The individual and average ages of the members of the Board revealed that the oldest member is 67 years old (whose second term of service will end within five months); the youngest member is 44 years old (appointed 1 April 2017) and the average age of the Board is 56 years. This age profile is similar to the majority of local and international corporate boards. It does appear that the NLC Board is conscious of enhancing the age diversity of the Board with three of the five members who joined on 1 April 2017 being 55 years or younger. It was also noted that one of the current members who joined in 2013 was 46 years old at the time.

All seven Board members are independent, non-executive members. Although legislation allows for one executive member, the NLC has opted to not include any executive members on the Board. The NLC could consider the inclusion of an executive member on the Board which would enhance the diversity of the governing body. The amendment of the composition of the Board should be updated in the Charter. None of the Board members have exceeded the legislated tenure. The majority (71%) of the Board members were recently appointed (1 April 2017) after previous members’ terms of service ended. This has resulted in a low average tenure of 2.8 years. It is noted that the Chairperson will soon be ending his second term of service.

The National Lotteries Commission’s corporate governance framework embodies the Lotteries Act, 57 of 1997 as amended, the Public Finance Management Act (PFMA), principles contained in the Companies Act and KING IV code, processes and systems that enable the Commission to meet corporate governance expectations as well as provide direction, control and accountability by the Commission.

The Minister of Trade and Industry, in his capacity as the Executive Authority of the NLC, exercises oversight in accordance with provisions of the PFMA. The NLC complied with all reporting requirements of the PFMA and Treasury Regulations Compliance Schedule through the submission of quarterly reports, management accounts, income and expenditure statements with projections, annual financial statements, budget of estimated revenue and expenditure, strategic and annual performance plans, a fraud prevention plan and a risk management plan within the stipulated periods as indicated under the PFMA and Treasury Regulations Compliance Schedule.

Parliament, through the Portfolio Committee on Trade and Industry (Portfolio Committee) exercises oversight of the service delivery performance and commitments made in terms of the NLC’s strategy and annual performance plan. As part of Stakeholder management, the NLC engage with the Minister and the Portfolio Committee.

During the period under review, the NLC adopted the Corporate Governance Framework^®. This framework provides a holistic view of the governance status of the organisation at any given point in time. Through its Corporate Governance Framework®, the NLC aims to enhance the Board’s oversight role by improving information sharing and cohesion between the Board and key management. The framework will equip the board, senior executives and internal stakeholders to identify areas of governance which need to be prioritised so that the necessary corrective action can be taken to mitigate risk and exploit opportunities to improve governance and drive growth and sustainability. The NLC is in the process of digitising the Corporate Governance Framework® which will further enhance transparency and accountability within the organisation.

GOVERNANCE STRUCTURE

The Board reviewed and approached its arrangements for delegation to promote independent judgement and assist with balance of power and the effective discharge of duties without abdicating its accountability. Delegation arrangements were in accordance with the Lotteries Act, as amended, which stipulates that the Board may appoint committees to assist it in efficiently and effectively performing its functions and exercising its powers. Committees shall consist of such members of the board as the board may designate and the board shall appoint the chairperson of every committee. Every committee shall perform its functions in accordance with the provisions of this Act and such directives of the board that are not in conflict with such provisions. Any delegated function so performed shall be deemed to have been performed by the board.

The Board had a total of six committees which included two statutory committees and five standing committees as depicted below:

Role of the NLC Board

The Board Charter was adopted by the Board in March 2017 and was reviewed in March 2018. The Board charter guides the Board with respect to their functions, powers and responsibilities. Over and above the responsibility for the setting the strategic direction of the NLC, finance and performance objectives, the Board has applied the principles of openness and transparency in fulfilling its statutory responsibilities to:

