2014 - 2015 annual report · 6 annual report 2014/2015 south african national accreditation system...

1ANNUAL REPORT 2014/2015

SOUTH AFRICAN NATIONAL ACCREDITATION SYSTEM

2014 - 2015 ANNUAL REPORTTowards Global Trust2014 - 2015 ANNUAL REPORT

Towards Global Trust

2 ANNUAL REPORT 2014/2015




TABLE OF CONTENTS

General Information

7. External Auditor’s report...................

8. Situational analysis...........................

8.1. Service delivery environment...........

8.2. Global trends....................................

8.3. National trends.................................

8.4. Outlook.............................................

8.5. Organisational environment.............

8.6. Key policy development and

legislation changes...........................

8.7. Strategic outcome-oriented goals....

8.7.1 Performance against the

annual performance plan..................

8.8. Programme overview........................

8.8.1 Accreditation provision.....................

8.8.2. Strategy and development...............

8.8.3. Knowledge transfer...........................

8.8.4. Service delivery: customer

experience........................................

8.9. Revenue collection...........................

8.10. Capital investment............................

performance information

27

28

28

28

28

28

28

29

29

30

33

33

34

36

36

37

37

Highlights 2014/15.......................

1. About SANAS...............................

List of abbreviations and

acronyms......................................

5

6

106

General

information ..................................

2. Foreword by the

Minister of Trade and

Industry........................................

3. Foreword by the

Chairperson.................................

4. Chief Executive Officer‘s

Overview......................................

5. Statement of

responsibility................................

6. Strategic overview.......................

6.1. Our vision....................................

6.2. Our mission.................................

6.3. Our values...................................

6.4. Legislation mandate....................

6.5. Core functions.............................

6.6. Organisational structure..............

Board members...........................

PART

APART

B13

14

16

18

20

21

21

21

21

21

22

22

24



9.1. Introduction...................................

9.2. Portfolio committee.......................

9.3. Executive authority........................

9.4. The board......................................

9.4.1. Introduction...................................

9.4.2. Roles and responsibilities of the

board.............................................

9.4.3. Composition of the board..............

9.4.4. Remuneration of the board

members.......................................

9.4.5. Commitees....................................

9.4.5.1. Audit committee............................

9.4.5.2. Risk Committee............................

9.5. Internal control and audit..............

9.6. Compliance with laws and

regulations....................................

9.7. Fraud and corruption....................

9.8. Minimising conflicts of interest......

9.9. Code of conduct...........................

9.10. Company secretary......................

9.11. Social responsibility......................

9.12. Health, safety and

environmental issues....................

10. Report of the audit committee ......

11.1 Introduction....................................

11.2. The SANAS performance

management framework.................

11.3. Employee wellness and

appreciation programmes..............

12. Policy development........................

12.1. Key achievements..........................

12.2. Challenges faced by SANAS..........

12.3. Future human resources plans

and goals........................................

12.4. Human resources oversight

statistics..........................................

Human Resources Management

FINANCIAL information

51

52

52

52

52

52

52

53

Index............................................

Accounting authority’s

responsibilities and

approval.......................................

Independent auditors report........

Accounting authority’s report.......

Statement of financial

position as at 31 March 2015......

Statement of financial

Performance as for the year

ended 31 March 2015.................

Statement of changes in

net assets....................................

Cash flow statement....................

Statement of comparison of

budget and actual amounts.........

Accounting policies......................

Notes to the annual financial

statements...................................

Governance

57

58

59-61

62-63

64

65

66

67

68-69

70-83

84-105

39

39

39

40

40

40

41

43

43

43

44

45

45

46

46

46

46

47

47

48

PART

CPART

DPART

E



SANAS became one of the first African accreditation bodies to sign the first AFRAC MRA to

facilitate South African exports

3 new accreditation programmes for road transport management, Food Safety System

Certification (FSSC) and organic agriculture production and processing certification

HIGHLIGHTS 2014/15

100% of IPAP’s targets achieved in support of IPAP sectors

85.7% of SANAS’s targets reached

Service Delivery Results

10

9

8

7

6

5

4

3

2

1

0

Overall quality of SANAS’s product Overall quality of SANAS’s services Overall quality of SANAS’s relationships*0 means “very poor” and 10 means “excellent; rounded off

72% overall independent customer satisfaction result of conformity assessment bodies

made up of the following:

1 507 accredited conformity assessment bodies for testing, inspection and calibration to

support industrial development (as opposed to 1 447 in 2013/14)

7.57

7.5



The South African National Accreditation System (SANAS) is the sole national body responsible for carrying out accreditations in respect of conformity assessment, which includes the accreditation of calibration, testing and verification laboratories, certification bodies, inspection bodies, verification agencies and any other type of body that may be added to its scope of activity. SANAS is also the national body to monitor Good Laboratory Practice (GLP) compliance with principles adopted by the Organisation for Economic Cooperation and Development (OECD) for GLP facilities. SANAS is the largest accreditation body on the African continent and among the largest in the world.

SANAS plays a key role in South Africa’s economy through facilitating a network of competent conformity assessment bodies (CABs) through an impartial and transparent mechanism for organisations to independently demonstrate their competence, providing global trust in the quality of its goods and services, fostering the beneficial exchange of goods and services, and providing a service that is recognised as equitable to best international practice.

The value that SANAS offers to the South African economy is an expanding network of accredited conformity assessment facilities and the maintenance of its international recognition. This is combined with highly specialised knowledge and a competent skills base. To date, a pool of over 1 500 accredited laboratories, certification bodies, inspection bodies, proficiency testing scheme providers and GLP test facilities is available to manufacturers and exporters of South African products and services.

PRINCIPAL ACTIVITIES

SANAS’s principal activities involve the accreditation of the following:

• CALIBRATION LABORATORIES AND PROFICIENCYTESTING SCHEMES provide metrological traceability in South Africa as stipulated in the Measurement Units and Measurement Standards Act, Act No. 18 of 2006. SANAS-accredited laboratories form an integral part of the metrological chain whenever physical measurements are performed for manufacturing and exports, safety or scientific purposes, for law enforcement purposes or to ensure that South African manufacturers remain globally competitive.

• TESTING LABORATORIES play an important role in supporting South African manufacturing, exports and Industrial Policy Action Plan (IPAP) priority sectors by providing objective evidence that a product or service conforms to certain customer requirements or specifications.

• PHARMACEUTICAL LABORATORIES provide a service to the South African pharmaceutical industry, in particular for chemical and microbiological testing. The South African pharmaceutical industry is regarded as the largest in Africa, constituting about 33% of all the pharmaceutical sales in Africa. Pharmaceutical laboratories not only support this industry, but play a vital role in fighting the numerous diseases that are ravaging our country, such as tuberculosis (TB) and HIV/AIDS.

• INSPECTION BODIES mainly operate in the regulatory domain where regulators, the industry and citizens need to be confident that inspection bodies are competent to perform their duties. This is especially relevant in the case of bodies inspecting workplace health and safety requirements in accordance with the Occupational Health and Safety Act, those inspecting diagnostic imaging equipment such as medical and dental diagnostic X-ray equipment in accordance with the Hazardous Substances Act, and those inspecting compulsory standards in accordance with the National Regulator for Compulsory Specifications Act. Inspection bodies also support the green industry initiative through the measurement and verification of energy efficiency.

• LEGAL METROLOGY (VERIFICATION LABORATORIES) protect consumers from unfair trade practices. These laboratories fall under the domain of legal (trade) metrology and perform verifications on volume, mass and length measuring instruments in accordance with the requirements of the Trade Metrology Act and other related technical regulations to ensure reliable results.

• CERTIFICATION BODIES that are accredited by SANAS certify other organisations in terms of the compliance of their management systems with recognised standards, such as those of the International Standards Organisation (ISO) and the South African National Standard (SANS). These management systems include those for quality management (ISO 9000), environmental management (ISO 14000), occupational health and safety management (ISO 18000), food safety management (ISO 22000), energy management (ISO 50001), road transport management (SANS 1395) and organic agricultural production and processing (SANS 1369). Certification bodies also validate and verify the greenhouse gas (GHG) emissions of organisations and projects (ISO 14065).

• MEDICAL PATHOLOGY LABORATORIES need to be credible, as their credibility is paramount to the health and safety of the patients who rely on the testing services they provide. Laboratory tests are an integral part of the workup of any patient and constitute up to 80% of a physician’s diagnosis and treatment choice. As medical doctors base their diagnosis on the results issued by medical laboratories, it is important that these results are accurate and reliable.

1. ABOUT SANAS



• BLOOD TRANSFUSION FACILITIES aim to provide the transfusion of safe units of blood. Accreditation plays a vital role in ensuring that the personnel involved in all the activities (donor registration, blood collection, testing, processing and storage) of a blood transfusion service are competent and that they adhere to national and/or international standards.

• A VETERINARY LABORATORY INDUSTRY that is strong and competent is important for South Africa for the diagnosis of diseases, especially emerging diseases, such as bovine spongiform encephalopathy (BSE) (mad cow disease), as well as for testing the safety of meat and other animal products.

• A GLP MONITORING AUTHORITY inspects test facilities and conducts study audits to ascertain their degree of compliance to the OECD principles of GLP. These principles were primarily developed to promote the quality and validity of test data used to determine the safety of chemicals and chemical products. Quality test data forms the basis for the mutual acceptance of data among countries. The application of these principles should help avoid the creation of barriers to trade and further improve the protection of human health and the environment. SANAS is the official GLP monitoring authority in South Africa.

• FORENSIC LABORATORIES are crucial to our criminal justicesystem as they provide very useful information that aids in the investigation and prosecution of crime through the scientific examination of physical evidence.

• BROAD-BASED BLACK ECONOMIC EMPOWERMENT (B-BBEE) VERIFICATION AGENCIES are accredited by SANAS. These agencies support government’s national objective to allow for the broader participation of previously disadvantaged people in the mainstream economy.

• THE SANAS KNOWLEDGE TRANSFER UNIT providestraining in Management Systems for Testing and Calibration Laboratories (ISO/IEC 17025), Medical Laboratories (ISO 15189), Inspection Bodies (ISO/IEC 17020), Certification Bodies (ISO/IEC 17021), Verification Laboratories (SANS 10378) and B-BBEE Verification Agencies (SANAS R47). Documenting the Systems, Internal Auditing, Nominated Representative, Technical Representative, Technical Assessment Techniques and Assessors’ Training courses are also offered.



THE VALUE OF THE ACTIVITIES IN THE GREATER SOUTH AFRICAN CONTEXT IS DEPICTED IN THE FIGURE BELOW:

What we doBenefit to

society

Benefit to

Industry/

Exporters

Benefit to

South Africa

Increase local business and export opportunities

Improve South Africa’s product competitiveness

Support regulators in the protection of health, safety of society and the

environment

Lock-in exports and improved economic growth

Minimised waste of scarce financial resources and support job creation

Improve South Africa’s knowledge base and continued

compliance to international requirements

Accredited conformity assessment bodies

Expand the acceptance of conformity assessment

results nationally, regionally and globally

Develop new accreditation programmes in support of our Industrial Policy Action

Plan and the National Development Plan

Offer training on mattters relating to accreditation

Accredited conformity assessment bodies

provide accurate test inspection and certification

results essential for the protection of society’s health, safety and the

environment

Poor-quality products are kept out of our borders

Improved living conditions and a safer environment

Testing, inspection and certification results can be

trusted

Facilitate the acceptance of South African-produced

goods and services-globally

Tested, inspected or certified once, accepted

everywhere

Level the playing field between big and small conformity assessment

bodies

Reduce the need for re-testing, re-certification or

re-inspection byproviding world-class quality

infrastructures

Improve the understanding of

accreditation and the implementation of

management systems

Reduce cost and mitigate the risk of rejection of exported goods and

services



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initi

ativ

es



SANAS is a signatory to the global multilateral recognition arrangements (MRAs) managed by ILAC and IAF. These arrangements cover 80 economies and 85 accreditation bodies. Signatories to the arrangement are obliged to recognise each

other’s accreditation as equal and should therefore promote the acceptance of the results of the signatories’ CABs within their economies

GLOBAL REACH

SUMMARY OF GOVERNMENT INTERVENTIONS

Government Department IPAP-assigned Accreditation System ProjectsDepartment of Trade and Industry Energy-efficiency measurement and verification

Energy management

Greenhouse gas emission verification and validation

Disinfectants and detergents

Fish and food, and associated industries

Organic agricultural production and processing

Electro-technical products

Automotive vehicles and components

Food safety system certification

Personal flotation devices, swimming aids and respiratory protective devices

Electronic gambling equipment

Other Accreditation System Projects

National Department of Tourism Responsible tourism

Department of Water Affairs Water quality

Department of Health Diagnostic X-ray imaging systems

Department of Agriculture Abattoirs and pig farms in Gauteng

Department of Transport Road transport management

Department of Labour Pressure equipment

Lifts, escalators and passenger conveyers

Risk-based inspection and certification

Occupation hygiene

Electric installations

Major hazardous installations

Gas test stations

Explosive facilities, equipment and processes



General INformationPART A



General INformationPART A

General InformationName : South African National Accreditation System (SANAS)Physical address : the dti Campus, 77 Meintjies Street, Sunnyside, Pretoria, 0002Postal address : Private Bag X23, Sunnyside, Pretoria, 0132Telephone number : +27 12 394 3760Fax number : +27 12 394 0526Website address : www.sanas.co.za

External auditors : Ernst & Young IncorporatedBankers : First National BankCompany secretary : Mr Dawood Petersen



Building global trust in the goods and services produced by South African manufacturers requires a well-functioning, internationally recognised independent accreditation system.

Consumers nationally and around the world are becoming increasingly aware of what they consume and of their power to influence the quality of goods and services, as well as their right to an environment that is protected and not harmful to their health or wellbeing. The relevance of accreditation has therefore grown, and accreditation bodies are expected to provide the trust consumers need nationally, regionally and internationally.

SANAS is South Africa’s sole accreditation body, and exercises its mandate in accordance with the Accreditation for Conformity Assessment, Calibration and Good Laboratory Practice Act, 19 of 2006 (the Accreditation Act).

As the internationally recognised national accreditation body for the accreditation of CABs, SANAS is tasked to: • accredit or monitor, for GLP compliance purposes,

organisations falling within its scope of activity;• promote accreditation as a means of facilitating

international trade and enhancing South Africa’s economic performance and transformation; and

• promote the competence and equivalence of accredited bodies and GLP-compliant facilities.

These contributions are critical to build trust and facilitate economic growth. The network of accredited facilities provided by SANAS, services South African industries such as metals, fabrication, aerospace, automotive, green industries, agro-processing, clothing and textiles, biofuels, pharmaceuticals and chemicals. This network is also used to protect the health and safety of the South African public and the environment.

SANAS, which is the biggest accreditation body in Africa and among the biggest accreditation bodies in the world, remains a signatory to ILAC and the IAF. This international network of accreditation bodies allows South African goods and services to continue to be accepted in 80 economies across the world, represented by 85 accreditation bodies that are also signatories to the MRA without being re-tested, re-certified or re-inspected.

A significant feature of the international engagement of the dti involves work to support African regional economic integration and development. the dti pursues a systematic methodology that includes strategic and technical missions. These generally include cooperation to promote infrastructure development, trade and investment, and offer technical assistance, particularly for institutional and policy building. This work will continue to ensure a broad-based engagement

in African development activities. Work on infrastructure development in Southern Africa is a key priority. The success achieved by SANAS through the leadership role it plays in supporting the establishment of an internationally recognised accreditation infrastructure in South African Development Community (SADC) and the rest of Africa paves the way in realising meaningful regional integration and cross-border trade, while ensuring that products of a poor quality are locked out, and intraregional trade is locked in.

Agro-processing is one of the largest manufacturing sectors in terms of employment and makes a significant contribution to total manufacturing value-add. Agro-processing has been identified as a sector with the potential to actualise macro-economic objectives as contained in the New Growth Path (NGP) and NDP. A key characteristic of the agro-processing sector is its strong up- and downstream linkages. Upstream, the sector links to primary agriculture across a variety of farming models and products. Downstream, agro-processing outputs are both intermediate products to which further value is added and final goods that are marketed through wholesale and retail chains, as well as a diverse array of restaurants, pubs, shebeens and fast-food franchises. This link with agriculture is critical for employment creation and poverty eradication. The development of two new accreditation certification programmes by SANAS sets it on a course to support the manufacture, export and acceptance of the country’s agro-processed products nationally, regionally and internationally.

2. ForEwOrd by the minister of trade and industry



In 2014/15, SANAS continued to support the dti’s priorities to provide effective and efficient service delivery, promote industrial development and build mutually beneficial regional and global relations to advance South African trade. This annual report highlights the support SANAS provided during the continuing implementation of IPAP by also finalising the accreditation programme for energy management. SANAS worked closely with the SABS, NMISA and NRCS to ensure the alignment of activities to support industrial development.

In the regional context, SANAS continued to play a leading role in supporting the creation of the required internationally recognised accreditation infrastructure for the SADC and Africa through AFRAC. A milestone in 2014/15 was when SANAS became one of the first signatories of the AFRAC MRA, which is important to support trade in the region as it enables the mutual recognition of conformity assessment results.

SANAS’s mandate extends across government departments and, as such, it also plays an important role in providing accreditation services to the departments of Labour, Tourism, Health, Transport, Water Affairs, and Agriculture, Forestry and Fisheries, who continue to use SANAS’s accreditation services to support effective and efficient service delivery.

I would like to take this opportunity to thank SANAS, its Board of Directors, management and staff for their dedication and focus during this financial year under review.

________________________________Dr Rob Davies, MPMinister of Trade and Industry



This annual report highlights the achievements of SANAS during the 2014/15 financial year, as well as the challenges experienced in fulfilling its mandate in terms of the Accreditation Act.

Supporting the local manufacture and export of South African goods through the principle of “tested, inspected or certified once, accepted everywhere”, as well as supporting socio-economic development by providing the accreditation tools that support the protection of its citizens’ health and safety, as well as the environment, remained a focus for the 2014/15 financial year. As a public entity, SANAS is one of the country’s key technical infrastructure institutions. As such, it plays an important role in supporting the efforts of government to re-industrialise South Africa.

I am pleased to report that SANAS has once again made significant strides towards attaining the objectives set by its Board of Directors for 2014/15. Our strategy of growth, maintenance and support continues to pay off with a growth of 4% in the number of accredited facilities, bringing to 1 507 the number of accredited CABs at the end of the period under review. This growth bodes well for South Africa’s industrialisation policy objectives, as these CABs provide a vital link for the testing, inspection and certification of goods and services produced by the manufacturing sector.

Since the approval of IPAP by Cabinet, SANAS has continued to play an important role in supporting government’s green industries objective through the further roll-out of accreditation programmes for energy management and energy efficiency, and the development and roll-out of the accreditation programme for the certification of road transport management, food safety management systems and organic agriculture production and processing. Other government departments, such as Labour, Tourism, Health, Transport, Water Affairs, and Agriculture, Forestry and Fisheries, also continued to use SANAS’s accreditation services.

Stakeholder management

During the period under review, stakeholder engagement activities focused on raising the awareness of SANAS and accreditation, promoting SANAS’s accreditation programme to non-accredited organisations, improving SANAS’s external relationships and developing the SANAS brand, thus expanding its footprint beyond South Africa.

Regional relations

SANAS, which is the biggest accreditation body in Africa, continued to play a leading role in the SADC region and on the African continent by supporting the creation of the required internationally recognised accreditation infrastructure for SADC and Africa.

In collaboration with Southern African Development Community Cooperation in Accreditation Services (SADCAS), SANAS provides accreditation services to CABs in the SADC member states. As such, SANAS continues to play an important role in Africa. It contributes to preventing products that are unsafe and of a poor quality from entering South African markets, as well as facilitating trade both within the region and internationally.

During the period under review, SANAS, and in particular its Chief Executive Officer (CEO), Mr Ron Josias (who was re-elected as the AFRAC Chairperson), continued to lead the process of obtaining the required international recognition for the African accreditation infrastructure through AFRAC. SANAS also underwent a peer review by AFRAC.

International recognition

We have reaffirmed our commitment to ensure that the quality and safety of locally produced goods and services meet international standards by actively engaging in the activities of ILAC and IAF. During the period under review, SANAS continued its engagement with ILAC and IAF by way of the MRA.

3. ForEwOrd by the chairperson



Service deliverySANAS continues to be a well-run organisation. This is supported by the reports of the Audit Committee, the Risk Committee, the Human Resources and Remuneration Committee, and the independent internal auditors.

Although SANAS performed well during the period under review, it had to do so under very challenging circumstances, specifically in terms of serious office space limitations. SANAS, however, managed to achieve 100% completion of 12 of its 14 targets, which amounted to an 85.7% achievement of its targets. The remaining two targets were close to 100%.

