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MINISTER OF SPORTSHON Mr. Fikile Mbalula

BSA Annual Report 2010/11

Chairperson’s Report

Introduction by the Acting Chief Executive Officer

Human Resource Report

BSA Board Members

Performance Information

Report of the Audit Committee

Report of the Auditor General

Board Members’ Report

Boxing Awards 2010/11

Annual Financial Statements

Statement of Financial Position

Statement of Financial Performance

Statement of Changes in Net Assets

Statement of Cash Flows

Accounting Policies

Notes to the Annual Financial Statements

Detailed Statement of Financial Performance

4 - 5

6 - 7

8

9

10 - 21

22 - 23

19 - 26

27 - 28

29 - 32

38

41

42

43

44

45-58

59-76

77-78

C o n t e n t s

Mission

Vision

Values

To create a world class regulatory body for boxing in a united and safe environment.

To enhance the capacity of all stakeholders to improve the quality, passion and popularity of professional boxing in South Africa and Internationally.

Boxing SA is founded on the following values and culture:

• Fairness• Respect• Honesty• Excellence• Accountability• Discipline• Ambition• Passion• Consistency

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Boxing South Africa (BSA) in the year under review operated under tremendous pressure. This was both

on the financial and human resource fronts. The world was still engulfed in a severe global economics recession. South Africa and all its facets could not escape. Professional Boxing has sponsorship as part of its major challenges. This has severely hampered activities in our sport and needs ongoing urgent attention.

BSA held its Annual Boxing Awards Ceremony in Durban, KwaZulu-Natal. The ceremony was held on the 19th February 2011. This event was linked with the Mass Participation event. Due to the ongoing human resources and managerial challenges, there were organization problems that made the event not be of optimal standard. The BSA was ably assisted by the KZN Department of Sport and the Sport and Recreation of South Africa (SRSA).

In spite of the adverse financial situation BSA held very successful boxing tournaments throughout the country. A total of 79 tournaments were held, wherein 21 featured South Africa Titles, 18 International Bouts as well as 40 Development Tournaments (Nursery Tournaments). Female Boxers and Ring Officials featured prominently and successfully in all of the above. Due to the non-televising of boxing tournaments by the SABC, Boxing suffered tremendously both on the viewership and financially. Most of the BSA revenue is derived from sanctioning fees of tournaments. This situation contributed negatively in exacerbating the already dire state of BSA finances.

In August 2010 The Minister of Sports and Recreation, Dr. Rev Stofile, appointed to the Board of Boxing South Africa additional three members to bring the totally of members to seven (7) which is the number prescribed by the Boxing Act of 2001. With the full quota of the stipulated Board members BSA could hold meetings and activities as required by the

CHAIRMAN’S REPORT

Dr. Malefetsane Peter Ngatane

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Act. Financing the organization remained a challenge. BSA has not as yet been properly funded for it to satisfactorily address and carry out its activities as per the Act mandate.

In January 2011, the board of BSA embarked on a search for a permanent CEO, as Mr. Mtya was still acting. The process was completed on the 27th January 2011 lists of recommended candidates were submitted to the new Minister of Sport and Recreation Mr. Fikile Mbalula. The Minister identified Mr. Moffat Qithi to be the CEO of Boxing South Africa.

The AFS were submitted to the AG on time. Some of the queries from the previous audits were addressed though not adequately. All this resulted in a qualified report from the Auditor General (AG). The AG identified as contributing factors, poor Human Resources situation and Financing.

I would like to take this opportunity to personally and on behalf of the Board to pass gratitude to the staff of BSA both in the Head Office and those running the Provincial Offices of BSA (these are still to be promulgated by the Boxing Act).

Dr. Malefetsane Peter NgataneChairperson of the Board

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In the year under review, Boxing SA continued on the path it had already set in its quest to improve its image and

restore the public faith, the confidence of the stakeholders, as well as all other prospective players across the domain.

Financial Management As our main challenge has historically been on the financial management front, special attention had to be given to this aspect for boxing to improve its standing. This was mainly brought about by the absence of a CFO to provide proper guidance and prepare financial reports, as well as add influence on financial decision making.

Only towards the end of the financial year could a Financial Management Consultant be appointed. This appointment certainly eased the situation and added on the effort in the financial department. Since the appointment, we have achieved the following;

• Do overall risk assessment of the entity• Revised Policies to address risks identified• Drafted new policies that were necessary but did not exist• Introduced Action Plans for improvement in the control of finances• Monitored the Action Plans monthly for continuity

The new Policies were approved on 6 May 2011 and immediately implemented. Proper monitoring is taking place. Unfortunately because of the late implementation of these measures, the significant improvements effected may not reflect in the current year, but will certainly shape the future.

Based on the above mentioned strategy, and the appointment of the CEO with effect from 1 June 2011, I am confident that there will be smooth progress and improvement in the next financial year.

INTRODUCTION BY ACTING CHIEF EXECUTIVE OFFICER

Loyiso Mtya : Acting CEO

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TournamentsNew strategies were introduced in the processes of conducting the ratings and sanctions programs. This was aimed at improving the quality of boxers challenging for National titles thus resulting in better matches.

DevelopmentandEducationalProgramsBoxing SA took a strategic decision to expose the current boxers to future wealth creation opportunities through the New Venture Creation Program. A partnership was formed with EDULINK to run the skills program.

The program was designed to empower licenses on effective life management skills and allow them to maximize their personal potential. It is also designed to guide them on the necessary considerations they must take into account in creating a sustainable living during and after their boxing days.

Female BoxingSouth African female boxing continues to grow as female bouts were included in development and National title promotions. This effort came into fruition when female boxer Kabisile Tshabalala won the BSA award for Prospect of the Year.

The reigning WBF Female World Champion Noni Tenge earned a rating by the more recognizable IBF world sanctioning body, another historic punch for South African boxing.

_________________________________Loyiso Mtya Acting CEO

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Occupational Status Gender BSA Staff

BSA ProvincialManager African Indian Coloured White

Resignations

Male 0 0 0 0 0 0

Female 0 0 0 0 0 0

Dismissal

Male 0 0 0 0 0 0

Female 0 0 0 0 0 0

Appointments Male 2 2 1 1 0 0

Current StaffPermanent Staff

Male 5 6 10 0 0 1

Female 6 0 3 1 2 0

Contracts

Male 1 0 1 0 0 0

Female 0 0 0 0 0 0

Consultants - Staff Female 1 0 0 1 0 0

Notes#BoxingSouthAfricaappointedtheCEOwitheffectfrom1June2011(Subsequentevent).*TheFinancialManagementConsultantwasappointedwitheffectfrom1January2011onasixmonthscontract.

HUMAN RESOURCE STATISTICAL COMPOSITION

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BOXING SA BOARD MEMBERS AS AT MARCH 2011

Dr. Malefetsane Peter Ngatane

Mr. Archie Jonas

Mr. Claude Bassuday

Mr. Sakhiwe Sodo

Mr. Andile Sidinile

Mr. Solly Selebi

Mr. Mark Syfris

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PERFORMANCE INFORMATION

Introduction Boxing SA is a Schedule 3 Public Entity under the executive authority of the Department of Sport and Recreation. It has been established as a successor to the formerly known as South African National Boxing Control Commission in terms of the Parliament Act 11 of 2001, Boxing Act.

Boxing SA’s leadership has substantially adjusted the Strategic Plan in a context that meets the requirements of the Treasury Regulations 5.2, covering measurable objectives and outputs for the programmes of Boxing SA and the multi-year projections of baseline allocations and expenditure.

Important areas of work were prioritized and added to the strategic plan and targets that were no longer pertinent were amended accordingly so that they are in alignment with the adjusted strategic plan. The strategic objectives need regular monitoring. Boxing SA did not have a permanent CEO and CFO during the 2010/2011 financial year. The strategic goal of Boxing SA is to ensure effective and efficient administration of boxing in South Africa. Boxing SA’s strategic course was significantly focused on the achievement of this goal during 2010/2011 and for this reason the organization’s performance is reported in terms of its core mandates.