• advise the Minister on the issuing of the licence to conduct the National Lottery;
• advise the Minister on the efficacy of legislation pertaining to lotteries and ancillary matters;
• ensure that the National Lottery and Sports Pools are conducted with all due propriety;
• advise the Minister on establishing and implementing a social responsibility programmes in respect of lotteries;
• ensure that interests of every participant in the National Lottery are adequately protected;
• Administer and invest the money paid to the National Lotteries Distribution Trust Fund in accordance with the Lotteries Act;
• ensure that net proceeds of the National Lottery are as large as possible;
• perform such additional duties in respect of lotteries as the Minister may assign to the Board;
• administer the National Lottery Distribution Trust Fund (NLDTF) and hold it in trust;
• monitor, regulate and police lotteries incidental to exempt entertainment, private lotteries and society lotteries;
• make such arrangements as may be specified in the Licence for the protection of prize monies and sums for distribution;
• advise the Minister on any matter relating to the National Lottery and other lotteries or any other matter on which the Minister requires the advice of the Board; and
• advise the Minister on percentages of money to be allocated.

Board Appointments

All non-executive Board members are appointed by the Minister of Trade and Industry, in accordance with section 3 of the Lotteries Act as amended. The Minister appoints a chairperson, who shall be a person with applicable knowledge or experience with regard to matters connected with the functions of the board, one member designated by the Minister and not more than five members who have proven business acumen or applicable knowledge or experience with regard to matters connected with the functions of the board, and of whom at least one should be a legal practitioner admitted to practise in the Republic and at least one a chartered accountant in the Republic. The Lotteries Act further stipulates that at least four members shall be persons who are not in the service of any sphere of government.

During the year under review, the Minister appointed five non-executive Board members with the requisite skills as stipulated in Lotteries Act.

Commissioner

The Commissioner is an ex-officio member of the Board, whose five-year terms of office was renewed effective 1 October 2017. The Commissioner is a member of the Institute of Directors South Africa. The Commissioner is accountable to the Board for the performance of all financial, administrative and clerical functions, as well as any duties which may be delegated to him or her by the Board under the Act and holds office for an agreed term of five years which may be renewed only once for a further period of five years.

Independence

All non-executive Board members are considered as independent as they have no material interest in the NLC, interest in national lottery operator, beneficiaries or suppliers. Members are required to complete an annual disclosure of interest and required to disclose interest at every meeting to ensure that circumstances that may give rise to conflict of interest are managed and monitored effectively. There were no conflicts of interest identified during the reporting period.

Board evaluation and effectiveness

The Board and Board committee effectiveness was evaluated by an independent service provider, considering developments in the composition of the Board and the strategy to reposition the NLC as a regulator. The Board Evaluation process was based on a quantitative and qualitative approach. Additionally, Members of the Board were provided an opportunity to provide qualitative commentary based on their assessment for each evaluation category.

The Board Evaluation questionnaire consisted of evaluation questions in the following categories:

The questionnaires completed, and interviews conducted revealed that the directors were satisfied that good governance is generally practised and that the Board is effective in its functioning as a collective, both with respect to adherence to its mandate as well as its oversight and support role within the Commission.

The Board evaluation was conducted towards the end of the 2017/18 financial period therefore the Board is reviewing the recommendations on areas of improvement with a view to ensuring that adopted recommendations are implemented and progress made on the implementation of the outcomes are reported in 2018.

Board induction and continuous development

Board induction sessions were convened during the year to ensure that all Board members are appraised on the functions of the Board and operations of the NLC. The Board introduced continuous development programmes that would enhance the skill of the collective Board and assist the Board in its strategic focus and that of the NLC. The Board undertook an exploratory visit to regulators in European jurisdictions to gain understanding on how regulators are regulating the lotteries industry and to improve the regulatory framework of the NLC. The Board is satisfied that the arrangements in place for accessing professional corporate governance services are effective as members subscribe to the Corporate Governance Body of Knowledge® and are full members of the IODSA, SAICA, Law Society of South Africa and The Public-Sector Audit Committee Forum.

Adoption of King IV

The NLC Board adopted King IV in accordance with the commitment made to the Minister of Trade and Industry in the shareholder compact, to comply with principles of the King IV Report on Corporate Governance for South Africa. An independent high-level assessment on the current governance structure and public disclosures made by the NLC was conducted to assess the current level of compliance with King IV principles, whilst considering relevant legislation governing the NLC, the nature of NLCs activities, members and key stakeholders of the NLC. Overall, the NLC governance practices, policies and procedures were found to be aligned with 16 Principles of King IV that relate to the organisation, with some areas of improvement recommended.

