance 5 294 5 0% 6 33

Supply Chain 2 281 0 0% 1 0

Human Resources 2 803 12 0% 1 12

Compliance 10 472 100 10% 11 90

Law Enforcement 4 055 5 0% 1 5

IT 1 333 0 0% 0 0

2.3 EMPLOYMENT AND VACANCIES

PROGRAMME2015/16

NO. OF EMPLOYEES2015/16

APPROVED POSTS2016/17


VACANCIES % OF VACANCIES

CEO 5 5 4 1 25%

Finance 8 8 7 1 14%

Supply Chain 5 5 5 0 0%

Human Resources 9 9 9 0 0%

Compliance 19 20 19 1 5%

Law Enforcement 8 9 9 0 0%

IT 2 2 2 0 0%

PROGRAMME2015/16


APPROVED POSTS2016/17


VACANCIES % OF VACANCIES

Top Management 2 2 2 0 0%

Senior Management 4 4 3 1 33

Professional qualified 6 6 6 0 0%

Skilled 23 24 23 1 4%

Semi-skilled 16 17 16 1 6%

Unskilled 5 5 5 0 0%

TOTAL 56 58 55 3 5%


2.4 EMPLOYMENT CHANGES

PROGRAMMEEMPLOYMENT AT BEGINNING OF

PERIOD APPOINTMENTS TERMINATIONS EMPLOYMENT AT END OF PERIOD

Top Management 2 0 0 2

Senior Management 4 0 1 3

Professional qualified 6 0 0 6

Skilled 23 2 1 23

Semi-skilled 16 1 1 16

Unskilled 5 0 0 5

TOTAL 56 3 3 55

2.5 REASON FOR STAFF LEAVING

REASON NUMBER% OF TOTAL NO. OF STAFF

LEAVING

Death 0 0%

Resignation 2 100%

Dismissal 1 100%

Retirement 0 0%

Ill health 0 0%

Expiry of contract 0 0%

Other 0 0%

TOTAL 3 100%

Most staff leave the organisation mainly for growth.

2.6 LABOUR RELATIONS: MISCONDUCT AND DISCIPLINARY ACTION

Verbal Warning 0

Written Warning 0

Final Written warning 0

Dismissal 1


2.7 EQUITY TARGET AND EMPLOYMENT EQUITY STATUS

LEVELS

MALE

AFRICAN COLOURED INDIAN WHITE

CURRENT TARGET CURRENT TARGET CURRENT TARGET CURRENT TARGET

Top Management 1 1 0 0 0 0 0 0

Senior Management 2 3 0 0 0 0 0 0

Professional qualified 4 3 0 0 0 0 0 0

Skilled 10 10 1 1 0 0 1 1

Semi-skilled 6 7 0 0 1 0 1 1

Unskilled 2 2 0 0 0 0 0 0

TOTAL 25 26 1 1 1 0 2 2

LEVELS

FEMALE

AFRICAN COLOURED INDIAN WHITE

CURRENT TARGET CURRENT TARGET CURRENT TARGET CURRENT TARGET

Top Management 1 0 0 1 0 0 0 0

Senior Management 0 0 0 0 1 1 0 0

Professional qualified 2 3 0 0 0 0 0 0

Skilled 9 10 0 0 0 0 2 1

Semi-skilled 5 6 0 1 1 0 2 3

Unskilled 2 2 0 0 0 0 1 1

TOTAL 19 21 0 2 2 1 5 5

LEVELS

DISABLED STAFF

MALE FEMALE

CURRENT TARGET CURRENT TARGET

Top Management 0 0 0 0

Senior Management 0 0 0 0

Professional qualified 0 0 0 0

Skilled 0 0 0 0

Semi-skilled 1 1 0 0

Unskilled 0 0 0 0

TOTAL 1 1 0 0


FINANCIAL INFORMATION

PART E

LIMPOPO GAMBLING BOARD | ANNUAL REPORT 2017 53


STATEMENT OF RESPONSIBILITY

STATEMENT OF RESPONSIBILITY FOR THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2017

The Board is responsible for the preparation of the Limpopo Gambling Board Annual Financial Statements and for the judgements made in this information.

The Board 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 our opinion, the financial statements fairly reflect the operations of the Board for the financial year ended 31 March 2017. The Auditor-General is engaged to express an independent opinion on the financial statements of the Board.

The Limpopo Gambling Board Annual Financial Statements for the year ended 31 March 2017 have been audited by the Auditor-General and their report is presented on pages 57 to 61.

The Annual Financial Statements have been prepared in accordance with Standards of Generally Recognised Accounting Practice (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board.

The Annual Financial Statements set out on pages 62 to 93, which have been prepared on the going concern basis, were approved by the Board on 31 May 2017 and were signed on its behalf by:

Mr. Serobi Maja Mr. M.T. Mokono

Chief Executive Officer Chairperson


REPORT OF THE BOARD

The members submit their report for the year ended 31 March 2017.

1. REVIEW OF ACTIVITIES

MAIN BUSINESS AND OPERATIONS

The entity operates principally in South Africa. The mandate of the Board is to regulate, control and monitor activities in the Province in line with the Limpopo Gambling Board Act No. 3 of 2013.

The operating results and state of entity are fully set out in the attached Annual Financial Statements and do not in our opinion require further comment.

2. GOING CONCERN

The Annual Financial Statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.

The entity is wholly dependent on the Limpopo Department of Economic Development, Environment and Tourism for continued funding of operations

3. SUBSEQUENT EVENTS

The members are not aware of any matter or circumstance arising since the end of the financial year.

4. NON-CURRENT ASSETS

No major changes in the nature of the non-current assets of the entity occurred during the year, as well as the policies relating to their use.

5. BOARD

The term of office for the Board members below has expired as at 31 March 2017. The Executive Authority is yet to appoint the new members of the Board.

• Mr M.T Mokono (Chairperson)

• Ms M.J Mogale (Deputy Chairperson)

• Mr Khosi T.N. Makumbane

• Ms B.L.Montjane

• Mr A.V.K. Mashele

• Mr J.K Sithole

• Mr K.S. Maboea

• Mr Serobi Maja (CEO)


6. ACCOUNTING POLICIES

The Annual Financial Statements prepared in accordance with the Standards of Generally Recognised Accounting Practices (GRAP), including any interpretations of such Statements issued by the Accounting Standards Board, as the prescribed framework by National Treasury.

7. BANKERS

Standard Bank


REPORT OF THE AUDITOR-GENERAL

REPORT OF THE AUDITOR-GENERAL TO THE PROVINCIAL LEGISLATURE ON THE LIMPOPO GAMBLING BOARDREPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Opinion

1. I have audited the Financial Statements of the Limpopo Gambling Board set out on pages 62 to 92, which comprise the Statement of Financial Position as at 31 March 2017, and the Statement of Financial Performance, Statement of Changes in Net Assets, Statement of Cash Flows and the Statement of Comparison of Budget Information with actual information for the year then ended, as well as the notes to the Financial Statements, including a summary of significant accounting policies.

2. In my opinion, the Financial Statements present fairly, in all material respects, the financial position of the Limpopo Gambling Board as at 31 March 2017, and its financial performance and cash flows for the year then ended in accordance with SA Standards of Generally Recognised Accounting Practise (SA Standards of GRAP) and the requirements of the Public Finance Management Act, 1999 (Act No. 1 of 1999) (PFMA).

Basis for opinion

3. I conducted my audit in accordance with the International Standards on Auditing (ISAs). My responsibilities under those standards are further described in the Auditor-General’s responsibilities for the audit of the Financial Statements section of my report.