An independent customer experience survey that was undertaken during this period showed an overall customer satisfaction rate out of 10. The quality of SANAS’s products and the quality of its relationship scored 7,5. A score of 7 against a targeted 7,5 was attributed to the quality of SANAS’s service. The 7 score is largely attributed to the need to improve the speed of service delivery. In this regard, a healthy investment had been made in information and communication technology (ICT) to automate accreditation processes. The first phase of the project was rolled out and the second phase will come into operation in the first quarter of 2015.

In terms of the SANAS/academic institutions partnership agreement, SANAS and the academic institutions promoted the application of laboratory management in academic institutions and exposed students and staff of the academic institutions to the operations of an accreditation body. An external bursary scheme programme was rolled out in 2014/15. Six students received bursaries. The students were introduced to the technical infrastructure in South Africa and attended sessions presented by SANAS, NMISA, NRCS and SABS.

SANAS also invested in the development and training of its own staff. During this period, 56 SANAS employees received formal training and eight bursaries were awarded. SANAS continued to roll out an internship programme and two interns were appointed for a one-year period. Two interns who had started their internship programmes in 2013/14, and completed them in 2014/15, were appointed to permanent positions during the period under review.

Looking ahead

Much work has been done. However, much work still lies ahead. Therefore, the Board will continue to focus the organisation towards contributing to government’s strategic objectives, improving SANAS’s external relationships and processes, raising awareness of SANAS and accreditation, increasing SANAS’s productivity, transforming the SANAS assessor pool and improving the quality of SANAS’s product and service delivery.

SANAS’s business will remain rooted in the international requirements for an accreditation body as documented in ISO/IEC 17011. SANAS underwent a successful peer evaluation by AFRAC in December 2014. In 2015, SANAS will be peer-reviewed by IAF and ILAC to maintain the agency’s global recognition of the equivalence of its accreditation system, thus opening a global network for the acceptance of South Africa’s goods and services globally.

Appreciation

The commitment of SANAS’s employees, including its management, continued to contribute to the organisation’s success. I would like to express my sincere thanks and appreciation to all SANAS staff members. To my fellow Board members, with whom I had the privilege to lead the organisation during this financial year, a special word of thanks for their devotion and dedication to SANAS.

A special thanks to Dr Rob Davies, Minister of Trade and Industry, Mr Mzwandile Masina, Deputy Minister of Trade and Industry, Mr Lionel October, Director-General in the dti, as well as all the staff of the dti who contributed to the activities and success of SANAS during the period under review.

Lastly, I would like to extend my sincere thanks and appreciation to all the SANAS assessors, as well as the members of the Specialist Technical Committee, the Approval Committee and the Advisory Forum, for their continued support and valued input in the accreditation process.

________________________________Prags Govender ChairpersonSouth African National Accreditation System



income

Amid the ongoing economic challenges South Africa faces, the financial year ending 31 March 2015 was characterised by a continuation of the improvements witnessed over the reporting period. The roll-out of new accreditation programmes in support of IPAP over the past years and the growth in accreditation programmes that SANAS maintained has contributed to a 4% growth in the number of accredited facilities. The growth in accreditation contributed 4.2% to income above budget.

SANAS’s testing laboratory accreditation programme remains the fastest-growing programme, closely followed by the inspection and certification body programmes.

In accordance with the Accreditation Act, SANAS’s income is derived from fees charged for accreditation services, the government grant, training services and projects. The largest contribution to SANAS’s income for 2014/15 was accreditation fees (46%), followed by the government grant (42%)

Below is the breakdown as a percentage of income.

.

Spending trends

Accreditation, as well as the compensation of core accreditation-function employees, makes up the greatest proportion of expenditure. With the restructuring project, known as Project Breakthrough, accreditation expenditure increased by 7%.

As SANAS is a service delivery entity, the overall compensation of employees has remained at 48% of total expenditure over the past three financial years. The other two major components of expenditure are travel costs (17% of total expenditure) and contracted assessors to assess facilities for accreditation (13%). Both these expenditure items remained constant.

The expenditure focus remained on accreditation services as the core function of SANAS at 53% of total expenditure. This includes the direct costs of providing accreditation services, such as travel costs and contracted assessors to assess facilities.

42%

46%

7%

5%0%

training

Interest

Accereditation fees

the dti grant

Projects/Sundry

4. CHIEF EXECUTIVE OFFICER’S OVERVIEW

TRAVEL

Other

ASSESSORs

SALARIES

17%

13%

48%

22%



Capacity constraints and challenges

The main challenge that has hampered the implementation of SANAS’s activities is limited office space and the cession of the associated 15-year lease agreement. SANAS applied to the Minister of Trade and Industry for permission to obtain immovable property. It also applied to National Treasury in terms of Section 54(2)(d) of the Public Finance Management Act (PFMA) for concurrence. Approval from the Minister of Trade and Industry was received on 14 February 2014 and final concurrence was received from National Treasury on 20 August 2014. On 7 October 2014, National Treasury informed SANAS that its baseline would be reduced by R29 million over the 2015/16 and 2016/17 financial years. This reduction in the baseline has created an affordability challenge in addressing its main obstacle to safe, suitable office space. It would therefore be crucial for SANAS to retain the current projected surplus, which will go a long way in mitigating the challenge introduced through the reduction in the baseline. SANAS has now appointed a project management company to find suitable office space. SANAS will then determine the exact amount it will require to purchase the building.

Discontinued activities

No programmes were discontinued during the period under review.

New or proposed activities

The demand by government for accreditation services to support its strategic objectives continues to grow. During the year under review, SANAS continued with the implementation of accreditation systems for the projects assigned to it through IPAP. This included finalising accreditation systems for road transport management and organic agricultural production and processing certification, which were rolled out in March 2015. SANAS continued to participate in the work of the Nuclear Energy Subworking Group on Skills, Localisation and Industrialisation, and also rolled out the Food Safety System Certification (FSSC) programme.

Requests for roll-over of funds

The 2014/15 surplus is R 14,048.154. As SANAS’s budget for 2015/16 and 2016/17 was cut by R29 million and it experiences increasing pressure to house its staff in suitable accommodation, it is critical that the 2014/15 surplus roll-over be approved.

Supply chain management

SANAS manages all procurement in line with the guidelines and instructions stipulated by National Treasury. The SANAS Supply Chain Unit consists of a supply chain officer and a supply chain administrator.

SANAS utilises the Advanced Procurement module on Pastel Evolution to maintain a supplier database. It also rotates suppliers when it requests quotations. Formal tenders are placed on the Government Tender Bulletin, as well as the SANAS website. Specification, evaluation and adjudication bid committees are established in terms of SANAS’s Supply Chain Management Policy.

During the 2014/15 financial year, SANAS received an unqualified audit with three findings raised.

plan for future to address financial challenges

The largest portion of SANAS’s income is derived from fees charged. SANAS will continue to grow the accreditation base. In addition, cost containment is being implemented with further areas identified where process improvements could contribute to ensuring that accreditation remains a financially viable business.

Economic viability

Notwithstanding the temporary reduction in the dti’s grant for the 2015/16 and 2016/17 financial years, SANAS’s business model remains economically viable.

Acknowledgements

In conclusion, I would like to express my gratitude to the Chairperson and SANAS’s Board of Directors, the SANAS team, assessors, committee chairpersons, committee members, accredited facilities, the dti and all stakeholders for their continued support and feedback. We are looking forward to an exciting and successful 2015/16. I also want to make use of this opportunity to recognise the important and substantive work of Ms Christinah Leballo as Senior Manager of SANAS. Ms Leballo retired in February 2015 and I wish her well in her future endeavours.

__________________Ron JosiasChief Executive OfficerSouth African National Accreditation System

70 000 000

60 000 000

50 000 000

40 000 000

30 000 000

20 000 000

10 000 000

2012/13 2013/14 2014/2015

sTRATEGY & dEVELOPMENT

cORPORATE SERVICES

aDMINISTRATION

aCCreditation



To the best of my knowledge and belief, I confirm the following:

• All information and amounts disclosed in the annual report are consistent with the annual financial statements audited by the Auditor-General.

• The annual report is complete, accurate and free from any omissions.

• The annual report has been prepared in accordance with the guidelines for annual reports as issued by National Treasury.

• The annual financial statements (Part E) have been prepared in accordance with the standards of Generally Recognised Accounting Practice (GRAP) applicable to the public entity.

• The Accounting Authority is responsible for the preparation of the annual financial statements and for the judgements made in this information.

• The Accounting Authority is responsible for establishing and implementing a system of internal control, which has been designed to provide reasonable assurance of the integrity and reliability of the performance information, the human resources information and the annual financial statements.

• The external auditors are engaged to express an independent opinion on the annual financial statements. In our opinion, the annual report fairly reflects the operations, performance information, human resources information and financial affairs of the entity for the financial year ended 31 March 2015.

Yours faithfully

_____________________Ron JosiasChief Executive OfficerSouth african national accreditation system14 August 2015

_____________________Prags GovenderChairperson of the BoardSouth african national accreditation system14 August 2015

5. STATEMENT OF RESPONSIBILITY AND CONFIRMATION OF THE ACCURACY OF THE ANNUAL REPORT



6.1 OUR VISION

To pioneer and lead the future of accreditation in Africa and deliver services with a spirit of excellence.

6.2 OUR MISSION

Our mission is to provide an impartial and transparent mechanism for organisations to independently demonstrate their competence, facilitate the beneficial exchange of

goods, services and knowledge, and provide a service that is recognised as equitable to best international practice, while reflecting the demographics of South Africa in all we do.

6.3 OUR VALUES

Four principles and attributes guide everything we do. They are integral to our role as a public entity that helps instill global trust in the goods and services produced by South Africa.

6. STRATEGIC OVERVIEW

6.4 LEGISLATIVE MANDATE

SANAS is classified as a Schedule 3A public entity in terms of the PFMA. It is established under the Accreditation Act and man-dated as depicted below:

Enabling Act Mandate

Accreditation for Conformity Assessment, Calibration and Good Laboratory Practice Act, 19 of 2006

SANAS is the sole national accreditation body established to provide an internationally recognised and effective accreditation and monitoring system for the Republic of South Africa by doing the following:• Accrediting or monitoring, for GLP-compliance purposes, organisations falling within its scope of activity• Promoting accreditation as a means of facilitating international trade and enhancing South Africa’s economic performance and transformation• Promoting the competence and equivalence of accredited bodies• Promoting the competence and equivalence of GLP-compliant facilities

Integrity Excellence Partnership Pioneering

We are a company that understands that

our organisation’s value is based on trust. Therefore, we are consistent in our actions, principles and outcomes, and we act with honesty without

compromising the truth.

We are determined to be the best we can be, to exceed expectations,

explore and implement new systems and continually

strive to give the best world-class service.

We firmly believe in the fact that together we can do more. We invest

in collaborations within and outside South Africa in order to advance our customers

and South Africa’s interests.

We are an innovative, forward-

thinking company and have the courage and confidence to come up

with new creative ways of accreditation that have the potential to change

Africa.



In order to achieve its mandate, the Accreditation Act empowersSANAS to perform the following functions:

• Promote the organisation as the sole national accreditation body in its scope of activity

• Encourage and promote the accreditation of calibration, testing and verification laboratories, certification bodies, inspection bodies, verification, rating agencies and any other type of body that may be added to its scope of activity

• Encourage and promote GLP compliance with principles adopted by the OECD for GLP facilities

• Promote the acceptance of its activities and those of all bodies accredited by SANAS or its international counterparts

• Promote the recognition of accredited bodies by users of conformity assessment

• Liaise with regional and international standard bodies and with technical regulatory and metrology organisations in respect of any matter related to accreditation

• Liaise with national regulators in respect of any matter related to accreditation

• Promote the use of accredited bodies to facilitate trade• Advise national, regional and international organisations

on the conditions for accreditation and on other issues related to accreditation

• Establish and maintain a register of all accredited organisations in South Africa

• Initiate, negotiate, conclude and maintain MRAs• Support government in activities on MRAs• Obtain and maintain membership of national or

international organisations that may assist SANAS to achieve its objectives and actively participate in such organisations

• Participate in formulating international and regional guidelines and standards to facilitate the accreditation process

• Formulate and implement national guidelines and standards to facilitate the accreditation process

• Promote recognition and protect the use of the SANAS logo nationally and internationally

• Promote and protect regional and international arrangement logos, such as those of ILAC and IAF

• Establish appropriate technical committees• Investigate methods of facilitating trade through

accreditation

6.6 ORGANISATIONAL STRUCTURE The organisation’s structure represents the collective accountability and responsibilities in ensuring adherence to good governance. At the apex of the structure is the Minister of Trade and Industry as the Executive Authority, who performs an oversight role and appoints the Board of Directors.

6.5 CORE FUNCTIONS



(Retired January 2015)

• Medical Laboratories• Certification Bodies• B-BBEE Verification • Blood Transfusion, GLP and GCP• General Testing

• Human Resources• Quality Management• ICT• Facility Management • Administration Co-ordination

• Research and Development• Knowledge Transfer (Training)• SADC Accreditation Regional Coordinator• AFRAC and SADCA Secretariats• Marketing and Communication

• Business Management• Procurement

MINiSTER: TRADE & INDUSTRYDr Rob Davies

BOARD OF DIRECTORSChairperson:

Mr Prags Govender

ADVISORY FORUM

AUDIT COMMITTEE & RISK COMMITTEE Chairperson

Mr Lunga Saki

SANAS CEOMr Ron Josias

HR & Remuneration Committee Chairperson

Mr Vernon Seymour

SENIOR MANAGER MECHANICAL &

PHYSICALMr Mpho Phaloane

SENIOR MANAGER CERTIFICATION,

TESTING,b-bBEEMs Christinah Leballo

SENIOR MANAGER CORPORATE SERVICES

Vacant

SENIOR MANAGER Strategy &

DEVELOPMENTDr Elsabe Steyn

CHIEF FINANCIAL OFFICER

Ms Christi Warren

COMPANY SECRETARY/Legal advisorMr Dawood Petersen

EXECUTIVE AUTHORITY

ACCOUNTING AUTHORITY

COMMITTEE OF THE

BOARD

MEMBERS OF KEY

MANAGEMENT

Organisational Structure

• Inspection Bodies• Calibration Laboratories• Testing Laboratories• Mechanical and Physical Testing Laboratories • Verification



Mr Prags GovenderChairperson: Board of Directors

Mr Ron JosiasSANAS CEO

Mr Phakamisa Zonke

Mr Vernon SeymourChairperson: HR and Remuneration

Committee

Mr Lunga SakiChairperson: Audit Committee and Risk

Committee

ms Jennifer Rathebe Ms Nomkhosi Magwaza

Mr Jacob Malatse ms BERENICE Lue Marais Mr Aluwani Ramabulana Mr Tervern Jaftha

BOARD MEMBERS

ms Anna-Marie Lotter



PERFORMANCE INFORMATIONPART B



PERFORMANCE INFORMATIONPART B

Ernst & Young Incorporated, as elected in terms of the Public Audit Act Section 4(3), performed the necessary procedures to obtain evidence about the usefulness and reliability of selected predetermined objectives presented in the annual performance report. The outcome of this review is captured in Part E (Annual Financial Information Statements) pages 58 to 105.

7. EXTERNAL AUDITOR’S REPORT ON PREDETERMINED OBJECTIVES



8.1 Service delivery environment

Globally, growth in the demand for accreditation is driven by the regulatory sectors. National demand largely arises from the strategic role SANAS plays in advancing the achievement of the NDP and the associated IPAP.

8.2 GLOBAL TRENDS

Global growth in demand for accreditation is largely fuelled by the green economy and regional integration initiatives. New and established global bodies, such as the World Trade Organisation (WTO), the World Anti-doping Agency (WADA), the International Electro-technical Commission (IEC) and retailer-based schemes like GlobalGap, increasingly recognise the value of a network of national accreditation bodies that can support their objectives. This realisation places the burden on SANAS to ensure that its accreditation programmes meet the demands of global bodies. This will make it possible for SANAS’s national CABs to demonstrate their competencies and facilitate the acceptance of their testing, inspection or certification results by these international bodies. Failure to meet the requirements of these global bodies may exclude goods and services produced in South Africa from being accepted. Such goods and services might also become uncompetitive due to the high cost of international conformity assessment services.

8.3 NATIONAL TRENDS

National growth is largely the result of the recognition of the importance of accreditation in achieving South Africa’s development goals and SANAS’s strategic role in locking in export markets and locking out unsafe, poor-quality goods and services as part of South Africa’s technical infrastructure.

8.4 OUTLOOK

South Africa’s infrastructure development plans and the further roll-out of the NDP, coupled with global protection initiatives, will continue to be the main drivers of the demand for accredited conformity assessment services in the near and medium term.

Although the economic volatility in developed economies remains a challenge, the exceptional economic growth in Africa, linked with the continent’s regional integration initiatives between SADC, the European Accreditation Cooperation (EAC) and the Common Market for Eastern and Southern Africa (COMESA) should further increase the demand for accreditation.

8.5 ORGANISATIONAL ENVIRONMENT

The period under review has seen SANAS continue with its focus on improving its efficiency and effectiveness through investment in information technology. Furthermore, SANAS’s Project Breakthrough, aimed at rightsizing the organisation, continues to encounter challenges with office space. In this regard, a second office was leased for a two-year period, while SANAS pursues a more permanent solution through the procurement of suitable office space. Although the required permission and consent were obtained from the Minister of Trade and Industry and the Minister of Finance, a reduction imposed by National Treasury on SANAS’s baseline for the 2015/16 and 2016/17 financial years has seen the savings earmarked for the procurement of the building being significantly reduced. An application is currently in progress to request a roll-over of the projected surplus of 2014/15. Such approval will again put SANAS on the right path to address its biggest challenge.

The 2014/15 financial year was concluded with a satisfactory performance as SANAS managed to achieve 100% completion of 12 of the 14 targets, which amounted to an overall performance score of 85.7% achievement of its targets. The remaining two targets were close to 100%.

8. SITUATIONAL ANALYSIS



8.6 KEY POLICY DEVELOPMENTS AND LEGISLATIVE CHANGES

The following legislation and policy changes may impact on the operations and finances of SANAS over the foreseeable future:

SANAS provides an accreditation service that impacts directly on all CABs, industry sectors and the economy by facilitating the national, regional and international acceptance of test, inspection and certification results, thus lowering the risk of rejection of South Africa’s goods and services. SANAS accreditation also supports South Africa’s development objectives, as well as its regulators, which use accredited results to ensure the health and safety of our citizens and the protection of our environment. SANAS’s goals are therefore aligned with those of the dti.

In accordance with SANAS’s five-year strategic plan, it is committed to the achievement of the following four strategic objectives:

1) IMPROVE SANAS’S OPERATIONAL EFFICIENCY TO DELIVER SERVICES WITH A SPIRIT OF EXCELLENCE

Over the past five years, SANAS has maintained a growth trajectory in its accredited facilities. The need to contain cost while improving service delivery is increasingly important for SANAS, as most of its processes have been very labour intensive. Investments in ICT are starting to take shape in financial management, supply chain management and accreditation processes. The financial and procurement processes have now been automated with the roll-out of the accreditation process schedules for the first quarter of 2015.

2) CONTRIBUTE TO INDUSTRIAL DEVELOPMENT AND THE PROTECTION OF HEALTH, SAFETY AND THE ENVIRONMENT

In order to contribute to industrial development, SANAS needs to deliver on the assigned task of IPAP. New accreditation programmes, developed over a shorter period of time, are crucial to the success of South Africa’s industrial development goals. Furthermore, regulators rely on accreditation as one of the conditions to allow CABs to operate within the regulatory

domain. Herein SANAS strives to ensure the robustness of its accreditation and assessment processes.

3) PROMOTE ACCEPTANCE OF SANAS-ACCREDITED RESULTS AMONG INTERNATIONAL PARTNERS TO ADVANCE SOUTH AFRICA’S TRADE AND INDUSTRY OBJECTIVES

The expansion of the global recognition of SANAS-accredited facilities, as well as its test, inspection and certification results, depends on the organisation’s continued compliance with international accreditation requirements, and its ability to influence international accreditation criteria. SANAS enjoys membership of the highest decision-making structures of ILAC and IAF.

4) SUPPORT REGIONAL INTEGRATION AND RELATIONS TO ADVANCE SOUTH AFRICA’S TRADE, INDUSTRIAL POLICY AND ECONOMIC DEVELOPMENT OBJECTIVES

Locking in exports and locking out poor-quality goods and services are key objectives of the South African technical infrastructure institutions of which SANAS is a key member. SANAS plays a leading role in developing the required accreditation infrastructure in SADC and the rest of the African continent. SANAS host the secretariats of both AFRAC and SADCA. It also holds the chairmanship of AFRAC.