Company Secretary

The Board reviewed and was satisfied that the skills, competence and experience of the Company Secretary adequately support the performance of the required duties in to the Board and that the office of the company secretary is empowered and that the position carries the necessary authority. The Company Secretary is not a member of the Board and has unfettered access to the Board whilst maintaining an arms-length relationship with the Board and its members.

REVIEW COMMITTEE

BOARD AND DISTRIBUTING AGENCY COMMITTEE

In view of provisions stipulated in section 3(1)(d) of the Lotteries Act and the nature of matters for discussions, the Board and Distributing Agency Committee (‘the Committee’) was constituted to deal with Distributing Agency matters relating to the adjudication of applications for grants, the operations of the Distributing Agencies as matters relating to the Grant Funding mandate of the NLC.

The Lotteries Act, as amended, stipulates that Chairpersons of the Distributing Agency are ex-offıcio members of the Board with no voting rights and may only attend meetings of the board by invitation or if matters relating to the adjudication of applications for grants or distribution of grants are to be discussed.

BOARD REGULATORY COMPLIANCE AND LEGAL COMMITTEE

The Board Regulatory Compliance and Legal Committee is a Committee charged with the duty to ensure that the Board advises the Minister on issuing the licence to conduct the National Lottery as well as ensure that the National Lottery and sports pools are conducted with all due propriety and strictly in accordance with the Constitution, the Lotteries Act, all other applicable law and the licence for the National Lottery together with any agreement pertaining to that licence. The Committee is also expected to provide assurance to the Board that the NLC is fulfilling its primary regulatory mandate, that is to ensure that the interests of every participant in the National Lottery are adequately protected.

Key value creating activities for 2017/18

The activities of the Committee have resulted in achievement of all strategic objectives and performance targets detailed in the Regulatory Compliance Report here, Legal Division Report here and Strategic Objectives here. Compliance with laws and regulations The Board recognises the role that compliance with applicable regulatory requirements plays in the governance and sustainability of the Commission and undertakes to subscribe to fundamental principles to ensure compliance with relevant legislation. In discharging its duties of ensuring that the Commission complies with legislation, the Board has committed the Commission shall conduct its business in accordance with applicable regulatory requirements and ensure that appropriate policies and frameworks are committed to promote a culture of compliance within the NLC. The Board Regulatory Compliance and Legal Committee is charged with a duty to ensure Organisational Compliance is maintained at an acceptable level and ensure that all instances of non-compliance are adequately followed up and resolved with sound and practical recommendations to business. The Board reviewed and approved Organisational Compliance Policy and approved the regulatory universe of the NLC which comprises of 72 pieces of legislation. Of the 72 pieces of legislation, 13 represents core legislation, 36 secondary legislation and 23 topical legislation. For the 2017/2018 FY, the top ten legislations, which were determined in terms of applicability to the NLC and risk rating (impact on NLC reputation and value of fines imposed upon non-compliance) were identified as follows: Lotteries Amendment Act, Act 57 OF 1997 Public Finance Management Act, No. 1 of 1999 Preferential Procurement Policy Framework Act, No. 5 of 2000 Prevention and Combating of Corrupt Activities Act, No. 12 of 2004 Occupational Health and Safety Act, No. 85 of 1993 Basic Conditions of Employment Act, No. 75 of 1997 Employment Equity Act, No. 55 of 1998 Protection of Personal Information Act, No. 4 of 2013 Promotion of Access to Information Act, No. 2 of 2000 Public Service Act No. 103 of 1994 Organisational Compliance monitoring was conducted whereby Act owners (divisional liaisons where Act are applicable) provided controls and processes with which the NLC ensure compliance with the requirements of relevant Acts. These controls and processes were assessed for correctness and validity through corroboration of supporting documents such as reports, policies, matrices, etc; and through enquiry with the relevant Act Owners. Continuous monitoring of organisational compliance takes place on a quarterly basis and as determined by the Compliance Office to ensure that the NLC maintains acceptable levels of Compliance with these critical pieces of legislation. Policies developed internally were also subjected to alignment by oversight committees including the Board, to ensure that they do not conflict with laws and regulations relevant to the NLC. Organisational processes and operations were carried out in such a way as to ensure compliance with applicable legislation in the areas of grant funding, lotteries compliance and enforcement, human resources management, financial management as well as information and communication technology. There was no material or repeat regulatory penalties, sanctions or fines for non-compliance with statutory obligations and there were no environmental regulator inspections conducted during the period. The Committee was satisfied that the NLC has complied with primary legislation governing the public entity, which are the Lotteries Act, as amended, and the Public Finance Management Act. Other applicable laws and regulations were complied with during the year under review. The Committee will focus on the monitoring of legislation relating to the protection of personal information and cyber security.

