Annual Report 2006/2007

Transcription

1 Annual Report 2006/2007 ISBN RP67/2007 RP49/2007 labour Department: Labour REPUBLIC OF SOUTH AFRICA

2 Our Vision INSETA promotes and enables quality skills development through funding education and training in South Africa to meet the national skills agenda and contributes to transformation in the sector ISBN RP67/2007

3 CONTENTS: The Chairperson s Report 2 The Chief Executive Officer s Report 4 Report of the Audit Committee 12 Report of the Auditor-General 14 Annual Financial Statements 16 INSETA Council 48 Council Committees 50 INSETA Organogram 51 INSETA Team 52 Statements of Support 54 National Skills Development Strategy (NSDS) II Targets and INSETA's Achievements 57 Glossary of Terms 61 1 annual report 2006/07

4 CHAIRPERSON S REPORT 2

5 It can be said that the crux of a SETA s work is determined by the Service Level Agreement it has signed with the Department of Labour and whether it has met its targets in terms of this Agreement. I am pleased to report that INSETA, during the period under review, has achieved its targets and has increased its rate of delivery to stakeholders. As in previous years both Council and INSETA s Management have identified good corporate governance, as one of its critical success factors and this year of reporting is no exception. INSETA s commitment to transformation is evident both in the composition of its Council (61% black of who 53% are female) and staff (83% black with a 71% female profile). Excellence (ISOE) Grant, namely the Nelson Mandela Metropolitan University and the Umfolozi College. During the period under review, 112 education and training providers were accredited with INSETA s Quality Division, INSQA and many of the new accreditations were as a result of providers wishing to offer education and training towards the requirements for licensing of Financial Advisors under the Fit and Proper Determination of the Financial Advisory and Intermediary Services (FAIS) Act. Representing a sector which faces transformational challenges, INSETA has a key role to play by providing discretionary funding for the education and training of employed and unemployed learners and interns. Representing a sector which faces transformational challenges, INSETA has a key role to play by providing discretionary funding for the education and training of employed and unemployed learners and interns. The National Skills Development Strategy (NSDS) is transformational in that it requires of SETAs that 85% of people trained should be black, 54% women and 4% people with disabilities. The SETA provides an education and training pipeline through which black matriculants and graduates are provided with the skills and expertise to assist the sector to meet its Financial Sector Charter (FSC) targets. Together with my fellow Councillors we have approved R57,3 million in terms of funding of discretionary grants for projects that are aligned to the NSDS. Many of the projects are direct interventions into transformational issues such as INSETA s Black Brokers Running a Brokerage pilot project. The project aims to train and equip 20 black SMMEs with the necessary skills and knowledge to grow, become sustainable and profitable and to be future role models for other SMMEs in the sector. INSETA continues to fund learning through its Bursary Fund that addresses the scarce and critical skills needs in the sector such as actuaries, financial planners, financial managers, customer care managers and compliance managers. We are pleased to report that as in previous years, INSETA s levy-payers again achieved a high rate of compliance in terms of mandatory grants. Two institutions were the proud recipients of INSETA s Institute of Sectoral or Occupational The uptake in terms of learners participating in Learnerships has been very encouraging and Council approved R20,6 million in terms of funding for employed and unemployed learners. We are very appreciative of the National Skills Fund (NSF) support, funding and approval for our Critical Skills Project where 539 learners are participating in a Wealth Management Learnership aimed at National Qualifications Framework (NQF) Level 5. APPRECIATION During the period under review, developments took place at Council where new Councillors were appointed as well as a change in Chairperson and Deputy Chairperson. I would like to express my gratitude to outgoing Chairperson, Barry Scott and Deputy Chairperson, Blum Khan for their efforts, support and commitment to INSETA during their tenure. I would also like to welcome the new Councillors to Council who are already making a positive and meaningful contribution to INSETA. To the remaining Councillors, thank you for your support and sage advice, which I value immensely. To Mike Abel and his team, well done on your sterling efforts and thank you for your continued commitment and passion for the work that you do at INSETA. Our appreciation must be expressed to all INSETA s stakeholders and in particular the Department of Labour and the South African Qualifications Authority (SAQA) for their assistance. 3 TETIWE JAWUNA CHAIRPERSON annual report 2006/07