Functions and duties of BSA The duties and powers of Boxing SA as contained in section 8 of the Boxing Act, are the following: (a) Compile and publish information statistics and annual report on its activities; (b) Assist in the establishment of an association or federation of associations; (c) (i) Hold meetings at least four times a year; (ii) Hold meetings at its request, or at the request of the associations, or federation of such associations to discuss boxing matters; (d) Consider applications for recognition of international boxing bodies or organizations and their boxing champions. Mandate of Boxing SA Boxing SA has the statutory mandate premised on the objects of the Act in Section 2 among other things to: (a) Give effect to the provisions of the Constitution;

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(b) Regulate, control and exercise general supervision over professional boxing at tournaments in the Republic; (c) Protect and regulate the interests and organizational rights of boxers, trainers, managers, promoters, officials and stakeholders involved in professional boxing matters;

(d) To promote: (i) Orderly collective action;

(ii) Boxing in the Republic;

(iii) The effective resolution of boxing disputes. Boxing SA has redefined the above mandates into the following broad strategic objectives: • Create an organized and regulated environment for professional boxing; • Design an appropriate structural arrangement for boxing; • Improve quality of tournaments; • Enhance the popularity of boxing; • Develop high performing boxers and ring officials for international stage; • Create an enabling environment for the increased welfare of licencees; • Provide for the seamless transition of boxers from amateur to professional ranks.

Boxing South Africa in executing the task of administering professional boxing activities in this country is overseen by the Department of Sport and Recreation, and the Parliamentary Portfolio Committee on Sport and Recreation.

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PerformanceOverview

For 2010/11 financial year Boxing SA has had achievements, and challenges, and these challenges are being systematically addressed during the 2011/12 period, in a spirit of continuous improvement and learning.

Financial Management

The objective of Boxing SA financial accounting is to provide information that external users can use to make decisions about their interest, and also analyze how the entity is performing. Financial Accounting encompasses recording, controlling, and reporting accurately and within time frames (timely). Financial Management/Management Accounting is concerned about information that will assist in decision-making and performance evaluation activities.

Achievements

• Boxing SA’s continuity though experiencing constrained cash flow;• Settlement of long outstanding liabilities;• Conservative, and reduced spending;• Enhanced finance management capacity by the appointment of the Financial Management Consultant;

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Challenges

• Inadequate appropriation from SRSA; • Failure to secure a Sponsorship; • Deficit suffered by Boxing SA of R3 million; • SARS Liability that has long been outstanding, as a result BSA incurred fruitless and wasteful expenditure.

Operations

The focus of this programme is aimed at achieving the following strategic objectives:

• Increasing participation in boxing by people of all race groups and genders; • South African boxers are matched against quality national and international boxers to create opportunities for their upward movement towards contesting for world status; • Creating opportunities for all contestants from every region in the country irrespective of gender and race to participate in the sport.

Achievements

• South African boxing has become more competitive around the world;• Boxing SA enjoys recognition and respect by major international/world professional bodies;• Increased number of international fights staged in SA;• Increased number of boxers in international boxing arena;• Recognition of Boxing SA licencees not only by African Boxing Union (ABU), but also by World Boxing Council (WBC), World Boxing Association (WBA), World Boxing Federation (WBF), International Boxing Ogarnisation (IBO) and International Boxing Federation (IBF).

Challenges

• The number of female participants has not substantially increased;• Development tournaments have not reached the target;• Some provinces had little or no tournaments;• Failure to have Baby Champs project, due to lack of funding.

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Strategic Management & Corporate Services

The objective of this programme is to “Administer, Guide, Manage” affairs of Boxing SA, and to also “Monitor and Report” on the performance of the entity Boxing SA, as well as liaise with all stakeholders. The focus areas are:

• Ethical Practices; • Compliance Legal & Regulatory Framework; • Effective and efficient stakeholder engagement; • Creation of boxing environment that is full of opportunities to all SA Citizens; • Achievement of Government priorities (political and social responsibilities).

Achievements

• Boxing SA’s continuity though experiencing constrained cash flow;• BSA’s relationships with Provincial and Local Governments, as well as South African National Amateur Boxing Organisation

(SANABO);• Synergy between BSA and SRSA;• Skills Transfer programme, through the appointment of the Financial Management Consultant.

Challenges

• Late appointment of the permanent CEO;• Late performance of the internal audit functions.

Strategic objectives for the year

Good financial results;1. Efficient financial management;2. Efficient human capital management;3. Good corporate governance;4. Facilitate boxing development projects;5.

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Proper IT systems in place;6. Maintain safety, health and the environment;7.

Deliver good quantity and quality tournaments8. .

Report on achievement of strategic objectives for the year

Strategic priority 1: Financial Results

Objectives Targets Actual Achievements

Revenue (Rand) R10.3 million R7.6 million BSA did not receive additional funding from SRSA; neither did it receive a sponsorship as was expected.

Net Profit / (Loss) (Rand) R0.9 million (R2.7 million) BSA incurred significant costs that led to such a deficit, namely Interest and penalties on SARS - R1.5 million, BSA Annual Awards Project - R428 826, Travel and Accommodation costs - R623 931; audit fees payable to AGSA - R802 653.

Debtors Collection (Days) 30 60+ The variance in debtors’ collection is attributable to the promoters only settling their account once he/she is certain of the next tournament date.

Expenditure (Rand) (R9.3 million) (R10.3 million) Much of BSA expenditure is attributable to the significant costs stated under the Net Profit / (Loss) variance.

Going concern (%) 60 60 Boxing SA reported a deficit of R3 million, as a result it is still operating with an unfavourable net asset figure.

Creditors Payment (Days) 30 120+ BSA grant is not enough to settle the long outstanding tax liability and audit fees payable to AGSA.

Boxing South Africa aims to increase financial performance so as to ensure the financial stability of the entity.

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Strategicpriority2:FinancialManagementandAdherencetoPFMA,TreasuryRegulations,BoxingSAPoliciesandotherDirectives


Performance of Internal audit functions 1 1 BSA engaged Mazars as their Internal Auditors.

Risk assessment & Audit preparation plan 1 1 The risk assessment was done byBSA Financial Management Consultant

Conservative Budgeting (%) 84 80 BSA’s overall spending is unfavourable compared to the budget and as compared to the prior financial year 2009/10.

Financial Management policies and Procedures 25 27 BSA’s policies and procedures have been reviewed and adopted subject to change that might be effected as and when necessary.

Quarterly Reports submitted to SRSA 4 4 BSA submitted all four quarterly reports on time to SRSA.

Unqualified audit report 1 - Qualified Report was issued.

Compliance to Boxing Act and Regulations (%) 100 100

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Strategic priority 3: Human Capital Management


Full time CEO 1 1 CEO’s appointment will only come into effect in July.

Full time CFO (Financial Management Consultant – 1 Year Contract)

1 1 The Financial Management Consultant has already been working at BSA.

Training and Development (Board & Staff) 1 1 VIP Training

Formulation / Development of HR Recruitment and Retention policy

- 1 A policy has been created and Awaiting final approval.

Strategic priority 4: Information Technology Infrastructure


IT Management:Updated IT Master System and Data recovery system (%). 100 100 All systems in order.

IT Security Management:Well managed IT System, network and hardware (Firewalls and antivirus) (%).

100

IT user satisfaction: Well addressed IT complaints (%). 100

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Strategic priority 5: Adoption of good governance structure


Audit Committee 1 1 The audit committee has been functioning well. The committee is Chaired by Thulani Duncan Ntuli.

HR Committee 1 1 The HR committee is headed by Sakhiwe Sodo. The committee functioned effectively during this year compared to prior years. Appointments of FMC and CEO processes have been facilitated by this Committee.

Finance Committee 1 1 The Finance committee is headed by Mark Syfris.

Sanctioning Committee - 1 The Sanctioning committee is headed by Solly Selebi. The committee comprises BSA Provincial Managers, Media people and Andile Sidinile.

Legal and Regulatory Committee - - The Legal and Regulatory Committee was headed by Claude Bassuday.