BOARD HUMAN CAPITAL, SOCIAL AND ETHICS COMMITTEE

The Board Human Capital, Social and Ethics Committee is constituted to ensure that the NLC has a clearly articulated recruitment and remuneration philosophy and the design and implementation of remuneration structures that are market related, consistent, fair, legally compliant and equitable and the Board fulfils functions relating to its social and ethical environment, transformation objectives and employment equity as contemplated in relevant legislation and best practice.

Key value creating activities for 2017/18

Gift Declarations In terms of the Donations Policy, employees are required to electronically disclose all gifts received from suppliers, from any person who received a grant or intends to apply or has applied in terms of section 13, for a licence to conduct the National Lottery. The Ethics Office recorded a total of 73 gifts have been lodged in the period under review as follows. Category Total donated   Percentage   Beneficiaries R9 400.00   43%   Service provider R4 525.00   21%   Principled operator R7 920.30   36%   Total R 21 845.30   100%   Quarter 2: A Respectful Working Environment Quarter 3: Compliance from a Legal Perspective Quarter 4: Privacy, Confidentiality and Restraint of Trade Other services provided by the ethics office included support in the form of evidence and interpretation on three NLC cases where employees contravened NLC policies. The ethics office was satisfied with level of compliance with Ethics and Conduct Policy and Gift and Donations Policy. The NLC whitsle-blowing Policy outlines the procedure for reporting suspected instances of corruption and ensures that employees are not victimised for coming forward. NLC also subscribes to a KPMG managed hotline for anonymous tip-offs. The CAE report provides further details in this regard. NLC employees have the freedom to belong to recognised bargaining councils, in accordance to with the Labour Relations Act of South Africa. Human rights at NLC are dealt with in line with its internal policies and relevant legislation. Information pertaining to the NLC standing on B-BBEE; Transformation, Skills; Health and Safety and Environment is elaborated as follows.

Remuneration report

The Strategy is built on establishing demanding key performance measures including financial and non-financial measures for executives to drive a performance culture through the business. The Strategic plan seeks to position NLC as the “Employer of Choice”. To attract and retain high-calibre employees and deliver on its mandate, the NLC will offer employees a diverse, challenging and rewarding professional experience by means of competitive conditions of employment as well as opportunities to achieve career goals and develop the full potential of employees.

The intent of the Strategy is to:

• Provide market competitive levels of remuneration to the NLC staff and executives having regard to the level of work and the impact the NLC employees can potentially have on the performance of the organisation.
• Attract, motivate, reward and retain executives capable of delivering the business plan and substantially growing the organisation.
• Align performance incentives for both executives and staff with stakeholder interests.

Overview of NLC Remuneration policy

The NLC is a home for those employees who find fulfilment in contributing towards the socio-economic development of South Africa’s people through poverty alleviation. The NLC will recognise employees who excel in this environment through a holistic and competitive total reward offering, attractive benefits as well as career development opportunities.

Reward Philosophy

A reward philosophy consists of a set of beliefs which underpin the reward strategy of the organisation, govern reward policy and provide the foundation for the guiding principles which determine how the reward processes operate. Whilst the reward strategy and programs can change, the philosophy, like any organisation value system, is much more long-lasting in nature.