6 CHIEF EXECUTIVE OFFICER S REPORT 4

7 We are pleased to report that our undertaking to increase our rate of delivery to stakeholders has once again been achieved, through good corporate governance and our commitment to assisting the sector to contribute towards the economic growth of the country through a skilled and transformed work force. CORPORATE GOVERNANCE In September 2006 our Annual General Meeting was held where new Councillors were elected to serve on our Council. Our current Council comprises of thirteen Councillors representing constituencies from Labour, Business and State, all of who have a sound appreciation of strategic issues that surround the SETA and a strong inclination of corporate governance. Our Council Sub-Committees, namely the Audit Committee, Finance, IT & Administration Committee and HR/Remuneration Committee met on a regular basis during the year. All three Committees saw the election of a new Chairperson and it would be remiss of me not to express our sincere appreciation to the outgoing Chairpersons for their commitment and support to INSETA during their tenure as Chairpersons. REVIEW OF INSETA S VISION AND MISSION During the period under review strategic planning sessions were held with Management and with our Council where our vision and mission statement was reviewed. It was felt that a change was needed which compellingly reflects INSETA s attitude, outlook and orientation. Our vision and mission statement now states: INSETA promotes and enables quality skills development through funding education and training in South Africa to meet the national skills agenda and contributes to transformation in the sector. Our new mission statement encapsulates our reason for existence, aims and responsibilities as a SETA. POLICIES AND PROCEDURES Several policies and procedures were reviewed and in some instances amended during the period under review. Policies reviewed included: Travel, Information Technology, Training, Finance, Supply Chain Management and Human Resources. In addition, a Quality Management System Manual was reviewed and submitted to the South African Qualifications Authority (SAQA), and the Materiality Framework was updated. SUPPLY CHAIN MANAGEMENT Our preferred provider database was reviewed during the year and providers were afforded the opportunity to submit an expression of interest with a view to providing support materials and services to INSETA. Continuous improvements were made to our electronic order and invoice processing system which provide for live budgeting control capabilities as well as a review of the process flow protocol for invoice processing in order to achieve greater efficiency in making payments. Within the financial year the Department of Trade and Industry gazetted the BBBEE Codes of Good Practices through Parliament for implementation, requiring that all public entities comply. As such we initiated a process to ensure that INSETA has a BBBEE compliance model with system reviews, which is necessary for meeting our targets. HUMAN RESOURCES During the period under review, INSETA had a permanent personnel compliment of 24. INSETA s Management is committed to transformation and the table on the following page illustrates delivery against this commitment. By focusing on strengthening our stakeholder relations and sound financial management, governance and operational competence we have again met our targets in terms of our mandate as a SETA. An accomplishment we are very proud of and one that could only be achieved through the solid partnerships that we have with our stakeholders. 5 annual report 2006/07

8 INSETA Personnel as at 31 March 2007: Name Designation Gender Race Mike Abel Chief Executive Officer Male Indian Phakama Nkosi Corporate Services Manager Male Black Shirley Steenekamp Skills Development Manager Female White Glen Edwards ETQA Manager Male White Aubrey Maseko Learnerships Manager Male Black Laurel de Bruyn Public Relations Officer Female White Neesha Naidoo ETQA Senior Consultant Female Indian Tamara Ntombela ETQA Specialist Female Black Nathan Seotsanyana ETQA Specialist Male Black Tumi Peele Skills Development Consultant Female Black Delaine Galloway ETQA Consultant Female Coloured Bongiwe Ramaboea Learnerships Administrator Female Black Vuyo Diniso Learnerships Administrator Female Black Tebogo Mothapo Supply Chain Unit Administrator Female Black Setlakalane Mokou Corporate Services Specialist Male Black Kim Pretorius Skills Development Administrator Female White Viola James Skills Development Administrator Female Coloured Ella Matshikiza Personal Assistant to CEO Female Black Kgomotso Mogomi Corporate Services Office Administrator Female Black William Fisher ETQA Administrator Male Coloured Lavern Ogle Learnerships Secretary Female Coloured Itumeleng Motaung ETQA Secretary Female Black Zodwa Motloung Receptionist Female Black Jabu Mabaso Housekeeper Female Black Salary Bands and Grading for INSETA Personnel Paterson Range Position Monthly Salary 6 D5 D4 Managers R R D1 C3 Senior Specialist and Specialists R R C1 B5 Administrators and Personal Assistant R9 500 R C4 B3 Secretarial R6 750 R8 480 B2 A3 Support Services R3 200 R5 325

