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

28 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS ACCOUNTING POLICIES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH Revenue recognition (continued) 3.1 Levy income The accounting policy for the recognition and measurement of skills development levy income has been amended on the basis of a revised interpretation of the Skills Development Act, Act No 97 of 1998 and the Skills Development Levies Act, Act No 9 of The new accounting policy allows SETAs to recognize revenue on the receipt of the funds from the Department of Labour in the bank account of the SETA in line with international practice for revenue recognition on an accrual basis. The revision was completed and issued by National Treasury on the 27 th July 2007 and is effective from 1 st April The accounting policy for is consistent with previous year policies and disclosures. In terms of section 3(1) and 3(4) of the Skills Development Levies Act (the Levies Act), 1999 (Act No. 9 of 1999) as amended, registered member companies of the SETA pay a skills development levy of 1% of the total payroll cost to the South African Revenue Services (SARS), who collects the levies on behalf of the Department of Labour (DoL). Companies with an annual payroll cost less than R are exempted in accordance with section 4(b) of the Levies Act as amended, effective 1 August % of skills development levies are paid over to the SETA (net of the 20% contribution to the National Skills Fund). The SETA was not in a position to verify that SARS has collected all potential skills levy income. Levy income is recognised on the accrual basis. An accrual is made for outstanding levies due at year end, based on an extrapolation of the first eleven months levies received for the year. Changes to prior year estimates are accounted for in revenue in the current period. Revenue is adjusted for inter-seta transfers due to employers changing SETA s. Such adjustments are separately disclosed as interseta transfers. The amount of the interseta adjustment is calculated according to the most recent Standard Operating Procedure issued by the Department of Labour. When a new employer is transferred to the SETA, the levies transferred by the former SETA are recognised as revenue and allocated to the respective category to maintain its original identity. 3.2 Interest and penalties Interest and penalties received on the skills development levy are recognised on the accrual basis. 3.3 Funds allocated by the National Skills Fund for Special Projects Funds transferred by the National Skills Fund (NSF) are accounted for in the financial statements of the SETA as a liability until the related eligible special project expenses are incurred, when the liability is extinguished and revenue recognised. Property, plant and equipment acquired for NSF Special Projects are capitalised in the financial statements of the SETA, as the SETA controls such assets for the duration of the project. Such assets may however only be disposed of in terms of agreement and specific written instructions by the NSF Government grants and other donor income Conditional government grants and other conditional donor funding received are recorded as deferred income when they become receivable and are then recognised as and when the conditions are met. Unconditional grants received are recognised when the amounts have been received.

29 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS ACCOUNTING POLICIES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH Revenue recognition (continued) 3.5 Investment income Interest income is accrued on a time proportion basis, taking into account the principal outstanding and the effective interest rate over the period to maturity. 4. Grants and project expenditure A registered employer may recover a maximum of 50% of its total levy payment as mandatory employer grant (excluding interest and penalties) by complying with the criteria in accordance with the Skills Development Act, 1998 SETA Grant Regulations regarding monies received and related matters (the SETA Grant Regulations). Mandatory grants Grants are equivalent to 50% of the total levies contributed by employers to the SETA during the corresponding financial period. Retrospective adjustments by SARS The SETA refunds amounts to employers in the form of grants, based on information from SARS. Where SARS retrospectively amends the information on levies collected, it may result in grants that have been paid to certain employers that are in excess of the amount the SETA is permitted to have granted to employers. A receivable relating to the overpayment to the employer in earlier periods is raised at the amount of such grant over-payment, net of bad debts and provision for irrecoverable amounts. Discretionary grant and project expenditure A SETA may out of any surplus monies and in accordance with criteria as defined in the SETA Grant Regulations allocate funds to employers, and other associations or organisations when the conditions have been met. The criteria for allocating funds are approved by the SETA Board. Where necessary it can be required of interested employers, associations or organisations to complete and submit a funding application for consideration and approval by the SETA. Project expenditure comprise: - costs that relate directly to the specific contract - costs that are attributable to contract activity in general and can be allocated to the project, and - such other costs as are specifically chargeable to the SETA under the terms of the contract. Such costs are allocated using methods that are systematic and rational and are applied consistently to all costs having similar characteristics. Discretionary grant and project costs are recognised as expenses in the period in which they are incurred. 5. Irregular and fruitless and wasteful expenditure Irregular expenditure means expenditure incurred in contravention of, or not in accordance with, a requirement of any applicable legislation, including: - The PFMA, as amended - The Skills Development Act (the Act), 1998 (Act No. 97 of 1998) as amended. Fruitless and wasteful expenditure means expenditure that was made in vain and would have been avoided had reasonable care been exercised. All irregular and fruitless and wasteful expenditure is recognised against the respective class of expense in the period in which they are incurred. 27 annual report 2006/07

30 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS ACCOUNTING POLICIES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH Property, plant and equipment Property, plant and equipment is stated at cost less any subsequent accumulated depreciation and adjusted for any impairments. Depreciation is charged so as to write off the costs of assets over their estimated useful lives, using the straight line method. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount (i.e. impairment losses are recognised). The gain or loss on disposal of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount and are taken into account in determining operating surplus. 7. Leasing Finance leases, consistent with the definition set out in the Treasury Regulations refer to a contract that transfers the risks, rewards, rights and obligations incidental to ownership to the lessee and are recorded as a purchase of equipment by means of long-term borrowing. All other leases are classified as operating leases. Payments made under operating leases (leases other than finance leases) are charged to the Statement of Financial Performance on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place. 8. Provisions Provisions are recognised when the SETA has a present obligation as a result of a past event and it is probable that this will result in an outflow of economic benefits that can be estimated reliably. Long-term provisions are discounted to net present value. The cost of employee benefits is recognised during the period in which the employee renders the related service. Employee entitlements are recognised when they accrue to employees. A provision is made for the estimated liability as a result of services rendered by employees up to the Statement of Financial Position date. Provisions included in the Statement of Financial Position are provisions for leave (based on the current salary rates) and termination benefits. Termination benefits are recognised and expensed only when the payment is made. No provision has been made for retirement benefits as the SETA does not provide for retirement benefits for its employees. 9. Grants and projects 28 Mandatory and discretionary grant payments A liability is recognised for grant payments once the specific criteria set out in the SETA Grant Regulations has been complied with by member companies and it is probable that the SETA will approve the grant application for payment. The liability is measured at the net present value of the expected future cash outflow as determined in accordance with the Act. The measurement involved an estimate, based on the amount of levies received. Discretionary projects No provision is made for projects approved at year-end, unless the service in terms of the contract has been delivered. Where a project has been approved, but has not been accrued for or provided for, it is disclosed as commitments in the notes to the financial statements.

