Independent Development Trust

Presentation toPortfolio Committee for Public

Works:2008/09 Annual Report

October 2009

Content of Presentation

Compliance Statement Opening Remarks Statements: Minister; Chairperson

Trustees Report Performance Report Annual Financial Statements Concluding Comments

Compliance Statement In terms of Section 55 (1) (b) of the Constitution, the National Assembly must provide mechanisms to effect oversight of among other any organ of state. Hence this account to the Portfolio Committee on the performance over the 2008/09 financial year and application of public resources with which the IDT has been entrusted, is being presented in respect of the Committee's oversight responsibility and to enable the Committee to recommend the IDT’s Annual Report to Parliament

Statement: Executive Authority Expectation that public institutions have mastered and institutionalised the PFMA Extremely proud of the IDT achieving 7th successive unqualified audit which sets the IDT apart and a leader.Endorse the IDT Annual Report rooted in:

Quarterly reports: accountability; trackingWitnessed the impact of the IDT’s performance and the impact thereof on peoples livesConfidence in the value of the IDT as a development agency in advancing the national social policy agenda

Statement: Chairperson IDT operates in a dynamic & changing environment. Noted key changes which impacted over the reporting period, e.g., Executive Authority; changes in the BoardBoard approved the IDT’s 1st long term Strategic Vision Performance challenges, largely out of the organisation’s control, were timeously reported to the Board and corrective actions put in placeConfidently present the 2008/09 results

Trustees Report

Trustees ReportCompliance Statement: Page 9

Mandate of the IDT (Page 9-10): Retained primary mandate to support government with the eradication of poverty despite changes of focus and interpretationIn 2008/09 the IDT introduced a focus on women in recognition of the increasing feminisation of poverty and the effectiveness of women as change agents

Corporate Governance (Page 10): sound corporate governance is integral to the IDT’s business enterprise and ethics

Executive Authority: Complied with provisions of the Shareholder Compact.Reporting to Parliament: Presented 2009/11 Corporate Plan

Corporate Governance: Board of TrusteesBoard Structure (page 11-12):

12 independent, non-executive Trustees, 10 by public nomination + 2 by MinisterAssumed office 1 October 2007Names of Trustees

Responsibilities (page 13)facilitated by Board Committees. Board CharterReserved specific matters and other delegated to CEO

Functioning of Board (page 15): Attendance

Board Committees Page (17-23) Outline of functions of Committees, main achievements, dates of meetings and membership

Audit Committee: Same members

Finance Committee

Strategic Planning and Programmes Committee

Human Resources and Corporate Services Committee

Remuneration Committee

Financial Overview (Page 25-29)Financial Performance Information:

Sound financial management which emphasises internal controls and assures stakeholders that assets are safeguarded and transactions executed according to generally accepted business practices and adopted policiesResources strictly applied in accordance with budget allocations approved by the BoardActual overhead expenditure was R 332.3 m representing a variance of 0.85% under-spending for the reporting periodR150m of IDT’s funds approved for poverty eradication programmes (‘Mud Schools’ programme in particular). R 94m was spent and the rest will be spent/concluded in 2009/10Renewed focus on cost containment, improving efficiencies, working capital improvement and managing capital expenditure

Financial Overview (Page 25-29)Undertook a comprehensive review of programme recoverables:

Strict verification and ageing of all programme related transactions up to an including the 2005/06 financial year.

Results tested against strict criteria to determine reasonable expectations to recover such costs from clients

Based on this evaluation, the Board approved an amount of R57.7m to be written off in order to appropriately restate the balance sheet item in respect of total programme expenditure of +R 3 billion over the period (2005-2009)

Does not represent wasted or lost resources as contracts were delivered to the satisfaction of clients

Exposure of this nature is unlikely to recur as, since 2008, payments for services are drawn down directly from dedicated client-contract bank accounts

Financial Overview (Page 25-29)Investment of main fund and other sources of income

Main source of funding = income from investment of main fund. Income partially applied to fund operationsCapital applied in poverty eradication projects and thus gradually diminishingAt 31-Mar-09 balance= R 948mUncertainty in global markets, results in high volatilityFund performance monitored by an Investment Committee which contributed to revenue receipts exceeding budget targets by 48% notwithstanding market fluctuationsIncreased capacity and commitment to recover costs from public sector (and few private sector) programmesDeveloped a Costing Model to identify cost drivers, have a sound basis for determining management fees and baselines for future financial planning

Financial Performance

Budget Actual %

Expenditure R 347,1 m R 354,5 m

(Note)

102%

Mud Schools R 132 m R 89,8 m 68%Write-down of

Programme

Recoverables

- R 56,6 m -

Revenue R 100,4 m R 157,5 m 156,9%Application of

InvestmentsR 343,4 m

Financial Overview (Page 25-29)Long-Term Sustainability

IDT established with a R 2bn government grant in 1990Until 2005, investment income from the balance of this grant covered operational expensesGrowth in business and volatility in market impacting on interest rates has resulted in a growing margin between expenditure applied and revenue since 2006Capital base is depleting challenging the financial sustainability of the IDT post the 2011/12 financial yearIDT’s long-term Strategic Vision is aligned to social policy agenda (MTSF) as the development agency of choice. Thus IDT has recorded its future funding requirements with National Treasury

Risk Management (Page 29-31)Risks Management embedded in IDT's business processesKey players:

Accounting Authority: Audit Committee in particularExecutive ManagementRisk Champions