9 TRAINING AND DEVELOPMENT INVESTMENTS POLICY INSETA personnel received skills based capacity development training and study funding support during the period under review. Performance appraisals were conducted for staff through which training needs were identified and training plans completed. FINANCIAL MANAGEMENT As was the case in previous years, INSETA s stakeholders achieved a very high rate of compliance in terms of the mandatory grants. A computation was prepared whereby the actual grants were used to calculate an estimate grant payout percentage; this is currently 87% (2005/6 87%). Furthermore, the employer grants and project expenses increased to R125,8 million for the 2006/07 financial year. Of the R250 million cumulative surplus available for the allocation to projects, R240 million has been approved and allocated for projects and skills priorities. The total amount spent on these approved projects to date is R155 million which is a 65% (2005/6 62%) spend rate on allocated funds. Of the funds (80%) received through the Skills Levy Act, 12,5% percent may be utilised for operational purposes. INSETA generated an administration surplus of R2,0 million (2005/06 R3,4 million) for the current financial year, i.e. unspent administration income. This surplus was subsequently transferred to the discretionary reserve for future sector related projects. COST OF CONSULTANTS AND TECHNICAL ADVISORS INSETA s main service partners have not changed during the year and are: Deloitte (Financial, Administration & IT Management) PricewaterhouseCoopers (Project Management) Ngubane & Co (Internal Auditors) The Auditor-General (External Auditors) During the year under review, the cost of engaging the services of the abovementioned consultants and technical advisors was approximately R8,2 million. The INSETA Investments Policy requires that funds are invested on a 30 day call / short-term fixed deposit with any of the big four South African Banks. Funds invested must be spread between at least three banks and not more than forty percent of the total fixed deposits may be invested with a single bank. INSETA placed its investments with RMB (a division of FirstRand Bank Limited), Nedbank Limited, BOE and ABSA Bank limited during the 2006/07 financial year. STAKEHOLDER RELATIONS AND MARKETING Much emphasis was placed in fostering greater relationships with our stakeholders during the year under review. Many hours were spent visiting individual stakeholders, which allowed for open discussion and communication. Previously we outsourced the function of Public Relations and Communications and during the year we appointed a permanent staff member as Public Relations Officer, bringing this function in-house. This move has seen the consolidation and implementation of a corporate image for INSETA, the reintroduction of our monthly newsletter and a concerted drive to increase our visibility with the media by regularly disseminating media releases and articles and participating in stakeholder functions. There has been increased activity on the INSETA website as more and more stakeholders use it and the Call Centre. Many information sessions and training workshops were held with stakeholders during the period under review, which were well attended and well received. SKILLS DEVELOPMENT RESEARCH, PRODUCTION AND DISSEMINATION OF THE SECTOR SKILLS PLAN (SSP) The annually updated Sector Skills Plan for 2006/7 was presented to the Department of Labour. In the preparation of the Sector Skills Plan an in-depth industry wide skills audit and research was conducted. An Executive Summary of the Sector Skills Plan was also compiled and distributed to stakeholders at regional forums. 7 annual report 2006/07

10 As a result of research conducted in the sector, a Career Guide was also produced which contains input received from employees, HR Directors and education and training providers. We are pleased to advise that this Guide has been well received and distributed and formed the topic of a series of focused workshops, which were conducted regionally. In going forward the focus of research will extend to cover employment equity implementation as well as the extent and need for ABET interventions in the sector. TRAINING OF SKILLS DEVELOPMENT FACILITATORS Research conducted indicated that the role of the Skills Development Facilitator (SDF) is becoming increasingly important and has identified the need for them to be strategic in organisations. However research also indicates that most SDFs are relatively junior officials within their organisations and as such have little strategic input into the top echelons. Organisations are increasingly wanting to maximise the Return on Investment (ROI) on training rands, and this has highlighted the importance of the SDF function. During the period under review, INSETA sponsored an SDF Upskilling Programme. As SDFs complete their training and assessments they will be professionally registered with the South African Board of Personnel Practitioners (SABPP), in a newly assigned professional HR category for SDFs. INSETA SMME STRATEGY Our Regional Advisors remain the major drivers in the regions for all INSETA-related SMME functions. Their work is to ensure that these small and medium sized enterprises are participating as much as possible in appropriate education and training and other INSETA initiatives. REPORTING AND MANDATORY GRANT EVALUATIONS AND PAYMENT INSETA has approximately stakeholders of which some are levy payers. An amount of R87,3 million has been paid in mandatory grants for this financial year. It is from the Workplace Skills Plans (WSPs) and Annual Training Reports (ATRs) that interesting statistics are drawn to show the extent of transformation in the sector and where the planned training has and will take place. These are recorded in INSETA s SSP Publication. The sector can take heed of these statistics since they indicate that unless skills development is far more focused on black people and females, then the NSDS and FSC targets will take longer to realise. Scarce skills that need to be addressed remain black and women executives and senior managers, black actuaries and professionals such as qualified financial planners and financial managers. Customer care, compliance and marketing skills remain a scarce skill as well. ALIGNMENT OF EMPLOYMENT EQUITY AND SKILLS DEVELOPMENT A series of workshops were conducted and meetings held with key individuals within organisations during the period under review with a specific focus on aligning skills development and employment equity. DISCRETIONARY GRANT PROJECTS Some of the projects approved during the period under review include: Name of Project Objective of the Project Approved Funding Career Guidance Project The objective of the project is designed to update the current Career Guide and to provide training to 50 SDFs who will provide career guidance to learners who will be employed in the sector. R Sector Skills Plan Research Project The objective of the project is to provide all stakeholders with an updated and comprehensive Sector Skills Plan and a Report on Critical and Scarce Skills in the Sector according to the guidelines as provided by the Department of Labour. This will be done by means of thorough and detailed research. R

