RTMC ANNUAL REPORT2011/12

PRESENTATION TO PORTFOLIO COMMITTEE10-11 OCTOBER 2012

ACTING CEO: COLLINS LETSOALO

“SAFE ROADS -THE CHANGE WE WANT TO SEE”

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OUTLINE

• RTMC Audit JourneyOverall Financial PositionStatement of Financial PositionStatement of Financial Performance• Opinion Comparatives• Emphasis of Matter• Pre-determined Objectives• Required Funding for RTMC Mandate

RTMC Audit Journey

• Reporting a state of technical insolvency based on material loss of 41m, mainly due to SANRAL debt write off (R26m) and intangible asset write off (R8,1m), leaving the entity with loss of R7m.

• R7m - a reduction in the loss from 2009/10 loss of R72m.• Liabilities exceed assets by R203 million.• Main contributor - liability of R200 million relating to

irregular use of Transaction Fees in 2009/10 financial year (uncovered and confirmed through the Ministerial Task Team, and an a matter that would resolve the going concern challenge of the Corporation when addressed).

Overall Financial Position

STATEMENT OF FINANCIAL POSITION (B/S)

Liabilities Amount Details Reasons

Payables R449 million

• R430 million = Transaction fees due from provinces and payable to DoT

• R213 million = Transaction fees (Irregularly utilized (R200 M)and balance at bank plus fair value adjustment )

•R50million = AARTO infringements

Same as in account receivables

•Mainly transaction fees irregularly utilized in 2009/10 financial year ,these needs to be written off as they recovery is doubtful

•Infringements fees paid into AARTO national bank account and payable to issuing authorities

Annual Financial Report: 2011/12

STATEMENT OF FINANCIAL POSITION (B/S)

Current assets Amount Details Reasons

Cash and bank R130 million •AARTO Accounts = R32 million

•eNaTIS Accounts = R92 million

•RTMC Main = R5 million

AARTO Accounts: Infringement fees for both Gauteng Department of Community Safety, Tshwane Metro (TMPD) and RTIA paid into the AARTO national bank accounts

Funds in eNatis account represent transaction fees received by the RTMC from provinces and not yet paid over to the Department of Transport at year end.

Trade and other receivables

R155 million •Transaction fees due from Provinces = R137 million (2011: 125million)

•AARTO Infringements due from Issuing Authorities = R18 million

- Transaction fees receivable from Provinces.- 70% of all outstanding debts are within the 90 day period- 30% of the total debts is long outstanding (R41 million)- R41million of the long outstanding balance is shared amongst the three provinces {Limpopo (R11 million), Mpumalanga (R16 million) and North West (R14 million)} and these relate to the period when issuing authorities were still paying directly to the RTMC

Change in accounting principle to account only on cash basis thus these are monies due by RTIA and GDOC that were overpaid in the previous accounting principle.

Non-current asset R9 ,2 million •PPE = R7,6 million•Intangible assets = R1,6 million

•Intangible asset of R8,1 m written off•Assets register developed and 100% compliant

Annual Financial Report … Cont.

STATEMENT OF FINANCIAL PERFORMANCE (I/S)

INCOME Amount Details Reasons

Government grant

R77.9 million (2011: 73,6 million)

MTEF allocation from Treasury Government grant allocated to the Corporation for 2011/2012 ,the actual requested budget was for R180m

Other income R53 million •R2. 9 million – contribution by SANRAL for the training of traffic police.•Difference relate to other sponsors and sundry income (disposal of asset)

•R98 million owed by JMPD written-off in the previous financial year (restatements of financials).

AARTO R2,5m Collecting agency fees as per AARTO regulation Infringement fees issued by NTP

-3% collection fees recognized as income and only amounted to R1,4m in the reporting period-R1m infringement fees issued since September 2011

EXPENDITURE

Operating expenditure

R178million ( 2011: 161 million)

Key drivers:

•Payroll = R100million•Assets written off/ retired = R9,5 million•Provision for bad debts= R27million•Lease rentals = R11 million•Depreciation = R3,8 million•Accident investigation = 3,8m•Other projects = 9,7million

•Payroll costs increased by 10% from the previous financial year•Accident reporting system valued at R57 million discontinued•Impairment of hardware relating to ARS(R8 million impairment)

Deficit for the year

R41 million ( 2011: 72million) Mainly due to the asset written-off and debt written off amounting to R34m of current loss

Annual Financial Report … Cont.