4. I am independent of the Department in accordance with the International Ethics Standards Board for Accountants’ Code of ethics for professional accountants (IESBA code) together with the ethical requirements that are relevant to my audit in South Africa. I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA code.

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

Emphasis of matters

6. I draw attention to the matters below. My opinion is not modified in respect of these matters.

Material losses

7. As disclosed in Note 23 to the Financial Statements, a material loss to the amount of R1 114 997 was incurred in the settlement of a labour dispute.

Significant uncertainty

8. With reference to Note 27 to the Financial Statements, the entity is the defendant in a labour matter at- the CCMA. The entity is opposing the matter as it believes it has a reasonable ground for its action. The ultimate outcome of the matter cannot presently be determined and no provision for any liability that may result has been made in the Financial Statements.


Restatement of corresponding figures

9. As disclosed in Note 31 to the Financial Statements, the corresponding figures for 31 March 2016 have been restated as a result of an error in the Financial Statements of the entity at, and for the year ended 31 March 2017.

Other matter

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

Unaudited supplementary schedules

11. The supplementary information set out on pages 20 to 28 does not form part of the Financial Statements and is presented as additional information. I have not audited these schedules and, accordingly, I do not express an opinion thereon

Responsibilities of the Accounting Authority

12. The Accounting Authority is responsible for the preparation and fair presentation of the financial statements in accordance with GRAP and the requirements of the PFMA 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.

13. In preparing the financial statements, the Accounting Authority is responsible for assessing the entity’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless there is an intention either to liquidate the entity or to cease operations, or there is no realistic alternative but to do so.

Auditor-General’s responsibilities for the audit of the Financial Statements

14. My objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditor’s Report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.

15. A further description of my responsibilities for the audit of the statements is included in the Annexure to the Auditor’s Report.

REPORT ON THE AUDIT OF THE ANNUAL PERFORMANCE REPORT

Introduction and scope

16. In accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA) and the general notice issued in terms thereof I have a responsibility to report material findings on the reported performance information against predetermined objectives for selected programmes presented in the Annual Performance Report. I performed procedures to identify findings but not to gather evidence to express assurance.

17. My procedures address the reported performance information, which must be based on the approved performance planning documents of the entity. I have not evaluated the completeness and appropriateness of the performance indicators included in the planning documents. My procedures also did not extend to any disclosures or assertions


relating to planned performance strategies and information in respect of future periods that may be included as part of the reported performance information. Accordingly, my findings do not extend to these matters.

18. I evaluated the usefulness and reliability of the reported performance information in accordance with the criteria developed from the performance management and reporting framework, as defined in the general notice, for the following selected programmes presented in the Annual Performance Report of the entity for the year ended 31 March 2017

Programmes Pages in the Annual Performance Report

Programme 3 – Compliance 32 – 33

Programme 4 – Law enforcement 33

19. I performed procedures to determine whether the reported performance information was properly presented and whether performance was consistent with the approved performance planning documents. I performed further procedures to determine whether the indicators and related targets were measurable and relevant, and assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete.

20. I did not identify any material findings on the usefulness and reliability of the reported performance information for the following programmes:

• Programme 3 – Compliance

• Programme 4 – Law enforcement

Other matters

21. I draw attention to the matter below.

Achievement of planned targets

22. Refer to the Annual Performance Report on pages 31 to 33 for information on the achievement of planned targets for the year and explanations provided for the under/overachievement of targets.

Adjustment of material misstatements

23. I identified material misstatements in the Annual Performance Report submitted for auditing. These material misstatements were on the reported performance information of programme 4: Law Enforcement. As Management subsequently corrected the misstatements, I did not raise any material findings on the usefulness and reliability of the reported performance information

REPORT ON AUDIT OF COMPLIANCE WITH LEGISLATION

Introduction and scope

24. In accordance with the PAA and the general notice issued in terms thereof I have a responsibility to report material findings on the compliance of the entity with specific matters in key legislation. I performed procedures to identify findings but not to gather evidence to express assurance.

25. I did not identify material findings in respect of the compliance criteria for the applicable subject matters.


Other information

26. The Accounting Authority is responsible for the other information. The other information comprises the information included in the Annual Report, which includes the Audit Committees report. The other information does not include the Financial Statements, the Auditor’s Report thereon and those selected programmes presented in the Annual Performance Report that have been specifically reported on in the Auditor’s Report.

27. My opinion on the Financial Statements and findings on the reported performance information and compliance with Legislation do not cover the other information and I do not express an audit opinion or any form of assurance conclusion thereon.

28. In connection with my audit, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements and the selected programmes presented in the Annual Performance Report, or my knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work I have performed on the other information obtained prior to the date of this Auditor’s Report, I conclude that there is a material misstatement of this other information, I am required to report that fact.

Internal control deficiencies

29. I considered internal control relevant to my audit of the Financial Statements, reported performance information and compliance with applicable Legislation; however, my objective was not to express any form of assurance thereon.

30. I did not identify any significant internal control deficiencies relevant to my audit of the Financial Statements, reported performance information and compliance with applicable legislation.

Polokwane

31 July 2017


1. As part of an audit in accordance with the ISAs, I exercise professional judgement and maintain professional scepticism throughout my audit of the Financial Statements, and the procedures performed on reported performance information for selected and on the entity’s compliance with respect to the selected subject matters.

FINANCIAL STATEMENTS

2. In addition to my responsibility for the audit of the Financial Statements as described in the Auditor’s Report, I also:

• identify and assess the risks of material misstatement of the Financial Statements whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control,

• obtain an understanding of internal control relevant to the audit 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,

• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Accounting Authority,

• conclude on the appropriateness of the Accounting Authority’s use of the going concern basis of accounting in the preparation of the Financial Statements. I also conclude, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Limpopo Gambling Board ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my Auditor’s Report to the related disclosures in the Financial Statements about the material uncertainty or, if such disclosures are inadequate, to modify the opinion on the Financial Statements. My conclusions are based on the information available to me at the date of the Auditor’s Report. However, future events or conditions may cause a entity to cease to continue as a going concern, and

• evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE

3. I communicate with the Accounting Authority regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

4. I also confirm to the Accounting Authority that I have complied with relevant ethical requirements regarding independence, and communicate all relationships and other matters that may reasonably be thought to have a bearing on my independence and here applicable, related safeguards.

ANNEXURE – AUDITOR-GENERAL’S RESPONSIBILITY FOR THE AUDIT


STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2017

NOTES2017

R2016

R

Assets

Current Assets

Receivables from exchange transactions 6 211 353 6 854 417

Cash and cash equivalents 7 28 418 522 8 548 447

28 629 875 15 402 864

Non-Current Assets

Property, plant and equipment 3 6 733 949 4 582 019

Total Assets 35 363 824 19 984 883

Liabilities

Current Liabilities Finance lease obligation 8 - 185 114

Payables and other payables 15 2 054 725 566 586

Staff Accrual 10 1 102 037 1 216 600

Deferred income 11 7 456 233 9 458 636

Long service award 12 33 083 44 369

10 646 078 11 471 305

Non-Current Liabilities

Operating lease liability 5 12 434 293 10 640 879

Long service award 12 222 224 198 634

12 656 517 10 839 513

Total Liabilities 23 302 595 22 310 818

Net Assets 12 061 229 (2 325 935)

Accumulated surplus 12 061 229 (2 325 935)