Medical Panel - - There is no official Medical Panel, however, Dr. Malefetsane Ngatane advises the office on medical issues.

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SRSA, SANABO, Provincial & Local Government (%) 100 100 The relationship between BSA, and Provincial and Local Government is working. However, its relations with SANABO needs continued engagements for strengthening.BSA’s relationship with SRSA has improved and BSA now receives guidence there to and SRSA has taken steps to become involved in assisting BSA.

Boxing South Africa aims to ensure good corporate governance by adherence to relevant legislations, risk management and internal controls.

Strategicpriority6:Capital(BoxingDevelopment)Projects


Boxing SA Mass participation1. Project Strategic Plan

1 1 BSA has a Project Plan in place. However, funds are required in order to run this project successfully. Boxing SA will engage SRSA so that it is able to tap into the parent Department’s Mass Participation Programme Funds.

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Strategicpriority7:Safety,Health&Environment


Banned Substances Workshop 2 - Specific workshop on this matter has been put on hold until enough funding is secured.

Inside Ring Fatalities - - No fatalities were experiences in the ring.

After fight death - - No death after the fight incidents reported.

Strategicpriority8:Deliveryofqualitytournament


International Tournaments 29 18 Boxing South Africa has 15 male International (World) Champions, and 2 female World Champions. As a result South African boxers are more competitive.

SA Title tournaments 24 21 Most of the SA titles remain vacant. However, BSA has 13 male champions and 2 SA female champions.

Development tournaments 53 40 The anticipated number of tournaments could not be staged as SABC reduced tournament dates and also due to the 2010 World Cup event.

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Mass Project / Training & development programme participants 150 100 Lack of adequate funding resulted in training of the boxers to the tune of 100.

Enhance the popularity of boxing amongst its fraternity and increase the customers:

Ring Officials1. Boxers2. Trainers/Managers3. Promoters4.

11455512450

13761813441

Number of the participants has generally increased significantly except for a slight decrease in the number of licensed promoters.

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BOXING SOUTH AFRICA

Report of the Audit committeeWe are pleased to present our report for the financial year ended 31st March 2011.

Audit committee members and attendanceThe Audit Committee consists of the members listed hereunder and should meet 4 times per annum as per its terms of reference. During the current year five meetings were held.

Name of member Number of meetings attendedThulani Duncan Ntuli (Chairperson) 5Tendani Ndou 5

Audit Committee ResponsibilityThe Audit Committee reports that it has complied with its responsibilities arising from section 51 (1) (a) (ii) of the PFMA and Treasury Regulations 27.1.8. The Audit Committee also reports that it has adopted appropriate, formal terms of reference such as its audit committee charter, and has regulated its affairs in compliance with this charter but has not discharged all its responsibilities as contained therein as a result of the Internal Audit function that was partially operational.

The effectiveness of internal controlThe system of internal control was not entirely effective for the year under review. During the year under review, several deficiencies in the system of internal control and/or deviations were reported by the Auditor General of South Africa. In certain instances, the matters reported previously have not been fully addressed.

The quality of in year management and monthly/quarterly reports submitted in terms of the Act The internal Audit function of the entity is outsourced. The internal Audit function performs a risk-based audit; they conducted a risk assessment in terms of Treasury Instruction 3.2.1.

After risk assessment was conducted, the internal Audit prepared a coverage plan based on its assessment of key areas of risk. The Audit Committee approved the plan but Internal Audit was only able to perform one audit project due to lack of budget.

The Committee is satisfied with the content and quality of the report prepared and issued by the Internal Audit Function.

REPORT OF THE AUDIT COMMITTEE

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EvaluationoffinancialstatementsThe Audit Committee has:• Reviewed and discussed with the Auditor General and the Accounting Officer the audited and annual financial statements to be included in the annual report;• Reviewed the Auditor General’s management letter and management response thereto;• Reviewed changes in accounting policies and practices;• Reviewed the entity’s compliance with legal and regulatory provisions;• Reviewed significant adjustment resulting from the audit.

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.

Internal AuditThe Audit Committee is not satisfied that the internal audit function is operating effectively and that is has addressed the risks pertinent to the entity in its audit.

Auditor General of South AfricaThe Audit Committee has met with the Auditor General of South Africa to ensure that there are no unresolved issues.

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REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON BOXING SOUTH AFRICA REPORT ON THE FINANCIAL STATEMENTS

REPORT OF THE AUDITOR GENERAL

Introduction1. I have audited the accompanying financial statements

of Boxing South Africa (Boxing SA), which comprise the statement of financial position as at 31 March 2011, and the statement of financial performance, statement of changes in net assests and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 41 to 76.

Accounting authority’s responsibility for the financial statements2. 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 (SA Standards of GRAP) 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 management determines necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor-General’s responsibility3. As required by section 188 of the Constitution of the

Republic of South Africa, 1996 (Act No. 108 of 1996) and section 4 of the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA), my responsibility is to express an opinion on these financial statements based on my audit

4. I conducted my audit in accordance with International Standards on Auditing and General Notice 1111 of 2010 issued in Government Gazette 33872 of 15 December 2010. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

5. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal 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.

6. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my qualified audit opinion.

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Basis for qualified opinionTrade and other payables7. The entity could not provide sufficient appropriate audit

evidence to support an amount of R324 026 included in trade and other payables. There were no satisfactory alternative audit procedures that I could perform to obtain reasonable assurance that all trade and other payables were adequately recorded. Consequently, I could not satisfy myself as to the existence, completeness, rights and obligations and valuation of trade and other payables.

8. Included in trade and other payables is an amount of R518 515 relating to insurance received in advance. The Standard of Generally Recognised Accounting Practice, GRAP 19, Provisions, Contingent liabilities and contingent assets, requires the amount recognised as a provision to be stated at the best estimate of the expenditure required to settle the present obligation at the reporting date. GRAP 19 further states that provisions shall be reviewed at each reporting date and adjusted to reflect the current best estimate. The entity did not review insurance received in advance on 31 March 2011, as required by GRAP 19.

Qualified opinion9. In my opinion, except for the effects of the matters

described in the Basis for qualified opinion paragraphs, the financial statements present fairly, in all material respects, the financial position of Boxing SA as at 31 March 2011 and its financial performance and cash flows for the year then ended, in accordance with SA Standards of GRAP and the requirements of the PFMA.

Emphasisofmatters10. I draw attention to the matters below. My opinion is not

modified in respect of these matters:

Significant uncertainties11.Enquiries of management and the attorneys revealed that

the public entity is a defendant in the following lawsuits:• Premises lawsuit• Marketing agent lawsuit• Legal fees lawsuit

The outcome of these lawsuits cannot be determined at present and a provision for any liability that may result has been made in the financial statements.

Restatement of corresponding figures12. Misstatements in the corresponding figures were

identified during our audit of the financial statements for the current year relating to finance lease obligations and the opening balance of the insurance asset. Management corrected these misstatements by restating the corresponding figure for finance lease obligations and the insurance asset as disclosed in note 1.17 to the financial statements.

Going Concern13. Note 21 to the financial statements indicates that Boxing

SA incurred a net deficit of R2 709 332 during the year ended 31 March 2011 and, as of that date, the entity’s liabilities exceeded its total assets by R6 248 040. These conditions, along with other matters set forth in note 21 indicate the existence of a material uncertainty that may cast significant doubt on the entity’s ability to continue as a going concern.

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Irregular expenditure14. As disclosed in note 23 to the financial statements,

irregular expenditure to the amount of R720 308 was incurred as the entity failed to comply with Supply Chain Management Regulations.

Fruitless and wasteful expenditure15. As disclosed in note 22 to the financial statements,

fruitless and wasteful expenditure to the amount of R1 603 809 was incurred as a result of the following:

• The entity failed to comply with its internal policies and procedures regarding insurance claim payments.

• Interest and penalties were incurred as a result of late payment on amounts owed to the South African Revenue Service and the Auditor General of South Africa.