31 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS ACCOUNTING POLICIES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH Financial instruments Recognition Financial assets and financial liabilities are recognised on the SETA s Statement of Financial Position when the SETA becomes a party to the contractual provisions of the instrument. Financial assets Investments are recognised and derecognised on a trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value through profit and loss, which are initially measured at fair value. Financial assets can be classified into the following specified categories: financial assets as at fair value through profit or loss (FVTPL), held to-maturity investments, available-for-sale (AFS) financial assets and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All financial assets of the SETA were categorised as loans and receivables. Loans and receivables Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method less any impairment. Interest income is recognised by applying the effective interest rate except for short-term receivables where the recognition of interest would be immaterial. Effective interest method The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period. Impairment of financial assets Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the surplus or deficit. Financial liabilities Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities Account and other payables do not bear interest and are stated at their nominal value. Financial liabilities at FVTPL Financial liabilities are classified as FVTPL where the financial liability is either held for trading or it is designated as at FVTPL. All financial liabilities of the SETA were classified as other financial liabilities. Other financial liabilities. Other financial liabilities are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. 29 annual report 2006/07

32 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS ACCOUNTING POLICIES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH Reserves Net assets is classified based on the restrictions placed on the distribution of monies received in accordance with the regulations issued in terms of the Skills Development Act, 1998 (Act 97 of 1998) as amended as follows: - Administration reserve - Employer grant reserve - Discretionary reserve - Unappropriated surplus Employer levy payments are set aside in terms of the Skills Development Act and the regulations issued in terms of the Act, for the purpose of: 2006/ /06 % % Administration costs of the SETA Employer grant fund levy Discretionary grants and projects Received by the SETA Contribution to the National Skills Fund In addition, contributions received from public service employers in the national or provincial spheres of government may be used to fund the SETA s administration costs. Interest and penalties received from SARS as well as interest received on investments are utilised for discretionary grants projects. Surplus funds in the administration reserve and unallocated funds in the employer grant reserve are moved to the discretionary fund reserve. Provision is made in mandatory grant reserve for newly registered companies, participating after the legislative cut-off date. 12. Comparative figures Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year. 13. Taxation No provision has been made for taxation, as the SETA is exempt from income tax in terms of Section 10 of the Income Tax Act, 1962 (Act 58 of 1962). 14. Consumable inventory Consumables are recognised as an asset on the date of acquisition and it is measured at the cost of the acquisition it is subsequently recognised in surplus or deficit as it is consumed. 30

33 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH ALLOCATION OF NET SURPLUS FOR THE YEAR TO RESERVES: Total per Statement of Admini- Employer Discretionary reserve Financial Performance stration grants Discretionary Total 2005/ /07 reserve reserve grants Projects discretionary R 000 R 000 R 000 R 000 R 000 R 000 R 000 Total revenue Skills Development Levy: Income from non-exchange transactions Admin levy income (10%) Grant levy income (70%) Skills Development Levy: Penalties and interest from non-exchange transactions National Skills Fund income Investment income Total expenses ( 289) Administration expenses National Skills Fund expenses Employer grants and project expenses ( 289) Net surplus per Statement of Financial Performance Allocated (33 999) annual report 2006/07

34 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH SKILLS DEVELOPMENT LEVY INCOME FROM NON-EXCHANGE TRANSACTIONS 2006/ /06 R 000 R 000 The total levy income per the Statement of Financial Performance is as follows: Levy income: Administration Levies received Levies received from SARS Interseta transfers in Interseta transfers out ( 44) ( 46) Levies accrued Levy income: Employer grants Levies received Levies received from SARS InterSETA transfers in InterSETA transfers out ( 222) ( 178) Levies accrued ( 919) Levy income: Discretionary grants Levies received Levies received from SARS InterSETA transfers in InterSETA transfers out ( 89) ( 60) Levies accrued INVESTMENT INCOME 2006/ /06 R 000 R 000 Interest income Bank deposits

35 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH EMPLOYER GRANT AND PROJECT EXPENSES 2006/ /06 R 000 R 000 Mandatory grants Disbursed Movement in provisions and accruals (3 306) (13 835) Discretionary grants - disbursed ( 289) 1 Project expenditure Disbursed Movement in provisions and accruals ( 478) Project expenditure consist of: Direct project costs ADMINISTRATION EXPENSES 2006/ /06 R 000 R 000 Depreciation Operating lease rentals (minimum lease payments) Buildings Maintenance, repairs and running costs Property and buildings Advertising, marketing and promotions, communication Entertainment expenses Consultancy and service provider fees Legal fees Cost of employment Travel and subsistence Staff training and development Remuneration to members of the Accounting Authority Remuneration to members of the audit committee 9 - External auditor s remuneration Allowance for doubtful debts Other Consulting fees Internal audit fees Telephone costs Other annual report 2006/07

36 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH ADMINISTRATION EXPENSES (continued) 5.1Cost of employment 2006/ /06 R 000 R 000 Salaries and wages Basic salaries Performance awards Temporary staff - 81 Leave payments Social contributions UIF Allocation of cost of employment Administration expenses Weighted average number of employees Refer to the report by the Accounting Authority for disclosure concerning the emoluments of members of the Accounting Authority and the Chief Executive Officer. 6 PROPERTY, PLANT AND EQUIPMENT Closing Accumulated carrying Cost depreciation amount Year ended 31 March 2007 R 000 R 000 R 000 Computer equipment 713 ( 538) 175 Computer software 73 ( 72) 1 Office furniture and fittings 790 ( 360) 430 Office equipment 293 ( 116) 177 Office Fixtures 844 ( 572) 272 Balance at end of period (1 658) Made up as follows: - Owned assets (1 658) Year ended 31 March Computer equipment 613 ( 426) 187 Computer software 73 ( 72) 1 Office furniture and fittings 660 ( 286) 374 Office equipment 172 ( 86) 86 Office Fixtures 844 ( 492) 352 Balance at end of period (1 362) Made up as follows: - Owned assets (1 362) 1 000