STATEMENT OF FINANCIAL PERFORMANCE

FOR THE YEAR ENDED 31 MARCH 2017

NOTES2017

R2016

R

Revenue

Revenue from exchange transactions

Interest received 18 1 107 397 394 894

Revenue from non-exchange transactions

Transfer revenue

Government grants & subsidies 19 61 273 000 48 559 000

Other operating revenue 17 98 296 645 86 886 941

Total revenue from non-exchange transactions 159 569 645 135 445 941

Total revenue 160 677 042 135 840 835

Expenditure

Employee related costs 20 (30 933 628) (29 377 830)

Depreciation and amortisation 3 (883 591) (1 047 564)

Bad debt impartment (320 000) -

Finance costs 21 (38 262) (70 054)

Board members' expenses 22 (2 829 804) (3 505 066)

Operating expenses 23 (26 367 040) (18 955 239)

Total expenditure (61 372 325) (52 955 753)

Operating surplus 99 304 717 82 885 082

Gain on disposal of assets and liabilities 592 218 -

Surplus for the year 99 896 935 82 885 082


STATEMENT OF CHANGES IN NET ASSETS

FOR THE YEAR ENDED 31 MARCH 2017

ACCUMULATED SURPLUS

R

TOTAL NET ASSETS

R

Balance at 01 April 2015 5 795 628 5 795 628

Changes in net assets

Prior Year adjustment (714 738) (714 738)

Funds surrendered (90 291 907) (90 291 907)

Net income (losses) recognised directly in net assets (91 006 645) (91 006 645)


Total recognised income and expenses for the year (8 121 563) (8 121 563)

Total changes (8 121 563) (8 121 563)

Balance at 01 April 2016 (2 325 935) (2 325 935)

Changes in net assets

Prior year correction (40 686) (40 686)


Net balance after funds surrendered (85 499 801) (85 499 801)


Total recognised income and expenses for the year 14 397 134 14 397 134

Total changes 14 397 134 14 397 134

Balance at 31 March 2017 12 061 229 12 061 229


CASH FLOW STATEMENTFOR THE YEAR ENDED 31 MARCH 2017

NOTES2017

R2016

R

Cash flows from operating activities

Receipts

Grants and own revenue 159 569 645 135 445 941

Interest income 1 107 397 394 894

Other receipts (changes in receivables) 6 323 064 (5 234 762)

167 000 106 130 606 073

Payments

Employee costs (30 921 324) (29 134 827)

Operating expenses (24 583 595) (16 292 323)

Finance Costs (38 262) (70 054)


Other payments (changes in payables) (628 829) 2 794 829

Board expenses (2 829 804) (3 505 066)

(144 501 615) (136 499 348)

Net cash flows from operating activities 25 22 498 491 (5 893 275)

Cash flows from investing activities

Purchase of property, plant and equipment 3 (3 531 271) (292 230)

Proceeds from sale of property, plant and equipment 3 1 087 969 -

Net cash flows from investing activities (2 443 302) (292 230)

Cash flows from financing activities

Finance lease payments (185 114) (163 089)

Net increase/(decrease) in cash and cash equivalents 19 870 075 (6 348 594)

Cash and cash equivalents at the beginning of the year 8 548 447 14 897 041

Cash and cash equivalents at the end of the year 7 28 418 522 8 548 447


STATEMENT OF COMPARISON OF BUDGET AND

ACTUAL AMOUNTSFOR THE YEAR ENDED 31 MARCH 2017

APPROVED BUDGET

RADJUSTMENTS

RFINAL BUDGET

R

ACTUAL AMOUNTS ON COMPARABLE

BASISR

DIFFERENCE BETWEEN FINAL

BUDGET AND ACTUAL

R REF.

Statement of Financial Performance

Revenue

Revenue from exchange transactions

Interest received 313 000 - 313 000 1 107 397 794 397 18

Revenue from non-exchange transactions

Transfer revenue

Government grants & subsidies 61 273 000 - 61 273 000 61 273 000 - 19

Other operating revenue 86 626 000 - 86 626 000 98 296 644 11 670 644 17

Total revenue from non-exchange transactions 147 899 000 - 147 899 000 159 569 644 11 670 644

Total revenue 148 212 000 - 148 212 000 160 677 041 12 465 041

Expenditure

Personnel (36 823 167) 1 149 583 (35 673 584) (30 933 628) 4 739 956 30

Depreciation and amortisation (1 601 168) - (1 601 168) (883 591) 717 577 3

Bad debts impairement - - - (320 000) (320 000) 21

Finance costs (276 000) 253 526 (22 474) (38 262) (15 788)

Board members' expenses (3 574 350) 627 463 (2 946 887) (2 829 804) 117 083 22

Operating expenses (20 938 157) (2 549 635) (23 487 792) (26 367 040) (2 879 248) 23

Total expenditure (63 212 842) (519 063) (63 731 905) (61 372 325) 2 359 580

Operating surplus 84 999 158 (519 063) 84 480 095 99 304 716 14 824 621

Gain on disposal of assets and liabilities - - - 592 218 592 218

Surplus before taxation 84 999 158 (519 063) 84 480 095 99 896 934 15 416 839

Actual Amount on Comparable Basis as Presented in the Budget and Actual Comparative Statement 84 999 158 (519 063) 84 480 095 99 896 934 15 416 839

Statement of Financial Position

Assets

Non-Current Assets

Property, plant and equipment (4 493 000) 519 061 (3 973 939) (3 531 271) 442 668 3

Total Assets (4 493 000) 519 061 (3 973 939) (3 531 271) 442 668

Net Assets (4 493 000) 519 061 (3 973 939) (3 531 271) 442 668


ACCOUNTING POLICIES

1. PRESENTATION OF ANNUAL FINANCIAL STATEMENTS

The Annual Financial Statements have been prepared in accordance with the Standards of Generally Recognised Accounting Practice (GRAP), issued by the Accounting Standards Board in accordance with Section 91(1) of the Public Finance Management Act (Act 1 of 1999).

These Annual Financial Statements have been prepared on an accrual basis of accounting and are in accordance with historical cost convention as the basis of measurement, unless specified otherwise. They are presented in South African Rand.

A summary of the significant accounting policies, which have been consistently applied in the preparation of these Annual Financial Statements, are disclosed below.

These accounting policies are consistent with the previous period, except for the changes set out in note. Changes in accounting policy.

1.1 PRESENTATION CURRENCY

These Annual Financial Statements are presented in South African Rand, which is the functional currency of the entity.

1.2 GOING CONCERN ASSUMPTION

These Annual Financial Statements have been prepared based on the expectation that the entity will continue to operate as a going concern for at least the next forseeable future.

1.3 SIGNIFICANT JUDGEMENTS AND SOURCES OF ESTIMATION UNCERTAINTY

In preparing the Annual Financial Statements, Management is required to make estimates and assumptions that affect the amounts represented in the Annual Financial Statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the Annual Financial Statements. Significant judgements include: provision for leave pay, bonus provision, leave pay, useful lives and depreciation methods. Notes relating to the subjects are included under the affected areas of Financial Statements.

1.4 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are tangible non-current assets that are held for use in the production or supply of goods or services, rental to others, or for administrative purposes, and are expected to be used during more than one period.


The cost of an item of property, plant and equipment is recognised as an asset when:

• it is probable that future economic benefits or service potential associated with the item will flow to the entity; and

• the cost of the item can be measured reliably.

Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses.