Legislation and policy changes that may impact on SANAS

The impact on SANAS Risks to SANAS’s finances

Broad-based Black Economic Empow-erment Amendment Act, Act No. 46 of 2013

A reduction in the number of accredited B-BEEE verification agencies

Medium due to the uncertainty surround-ing SANAS’s future role in B-BBEE verification

Legal Metrology Act, Act No. 9 of 2014 An increased need for SANAS accredita-tion as a result of the extended scope from trade to legal metrology

Low as the increase will be gradual

8.7 STRATEGIC OUTCOME-ORIENTED GOALS



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out



Accreditation Provision is responsible for managing the accreditation of new and existing clients in compliance with legislation and international good practice. Ensuring a competent pool of accredited conformity assessment services to the IPAP priority sectors is a key driver. The subprogrammes cover testing laboratories, medical laboratories, blood transfusion facilities, veterinary laboratories, Good Clinical Practice (GCP) and GLP-compliant facilities, pharmaceutical laboratories, forensic laboratories and certification bodies, as well as mechanical and physical testing, calibration and verification laboratories, and inspection bodies. The programme is headed by a Senior Manager.

During the period under review, 60 new accreditations were awarded, bringing the number of accredited facilities to 1 507. The programme experienced significant growth in the expansion of accreditation scopes within a specific discipline.

The increase in the total number of accredited facilities was 4% (59) in 2014/15.

1 520

1 500

1 480

1 460

1 420

1 400

1 380

1 360

2012/13 2013/14 2014/15

Chem

& m

icr

Test

Mec

h &

Phys

Med

ical

Vete

rina

ry

B-BB

EE

Veri

ficat

ion

Calib

rati

on

Insp

ecti

on

Phar

mac

euti

cal

BTS

Fore

nsic

s

GCP/

GLP

CRM

PTS

Cert

ifica

tion

400

300

200

100

0

233

91

311

22

52

152

214 198

4

183

26

26

31

Total Number of Accredited Facilities: 1 50731 February 2015

Annual Growth in the number of accredited Facilities

The growth in accreditation contributed to 5% income above budget.

8.8 PROGRAMME OVERVIEW 8.8.1 ACCREDITATION PROVISION

1 419

1 447

1 507



8.8.2 Strategy AND DEVELOPMENT

PERFORMANCE HIGHLIGHTSThree new accreditation programmes were launched in support of IPAP. These are as follows:

New programmes FieldRoad Transport Management Certification Food Safety Management CertificationOrganic Agriculture Production and Processing

Certification

SANAS-accreditation support for Food Safety System Certification (FSSC 22000)

Key intervention: Establishing a system for the accreditation of certification bodies for food safety system certification (FSSC 22000).

Background

SANAS launched a new accreditation programme for the recognition of the FSSC 22000 scheme on 7 November 2014.

The standard covers the following:

• Perishable animal products (meat, poultry, eggs, dairy and fish products)

• Perishable vegetable products (packed fresh fruit and fresh juices, preserved fruit, packaged fresh vegetables and preserved vegetables)

• Products with a long shelf life at ambient temperature (canned products, biscuits, snacks, oil, drinking water, beverages, pasta, flour, sugar and salt)

• Chemical manufacturing (vitamins, additives and bio-cultures, excluding technical and technological aids)

• Food packaging material manufacturing

The FSSC 22000 scheme has additional requirements over and above SANS/ISO 22000. These additional requirements were established by the FSSC Foundation, represented by the FSSC Board of Stakeholders, which is responsible for the content of the scheme and the delivered certification audit. The scheme is fully recognised by the Global Food Safety Initiative (GFSI), a collaboration between some of the world’s leading food safety experts, including retailers, manufacturers and food service companies, as well as service providers active in the food supply chain. The aim of the structure is to facilitate the exchange of information and the identification of best practice at an international and multistakeholder level along the entire supply chain. The ultimate aim is safe food for consumers everywhere.

Accreditation by SANAS

SANAS will provide third-party attestation of the technical competence of the certification bodies certifying food safety systems, and will recognise the technical competence of the certification body.

SANAS-accreditation support for Organic Agricultural Production and Processing (OAPP)

Key intervention: Establishing a system for the accreditation of certification bodies for organic agricultural production and processing.

Background

SANAS launched a new accreditation programme for certification bodies certifying organic agricultural production and processing in accordance with SANS 1369 on 26 March 2015.

In recent years, there has been growing awareness of health and environmental issues. Consumers worldwide are becoming concerned about the quality and safety of the food that they eat. They are also concerned about the effects of pesticides, fertilizers, livestock effluent and veterinary drugs on their health. Organic agriculture is considered to be a viable solution to most of the concerns that have emerged in society. Organic agricultural production and processing is also a vehicle for sustainable development. In this regard, IPAP identifies organic agricultural production and processing as a food sector that represents a high-value niche subsector with the potential to create 20 000 jobs over five years in both the primary agriculture and agro-processing stages of the value chain. Moreover, since South Africa currently imports a significant proportion of the organic food demanded by consumers, there are both import replacement and export opportunities for this subsector.

The fundamental principles of the South Africa organic agricultural production and processing standard are as follows:

• Enhanced biological diversity within the whole system• Increased soil biological activity• Maintenance and improvement of long-term soil fertility• Recycling of wastes of plant and animal origin in order

to return nutrients to the soil, thus minimising the use of non-renewable resources

• Relying on renewable resources in locally organised agricultural systems

• Promoting the healthy use of soil, water and air, as well as minimising all forms of pollution that may result from

agricultural practices• Handling agricultural products, with an emphasis on careful processing methods, in order to maintain the

organic integrity and vital qualities of the product at all stages

• Consumer protection

The roll-out of this accreditation programme will also give consumers who buy certified organic farm products certainty



that they are actually buying organically produced products, because they will have been certified by the technically competent organic certification body that has been accredited by SANAS. This programme also supports the consumer protection provided for by the Agricultural Product Standards Act, Act No. 119 of 1990, for misleading or the misrepresentation of information on the labelling.


SANAS will provide third-party attestation of the technical competence of the certification bodies certifying organic agricultural production and processing in accordance with SANS 1369. The SANAS-accredited CABs will certify organic agricultural production and/or processing in terms of how they have fulfilled the requirements stated in SANS 1369. The certification will be based on the tangible evidence of organic agricultural production and processing as articulated in SANS 1369. Certification bodies that are to provide certification services according to SANS 1369 will be accredited according to ISO/IEC 17065. SANAS will recognise the technical competence of the certification body to certify the organisation according to the OAPP standard.

SANAS-accreditation support for Road Transport Management

Key intervention: Establishing a system for the accreditation of road transport management certification bodies.

Background

Despite concerted and ongoing efforts by the road and traffic authorities for an effective law enforcement strategy, the sharp increase in heavy vehicle traffic and the effects of overloading continue to be a major problem on South African roads. Overloading causes premature road deterioration and, together with inadequate vehicle maintenance, high levels of driver fatigue and poor driver health care programmes contribute significantly to South Africa’s poor road safety record.

In view of the above, the South African road freight and passenger transportation industry started to look at a possible solution and the finalisation of the Road Transport Management System (RTMS) SANS 1395. The SANAS accreditation programme for RTMS certification is considered a milestone for the industry and for stakeholders involved in the sector.

SANAS launched a new accreditation programme for RTMS certification in Pretoria on 19 March 2015. Stakeholders involved in road freight and passenger transportation, who will be implementing the RTMS and require certification, as well as certification bodies and other relevant stakeholders, such as representatives of the Department of Transport and the RTMS National Steering Committee, attended the launch. The roll-out of this new RTMS accreditation programme for certification bodies is the result of work done by a SANAS working group of technically knowledgeable experts who developed the SANAS Technical Requirements that address the scope of the

accreditation and the minimum qualifications and experience required in the RTMS.The implementation of the SANS 1395 family of standards will play a critical role in economic growth by ensuring efficient road freight transport between the country’s centres of production and its shipping ports, and vice versa, which will boost competitiveness.

Each organisation, consignor/consignee or operator that implements SANS 1395 will be required to develop appropriate processes, systems and measurement methods that will enable it to demonstrate compliance with this standard. The aim is for the RTMS to be implemented in a sustainable manner that will achieve the objectives of improved road safety, reduced road accidents, optimised payload efficiency, the maintenance of roadworthy vehicles and improved driver wellness and training.


SANAS will provide third-party attestation of the technical competence of the certification bodies certifying the RTMS in accordance with SANS 1395. SANS 1395 will recognise the technical competence of the certification body to certify organisations.



The overall satisfaction results from the customer survey is set out in the table below:

In 2015/16, SANAS will focus on improvements to address the issue of SANAS’s response to queries from CABs. The ICT programme will be rolled out in the first quarter of 2015 and Phase 3 of the ICT programme will start. The new system will introduce an online system through which accredited facilities will be able to send enquiries, apply for accreditation, extend their scopes, upload supporting documentation and view the status of their applications online from any internet-enabled device.

69 courses over a total of 187 training days to 1 015 trainees

5 new lead assessors and 165 technical assessors qualified

10 SEDA SMME representatives trained

6 SEDA senior centre managers trained

8.8.3 KNOWLEDGE TRANSFER (TRAINING)

PROGRAMME HIGHLIGHTS

SANAS’s Knowledge Transfer Unit has developed a solid reputation both nationally and regionally, and is a sought-after provider of training. It provides courses on matters of accreditation to the public, while undertaking projects and meeting SANAS’s in-house training needs. During the year under review, the programme delivered 69 courses to 1 015 participants over 187 training days.

SANAS’s operations rely on the availability of competent assessors who are contracted on an as-needed basis. Most of these individuals work in their fields of expertise and are trained by members of the Knowledge Transfer Unit prior to qualifying as SANAS assessors. SANAS’s pool of registered assessors now stands at 279, which includes 139 PDIs (an increase from 76 in the previous year).

In March 2014, SANAS and SEDA signed a Memorandum of Understanding to support the development of small and medium enterprise representatives from the SEDA incubators responsible for enterprise development, renewable energy, chemical processing, furniture manufacturing and testing, and agriculture and training skills. Ten individuals were trained in ISO/IEC 17205: 2005 Management Systems. SANAS also conducted a session on SANAS’s accreditation requirements and processes with six of the senior centre managers of SEDA’s incubators to enable them to understand the purpose and benefits of accreditation, SANAS’s accreditation requirements, the accreditation process, the financial and human resource needs, and the accreditation project planning and approach.

8.8.4 SERVICE DELIVERY: CUSTOMER EXPERIENCE

In 2014/15, SANAS conducted an independent CAB customer satisfaction survey. The survey covered the following:• The quality of SANAS’s assessments• The benefits of being accredited by SANAS• The quality of a SANAS accreditation certificate • The ease of doing business with SANAS• SANAS’s response to queries from CABs

Grading : 0 means “very poor” and 10 means “excellent”rounded off

7.57.0

10

9

8

7

6

5

4

3

2

1

Overall quality of SANAS’s product

Overall quality of SANAS’s services

Overall quality of SANAS’s relationships

7.5

7.97.2

7.0 7.1 6.8

10

9

8

7

6

5

4

3

2

1

The Quality Of SANAS’s Assessments

The benefits of being accredited by SANAS

The quality of a SANAS accreditation certificate

The ease of doing business with SANAS

SANAS’s response to queries from CABs

Grading : 0 means “very poor” and 10 means “excellent” rounded off



Sources of revenue

2014/15 2013/14Estimate Actual

amount col-lected

(Over)/Under Collection

Estimate Actual amount

collected

(Over)/Under Collection

R’000 R’000 R’000 R’000 R’000 R’000Accreditation fee income 40,051 39,183 868 38,057 35,598 2,459Training income 5,913 5,604 309 5,893 5,982 -89Total 45,964 44,787 1,177 43,950 41,580 2,370

8.9 REVENUE COLLECTION

The SANAS accreditation fee income consists of annual fees

as well as income received on additional accreditation services

requested by the customers. The SANAS revenue collection

policy for fee income therefore differs for these two categories.

Annual fees are required to be paid by the 31st of May each year

whereas other fee income requires payment to be made before

the required service is delivered in order for SANAS to make

the necessary travel arrangements. For SANAS to facilitate

the process of additional accreditation services, invoices are

issued upon request however the recognition of income only

occurs when the particular service has been delivered. In special

circumstances, deviation from this policy is allowed however

these are kept to a bare minimum in order to keep control over

these debtors. Therefore the under-collection at year-end is

predominantly annual fees.

The SANAS training revenue consists of invoices issue for

attendance of SANAS courses offered through the Knowledge

Transfer division. Although payment is usually required at

registration, some customers have made arrangements to settle

accounts at a later stage and therefore certificates are not issued

until full payment is received.

8.10 CAPITAL INVESTMENT

Infrastructure pro-jects

2014/15 2013/14Budget Actual

expenditure(Over)/Under expenditure

Budget Actual expenditure

(Over)/Under expenditure

R’000 R’000 R’000 R’000 R’000 R’000Acquisition of immov-

able property

50,000 - 50,000 - - -

SANAS did not acquire immovable as anticipated during 2014/15

as concurrence by the Minister of Finance for acquisition of

immovable property as well as approval to retain 2013/14 surplus

was only received during the financial year. During October 2014

SANAS received notice of a reduction in baseline for 2015/16

and 2016/17 financial years totalling R29 million. This reduction

resulted in the ring-fencing of approved reserves towards

operational costs for these two financials years. Funds available

for the building (R34.8 million) are therefore less than the original

estimation. SANAS has appointed a project management

company to assist with procuring an appropriate building however

this company will now first establish the affordability of a building

before further work is done. SANAS will also request to retain

the 2014/15 surplus of R14 million in order to secure immovable

property and fund the fit outs required.



PART CGOVERNANCE



PART CGOVERNANCE

The Board is committed to effective corporate governance to ensure that the interests of SANAS and its stakeholders are paramount. Consequently, SANAS subscribes to the principles of transparency, accountability and business integrity in all its dealings with stakeholders.

The Board, as the custodian of corporate governance, ensures that SANAS endorses and implements the Code of Corporate Practices and Conduct contained in the King Code and Report on Governance for South Africa (King III). During the period under review, an independent internal audit was conducted by Outsourced Risk and Compliance Assessment (Pty) Ltd (ORCA) to assess SANAS’s compliance with the prescripts of King III. The auditors’ overall conclusion was that SANAS complies with the prescripts of King III, and the Board was satisfied with SANAS’s levels of compliance.

The Board is cognisant of the benefits that SANAS can derive from good corporate citizenship by adhering to the prescripts of King III. Accordingly, the Board does not only consider SANAS’s financial performance, but also its non-financial performance, aiming to achieve a balance of integrated economic

performance, service delivery, and social and environmental performance.

SANAS continually strives to improve its compliance with the prescripts of King III. The internal auditors conducted an independent audit into SANAS’s compliance and indicated that SANAS was in compliance with the prescripts of King III. SANAS’s compliance is monitored by the Board and the respective subcommittees.

9.2 Portfolio committee

The Portfolio Committee on Trade and Industry exercises oversight over the service delivery performance of SANAS and, as such, reviews the non-financial information contained in the annual report. It is concerned with service delivery and enhancing economic growth.

SANAS met with the Portfolio Committee on Trade and Industry on two occasions during the year under review, as indicated below:

9. GOVERNANCE9.1 Introduction

Date Committee Reasons for engagement 8 July 2014 Portfolio Committee on Trade and

Industry Briefed by the dti on industrial develop-ment

27 January 2015 Portfolio Committee on Trade and Industry

Visit to SANAS’s offices to gain a deeper understanding of SANAS’s function

In terms of section 6(2)(b) of the Accreditation Act, the Minister of Trade and Industry is the Executive Authority, as contemplated in section 52 of the PFMA. The oversight function of the Executive Authority rests by and large on the prescripts of the PFMA.

The PFMA governs and gives authority to the Executive Authority for oversight powers.

SANAS met with the Minster of Trade and Industry and senior staff members of the dti as depicted below:

9.3 Executive Authority

Date Reasons for engagement 29 July 2014 Minister and senior staff Visit by the Minister to SANAS’s offices

as part of his annual communication with the Chairperson of SANAS’s Board of Directors and the CEO

9 October 2014 Minister IPAP discussion and reporting on entities’ contributions

12 June 2014 Deputy Director-General Meeting with the technical infrastructure institutions to report on IPAP contribu-tions and matters concerning these institutions

11 July 20147 November 2014



Quarterly reports submitted to the dti

Submission Date submittedQuarter 1 31 July 2014Quarter 2 31 October 2014Quarter 3 30 January 2015Quarter 4 30 April 2015

9.4 The Board

9.4.1 Introduction

In terms of section 6(2)(a) of the Accreditation Act, the Board is the Accounting Authority, as contemplated in section 49(2)(a) of the PFMA.

The Board confirms its commitment to the highest standards of corporate governance and recognises that practices and procedures can always be improved. Therefore, the Board will continually review SANAS’s own norms and standards.

SANAS is and remains committed to the principles of openness, integrity and accountability, and continually reviews its processes and practices to ensure compliance with legal obligations and adherence to good corporate governance as captured in King III and the PFMA, which is an integral part of SANAS’s objectives.

The primary objective of any system of corporate governance is to ensure that the Board and management, who manage the day-to-day operations of SANAS, have been entrusted to carry out their responsibilities faithfully and effectively, placing the interest of the organisation ahead of their own. This process is facilitated through the establishment of appropriate reporting and control structures within SANAS.

The Board, as the Accounting Authority, is accountable to the Executive Authority and is ultimately responsible for the implementation of sound corporate governance practices in accordance with the relevant provisions of King III and the dti/SANAS Shareholders’ Compact, as agreed to between the Executive Authority and the Accounting Authority. The Board and its subcommittees will continue to consider and pay attention to issues of governance, including transparency, disclosure, financial control and accountability, during the next financial year and thereafter.

The Board has grown from strength to strength in meeting and realising its roles and responsibilities in accordance with its governing terms of reference, which are aligned with the latest developments in corporate governance.

The Board is of the opinion that, save as specifically disclosed, SANAS has complied, in all material respects, with the requirements of King III.

An annual self-assessment review process has been developed for the Board, individual directors and Board subcommittees. All Board members have access to the advice and services of the Company Secretary and are entitled to seek independent professional advice at the company’s expense. They also have unrestricted access to all company information, records, documents and property. The Board meets at least four times a year, and additional meetings are convened at short notice to consider specific business. The Board has delegated specific responsibilities to the subcommittees that are chaired by independent non-executive directors. All subcommittees have specific terms of reference.

9.4.2 Roles and responsibilities of the Board

In addition to the roles and responsibilities that the Board executes in accordance with the prescripts of King III and the Accreditation Act, it also:

• approves SANAS’s Strategic Plan, Annual Performance Plan and Business Plan;

• monitors the implementation of the plans and approves all budgets;

• ensures that policies and procedures that provide for effective risk management and internal controls are established and reviewed;

• recognises the need for establishing and appointing committees to enable it to comply with the PFMA and other legal requirements;

• determines the composition and, as it sees fit, amends, develops and implements any rules, regulations and procedures of committees established, which in the opinion of the Board, may be necessary;

• formulates and makes publicly available rules consistent with the provisions of the Accreditation Act, including the form and procedure for applications for accreditation or GLP compliance, fees applicable to different categories of accreditation or GLP compliance, and fees for training or other projects undertaken;

• monitors the proper use of the name, accreditation body logo or accreditation symbol of SANAS’s logo, as well as regional and international accreditation logos; and

• approves all permanent positions of senior managers.

Board members undertake to act in the best interest of SANASby ensuring adherence to legal standards of conduct, seek



independent advice in connection with their duties following anagreed procedure and disclose real or perceived conflicts to theBoard and deal with them accordingly.

The composition of the Board is premised on a unitary board structure that provides solid interaction among members of the Board of Directors in the decision-making process on strategy, performance, planning and the allocation of resources, risk, ethics and communication with stakeholders. In terms of the Accreditation Act, the Board should consist of no less than 10 members and no more than 15 members.

Accordingly, the Board comprises of 12 Board members, all of whom are appointed by the Minister of Trade and Industry as

the Executive Authority for SANAS. There are 11 non-executive directors and one executive director (the CEO). The Chief Financial Officer is invited to attend all board meetings. All non-executive directors are independent of a management function and have no conflict of interest with the business of SANAS.

The performance of the members of the Board is evaluated annually to ensure the effectiveness of the Board and to identify any areas of improvement. A self-evaluation exercise was conducted during the financial year under review. A report was compiled by the Company Secretary and submitted to the Executive Authority. The performance of the Board was significantly high.