37 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH PROPERTY, PLANT AND EQUIPMENT (continued) Closing Accumulated carrying Cost depreciation amount Year ended 31 March 2005 R 000 R 000 R 000 Computer equipment 497 ( 332) 165 Computer software 73 ( 69) 4 Office furniture and fittings 612 ( 221) 391 Office equipment 155 ( 56) 99 Office Fixtures 487 ( 445) 42 Balance at end of period (1 123) 701 Made up as follows: - Owned assets (1 123) 701 Movement summary 2007 Carrying Carrying amount Depreciation amount 2006 Additions charge 2007 R 000 R 000 R 000 R 000 Computer equipment ( 112) 175 Computer software Office furniture and fittings ( 74) 430 Office equipment ( 30) 177 Office Fixtures ( 80) 272 Balance at end of period ( 296) Movement summary 2006 Carrying Carrying amount Depreciation amount 2005 Additions charge 2006 R 000 R 000 R 000 R 000 Computer equipment ( 94) 187 Computer software 4 - ( 3) 1 Office furniture and fittings ( 65) 374 Office equipment ( 30) 86 Office fixtures ( 47) 352 Balance at end of period ( 239) annual report 2006/07

38 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH ACCOUNTS RECEIVABLE 2006/ /06 R 000 R 000 Other accounts receivable Deposits Refund from lessee Advances 38 - Closing balance ACCOUNTS RECEIVABLE FROM NON-EXCHANGE TRANSACTIONS Skills development levy debtors Administration levy debtors Employer grant levy debtors Discretionary grant debtors Interest and penalties on levies receivable Interseta debtors SARS receivable Employer receivable Allowance for doubtful debts (189) (92) SARS receivable 2006/07 Opening Change in Closing Balance Estimate Addition balance R 000 R 000 R 000 R 000 Provision for levies incorrectly received ( 884) 8 ( 355) (1 231) Other levies incorrectly received - - ( 163) ( 163) Future levy receivable (925) (917) ( 117) (771) 2005/06 Opening Change in Closing Balance Estimate Addition balance R 000 R 000 R 000 R 000 Provision for levies incorrectly received - - ( 884) ( 884) Future levy receivable - (2 135) (2 135)

39 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH ACCOUNTS RECEIVABLE FROM NON-EXCHANGE TRANSACTIONS (continued) An amount of R (2006: R ) relates to levies incorrectly contributed by employers, and paid over by SARS and DOL, after being exempted from contributing skills development levies due to new legislation which came into effect 1 August It is estimated that additional levies of R (2006: R ), relating to potential future levy corrections, will be received. An amount of R (2006: Rnil) relates to additional levies incorrectly received by the SETA. 8.2 Employer receivable 2006/ /06 R 000 R 000 Overpayment to employers Allowance for doubtful debt ( 189) (92) Net effect of SARS retrospective adjustments on affected employers R (2006: R ) was recognised as a receivable relating to the overpayment to the employer in earlier periods, and is based on the amount of such grant over payments. An amount of R (2006: R92 000) was provided for as doubtful debt. 9 CASH AND CASH EQUIVALENTS 2006/ /06 R 000 R 000 Cash at bank and on hand Cash at bank Cash on hand 4 4 Short term investments/instruments Cash and cash equivalents at end of year As required in Treasury Regulation 31.2, National Treasury approved the banks where the bank accounts are held. The weighted average interest rate on short term bank deposits was 7.85% (2006: 6.92%). The Skills Development Act Regulations state that a SETA may, if not otherwise specified by the Public Finance Management Act, invest moneys in accordance with the investment policy approved by the relevant SETA. Treasury Regulation 31.3 requires that, unless exempted by the National Treasury, the SETA as a public entity that is listed in Schedule 3A of the Act must invest surplus funds with the Corporation of Public Deposits. As the SETA was exempted by the National Treasury from the requirement of Treasury Regulation 31.3 to invest surplus funds with the Corporation for Public Deposits, surplus funds were invested in line with an investment policy as required by Treasury Regulation annual report 2006/07

40 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH ACCOUNTS PAYABLE 2006/ /06 R 000 R 000 Skills development grants payable - mandatory Project creditors InterSETA payables Service provider fees outstanding Sundry payables Trade creditors Other accrued expenses Employer payables NATIONAL SKILLS FUND: SPECIAL PROJECTS Opening balance Draw down received during the year Learnership project Learnership project prior year refund (3 265) - Council approved VAT refund Interest received Utilised and recognised as revenueconditions met: Learnership Project - (12 273) Closing balance During the current year conditional funds of R (2006: R ) were received from the National Skills Fund for the purposes of a Learnership project. This amount was recognised as a liability until the conditions attached were met. During the year, Rnil (2006: R ) eligible project special expenses were incurred or recognised as revenue. At year end, R (2006:R ) continues to be accounted for as a liability until the remaining conditions attached have been met. R (2006: Rnil), which amount includes interest was paid back to the NSF on closure of the project. 12 GOVERNMENT GRANTS AND DONOR FUNDING RECEIVED IN ADVANCE 2006/ /06 R 000 R Opening balance Received during the year - 57 Learnerships - 57 Closing balance Current During the year conditional grants funds of Rnil (2006: R57 000) was received from Department of Labour for the purposes of Learnerships.

41 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH PROVISIONS Employee Employee 2006/ /06 leave bonus provision provision R 000 R 000 Open carrying amount Amounts utilised ( 102) ( 114) ( 216) ( 279) Change in estimate Closing carrying amount Leave provision is calculated based on the number of leave days outstanding at year end and the total cost of employment. Bonus provision is calculated using the total cost of employment and is based on performance evaluation conducted by the CEO of the SETA and the Remunerations Committee as appropriate. 14 RECONCILIATION OF NET CASH FLOW FROM OPERATING ACTIVITIES TO NET SURPLUS 2006/ /06 R 000 R 000 Net surplus as per Statement of Financial Performance Adjusted for non-cash items: Depreciation Allowance for doubtful debts Increase in provisions Special project income recognised - (12 273) Adjusted for items separately disclosed Investment income (7 215) (6 225) Adjusted for working capital changes: Increase in receivables from non-exchange transactions (17 463) (3 718) Decrease/(increase) in receivables 171 ( 265) Increase/(decrease) in payables (17 949) Cash utilised in operations (3 601) (23 354) 15 CONTINGENCIES In terms of the PFMA, all surplus funds as at year-end may be forfeited to National Treasury should an application for retention of surplus funds be denied. We have on the 31 May 2007 submitted an application to the Department of Labour for the retention of surplus funds. As in the previous year INSETA expects that National Treasury will approve the retention of surplus funds. 39 annual report 2006/07