Depreciation is calculated to write off the cost of an asset on a straight line basis to its residual value over its useful life as follows:

ITEM AVERAGE USEFUL LIFE

Furniture 15 years

Fittings 10 years

Motor vehicles 5 years

Office equipment 15 years

Computer equipment 3 years

Computer software 1 years

Sundry assets 5 years

The useful life, depreciation method and residual value are reviewed at each reporting date and if expectations differ from previous estimates the changes are accounted for as change in accounting estimates in accordance with GRAP 3 “Accounting Policies, Changes in Accounting Estimates and Errors.” The carrying amount of an item of Property, Plant and Equipment shall be derecognised on disposal or when no future economic benefits or service potential are expected from its use or disposal and gains or losses shall be dealt with in the Statement of Financial Performance: Reviewing the useful life of an asset on an annual basis does not require the entity to amend the previous estimate unless expectations differ from the previous estimate. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.

1.5 FINANCIAL INSTRUMENTS INITIAL RECOGNITION

The Board classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability, or equity instrument in accordance with the substance of the contractual arrangement. Financial assets and financial liabilities are recognised in the Statement of Financial Position when the Board becomes party to the contractual provisions of the instrument.

The entity does not offset a financial asset and a financial liability unless a legally enforceable right to set off the recognised amounts currently exists; and the entity intends to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Initial measurement of financial assets and financial liabilities

Financial instruments carried on the Statement of Financial Position include cash and cash equivalents, trade and other receivables and trade and other payables. These instruments are initially measured at fair value plus in the case of financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. Where the effect of any extended payment terms is not material no adjustments are made.


Fair value methods and assumptions

The fair values of financial instruments are determined as follows: If the market for a financial asset is not active the entity establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs.

The effective interest rate method

The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability.

Amortised Cost

Amortised cost is the amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction for impairment or uncollectability.

Loans and receivables

Loans and receivables are initially measured at fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial asset. Where the effect on fair value at initial recognition of any extended payment terms is not material no adjustments are made.

Loans and receivables are subsequently measured at amortised cost using the effective interest rate methods less any impairment loss. Interest income is recognised in the Statement of Financial Performance by applying the effective interest rate.

Trade and other receivables and cash and cash equivalents that have fixed or determinable payments that are not quoted in active market are classified as loans and receivables.

Financial liabilities held at amortised cost

Trade and other payables and finance lease liabilities are included in financial liabilities held at amortised cost. Items classified within trade and other payables are not usually re- measured, as obligations are usually known with a high degree of certainty due to their short term maturity, therefore the carrying amount would approximate the fair value. Where the effect on fair value at initial recognition of any extended payment terms is not material no adjustments are made.

Cash and Cash Equivalents

Cash and cash equivalents are measured at fair value, based on the relevant exchange rates at balance sheet date. Cash and cash equivalents includes cash on hand, deposits held at call with banks and other highly liquid investments with


original maturities of three months or less. For the purpose of the Cash Flow Statement, cash and cash equivalents comprise cash on hand net of bank overdrafts, all of which are available for use by the Board unless otherwise stated. The cash flow statement is prepared on the basis of the direct method.

1.6 LEASES

Finance leases - lessee

A finance lease is a lease that transfers substantially all the risks and rewards incident ownership to the lessee. If at inception of the lease the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset it will be classified as a finance lease.

Finance leases are recognised as assets and liabilities in the Statement of Financial Position at amounts equal to the fair value of leased assets or if lower the present value of the minimum lease payments. The corresponding liability to the lessor is included in the Statement of Financial Position as a finance lease obligation. The discount rate used in the calculation of the present value of the minimum lease payments is the interest rate implicit in the lease.

Minimum lease payments are apportioned between the finance charge and reduction of the outstanding liability. The finance charge is allocated.

Operating leases - lessee

An operating lease is a lease agreement that does not transfer all the risks and rewards incident to ownership to the lessee at inception.

Operating leases are recognised as an expense in the financial statements on a straight line method over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset or liability.

1.7 INVENTORIES

The Board does not operate an inventory system for consumables that are bought in bulk as the stock levels are always immaterial at reporting dates. These transactions are charged to the statement of financial performance on monthly basis to various divisional accounts. The consumables at hand on the reporting date are counted to determine if they are material for disclosure in the Financial Statements.

1.8 IMPAIRMENT OF CASH-GENERATING ASSETS

Cash-generating assets are assets managed with the objective of generating a commercial return. An asset generates a commercial return when it is deployed in a manner consistent with that adopted by a profit-oriented entity.

Impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition of the loss of the asset’s future economic benefits or service potential through depreciation (amortisation).

Carrying amount is the amount at which an asset is recognised in the statement of financial position after deducting any accumulated depreciation and accumulated impairment losses thereon.


A cash-generating unit is the smallest identifiable group of assets managed with the objective of generating a commercial return that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets.

Costs of disposal are incremental costs directly attributable to the disposal of an asset, excluding finance costs and income tax expense.

Depreciation (Amortisation) is the systematic allocation of the depreciable amount of an asset over its useful life.

Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal.

Recoverable amount of an asset or a cash-generating unit is the higher its fair value less costs to sell and its value in use.

Useful life is either:

(a) the period of time over which an asset is expected to be used by the entity; or

(b) the number of production or similar units expected to be obtained from the asset by the entity.

Criteria developed by the entity to distinguish cash-generating assets from non-cash-generating assets are as follow:

1.9 EMPLOYEE BENEFITS

Short-term employee benefits

The cost of all short term employee benefits, (those payable within 12 months after the service is rendered, such as paid vacation leave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period in which the service is rendered and are not discounted.

The expected cost of compensated absences is recognised as an expense as the employee render services that increase their entitlement or, in the case of non-accumulating absences, when the absence occurs.

The expected cost of surplus sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance.

Defined contribution plans

Payments to defined contribution retirement benefits plans are charged as an expense to the Statement of Financial Performance as they fall due. There are no post employment benefits which have been arranged by the Board.

1.10 PROVISIONS AND CONTINGENCIES

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimates. Provisions are recognised when:

• the Board has a present legal or constructive obligation as a result of a past event;

• it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation; and

• a reliable estimate can be made of the amount of the obligation.


Contingent Liabilities are regarded as:

• possible obligations that arises from past events.

• whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future events.

• the amount of the obligation cannot be measured with sufficient reliability.

1.11 COMMITMENTS

Items are classified as commitments when an entity has committed itself to future transactions that will normally result in the outflow of cash.

Disclosures are required in respect of unrecognised contractual commitments.

Commitments for which disclosure is necessary to achieve a fair presentation should be disclosed in a note to the financial statements, if both the following criteria are met:

• Contracts should be non-cancellable or only cancellable at significant cost (for example, contracts for computer or building maintenance services); and

• Contracts should relate to something other than the routine, steady, state business of the entity – therefore salary commitments relating to employment contracts or social security benefit commitments are excluded.

1.12 REVENUE FROM EXCHANGE TRANSACTIONS

Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net assets, other than increases relating to contributions from owners.

An exchange transaction is one in which the entity receives assets or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of goods, services or use of assets) to the other party in exchange.

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.

Rendering of services

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the reporting date. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied:

• the amount of revenue can be measured reliably;

• it is probable that the economic benefits or service potential associated with the transaction will flow to the entity;

• the stage of completion of the transaction at the reporting date can be measured reliably; and

• the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

When services are performed by an indeterminate number of acts over a specified time frame, revenue is recognised on a straight line basis over the specified time frame unless there is evidence that some other method better represents the stage of completion. When a specific act is much more significant than any other acts, the recognition of revenue is postponed until the significant act is executed.


When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.

Service revenue is recognised by reference to the stage of completion of the transaction at the reporting date.

1.13 REVENUE FROM NON-EXCHANGE TRANSACTIONS

Transfers are inflows of future economic benefits or services potential from non-exchange transactions, other than taxes.