Name Designation (in terms of the public

entity board structure)

Appointment term Qualifications Area of expertise

Other committees

Prags Govender

Chairperson of the Board

1 December 2013 MBA from the National University, California

Biological Science

Lunga Saki Chairperson of the Audit Committee and Chairperson of the Risk Committee

1 December 2013 BCom from the University of Cape Town

FinanceAudit and FinanceStrategyRisk ManagementCorporate GovernanceSupply ChainAdvanced Verifications and BEE

Audit Committee Risk Committee

Vernon Seymour

Chairperson of the Human Resources and Remuneration Committee

1 December 2013 LLM from Harvard University

Law Human Resources and Remuneration Committee

Jennifer Rathebe

1 December 2013 MSc in Chemistry from the University of Salford

Biology and Chemistry

Human Resources and Remuneration Committee

Berenice Lue Marais

1 December 2013 MBA from the American University KOGOD School of Business

Finance and Development

Jacob Malatse

1 December 2013 MPhil from the University of Stellenbosch

Engineering Audit Committee Risk Committee

9.4.3 Composition of the Board



Name Designation (in terms of the public

entity board structure)

Appointment term Qualifications Area of expertise

Other committees

Phakamisa Zonke

1 December 2013 CA (SA) Accountancy, Finance and Property


Tervern Jaftha

1 December 2013 BAdmin from the University of Pretoria

Quality and Standards


Nomkhosi Magwaza

1 December 2013 MBA from the University of Durban - Westville

Black Economic Empowerment


Anna-Marie Lötter

1 December 2013 MPhil from the University of Pretoria

Industrial Development and Technical Infrastructure

Aluwani Ramabulana

1 December 2013 BSc from Oregon State University andMBA from Nyenrode University

Engineering and Transport Finance


Ron Josias Chief Executive Officer

MBA from the University of WalesMPhil: International Management from the University of Pretoria

Engineering Management

The Board provides strategic direction and is the legally accountable body for the daily operations of SANAS. The Board had adopted appropriate formal terms of reference in the Charter in line with the requirements of King III, the PFMA and

the Shareholders’ Compact entered into between SANAS and the dti. The Board has conducted its affairs in compliance with this Charter and all other legal obligations.



Board Member Meeting attendance records23 May 2014 *25 July

20145 September

2014*1 December

2014 2 December

20156 March

2015Prags Govender X X X X X XLunga Saki X X X X X XJennifer Rathebe X X - X X XBerenice Lue Marais

- X X X X X

Jacob Malatse - - X X X XPhakamisa Zonke - X - X X XTervern Jaftha - - X X X XNomkhosi Magwaza

X X - X X -

Anna-Marie Lötter X X X X X XVernon Seymour X X X X X XAluwani Ramabulana

X X X X X X

Ron Josias CEO X X X X X XBy invitationDawood Petersen Company

Secretary X X X X X X

Christi Warren CFO X X *** X X X*This was a special board meeting, *** On annual leave; x Attended; - Absent

9.4.4 Remuneration of Board members

The members of the Board receive a stipend for attending meetings in accordance with National Treasury’s determination. The Board’s remuneration is based on SANAS’s classification as a schedule 3A entity. Eight of the members of the Board are employed by an organ of state and are not entitled to remuneration other than a refund for out-of-pocket expenses incurred to attend a meeting.

9.4.5 Committees

The Board formally delegates duties to management through different structures, such as the responsibility and accountability for operations to the Executive Management Committee. The subcommittees of the Board are appointed according to the skills set required by such committees. These subcommittees are the Audit Committee, the Risk Committee and the Human Resources and Remuneration Committee.

9.4.5.1 Audit Committee

The Audit Committee is an independent statutory committee appointed by the Board, which delegates duties and responsibilities to it in accordance with section 77 of the PFMA. In terms of section 51(1)(a)(ii) of the PFMA, the Board, as the Accounting Authority, must ensure that SANAS has and maintains a system of internal audit under the control and direction of the Audit Committee.

The function of the Audit Committee is to assist the Board to discharge its duties relating to the safeguarding of assets and liabilities, the operation of adequate systems of control, reviewing financial information and preparing annual financial statements.

The Audit Committee’s terms of reference are formalised in a Charter approved by the Board. During the period under review, the Audit Committee conducted its affairs in accordance with the Charter, and discharged its responsibilities as required by the Charter, the Companies Act, 71 of 2008 and the prescripts of King III.

9.4.5.1.1 Audit Committee’s Responsibilities

The Audit Committee has adopted appropriate terms of reference in accordance with the requirements of section 77 of the PFMA and Treasury Regulation 27.1, and conducted its affairs in compliance with these terms of reference. Furthermore, the Audit Committee ensured compliance with the relevant provisions of the Shareholders’ Compact entered into between SANAS and the dti.

The Audit Committee performs an oversight function and advises the Board in carrying out its responsibilities as they relate to financial, management and other reporting practices, internal controls and the management of risks, integrated reporting, combined assurance, information technology governance, and compliance with laws, regulations and ethics.



The Audit Committee reports to the Board on any matter identified during the course of carrying out its duties that it considers to be significant.

The Audit Committee performs or undertakes, on behalf of the Board, any other tasks or actions as the Board may authorise from time to time.

In addition, the Audit Committee: • reviews and assesses the adequacy of management

reporting to the Board and management in terms of the quantity, quality and timing of information necessary to understand and report internally and externally on SANAS’s operations and financial condition;

• reviews the accounting policies and practices in view of the applicable statutory requirements and generally accepted accounting principles, and evaluates SANAS’s financial statements for reasonability and accuracy;

• satisfies itself with regard to the integrity and prudence of management control systems, including the review of policies and/or practice;

• ensures that the Board and management are aware of any matters that might have a significant impact on the financial condition or affairs of SANAS; and

• monitors the accomplishment of established objectives through the mission statement, business plan and transformation process.

9.4.5.1.2 Audit Committee Membership and Attendance

The Audit Committee comprises four members, of which the Chairperson is a non-executive director. In accordance with its Charter, the Audit Committee is required to meet at least four times during a financial year. During the year under review, the Audit Committee held five meetings.

Audit Committee

member

Meeting attendance records

14 May 2014

*11 July 2014

15 August 2014

14 November 2014

27 February 2015

Lunga Saki X X X X XJacob Malatse X X X X XPhakamisa Zonke

- - - - -

Aluwani Ramabulana

X X X X X

By invitationRon Josias Chief Executive

OfficerX X X X X

Dawood Petersen

CompanySecretary

X X X X X

Christi Warren Chief FinancialOfficer

X X X X X

* This was a special Audit committee meeting, x Attended; - Absent

9.4.5.2 Risk Committee

The Board acknowledges that it is responsible for the entire process of risk management, as well as forming its own opinion on the effectiveness of the process. The Board has established a Risk Committee that operates under an appropriate Charter and is chaired by an independent non-executive member. The Risk Committee’s mandate is to assess the effectiveness of SANAS’s risk management process. SANAS’s management is accountable for designing, implementing and monitoring the process of risk management and integrating it into the organisation’s day-to-day activities.

Under the supervision of the Risk Committee, SANAS’s management assessed, reviewed and updated the

organisational Risk Management Framework during the period under review. The Risk Management Framework was implemented in all streams and business units to ensure that risks are understood and the controls necessary to mitigate these risks are in place.The Risk Committee performs an oversight function and advises the Board primarily on matters relating to risks that SANAS is and may be exposed to.

More specifically, the Risk Committee: • monitors major risk areas, including the financial, legal

and fiscal risks, the internal control environment and the control process;

• monitors the areas that expose SANAS to potential financial risks and ensures that SANAS’s management effectively manages the risks;



• ensures that an effective system of accounting and internal control is established and maintained to manage financial risks;

• oversees the development and annual review of a Risk Management Framework to be recommended for approval to the Board;

• monitors the implementation of the Risk Management Framework by means of risk management systems and processes, and quarterly reports;

• makes recommendations to the Board concerning SANAS’s levels of risk tolerance and appetite;

• obtains assurance that risks are managed within the levels of tolerance and appetite as approved by the Board;

• ensures that the Risk Management Plan is widely disseminated throughout SANAS and integrated into its day-to-day activities;

• obtains assurance that risk management assessments are performed on an ongoing basis;

• obtains assurance that frameworks and methodologies are implemented to increase the possibility of anticipating unpredictable risks;

• obtains assurance that SANAS considers and implements appropriate risk strategies and responses;

• obtains assurance that continuous risk monitoring by SANAS takes place;

• liaises closely with the Human Resources and Remuneration Committee to exchange information relevant to risk;

• expresses its formal opinion to the Board on the effectiveness of the system and process of risk management; and

• reviews reports concerning risk management to be included in the integrated report to ensure that it is timely, comprehensive and relevant.

9.4.5.2.1 Risk Committee Membership and Attendance

The Risk Committee comprises three members, of which thechairperson is a non-executive director.

Risk Committee

member

Meeting attendance records

14 May 2014

*11 May 2014

15 August 2014

14 November 2014

27 February 2015

Lunga Saki X X X X XJacob Malatse X X X X XPhakamisa Zonke

- - - - -

Aluwani Ramabulana

X X X X X

By invitationRon Josias Chief Executive

OfficerX X X X X

Dawood Petersen

CompanySecretary

X X X X X

Christi Warren Chief FinancialOfficer

X X X X X

* This was a special Risk committee meeting, x Attended; - Absent

9.5 INTERNAL CONTROL AND AUDIT

SANAS maintains internal controls and systems designed to provide reasonable assurances as to the integrity and reliability of the financial statements and to adequately safeguard, verify and maintain accountability for its assets. Such controls are based on established policies and procedures and are implemented with an appropriate segregation of duties. The internal audit function operates under the direction of the Audit Committee and the Risk Committee, which approve the scope of the work to be performed. Significant findings are reported to the Audit Committee and the Risk Committee.

9.6 COMPLIANCE WITH LAWS AND REGULATIONS

The Board, with the assistance of the Audit Committee and the Risk Committee, ensures that SANAS’s management has the necessary mechanisms in place for compliance with all the legislation and regulations governing its activities. The specific steps involved in carrying out this responsibility include the following:

• Reviewing policy documents, which should incorporate compliance with laws, regulations, ethics and policies, and compliance with rules regarding conflict of interest



• Monitoring compliance with policies and procedures • Taking note of significant cases of employee conflicts of

interest, misconduct or fraud and the resolution of such cases

• Reviewing the internal auditor’s report(s) relating to the scope of reviews of compliance, any significant findings, and the resolution and follow-up on findings and recommendations

• Monitoring developments and changes in legislation relating to the responsibilities and liabilities of SANAS’s management, and monitoring and reviewing the extent to which SANAS’s management is meeting its obligations

• Monitoring developments and changes in the legislation and regulations that relate to SANAS’s operations

• Monitoring and reviewing the extent to which SANAS is complying with such legislation.

9.7 FRAUD AND CORRUPTION

SANAS manages fraud, corruption, theft, maladministration and any other dishonest activities of a similar nature in accordance with the provisions of its guiding policy, the Anti-fraud and Corruption Policy, as well as the Fraud Prevention Plan and Anti-fraud Charter.

It is the responsibility of SANAS employees to report all incidents of fraud, corruption, theft, maladministration or any other dishonest activity of a similar nature to their managers. If employees are uncomfortable about reporting such matters to their managers, they should report the matter to their manager’s superior, with final recourse to the CEO. Employees may also report such matters to the Human Resources Department if they wish to remain anonymous or for any other reason.

All managers are responsible for the detection, prevention and investigation of fraud, corruption, theft, maladministration or any dishonest activities of a similar nature within their areas of responsibility.

SANAS will take appropriate legal recourse to recover losses or damages arising from fraud, corruption, theft or maladministration. The responsibility to conduct investigations relating to allegations of fraud, corruption, theft, maladministration or any other dishonest activity of a similar nature resides with the CEO.

The confidentiality and protection of whistleblowers is protected in accordance with the Protected Disclosures Act, 26 of 2000. No cases were reported in the period under review.

9.8 MINIMISING CONFLICTS OF INTEREST

SANAS, as part of the dti’s COTII, acknowledges the importance of ensuring that potential conflicts of interest are mitigated. In this regard, SANAS has adequate measures in place to ensure that possible conflicts of interest do not exist.

SANAS has processes and procedures in place to mitigate against the possible associated risks emanating from instances where a perceived conflict of interest cannot be avoided.

9.9 CODE OF CONDUCT

SANAS’s Code of Conduct is governed by its Code of Ethics and Business Conduct. The Code of Ethics and Business Conduct sets out the following:

• SANAS’s values • The framework for identifying conduct that is ethical and

acceptable for SANAS employees • The context for the ethical use of authority • The alignment of SANAS’s guidelines for ethical behaviour

with those of the public service

SANAS places a strong emphasis on the implementation of the Code of Ethics to ensure that all employees and stakeholders are aware of the basic values held by the organisation and its employees and to ensure accountability within the organisation in terms of fundamental ethical values and value systems.

SANAS subscribes to the Code of Conduct for the Public Service as detailed in the Public Service Regulations. This code of conduct has been integrated into SANAS’s Code of Ethics and Business Conduct. The Code of Conduct provides a guideline to employees as to what is expected of them from an ethical point of view, both in their individual conduct and in their relationships with each other. Compliance with the Code of Conduct can be expected to enhance professionalism and help ensure confidence in the organisation.

Failure to comply with any provisions of the Code of Conduct shall be interpreted as a violation of the core values of SANAS and the employee concerned shall be dealt with according to the relevant grievance or disciplinary process.

9.10 COMPANY SECRETARY

The Company Secretary, as the overseer of corporate governance, is responsible for assisting the Board to ensure adherence to the principles of sound corporate governance. The Company Secretary has an arms’ length relationship with the Board. The Company Secretary informs the Board of



any legislation, regulations or policies relevant to or affecting SANAS and reports non-compliance with the relevant legislation, regulations or policies to the Board.

During the year under review, the Company Secretary assisted in providing ongoing training to members of the Board on the implications of King III.

9.11 SOCIAL RESPONSIBILITY

During the period under review, SANAS continued with its social responsibility in South African communities. In this regard, it adopted the Madzibandlela Orphanage Home and the Boitumelo Community Project. The Madzibandlela Orphanage Home takes care of vulnerable and abused children in the community and the Boitumelo Community Project aims to create a conducive environment for orphans and street children. SANAS and SANAS staff donated various necessities, including an industrial bread oven and their time, to support the two projects

9.12 HEALTH, SAFETY AND ENVIRONMENTAL ISSUES

SANAS makes the necessary resources available to actively manage occupational health, safety and environmental issues in line with the Occupational Health and Safety Act of 1993. In August 2014, SANAS updated its Health, Safety, Security and Emergency Response Procedure HR 12-02, which provides clear principles and guidelines to be followed in ensuring effective health and safety working conditions for employees of SANAS, the prevention of health hazards in the workplace and the effective handing of emergency response situations.



We are pleased to present our report for the financial year ended 31 March 2015.

Audit Committee Responsibility

The Audit Committee reports that it has complied with its responsibilities arising from Section 51(1)(a)(ii) of the PFMA and Treasury Regulation 27.1. The Audit Committee also 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 its responsibilities as contained therein, except that it has not reviewed changes in accounting policies and practices.

The Effectiveness of Internal Control

The Audit Committee, reviewed the effectiveness of internal controls, information communication technology and control. The Audit Committee assessed the effectiveness of the internal auditors and was satisfied that the internal auditors had addressed all the identified areas of risks, culminating in the internal audit plan. In addition, the Audit Committee reviewed the activities of the internal auditors, including the internal audit plan and coordination with the external auditors. The Audit Committee approved the internal audit plan. The Audit Committee had its annual meeting with the internal auditors to discuss matters relating to performing the internal audit function and no significant matters were raised or discussed.

The following internal audit work was undertaken, completed and adequately resolved during the 2014/15 financial year:

• Audit of Pre-determined Objectives/Performance Information

• Procurement/Supply Chain Management Review• Human Resources (payroll) Review• Cash and Bank Review• Strategic Objectives (review of controls relating to

strategic risks)• Mechanical and Physical Review• Certification, Testing and B-BBEE Review• Research and Development Review• Information Technology Review• Risk Assessment and Risk Register Review• Internal and External Audit Findings Review• Performance Information Review (first, second, third and

fourth quarters)

The Risk Committee is tasked with obtaining assurance on the overall system of risk management. The Risk Committee reviewed the risk management system of SANAS and the effectiveness of the overall system of risk management. Annually, a risk workshop takes place during which the Board, the management of SANAS and the internal auditors meet to assess the existing and emerging risks that SANAS may potentially be exposed to. The outcomes of the risk workshop culminates in the Risk Register, which is approved by the Board and utilised to measure actions taken to mitigate the realisation of the risks contained in the Risk Register. The Risk Committee reviewed the legal and compliance risks as part of SANAS’s risk assessments. The Risk Committee assess SANAS’s compliance with laws and regulations, culminating in the Legal Register.

In-Year Management and Monthly/Quarterly Report

The Audit Committee, at each meeting, considered the financial statements for the quarter under review to detemine the adequacy, reliability and accuracy of the financial information provided by the management of SANAS. In addition, the Audit Committee reviewed the quarterly report, which is the culmination of SANAS’s overall performance for the quarter under review. This includes reviewing SANAS’s compliance with the performance management and reporting systems, as well as SANAS’s quarterly performance against the pre-determined performance objectives. SANAS reports monthly and quarterly to National Treasury and the dti on its overall performance.

10. Report of the Audit Committee



Report of the Audit Committee and the Risk Committee

Evaluation of Financial Statements

The Audit Committee has reviewed the annual financial statements, as prepared by the management of SANAS, and is satisfied with the manner in which the financial position of SANAS is presented. The Audit Committee presented the annual financial statements of the public entity for approval to the Board and the Board approved them.

We have reviewed the entity‘s implementation plan for audit issues raised in the prior year and we are satisfied that the matters have been adequately resolved.

The Audit Committee concurs and accepts the conclusions of the Auditor-General on the annual financial statements and is of the opinion that the audited annual financial statements be accepted and read together with the report of the Auditor-General.

_________________ Mr Lunga Saki Chairperson of the Audit Committee South african national accreditation system31 July 2015



HUMAN RESOURCEs MANAGEMENTPART D



PART D

The Human Resources and Remuneration Committee is tasked with providing the Board with recommendations on policy matters relating to the following:• The recruitment of senior staff, including the CEO • Recruitment, benefits, incentives and bonus

arrangements to employees• Succession and retention planning for senior staff

members, including the CEO • Areas of scarce and critical skills and • The meeting of equity targets

This Committee held four meetings during the year under review. It confirms that it has conducted its affairs in accordance with its terms of reference and has discharged all its responsibilities as set out therein and delegated to it by the Board.

The roles and responsibilities of the Human Resources and Remuneration Committee include the following:

• Annually reviewing the remuneration terms and conditions and making recommendations to the Board

• Considering any changes to the employee benefit structures and making recommendations to the Board

• Considering the remuneration, incentive and benefit arrangement of the CEO, including pension rights and any compensation payments, and making recommendations to the Board

• Considering cost of living increases, performance bonus awards, changes to employees’ terms and conditions and

any other related activities, and making recommendations to the Board

• Reviewing the Human Resources Strategy and human resources policies, and making recommendations to the Board

• Promoting and fostering a culture of excellence throughout SANAS; and

• Ensuring compliance with applicable legislation and regulations

11.1.1 Remuneration Policy

SANAS aims to attract, retain and motivate employees of the highest calibre, while at the same time aligning its remuneration packages with market-related remuneration based on best practice and benchmarking with similar organisations. SANAS’s approach to remuneration is all-inclusive, balanced and mindful of the following elements:

• A guaranteed remuneration package • Eligibility for a discretionary performance bonus • Individual growth and development• A stimulating and professional work environment

11.1.2 Human Resources and Remuneration Committee membership and attendance

The Human Resources and Remuneration Committee currently comprises four non-executive directors.

Human resources andremuneration

committee member

Meeting attendance records15 April 2014 *2 July 2014 24 October 2014 13 February 2015

Vernon Seymour X X X XJennifer Rathebe X X X XTervern Jaftha X X - XNomkhosi Magwaza

- X X -

By invitationDawood Petersen Company

Secretary X X X X

Ron Josias Chief Executive Officer

**** X **** ****

Elsabe Steyn Senior Manager X **** **** ****Godfrey Zulu Human Resources

ManagerX X X X

**** Not invited; x Attended; - Absent . * This was a special meeting

11. HUMAN RESOURCES MANAGEMENT 11.1. INTRODUCTION



The Human Resources Manager is responsible for managing the day-to-day operations, including the administration of the human resources policies, procedures and programmes, implementing effective and efficient human resources systems, and ensuring the effective implementation of SANAS’s Human Resources Strategy.