11 Name of Project Objective of the Project Approved Funding Broad Based Black Economic Empowerment Support Project The objective of this project is to quantify the number of BEEs in the sector and measure the level of skills support in terms of a number of initiatives such as entrepreneurial skills development, procurement development, corporate governance support, BEE grants for New Venture Creation Learnerships. R2, ABET Support Project The objective of this project is to train 500 learners (both from formal and informal sectors) in programmes leading to an ABET Level 4 qualification. R1, Corporate Social Investment (CSI) Project The objective of the project is to support NGOs/CBOs that operate within or that provide support services to the Insurance industry. Organisations receive a skills development grant to support the skills needs of its staff. Ten NGOs/CBOs/Co-operatives who comply with INSETA s criteria will receive a CSI Grant. R Institutes of Sectoral or Occupational Excellence (ISOE) Project The objective of this project is to improve the quality and relevance of education and training provision by means of the ISOE project. R1, New Venture Creation Institutional Support Project The objective of this project is to train and mentor 54 young people from designated groups to establish viable new ventures and to measure the sustainability of the new ventures after 12 months. R1, Black Brokers Running a Brokerage Project The objective of this pilot project is to train and equip 20 black SMMEs with the necessary skills and knowledge to grow their brokerages and become sustainable and profitable and to be role models to other SMMEs in the sector. R SMME Support Project The objective of the SMME Support project is essentially a capacitybuilding project designed to support the achievement of the NSDS objective of supporting SMMEs. This proposed project would assist with meeting the objective of providing strategic and practical skills development support that will enable the maintenance of sustainable SMME businesses in the sector. R Research Studies, Impact Study, Customer Satisfaction Survey, Sustainability Study The objective of this project is to measure the impact of INSETA s skills development interventions, like the discretionary grant-funded projects and how these have contributed to skills growth and transformation in the sector. In this reporting year, the research focused only on identifying the baseline of BBBEE levy-paying companies. R Provider Capacity Building Project Employment Equity Project The objective of this project is to address the shortage of black education and training providers who can effectively and efficiently provide education and training to the industry. Through a focused capacity building programme for 40 potential participants, action learning will be integrated in the workplace to accelerate capacitybuilding and opportunities for skills and knowledge transfer to happen. The objective of this project is to support the effective implementation of INSETA's SMME Strategy. R R1, annual report 2006/07

12 BURSARY FUND INSETA s Bursary Fund specifically focuses on funding learning to address the scarce and critical skills needs in the sector as identified in our Sector Skills Plan and Scarce and Critical Skills Research Reports. Recipients of bursaries are engaged through a variety of institutions in leadership and development programmes, financial management programmes, customer care and marketing programmes, FAIS Fit & Proper programmes and ABET programmes. Since the inception of the Bursary Fund in September 2005 we have disbursed R12,5 million to achieve this objective. National Learner Records Database (NLRD). A new CD for the uploading of learner details and achievements has been developed in this regard, and distributed to providers, giving them an efficient and consistent system for keeping records. QUALIFICATIONS A number of SAQA registered Insurance Qualifications expired during the year and were replaced with reviewed Qualifications. Responsibility for the development and registration of qualifications is now managed under a new arrangement, a Joint Implementation Plan (JIP) with SAQA. INSTITUTES OF SECTORAL OR OCCUPATIONAL EXCELLENCE (ISOE) Two institutions have been identified, have met the criteria and have received INSETA s annual ISOE grants; they are the Nelson Mandela Metropolitan University and the Umfolozi FET College. WORKSHOPS AND TRAINING PROGRAMMES At the end of March 2007, workshops were conducted for Learning Providers in Gauteng, Western Cape and Kwazulu Natal to assist them in specific details relating to accreditation, learning delivery, quality assurance and certification. QUALITY ASSURANCE ACCREDITATION OF LEARNING PROVIDERS Training programmes in Coaching and Mentoring, and in Outcomes-Based Education, were also offered to INSETA s stakeholders and were well received. 10 INSETA s accreditation of education and training providers for the delivery of learning for competence towards unit standards and qualifications is an ongoing function. In the past year a total of 112 providers received primary and/or secondary accreditation. INSETA monitors and audits the work of such providers. Many of the new accreditations were as a result of providers wishing to offer training towards the requirements for licensing of Financial Advisors under the Fit and Proper Determination of the FAIS Act. In this regard, INSQA has assisted the sector in meeting licensing requirements through targeted skills programmes and recognition of prior learning. Our ETQA division continues to offer support to Financial Advisors affected by the FAIS Act, and many queries have been dealt with during the year. Large volumes of active learners as a result of learnerships and skills programmes means that our ETQA Division has had to manage large volumes of verifications of learner achievements, and assist the Learning Providers in loading the results onto the During the year, Assessor and Moderator Forums were established in Gauteng, Cape Town and Durban. The purpose of these forums is for Assessors and Moderators to share ideas and to establish consistent practices in the sector and to refer quality assurance issues to them for input. SAQA AUDIT INSQA is due for an audit by SAQA in the new financial year to ensure ETQA compliance and performance with SAQA requirements. Preparations for the audit have commenced in the form of a self-evaluation exercise, which has been completed and submitted to SAQA. DISCRETIONARY GRANT FUNDING FOR LEARNERSHIPS INSETA s Council approved the funding for the amount of R6,8 million for Learnerships for Employed Learners and R13,8 million for Learnerships for Unemployed Learners. Stakeholders have been extremely positive in their participation of these grants and we currently have Learners participating in these Learnerships.