Recognition

An inflow of resources from a non-exchange transaction recognised as an asset is recognised as revenue, except to the extent that a liability is also recognised in respect of the same inflow.

As the entity satisfies a present obligation recognised as a liability in respect of an inflow of resources from a non-exchange transaction recognised as an asset, it reduces the carrying amount of the liability recognised and recognizes an amount of revenue equal to that reduction.

Measurement

Revenue from a non-exchange transaction is measured at the amount of the increase in net assets recognised by the entity.

When, as a result of a non-exchange transaction, the entity recognises an asset, it also recognizes revenue equivalent to the amount of the asset measured at its fair value as at the date of acquisition, unless it is also required to recognize a liability. Where a liability is required to be recognised it will be measured as the best estimate of the amount required to settle the obligation at the reporting date and the amount of the increase in net assets, if any, recognised as revenue. When a liability is subsequently reduced, because the taxable event occurs or a condition is satisfied, the amount of the reduction in the liability is recognised as revenue.

Transfers

Apart from services in kind, which are not recognised, the entity recognises an asset in respect of transfers when the transferred resources meet the definition of an asset and satisfy the criteria for recognition as an asset.

Transferred assets are measured at their fair value as at the date of acquisition.

Government grants

The Board receives a grant from Government for each financial year. The grant is recognised when there is assurance that:

• the Board will comply with the conditions attached to the grant; and

• the grant will be received.


1.14 ACCUMULATED SURPLUS

In terms of Section 53(3) of Public Finance Management Act a public entity which must submit a budget in terms of Subsection (1) may not budget for a deficit and may not accumulate surpluses unless the prior written approval has been obtained from the National Treasury. Pursuant to this provision surpluses at each reporting date are surrendered unless retention has been authorised. Funds generated by the Board are surrendered as per Instruction Note 2 of 2013.

1.15 BUDGET INFORMATION

Entities are typically subject to budgetary limits in the form of appropriations or budget authorizations (or equivalent), which is given effect through authorizing Legislation, appropriation or similar.

General purpose financial reporting by an entity shall provide information on whether resources were obtained and used in accordance with the legally adopted budget.

Budget information in accordance with GRAP 1 and 24 has been provided as a Statement of Comparison of Budget and Actual Expenditure .

A reconciliation of budget and surplus / deficit with cash generated from operating investing and financing activities is also provided as part of the Financial Statements.

1.16 COMPARATIVE FIGURES

Where necessary, comparative figures have been reclassified to conform to changes in presentation in the current year.

1.17 FRUITLESS AND WASTEFUL EXPENDITURE

Fruitless expenditure means expenditure which was made in vain and would have been avoided had reasonable care been exercised.

In the eventuality of fruitless and wasteful expenditure appropriate disciplinary action is taken against the culprit and appropriate steps are also taken to recover the loss.

The Accounting Officer will accordingly be informed in line with prescripts of the PFMA. The loss so incurred will be disclosed in Financial Statements in the period to which it relates.

1.18 IRREGULAR EXPENDITURE

Irregular expenditure as defined in Section 1 of the PFMA is expenditure other than unauthorised expenditure, incurred in contravention of or that is not in accordance with a requirement of any applicable Legislation.

In the event such expenditure occurs appropriate disciplinary action will be taken against the perpetrator and appropriate steps will also be taken to recover the loss.

The Accounting Officer will accordingly be informed in line with the prescripts of the PFMA. The loss so incurred will be disclosed in the Financial Statements in the period to which it relates.


1.19 RELATED PARTIES

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.

The Board is mandated by the Limpopo Department of Economic Development, Environmental and Tourism to regulate, control and monitor gambling activities in the Province.

Related parties include:

• Individuals owning directly and indirectly an interest in the entity.

• Key management personnel and their families.

1.20 EVENTS AFTER REPORTING DATE

Events after reporting date are those events, both favourable and unfavourable, that occur between the reporting date and the date when the Financial Statements are authorised for issue. Two types of events can be identified:

• those that provide evidence of conditions that existed at the reporting date (adjusting events after the reporting date); and

• those that are indicative of conditions that arose after the reporting date (non-adjusting events after the reporting date).

The entity will adjust the amount recognised in the Financial Statements to reflect adjusting events after the reporting date once the event occurred.

The entity will disclose the nature of the event and an estimate of its financial effect or a statement that such estimate cannot be made in respect of all material non-adjusting events, where non-disclosure could influence the economic decisions of users taken on the basis of the Financial Statements.

1.21 PRIOR PERIOD ERROR

Prior period errors are omissions from and misstatements in, an entity’s Financial Statements for one or more prior periods arising from failure to use/misuse of reliable information that:

• was available when the Financial Statements for the period was issued, and

• could have been reasonably expects to be taken into account in those financial statements.

LIMPOPO GAMBLING BOARD | ANNUAL REPORT 201776 LIMPOPO GAMBLING BOARD | ANNUAL REPORT 201776

NOTES TO THE ANNUAL FINANCIAL STATEMENTS

2. NEW STANDARDS AND INTERPRETATIONS

2.1 STANDARDS AND INTERPRETATIONS ISSUED, BUT NOT YET EFFECTIVE

The entity has not applied the following standards and interpretations, which have been published and are mandatory for the entity’s accounting periods beginning on or after 01 April 2017 or later periods:

2.2 STANDARDS AND INTERPRETATIONS NOT YET EFFECTIVE OR RELEVANT

The following standards and interpretations have been published and are mandatory for the entity’s accounting periods beginning on or after 01 April 2017 or later periods but are not relevant to its operations:

GRAP 20: Related parties

The objective of this standard is to ensure that a reporting entity’s Annual Financial Statements contain the disclosures necessary to draw attention to the possibility that its financial position and surplus or deficit may have been affected by the existence of related parties and by transactions and outstanding balances with such parties.

An entity that prepares and presents Financial Statements under the accrual basis of accounting (in this standard referred to as the reporting entity) shall apply this standard in:

• identifying related party relationships and transactions;

• identifying outstanding balances, including commitments, between an entity and its related parties;

• identifying the circumstances in which disclosure of the items in (a) and (b) is required; and

• determining the disclosures to be made about those items.

This standard requires disclosure of related party relationships, transactions and outstanding balances, including commitments, in the consolidated and separate Financial Statements of the reporting entity in accordance with the Standard of GRAP on Consolidated and Separate Financial Statements. This standard also applies to individual Annual Financial Statements.

Disclosure of related party transactions, outstanding balances, including commitments, and relationships with related parties may affect users’ assessments of the financial position and performance of the reporting entity and its ability to deliver agreed services, including assessments of the risks and opportunities facing the entity. This disclosure also ensures that the reporting entity is transparent about its dealings with related parties.

The standard states that a related party is a person or an entity with the ability to control or jointly control the other party, or exercise significant influence over the other party, or vice versa, or an entity that is subject to common control, or joint control. As a minimum, the following are regarded as related parties of the reporting entity:

• A person or a close member of that person’s family is related to the reporting entity if that person:

- has control or joint control over the reporting entity;


- has significant influence over the reporting entity;

- is a member of the management of the entity or its controlling entity.

• An entity is related to the reporting entity if any of the following conditions apply:

- the entity is a member of the same economic entity (which means that each controlling entity, controlled entity and fellow controlled entity is related to the others);

- one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of an economic entity of which the other entity is a member);

- both entities are joint ventures of the same third party;

- one entity is a joint venture of a third entity and the other entity is an associate of the third entity;

- the entity is a post-employment benefit plan for the benefit of employees of either the entity or an entity related to the entity. If the reporting entity is itself such a plan, the sponsoring employers are related to the entity;

- the entity is controlled or jointly controlled by a person identified in (a); and

- a person identified in (a)(i) has significant influence over that entity or is a member of the management of that entity (or its controlling entity).