The value of human capital within the public entity is critical, as SANAS must be able to achieve its mandate in terms of the Accreditation Act, as well as be in a position to respond to clients’ different needs and expectations.

The aim of the Human Resources Management function is to improve vacancy management, staff turnover and performance management, as well as to comply with statutory requirements and advance SANAS as a learning organisation.

11.2 The SANAS Performance Management Framework

The SANAS Performance Management Framework is based on a balanced scorecard philosophy and balanced scorecard principles. An organisational scorecard, aligned with SANAS’s Strategic Plan, is used to agree on individual scorecards in April every year. Quarterly reviews are used to measure performance, which culminates in annual performance reviews.

11.3 Employee Wellness and Appreciation Programmes

SANAS has designated a member of the senior management to the service of the Employment Equity Committee. This person is responsible for equity issues and health promotion programmes. SANAS’s policies are non-discriminatory and do not discriminate unfairly against employees on the basis of their HIV status.

During the year under review, SANAS held an Employee Wellness Day in partnership with Discovery Health, where holistic screening tests were conducted. The theme for the year under review was mental fitness. SANAS arranged for presentations by psychologists, and staff also attended emotional intelligence training sessions.

12. POLICY DEVELOPMENT 12.1 Key achievements

All human resources queries and complaints were addressed and all performance contracts and performance reviews were completed. SANAS allocated bursaries to staff members. All the

compliance reporting was done in the form of the Employment Equity Report and the Workplace Skills Plan.

SANAS continues to provide learning, personal growth and development opportunities for its employees. The skills development initiatives available to employees include short courses, in-house training and bursaries.

12.2 Challenges faced by SANAS

SANAS’s strategy to maintain, grow and support national, regional and international developments in accreditation continues to place a significant demand on its human resources. These resources include external contracted assessors, as well as internal administration and management resources. SANAS’s ability to sustain and grow its existing customers and programmes, integrate new programmes and support accreditation developments will depend on its ability to attract, train and retain personnel and assessors with the skills that will enable it to keep pace with the growing demand for its services. Most of SANAS’s personnel possess technical and managerial capabilities that are difficult to replace. Their expertise is also in high demand in industry. A significant loss or diminution in the collective pool of SANAS’s employees and assessors could have a materially adverse affect on its ability to fulfill its mandate.

12.3 Future Human Resources Plans and Goals

Attracting and retaining the right skills remains a challenge, and SANAS has conducted and implemented a review of its salary structures, pay progression and rewards schemes. The future human resources plans and goals include reducing the vacancy rate to 10%, rolling out a continuous development and succession programme and the continued roll-out of the partnership arrangement with tertiary institutions, including the external bursary scheme and internship programme.

11.1.3 Human Resources Management



12.4 Human resources oversight statistics

12.4.1 Skills and leadership development

Leadership, professional and skills development remain a key imperative for SANAS. In this regard a total of R398 098 was spent on training and skills development for the reporting period. On average, an amount of R3 554 was spent per employee per intervention. SANAS also granted eight bursaries in 2014/15. The table below illustrates the specific interventions.

Intervention Business unit Training expenditure Number of employees trained

Skills development of PAs Personal assistants R13 668.00 2Skills development of administrators

Administration R61 387.00 17

Leadership development of SANAS managers

Various managers R113 737.00 27

Skills development for marketing and communication

Marketing R7 638.00 2

Professional and skill development of HR

Human Resources R17 599.00 3

Financial skills development Finance and others R28 996.00 6ICT training Quality Management, IT R10 545.00 2Skills development of all staff Various R137 529.00 52Nuclear Power Projects, Safety and Waste Management 2014 Summit

Mechanical and Physical R6 999.00 1

Bursaries Various R140 547.00 8



12.4.2 Employment and vacancies

During the year under review, SANAS continued with its effort to fill its vacant positions. Sixteen vacant positions were filled.The reasons for staff leaving is captured in the table below

Reason NumberResignation 3Retirement 1Total 4

The above is the total number of employees who terminated their employment in the year under review. They resigned voluntarily due to further career advancement opportunities. One staff member reached retirement age in 2014/15.

12.4.3 Labour Relations: Misconduct and disciplinary action

Reasons NumberVerbal warning 0Written warning 0Final written warning 0Dismissal 0

12.4.4 Equity target and employment equity status

MaleAfrican Coloured Indian White

Cur

rent

Targ

et

Cur

rent

Targ

et

Cur

rent

Targ

et

Cur

rent

Targ

et

Top Management 0 0 1 0 0 0 0 0Senior Management 1 1 0 0 0 0 0 0Professionally qualified 11 1 1 0 1 0 2 0Skilled 3 2 0 0 0 0 0 0Semi-skilled 2 0 0 0 0 0 0 0Unskilled 0 0 0 0 0 0 0 0Total 17 4 2 0 1 0 2 0

FemaleAfrican Coloured Indian White

Cur

rent

Targ

et

Cur

rent

Targ

et

Cur

rent

Targ

et

Cur

rent

Targ

et

Top Management 0 0 0 0 0 0 0 0Senior Management 0 1 0 0 0 0 2 0Professionally qualified 11 1 0 0 0 0 4 0Skilled 16 3 3 0 1 0 2 0Semi-skilled 10 2 0 0 0 0 0 0Unskilled 2 0 0 0 0 0 0 0Total 39 7 3 0 1 0 8 0



DisabledMale Female

Cur

rent

Targ

et

Cur

rent

Targ

et

Total 0 1 2 0

SANAS’s recruitment provides for the accommodation of people with disabilities. All position advertisements encourage, support and welcome job applications by people with disabilities.

ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2015



Financial InformationPART E




Index

The reports and statements set out below comprise the annual financial statements presented to the Accounting Authority and Parliament:

Accounting Authority's Responsibilities and Approval 58

Independent Auditors Report 59-61

Accounting Authority's Report 62-63

Statement of Financial Position as at 31 March 2015 64

Statement of Financial Performance for the year ended 31 March 2015 65

Statement of Changes in Net Assets 66

Cash Flow Statement 67

Statement of Comparison of Budget and Actual Amounts 68-69

Accounting Policies 70-83

Notes to the Annual Financial Statements 84-106



ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2015 ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2015

ACCOUNTING AUTHORITY’S RESPONSIBILITIES AND APPROVAL

The Accounting Authority is required by the Public Finance Management Act (Act 1 of 1999), to maintain adequate accounting records and is responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is our responsibility to ensure that the annual financial statements fairly present the state of affairs of the South African National Accreditation System as at the end of the financial year and the results of its operations and cash flows for the period then ended in conformity with Generally Recognised Accounting Practice. The external auditors are responsible for reporting on the fair presentation of the annual financial statements.

The annual financial statements have been prepared in accordance with Standards of Generally Recognised Accounting Practice (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board.

The Accounting Authority acknowledges that they are ultimately responsible for the system of internal financial control established by the entity and place considerable importance on maintaining a strong control environment. To enable the Accounting Authority to meet these responsibilities, the Accounting Authority sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the entity and all employees are required to maintain the highest ethical standards in ensuring the entity’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the entity is on identifying, assessing, managing and monitoring all known forms of risk across the entity. While operating risk cannot be fully eliminated, the entity endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.

The Accounting Authority is of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.

The Accounting Authority has reviewed the entity’s cash flow forecast and, in the light of this review and the current financial position, they are satisfied that the entity has or has access to adequate resources to continue in operational existence for the foreseeable future.

The external auditors are responsible for independently reviewing and reporting on the entity’s annual financial statements. The annual financial statements have been examined by the entity’s external auditors and their report is presented on pages 59 to 61.

The annual financial statements set out on pages 64 to 67, which have been prepared on the going concern basis, were approved by the Accounting Authority on 23 July 2015 and were signed on its behalf by:

Mr P GovenderChairperson

Mr R JosiasCEO




Mr R JosiasCEO

INDEPENDENT AUDITOR’S REPORT TO THE PARLIAMENT ON THE SOUTH AFRICAN NATIONAL ACCREDITATION SYSTEMSREPORT ON THE FINANCIAL STATEMENTS

Introduction

We have audited the financial statements of South African National Accreditation System set out on pages 64 to 106, which comprise

the statement of financial position as at 31 March 2015, and the statement of financial performance, statement of changes in net

assets and cash flow statement and statement of comparison of budget and actual amounts for the year then ended, as well as the

notes, comprising a summary of significant accounting policies and other explanatory information.

Accounting authority’s Responsibility for the Financial Statements

The board of directors, which constitutes the accounting authority is responsible for the preparation and fair presentation of these

financial statements in accordance with South African Standards of Generally Recognised Accounting Practice and the requirements

of the Public Finance Management Act of South Africa, 1999 (Act No. 1 of 1999) (PFMA), and for such internal control as the accounting

authority determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether

due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance

with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the

audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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 judgment, 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 control 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 control. An audit

also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by

management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of South African National

Accreditation System as at 31 March 2015, and its financial performance and cash flows for the year then ended in accordance with

South African Standards of Generally Recognised Accounting Practice and the requirements of the PFMA.

Additional matters

We draw attention to the matters below. Our opinion is not modified in respect of these matters.




REPORT ON THE FINANCIAL STATEMENTS (continued)

Predecessor auditor

The financial statements of the prior year were audited by a predecessor auditor in terms of section 4(3) of the Public Audit Act of

South Africa, 2004 (Act No. 25 of 2004) (PAA) on 29 July 2014. An unmodified opinion was expressed.

Report on Other legal and Regulatory Requirements

In accordance with the PAA and the general notice issued in terms thereof, we report the following findings on the reported

performance information against predetermined objectives for the selected objectives presented in the annual report, non-compliance

with legislation as well as the internal control. We performed tests to identify reportable findings as described under each subheading

but not to gather evidence to express assurance in these matters. Accordingly, we do not express an opinion or conclusion on these

matters.

Predetermined Objectives

We performed procedures to obtain evidence about the usefulness and reliability of the reported performance information for the

following selected objectives presented in the annual performance report of the entity for the year ended 31 March 2015:

Objective 2: Contribute to industrial development and the protection of health, safety and environmental on pages 30 to 31

Objective 4: Support regional integration and relations to advance South Africa’s trade, industrial policy and economic development

on page 32

We evaluated the reported performance information against the overall criteria of usefulness and reliability.

We evaluated the usefulness of the reported performance information to determine whether it was presented in accordance with the

National Treasury’s annual reporting principles and whether the reported performance was consistent with the planned objectives.

We further performed tests to determine whether indicators and targets were well defined, verifiable, specific, measureable, time

bound and relevant, as required by the National Treasury’s Framework for managing programme performance information (FMPPI).

We assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete.

The material findings in respect of the selected objectives are as follows:

Contribute to industrial development and the protection of health safety and environment

Usefulness of reported performance information

Treasury Regulation 30.1.3(g) requires the annual performance to form the basis for the annual report, therefore requiring consistency

of objectives, indicators and targets between planning and reporting documents. A total of 50% of the reported objectives were not

consistent with those in the approved strategic plan. This was due to the indicator for IPAP 2 progress being reported as separate

indicators.

INDEPENDENT AUDITOR’S REPORT TO THE PARLIAMENT ON THE SOUTH AFRICAN NATIONAL ACCREDITATION SYSTEMS




REPORT ON THE FINANCIAL STATEMENTS (continued)

We did not identify any material findings on the usefulness and reliability of the reported performance information for the following

objectives:

Support regional integration and relations to advance South Africa’s trade, industrial policy and economic development objectives

Achievement of Planned Targets

Refer to the annual performance report in the annual report for information on the achievement of the planned targets for the year.

Compliance with legislation

We performed procedures to obtain evidence that the entity had complied with applicable legislation regarding financial matters,

financial management and other related matters. Our findings on material non-compliance with specific matters in key legislation, as

set out in the general notice issued in terms of the PAA, are as follows:

• The internal audit function did not prepare a rolling three-year strategic internal audit plan, as required by Treasury Regulation

27.2.7.

• Internal audit did not report at every audit committee meetings, as required by Treasury Regulation 27.2.8.

Internal control

We considered internal control relevant to the audit of the financial statements, annual performance report and compliance with

legislation, but not to gather evidence to express an opinion of conclusion of the effectiveness if the entity’s internal controls.

The matters of internal control reported below are limited to significant internal control the deficiencies that resulted in the finding on

the annual performance report and the findings on non-compliance with legislation included in this report.

Leadership

Management did not exercise adequate oversight over compliance with laws and regulation as instances of non-compliance with laws and regulations were identified.

Financial and performance management

Management did not review and monitor compliance with applicable laws and regulations. Non-compliance with laws and regulations

could have been prevented had compliance been properly reviewed and monitored.

INDEPENDENT AUDITOR’S REPORT TO THE PARLIAMENT ON THE SOUTH AFRICAN NATIONAL ACCREDITATION SYSTEMS

Ernst & Young Inc.Sphiwe StemelaRegistered AuditorChartered Accountant (SA)




ACCOUNTING AUTHORITY’S REPORT

1. GENERAL REVIEW

The South African National Accreditation System (SANAS) is a Schedule 3A Public Entity as listed in the Public Finance Management

Act of South Africa, 1999 (Act No.1 of 1999) (PFMA) as amended.

SANAS is the sole government recognised accreditation body for conformity assessment in South Africa. SANAS promotes

the competence, against a specific schedule of activity, of its accredited facilities nationally, regionally and internationally. It has

successfully concluded several mutual recognition arrangements in this regard.

SANAS is guided by the principles of the PFMA and promulgated by the Accreditation for Conformity Assessment, Calibration and

Good Laboratory Practice Act of South Africa, 2006 (Act No.19 of 2006) as of 1 May 2007. The statutory duties, responsibilities and

liabilities are imposed on the Accounting Authority by the PFMA.

The activities of SANAS during the year under review are comprehensively covered in the annual report.

2. ACCOUNTING AUTHORITY MEMBERS

The governing body of SANAS is the Accounting Authority.

Mr P Govender (Chairperson)

Mr R Josias (CEO)

Mr J Malatse

Ms N Magwaza

Ms J Rathebe

Mr T Jaftha

Ms B Lue Marais

Mr L Saki

Mr P Zonke

Mr V Seymour

Ms A Lötter

Mr A Ramabulana

Mr D Petersen (Company Secretary)

3. BUSINESS AND OPERATIONS

The entity’s business and operations and the results thereof are clearly reflected in the annual report and the attached financial

statements.

4. FIXED ASSETS

There have been no major changes in the fixed assets during the period or any changes in the policy relating to their use. SANAS

anticipated to purchase an Office Building during 2014 however this was delayed as SANAS awaited concurrence by the Minister

of Finance for acquisition of immovable property as well as approval to retain 2013/14 surplus. Both approvals were subsequently

received, however during October 2014 SANAS received notice of a reduction in baseline for 2015/16 and 2016/17 financial




years totaling R29 million. This reduction now means that SANAS will have to ringfence reserves towards operational costs as the

operational budgets cannot be reduced. Funds available for the building are therefore less than originally estimated (see note 22 for

further information). SANAS has appointed a Project Management Company to assist with procuring an appropriate building however

this company will now first establish the affordability of a building before further work is done.

5. EVENTS SUBSEQUENT TO THE YEAR END

The Board approved the payout of staff bonuses for the 2014/15 financial year on 23 July 2015. This has been captured under trade

and other payables under note 13. No other material facts or circumstances arose between the accounting date and the date of this

report that require disclosure in or adjustment to the financial statements.

6. TAXATION

SANAS is exempt from paying normal South African income tax in terms of the Income Tax Act as amended as detailed in note 20.

7. PUBLIC FINANCE MANAGEMENT ACT (PFMA)

The Board is the Accounting Authority in terms of the PFMA, of which SANAS is listed as a Schedule 3A public entity.

The PFMA focuses on financial management with related outputs and responsibilities. SANAS has established an ongoing process

of awareness and education. In this regard, SANAS has already taken expert advice on the PFMA resulting in various initiatives which

are addressed in more detail later in the report.

With the continuing emphasis on PFMA compliant systems, the Accounting Authority is of the opinion that SANAS has complied, in all

material respects, with the provisions of the Public Finance Management Act, 1 of 1999 (PFMA), as amended, and other applicable

legislation during the period under review.

8. BUSINESS AND POSTAL ADDRESS

Business addresses Postal address Contact detailsthe dti Campus Private Bag X23 Telephone: (012) 394 376077 Meintjies Street Sunnyside Fax number: (012) 394 0526Building G 0132 Email: [email protected] FloorSunnyside

SANAS Knowledge Transfer Centre Telephone: (012) 740 8400121 Muckleneuck streetNieuw Muckleneuk, Pretoria

Bankers First National Bank – Hatfield BranchAuditors Ernst & Young Incorporated as elected in terms of the Public Audit Act Section 4(3)

ACCOUNTING AUTHORITY’S REPORT (continued)




STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2015

Figures in Rand Note(s) 2015 2014 (restated)

ASSETS

Current AssetsTrade and other receivables from exchange transactions 7 1,145,258 2,317,001Other receivables from non exchange transactions 108,854 108,854Cash and cash equivalents 8 89,186,866 72,666,911

90,440,978 75,092,766

Non Current AssetsProperty, plant and equipment 4 3,135,171 3,046,452Intangible assets 5 1,812,038 694,615

4,947,209 3,741,067Total Assets 95,388,187 78,833,833

LiabilitiesCurrent LiabilitiesFinance lease obligation 10 146,660 102,976Trade and other payables 13 5,482,136 5,786,633Income received in advance 11 5,724,658 2,759,227Provisions 12 1,533,279 1,534,001

12,886,733 10,182,837

Non Current LiabilitiesFinance lease obligation 10 1,840,484 1,987,144Operating lease liability 22 2,740,703 2,791,739

4,581,187 4,778,883Total Liabilities 17,467,920 14,961,720Net Assets 77,920,267 63,872,113

ReservesGovernment grant reserve 8,097,674 8,097,674Accumulated surplus 9 69,822,593 55,774,439Total Net Assets 77,920,267 63,872,113




Statement of Financial Performance for the year ended 31 March 2015


Revenue 15 75,762,676 71,530,349Other income 16 6,038,772 6,151,770Operating expenses (71,409,747) (66,515,542)

Operating surplus 17 10,391,701 11,166,577Investment income 18 3,952,824 2,687,967Finance costs 19 (296,371) (308,357)Surplus for the year 14,048,154 13,546,187




Figures in RandGovernment grant reserve

Accumulated surplus

Total net assets

Balance at 01 April 2013 10,000,000 40,325,926 50,325,926Changes in net assetsSurplus for the year - 14,212,920 14,212,920Transfer of reserve to income (634,871) - (634,871)Transfer of Government Grant spent on PPE to Accumulated surplus (1,267,455) 1,267,455 -Total changes (1,902,326) 15,480,375 13,578,049

Opening balance as previously reported 8,097,674 55,806,301 63,903,975AdjustmentsCorrection of reserve previously allocated to income (see note 26) 634,871 (634,871) -

Transfer of reserve to accumulated surplus (see note 26) (634,871) 634,871 -Prior year adjustments (see note 26) - (31,862) (31,862)

Balance at 01 April 2014 as restated* 8,097,674 55,774,439 63,872,113Changes in net assetsSurplus for the year - 14,048,154 14,048,154Total changes - 14,048,154 14,048,154Balance at 31 March 2015 8,097,674 69,822,593 77,920,267

Statement of Changes in Net Assets





Cash flows from operating activities

Cash receiptsFunds received from the dti 35,712,000 33,473,000Fee income 40,050,676 38,461,990Investment income 3,952,824 2,687,967Other receipts 6,038,772 6,151,770

85,754,272 80,774,727

Payments

Employee costs (34,672,575) (33,689,054)Suppliers (32,259,865) (32,339,298)Finance costs (296,371) (308,357)

(67,228,811) (66,336,709)Net cash flows from operating activities 21 18,525,461 14,438,018

Cash flows from investing activities

Purchase of property, plant and equipment 4 (760,083) (1,690,372)Disposal of property, plant and equipment 4 443 27,151Capitalised development costs 5 (1,142,890) (174,801)Net cash flows from investing activities (1,902,530) (1,838,022)

Cash flows from financing activities

Finance lease payments (102,976) (66,617)Net cash flows from financing activities (102,976) (66,617)

Net increase/(decrease) in cash and cash equivalents 16,519,955 12,533,379Cash and cash equivalents at the beginning of the year 72,666,911 60,133,532Cash and cash equivalents at the end of the year 8 89,186,866 72,666,911