• The human resource function was outsourced even though Boxing SA staff received training to perform the function themselves.

Material losses16. As disclosed in note 24 to the financial statements,

material losses to the amount of R132 335 were incurred as a result of shortfalls between cash received for license fees and cash banked.

Additional matter17. I draw attention to the matter below. My opinion is not

modified in respect of this matter:

Unaudited supplementary schedule18. The supplementary information set out on page 77 of

the annual financial statements does not form part of

the financial statements and is presented as additional information. I have not audited this schedule and accordingly I do not express an opinion thereon.

REPORT ON OTHER LEGAL AND REGULATORYREQUIREMENTS19. In accordance with the PAA and in terms of General notice

1111 of 2010, issued in Government Gazette 33672 of 15 December 2010, I include below my findings on the annual performance report as set out on pages 15 to 21 and material non-compliance with laws and regulations applicable to the public entity.

PredeterminedobjectivesIncluded below are the findings raised during our audit of the report on predetermined objectives.

Usefulness of information20. The following criterion was used to assess usefulness:

• Measurability: Indicators are well defined and verifiable, and targets are specific, measurable and time-bound.

21. The following audit finding relates to the above criterion:

• For the selected objectives, 23% of the planned and targets were not:

- Specific in clearly identifying the nature and the required level of performance

- Measurable in identifying the required performance

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Compliance with laws and regulationsIncluded below are findings on material non-compliance with laws and regulations applicable to the public entity.

Strategic planning22. The accounting authority did not finalise and submit a

strategic plan to the relevant executive authority on or before 1 April as required by Treasury Regulation 30.1.1 and 30.1.2

23. The accounting authority did not ensure that the public entity has and maintained an effective, efficient and transparent system of internal control regarding performance management, which described and represented how the entity’s processes of performance planning, monitoring, measurement, review and reporting were conducted, organised and managed as required by section 51(1)(a)(i) of the PFMA.

Annual financial statements, performance and annual report24. The accounting authority submitted financial statements

for auditing that were not prepared in all material aspects in accordance with SA Standards of GRAP, as required by the 2011 AG Audit directive published in General Notice 1111, issued in Government Gazette no. 33872 of 15 December 2010. Certain material misstatements identified by the AGSA with regards to finance lease obligations, revenue, operating expenditure, trade and other payables, property, plant and equipment, material loss and loss on de-recognition of leased assets were subsequently corrected, however the uncorrected material misstatements resulted in the financial statements receiving a qualified audit opinion as a result

of contravention of section 55(2)(a) of the PFMA.

Audit committee25.The audit committee did not function as per the

requirements of section 77 of the PFMA and/or Treasury Regulation 27.1 in that:

• The audit committee was not constituted correctly as it had two members instead of three,

• The audit committee did not review:- effectiveness of the internal control systems;- effectiveness of the internal audit function; and - adequacy, reliability and accuracy of the financial information provided to management and other users of such information.

Internal Audit26. The internal audit function did not adhere to the

requirements of section 51(1)(a)(ii) of the PFMA and Treasury Regulation 27.2, in that:

• The internal audit did not report at all audit committee meetings.

• A risk management strategy, which includes a fraud prevention plan, was not used to direct internal audit effort and priority, and to determine the skills required of managers and staff to improve controls and to manage these risks.

• The internal audit function did not evaluate and make recommendations on the effectiveness and efficiency of controls on the information systems environment, the effectiveness of operations and compliance with laws and regulations.

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Procurementandcontractmanagement27. In some cases, sufficient appropriate audit evidence

could not be obtained for some of the goods and services with a transaction value between R10 000 and R500 000 were procured by inviting at least three written quotations from prospective suppliers as per the requirements of TR 16A6.1 and National Treasury Practice Note 8 of 2007/08.

28. In certain instances, awards were made to suppliers who failed to provide written proof from the South African Revenue Service that their tax matters are in order as per the requirements of Preferential Procurement Regulations 16 and TR 16A9.1(d).

29. A list of prospective suppliers was not in place for procuring goods and services through quotations as required of National Treasury Note 8 of 2007/08.

Expendituremanagement30. The accounting authority did not take effective and

appropriate steps to prevent irregular expenditure as per the requirements of section 51(1)(b) of the PFMA.

31 The accounting authority did not take effective and appropriate steps to prevent fruitless and wasteful expenditure as per the requirements of section 51(1)(b) of the PFMA.

32. The accounting authority did not take effective and

appropriate steps to prevent losses through criminal conduct as per the requirements of section 51(1)(b) of the PFMA.

33. The accounting authority did not take effective and appropriate disciplinary steps against officials who made or permitted irregular and fruitless and wasteful expenditure as required by section 51(1)(e) of the PFMA.

Internal control34. In accordance with the PAA and in terms of General

notice 1111 of 2010, issued in Government Gazette 33672 of 15 December 2010. I considered internal control relevant to my audit, but not for the purpose of expressing an opinion on the effectiveness of internal control. The matters reported below are limited to the significant deficiencies that resulted in the basis for the qualified opinion, the findings on the annual performance report and the findings on compliance with laws and regulations included in this report.

Leadership35. There was a lack of oversight responsibility regarding

financial and performance reporting, compliance with laws and regulations and related internal controls. Policies and procedures were not established and communicated to enable and support understanding and execution of internal control objectives, processes, and responsibilities. Action plans to address internal control deficiencies were not adequately developed and the implementation thereof was not adequately monitored. A formal IT governance framework was not implemented.

Financial and performance management36. Proper record keeping was not implemented in a

timely manner to ensure that complete, relevant and accurate information is accessible and available to

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support financial and performance reporting. There was a lack of controls over daily and monthly processing and reconciling of transactions. There was also a lack of controls over IT systems to ensure reliability of the systems and the availability, accuracy and protection of information. Accurate and complete financial and perfomance reports were not prepared and were not supported by reliable information. Compliance with applicable laws and regulations was not monitored and reviewed.

Governance37. Appropriate risk management activities was not

implemented to ensure that regular risk assessments, including consideration of IT risks and fraud prevention, were conducted and a risk management strategy to address risks was not developed and implemented. The internal audit unit did not always identify internal control deficiencies and did not always recommend corrective action. The audit committee did not always evaluate and monitor risks and did not provide adequate oversight of the effectiveness of the internal control environment.

Pretoria31 July 2011

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The Board submits its report for the year ended 31 March 2011. This report forms part of the audited financial statements.

1. LegalformandjurisdictionBoxing South Africa is a public entity in terms of Schedule 3A of the Public Finance Management Act, 1999 (Act No. 1 of 1999) and is governed by the Boxing Act, 2001 (Act No. 11 of 2001).

2. Review of activities

Main business and operationsBoxing South Africa is responsible for the administration of professional boxing in South Africa.

The operating results and state of affairs of Boxing South Africa are fully set out in the attached annual financial statements.

Net deficit of the entity is R 2 709 332 (2010: R 2 176 810 surplus).

Trade and other payables include Value Added Tax (VAT) payable to the South African Revenue services after VAT deregistration with effect from 1 April 2005. Provision was also made for interest and penalties imposed by the South African Revenue Services.

3. Subsequent events Boxing South Africa Board is not aware of any matters or circumstances which may have arisen since the end of the financial year, not otherwise dealt with in the annual financial statements, which significantly affects the position of the organization or the results of its operations.

4. Accounting policiesThe attached financial statements have been prepared in accordance with the PFMA. Accounting records, control and reporting conform to Generally Recognized Accounting Practice. The reporting requirements of the South African Statements of Generally Accepted Accounting Practice are reflected in the financial statements.

5. Property,plantandequipmentProperty, plant and equipment to the value of R28 800 (2010: R6 131) have been acquired during the accounting period under review.

6. Board members’ RemunerationIt is a requirement in terms of section 55 of the PFMA to disclose remuneration paid and accrued to Board members as well as the Chief Executive Officer, General Manager and Chief Financial Officer. The honorariums of Board Members are shown in the notes to the Financial Statements.