The standard furthermore states that related party transaction is a transfer of resources, services or obligations between the reporting entity and a related party, regardless of whether a price is charged.

The standard elaborates on the definitions and identification of:

• Close member of the family of a person;

• Management;

• Related parties;

Notes to the Annual Financial Statements

• Remuneration; and

• Significant influence

The standard sets out the requirements, inter alia, for the disclosure of:

• Control;

• Related party transactions; and

• Remuneration of management

The effective date of the standard is not yet set by the Minister of Finance.

The entity has early adopted the standard for the first time when the Minister sets the effective date for the standard. The impact of the standard is not material.


3. PROPERTY, PLANT AND EQUIPMENT

2017 2016

COST / VALUATIONR

ACCUMULATED DEPRECIATION AND

ACCUMULATED IMPAIRMENT

RCARRYING VALUE

RCOST / VALUATION

R

ACCUMULATED DEPRECIATION AND

ACCUMULATED IMPAIRMENT

RCARRYING VALUE

R

Fittings 3 244 475 (1 325 793) 1 918 682 3 244 475 (1 001 346) 2 243 129

Motor vehicles 2 410 993 (445 424) 1 965 569 3 591 247 (2 558 952) 1 032 295

Office equipment 523 862 (221 141) 302 721 475 594 (182 160) 293 434

Computer equipment 1 752 531 (1 099 208) 653 323 1 334 653 (1 070 900) 263 753

Computer software 665 238 (61 450) 603 788 61 450 (61 450) -

Furniture 1 952 843 (662 977) 1 289 866 1 295 941 (653 518) 642 423

Leased assets - - - 550 210 (443 225) 106 985

Sundry assets 12 140 (12 140) - 18 280 (18 280) -

Total 10 562 082 (3 828 133) 6 733 949 10 571 850 (5 989 831) 4 582 019

Reconciliation of property, plant and equipment - 2017

OPENING BALANCER

ADDITIONSR

DISPOSALSR

DEPRECIATIONR

TOTALR

Fittings 2 243 129 - (324 447) 1 918 682

Motor vehicles 1 032 295 1 558 200 (452 283) (172 643) 1 965 569

Office equipment 293 434 75 044 (20 680) (45 077) 302 721

Computer equipment 263 753 547 732 - (158 162) 653 323

Computer software - 603 788 - - 603 788

Furniture 642 423 746 507 (22 788) (76 276) 1 289 866

Leased assets 106 985 - - (106 985) -

4 582 019 3 531 271 (495 751) (883 590) 6 733 949

Reconciliation of property, plant and equipment - 2016

OPENING BALANCER

ADDITIONSR

DEPRECIATIONR

TOTALR

Fittings 2 567 577 - (324 448) 2 243 129

Motor vehicles 1 255 921 - (223 626) 1 032 295

Office equipment 243 991 75 995 (26 552) 293 434

Computer equipment 284 534 193 235 (214 016) 263 753

Furniture 694 942 23 000 (75 519) 642 423

Leased assets 290 388 - (183 403) 106 985

5 337 353 292 230 (1 047 564) 4 582 019


4. INTANGIBLE ASSETS

2017 2016

COST / VALUATIONR

ACCUMULATED AMORTISATION

AND ACCUMULATED IMPAIRMENT

RCARRYING VALUE

RCOST / VALUATION

R

ACCUMULATED AMORTISATION

AND ACCUMULATED IMPAIRMENT

RCARRYING VALUE

R

Trademarks 7 866 (7 866) - 7 866 (7 866) -

DETAILS OF VALUATION

The useful lifes and residual values were reassessed at year end for both tangible and intangible assets however, no material adjustments were considered necessary.

5. OPERATING LEASE LIABILITY DEPRECIATION

RTOTAL

R

Operating lease liability 12 434 293 10 640 879

6. RECEIVABLES FROM EXCHANGE TRANSACTIONS

Debtors' control 364 447 6 754 124

Prepaid expenses and deposit 123 237 60 242

Sundry debtors 43 669 40 051

Provision for Doubtfull debts (320 000) -

211 353 6 854 417

7. CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of:

Petty cash 2 000 2 000

Bank balances 28 416 522 8 546 447

28 418 522 8 548 447

8. FINANCE LEASE OBLIGATION

Minimum lease payments due

- within one year - 209 828

Present value of minimum lease payments due

- within one year - (24 714)

Current liabilities - 185 114

The finance lease expired as at end of 31 January 2017 and the leased office equipment was returned to the lessor.


10. STAFF ACCRUAL

RECONCILIATION OF STAFF ACCURAL- 2017OPENING BALANCE

RACCRUED

R

UTILISED DURING THE YEAR

RBALANCE

R

Leave days 867 927 3 099 828 (3 230 849) 736 906

13th cheques and savings (CEO and Management) 348 673 1 487 194 (1 470 736) 365 131

1 216 600 4 587 022 (4 701 585) 1 102 037

RECONCILIATION OF STAFF ACCURAL- 2016OPENING BALANCE

RADDITIONS

R

UTILISED DURING THE YEAR

RBALANCE

R

Leave days 696 167 2 055 007 (1 883 247) 867 927

13th cheques and savings (CEO and Management) 344 296 1 425 652 (1 421 275) 348 673

1 040 463 3 480 659 (3 304 522) 1 216 600

11. DEFERRED INCOME 2017

R2016

R

Reconciliation for the deferred income

Opening balance 9 458 636 6 292 348

Recognised as income (9 458 636) (6 292 348)

Received in advance 7 456 233 9 458 636

7 456 233 9 458 636

Deferred income is a money received for services which have not yet been delivered.

12. LONG SERVICE AWARD

Movement in the employee long term service award liability

Opening liability 243 003 -

Current service cost 28 659 239 662

Interest 21 145 18 341

Benefits paid (37 500) (15 000)

Subtotal 255 307 243 003

Current portion of liability as at 31 March (33 083) (44 369)

Long term portion of liability as at 31 March 222 224 198 634

Expense recognised in (profit)/loss

Current service cost 234 162 224 662

Interest cost 21 145 18 341

255 307 243 003


12. LONG SERVICE AWARD (CONTINUED)

Principal actuarial assumptions of valuation model used 2017 2016

Discount rate as at 31 March 2016 (%) 8.91% 8.91%

Real discount rate 8.91% 8.91%

Average retirement age: females 65 65

Average retirement age: males 65 65

13. DEFINED CONTRIBUTION PLAN 2017

R2016

R

The employer contributes a percentage of an employee’s salary to the Old Mutual Pension Fund which is subject to the Pension Fund Act, where it is vested on the employee’s behalf. On retirement the employee will receive contributions plus returns on investment. The employer has no obligation other than to make the monhtly payments and no further risk. The risk of market movements lies with the employee.

Senior staff 725 101 734 305

Other staff 1 907 314 1 842 369

Total contributions 2 632 415 2 576 674

14. INCOME TAX

The Limpopo Gambling Board is exempt from tax in terms of the provisions of Section 10(1)(cA)(i) of the Income Tax act.