42 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH COMMITMENTS 16.1 Discretionary reserve Of the balance of R available in the Discretionary reserve at the end of March 2007, R has been approved and allocated for future projects and skills priorities as set out below. Amounts for expenses that have already been contracted or incurred, and therefore included in grant expenses in the Statement of Financial Performance, are also indicated. A request for the accumulation of these funds has been submitted to National Treasury. At the time of compiling the financial statements, no reply had been received. Opening Approved by Opening Approved by balance Accounting balance Accounting 2005/06 Authority Utilised 2006/07 Authority Utilised Total R 000 R 000 R 000 R 000 R 000 R 000 R ABET level 4 support Black Business training support Black Brokers - Running a brokerage Board/Exco Programme Bursaries and voucher project Business School Bursaries for Leadership and Management studies Career Guide Charter Implementation Support Coaching and Mentoring Corporate Social Investment CPD Curriculum Development Develop Learner Certificates ELDP/LAP Employment Equity FAIS Act Support Project Financial Sector Charter Learnerships HIV/AIDS materials development IIP Implementation Support Institute of Sectoral Excellence Insurance Standards Generating Body International Research Internships Learnerships LMP Portal Materials Development (INSMAT) / Learning Implementation Guides Maths Upliftment in the Insurance Sector

43 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH COMMITMENTS (continued) 16.1 Discretionary reserve (continued) Opening Approved by Opening Approved by balance Accounting balance Accounting 2005/06 Authority Utilised 2006/07 Authority Utilised Total R 000 R 000 R 000 R 000 R 000 R 000 R 000 New Venture Development New Venture Institutional Support NSF VAT NSF Critical Skills Project Project VAT Provider Capacity Building PWC Management fees (Project office service provider) Research Research studies SAQA / INSETA Joint implementation SMME Support (RAs) Standards Writing Consultancy Funeral services sub-committees Supply Chain Management Project Train the Trainer: OBE Materials Development Training of Assessors Trustee Training Skilling Program WIN - Woman in Insurance Total project expenditure Operating Leases Total of future minimum lease payments under non-cancellable leases: 2006/ /06 R 000 R 000 Not later than one year Later than one year and not later than five years The operating lease relates to building premises used for office accommodation. The lease agreement was entered into effective 1 August 2005 and will be operational for a period of five years, expiring on 31 July annual report 2006/07

44 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH FINANCIAL INSTRUMENTS In the course of the SETA s operations it is exposed to interest rate, credit, liquidity and market risk. The SETA has developed a comprehensive risk strategy in order to monitor and control these risks. The risk management process relating to each of these risks is discussed under the headings below. The SETA s exposure to interest rate risk and the effective interest rates on financial instruments at Statement of Financial Position date are as follows: Floating rate Non-interesting bearing TOTAL Amount Effective Amount Weighted R 000 interest R 000 average period rate until maturity in years Year ended 31 March 2007 Assets Cash % Accounts receivable Total financial assets Liabilities Accounts payable Total financial liabilities Year ended 31 March 2006 Total financial assets % Total financial liabilities Credit risk Financial assets, which potentially subject the SETA to the risk of non performance by counter parties consist mainly of cash and cash equivalents and accounts receivable. The SETA limits its counter-party exposure by only dealing with well-established financial institutions approved by National Treasury. The SETA s exposure is continuously monitored by the accounting authority. Credit risk with respect to levy paying employers is limited due to the nature of the income received. The SETA s concentration of credit risk is limited to the Insurance industry in which the SETA operates. No events occurred in the Insurance industry during the financial year that may have an impact on the accounts receivable that has not been adequately provided for. The SETA is exposed to a concentration of credit risk, as significant amounts is owed by the South African Revenue Service (SARS). This concentration of risk is limited as SARS is a government entity with sound reputation. 42 Liquidity risk The SETA manages liquidity risk through proper management of working capital, capital expenditure and actual vs. forecasted cash flows and its cash management policy. Adequate reserves and liquid resources are also maintained. Market risk The SETA is exposed to fluctuations in the employment market for example sudden increases in unemployment and changes in the wage rates. No significant events occurred during the year that the SETA is aware of.

45 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH FINANCIAL INSTRUMENTS (continued) Fair values The SETA s financial instruments consist mainly of cash and cash equivalents, account and other receivables, and account and other payables. No financial instruments were carried at an amount in excess of its fair value. No financial asset was carried at an amount in excess of it s fair value and fair values could be reliably measured for all financial instruments. The following methods and assumptions were used to determine the fair value of each class of financial instruments: Cash and cash equivalents Cash and cash equivalents comprise cash held by the SETA and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates their fair value. Accounts receivable The carrying amount of accounts receivable is net of the allowance for any doubtful debt, estimated by the accounting authority based on prior experience. The carrying amount of these assets approximates their fair value. Accounts payable The carrying amount of account and other payables approximates fair value due to the relatively short-term maturity of these financial liabilities. 18 RECLASSIFICATION OF RESERVE BALANCES During the current year the interpretation of what constitutes surplus administration funds changed. Previously the SETA calculated the surplus administration reserve, which is transferred to the discretionary reserve, on the accrual basis. The Surplus administration reserve calculation now includes an adjustment for the difference between the amount of capital expenditure incurred in a year and depreciation. This is consistent with the way the SETA prepares its budget. This change has been accounted for retrospectively and comparative information has been restated. The opening reserve balance at 1 April 2005 has been adjusted by R , which is the carrying value of Property, plant and equipment at that date. 19 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the SETA s accounting policies management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Key sources of estimation uncertainty The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. 43 annual report 2006/07