Reward Principles

The core reward principles are permanent and play a crucial role in guiding reward decisions, policies, processes and practices.

• Internal Equity

NLC endeavours to reward its people according to their role, contribution and worth as required by Labour Relations Amendment Act, 2014 (Act No 6 of 2014) EQUAL PAY FOR WORK OF EQUAL VALUE.

• External Competitiveness

The NLC will continuously benchmark the market to strategically position itself to ensure competitive total guaranteed packages for employees within the parameters of affordability.

Where the organisation attracts their skills from and where it can potentially lose its skills to, can be used as an indication of the labour market against which it can benchmark its salaries.

The NLC relative market position will always ensure that it is possible to retain and attract the core competencies required for organisation strategy achievement.

To this extent the organisation’s pay scales are aligned to the market median/50th percentile benchmarked against the National All Industries sector for Executive, Management and staff.

• Annual remuneration adjustments

CPI, labour market trends, market movements and affordability will be considered to determine the overall salary increase percentage for the organisation. The distribution of the increases will however be based on the proficiency, value and performance of the individual, as determined by their contribution.

• Reward for Performance

The NLC endeavours to communicate and translate strategic objectives into earning opportunities for each employee or group of employees (teams) through the implementation of reward schemes, i.e incentives and recognition schemes. This result in linking reward to contracted outputs and results in line with business strategy.

NLC believes that its remuneration policy plays an essential, vital role in realising business strategy and therefore should be competitive in the markets in which it operates.

Elements of remuneration for Executive Management

The National Lotteries Commission operates on total cost-to-company (CTC) philosophy whereby cash remuneration, benefits (including a provident retirement fund, medical aid and other insured benefits) form part of employees’ fixed total CTC remuneration. Senior management and executive directors also participate in short-term incentives in the form of a performance bonus plan.

The different components of remuneration, their objectives, the policy which governs it and their link to the business strategy are stated in the Remuneration Strategy.

Total Guaranteed Package Approach

The total value of reward is expressed as the total benefit to the individual as well as a cost to NLC. All elements of remuneration are calculated, and the total constitutes the total package. The individual can see the total benefit received from the organisation, it becomes easier to manage from a cost perspective (total picture) and is the only truly equitable way of managing reward because apples are compared with apples and performance impacts on the total package and not on parts thereof, namely the salary only.

Board responsibility

The board carries ultimate responsibility for the remuneration policy. The remuneration committee operates in terms of a board-approved mandate. The board approves all remuneration related matters including new and amended salary structure and short-term incentive schemes and their design.

Role of benchmarking

To ensure that the NLC Reward remains competitive in the markets in which it operates, all elements of remuneration are subject to regular reviews against relevant market and peer data. Reviews are performed when required to benchmark the NLC’s remuneration against the national South African market.

The policy aims at positioning the NLC as a preferred employer within the regulatory services. To retain flexibility and ensure fairness when directing human capital to those areas of the Group requiring focused attention, subjective performance assessments are required when evaluating employee contributions.

The Board Human Capital, Social and Ethics Committee is a Committee evaluates and monitors the remuneration philosophy and practices to ensure consistency with governance principles and corporate strategy. The Human Capital division implements the NLC board-approved remuneration policies to ensure:

Salary structures and policies, cash as well as short-term incentives (STI), motivate superior performance and are linked to realistic performance objectives that support sustainable long-term business sustainability.
	–	Stakeholders can make an informed assessment of reward practices and governance processes.
	–	Compliance with all applicable laws and regulatory codes.

Performance bonus

The Board has reviewed and approved the Performance Management Policy which details the elements of the NLC’s performance bonuses. Bonus payments are based on combined value of the employee’s individual performance score and achievements of the NLC as an organisation against its own targets.

A performance bonus of up to 20% of the basic annual salary is payable to employees below management level and 20% of total package to managers and executives.

The qualification criteria is permanent employees of the NLC and employees on fixed-term contract five year contract) in the employ of the NLC for the financial year for at least four months and remained on the same level for the period.