Cash Flow Statement




Figures in Rand

Approved budget

Adjust-ments

Final Budget Actual amounts on comparable

basis

Difference between final budget and

actual

Refer-ence

Statement of Financial Performance

Revenue

Revenue from exchange transactionsthe dti grant 35,712,000 - 35,712,000 35,712,000 -Fee income 38,424,554 - 38,424,554 40,050,676 1,626,122 Note 29Recoveries 25,000 - 25,000 37,783 12,783Courses and project fees 6,367,496 - 6,367,496 5,913,876 (453,620)Sundry income 152,000 - 152,000 84,346 (67,654)Interest received investment 1,750,000 - 1,750,000 3,952,824 2,202,824 Note 29Total revenue from exchange transactions

82,431,050 - 82,431,050 85,751,505 3,320,455

ExpenditureEmployee costs (41,478,571) - (41,478,571) (35,962,025) 5,516,546 Note 29Transfer payments (502,981) - (502,981) (502,981) -Depreciation and amortisation (527,729) - (527,729) (686,339) (158,610)Finance costs (296,371) - (296,371) (296,371) -Debt impairment (100,000) - (100,000) (95,296) 4,704General Expenses (39,527,398) - (39,527,398) (34,163,548) 5,363,850 Note 29

Total expenditure (82,433,050) - (82,433,050) (71,706,560) 10,726,490

Operating surplus (2,000) - (2,000) 14,044,945 14,046,945Gain on disposal of assets - - - 442 442Gain on foreign exchange 2,000 - 2,000 2,767 767

2,000 - 2,000 3,209 1,209Surplus - - - 14,048,154 14,048,154Actual Amount on Comparable Basis

- - - 14,048,154 14,048,154

Statement of Comparison of Budget and Actual Amounts




Figures in Rand

Approved budget

Adjust-ments

Final Budget

Actual amounts on comparable

basis

Difference between final budget and

actual

Refer-ence

Cash Flow Statement

Cash flows from operating activitiesReceiptsFunds from the dti 35,712,000 - 35,712,000 35,712,000 -Fee income 44,792,050 - 44,792,050 45,765,365 973,315Interest income 1,750,000 - 1,750,000 3,952,824 2,202,824Other receipts 177,000 - 177,000 324,083 147,083

82,431,050 - 82,431,050 85,754,272 3,323,222

PaymentsEmployee costs (41,478,571) - (41,478,571) (34,672,575) 6,805,996Suppliers (39,108,885) - (39,108,885) (32,259,865) 6,849,020Finance costs (296,371) - (296,371) (296,371) -

(80,883,827) - (80,883,827) (67,228,811) 13,655,016Net cash flows from operating activities

1,547,223 - 1,547,223 18,525,461 16,978,238 Note 29

Cash flows from investing activitiesPurchase of property, plant and equipment

(58,478,000) - (58,478,000) (760,083) 57,717,917

Proceeds from sale of property, plant and equipment

- - - 443 443

Capitalised development costs (1,750,000) (1,750,000) (1,142,890) 607,110Net cash flows from investing activi-ties

(60,228,000) - (60,228,000) (1,902,530) 58,325,470 Note 29

Cash flows from financing activitiesFinance lease payments (146,000) (146,000) (102,976) 43,024 -

Net increase/(decrease) in cash and cash equivalents

(58,826,777) - (58,826,777) 16,519,955 75,346,732

Cash and cash equivalents at the beginning of the year

58,939,000 - 58,939,000 72,666,911 13,727,911

Cash and cash equivalents at the end of the year

112,223 - 112,223 89,186,866 89,074,643

Statement of Comparison of Budget and Actual Amounts (continues)




ACCOUNTING POLICIES

1. Presentation of Annual Financial Statements

The annual financial statements have been prepared in accordance with the Standards of Generally Recognised Accounting Practice

(GRAP), issued by the Accounting Standards Board in accordance with Section 91(1) of the Public Finance Management Act (Act 1

of 1999).

These annual financial statements have been prepared on an accrual basis of accounting and are in accordance with historical cost

convention as the basis of measurement, unless specified otherwise. They are presented in South African Rand.

In the absence of an issued and effective Standard of GRAP, accounting policies for material transactions, events or conditions were

developed in accordance with paragraphs 8, 10 and 11 of GRAP 3 as read with Directive 5.

Assets, liabilities, revenues and expenses were not offset, except where offsetting is either required or permitted by a Standard of

GRAP.

1.1 Going concern assumption

These annual financial statements have been prepared based on the expectation that the entity will continue to operate as a going

concern for at least the next 12 months.

1.2 Significant judgements and sources of estimation uncertainty

In preparing the annual financial statements, management is required to make estimates and assumptions that affect the amounts represented in the annual financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the annual financial statements. Significant judgements include:

Trade receivables and/or loans and receivables

The entity assesses its trade receivables for impairment at each statement of financial position date. In determining whether an impairment loss should be recorded in the Statement of Financial Performance, the entity makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset.

The impairment for trade receivables is calculated on a portfolio basis, based on historical data stored on the ability of trade debtors to settle their balances and other indicators present at the reporting date that correlate with defaults on the portfolio.

Fair value estimation

Impairment testing

The recoverable amounts of cash generating units and individual assets have been determined based on the higher of value in use calculations and fair values. These calculations require the use of estimates and assumptions. It is reasonably possible that the assumptions may change which may then impact our estimations and may then require a material adjustment to the carrying value of tangible assets.

The entity reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows

of other assets and liabilities. If there are indications that impairment may have occurred, estimates are prepared of expected future




ACCOUNTING POLICIES (continues)1.2 Significant judgements and sources of estimation uncertainty (continued)

cash flows for each group of assets. Expected future cash flows used to determine the value in use of tangible assets are inherently

uncertain and could materially change over time. They are significantly affected by a number of factors including supply demand,

together with economic factors such as such as exchange rates and inflation interest.

When the carrying amount of a non cash generating asset exceeds its recoverable service amount, it is impaired.

The entity assesses at each reporting date whether there is any indication that a non cash generating asset may be impaired. If any

such indication exists, the entity estimates the recoverable service amount of the asset.

Provisions

Provisions were raised and management determined an estimate based on the information available. Additional disclosure of these

estimates of provisions are included in note 12 Provisions.

Effective interest rate

The entity used the prime interest rate to discount future cash flows.

Allowance for doubtful debts

Within trade receivables, an impairment loss on debtors is recognised in surplus and deficit when there is objective evidence that it

is impaired. The impairment is measured as the difference between the debtors carrying amount and the present value of estimated

future cash flows discounted at the effective interest rate, computed at initial recognition.

1.3 Property, plant and equipment

The cost of an item of property, plant and equipment is recognised as an asset when:

• it is probable that future economic benefits or service potential associated with the item will flow to the entity; and

• the cost of the item can be measured reliably.

Property, plant and equipment is initially measured at cost.

Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently

to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of property, plant and

equipment, the carrying amount of the replaced part is derecognised.

The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located is also included in

the cost of property, plant and equipment, where the entity is obligated to incur such expenditure, and where the obligation arises as

a result of acquiring the asset or using it for purposes other than the production of inventories.

Property, plant and equipment are depreciated on the straight line basis over their expected useful lives to their estimated residual

value.

Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses.

The useful lives of items of property, plant and equipment have been assessed as follows:




ACCOUNTING POLICIES (continues)1.3 Property, plant and equipment (continued)

Item Average useful lifeFurniture and fixtures 10 to 20 years

Office equipment 5 17 years

IT equipment 4 8 years

The residual value, and the useful life and depreciation method of each asset are reviewed at the end of each reporting date. If the

expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated

separately.

The depreciation charge for each period is recognised in surplus or deficit unless it is included in the carrying amount of another asset.

Items of property, plant and equipment are derecognised when the asset is disposed of or when there are no further economic

benefits or service potential expected from the use of the asset.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in surplus or deficit when the

item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the

difference between the net disposal proceeds, if any, and the carrying amount of the item.

1.4 Intangible assets

An intangible asset is recognised when:

• it is probable that the expected future economic benefits or service potential that are attributable to the asset will flow to the

entity; and

• the cost or fair value of the asset can be measured reliably.

The entity assesses the probability of expected future economic benefits or service potential using reasonable and supportable

assumptions that represent management’s best estimate of the set of economic conditions that will exist over the useful life of the

asset.

Where an intangible asset is acquired through a non exchange transaction, its initial cost at the date of acquisition is measured at its

fair value as at that date.

Expenditure on research (or on the research phase of an internal project) is recognised as an expense when it is incurred.

An intangible asset arising from development (or from the development phase of an internal project) is recognised when:

• it is technically feasible to complete the asset so that it will be available for use or sale.

• there is an intention to complete and use or sell it.

• there is an ability to use or sell it.

• it will generate probable future economic benefits or service potential.

• there are available technical, financial and other resources to complete the development and to use or sell the asset.

• the expenditure attributable to the asset during its development can be measured reliably.

Intangible assets are carried at cost less any accumulated amortisation and any impairment losses.

An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to




ACCOUNTING POLICIES (continues)1.4 Intangible assets (continued)

the period over which the asset is expected to generate net cash inflows or service potential. Amortisation is not provided for these

intangible assets, but they are tested for impairment annually and whenever there is an indication that the asset may be impaired. For

all other intangible assets amortisation is provided on a straight line basis over their useful life.

The amortisation period and the amortisation method for intangible assets are reviewed at each reporting date.

Reassessing the useful life of an intangible asset with a finite useful life after it was classified as indefinite is an indicator that the asset

may be impaired. As a result the asset is tested for impairment and the remaining carrying amount is amortised over its useful life.

Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows:

Item Useful lifeComputer software 10 years

Intangible assets are derecognised:

• on disposal; or

• when no future economic benefits or service potential are expected from its use or disposal.

The gain or loss is the difference between the net disposal proceeds, if any, and the carrying amount. It is recognised in surplus or

deficit when the asset is derecognised.

1.5 Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or a residual interest of

another entity.

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an

arm’s length transaction.

Liquidity risk is the risk encountered by an entity in the event of difficulty in meeting obligations associated with financial liabilities that

are settled by delivering cash or another financial asset.

Initial recognition

The entity recognises a financial asset or a financial liability in its statement of financial position when the entity becomes a party to

the contractual provisions of the instrument.

Initial measurement of financial assets and financial liabilities

The entity measures a financial asset and financial liability initially at its fair value plus transaction costs that are directly attributable

to the acquisition or issue of the financial asset or financial liability.

Subsequent measurement of financial assets and financial liabilities

The entity measures all financial assets and financial liabilities after initial recognition using the following categories:

• Financial instruments at fair value.




ACCOUNTING POLICIES (continues)1.5 Financial instruments (continued)

• Financial instruments at amortised cost.

• Financial instruments at cost.

All financial assets measured at amortised cost, or cost, are subject to an impairment review.

Impairment and uncollectibility of financial assets

The entity assess at the end of each reporting period whether there is any objective evidence that a financial asset or group of

financial assets is impaired.

Financial assets measured at amortised cost:

If there is objective evidence that an impairment loss on financial assets measured at amortised cost has been incurred, the amount

of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows

(excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The

carrying amount of the asset is reduced directly OR through the use of an allowance account. The amount of the loss is recognised

in surplus or deficit.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event

occurring after the impairment was recognised, the previously recognised impairment loss is reversed directly OR by adjusting an

allowance account. The reversal does not result in a carrying amount of the financial asset that exceeds what the amortised cost

would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is

recognised in surplus or deficit.

Derecognition

Financial assetsThe entity derecognises a financial asset only when:

• the contractual rights to the cash flows from the financial asset expire, are settled or waived;

• the entity transfers to another party substantially all of the risks and rewards of ownership of the financial asset; or

• the entity, despite having retained some significant risks and rewards of ownership of the financial asset, has transferred control

of the asset to another party and the other party has the practical ability to sell the asset in its entirety to an unrelated third party,

and is able to exercise that ability unilaterally and without needing to impose additional restrictions on the transfer. In this case,

the entity :

- derecognise the asset; and

- recognise separately any rights and obligations created or retained in the transfer.

Financial liabilities

The entity removes a financial liability (or a part of a financial liability) from its statement of financial position when it is extinguished

— i.e. when the obligation specified in the contract is discharged, cancelled, expires or waived.




1.6 Leases

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified

as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

Finance leases – lessee

Finance leases are recognised as assets and liabilities in the statement of financial position at amounts equal to the fair value of the

leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor is included in

the statement of financial position as a finance lease obligation.

The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease.

The lease payments are apportioned between the finance charge and reduction of the outstanding liability.The finance charge is

allocated to each period during the lease term so as to produce a constant periodic rate of on the remaining balance of the liability.

Operating leases – lessee

Operating lease payments are recognised as an expense on a straight line basis over the lease term. The difference between the

amounts recognised as an expense and the contractual payments are recognised as an operating lease asset or liability. This liability

is not discounted.

Any contingent rents are expensed in the period they are incurred.

1.7 Impairment of cash generating assets

Cash generating assets are those assets held by the entity with the primary objective of generating a commercial return. When an

asset is deployed in a manner consistent with that adopted by a profit orientated entity, it generates a commercial return.

Identification

When the carrying amount of a cash generating asset exceeds its recoverable amount, it is impaired.

The entity assesses at each reporting date whether there is any indication that a cash generating asset may be impaired. If any such

indication exists, the entity estimates the recoverable amount of the asset.

Irrespective of whether there is any indication of impairment, the entity also test a cash generating intangible asset with an indefinite

useful life or a cash generating intangible asset not yet available for use for impairment annually by comparing its carrying amount with

its recoverable amount. This impairment test is performed at the same time every year. If an intangible asset was initially recognised

during the current reporting period, that intangible asset was tested for impairment before the end of the current reporting period.

Value in use

Value in use of a cash generating asset is the present value of the estimated future cash flows expected to be derived from the

continuing use of an asset and from its disposal at the end of its useful life.

ACCOUNTING POLICIES (continues)





1.7 Impairment of cash generating assets (c0ntinued)

When estimating the value in use of an asset, the entity estimates the future cash inflows and outflows to be derived from continuing

use of the asset and from its ultimate disposal and the entity applies the appropriate discount rate to those future cash flows.

Reversal of impairment loss

The entity assess at each reporting date whether there is any indication that an impairment loss recognised in prior periods for a

cash generating asset may no longer exist or may have decreased. If any such indication exists, the entity estimates the recoverable

amount of that asset.

An impairment loss recognised in prior periods for a cash generating asset is reversed if there has been a change in the estimates

used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of the asset

is increased to its recoverable amount. The increase is a reversal of an impairment loss. The increased carrying amount of an asset

attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined (net of

depreciation or amortisation) had no impairment loss been recognised for the asset in prior periods.

A reversal of an impairment loss for a cash generating asset is recognised immediately in surplus or deficit.

After a reversal of an impairment loss is recognised, the depreciation (amortisation) charge for the cash generating asset is adjusted

in future periods to allocate the cash generating asset’s revised carrying amount, less its residual value (if any), on a systematic basis

over its remaining useful life.

A reversal of an impairment loss for a cash generating unit is allocated to the cash generating assets of the unit pro rata with the

carrying amounts of those assets. These increases in carrying amounts are treated as reversals of impairment losses for individual

assets. No part of the amount of such a reversal is allocated to a non cash generating asset contributing service potential to a cash

generating unit.

In allocating a reversal of an impairment loss for a cash generating unit, the carrying amount of an asset is not increased above the

lower of:

• its recoverable amount (if determinable); and

• the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been

recognised for the asset in prior periods.

The amount of the reversal of the impairment loss that would otherwise have been allocated to the asset is allocated pro rata to the

other assets of the unit.

Redesignation

The redesignation of assets from a cash generating asset to a non cash generating asset or from a non cash generating asset to a

cash generating asset only occur when there is clear evidence that such a redesignation is appropriate.




ACCOUNTING POLICIES (continues)1.8 Impairment of non cash generating assets

Cash generating assets are those assets held by the entity with the primary objective of generating a commercial return. When an

asset is deployed in a manner consistent with that adopted by a profit orientated entity, it generates a commercial return.

Non cash generating assets are assets other than cash generating assets.

Identification

When the carrying amount of a non cash generating asset exceeds its recoverable service amount, it is impaired.

The entity assesses at each reporting date whether there is any indication that a non cash generating asset may be impaired. If any

such indication exists, the entity estimates the recoverable service amount of the asset.

Irrespective of whether there is any indication of impairment, the entity also test a non cash generating intangible asset with an

indefinite useful life or a non cash generating intangible asset not yet available for use for impairment annually by comparing its

carrying amount with its recoverable service amount. This impairment test is performed at the same time every year. If an intangible

asset was initially recognised during the current reporting period, that intangible asset was tested for impairment before the end of

the current reporting period.

Value in use

Value in use of non cash generating assets is the present value of the non cash generating assets remaining service potential.

The present value of the remaining service potential of a non cash generating assets is determined using the following approach:

Depreciated replacement cost approach

The present value of the remaining service potential of a non cash generating asset is determined as the depreciated replacement

cost of the asset. The replacement cost of an asset is the cost to replace the asset’s gross service potential. This cost is depreciated

to reflect the asset in its used condition. An asset may be replaced either through reproduction (replication) of the existing asset or

through replacement of its gross service potential. The depreciated replacement cost is measured as the reproduction or replacement

cost of the asset, whichever is lower, less accumulated depreciation calculated on the basis of such cost, to reflect the already

consumed or expired service potential of the asset.

Recognition and measurement

If the recoverable service amount of a non cash generating asset is less than its carrying amount, the carrying amount of the asset is

reduced to its recoverable service amount. This reduction is an impairment loss.

An impairment loss is recognised immediately in surplus or deficit.

When the amount estimated for an impairment loss is greater than the carrying amount of the non cash generating asset to which it

relates, the entity recognises a liability only to the extent that is a requirement in the Standards of GRAP.

After the recognition of an impairment loss, the depreciation (amortisation) charge for the non cash generating asset is adjusted in

future periods to allocate the non cash generating asset’s revised carrying amount, less its residual value (if any), on a systematic

basis over its remaining useful life.





1.8 Impairment of non cash generating assets (Continued)

Reversal of an impairment loss

The entity assess at each reporting date whether there is any indication that an impairment loss recognised in prior periods for a non

cash generating asset may no longer exist or may have decreased. If any such indication exists, the entity estimates the recoverable

service amount of that asset.

An impairment loss recognised in prior periods for a non cash generating asset is reversed if there has been a change in the estimates

used to determine the asset’s recoverable service amount since the last impairment loss was recognised. The carrying amount of the

asset is increased to its recoverable service amount. The increase is a reversal of an impairment loss. The increased carrying amount

of an asset attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined

(net of depreciation or amortisation) had no impairment loss been recognised for the asset in prior periods.

A reversal of an impairment loss for a non cash generating asset is recognised immediately in surplus or deficit.

After a reversal of an impairment loss is recognised, the depreciation (amortisation) charge for the non cash generating asset is

adjusted in future periods to allocate the non cash generating asset’s revised carrying amount, less its residual value (if any), on a

systematic basis over its remaining useful life.

Redesignation

The redesignation of assets from a cash generating asset to a non cash generating asset or from a non cash generating asset to a

cash generating asset only occur when there is clear evidence that such a redesignation is appropriate.

1.9 Employee benefits

Employee benefits are all forms of consideration given by an entity in exchange for service rendered by employees.

Termination benefits are employee benefits payable as a result of either:

• an entity’s decision to terminate an employee’s employment before the normal retirement date; or

• an employee’s decision to accept voluntary redundancy in exchange for those benefits.

Short term employee benefits

Short term employee benefits are employee benefits (other than termination benefits) that are due to be settled within twelve months

after the end of the period in which the employees render the related service.

Short term employee benefits include items such as:

• wages, salaries and social security contributions;

• short term compensated absences (such as paid annual leave and paid sick leave) where the compensation for the absences is

due to be settled within twelve months after the end of the reporting period in which the employees render the related employee

service;

• bonus, incentive and performance related payments payable within twelve months after the end of the reporting period in which

the employees render the related service; and

• non monetary benefits (for example, medical care, and free or subsidised goods or services such as cellphones) for current

employees.





1.9 Employee benefits (Continued)

When an employee has rendered service to the entity during a reporting period, the entity recognise the undiscounted amount of short

term employee benefits expected to be paid in exchange for that service:

• as a liability (accrued expense), after deducting any amount already paid. If the amount already paid exceeds the undiscounted

amount of the benefits, the entity recognise that excess as an asset (prepaid expense) to the extent that the prepayment will

lead to, for example, a reduction in future payments or a cash refund; and

• as an expense, unless another Standard requires or permits the inclusion of the benefits in the cost of an asset.