46 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued) Useful lives of property, plant and equipment The SETA reviews the estimated useful lives of property, plant and equipment at the end of each annual reporting period, refer note 6 for the carrying values of property, plant and equipment. The SETA is currently established until 31 March 2010 and in terms of the Act read with Government Notice No. R.1082 of 7 September 1999 a SETA is required to apply to the Minister for a renewal of its certificate of establishment by 1 April In the light of the requirement to apply for a renewal of a SETA s certificate of establishment, management was required to consider how it impacts the period over which assets are expected to be available for use by the SETA. Management determined, consistent with the prior year, that the useful life of assets should not be limited by the SETA s establishment until 31 March Managements determination of useful life also impacts the determination of the residual value of assets. The following useful lives are used in the calculation of depreciation - Computer equipment 3 years - Computer software 2 years - Office furniture and fittings 10 years - Office equipment 5 years - Office fixtures over the lease term 20 NEW ACCOUNTING PRONOUNCEMENTS At the date of authorisation of these financial statements, there are Standards and Interpretations in issue but not yet effective. These include the following Standards and Interpretations that are applicable to the SETA and may have an impact on future financial statements: Effective date, commencing on or after IFRS 7 (AC 144) Financial Instruments: Disclosures 1 Jan 07 GRAP 9 Revenue from Exchange Transactions * GRAP 12 Inventories * GRAP 13 Leases * GRAP 17 Property Plant and Equipment * GRAP 100 Non-current Assets held for Sale and Discontinued Operations * GRAP 102 Intangible Assets * * An entity shall apply Standards of GRAP for annual financial statements covering periods beginning on or after a date to be determined by the Minister of Finance in a regulation to be published in accordance with section 91(1)(b) of the PFMA. This date has not yet been published as at the date of this set of financial statements. 44 IFRS 7 (AC 144) IFRS 7 (AC 144) - Financial Instruments: Disclosures. The Standard adds certain new disclosures about financial instruments to those currently required by IAS 32 - Financial Instruments: Disclosure and Presentation. The Standard replaces the disclosures currently required by IAS 30 - Disclosures in the Financial Statements of Banks and Similar Financial Institutions (IAS 30). The Standard therefore groups all financial instruments disclosures together in a new Standard.

47 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH NEW ACCOUNTING PRONOUNCEMENTS (continued) GRAP 9 GRAP 9 - Revenue from Exchange Transactions. The Standard provides additional South African public sector specific examples of revenue transactions however it does not significantly differ from IAS 29 (AC 111) - Revenue. It is not expected that this Standard will significantly impact future disclosure due to the limited nature and volume of exchange transactions for which a SETA is expected to account. GRAP 12 GRAP 12 - Inventories. The Standard provides additional guidance on the recognition and the initial measurement of inventories including recognising inventories acquired at no cost, or for nominal consideration, at fair value as at the date of acquisition. It is not expected that this Standard will significantly impact future disclosure due to the limited nature and volume of inventory for which a SETA is expected to account. GRAP 13 GRAP 13 - Leases. The Standard clarifies that the leases standard should still be applied even where legislation may prohibit and entity from entering into certain types of lease agreements. It further adds an additional requirement to disclose the depreciation and finance charge relating to the leased asset under accounted for as a finance lease by the lessee. GRAP17 GRAP 17 - Property Plant and Equipment. On initial application the Standard requires that assets which were acquired at no cost, or for a nominal cost, is accounted for at its fair value as at the date of acquisition.this treatment is different to the current treatment which accounts for such assets at cost. We do not expect this to significantly impact the carrying value of assets. GRAP 100 GRAP Non-current Assets held for Sale and Discontinued Operations. The Standard provides public sector specific examples and refer to non-cash-generating assets that are relevant to the public sector however it does not significantly differ from IFRS 5 - Non-Current Assets Held for Sale and Discontinued Operations. It is not expected that this Standard will significantly impact future disclosure due to the limited nature and volume of such transactions for which a SETA is expected to account. GRAP 102 GRAP Intangible Assets.This standard is drawn primarily from the International Accounting Standard on Intangible Assets (IAS 38). The Standard does provide additional public sector specific examples it also expands the identifiability criterion in the definition of an intangible asset to include contractual rights arising from binding arrangements, and to exclude rights granted by statute. The Standard will also require where an intangible asset is acquired at no cost or for a nominal consideration, that its cost is recorded as its fair value as at the date it is acquired. 45 annual report 2006/07

48 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH RELATED PARTY TRANSACTIONS Transactions with other SETAs Interseta transactions and balances arise due to the movement of employers from one SETA to another. No other transactions occurred during the year with other SETAs. The balances at year-end included in receivables and payables are: 2006/ /06 R 000 R 000 Amount Amount Amount Amount of the receivable/ of the receivable/ transaction (payable) transaction (payable) Receivables Fasset Health & Welfare SETA ISETT Bankseta SASSETA Wholesale & Retail SETA Services SETA THETA Payables Fasset Health & Welfare SETA Bankseta MERSETA Services SETA Total ( 10)

49 Insurance Sector Education and Training Authority ANNUAL FINANCIAL STATEMENTS NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH RELATED PARTY TRANSACTIONS (continued) Transactions with other related parties During the year members of the accounting authority and employees were required to disclose their interest in any contracts that the SETA is entering into with an outside party. As a result the SETA entered into the following transactions with related parties: 2006/ /06 R 000 R 000 Nature Transaction Amount Amount Amount Amount of type of the receivable/ of the receivable/ Related party relationship transaction (payable) transaction (payable) Receivables NSF income Related to DoL Funding Payables - (6 951) (3 411) Star trackers Spouse of council Events member management NSF expenses Related to DoL Repayment - (6 775) (3 235) DoL Executive Authority Funding - ( 176) 57 ( 176) Total (3 714) The above transactions occurred under terms that were no less favourable than those available in similar arm s length dealings. 47 annual report 2006/07

50 INSETA COUNCIL Tetiwe Jawuna Chairperson Business Representative Nosipho Molope State Representative Ivan Mzimela Deputy Chairperson Labour Representative Audrey Mothupi Business Representative Artwell Hlengwa Business Representative Margie Naidoo Labour Representative Reone Kerr Business Representative Lindani Ndlovu Business Representative 48 Barry Scott Business Representative Laetitia van Dyk Labour Representative Charles Wells Labour Representative Eugene Zeeman Labour Representative * Absent - Blum Khan (Labour Representative)