Bonus maybe granted as follows:

The rating of an employee determines the percentage to be paid from the approved bonus percentage.

Formula for calculation of performance bonus as

Performance Bonus =	Employee Performance rating x bonus percentage
	Maximum score in rating category

Annual Merit Salary

The Performance Management Policy also provides for the awarding of Annual Merit Salary increases awarded based on performance. The rating achieved on an overall rating for the year is used to determine the merit salary increases for employees.

BOARD NOMINATIONS COMMITTEE

The Board Nominations Committee was established to ensure that the Board comprises the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibility objectively and independently.

BOARD AUDIT AND RISK COMMITTEE REPORT FOR THE YEAR ENDED 31 MARCH 2018

The Board Audit and Risk Committee (audit committee) presents its report for the financial year ended 31 March 2018, as required by section 77 of the Public Finance Management Act, 1999 (Act No. 1 of 1999, as amended by Act No. 29 of 1999) (PFMA) read with treasury regulation 27.1.10.

Members and attendance

The audit committee was established in accordance with sections 51(1)(a)(ii) and 77 of the PFMA. The audit committee charter requires that the audit committee comprises a minimum of three members, the majority of whom should be from outside the public service or the majority of whom should be non-executive members, although committee members need not all be members of the NLC Board. Members qualifications are detailed here.

The audit committee comprises four members, including the chair, Ms Doris Dondur. In terms of section 77(b) of the PFMA, the audit committee must meet at least twice a year. The Committee Charter makes provision for a minimum of four meetings per year. During the financial year ended 31 March 2018, the audit committee met on six occasions. The table below shows the attendance of these meetings.

**	Term of office ended

Special Board meeting and workshops include:

• Special meeting (AFS approval, National Lottery Participant Trust Workshop)
• Board policy review session

The members of the audit committee held meetings with the Board, senior management of the Commission, internal audit function and the external auditors, collectively and individually, on matters related to governance, internal control and risk in the Commission, throughout the reporting period. The committee Chairperson also participated in the annual audit committee Chairpersons Forum with the Minister of Trade and Industry to report on governance, internal control, risk, performance and financial information and other relevant matters concerning the Commission.

Audit committee’s responsibility

The audit committee has complied with its responsibilities arising from the PFMA and reports that it operated in terms of the audit committee charter read in conjunction with the internal audit charter.

Effectiveness of internal control

The audit committee acknowledges management’s efforts to strengthen internal controls in the Commission. The committee is satisfied with the current technical support, monitoring and evaluation by the internal audit function.

The audit committee is satisfied that matters reported by the external auditors and the internal audit function in prior years have been fully and correctly addressed. Management has provided assurance that effective corrective action has been implemented and that the audit committee will monitor these matters going forward.

Vacancies will be filled prudently with properly qualified, skilled and experienced personnel and have not impaired the effective functioning of the system of internal control.

The NLC has adopted anti-corruption measures to curb potential fraud and corruption. The audit committee is satisfied with the prevention of fraud. The fraud risks have been tabled at each quarterly meeting of the audit committee.

Due to the strategic importance of, and investment in, the modernisation of information and communication technology (ICT) in the committee the audit committee has monitored the risk register and progress reports on the respective action plans during the year under review. The audit committee is comfortable that ICT risks are being addressed or mitigated, in implementing the new systems.

The quality of monthly and quarterly reports submitted in terms of the PFMA

The audit committee is satisfied with the content and quality quarterly reports prepared and issued during the year under review in compliance with the statutory framework.

The audit committee has reviewed and commented on the NLC’s annual financial statements and report on performance information and their timely submission to the external auditors by 31 May 2018.

The audit committee has reviewed the reports issued to National Treasury and is satisfied that the Commission is meeting its obligations and have recognised revenue to the extent that conditions for that recognition have been met.

The audit committee is comfortable that the Minister of Trade and Industry is exercising its oversight responsibilities in terms of PFMA and ensuring that funds are utilised for the purpose as described in the PFMA, Lotteries Act and Annual Performance Plan.