The expected cost of compensated absences is recognised as an expense as the employees render services that increase their

entitlement or, in the case of non accumulating absences, when the absence occurs. The entity measures the expected cost of

accumulating compensated absences as the additional amount that the entity expects to pay as a result of the unused entitlement

that has accumulated at the reporting date.

The entity recognise the expected cost of bonus, incentive and performance related payments when the entity has a present legal

or constructive obligation to make such payments as a result of past events and a reliable estimate of the obligation can be made. A

present obligation exists when the entity has no realistic alternative but to make the payments.

1.10 Provisions and contingencies

Provisions are recognised when:

• the entity has a present obligation as a result of a past event;

• it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the

obligation; and

• a reliable estimate can be made of the obligation.

The amount of a provision is the best estimate of the expenditure expected to be required to settle the present obligation at the

reporting date.

Contingent assets and contingent liabilities are not recognised however are disclosed when there is a potential significant and

material effect on the entity.

1.11 Revenue from exchange transactions

Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in an

increase in net assets, other than increases relating to contributions from owners.

An exchange transaction is one in which the entity receives assets or services, or has liabilities extinguished, and directly gives

approximately equal value (primarily in the form of goods, services or use of assets) to the other party in exchange.

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an

arm’s length transaction.

Measurement

Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and volume rebates.





1.11 Revenue from exchange transactions (continued)

Recognition of rendering of services

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the

transaction is recognised by reference to the stage of completion of the transaction at the reporting date. The outcome of a transaction

can be estimated reliably when all the following conditions are satisfied:

• the amount of revenue can be measured reliably;

• it is probable that the economic benefits or service potential associated with the transaction will flow to the entity;

• the stage of completion of the transaction at the reporting date can be measured reliably; and

• the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

Service revenue is recognised by reference to the stage of completion of the transaction at the reporting date. Stage of completion is

determined by surveys of work performed.

1.12 Revenue from non exchange transactions

Revenue comprises gross inflows of economic benefits or service potential received and receivable by an entity, which represents an increase in net assets, other than increases relating to contributions from owners.

Control of an asset arises when the entity can use or otherwise benefit from the asset in pursuit of its objectives and can exclude or otherwise regulate the access of others to that benefit.

Exchange transactions are transactions in which one entity receives assets or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of cash, goods, services, or use of assets) to another entity in exchange.Non exchange transactions are transactions that are not exchange transactions. In a non exchange transaction, an entity either receives value from another entity without directly giving approximately equal value in exchange, or gives value to another entity without directly receiving approximately equal value in exchange.

Transfers are inflows of future economic benefits or service potential from non exchange transactions, other than taxes.

Recognition

An inflow of resources from a non exchange transaction recognised as an asset is recognised as revenue, except to the extent that a liability is also recognised in respect of the same inflow.

As the entity satisfies a present obligation recognised as a liability in respect of an inflow of resources from a non exchange transaction recognised as an asset, it reduces the carrying amount of the liability recognised and recognises an amount of revenue equal to that reduction. Measurement

Revenue from a non exchange transaction is measured at the amount of the increase in net assets recognised by the entity.

When, as a result of a non exchange transaction, the entity recognises an asset, it also recognises revenue equivalent to the amount of the asset measured at its fair value as at the date of acquisition, unless it is also required to recognise a liability. Where a liability is required to be recognised it will be measured as the best estimate of the amount required to settle the obligation at the reporting date, and the amount of the increase in net assets, if any, recognised as revenue. When a liability is subsequently reduced, because the taxable event occurs or a condition is satisfied, the amount of the reduction in the liability is recognised as revenue.




1.12 Revenue from non exchange transactions (continnued)

Transfers

Apart from services in kind, which are not recognised, the entity recognises an asset in respect of transfers when the transferred

resources meet the definition of an asset and satisfy the criteria for recognition as an asset.

The entity recognises an asset in respect of transfers when the transferred resources meet the definition of an asset and satisfy the

criteria for recognition as an asset.

Gifts and donations, including goods in kind

Gifts and donations, including goods in kind, are recognised as assets and revenue when it is probable that the future economic

benefits or service potential will flow to the entity and the fair value of the assets can be measured reliably.

1.13 Funds received from the dti

Funds received from the dti are recognised as revenue from non exchange transactions when:

• it is probable that the economic benefits or service potential associated with the transaction will flow to the

entity;

• the amount of the revenue can be measured reliably, and

• to the extent that there has been compliance with any conditions associated with the grant.

1.14 Translation of foreign currencies

Foreign currency transactions

A foreign currency transaction is recorded, on initial recognition in Rands, by applying to the foreign currency amount the spot

exchange rate between the functional currency and the foreign currency at the date of the transaction.

At each statement of financial position date:

• foreign currency monetary items are translated using the closing rate;

• non monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate

at the date of the transaction; and

• non monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date

when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at

which they were translated on initial recognition during the period or in previous annual financial statements are recognised in surplus

or deficit in the period in which they arise.

When a gain or loss on a non monetary item is recognised directly in equity, any exchange component of that gain or loss is

recognised directly in equity. When a gain or loss on a non monetary item is recognised in surplus or deficit, any exchange component

of that gain or loss is recognised in surplus or deficit.

Cash flows arising from transactions in a foreign currency are recorded in Rands by applying to the foreign currency amount the

exchange rate between the Rand and the foreign currency at the date of the cash flow.





1.15 Fruitless and wasteful expenditure

Fruitless and wasteful expenditure means expenditure which was made in vain and would have been avoided had reasonable care

been exercised.

All expenditure relating to fruitless and wasteful expenditure is recognised as an expense in the Statement of Financial Performance

in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and where

recovered, it is subsequently accounted for as revenue in the Statement of Financial Performance.

1.16 Irregular expenditure

Irregular expenditure as defined in section 1 of the PFMA is expenditure other than unauthorised expenditure, incurred in contravention

of or that is not in accordance with a requirement of any applicable legislation, including

(a) this Act; or

(b) the State Tender Board Act, 1968 (Act No. 86 of 1968), or any regulations made in terms of the Act; or

(c) any provincial legislation providing for procurement procedures in that provincial government.

National Treasury practice note no. 4 of 2008/2009 which was issued in terms of sections 76(1) to 76(4) of the PFMA requires the

following (effective from 1 April 2008):

Irregular expenditure is recorded at the transaction amount as and when it is in incurred.

Irregular expenditure that was incurred and identified during the current financial and which was condoned before year end and/or

before finalisation of the financial statements must also be recorded appropriately in the irregular expenditure register. In such an

instance, no further action is also required with the exception of updating the note to the financial statements.

Irregular expenditure that was incurred and identified during the current financial year and for which condonement is being awaited at

year end must be recorded in the irregular expenditure register. No further action is required with the exception of updating the note

to the financial statements.

Where irregular expenditure was incurred in the previous financial year and is only condoned in the following financial year, the

register and the disclosure note to the financial statements must be updated with the amount condoned.

Irregular expenditure that was incurred and identified during the current financial year and which was not condoned by the relevant

authority must be recorded appropriately in the irregular expenditure register. If liability for the irregular expenditure can be attributed

to a person, a debt account must be created if such a person is liable in law. Immediate steps must thereafter be taken to recover the

amount from the person concerned. If recovery is not possible, the accounting officer or accounting authority may write off the amount

as debt impairment and disclose such in the relevant note to the financial statements. The irregular expenditure register must also

be updated accordingly. If the irregular expenditure has not been condoned and no person is liable in law, the expenditure related

thereto must remain against the relevant programme/expenditure item, be disclosed as such in the note to the financial statements

and updated accordingly in the irregular expenditure register.

1.17 Budget information

Entity are typically subject to budgetary limits in the form of appropriations or budget authorisations (or equivalent), which is given

effect through authorising legislation, appropriation or similar.





1.17 Budget information (Continued)

The annual financial statements and the budget are on the same basis of accounting therefore a comparison with the budgeted

amounts for the reporting period have been included in the Statement of comparison of budget and actual amounts.

The Statement of comparative and actual information has been included in the annual financial statements as the recommended

disclosure when the annual financial statements and the budget are on the same basis of accounting as determined by National

Treasury.

Comparative information is not required.

1.18 Related parties

The entity operates in an economic sector currently dominated by entities directly or indirectly owned by the South African Government.

As a consequence of the constitutional independence of the three spheres of government in South Africa, only entities within the

national sphere of government are considered to be related parties.

Management are those persons responsible for planning, directing and controlling the activities of the entity, including those charged

with the governance of the entity in accordance with legislation, in instances where they are required to perform such functions.

A related party transaction is a transfer of resources or obligations between related parties, regardless of whether a price is charged.

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the

other party in making financial and operating decisions or if the related party entity and another entity are subject to common control.

Related parties include:

a) Entities that directly, or indirectly through one or more intermediaries, control, or are controlled by the entity;

b) Associates (see International Public Sector Accounting Standard (IPSAS) 7, “Accounting for Investments in

Associates”);

c) Individuals owning, directly or indirectly, an interest in the reporting entity that gives them significant influence over the entity,

and close members of the family of any such individual;

d) Key management personnel, and close members of the family of key management personnel; and

e) Entities in which a substantial ownership interest is held, directly or indirectly, by any person described in (c) or (d), or over

which such a person is able to exercise significant influence.

The following are deemed not to be related parties:

a) (i) Providers of finance in the course of their business in that regard; and

(ii) Trade unions;

(b) In the course of their normal dealings with an entity by virtue only of those dealings (although they may

circumscribe the freedom of action of the entity or participate in its decision making process); and

(c) An entity with which the relationship is solely that of an agency.





Notes to the Annual Financial Statements

2. Changes in accounting policy

The annual financial statements have been prepared in accordance with Standards of Generally Recognised Accounting Practice on

a basis consistent with the prior year . No changes have been made other than the additional standards effective and adopted in the

current financial year.

3. New standards and interpretations

3.1 Standards and interpretations effective and adopted in the current year

In the current year, the entity has early adopted the following standards and interpretations that are effective for the current financial

year and that are relevant to its operations:

GRAP 105: Transfers of functions between entities under common control

The objective of this Standard is to establish accounting principles for the acquirer and transferor in a transfer of functions between

entities under common control. It requires an acquirer and a transferor that prepares and presents financial statements under the

accrual basis of accounting to apply this Standard to a transaction or event that meets the definition of a transfer of functions. It

includes a diagram and requires that entities consider the diagram in determining whether t his Standard should be applied in

accounting for a transaction or event that involves a transfer of functions or merger.

It furthermore covers Definitions, Identifying the acquirer and transferor, Determining the transfer date, Assets acquired or transferred

and liabilities assumed or relinquished, Accounting by the acquirer and transferor, Disclosure, Transitional provisions as well as the

Effective date of the standard.

The entity has adopted the standard for the first time in the 2015 annual financial statements however has no impact.

GRAP 106: Transfers of functions between entities not under common control

The objective of this Standard is to establish accounting principles for the acquirer in a transfer of functions between entities not under

common control. It requires an entity that prepares and presents financial statements under the accrual basis of accounting to apply

this Standard to a transaction or other event that meets the definition of a transfer of functions. It includes a diagram and requires

that entities consider the diagram in determining whether this Standard should be applied in accounting for a transaction or event that

involves a transfer of functions or merger.

It furthermore covers Definitions, Identifying a transfer of functions between entities not under common control, The acquisition

method, Recognising and measuring the difference between the assets acquired and liabilities assumed and the consideration

transferred, Measurement period, Determining what is part of a transfer of functions, Subsequent measurement and accounting,

Disclosure, Transitional provisions as well as the Effective date of the standard.


GRAP 20: Related parties

The objective of this standard is to ensure that a reporting entity’s annual financial statements contain the disclosures necessary to

draw attention to the possibility that its financial position and surplus or deficit may have been affected by the existence of related

parties and by transactions and outstanding balances with such parties.




3.1 Standards and interpretations effective and adopted in the current year (continued)

An entity that prepares and presents financial statements under the accrual basis of accounting (in this standard referred to as the

reporting entity) shall apply this standard in:

• identifying related party relationships and transactions;

• identifying outstanding balances, including commitments, between an entity and its related parties;

• identifying the circumstances in which disclosure of the items in (a) and (b) is required; and

• determining the disclosures to be made about those items.

This standard requires disclosure of related party relationships, transactions and outstanding balances, including commitments, in

the consolidated and separate financial statements of the reporting entity in accordance with the Standard of GRAP on Consolidated

and Separate Financial Statements. This standard also applies to individual annual financial statements.

Disclosure of related party transactions, outstanding balances, including commitments, and relationships with related parties may

affect users’ assessments of the financial position and performance of the reporting entity and its ability to deliver agreed services,

including assessments of the risks and opportunities facing the entity. This disclosure also ensures that the reporting entity is

transparent about its dealings with related parties.

The standard states that a related party is a person or an entity with the ability to control or jointly control the other party, or exercise

significant influence over the other party, or vice versa, or an entity that is subject to common control, or joint control. As a minimum,

the following are regarded as related parties of the reporting entity:

• A person or a close member of that person’s family is related to the reporting entity if that person:

- has control or joint control over the reporting entity;

- has significant influence over the reporting entity;

- is a member of the management of the entity or its controlling entity.

• An entity is related to the reporting entity if any of the following conditions apply:

- the entity is a member of the same economic entity (which means that each controlling entity, controlled entity and fellow

controlled entity is related to the others);

- one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of an economic

entity of which the other entity is a member);

- both entities are joint ventures of the same third party;

- one entity is a joint venture of a third entity and the other entity is an associate of the third entity;

- the entity is a post employment benefit plan for the benefit of employees of either the entity or an entity related to the

entity. If the reporting entity is itself such a plan, the sponsoring employers are related to the entity;

- the entity is controlled or jointly controlled by a person identified in (a); and

- a person identified in (a)(i) has significant influence over that entity or is a member of the management of that entity (or

its controlling entity).

The standard furthermore states that related party transaction is a transfer of resources, services or obligations between the reporting

entity and a related party, regardless of whether a price is charged.

The standard elaborates on the definitions and identification of:

• Close member of the family of a person;

• Management;

• Related parties;

• Remuneration; and

• Significant influence

Notes to the Annual Financial Statements (Continues)




3.1 Standards and interpretations effective and adopted in the current year (continued)

The standard sets out the requirements, inter alia, for the disclosure of:

• Control;

• Related party transactions; and

• Remuneration of management


3.2 Standards and interpretations issued, but not yet effective

The entity has not applied the following standards and interpretations, which have been published and are mandatory for the entity’s

accounting periods beginning on or after 01 April 2015 or later periods:

Standard/ Interpretation:

Effective date: Effective date:

Years beginning on or afterExpected impact:

• GRAP108: Statutory Receivables 01 April 2015 Separate disclosure including

measurement basis and impairment

criteria should any receivables occur






4. Property, plant and equipment

Figures in Rands 2015 2014Cost /

ValuationAccumulated depreciation

Carrying value

Cost / Valuation

Accumulated depreciation

Carrying value

Furniture and fixtures 1,056,608 (209,414) 847,194 984,169 (129,355) 854,814Office equipment 2,856,249 (1,546,582) 1,309,667 2,865,722 (1,341,774) 1,523,948IT equipment 1,744,954 (766,644) 978,310 1,131,009 (463,319) 667,690Total 5,657,811 (2,522,640) 3,135,171 4,980,900 (1,934,448) 3,046,452

Reconciliation of property, plant and equipment 2015

Opening balance

Additions Disposals Depreciation Total

Furniture and fixtures 854,814 78,639 (1) (86,258) 847,194Office equipment 1,523,948 41,297 (3,586) (251,992) 1,309,667IT equipment 667,690 640,147 (6,905) (322,622) 978,310

3,046,452 760,083 (10,492) (660,872) 3,135,171

Reconciliation of property, plant and equipment 2014

Opening balance

Additions Disposals Depreciation Total

Furniture and fixtures 94,406 840,426 (18) (80,000) 854,814Office equipment 1,206,374 550,876 (283) (233,019) 1,523,948IT equipment 622,617 299,070 (4,468) (249,529) 667,690

1,923,397 1,690,372 (4,769) (562,548) 3,046,452

Assets subject to finance lease (Net carrying amount)

Office equipment 838,538 974,517





5. Intangible assets

Figures in Rands 2015 2014Cost /

ValuationAccumulated amortisation

Carrying value

Cost / Valuation

Accumulated amortisation

Carrying value

- - - - - -Computer software 254,673 (48,213) 206,460 254,673 (22,746) 231,927Intangible assets under

development

1,605,578 - 1,605,578 462,688 - 462,688

Total 1,860,251 (48,213) 1,812,038 717,361 (22,746) 694,615

Reconciliation of intangible assets 2015

Opening balance

Additions Amortisation Total

Computer software 231,927 - (25,467) 206,460Intangible assets under

development

462,688 1,142,890 - 1,605,578

694,615 1,142,890 (25,467) 1,812,038

Reconciliation of intangible assets 2014

Opening balance

Additions Transfers Amortisation Total

Computer software - 30,614 224,059 (22,746) 231,927Intangible assets under

development

542,560 144,187 (224,059) - 462,688

542,560 174,801 - (22,746) 694,615

Intangible assets under development

The Intangible asset under development is software developed for the automation of the accreditation assessment process up to the

monitoring of the accreditation process and a website front end for external stakeholders.





6. Financial assets by category

The accounting policies for financial instruments have been applied to the line items below:

2015Financial instru-

ments at amortised cost

Total

Trade and other receivables 1,254,112 1,254,112Cash and cash equivalents 89,186,866 89,186,866

90,440,978 90,440,978

2014Financial instru-

ments at amortised cost

Total

Trade and other receivables (excludes prepayments) 2,425,855 2,425,855Cash and cash equivalents 72,666,911 72,666,911

75,092,766 75,092,766

7. Trade and other receivables from exchange transactions

2015 2014Trade debtors 1,176,819 2,370,055Less: Provision for Bad Debts (121,599) (134,437)Interest accrued 90,038 81,383

1,145,258 2,317,001

Credit quality of trade and other receivables

The credit quality of trade and other receivables that are neither past nor due nor impaired can be assessed by reference to

historical information about counterparty default rates:

None of the financial assets that are fully performing have been renegotiated in the last year.

Fair value of other receivables from exchange transactions

Carrying value of trade and other receivables reflects the approximate fair value at 31 March 2015.





7. Trade and other receivables from exchange transactions ( Continues)

Other receivables from exchange transactions past due but not impaired

Trade and other receivables which are less than "2 months or less past due" are not considered to be impaired as services are only

rendered after receipt of payment or payment commitment. At 31 March 2015, R 1,230,277 (2014: R 2,258,728) were past due but

not impaired.

The ageing of amounts past due but not impaired is as follows:

2015 20141 month past due 16,904 179,4572 months past due 1,213,373 2,079,271

Other receivables from exchange transactions

As of 31 March 2015, trade and other receivables of R 121,599 (2014: R 134,437) were impaired and provided for.

Reconciliation of provision for impairment of trade and other receivables

2015 2014Opening balance 134,437 114,899Provision for impairment 121,599 134,437Amounts written off as uncollectible (108,134) (172,501)Unused amounts reversed (26,303) -Additional impairment - 57,602

121,599 134,437

The creation and release of provision for impaired receivables have been included in operating expenses in the Statement of

Financial Performance (note 17). Amounts charged to the allowance account are generally written off when there is no expecta-

tion of recovering additional cash.





8. Cash and cash equivalents

Cash and cash equivalents consist of:

2015 2014Cash on hand 112,429 96,779Current account 2,321,398 3,761,263Short term deposits 29,567,002 27,918,206Call accounts 57,186,037 40,890,663

89,186,866 72,666,911

The short term deposits, which were invested for one month, matured on various dates prior to financial year end and were

all reinvested together with the accumulated interest. Cash on hand includes the Rand value of foreign exchange ordered for

international trips.