13 NATIONAL SKILLS FUNDS CRITICAL SKILLS PROJECT We are pleased to report that the NSF approved our project application to train 539 Learners on a Wealth Management Learnership (NQF Level 5) and provided funding of R13 million towards this project and INSETA has committed funding of R6,7 million. The project commenced in March 2007 and is progressing well. INTERNSHIPS AND WORK-BASED EXPERIENCE GRANTS During the period under review, INSETA s Council approved funding to the value of R11,1 million for Internships and Work-Based Experience Grants, to date we have supported 271 interns participating in this project. NEW LEARNERSHIP REGISTERED The following Learnership was registered during the period under review: Learnership Title Registration Number Qualification Qualification ID Expiry Date Wealth Management Level 5 13Q National Certificate: Wealth Management /11/09 APPRECIATION I would like to thank our Chairperson and Deputy Chairperson, Tetiwe Jawuna and Ivan Mzimela and members of Council for their guidance, support, expertise and wisdom. To my great team of managers and staff, thank you for your commitment, dedication and hard work. To all of our stakeholders, thank you for embarking on this skills development journey with us; we look forward to another successful year of partnering with you. MIKE ABEL CHIEF EXECUTIVE OFFICER 11 annual report 2006/07

14 REPORT OF THE AUDIT COMMITTEE 12 INTRODUCTION We are pleased to present our report for the financial year ended 31 March AUDIT COMMITTEE MEMBERS AND ATTENDANCE The Audit Committee consists of the members listed below and meets 4 times per annum as per its approved Terms of Reference. At 31 March 2007, the Audit Committee consisted of the following members: C P Kemp (Chairperson) M J Botha N Molope B Khan AUDIT COMMITTEE RESPONSIBILITY The Audit Committee reports that it has adopted appropriate formal terms of reference as its audit committee charter, has regulated its affairs in compliance with this charter and has discharged all it s responsibilities as contained therein. THE EFFECTIVENESS OF INTERNAL CONTROL The system of controls is designed to provide cost effective assurance that assets are safeguarded and that liabilities and working capital are efficiently managed. In line with the PFMA and the King II Report on Corporate Governance requirements, Internal Audit provides the Audit Committee and management with assurance that the internal controls are appropriate and effective. This is achieved by means of the risk management process, as well as the identification of corrective actions and suggested enhancements to the controls and processes. From the various reports of the Internal Auditors, the Audit Report on the Annual Financial Statements (AFS), and management letter of the Auditor-General, it was noted that no significant or material non-compliance with prescribed policies and procedures have been reported. Accordingly, we can report that the systems of internal control for the year under review were effective and efficient. EVALUATION OF THE ANNUAL FINANCIAL STATEMENTS The Audit Committee has Reviewed the results of the risk assessment. Reviewed and approved the internal audit coverage plan and budget. Obtained and considered periodic assurances regarding INSETA s continued compliance with the PFMA and other legislation. Reviewed and discussed the audited AFS to be included in the annual report with the Auditor-General and the Accounting Officer; Reviewed the Auditor-General management letter and management s response thereto; Reviewed changes in accounting policies and practices; and Reviewed significant adjustments resulting from the audit. CONCLUSION IN RESPECT OF THE YEAR UNDER REVIEW The Audit Committee wishes to report to Council that in its opinion: The respective charters of the Audit Committee and internal audit continue to be appropriately aligned to the PFMA Regulations and corporate governance practices in force during the year. The Audit Committee has effectively carried out its responsibilities and functions in accordance with the statutory requirements and its charter. The Internal Auditors (Ngubane and Co.) have operated objectively and independently. Their mandate includes providing independent assurances on the effectiveness of controls in terms of an Internal Audit Coverage Plan approved by the Audit Committee. This Plan is reviewed annually by the Committee so as to ensure that all significant functions, business processes and systems will be afforded internal audit coverage within the 3 year internal audit cycle required by the PFMA. The External Auditors have identified no impediments to conducting their audit of the AFS of INSETA.

15 CONCLUSION IN RESPECT OF THE YEAR UNDER REVIEW (continued) The continued adequacies of the methodology to more comprehensively identify, assess and document the risks are being given appropriate attention from management, the Audit Committee and Internal Audit. The effectiveness of measures taken to mitigate identified risks is continuously being assessed by management and internal audit. Control weaknesses identified and recommendations for control enhancements identified by internal audit receive adequate management attention. The Committee is satisfied that the SETA s overall system of internal control operated satisfactorily during the year under review. The Audit Committee concurs and accepts the Auditor- General conclusions on the AFS. The Audit Committee recommended that audited AFS be accepted together with the report of the Auditor-General. C P KEMP CHAIRPERSON OF THE AUDIT COMMITTEE 23 JULY annual report 2006/07