Internal audit function

The Board is obliged, in terms of the PFMA, to ensure that the entity has a system of internal audit under the control and direction of the audit committee. The audit committee is satisfied that the internal audit function has properly discharged its functions and responsibilities during the year under review.

The capacity of the internal audit function has been enhanced through the investment in an electronic system. The audit committee expects these initiatives to contribute to the internal audit function becoming more efficient, more responsive to challenges and better able to provide audit reports of a high quality to management and the committee on a timely basis. The audit committee supports the direction that the internal audit function is adopting in providing the necessary skills and agility required for the function to respond quickly and effectively to the demands for internal audit across the Commission’s different locations. The internal audit capacity was enhanced through co-sourcing sections of the internal audit function. The recent appointment of specialist ICT auditors is a welcome development considering the need for expertise in the auditing of automated systems and the development and maintenance of a system of continuous auditing.

The committee is satisfied that the internal audit function is operating effectively and that it has addressed the risks pertinent to the Commission.

The audit committee is satisfied that the internal audit function maintains an effective internal quality assurance and programme that covers all aspects of the internal audit activity. The internal assessment indicates that all significant areas of non-conformance identified in the previous year’s external quality assessment review have been rectified and thus a generally “conforms rating” can be applied to the internal audit work and the term “conforms with the International Standards for the Professional Practice of Internal Auditing” may be used by the function.

Risk management function

The audit committee is responsible for the oversight of the risk management function. The audit committee is satisfied that the risk function is adequately resourced and has delivered on its mandate. The committee has reviewed the risk register and the quarterly reports and is generally satisfied with the maturity of the risk management process.

Evaluation of the finance function

Overall, the audit committee is satisfied with the Commission’s finance function during the year under review.

Performance management

Part of the responsibilities of the audit committee includes the review of performance management. The audit committee has in terms of the performance of the Commission performed the following functions:

• Review and comment on compliance with statutory requirements and performance management best practices and standards.
• Review and comment on the alignment of the annual performance plan, budget, strategic plan, corporate plan and performance agreements.
• Review and comment on the relevance of indicators to ensure that they are measurable and relate to services performed by the department public entity.
• Review of reported non-compliance with legislation
• Review of compliance with current year reporting requirements
• Review of the quarterly performance reports submitted by management
• Review and comment on the Commission’s performance management system and making recommendations for its improvement.

The audit committee is satisfied that the performance report has been prepared in terms of the PFMA, the Treasury Regulations and any other related regulatory requirements for reporting performance.

Evaluation of the annual financial statements

The audit committee has reviewed the annual financial statements, which focused on the following:

• Significant financial reporting judgements and estimates contained in the annual financial statements.
• Clarity and completeness of disclosures and whether disclosures made have been set properly in context.
• Quality and acceptability of, and any changes in, accounting policies and practices.
• Compliance with accounting standards and legal requirements.
• Significant adjustments and/or unadjusted differences resulting from the audit.
• Reflection of unusual circumstances or events and management’s explanation for the accounting treatment adopted.
• Reasons for major year-on-year fluctuations.
• Asset valuations and revaluations.
• Calculation and levels of general and specific provisions.
• Write-offs and reserve transfers.
• The basis for the going concern assumption, including any financial sustainability risks and issues.

The audit committee is comfortable that the annual financial statements have been prepared in terms of GRAP and the PFMA.

The committee provided oversight over the NLPT, who report to the committee on a quarterly basis. The committee noted and was satisfied with the performance and clean audit opinion of the NLPT. The committee had sight of the NLC’s consolidated annual financial statement including NLPT, notwithstanding that this set of financial statements could not be audited by AGSA due to misalignment of the NLC and NLPT audit cycles. The consolidated audited financial statements thus only include the NLC and the NLDF.

The audit committee accepts the external audit report on the reported performance information and compliance with legislation. Whilst we accept the external audit report, the committee is of the view that further engagement with the Executive Authority and Auditor-General of South Africa is necessary, pursuant to the consolidation of the NLPT.

Ms D Dondur
Board Audit and Risk Committee Chair

31 July 2018