15. PAYABLES AND OTHER PAYABLES

Sundry creditors 696 246 465 478

Pay as you earn 463 573 -

Other accruals 894 906 101 108

2 054 725 566 586

16. OTHER OPERATING REVENUE

Other income 98 296 645 86 886 941


17. OTHER OPERATING REVENUE 2017

R2016

R

Annual license fees 7 628 544 6 311 714

Bingo application fees 47 950 477 600

Casino application fees - 477 000

Casino license fees - 20 988

Certificate of suitability 17 596 18 300

Employee registration fees 1 114 327 2 291 738

Horse racing application fees 316 728 8 798

Horse racing license fees - 107 980

Investigation fees 3 583 711 628 691

LPM application fees 228 461 -

LPM license fees 26 500 98 474

Levies 83 738 174 75 958 511

Bingo licence fees 149 359 -

Fines received - 640 000

Sundry Income 1 445 295 (152 853)

98 296 645 86 886 941

18. EXCHANGE REVENUE

Interest revenue 1 107 397 394 894

19. GOVERNMENT GRANTS AND SUBSIDIES

Operating grants

Department of Economic Development and Tourism 61 273 000 48 559 000

Unconditional

Included in above are the following grants and subsidies received:

Unconditional grants received 61 273 000 48 559 000


20. EMPLOYEE RELATED COSTS 2017

R2016

R

Salaries 24 284 587 21 370 295

Current service costs 28 659 -

Medical aid - company contributions 872 580 837 159

UIF 96 722 99 942

Leave pay provision charge 370 320 2 055 008

Pension fund 2 632 416 2 576 674

13th Cheques 1 487 194 1 425 652

Housing benefits and allowances 780 490 679 000

Danger allowance 32 794 32 800

Cell phone allowance 347 866 301 300

30 933 628 29 377 830

21. FINANCE COSTS

Finance leases 38 262 70 054

22. BOARD MEMBERS EXPENSES

Subsistence and travelling 53 396 79 978

International conferences and seminars 1 447 543 2 082 480

Board meetings 22 491 6 544

Accommodation 147 872 132 702

Monthly allowance 1 158 502 1 203 362

2 829 804 3 505 066


23. OPERATING EXPENSES 2017

R2016

R

Advertising and promotions 12 540 7 432Assessment rates 431 991 335 595Audit committee expenses - meetings 64 379 60 254Audit fees - Auditor General 1 034 585 1 071 095Audit fees - internal 222 740 153 600Bank charges 109 138 51 406Building maintenance 257 145 164 820Bursaries 125 828 28 119Cleaning materials 17 221 16 357Communication 174 432 127 730Computer expenses 118 600 52 162Consultation and research 310 531 322 080Courier and postage 3 175 5 076Crime awareness campaign 39 200 21 002Cutlery and consumables - 410Bad debts written off - 20 921Equipment maintenance 14 632 6 816Rental expenses 80 845 37 757Insurance 148 531 195 259Investigation fees 3 143 721 209 786Law enforcement expenses 2 318 13 459Legal fees 1 531 254 -License fees 152 310 208 497Magazines, books and periodicals 16 500 -Motor vehicle expenses - fuel 383 816 602 168Motor vehicle expenses - repairs 92 621 108 335Occupational injuries and diseases act fund 131 722 103 153Operating lease charges - building 11 357 959 11 357 958Other expenses 13 261 -Printing and stationery 505 232 442 214Publications - 34 143Refreshments 35 852 30 716Reimbursive travelling 878 550 488 533Rental - postal box 1 640 1 500Responsible gambling awareness strategy 1 007 928 5 384Security expenses 589 683 493 627Skills development levy 290 857 272 758Staff meals and accommodation 916 223 743 676Staff subsistence and toll fees 111 735 128 275Staff training - inhouse 125 475 160 822Staff welfare 16 991 24 924Subscriptions 42 203 33 656Telephone and fax 381 861 475 402Court settlement 1 114 997 -Water and electricity 356 818 338 362

26 367 040 18 955 239


24. AUDITORS’ REMUNERATION 2017

R2016

R

Fees 1 034 585 1 071 095

25. CASH GENERATED FROM (USED IN) OPERATIONS

Surplus 99 896 935 82 885 082

Adjustments for:

Depreciation and amortisation 883 591 1 047 564

Loss on sale of assets and liabilities (592 218) -

Bad debt impairment 320 000 -

Movements in operating lease assets and accruals 1 793 414 2 662 916

Movements in provisions 12 304 243 003

Surrendered funds (own revenue) (85 459 115) (90 291 907)

Changes in working capital:

Receivables from exchange transactions 6 323 064 (5 234 762)

Payables and other payables (679 484) (371 459)

Income received in advance - 3 166 288

22 498 491 (5 893 275)

26. COMMITMENTS

AUTHORISED OPERATIONAL EXPENDITURE

Already approved and contracted for

Expenditure 4 689 410 665 423

Total operational commitments

Already contracted for but not provided for 4 689 410 665 423

TOTAL COMMITMENTS

Total commitments

Already contracted for but not provided for 4 689 410 665 423

The commitments relate to contracts in respect of insurance, security, internal audit, maintenance and the Annual Reports. The commitments are funded from existing funds.


25. CASH GENERATED FROM (USED IN) OPERATIONS (CONTINUED) 2017

R2016

R

OPERATING LEASES - AS LESSEE (EXPENSE)

Minimum lease payments due

- within one year 10 521 000 9 564 543

- in second to fifth year inclusive 53 710 755 48 827 959

- later than five years 15 403 996 30 807 591

79 635 751 89 200 093

The Board rents offices in Polokwane at 8 Hans van Rensburg Street. Rental is payable monthly in advance and it escalates at the rate of 10% per annum. The tenant has the option to make an offer to purchase at any time during the currency of the lease agreement. The tenant is also precluded from using the building for other purposes other than that agreed upon in the lease agreement. The landlord can terminate the contract upon expiry of the termination date. There in no contingent rent in the Statement of Financial Performance. The lease expires on the 28th of February 2023.

27. CONTINGENCIES

The entity is defending an unfair dismissal claim at the CCMA. The employee was dismissed by the Board after being found guilty in an internal disciplinary enquiry on numerous counts of in subordination. The evidence against the former employee is strong, therefore there is little prospects of success for the former employee. LGB foresees that the matter will be finalised in the 2017/18 financial year.

28. RELATED PARTIES

RELATIONSHIPS

Parent department Limpopo Department of Economic Development Environment and Tourism

Members of key management Mr. Serobi Maja - Chief Executive Officer

Ms. Y.S.M. Mathabatha - Chief Financial

Officer Adv. L. Ganess - Senior Legal Manager

Mr. S. Maahlo - Senior Manager Finance

Mr. L.K. Mathavhane - Senior Manager

Mr. MP Masogo - Senior Manager Law

Board Members Mr. Mokono M.T - Chairperson

Mr. Mogale J. - Deputy Chairperson

Ms. Montjane B.L

Khosi Makumbane T.N

Mr. Mashele A

Mr. Maboela

Mr. Sithole J.K


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30. PRIOR-YEAR ADJUSTMENTS

Presented below are those items contained in the Statement of Financial Position, Statement of Financial Performance and Cash Flow Statement that have been affected by prior-year adjustments:

STATEMENT OF FINANCIAL POSITION

2015

CORRECTION OF ERROR

R RESTATED

R

Correction of accumulated depreciation (714 734) (714 734)

2014

Finance lease liability 536 536

Debtors (1 500) (1 500)

Refund of legal fees (39 722) (39 722)

(40 686) (40 686)

STATEMENT OF FINANICAL PERFORMANCE

2016

Department of Justice (39 722) (39 722)

Bettagaming (1 500) (1 500)

Finance lease and other adjustments 536 536

Surplus for the year (40 686) (40 686)

31. COMPARATIVE FIGURES 2017

R2016

R

Certain comparative figures have been restated.