51 INSETA COUNCIL ATTENDANCE AT MEETINGS DURING PERIOD UNDER REVIEW NAME OF COUNCILLOR TITLE 26 May 06 1 Sep Sep Nov Jan 07 Artwell Hlengwa Ordinary Member Present Apology Audrey Mothupi Ordinary Member Apology Present Barry Scott Ordinary Member 1 Present Present Present Apology Present Blum Khan Ordinary Member 2 Present Present Present Apology Present Charles Wells Ordinary Member Present Recused Present Present Recused Eltie Links Ordinary Member Apology Present Present * * Eugene Zeeman Ordinary Member Present Present Present Present Present Ivan Mzimela Deputy Chairperson Present Present Laetitia van Dyk Ordinary Member Present Present Lindani Ndlovu Ordinary Member Present Present Margie Naidoo Ordinary Member Present Apology Present Present Present Nosipho Molope Ordinary Member Apology Present Present Apology Apology Reone Kerr Ordinary Member Present Recused Present Present Recused Tetiwe Jawuna Chairperson 4 Present Present Present Present Present Notes: 1 Barry Scott was Chairperson at meetings held in May and September Blum Khan was Deputy Chairperson at meetings held in May and September Ivan Mzimela was elected Deputy Chairperson in November Tetiwe Jawuna was elected Chairperson in November Councillors only elected at AGM held in September * Eltie Links resigned from Council. 49 annual report 2006/07

52 AUDIT COMMITTEE ATTENDANCE AT MEETINGS DURING THE PERIOD UNDER REVIEW NAME OF MEMBER TITLE 11 Apr Nov Mar 07 Chris Kemp Chairperson 1 Present Present Present Thys Botha Ordinary Member Present Present Present Nosipho Molope Ordinary Member Apology Present Apology COUNCIL COMMITTEES Blum Khan Ordinary Member Apology Apology Apology Mohamed Akoob Chairperson 2 Present Present - Notes: 1 Chris Kemp appointed Chairperson from March Resigned from Committee HR/REMUNERATION COMMITTEE ATTENDANCE AT MEETINGS DURING THE PERIOD UNDER REVIEW NAME OF MEMBER TITLE 7 Dec Mar 07 Margie Naidoo Chairperson Present Present Tetiwe Jawuna Ordinary Member Present Present Ivan Mzimela Ordinary Member Present Apology Dudu Nyamane Ordinary Member 3 - Present Mpho Nkeli Ordinary Member Barry Scott Ordinary Member Notes: 3 Appointed as member from 15 March Resigned from Committee FINANCE, IT & ADMINISTRATION COMMITTEE ATTENDANCE AT MEETINGS DURING THE PERIOD UNDER REVIEW NAME OF MEMBER TITLE 9 Sep Nov Nov Mar 07 Chris Kemp Chairperson 5 Present Present Present Present Johan van Greuning Chairperson Present Tetiwe Jawuna Ordinary Member 7 Present Apology Apology - 50 Blum Khan Ordinary Member Apology Present Apology Apology Notes: 5 Chris Kemp was Chairperson for meetings held in September, November and March 7 Resigned from Committee 6 Johan van Greuning appointed Chairperson at meeting of 15 March, but chaired first meeting on 24 May 2007

53 INSETA Council Audit Committee INSETA / Deloitte Steering Committee INSETA / PWC Steering Committee Chief Executive Officer Manager: Skills Development Consultant: Skills Development Administrator: Skills Development Finance, IT & Administration Committee HR/Remuneration Committee Manager: Corporate Services Corporate Services Specialist Supply Chain Unit Administrator PA to CEO Public Relations Officer Manager: ETQA Senior Consultant: ETQA Consultant: ETQA Manager: Learnerships Consultant: Learnerships Administrator: Learnerships INSETA ORGANOGRAM Administrator: Skills Development Secretary / Office Administrator Consultant: ETQA Administrator: Learnerships Regional Advisors Receptionist Administrator: ETQA Secretary: Learnerships Housekeeper Secretary ETQA 51 annual report 2006/07

54 Corporate Services Division INSETA TEAM Left to right: Jabu Mabaso, Kgomotso Mogami, Phakama Nkosi, Tebogo Mathopa, Zodwa Motloung, * Absent: Setlakalane Mokou Learnerships Division Skills Development Division 52 Left to right: Bongiwe Ramaboea, Lavern Ogle, Aubrey Maseko, Vuyo Diniso, * Absent: Delaine Galloway Left to right: Tumi Peele, Shirley Steenekamp, Kim Pretorius, Viola James

55 ETQA Division Left to right: Tamara Ntombela, William Fisher, Nathan Seotsanyana, Glen Edwards, Itumeleng Motaung, Neesha Naidoo CEO s Office 53 Left to right: Ella Matshikiza, Laurel de Bruyn annual report 2006/07

56 Bruce Hemphill Chief Executive Liberty Group Dudu Nyamane HR Director Old Mutual SA STATEMENTS OF SUPPORT 54 To help address the skills shortage INSETA through their programmes is providing an opportunity for companies in the insurance sector to develop much needed skills in a structured and consistent manner to help grow the South African economy as well as assisting youth in acquiring skills that will secure them future employment. Liberty is proud to have been part of this facilitated process through INSETA that has seen employment of 112 people in our company. These placements have been extremely beneficial to the business and to the individuals it has helped. Since 2004 we have ran two successful FSC learnership programmes and are currently in midst of the third programme. The success can be partially attributed to the guidance and sponsorship received from the INSETA staff through continued interaction and assistance with our staff. The involvement of one of my executive director s at the INSETA council level is one other way of strengthening our commitment to the success and achievement of the INSETA objectives and goals, thus supporting delivery on the skills development mandate. I am honoured to pledge our continued commitment and participation in skills development initiatives and programmes even though as a business we have met our FSC targets in relation to the learnerships. We believe it s important for growing our economy as well as changing the face of the insurance sector going forward. The debate on shortage of skills in our country rages on. While visible growth has been observed since the introduction of various interventions by the government, the socio economic indicators tell us we still have a long way to go. It is critical that we continue to collectively engage around economic transformation efforts. For us at Old Mutual South Africa, one of these interventions is INSETA s contribution and collaboration around addressing skills shortage in the insurance sector. Over the last three years, Old Mutual has benefited immensely from funded learnership programmes for both employed and unemployed learners. The young people who are beneficiaries of this programme will be embarking on a learning pathway that has been identified as a scarce skill in the ASGI-SA programme. We are at pains to widen critical talent pools in our industries and this has become a vicious cycle where Peter takes from Paul creating spiralling salary costs and the growing wage gap. In addressing this challenge, Old Mutual and INSETA have formed another valued partnership to tackle the scarcity of critical skills. INSETA is funding a learnership programme aimed at the development of black brokers for the Insurance Industry through Old Mutual s Broker Academy. It also offers bursaries for the development of black women into middle and senior management positions, offers bursaries and funds internship for the development of black actuaries, chartered accountants and investment professionals. We value this partnership with INSETA and believe that this is just the beginning. Together we are always in the look out for new accelerated ways to tackle the ever rising challenges around skills and acquisition of experience. Our gratitude goes to the willing leadership of INSETA that is always ready to listen and engage with us.