16 REPORT OF THE AUDITOR-GENERAL 14 REPORT ON THE FINANCIAL STATEMENTS INTRODUCTION 1.) I have audited the accompanying financial statements of the Insurance Sector Education and Training Authority (INSETA) which comprise the statement of financial position as at 31 March 2007, statement of financial performance, statement of changes in net assets and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 18 to 47 RESPONSIBILITY OF THE ACCOUNTING AUTHORITY FOR THE FINANCIAL STATEMENTS 2.) The accounting authority is responsible for the preparation and fair presentation of these financial statements in accordance with the basis of accounting determined by the National Treasury of South Africa, as described in note 1 to the financial statements and in the manner required by the Public Finance Management Act, 1999 (Act No. 1 of 1999) (PFMA). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error selecting and applying appropriate accounting policies making accounting estimates that are reasonable in the circumstances. RESPONSIBILITY OF THE AUDITOR-GENERAL 3.) As required by section 188 of the Constitution of the Republic of South Africa, 1996 read with section 4 of the Public Audit Act, 2004 (Act No. 25 of 2004) and section 14(6) (a) of the Skills Development Act, 1998 (Act No. 97 of 1998), my responsibility is to express an opinion on these financial statements based on my audit. 4.) I conducted my audit in accordance with the International Standards on Auditing and General Notice 647 of 2007, issued in Government Gazette No of 25 May Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. 5.) An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal controls. 6.) An audit also includes evaluating the: appropriateness of accounting policies used reasonableness of accounting estimates made by management overall presentation of the financial statements. 7.) I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. BASIS OF ACCOUNTING 8.) The entity s policy is to prepare financial statements on the basis of accounting determined by the National Treasury, as described in note 1 to the financial statements. OPINION 9.) In my opinion the financial statements present fairly, in all material respects, the financial position of the Insurance Sector Education and Training Authority as at 31 March 2007 and its financial performance and cash flows for the year then ended, in accordance with the basis of accounting determined by the National Treasury of South Africa, as described in note 1 to the financial statements, and in the manner required by the Public Finance Management Act, 1999 (Act No.1 of 1999) EMPHASIS OF MATTERS Without qualifying my audit opinion, I draw attention to the following matters:

17 Highlight of a matter affecting the financial statements included in the notes. SKILLS DEVELOPMENT LEVIES 10.) I draw attention to accounting policy note 3 to the financial statements. The SETA does not have a legislative mandate to obtain and maintain source documentation to support revenue. As a result the SETA experienced difficulties in ensuring that revenue was recorded on a complete and accurate basis. The National Treasury has amended the accounting policy on revenue recognition to take legislative constraints into account and the new accounting policy will be effective from 1 April The financial statements for the year under review were prepared on a basis consistent with the previous year. OTHER REPORTING RESPONSIBILITIES REPORTING ON PERFORMANCE INFORMATION 11.) I have audited the performance information as set out on pages 57 to 60. RESPONSIBILITY OF THE ACCOUNTING AUTHORITY 12.) The accounting authority has additional responsibilities as required by section 55 (2)(a) of the PFMA to ensure that the annual report and audited financial statements fairly present the performance against predetermined objectives of the public entity. RESPONSIBILITY OF THE AUDITOR-GENERAL 13.) I conducted my engagement in accordance with section 13 of the Public Audit Act, 2004 (Act No. 25 of 2004) read with General Notice 646 of 2007, issued in Government Gazette No of 25 May ) In terms of the foregoing my engagement included performing procedures of an audit nature to obtain sufficient appropriate audit evidence about the performance information and related systems, processes and procedures. The procedures selected depend on the auditor s judgement. 15.) I believe that the evidence I have obtained is sufficient and appropriate. AUDIT FINDINGS 16.) I have not observed any matters that require inclusion in my report. APPRECIATION 17.) The assistance rendered by the staff of the Insurance Education and Training Authority during the audit is sincerely appreciated. AH Muller for Auditor-General Pretoria 20 August annual report 2006/07

18 ANNUAL FINANCIAL STATEMENTS Insurance Sector Education and Training Authority The Annual Financial Statements for the year ended 31 March 2007, set out on pages 18 to 47, have been approved by the Accounting Authority in terms of section 51(1) (f) of the Mike Abel - CEO Public Finance Management Act (PFMA), No 1 of 1999 as amended, on 31 May 2007, and are signed on their behalf by: Tetiwe Jawuna - Chairperson 16

19 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS 31 MARCH 2007 Contents Page Report of the Accounting Authority 18 Statement of Financial Performance 21 Statement of Financial Position 22 Statement of Changes in Net Assets 23 Cash Flow Statement 24 Accounting Policies to the Annual Financial Statements 25 Notes to the Annual Financial Statements annual report 2006/07