7. Board membersThe board members of the company during the year and to the date of this report are as follows:

BOARD MEMBER’S REPORT

34


Names Designation

Dr. P Ngatane Chairman

A.T. Jonas Non-executive board member

C. Bassuday Non-executive board member

S. Sodo Non-executive board member

A. Sidinile Non-executive board member

M. Syfris Non-executive board member

S. Selebi Non-executive board member

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Boitshepo Mandawe - FightOfTheYear Chris-van-Heerden - FightOfTheYear

BOXING ARWARDS FOR THE YEAR 2010/11

The recipients of the Boxing Awards for the year 2010/11 are as follows:

Boitshepo Mandawe – Gauteng

One performer whose boxer/fighter style ensures all out action, Mandawe is a thrill every minute. With a record of 8 wins and 2 defeats that comprises a 60% knockout ratio, he has a bright future as a fighter.

Chris van Heerden – Gauteng

This superbly fit and exciting South African/ABU Welterweight champion has compiled a record of 16 wins and one defeat, 10 of those wins by means of knockouts. He has successfully defended his titles twice and is now in line to challenge for the IBO world title.

Mzimasi Mnguni - LifetimeAchievementAward Nkosinathi Joyi -BoxerOfTheYear

Mzimasi Mnguni – Eastern Cape

Eyethu Promotions has put its 30 years of dedicated boxing excellence into top gear in the last few years. The period in question saw Mzi Mnguni, as the only active promoter in this boxing mad area, organising 5 National title fights and one international fight, keeping East London right on the trend as the Mecca of Boxing. He has deservedly won every available prize in South African boxing, and can only be awarded the ultimate achievement, which represents the ceiling of our recognition.

Nkosinathi Joyi – Eastern Cape

The former South African, former IBO and, current IBF world mini Flyweight champion is unbeaten in 21 fights that include 15 knockouts, resulting in a 68,18% knockout ratio. He is in the forefront of South African boxers who are eligible to unite world titles in their divisions and, judging by his unbelievable boxing abilities and his rating by the international boxing authorities as the best mini flyweight boxer in the world today, there is no stopping him.

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Jodi Solomons – Gauteng

This former amateur boxer is only the second female boxing manager, and the first to produce a world champion in Isaac Chilembe, the IBO Super Middleweight champion. Among the protégés are former SA and world champion Zolani Marali, as well as budding prospect Bongani Dlamini.

Jodi Solomons - ManagerOfTheYear Kabisile Tshabalala -ProspectOfTheYear

Kabisile Tshabalala – Gauteng

Rated no.1 in the South African Junior Featherweight division, Tshabalala is one of the leading forces in female boxing in the country today. With an unbeaten record of 5 fights and 1 draw in 6, she is now in line to challenge for the newly introduced National title.


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Sithembiso Ngqezana - Media Award Thabo Spampool -RingOfficialWinner

Sthembiso Ngqezana – Eastern Cape

This sports journalist of Mhlobo Wenene has gained a reputation as the voice of boxing due to the impartial and excellent commentary and analysis of boxing.

Thabo Spampool – Gauteng

One of the best referee/judges in the world, Spampool has travelled with distinction and gained valuable experience far and wide, showcasing South Africa in such powerhouses as Las Vegas, USA. The year in question saw him referee a total of 13 fights in and outside South Africa.

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Flo-Simba - KnockoutOfTheYear Lennox Mpulampula -TrainerOfTheYear

Flo Simba – Gauteng

The IBO Youth Heavyweight is one of the most exciting boxers in the world in the last decade. With dazzling speed and knockout power to match, he has an 81,82% knockout ratio, his prowess had to be recognized.

Lennox Mpulampula – Eastern Cape

This former boxer has, besides having successfully served amateur boxing as a National coach in international competition, produced a number world beaters and champions that include the first female world champion to come out of Africa, Noni Tenge. He is without doubt the best trainer in South Africa today, and surely one of the best the country has ever produced.


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Shona Mactaggert -LifetimeAchievement Thulani Magudulela - PromoterOfTheYear

Shona Macttagart – Gauteng

Known as the superwoman of boxing, Shona is one of the hardest working people and sharpest brains in world boxing. Having organised National and World fights for Golden Gloves all over the world, she has gained a lot of friends for South African boxing because of her dedicated and inspirational demeanour.

Thulani Magudulela – KwaZulu-Natal

The only active promoter in his province, the Director of Ludonga Promotions is the reason is still alive in KZN. The year in question saw him promote a total of 6 tournaments that included National championships, development tournaments as well as female and amateur boxers. His efforts have resulted in KZN boasting of 2 South African champions resident in the Province.

Annual Financial Statements

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Boxing South AfricaAnnual Financial Statements for the year ended 31 March 2011

ANNUAL FINANCIAL STATEMENTS

General Information

Board Dr. P Ngatane (Chairman)

A. T. Jonas

C. BassudayS. SodoA. SidinileM. SyfrisS. Selebi

Auditors Auditor-General of South Africa

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IndexThe reports and statements set out below comprise the financial statements presented to the shareholder:

Index Page

Statement of Financial Position 41

Statement of Financial Performance 42

Statement of Changes in Net Assets 43

Statement of Cash Flows 44

Accounting Policies 45-58

Notes to the Financial Statements 59-76

The following supplementary information does not form part of the financial statements and is unaudited:

Detailed Statement Of Financial Performance 77-78

ANNUAL FINANCIAL STATEMENTS

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Figures in Rand Note(s) 2011 2010(restated)

ASSETS

Non -current assets

Property, plant and equipment 2 278 834 547 878

Intangible assets 3 9 151 6 612

287 985 554 490

Current assets

Trade and other receivables from exchange transactions 4 1 153 928 1 198 655

Cash and cash equivalents 5 3 646 088 4 925 942

Financial asset 6 247 036 126 335

5 047 052 6 250 932

Total assets 5 335 037 6 805 422

NETASSETSANDLIABILITIES

LIABILITIES

Non - current liabilities

Finance lease obligation 7 163 049 281 822

Current liabilities

Finance lease obligation 7 26 168 18 262

Trade and other payables 8 11 254 964 10 190 040

Provisions 9 125 694 27 117

Operating lease liability 13 202 -

11 420 028 10 235 419

Total liabilities 11 583 077 10 517 241

Net assets and liabilities (6248042) (3538708)

Net assets and liabilities

Accumulated (deficit) (6248040) (3538708)

STATEMENT OF FINANCIAL POSITION

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Revenue 12 6 198 366 7 908 864

Operating expenses (5 812 046) (2 877 396)

Operating surplus for the year 15 386 320 5 031 468

Interest income 46 667 16 287

Other income 13 1 351 780 126 419

Employee costs 14 (2 859 562) (2 360 856)

Depreciation and amortisation 2 (155 409) (163 917)

Fair value adjustments 16 82 624 (23 613)

Finance costs 16 (1 561 752) (448 978)

(3095652) (2854658)

(Deficit)/Surplusfortheyear (2709332) 2 176 810

STATEMENT OF FINANCIAL PERFORMANCE

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Figures in Rand Note(s) Accumulated

deficitTotal Net Assets

Balance at 01 April 2009 (5888629) (5888629)

Changes in net assets

Surplus for the year 2 176 810 2 176 810

Correction of error 1.17 173 111 173 111

Restated balance at 31 March 2010 (3538708) (3538708)

Restated balance at 01 April 2010 (3538708) (3538708)

Deficit for the year (2 709 332) (2 709 332)

Balance at 31 March 2011 (6248040) (6248040)

STATEMENT OF CHANGES IN NET ASSETS

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Cashflowsfromoperatingactivities

Cash receipts from grants and fees 6 222 975 7 092 877

Cash paid to suppliers and employees (7 252 608) (3 157 949)

Cash generated from operations 17 (1029633) 3 934 928

Interest income 46 667 16 287

Finance costs (85 862) (448 978)

Netcash(outflow)/inflowfromoperatingactivities (1068827) 3 502 237

Cashflowsfrominvestingactivities

Purchase of property, plant and equipment 2 (28 800) -

Purchase of Insurance asset (120 000) (126 335)

Purchase of other intangible assets 3 (7 654) (6 131)

Fair value adjustment - Capital portion 82 624 (23 613)

Netcash(outflow)/inflowfrominvestingactivities (73830) (156079)

Cashflowsfromfinancingactivities

(Decrease) in finance lease liability (137197) (120653)

Total cash movement for the year (1279854) 3 225 505

Cash at the beginning of the year 4 925 942 1 700 437

Total cash at end of the year 5 3 646 088 4 925 942

STATEMENT OF CASH FLOWS

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PresentationofFinancialStatements1.