See Risk Management Infrastructure on Page 31

Performance Report

CEO’s Report (Page 35-45)2008/09: Coincided with the end of the CEOs 1st five-year term and start of 2nd termIDT able to effectively balance remaining focused on what has been planned with being responsive within a changing environment2008/09 Scorecard represents a combinations of KPIs and targets completely in the control of the IDT and those which are integrated with and dependent on inputs and cooperation of client departmentsSummary:

Achieved 11 (73.4%) of 15 KPI and targets, of which 10 (66.7%) were exceededUnderachieved 4 (26.6%) all of which were not in IDT’s control

CEO’s Report (Page 35-45)Development Impact accounted through 3 examples:

Social Infrastructure DeliveryEmpowerment of WomenKnowledge production

New Opportunities: responsive and flexible development agency, e.g., Xenophobia and intolerance Project; Re Tlisa Diphetoho; EPWP2Looking ahead: 2010/30 Strategic Vision which positions the IDT as the as the development agency which will drive transformation and innovation in supporting government with the design and implementation of a long-term comprehensive integrated anti poverty strategy. IDT funds will be solely invested in community-based sustainable development and anti poverty programmes, and the public-mandated work, such as the social infrastructure and social development programmes, will be delivered on a full cost recovery basis. IDT Team..\..\..\BOARD\2009\MAY 2009\2008-09 PERFORMANCE SUMMARY DRAFT 6.doc

CEO’s Report (Page 35-45)Social Infrastructure Delivery

83% of Turnover= Social infrastructure delivery, largely delivered in rural South Africa, e.g., EC = 39.6%; KZN= 22.8%. Thus supported government with the reduction of infrastructure backlogs in historically marginalised areas. Concluded and handed over eight (8) schools (Eastern Cape, Mpumalanga and Kwazulu-Natal) which were constructed with IDT funds as part of the Eradication of Mud Schools and Undesirable Structures Programme. Other outcomes of this specific programme:

24 contractors engaged on the projects, 21 (88%) were women contractors.Constructed 116 classrooms providing learners with first-time access to decent facilities. All schools were provided with: computer laboratories; furniture and solar power where there no electricity is available and pre-school facilities at the primary schools. Such facilities are not typically provided at state schools thus these rural learners have the access to the infrastructure for optimal learning and growth.

CEO’s Report (Page 35-45)Social Infrastructure Delivery cont.

The IDT did not fully meet its programme expenditure targets because we were not provided with the funds to do so. Notwithstanding this challenge the IDT achieved R1.313 billion (88%) against a targeted R1.5 billion, which in real terms represents a 13% increase on the previous year’s achievement of R1.167bn. The development impact of this programme expenditure includes:

R632.5m of programme expenditure was spent on local contractors and labour, which includes R450m on women contractors;53 581 job opportunities created of which 71% were women; and,2 195 persons received technical training and a further 13 259 basic life skills.

 Thus the IDT’s model of social infrastructure delivery, which is grounded in labour intensive methodologies and the empowerment of local labor and contractors, has meaningfully impacted the individuals who participated in the programme as well as their households.

CEO’s Report (Page 35-45)Empowerment of WomenIntroduced a Contractor Development Programme with the objective to meaningfully contribute towards the advancement and empowerment of disadvantaged communities, and women in particular, by:

providing opportunities to existing contractors, as well as emerging entrepreneurs in the building and construction industries;developing a pool of capable, highly skilled contractors, and women in particular, able to compete with the best in sector and to benefit from the substantial budget available for infrastructure development; and,Creating sustainable and self-sufficient contractors able to run profitable businesses.

 Target: 45 women contractors but registered 59 participants 25 women contractors were up-scaled on grading system of the Construction Industry Development Board as a result of contract values of the work they were awarded by the IDT.

Structure and Business Practice (page 53-59)

Structure: Operational model combines centralised systems, process, policies and functions with decentralised operations, which informs the structureInnovations and operations of the four (4) Business Units:

Office of the CEO Development Programmes Services Corporate Services Financial Services

Human Resources Management Report (Appendix 1): Page 109-117)

Annual Financial StatementsPage 61-106

Auditor General’s Report (Page 65-68)

The IDT received its seventh consecutive unqualified audit report for the year ended 31 March 2009.“In my opinion, the financial statements present fairly, in all material aspects, the financial position of the IDT as at 31 March 2009 and its statement of comprehensive income and its cash flows for the year then ended, in accordance with the Statement of Generally Accepted Accounting Practice and in a manner required by the PFMA. Without qualifying my opinion, I draw attention to the following matter”

The impairment of programme recoverable was highlighted as an Emphasis of Matter due to its valueMaterial amendments resulting from the audit were reflected as an “Other Matter”

Financial Overview

The financial statements fully compliant with SA GAAP (IFRS).Expenditure base exceeds revenue generation capacity.Revenue generating capacity volatile due to bonds in investment portfolio.Deliberate thrust to increase cost recoveries on managed infrastructure programmes.

Concluding RemarksProudly and confidently present the 2008/09 year-end results to the Portfolio Committee.Aware of the fact that the Committee might not have had the chance to witness the “IDT at work” during its Oversight visits As is evident from the map at the front of the report, the IDT has clear and definite footprint in all provinces. Hence, we would like to invite the Committee to:

Visit the IDT projects during the current year, andJoin us with the public presentation of the 2008/09 Annual Report in Tzaneen on 26 October 2009

Thank you

Thembi Nwedamutswu

Chief Executive Officer

thembin@idt.org.za

www.idt.org.za