20 REPORT OF THE ACCOUNTING AUTHORITY 18 Report by the Accounting Officer to the Executive Authority and Parliament of the Republic of South Africa. As the INSETA Accounting Authority, it is the Council s responsibility to prepare Financial Statements that fairly present INSETA s Financial Position at March 2007, and also the Financial Performance and summary Cash Flow Activities for the year ending 31 March We are of the opinion that appropriate Accounting Policies, supported by reasonable and prudent judgements and estimates, have been applied on a consistent basis. The Financial Statements comply with GAAP, including any interpretations of such Statements issued by the Accounting Practices Board and with the prescribed Standards of Generally Recognised Account Practice (GRAP). CORPORATE GOVERNANCE From the outset both Council and INSETA s Management identified good corporate governance, as one of its critical success factors, by setting the highest standards that comply with best practice and this stance remains unchanged as the SETA ends its seventh year of operations. The Council is supported in its functions and duties by the Audit Committee, Finance, IT & Administration Committee and HR/ Remuneration Committee all of which have been functional since the establishment of the SETA. The Audit Committee is governed by a Charter which outlines its roles and responsibilities and the Finance, IT & Administration Committee and HR/ Remuneration Committee abide by a Terms of Reference. INSETA has compiled a Fraud Prevention Plan and a high-level risk profile developed to be used in identifying, managing and controlling the business risks of the SETA. INSETA also has a Code of Conduct, which staff members and service providers abide by. INSETA has also developed and implemented a Supply Chain Management Policy and Procedure Manual. GENERAL REVIEW OF THE STATE OF AFFAIRS The Insurance Sector Education and Training Authority promotes and represents the training and development interests of the Insurance sector of the economy in terms of the skills development legislation. INSETA s mission is to promote and enable quality skills development through funding education and training in South Africa to meet the national skills agenda and contribute to transformation in the sector. INSETA represents the following constituents within the Insurance sector: Short-term insurance Life insurance Insurance and pension funding Risk management Health care benefits administration Collective investments Funeral insurance Reinsurance Pension funding and Activities auxiliary to financial intermediation The Insurance sector is a rapidly evolving, growing and developing major player in the South African economy. Approximately 7,000 employers have registered with the South African Revenue Services within the insurance sector with 4,260 classified as levy contributors. INSETA represents an industry with a diverse range of employers, many of whom are very small (about 10 employees) and some of whom are very large employers (in excess of 12,000 employees). The majority of the workforce represents skilled and highly skilled employees. The Insurance sector employs approximately 102,458 people (excluding people employed in micro-enterprises and informal businesses). The Council, which comprises of Business, Labour and the State, govern the affairs of the INSETA. INSETA itself is managed by Chief Executive Officer, Mike Abel, and has a permanent staff compliment of twenty four as at 31 March 2007, which increased from nineteen as

21 at 31 March Regional Advisors are appointed in Gauteng, Western Cape, Eastern Cape and Kwazulu Natal to assist, support and guide small employers in terms of the skills development legislation. The offices of the INSETA are located in Parktown, Johannesburg. (2005/06: R112,4 million). INSETA has allocated approximately 96% of its available surplus funds as at 31 March 2007 (31 March %). GOING CONCERN INSETA has adopted a learning strategy, which is aimed at all levels of employment in the sector. This strategy s objective is based on a classroom to boardroom approach and is aligned with the National Skills Development Strategy. We have every reason to believe that INSETA will continue to operate as a going concern in the foreseeable future. ALLOWANCES PAID TO COUNCIL MEMBERS INSETA s 80% levy income increased by 12.7% from R135,9 million for the 2005/06 financial year to R153,1 million for the 2006/07 financial year. Changes in levy income estimates relating to prior years are included in the current year balances. The administration surplus for 2006/07 was R2,0 million (2005/06 R3,4 million). The actual administration expenditure for the current financial year was R17,0 million (2005/06 R13,6 million). Total project and grant expenditure for the current financial year amounted to R125,8 million Council members employers are remunerated for their attendance at Council meetings and attendance at meetings of the various INSETA governance structures. Disclosure of the allowances paid to all Council members is in accordance with Treasury Regulation and is as follows: Council Chairperson Council Deputy Chairperson Council Member : R1 000 per meeting : R900 per meeting : R800 per meeting Name of Councillor Committee meeting attended during period under review Total Amount Paid Artwell Hlengwa Council R800 Audrey Mothupi Council R800 Barry Scott 1 Council R3 800 HR/Remuneration Committee R2 400 Blum Khan 2 Council R3 500 Finance, IT & Administration Committee R800 Charles Wells Council R2 400 Eltie Links 3 Council R1 600 Eugene Zeeman Council R4 000 Ivan Mzimela Council (Deputy Chairperson) R1 800 HR/Remuneration Committee R1 600 Laetitia van Dyk Council R Notes: 1 Barry Scott was Chairperson of INSETA during the period: 26 May September Blum Khan was Deputy Chairperson of INSETA during the period: 26 May September Eltie Links resigned from the Council annual report 2006/07

22 Name of Councillor Committee meeting attended during period under review Total Amount Paid Lindani Ndlovu Council R1 600 Margie Naidoo Council R3 200 HR/Remuneration Committee R5 000 Nosipho Molope Council R1 600 Audit Committee R800 Reone Kerr Council R2 400 Tetiwe Jawuna Council (Chairperson) R4 400 HR/Remuneration Committee R4 000 TOTAL R Note: The payments indicated above are paid to the nominating organisation and not to the individual representative. Remuneration of the Chief Executive Officer As required by Treasury Regulation of the Public Finance Management Act, the remuneration of the Chief Executive Officer during the reporting period consisted of the following components: 2006/ /06 (10 months) Basic Salary R R Bonuses R Travel expense and allowance R Other R R Total R R The CEO also acts as the CFO of INSETA. BUSINESS ADDRESS The Insurance Sector Education and Training Authority is situated on the Ground Floor, North Wing, Oakhurst, 11 St. Andrews Road, Parktown, Johannesburg. The postal address is P O Box 32035, Braamfontein, Tetiwe Jawuna Chairperson, INSETA Mike Abel CEO, INSETA