57 Lizé Lambrechts CEO Sanlam Personal Finance Jeanett Modise General Manager Mutual & Federal Insurance Company Limited (South Africa) In the past three years Sanlam Personal Finance has formed a close relationship with INSETA, to such an extent that we view them as an important business partner. The strong relationship management by the CEO Mike Abel has ensured that INSETA has aligned to the strategic needs of our Insurance sector. INSETA contributes significantly to the transformation initiatives in our company and sector by means of their funding and support of people development. The standards set for quality assurance in training by INSETA supported by regular audit visits, has led to the enhancement of our internal training community and training departments. During the last couple of years our relationship with the INSETA has strengthened and grown into a partnership of close collaboration and mutual benefit to both our organisations. Skills development is vital for us to achieve our strategic objectives. Our annual skills priorities are also closely aligned to those of the Insurance Sector Skills Plan. In our endeavour to continuously strengthen our human capital capability and contribute to skills development in the insurance sector, we have implemented a number of successful development initiatives in partnership with the INSETA. Thank you once again for your ongoing support and encouragement towards skills development in Mutual & Federal over the last 7 years. We can assure you that the INSETA plays a key role in ensuring the success of both individual companies and the insurance sector as a whole. 55 annual report 2006/07

58 Margaret Massie, Executive Head: People and Brand Services, Santam Adam Samie CEO Lion of Africa Insurance Company & Chairman: SAIA It gives Santam great pleasure to provide this statement of support to INSETA for the immense work they have been doing in the short-term insurance industry. Heeding the example set by INSETA 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; Santam believes that the abilities of our people/staff make the difference between competing businesses within the insurance industry. For this reason Santam has placed a renewed focus on igniting human capital as part of our 2010 strategy that guides us as we respond to the immediate challenges facing the insurance industry. Our training and development strategy thus facilitates leadership and management, as well as technical and behavioural skills development at all levels of the company. Our training and development programmes are implemented on completion of a consultative process involving the individual s personal and the company s overall strategic goals. In the short time that INSETA has been in existence, their training and development interventions have had a tremendous impact on our industry. These programs have targeted all spheres of our industry activities, from entrylevel learnerships to technical and management development programs for insurance executives. I have had the pleasure and the honour of being a patron of their inaugural development programs and am a strong supporter of INSETA interventions to ensure that the industry creates a large pool of trained and well-qualified professionals for the future. The non-racial nature of these programs also represents a strategic intervention that will assist in the creation of a level playing field for previously disadvantaged employees in our industry. Also in my capacity as Chairman of the South African Insurance Association (SAIA), I would like to congratulate Mike Abel and his team for their support of industry initiatives in the field of human resource development in our sector and transformation issues in general. 56 Learnerships are not only an essential FSC requirement, but a valuable tool for improving employee representation from targeted communities. We are therefore vigorously involved in an increasing number of year-long learnerships. Currently, almost 80% of qualifying participants are finding employment with us; this figure is well in excess of FSC requirements.

59 NSDS Indicator INSETA Target Achievement NSDS Objective 1: Prioritising critical skills for growth and development and equity 1.1 Skills development supports national and sectoral growth, development and equity priorities. 1.2 Information on critical skills widely available to learners. Impact of information dissemination researched, measured and communicated in terms of rising entry, completion and placement of learners % of large firms and 60% of medium firms EE targets, supported by skills development. Impact on overall equity profile assessed. 2.2 Skills development in at least 40% of small levy-paying firms supported and the impact of the support measured. 2.5 Number of small BEE firms and BEE co-operatives supported by skills development. Impact of support measured. Timeous research, updating and submission of SSP. 50 SDFs trained on use of career guide and for the guide to be widely distributed in the majority of the provinces. SSP research completed, signed off and submitted on due date. All SETA projects are informed by the SSP including the allocation of Learnerships and Internships funding. 682 SDFs trained and capacitated through the career guide, which is published each year and was distributed in six provinces. Additionally all INSETA s interventions are advertised through the INSETA Call Centre, website, newspapers, magazines and various sector and government exhibitions which INSETA participates in. NSDS Objective 2: Stimulating quality training for all in the workplace Number of large firms receiving WSP/ATR grants: 60 Number of medium firms receiving WSP/ATR grants: small firms receive skills support. The number of SMME BEE firms has not been determined yet in the sector. 83 large firms submitted WSPs and ATRs and received grants. 59 medium firms submitted WSPs and ATRs and received grants. According to the analysis of the ATR report submissions and research conducted for the SSP, the employee profile still reflects large imbalances in terms of race. 825 SMMEs received support, some through mandatory grants and others through skills programmes vouchers, Learnerships and bursaries funding. 202 SMME BEE firms received skills development support during the year through projects, vouchers and bursaries. Reason for Deviation From Target No deviation. The SETA identified additional opportunities to expose additional stakeholders to education and training on scarce skills. An increase in the participation rate from firms. Both the 80% and 60% indicators were achieved. An increase in the number of small firms as well as an increase in the participation by small firms. Although there was no baseline figure agreed with the Department of Labour, INSETA supported 202 SMME BEE firms as a result of the FAIS Act requirements for the sector. NSDS II TARGETS AND ACHIEVEMENTS 57 annual report 2006/07