The financial statements have been prepared in accordance with the Standards of Generally Recognised Accounting Practices (GRAP) issued by the Accounting Standards Board in accordance with 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 unless specified otherwise. They are presented in South African Rand.

A summary of the significant accounting policies, which have been consistently applied, are disclosed below.

These accounting policies are consistent with the previous period.

StandardsApprovedbutnotyetEffective• GRAP 18 - Segment Reporting• GRAP 21 - Impairment of non cash generating assets• GRAP 23 - Revenue from non exchange transactions (Taxes and transfers)• GRAP 24 - Presentation of budget information in the financial statements • GRAP 25 - Employee Benefits • GRAP 26 - Impairment of cash generating assets• GRAP 104 - Financial Instruments • GRAP 105 - Transfer of functions between entities under common control• GRAP 106 - Transfer of functions between entities not under common control• GRAP 107 - Mergers

1.1 Adoption of new and revised Standards

Standards and Interpretations effective in the current period. In the current year, the entity adopted by section 55(2)(a) of the PFMA to ensure that the annual report and audited financial statements fairly present the performance against predetermined objectives of the entity.

1.2Significantjudgementsandsourcesofestimationuncertainty

In preparing the annual financial statements, management makes 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 are inherent in the formation of estimates.

The formation of estimates; actual results in the future could differ from these estimates which may be material to the annual financial

ACCOUNTING POLICIES

49



statements. Significant judgements include:

Provisionfordoubtfuldebts

The provision for doubtful debts has dropped substantially since the method of calculation changed. The provision is calculated as 10% of all debts older than 2 years included in trade receivables. The reason for the change in the method of calculation is that the debt balances per promoter will be set off against credit balances owing to the same promoter hence reducing BSA liabilities. Therefore it is not feasible for BSA to provide a high provision for doubtful debts.

Impairment testing

Reviews and tests the carrying value of assets when events or change in circumstances suggest that the carrying amount may not be recoverable. If there are any indications that impairment may have occurred, estimates of expected future cash flows from these assets are prepared.

Provisions

The current year provision consists of leave provision consisting of the cost of all employees’ leave balances as at 31 March 2011 and the chairman’s discretionary fund amount for which the amount has been decided by BSA board.

Fair value estimation

The fair value of financial instruments that are not traded in an active market (for example, trade receivables and trade payables) is determined by using estimated discounted cash flows, to determine fair value for the remaining financial instruments. The economic entity makes assumptions that are based on market conditions existing at the end of each reporting period.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the economic entity for similar financial instruments.

Property,plantandequipment

The expected useful life of property plant and equipment is determined based on the time that the assets will be in use by the entity. The useful lives are reviewed at each reporting period.

ACCOUNTING POLICIES (continues)

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1.3Property,plantandequipment

Property, plant and equipment are tangible non-current assets (including infrastructure assets) that are held for use in the production or supply of goods or services, rental to others, or for administrative purposes, and are expected to be used during more than one period.

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.

Costs include costs (cash or cash price equivalent) incurred initially to acquire 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.

Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. The costs of self-constructed assets include the cost of materials, direct labour and an appropriate proportion of production overheads. Depreciation is charged so as to write off the cost of valuation of assets, over their estimated useful lives, using the straight - line method, on the following bases:

Item Average useful lifeFurniture and fixtures 8 yearsMotor vehicles 5 yearsOffice equipment 5 yearsIT equipment 4 yearsComputer software 3 yearsPromoting equipment 4 years

Depreciation on items of property, plant and equipment commences when the asset is available for use by the entity.

Residual values, depreciation methods and useful lives are reviewed annually or adjusted where necessary during the year. The residual value of an asset is the estimated amount that an entity would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age and condition expected at the end of its useful life. Useful life is the period over which an asset is expected to be available for use by an entity.


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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 are depreciated separately.

The depreciation charge for each period is recognised in surplus or deficit.

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 surplus or deficit arising from the derecognition of an item of property, plant and equipment is included in surplus or deficit when the item is derecognised. The surplus or deficit 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 asset is identified as an intangible asset when it: • Is capable of being separated or divided from an entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, assets or liability; or • Arises from contractual rights or other legal rights, regardless whether those rights are transferable or separate from the economic entity or from other rights and obligations.

An intangible asset is recognised when:

• It is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and

• The cost of the asset can be measured reliably.

Intangible assets acquired separately are measured on initial recognition at cost.

Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated 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 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.


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The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the asset may be impaired. The amortisation period and the amortisation method of an intangible asset with a finite useful life are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of financial performance in the expense category consistent with the function of the intangible asset.

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 3 years

Intangible assets are derecognised:• On disposal; or• When no future economic benefits or service potential are expected from its use or disposal.

1.5 Financial instruments

Initial recognition and measurement

Financial instruments are recognised initially when the economic entity becomes a party to the contractual provisions of the instruments.

The entity classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial assets and financial liabilities are recognised on the entity’s statement of financial position when the entity becomes party to the contractual provisions of the instrument.


53



For financial instruments which are not at fair value through surplus or deficit, transaction costs are included in the initial measurement of the instrument.

Regular way purchases of financial assets are accounted for at trade date.

Subsequent measurement

Financial instruments at fair value through surplus or deficit are subsequently measured at fair value, with gains and losses arising from changes in fair value being included in surplus or deficit for the period.

Impairmentoffinancialassets

At each end of the reporting period the economic entity assesses all financial assets, other than those at fair value through surplus or deficit, to determine whether there is objective evidence that a financial asset or group of financial assets has been impaired.

For amounts due to the economic entity, significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default of payments are all considered indicators of impairment.

In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator of impairment. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in surplus or deficit - is removed from equity as a reclassification adjustment and recognised in surplus or deficit.

Impairment losses are recognised in surplus or deficit.

Impairment losses are reversed when an increase in the financial asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the financial asset at the date that the impairment is reversed shall not exceed what the carrying amount would have been had the impairment not been recognised.

Reversals of impairment losses are recognised in surplus or deficit except for equity investments classified as available-for-sale.

Impairment losses are also not subsequently reversed for available-for-sale equity investments which are held at cost because fair value was not determinable.

Trade and other receivables

Trade receivables are initially measured at fair value, and are subsequently measured at amortised cost using the effective interest rate


54



method. Appropriate allowances for estimated irrecoverable amounts are recognised in surplus or deficit when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

Trade and other payables

Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value.

1.6Leases

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.

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

Finance leases – lessee

The following situations would normally individually or in combination lead to a lease being classified as a finance lease and have been considered by the entity:

The lease transfers ownership of the asset to the lessee by the end of the lease term;

The lessee has the option to purchase the asset at a price that is expected to be sufficiently lower than the fair value at the date the option becomes exercisable for it to be reasonably certain, at the inception of the lease, that the option will be exercised;

The lease term is for the major part of the economic life of the asset even if title is not transferred;

At the inception of the lease the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset ;


55



The leased assets are of such specialised nature that only the lessee can use them without major modifications;

If the lessee can cancel the lease, the lessor’s losses associated with the cancellation are borne by the lessee;

Gains or losses from the fluctuation in the fair value of the residual accrue to the lessee and the lessee has the ability to continue the lease for a secondary period at a rent that is substantially lower than market rent.

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, each determined at the inception of the lease. 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 entity’s incremental borrowing rate.

The lease payments are apportioned between the finance charge and reduction of the lease obligation. 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. Finance charges are charged directly against income.