FINDING 2010/11 Finding 2011/12 Audit Opinion 2011/12 WAYFORWARD

1. Trade and other receivables ,audit procedure could not be performed

1.Trade receivables reconciled and audit procedure performed

Unqualified Audit opinion

Continuous management of receivables to ensure audit opinion sustainable

2.Property Plant and Equipment no proper review of asset useful life and residual value

2.PPE asset useful life reviewed and assets damaged written off proper asset management implemented

Unqualified Audit opinion

Continuous management of PPE and appointment of competent asset management staff to ensure continuous monitoring

3.Intangible Assets not assessed for impairment

3.Intangible assets assessed for impairment leading to the R8,1m write off and adjustment of the intangible asset register

Unqualified Audit opinion

Continuous management of intangible and appointment of competent asset management staff to ensure continuous monitoring

4.RTIA information included in RTMC comparative figures

RTIA data removed from all comparative figures

Unqualified Audit opinion

Continuous review of RTMC data to ensure compliance with accounting principles

Opinion Comparison

FINDING ROOT CAUSE MITIGATION WAYFORWARD

30% Achievement of planed targets

Lack of strategy based funding

Lobbying of various stakeholders including the private sector to fund some of the programs

DOT and Treasury to assist in increasing the budget of RTMC from R82m to R240 this will ensure that the budget is aligned to strategy.

Annual financial statement and performance reports

Inadequate financial controls due to lack of skilled staff

Recruitment process reviewed to ensure only competent and skilled finance staff are appointed

Qualified and Competency based appointment in finance department

Non Compliance with the RTMC act

No agreed meetings of the shareholders committee

Facilitation of advanced agreed meeting where member quorate

DOT should develop a stringent process compelling MEC to attend ,through the mayors of the variance provinces

Inefficient Internal Control process

Lack of monitoring of performance management

Monthly review of the monitoring process. Review of monthly and quarterly report. Internal audit to review evidence and report on deficiencies

Implementation of approved policies and development of policies

Pre-determined Objectives

FINDING ROOT CAUSE MITIGATION WAYFORWARD

1.Going Concern 1. Asset write n off due the inability to bring the assets into use

2. Inadequate funding of the RTMC as highlighted by ministerial task team

1.Approval by the shareholders committee to write off those assets, Approval by the minister to condone the write off2.Unsuccessful request to Treasury to increase grant

Submission to treasury to write off the debt so as to allow the Statement of Financial Performance and Position to be positive thus eliminating the solvency matter

2.Material loss 1.Irregularly procured call centre system of written off R8,1m

2.ANRAL debt written of R26m

Proper case study performed prior to procuring any IT equipment to ensure sustainable maintenance and adherence to supply chain procedures.

Continuous management of internal control process to ensure continued adherence to supply chain process

3.Financial Misstatements Lack of skilled finance staff in asset management, lack of reconciliation skills in revenue management

AARTO accounted on a cash basis to provide an accurate disclosureRevaluation of asset done twice annuallyMaintenance of accurate asset register

Continuous reconciliation of AARTO account to avoid misstatementsQuarterly preparation of financial statement to avoid misstatementsImplementation of policies.

Emphasis of Matter

FINDING ROOT CAUSE MITIGATION WAYFORWARD

Leadership Lack of communication platforms to create awareness of approved policies and procedures

All approved policies and procedures are circulated a circular and placed on a shared drive

An intranet has been developed internally ,all policies will be placed on the web to ensure easy access for new staff members and old staff members.

Financial and performance management

Lack of financial staff to administer records management

A finance staff has been delegated with the role of record management, separate lockable are created to safe keep all finance records.

The senior manage finance will review all finance records to ensure completeness, Internal audit to conduct a audit of al finance process to ensure completeness of finance records

Governance Lack of agreed review dates with governvenace stakeholders

Agreed dates with stakeholders to review financial information on a quarterly basis as well as performance information

Monthly review of financial information ,and monthly review of performance information

Pre-determined Objectives … Cont.

THANK YOU

THE RTMC SUPPORTS THE DECADE OF ACTION TO ROAD SAFETY 2011 -2020, and is a Member of the United Nations

Road Safety Collaboration (UNRSC)