23 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 31 MARCH / /06 Note R 000 R 000 REVENUE Skills Development Levy: income from non-exchange transactions Skills Development Levy: penalties and interest from non-exchange transactions National Skills Fund income Investment income Total revenue EXPENSES Employer grant and project expenses 4 ( ) ( ) Administration expenses 5 (17 046) (13 620) National Skills Fund expenses 11 - (12,273) Total expenses ( ) ( ) NET SURPLUS FOR THE YEAR annual report 2006/07

24 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2007 ASSETS 2006/ /06 Note R 000 R 000 Non-current assets Property, plant and equipment Current assets Accounts receivable Accounts receivable from non-exchange transactions Cash and cash equivalents Total current assets Current liabilities Accounts payable National Skills Fund received in advance Government grants and donor funding received in advance Provisions Total current liabilities TOTAL NET ASSETS FUNDS AND RESERVES Funds and reserves Administration reserve Employer grant reserve Discretionary reserve Total funds and reserves

25 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDED 31 MARCH 2007 Notes Administration Employer grant Discretionary Unappropriated reserve reserve reserve surplus Total R 000 R 000 R 000 R 000 R 000 Balance at 1 April 2005 as previously reported Reclassification of reserve balances ( 701) - - Balance at 1 April 2005 as restated Net surplus per Statement of Financial Performance Allocation of unappropriated surplus ( 489) (16 556) - Excess reserves transferred to Discretionary reserve (3 411) Reclassification of reserve balances ( 299) - - Balance at 31 March 2006 as restated Net surplus per Statement of Financial Performance Allocation of unappropriated surplus (18 400) - Excess reserves transferred to Discretionary reserve 1 (2 019) (11 809) Balance at 31 March An amount of R (2006: R ) is retained in the administration reserve equal to the carrying value of Property, plant and equipment. An amount of R (2006: R ) is disclosed in the employer grant reserve for newly registered member companies, participating after the legislative cut-off date. 23 annual report 2006/07

26 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH / /06 Note R 000 R 000 CASH FLOWS FROM OPERATING ACTIVITIES Operating activities Cash receipts from stakeholders Levies, interest and penalties received Other cash receipts from stakeholders ( 468) ( 648) Cash paid to stakeholders, suppliers and employees ( ) ( ) Grants and project payments ( ) ( ) Special projects - (12 273) Compensation of employees (6 863) (5 661) Payments to suppliers and other (8 658) (11 075) Cash utilised in operations 14 (3 601) (23 354) Investment income Special projects 11 & Net cash inflow (outflow) from operating activities (5 173) CASH FLOW FROM INVESTING ACTIVITIES Purchase of property, plant and equipment 6 ( 351) ( 538) Net cash outflow from investing activities ( 351) ( 538) Net increase (decrease) in cash and cash equivalents (5 711) Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

27 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS ACCOUNTING POLICIES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH Basis of preparation The financial statements have been prepared in accordance with the South African Statements of Generally Accepted Accounting Practices (GAAP) including any interpretations of such Statements issued by the Accounting Practices Board, with the effective Standards of Generally Recognised Accounting Practices (GRAP) issued by the Accounting Standards Board replacing the equivalent GAAP Statement as follows: Standard of GRAP Replaced Statement of GAAP GRAP 1: Presentation of financial statements AC101: Presentation of financial statements GRAP 2: Cash flow statements AC118: Cash flow statements GRAP 3: Accounting policies, changes in accounting, AC103: Accounting policies, changes in accounting, estimates and errors estimates and errors Currently the recognition and measurement principles in the above GRAP and GAAP Statements do not differ or result in material differences in items presented and disclosed in the financial statements. The implementation of GRAP 1, 2 & 3 has resulted in the following changes in the presentation of the financial statements: Terminology differences: Standard of GRAP Statement of financial performance Statement of financial position Statement of changes in net assets Net assets Surplus/deficit Accumulated surplus/deficit Contributions from owners Distributions to owners Replaced Statement of GAAP Income statement Balance sheet Statement of changes in equity Equity Profit/loss Retained earnings Share capital Dividends The cash flow statement can only be prepared in accordance with the direct method. Specific information has been presented separately on the statement of financial position such as: (a) receivables from non-exchange transactions, including taxes and transfers (b) taxes and transfers payable (c) trade and other payables from non-exchange transactions. The amount and nature of any restrictions on cash balances is required. Paragraph of GRAP 1 has not been implemented due to the fact that the budget reporting standard has not been developed by the local standard setter and the international standard is not effective for this financial year. Although the inclusion of budget information would enhance the usefulness of the financial statements, non-disclosure will not affect the objective of the financial statements. The principal accounting policies adopted in the preparation of these financial statements are set out below and are, in all material respects, consistent with those of the previous year, except as otherwise indicated. 2. Currency These financial statements are presented in South African Rands since that is the currency in which the majority of the entity transactions are denominated Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Revenue is recognised when it is probable that future economic benefits will flow to the enterprise and these benefits can be measured reliably. annual report 2006/07