Assets held under finance lease are depreciated over their expected useful lives on the same basis as owned assets, or where shorter, the term of the relevant lease.

The economic entity entered into finance leasing arrangements for certain of its motor vehicles and office equipment.

The average lease term is 5 years and the average effective lending rate was 9.5 % (2010: 11.75%).

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.

ACCOUNTING POLICIES(continues)

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1.7 Impairment of assets

The entity assesses at the end of each reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the entity estimates the recoverable amount of the asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash generating unit to which the assets belongs is determined.

The recoverable amount of an asset or a cash generating unit is the higher of its fair value less costs to sell and its value in use.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss.

An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in surplus or deficit. Any impairment loss of a revalued asset is treated as a revaluation decrease.

An impairment loss is recognised for cash generating units if the recoverable amount of the unit is less than the carrying amount of the units. The impairment loss is allocated to reduce the carrying amount of the assets of the unit in the following order:

• First, to reduce the carrying amount of any goodwill allocated to the cash generating unit and • Then, to the other assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit.

An entity assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of those assets are estimated.

The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years.

A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other than goodwill is recognised immediately in surplus or deficit. Any reversal of an impairment loss of a revalued asset is treated as a revaluation increase.

1.8ProvisionsandContingencies

Provisions are recognised when:• The entity has a present obligation (legal or constructive) as a result of a past event;• It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and• A reliable estimate can be made of the obligation.

ACCOUNTING POLICIES(continues)

57



The amount of a provision is the present value of the expenditure expected to be required to settle the obligation. wWhere the effect of the time value of money is material, the amount of the provision is the present value of the expenditure required to settle the present obligation.

Contingent assets and contingent liabilities are recognised when:• There is a possible obligation to be confirmed by a future event that is outside the control of the entity;• The inflow of economic benefits is probable, but not virtually certain, and occurrence depends on an event outside the control

of the entity.

1.9 Government Grants

Government grants are recognised as income over the periods necessary to match them with the related costs which they are intended to compensate, on a systematic basis. A government grant that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs is recognised as income of the period in which it becomes receivable.

Government grants related to assets, including non-monetary grants at fair value, are presented in the statement of financial position either by setting up the grant as deferred income or by deducting the grant in arriving at the carrying amount of the asset.

Grants related to income are presented as a credit in the statement of financial performance.

Repayment of a grant related to income is applied first against any un-amortised deferred credit set up in respect of the grant. To the extent that the repayment exceeds any such deferred credit, or where no deferred credit exists, the repayment is recognised immediately as an expense.

Repayment of a grant related to an asset is recorded by increasing the carrying amount of the asset or reducing the deferred income balance by the amount repayable. The cumulative additional depreciation that would have been recognised to date as an expense in the absence of the grant is recognised immediately as an expense.

1.10 Revenue other than government grants

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 end of the reporting period. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied:

• The amount of revenue can be measured reliably;


58



• It is probable that the economic benefits associated with the transaction will flow to the entity;• The stage of completion of the transaction at the end of the reporting period can be measured reliably; and• The costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognised only to the extent of the expenses recognised that are recoverable.

Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for goods and services provided in the normal course of business, net of trade discounts and volume rebates, and value added taxation. Revenue is recognised to the extent that it is probable that the economic benefits will flow to Boxing South Africa and the amount can be reliably mea-sured. Interest is recognised on a time proportion basis which takes into account the principle investment and the effective interest rate.

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.

1.12 Borrowing Costs

Borrowing costs are recognised as an expense in the period in which they are incurred.

1.13 Irregular, fruitless and wasteful expenditure

Irregular expenditure means expenditure incurred in contravention of, or not in accordance with, the requirements of any applicable legislation, including the PFMA.

Fruitless and wasteful expenditure means expenditure that was made in vain and would have been avoided had reasonable care been exercised .

All irregular, fruitless and wasteful expenditure is charged against income in the period in which they are incurred.


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1.14Eventsafterreportingdate

Disclose for each material category of non-adjusting events after the reporting date:

• Nature of the event; • Estimation of its financial effect or a statement that such an estimation cannot be made.

Boxing South Africa directors are not aware of any matters or circumstances which may have arisen since the end of the financial year, not otherwise dealt with in the annual financial statements, which significantly affects the position of the organization or the results of its operations.

1.15EmployeebenefitsShorttermemployeebenefits

The cost of short term employee benefits, (those payable within 12 months after the service is rendered, such as paid vacation leave and sick leave, and non-monetary benefits such as medical care), are recognised in the period in which the service is rendered and are not discounted.

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.

1.16 Budget Information

In order to fully comply with GRAP 1, a note has been included reconciling the budget with the surplus in the statement of financial performance.


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1.17 PriorPeriodError

2011Effect:

Some income and expenses relating to prior year financial period were incorrectly accounted for in the statement of financial performance. The correction of the error(s) results in adjustments as follows:

StatementofFinancialPerformance

Effect on opening accumulated loss

Accumulated loss opening balance (3711819)Prior year sanctioning fees not accounted for 17 200National lotteries grant utilised in the prior year 22 946Depreciation calculated on R1 asset reversed (4)Licence refund relating to prior year licence paid (10 000)Finance lease expense not set off against finance lease liability (10 899)Finance lease opening balance correction 153 868Adjusted opening balance (3538708)

StatementofFinancialPosition

Trade and other payables

DisclosureNote8

The fair value adjustment amount was overstated in the prior year; adjusting journals were incorrectly processed to fair value adjustment creditors instead of trade payables.

The prior year figure for provisions was incorrectly disclosed in sundry payables.

The trade and other payables include the total amount owing to SARS, rather than just the VAT portion as disclosed in the prior year.


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8. Trade payables 2010 2010

(restated)

Trade payables 3 007 738 2 495 182

Deferred income 695 000 695 000

SARS 1 013 224 6 113 936

AGSA - -

Sundry payables 5 429 578 302 103

Accrued expense 42 593 42 593

Insurance received in advance 588 117 588 117

Msopi trust 353 -

Fair value adjustment (559 446) (46 890)

10 217 157 10 190 040

Provisions - 27 117

- 27 117

TOTAL 10 217 157 10 217 157


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2. Property,plantandequipment

2011 2010

Figures in Rand Cost / Valuation

Accumulated Depreciation

Carrying Value Cost / Valuation

Accumulated Depreciation

Carrying Value

Own Assets

Furniture and fixtures 125 826 (94 490) 31 336 100 203 (75 235) 24 968

Office equipment 10 617 (6 605) 4 012 25 758 (19 987) 5 771

IT equipment 209 263 (159 262) 50 001 210 253 (109 173) 101 080

Promoting equipment 13 264 (13 264) - 13 264 (9 808) 3 456

358 971 (273621) 85 349 349 478 (214203) 135 275

Capitalised leased assets

Motor vehicles 141 119 (58 917) 82 202 141 119 (30 693) 110 426

Office equipment 125 980 (14 697) 111 283 406 516 (104 339) 302 177

267 099 (73614) 193 485 547 635 (135032) 412 603

Total 626 070 (347235) 278 834 897 113 (349235) 547 878

Reconciliation of property, plant and equipment – 2011

Opening Balance

Additions Write Offs Revaluation Depreciation Closing Balance

Own Assets

Furniture and fixtures 24 968 26 000 (102) (4) (19 530) 31 336

Office equipment 5 771 2 800 (3 128) - (1 431) 4 012

IT equipment 101 080 - (155) - (50 924) 50 001

Promoting equipment 3 456 - - - (3 456) -

135 275 28 800 (3385) (4) (75341) 85 349

NOTES TO THE FINANCIAL STATEMENTS

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Opening Balance

Additions Write Offs Revaluation Depreciation Closing Balance

Capitalised leased asset

Motor vehicles 110 426 - - - (28 224) 82 202

Office equipment 302 177 125 980 (268 301) - (48 573) 111 283

412 603 125 980 (268301) - (76797) 193 485

Total 547 878 154 780 (271686) (4) (152138) 278 834

2.Property,plantandequipment(continued)Reconciliation of property, plant and equipment – 2010Figures in Rand Opening

BalanceDepreciation Total

Own assetsFurniture and fixtures 37 528 (12 560) 24 968Office equipment 9 983 (4 212) 5 771IT equipment 126 701 (25 621) 101 080Promoting equipment 6 607 (3 151) 3 456

180 819 (45544) (135374)Capitalised leased asset

Motor vehicles 135 828 (25 402) 110 426Office equipment 383 480 (81 303) 302 177

519 380 (45544) 135 275Total 700 127 (152249) 547 878

Property, plant and equipment pledged as securities for finance leases consists of a motor vehicle and office equipment as disclosed above. Refer to note 7 – finance lease obligations.