Property Plant and Equipment - 75 995

Net Effect - 75 995

32. RISK MANAGEMENT

CREDIT RISK MANAGEMENT

Credit risk refers to the risk that counter party will default on its contractual obligations resulting in financial loss to the entity. To mitigate credit risks, the entity has adopted a policy of only dealing with creditworthy parties. Credit risk with respect to trade and other receivables is limited due to our policy of not granting credit to third parties and also due to the fact the Limpopo Gambling Board is not a trading entity or profit orientated. Management manages the credit risk relating to staff loans by deducting payments due by employees monthly from their salaries. Our main source of income is through grants received from the Department of Economic Development, Environment and Tourism.


32. RISK MANAGEMENT (CONTINUED) 2017

R2016

R

Financial assets, that potentially subject the entity to credit risk, consist principally of cash and cash equivalents and short term deposits. The entity’s cash and cash equivalents and short term deposits are placed with high credit quality financial institution.

MAXIMUM EXPOSURE TO CREDIT RISK

The entity’s exposure to credit risk with regards to loans and receivables is limited due to the nature of the entity’s operations, as explained above. Credit risk is fairly low in respect of staff loans as they are related to the entity.

There has been no significant change during the financial year, or since the end of the financial year, to the entity’s exposure to credit risk, the approach of measurement or the objectives, policies and processes for managing this risk.

MARKET RISK

This is the risk that the fair value or future cash flows from a financial instrument will fluctuate as a result of the changes in market prices. Values in financial instruments may change, thus resulting in both potential gains and losses. The entity’s activities do not expose it to significant market risks. The entity’s activities expose it primarily to the risk of fluctuations in interest rate.

Interest rate risk is a risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Market risk exposures are measured using sensitivity analysis. A sensitivity analysis shows how surplus would have been affected by changes in the relevant risk variable that were reasonably possible at the reporting date.

INTEREST RATE SENSITIVITY ANALYSIS

The Board’s major source of revenue is government grants and to a lesser extent, interest income depending on cash equivalents held. A major expense is on salaries which are fixed for a financial year. The basis points increases or decreases, as detailed in the table below, were determined by Management and represent Management’s assessment of the reasonably possible change in interest rates. The sensitivity analysis below has been determined based on financial instruments exposure to interest rates at reporting date. As the entity does not have any instruments that affect net assets directly, the disclosure only indicates the effect of the change in interest rates on surplus.

A change in market interest rate at the reporting date would have increased / (decreased) the surplus for the year by amounts below:

Cash and equivalents (Upward change) 284 185 85 484

Cash and equivalents (Downward change) 1% (284 185) (85 484)

Liquidity risk is the risk that the organisation would not have sufficient funds available or may encounter difficulties in raising funds to meet its future commitments. This risk is regard is regarded as low considering the Board’s current funding structure and management of available cash resources.


32. RISK MANAGEMENT (CONTINUED)

The table below provides detail of the entity’s remaining contractual maturity for its financial liabilities:

2017

CARRYINGAMOUNT

RTOTAL CASH FLOW

R

CONTRACTUALCASH FLOW 1

R

CONTRACTUAL CASH FLOW 1-5

R

Other financial liabilities 12 434 293 12 434 293 10 521 000 64 231 755

2016

Other financial liabilities 10 640 879 10 640 879 9 564 543 58 392 502

The table below shows the classification on the Board’s principal instruments together with their carrying values:

FINANCIAL INSTRUMENTS

CARRYINGAMOUNT 2017

R

CARRYINGAMOUNT 2016

R

Cash & Cash Equivalents 28 418 522 8 548 447

Trade and Receivables 211 353 6 852 412

Trade and Other Payables 3 156 761 1 783 186

Finance Leases - 185 114

31 786 636 17 369 159

Net gains and losses on financial instruments.. The following table presents the total net gains of losses for each category of financial liabilities.

2017RECEIVABLES

R

FINANCIAL LIABILITY

RTOTAL

R

Interest income 1 107 397 - 1 107 397

Finance charges - (38 262) (38 262)

1 107 397 (38 262) 1 069 135

2016

Interest income 394 894 - 394 894

Finance charges - (70 054) (70 054)

394 894 (70 054) 324 840


33. GOING CONCERN

The Annual Financial Statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.

34. EVENTS AFTER THE REPORTING DATE

The Board is unaware of any matter or event arising since the end of the financial year.

35. FRUITLESS AND WASTEFUL EXPENDITURE 2017

R2016

R

Opening balance - 226 652

Less: Amounts condoned - (219 143)

Less: Amounts recoverable (not condoned) - (7 509)

- -

36. RECONCILIATION BETWEEN BUDGET AND CASH FLOW STATEMENT

Reconciliation of budget surplus/deficit with the net cash generated from operating, investing and financing activities:

OPERATING ACTIVITIES

Actual amount as presented in the budget statement 84 480 095 74 417 546

Basis differences (61 981 604) (80 310 821)

Net cash flows from operating activities 22 498 491 (5 893 275)

INVESTING ACTIVITIES

Actual amount as presented in the budget statement (3 973 939) (523 000)

Basis differences 1 530 637 230 770

Net cash flows from investing activities (2 443 302) (292 230)

FINANCING ACTIVITIES

Basis differences (185 114) (163 089)

Net cash generated from operating, investing and financing activities 19 870 075 (6 348 594)


37. BUDGET DIFFERENCES

INTEREST RECEIVED

The revenue banked was more than expected due to the issuing of bingo licences and an increase on collection of annual licence fees, horseracing application fees and other sundry income, as well as levies and LPM application fees.

EMPLOYEE COSTS

The personnel cost is having a saving of R4 731 088 which is due to resignation delayed appointments and provision for leave which is non-cash item

38. AMOUNTS TO BE SURRENDERED TO PROVINCIAL TREASURY 2017

R2016

R

Cash and cash equivalents 28 418 522 8 548 447

Less current liabilities (10 612 994) (11 471 305)

Less levies (1 525 852) -

Subtotal 16 279 676 (2 922 858)

Amount to be surrendered/(Deficit for the year) 16 279 676 (2 922 858)

39. OTHER OPERATING EXPENSES

Operating expenses - the material differences of R2 879 240 operating expenses is caused by court claims, smoothing of operating lease which is a non-cash item.

Bad debt provision - The impairment is caused by the dispute of Gold Rush. Depreciation - the depreciation was overstated by R717 577.32

40. ACTUAL CAPITAL EXPENDITURE VERSUS BUDGETED CAPITAL EXPENDITURE

Refer to Appendix B for the comparison of actual capital expenditure versus budgeted expenditure.

41. MATERIAL LOSSES: COURT SETTLEMENT

As disclosed in Note 24 to the financial statements, the amount of R 1 114 997 was paid in the settlement of a labour dispute arising from an employee who was dismissed by the Board, after being found guilty in an internal disciplinary enquiry for engaging in fraudulent and corrupt activities. The former employee took the matter to the CCMA wherein he was successful and his reinstatement was ordered. The Board then instructed a legal representative to take the matter on review, withholding the reinstatement of the employee. Due to long lapse of time (16 years) and the lack of court records, including the fact that if the matter were to be heard again, the two crucial witness are deceased hence affecting the chances of success.


NOTES

Physical Address8 Hans van Rensburg Street

Polokwane0699

Limpopo ProvinceSouth Africa

Postal AddressPrivate Bag X9520

Polokwane0700

Limpopo ProvinceSouth Africa

Tel: +27 15 230 2300Fax: +27 15 295 3566 or

+27 (0)86 505 3460E-mail: [email protected]

Website: www.lgb.org.za

PR261/2017ISBN: 978-0-621-45755-1

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