Breakdown of cash and cash equivalents

The following depicts the available cash and cash equivalents as at 31 March 2015 for commitments:

2015 2014

Accumulated reserve ringfenced for baseline cuts see note 9 29,067,000 -Accumulated reserve available for immovable property see note 9 34,805,113 -Foreign exchange currency to be used in 2015/16 110,997 -Other commitments liabilities and trade payables 17,467,923 -2014/15 Surplus retention to be requested 14,048,154 -Less: Assets on hand (6,312,318) -

89,186,866 -

9. Accumulated surplus

Ring fenced internal funds and reserves within accumulated surplus 2015

Accumulated reserve

Government grant reserve

commitments Baseline reduction

(2015/16 and 2016/17)

Total

Opening balance 55,774,439 8,097,674 - - 63,872,113Accumulated reserve approved to be

retained for immovable property

(55,774,439) (8,097,674) 63,872,113 - -

Accumulated reserve ringfenced for

baseline cuts

- - (29,067,000) 29,067,000 -

Accumulated reserve ringfenced for immovable property

- - 34,805,113 -

Accumulated reserve ringfenced for baseline cuts

- - - 29,067,000 -





10. Finance lease obligation

2015 2014Minimum lease payments due- within one year 425,304 399,347- in second to fifth year inclusive 1,996,226 2,421,531- later than five years 680,819 680,819

3,102,349 3,501,697less: future finance charges (1,115,205) (1,411,577)Present value of minimum lease payments 1,987,144 2,090,120

Present value of minimum lease payments due- within one year 146,660 102,976- in second to fifth year inclusive 1,217,934 941,880- later than five years 622,550 1,045,264

1,987,144 2,090,120

Non current liabilities 1,840,484 1,987,144Current liabilities 146,660 102,976

1,987,144 2,090,120

It is entity policy to lease certain office equipment under finance leases.

On 1 June 2006, SANAS entered into an operating lease agreement for office space that contained a finance lease in terms of the furniture and fittings. At this time SANAS was a Section 21 Company and on 1 May 2007, all assets and liabilities were transferred to SANAS as a Public Entity in terms of the Accreditation Act. The initial lease term was 15 years and the average effective borrowing rate was 14% (2014: 14%).

Interest rates are fixed at the contract date. The lease payments escalate at 6.5% p.a and no arrangements have been entered into for contingent rent.

The entity's obligations under finance leases are secured by the lessor's charge over the leased assets. Refer note 4.

11. Income received in advance

Income received in advance on debtor accounts are disclosed as income

received in advance.

2015 2014Income received in advance 5,724,658 2,759,227





12. Provisions

Reconciliation of provisions 2015

Opening Balance

Additions Utilised dur-ing the year

Reversed during the

year

Reduction due to re-

measurement or settlement without cost

to entity

Total

Leave pay provisions 1,408,344 194,625 (78,090) - - 1,524,879Travel costs 125,657 8,400 (17,560) (38,137) (69,960) 8,400

1,534,001 203,025 (95,650) (38,137) (69,960) 1,533,279

Reconciliation of provisions 2014

Opening Balance

Additions Utilised dur-ing the year

Total

Leave pay provisions 1,050,895 568,335 (210,886) 1,408,344Travel costs 251,015 49,570 (174,928) 125,657

1,301,910 617,905 (385,814) 1,534,001

A provision is recognised for leave pay due to employees based on the actual leave days due multiplied by the daily remuneration

rate. A provision for travel costs is recognised for services rendered but not yet charged to SANAS.

13. Trade and other payables

2015 2014Trade payables 3,117,655 3,805,359Accrued bonus 2,364,481 1,981,274

5,482,136 5,786,633

Trade payables are non interest bearing and are normally settled on 30 days terms. The carrying value of trade and other payables

reflects the approximate fair value at 31 March 2015.

14. Financial liabilities by category

2015Financial liabilities at

amortised costTotal

Trade and other payables 5,482,136 5,482,136Finance lease obligation 146,660 146,660

5,628,796 5,628,796





14. Financial liabilities by category (continues)

2014Financial liabilities at

amortised costTotal

Trade and other payables 5,786,633 5,786,633Finance lease obligation 102,976 102,976

5,889,609 5,889,609

15. Revenue

2015 2014Funds received from the dti 35,712,000 33,473,000Fee income 40,050,676 38,057,349

75,762,676 71,530,349

16. Other income

2015 2014Bad debt recovered 37,783 -Tenant allowance reimbursement - 208,848Courses and project fees 5,913,876 5,893,393Sundry income 87,113 49,529

6,038,772 6,151,770

17. Operating Surplus

Operating surplus for the year is stated after accounting for the following:

Operating lease charges 2015 2014Premises• Contractual amounts 2,992,534 2,634,610Equipment• Photocopy machines 160,121 128,702

3,152,655 2,763,312

Deficit on write off of property, plant and equipment 10,049 16,362Impairment on trade and other receivables 121,599 134,437Gain on foreign exchange differences 2,767 1,310Loss on foreign exchange differences 2,603 3,240Amortisation on intangible assets 25,467 22,746Depreciation on property, plant and equipment 660,872 562,548Employee costs 35,962,025 32,555,112Auditors remuneration 174,314 148,107Accounting Authority's expenses 265,176 213,421





18. Investment income

2015 2014Interest incomeInterest received on fixed deposits 3,952,824 2,687,967

19. Finance costs

2015 2014Interest received on fixed deposits 296,371 308,357

20. Taxation

No provision has been made for 2015 tax as the entity is exempt under Section 10(1)(cA)(i) of the Income Tax Act.

21. Cash generated from operations

2015 2014Surplus 14,048,154 13,546,187Adjustments for:Depreciation and amortisation 686,339 585,296Deficit on write off of assets 10,049 (22,382)Movements in operating lease assets and accruals (51,037) 104,492Movements in provisions (722) 232,091Changes in working capital:Trade and other receivables 1,171,743 (966,083)Other receivables from non exchange transactions - (108,854)Trade and other payables (304,496) 668,587Income received in advance 2,965,431 398,684

18,525,461 14,438,018

22. Commitments

Authorised capital expenditure

2015 2014Not yet contracted for and authorised by members• Property, plant and equipment 34,836,972 57,000,000





22. Commitments (continues)

These committed funds relates to property that the entity received approval from the Minster of Trade and Industry and concurrence

from the National Treasury to acquire immovable property. The total approved accumulated surplus amounted to R55.7 million

however National Treasury reduced the entity's baseline by R29million over 2015/16 and 2016/17 financial years. This has resulted

in the Board approving R29 million of the accumulated surplus to be ring fenced for operational issues. This leaves the entity with

R34.8 million towards immovable property. SANAS will request to retain the 2014/15 surplus of R16.4 million (before bonuses) in

order to fund secure immovable property and fund the fitouts required

Operating leases – as lessee (expense)

2015 2014Minimum lease payments due within one year 1,885,205 2,628,174 in second to fifth year inclusive 10,388,082 9,926,122 later than five years 395,215 2,742,380

12,668,502 15,296,676

Operating lease payments represent rentals payable by the entity for certain of its office properties. Sunnyside office lease was

negotiated for a term of 15 years with escalation of 6.5% per annum, whereas Brooklyn office lease was negotiated for a terms of

2 years with escalation of 8% per annum. No contingent rent is payable.





23. Related parties

Relationships

Members of key management Mr R Josias (CEO)

Ms MC Leballo (Senior Manager) Retired 31 January 2015

Mr M Phaloane (Senior Manager)

Dr E Steyn (Senior Manager)

Ms CR Warren (CFO)

Mr D Petersen (Company Secretary)

Executive Authority The Department of Trade and Industry (the dti)

Accounting Authority Mr P Govender (Chairperson)

Mr R Josias (CEO)

Mr J Malatse

Ms N Magwaza

Ms J Rathebe

Mr T Jaftha

Ms B Lue Marais

Mr L Saki

Mr P Zonke

Mr V Seymour

Ms A Lötter

Mr A Ramabulana

Mr D Petersen

SANAS MOU signatory National Laboratory Association (NLA)

Public Entities

National Departments





23. Related parties (continues)

Related party balances

2015 2014

Amounts included in Trade receivables regarding related parties

Amatola Water - (4,116)

Council for Scientific and Industrial Research 44,640 (11,708)

ESKOM 54,380 22,262

Lepelle Northern Water 76,226 58,612

Magalies Water 47,930 -

Mhlathuze Water 4 4

National Health Laboratory Service 118,658 450,941

National Metrology Institute of South Africa 175,576 19,277

National Regulator for Compulsory Specifications 13,520 65,292

Rand Water - 51,482

Sedibeng Water (31,320) -

South African Bureau of Standards 6,996 83,641

Umgeni Water - 53,707

Amounts included in Trade Payables regarding related parties

Council for Scientific and Industrial Research - 10,060

DENEL (Pty) Ltd - 22,250

Department of Trade and Industry 14,849 39,571

Government Printer Works 2,342 221

ESKOM 3,012 16,703

National Health Laboratory Service 14,272 -

National Metrology Institute of South Africa 87,515 104,817

National Laboratory Association 62,277 48,430

National Regulator for Compulsory Specifications 53,282 51,012

South African Bureau of Standards 6,413 10,306

Telkom SA Limited - 11,750





23. Related parties (continues)

Related party transactions

2015 2014Funds received from related partiesthe dti 35,712,000 33,473,000

Operational costs paid to related partiesTelephone - the dti 105,965 121,958

Postage - the dti 14,738 26,669Internet usage - the dti 24,194 26,393

Funds paid to related partiesTransfer payment National Laboratory Association 502,981 477,211

Exchange Transactions Services rendered to other Public EntitiesAgricultural Research Council 35,830 26,690Amatola Water 91,845 14,564Council for Scientific and Industrial Research 761,163 619,540Denel (Pty) Ltd 117,360 119,729ESKOM 334,918 520,616Lepelle Northern Water 93,594 93,824Magalies Water 189,151 58,440Mhlathuze Water 49,840 69,152National Health Laboratory Service 1,923,174 1,771,472National Metrology Institute of South Africa 629,623 523,066National Regulator for Compulsory Specifications 394,800 514,979Rand Water 12,854 269,996Sedibeng Water 29,300 77,111South African Airways (Pty) Ltd 67,170 64,035South African Bureau of Standards 1,465,827 1,519,206Telkom SA Limited 187,764 209,552Umgeni Water 132,304 143,700

Expenses Goods and Services paid to other Public EntitiesCouncil for Scientific and Industrial Research - 34,582DENEL (Pty) Ltd 9,960 24,600Government Printing Works 15,777 8,608ESKOM - 28,179National Health Laboratory Service 14,272 -National Metrology Institute of South Africa 151,270 310,645National Laboratory Association 679,144 605,007National Regulator for Compulsory Specifications 356,679 384,766South African Bureau of Standards 310,636 207,801Telkom SA Limited - 11,750

SANAS receives funds from the dti as well as utilises the above mentioned operational services of the dti due to the technical

infrastructure of the dti campus.

Through an MOU signed by SANAS and the NLA, SANAS transfers funds to the NLA from the funds received from the dti





24. Emoluments and Remuneration

Executive

2015

Salary Bonus and Per-formance payments

Travel al-lowance

Provident Fund

Medical Aid Total

Mr R Josias (CEO) 1,276,382 249,277 40,152 244,796 100,516 1,911,123Mr M Phaloane (Senior Manager) 823,085 60,119 54,000 163,813 61,092 1,162,109Ms MC Leballo (Senior Manager) 728,677 69,613 50,000 135,550 - 983,840Dr E Steyn (Senior Manager) 881,949 96,644 - 168,027 80,364 1,226,984Ms CR Warren (CFO) 892,929 66,365 - 162,337 41,680 1,163,311Mr D Petersen (Company Secretary) 774,128 79,618 - 93,279 29,692 976,717

5,377,150 621,636 144,152 967,802 313,344 7,424,084

2014

Mr R Josias (CEO) 1,211,635 235,834 40,152 228,534 91,908 1,808,063Mr M Phaloane (Senior Manager) 779,562 89,139 54,000 153,157 55,844 1,131,702Ms MC Leballo (Senior Manager) 818,259 150,306 60,000 151,237 - 1,179,802Dr E Steyn (Senior Manager) 839,586 129,930 - 157,097 72,702 1,199,315Ms CR Warren (CFO) 797,658 87,685 - 143,925 38,136 1,067,404Mr D Petersen (Company Secretary) 730,720 61,665 - 86,866 27,140 906,391

5,177,420 754,559 154,152 920,816 285,730 7,292,677





24. Emoluments and Remuneration (continues)

Accounting Authority

2015

Meeting fees TotalMr P Govender* - -Mr J Malatse* - -Ms N Magwaza* - -Ms J Rathebe 57,912 57,912Mr T Jaftha* - -Ms B Lue Marais* - -Mr L Saki 70,104 70,104Ms A Lötter* - -Mr P Zonke - -Mr V Seymour 64,008 64,008Mr A Ramabulana 73,152 73,152

265,176 265,176

2014

Mr P Govender* - -Mr J Malatse* - -Ms N Magwaza* - -Ms J Rathebe 47,120 47,120Mr T Jaftha* - -Ms B Lue Marais* - -Mr L Saki 5,760 5,760Ms A Lötter* - -Mr P Zonke 48,940 48,940Mr V Seymour 54,001 54,001Mr A Ramabulana 57,600 57,600

213,421 213,421* The Non Executive Directors are not remunerated in their personal capacity.





25. Change in estimate

Property, plant and equipment

The useful life of certain IT equipment, office furniture and office equipment was

estimated in 2010 to be 5 to 17 years. In the current period management have

revised their estimate to 5 to 20 years. The effect of this revision has decreased

the depreciation charges for the current and future periods by R 10,333

The amount of the effect in future periods is not disclosed because estimating

it is impracticable.

26. Prior period errors

The operating lease liability on the lease for the Brooklyn office was mistakenly

omitted at the inception of the lease in June 2013. The correction of the error

resulted in an adjustment of R31,861.91 in comparative figures for 2013/14

against “Accumulated Surplus” and “Operating liability”.

During the 2013/14, SANAS utilised a portion of the Government Grant received

towards furnishing the Brooklyn Office. Part of these funds was expenditure

that was reported on the Statement of Financial Performance. An equivalent

amount was transferred from the “Government Grant” under Reserves and

allocated to income in order to meet the expenditure. This was done based on

the requirement that entities cannot budget for a deficit. During 2014/15, the

allocation of reserves to income for reporting purposes was scrutinised. The

Government Grant was given to SANAS with no conditions but only restrictions

for what it could be used for. As an initial liability was not raised at receipt, the

allocation to income is not permitted in terms of GRAP23 and hence the prior

period figures for Surplus had to be amended. The utilisation of the grant was

therefore disclosed in the Statement of Net Assets, transferring the amount

from “Government Grant” to “Accumulated Surplus”.

2015 2014Statement of financial positionOperating lease liability - 31,862

Statement of Financial PerformanceLease payments - 31,862Other income - (634,871)





27. Risk management

The entity’s activities expose it to a variety of financial risks: market risk

(including fair value interest rate risk, cash flow interest rate risk and price risk),

credit risk and liquidity risk.

The entity’s overall risk management program focuses on the unpredictability

of financial markets and seeks to minimise potential adverse effects on the

entity’s financial performance. The Accounting Authority provides written

principles for overall risk management, as well as written policies covering

specific areas, such as interest rate risk, credit risk and investment of excess

liquidity.

Liquidity risk

The entity’s risk to liquidity is a result of the funds available to cover future

commitments. The entity manages liquidity risk through an ongoing review of

future commitments and credit facilities.

At 31 March 2015 Less than 1 year Between 1 and 2 years

Between 2 and 5 years

Over 5 years

Trade and other payables 5,482,136 - - -Finance lease obligation 146,660 198,912 1,019,022 622,550

At 31 March 2014 Less than 1 year Between 1 and 2 years

Between 2 and 5 years

Over 5 years

Trade and other payables 5,786,633 - - -Finance lease obligation 102,976 146,660 795,219 1,045,264

Interest rate risk

Fixed deposits attracts interest rates that vary in relation to the prime rate. The

entity’s policy is to manage interest rate risk so that fluctuations in variable

rates do not have a material impact on surplus or deficit

Finance lease liability attracts interest at a fixed rate.

Credit risk

Credit risk consists mainly of cash deposits, cash equivalents and trade

debtors. The entity only deposits cash with major banks with high quality credit

standing and limits exposure to any one counter party.

Trade receivables comprise a widespread customer base. Management

evaluated credit risk relating to customers on an ongoing basis.





27. Risk management (continues)

Financial instrument 2015 2014Cash and cash equivalents 89,186,866 72,666,911Trade and other receivables 1,254,112 2,425,855

Currency risk

The entity operates internationally but invoices only in South African Rands,

thus the entity is exposed to minimal foreign exchange risk.

The entity does not hedge foreign exchange fluctuations as the number of

international transactions is very small.

The entity reviews its foreign currency exposure, including commitments on

an ongoing basis. The entity expects its foreign exchange contracts to hedge

foreign exchange exposure.

28. Irregular expenditure

2015 2014Add: Irregular Expenditure current year 9,813 -Less: Amounts condoned (9,813) -

- -

Details of Irregular Expenditure condonedCondoned by

Accommodation booked above pre-

scribed rate*

Accounting Authority 9,813

*During the current financial year, accommodation was booked above the

prescribed rate of R1300 per night as instructed by National Treasury in the

Treasury Instruction 01 of 2013/2014 Cost Containment Measures as issued

19 December 2013. This resulted in investigations and although justified, the

expenditure was raised as Irregular expenditure in terms of the PFMA. The

total amount by which the bookings exceeded the prescribed limit was R9,813.

The excess of the prescribed amount was due to cost saving activities as

accommodation was either booked in or closer to the venue/desired location

thus saving on additional shuttle/car hire to transport the individuals to the

venue/desired location. No formal disciplinary or criminal steps were taken

however the transgressions were addressed with the relevant departments.





29. Statement of Comparison of Budget and Actual Amounts

The following are the explanations of material differences as required by paragraph 12(c) of GRAP 24:

Statement of financial performance:

Investment income: Interest was higher than originally budgeted due to additional funds held on fixed deposits. These funds were

anticipated to have been used to acquire a new office building already during 2012/13. SANAS continues to hold these funds until

the acquisition of immovable property is finalised.

Employee costs: Remaining posts within the approved restructuring project could not all be employed during 2014/15 due to space

constraints, however an additional office space was sourced during 2013 for the training department in order to provide temporary

space. This temporary office will further be split into office space to accommodate the vacancies temporarily until the immovable

property is acquired.

General expenses: Unutilised budget is due to delay in acquiring additional office space and associated costs not incurred. Other

unutilised budgets include direct costs of accreditation assessments that were withdrawn as well as an overestimation of additional

services to be received. It is difficult to budget for some activities as the final outcome is based on the demand in the industry.

Cash flows:

Net cash from operating: This variance is as a result of the surplus for 2014/15 which was higher than budgeted due to the reasons

detailed above.

Net cash from investing: Budget was anticipated to have been used towards the acquisition of immovable property as well as the

furniture and equipment required for the new office building during 2014/15. The total budgeted was R58 million.




AFRAC African Accreditation Cooperation ISO International Standards Organisation

B-BBEE Broad-based Black Economic Empowerment NMISA National Metrology Institute of South Africa

CAB Conformity Assessment Body NRCS National Regulator for Compulsory Specifications

CEO Chief Executive Officer OAPP Organic Agricultural Production and Processing

COMESA Common Market for Eastern and Southern Africa OECD Organisation for Economic Cooperation and Development

COTII Council of Trade and Industry Institutions ORCA Outsourced Risk and Compliance Assessment (Pty) Ltd

EAC East African Community PDI Previously Disadvantaged Individuals

FSSC Food Safety System Certification PFMA Public Finance Management Act

GCP Good Clinical Practice RTMS Road Transport Management System

GCPV Good Clinical Practice Veterinary SABS South African Bureau of Standards

GFSI Global Food Safety Initiative SADC Southern African Development Community

GHG Greenhouse Gases SADCA Southern African Development Community Cooperation in Accreditation

GRAP Generally Recognised Accounting Practice SADCAS Southern African Development Community Cooperation in Accreditation Services

GLP Good Laboratory Practice SANAS South African National Accreditation System

IAF International Accreditation Forum SANS South African National Standard

ICT Information and Communication Technology SEDA Small Enterprise Development Agency

IEC International Electrotechnical Commission TBT Technical Barriers to Trade

ILAC International Laboratory Accreditation Cooperation the dti The Department of Trade and Industry

IPAP Industrial Policy Action Plan WADA World Anti-doping Agency

IRBA Independent Regulatory Board for Auditors WTO World Trade Organisation

MRA Multilateral Recognition Arrangement

LIST OF ABBREVIATIONS AND ACRONYMS



Contact Details

Switchboard Telephone: +27 (0) 12 394-3760 | General Fax Number: +27 (0) 12 394-0526

Physical Address: the dti Campus, 77 Meintjies Street, Sunnyside, Pretoria, 0002, South Africa

BROOKLYN Physical Address: 121 muckleneuk street, Nieuw muckleneuk, Pretoria, 0002, South Africa

Postal Address: Private Bag X23, Sunnyside, Pretoria, 0132, South Africa

Website: www.sanas.co.za

RP218/2015

ISBN: 978-0-621-43795-9

2014 - 2015 annual report · 6 annual report 2014/2015 south african national accreditation system...

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