60 NSDS Indicator INSETA Target Achievement Reason for Deviation From Target NSDS Objective 2: Stimulating quality training for all in the workplace 2.7 Number of workers have achieved ABET level 4. Target for INSETA for the period 2006/07 for ABET registered Learners is: Level 4: 125 Level 3: 125 Level 2: 125 Level 1: 125 Target for INSETA for the period 2006/07 for ABET achieved Learners is: Level 4: 125 Level 3: 125 Level 2: 125 Level 1: 125 Total achieved for INSETA on ABET registered Learners is: Level 4: 155 Level 3: 128 Level 2: 137 Level 1: 129 Total achieved for INSETA on Learners who achieved is: Level 4: 133 Level 3: 127 Level 2: 137 Level 1: 127 Because financial support is being given on a continual basis by means of vouchers, the number of employees doing ABET increase as each group of employees completes the training. Increased participation and buy-in from employers led to the over-achievement against this target. Some ABET Learners that achieved in this period were registered in previous periods. ABET Learners registered in this period will complete in subsequent periods. 2.8 Number of workers assisted to enter and at least 50% successfully complete learning programmes. Impact of assistance measured. Target for INSETA for the period 2006/07 for the Employed Learners to enter Learnerships, skills programmes, workplace experience support programmes is 625 Learners. Target for INSETA for the period 2006/07 for the Learners to complete programmes is Learners were supported financially through skills programmes, Learnerships and bursary funding to enter learning programmes; some of which was towards getting them FAIS compliant before the closing date. 601 Learners who entered learning programmes successfully completed according to the National Learner Record Database. Increased participation and buy-in from employers lead to the over-achievement against this target. The 50% completion target was achieved as a result of the FAIS legislation and FSC requirements within the sector. NSDS Objective 3: Promoting employability and sustainable livelihoods through skills development non-levy paying enterprises, NGOs, CBOs and community-based co-operatives supported by skills development. Impact of support on sustainability measured with a targeted 75% success rate. Target for INSETA for the period 2006/07 is for 10 non-levy paying NGOs and CBOs supported through skills development funding. INSETA supported 10 NGOs and 5 CBOs financially to develop the skills of their employees. Visits to the NGOs and CBOs were conducted before and during the project to monitor the use of the grant. These NGOs and CBOs were given a directive by INSETA on where the grants must be used and a report requested on regular intervals and also at the end of the project. No deviation. Impact of the support is determined from the reports and the visits by INSETA. INSETA s Council has approved a project to measure the impact of all its interventions going forward.

61 NSDS Indicator INSETA Target Achievement Reason for Deviation From Target NSDS Objective 4: Assisting new entrants into the labour market and self-employment 4.1 Number of unemployed people assisted to enter learning programmes and at least 50% successfully completed. Impact of assistance measured. Target for INSETA for the period 2006/07 for the Unemployed Learners to enter Learnerships, skills programmes, workplace experience support programmes is 625 Learners. Target for INSETA for the period 2006/07 for the Learners to complete programmes is Learners were supported financially through skills program mes, Learnerships and bursary funding to enter learning program mes; some of which was towards them obtaining FAIS compliancy before the closing date. 45 Learners who entered learning programmes successfully completed according to the National Learner Record Database. Increased participation and buy-in from employers lead to the over-achievement against this target. The 50% completion target was achieved as a result of the FAIS legislation and FSC requirements within the sector. 4.2 Number of learners in critical skills programmes covered by sector agreements from FET and HET institutions assisted to gain work experience, of whom at least 70% successfully find placement in employment or self employment. Target for INSETA for the period 2006/07 is 470 Learners to gain work experience. Target for INSETA for the period 2006/07 is 329 Learners to be placed. 363 Learners were placed in internships with companies in the sector. Whilst employing the Learners is a matter, which is not within our control, we hold constant meetings with employers to solicit opportunities of employing the interns. 4.3 Number of young people trained and mentored to form new ventures and at least 70% of new ventures in operation 12 months after completion of programme. Target for INSETA New Venture Creation entered for the period 2006/07 is 54. Target for INSETA New Venture Creation to be sustained for the period 2006/07 is Learners received New Venture Creation support. 38 Learners were placed. Whilst employing the Learners is a matter, which is not within our control, we hold constant meetings with employers to solicit opportunities of employing the Learners. NSDS Objective 5: Improving the quality and relevance of provision 5.1 The SETA recognizes and supports Institutes of Sectoral or Occupational Excellence (ISOEs) within public and private institutions, spread as widely as possible geographically, whose excellence is measured in the number of learners successfully placed in the sector and employer satisfaction ratings of their training. Target for INSETA is 1 Institute. INSETA has supported the University of Western Cape Department of Management and the UCT Graduate School of Business in 2006 and the Umfolozi FET College and the Nelson Mandela Metropolitan University in Increased participation, buy-in and support from workplace providers resulted in the positive deviation. 59 annual report 2006/07

62 NSDS Indicator INSETA Target Achievement Reason for Deviation From Target NSDS Objective 5: Improving the quality and relevance of provision 5.2 Each province has at least two provider institutions accredited to manage the delivery of the New Venture Creation qualifications and 70% of new ventures still operating after 12 months. Target for INSETA is 2 Institutions. Two provider institutions namely Jobworx and Boston. In progress. No deviation. 5.3 There are measurable improvements in the quality of services delivered by skills development institutions and those institutions responsible for the implementation of the NQF in support of the NSDS. The SETA is to meet SAQA Audit and NLRD upload requirements. The SAQA Audit and NLRD upload requirements were met. No deviation. NOTES: 1. Targets are based on the definitions provided by the Department of Labour during the period. 2. Only the indicators that are applicable to INSETA (as per the Department of Labour Service Level Agreement) have been included. 60

63 ABET Adult Basic Education and Training AFS Annual Financial Statements BBBEE Broad Based Black Economic Empowerment BEE Black Economic Empowerment CBO Community Based Organisation CPD Continuous Professional Development CSI Corporate Social Investment DoL Department of Labour EE Employment Equity ETD Education and Training Development ETQA Education and Training Quality Authority FAIS Act Financial Advisory and Intermediary Services Act FET Further Education and Training FSB Financial Services Board FSC Financial Sector Charter GAAP Generally Accepted Account Practice GRAP Generally Recognised Account Practice INSETA Insurance Sector Education and Training Authority INSQA INSETA s Quality Division ISOE Institute of Sectoral or Occupational Excellence MoU Memorandum of Understanding NGO Non-Government Organisation NLRD National Learner Records Database NQF National Qualifications Framework NSA National Skills Authority NSF National Skills Fund NSDS National Skills Development Strategy OBE Outcomes Based Education PA Personal Assistant PFMA Public Finance Management Act QMS Quality Management System RA Regional Advisor ROI Return on Investment RPL Recognition of Prior Learning SAIA South African Insurance Association SABPP South African Board of Personnel Practitioners SAQA South African Qualifications Authority SARS South African Revenue Service SD Skills Development SDF Skills Development Facilitator SETA Sector Education and Training Authority SGB Standards Generating Body SMMEs Small, Medium and Micro Enterprises SMS SETA Management System SSP Sector Skills Plan WBE Work-Based Experience WSP Workplace Skills Plan J PAPRIKA / GLOSSARY OF TERMS 61 annual report 2006/07

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