NOTES TO THE FINANCIAL STATEMENTS (continues)

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3. Intangible assets

Fingures in Rand 2011 2010

Cost / Valuation

Amortisation Carrying value Cost / Valuation

Amortisation Carrying value

Computer software 13 785 (4634) 9 151 37 078 (30466) 6 612

Reconciliation of intangible assets – 2011

Fingures in Rand Opening balance

Additions Write Offs Amortisation Closing Balance

Computer software 6 612 7 654 (1844) (3271) 9 151

Reconciliation of intangible assets – 2010

Fingures in Rand Opening Balance

Additions Write Offs Amortisation Closing Balance

Computer software 12 149 6 131 - (11668) 6 612

Figures in Rand Note(s) 2011 2010

4. Trade and other receivables

Trade receivables from exchange transactions 1 141 118 1 460 393

Fair value adjustment debtors (90 316) (80 597)

Provision for doubtful debts (22 597) (228 148)

Other receivables 103 001 47 007

Prepayments 22 722 -

1 153 928 1 198 655

Reconciliation of provision for doubtful debts

Opening balance (228 148) (642 224)

Provision for impairment 205 551 414 076

(22597) (228148)


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5. Cash and cash equivalents

Cash on hand 1 320 4 612

Msopi Trust - 1 055

Bank balances 3 644 768 4 920 275

3 646 088 4 925 942

6. Financial asset

Financial asset measured at fair value through profit or loss 247 036 126 335

BSA invests R10 000 per month for the purpose of Boxers’ insurance.

7. Finance lease obligation

Minimum lease payments due

- within one year 150 029 136 748

- in second to fifth year inclusive 467 265 164 196

617 294 300 944

Less: future finance charges (428 077) (860)

Presentvalueofminimumleasepayments 189 217 300 084

Presentvalueofminimumleasepaymentsdue

- within one year 26 168 18 262

- in second to fifth year inclusive 163 049 281 822

189 217 300 084

Non-current liabilities 163 049 281 822

Current liabilities 26 168 18 262

189 217 300 084

Finance lease relate to motor vehicles and office equipment with lease terms of 5 years. The entity’s obligations under finance leases are secured by the lessors’ title to the leased asset. The current portion of the finance leases are based on the interest expense to be incurred


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in the next financial year based on monthly payments.


8 Trade and other payables

Trade payables 878 051 2 495 182

Deferred income – conditional grant - 695 000

SARS 8 604 497 6 113 936

AGSA 755 162 -

Sundry payables 617 288 302 103

Accrued expenses 20 684 42 593

Insurance received in advance 518 515 588 117

Fair value adjustment creditors (139 233) (46 890)

11 254 964 10 190 040

Trade payables consist of balances owing to promoters arising from tournaments that have occurred. Insurance received in advance relates to insurance received from boxers and will be paid over to the relevant service providers in the next financial year.

9. Provisions

Leave pay 79 694 (18 883)

Other 46 000 46 000

125 694 27 117


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10. Operating lease commitments

Minimum lease payments

- within one year 187 768 -

- in second to fifth year inclusive 220 674 -

408 442 -

11. Contingent liability

Legal proceedings - Sponsorship 1 197 000 1 197 000

Legal proceedings - Legal fees 519 976 519 976

Legal proceedings - Unpaid rental 310 609 310 609

Legal proceedings - Unpaid service fees - 111 025

2 027 585 2 138 610

Boxing SA is a defendant in a legal action involving a dispute with a sponsorship company contracted to secure sponsors on behalf of Boxing SA. The directors are of the opinion that it is improbable that the plaintiff will be successful. The company has not followed up on the matter.

Boxing SA is disputing legal fees charged by their former attorneys, as they consider the fees to be excessive in terms of the work performed. The attorneys have not pursued the case further.

Boxing SA is a defendant in a case for premises for unpaid rental, which is currently being defended by Du Preez and Associates. Summons was issued on 11 August 2009 and an intention to defend was filed on the 4 September 2009.

These cases have not been resolved as at 31 March 2011 and are carried forward from the prior year.


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12. Revenue

Sanctioning fees 1 790 724 3 901 586

Sponsorships - 400 000

Grant income - Sports and Recreation South Africa 2 208 000 3 087 000

License fees 527 588 520 278

Grant income - National Lotteries 672 054 -

Grant income - Eastern Cape 1 000 000 -

6 198 366 7 908 864

The amount included in revenue arising from the exchange of goods and services are as follows:

Sanctioning fees 1 790 724 3 901 586License fees 527 588 520 278

2 318 312 4 421 864

The amount included in revenue arising from non exchange of goods and services are as follows:

Sponsorships - 400 000Grant income - Sports and Recreation South Africa 2 208 000 3 087 000Grant income - National Lotteries 672 054 -Grant income - Eastern Cape 1 000 000 -

3 880 054 3 487 000

13. Other incomeInsurance revenue 347 600 57 000Forfeit fees 24 609 69 419Provision for bad debts adjustment 205 551 -Extinction of debt by prescription 774 020 -

1 351 780 126 419


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14. Employee costs

Basic salaries 2 152 158 1 834 467UIF 31 758 30 614SDL 24 825 21 243PAYE 505 415 413 918Leave payments 98 577 (44 925)Subsistence allowance 3 461 4 090Group life employee benefit 33 601 34 417Other salary related costs 9 767 67 032

2 859 562 2 360 856

15. Operating(deficit)/surplus

Operating (deficit)/surplus for the year is stated after accounting for the following:

Operating lease charges Premises - Contractual amounts 173 453 112 039

Legal expenses 72 954 189 732

Auditors’ remuneration 902 653 250 116

16. (Deficit)/surplusfortheyearThe (deficit) for the year is stated after accounting for the following costs:Finance costs (1 561 752) (448 978) Fair value adjustments 82 624 (23 613)Interest income 46 667 16 287


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17. Cash generated from operations

(Deficit)/surplus for the year (2 709 332) 2 176 810Adjustment For:

Depreciation and amortisation 155 409 163 917Interest income (46 667) (16 287)Finance costs 85 862 -Interest incurred 1 475 890 448 978Adjustment for provision (205 551) -Extinction of debt by prescription (774 020) -Loss on de-recognition of leased asset 148 730 -Bad debts 141 211 -Prior period adjustments (221 638) -Asset write off 5 226 -Fair value adjustments (82 624) 23 613Changes in working capital:Decrease in trade and other receivables 44 727 (815 987)Increase in trade and other payables 1 064 924 1 953 884Movement in provisions (98 578) -Movement in operating lease liability (13 202) -

(1029633) 3 934 928


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18. Related parties

RelationshipsParent department - Sports and Recreation South AfricaFellow controlled entity - South African Institute for Drug Free SportAffiliated federation - The South African National Boxing OrganisationProvincial department - The Eastern Cape Provincial GovernmentKey management personnel - Remuneration of Key Management Personnel

Related party transactions

Grant received from Sports and Recreation South Africa 2 208 000 3 087 000Grant received from Eastern Cape Provincial Government 1 000 000 -Remuneration of key management personnel (Refer to Note 19) 876 347 602 790


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19. Members’ emoluments

The amount reflected as member’s fees in the detailed statement of financial performance relates to non-executive members remuneration for this financial year. The board members have not been paid these amounts as well as prior amounts therefore BSA has raised a provision for these balances and they will be paid in the next financial year.

2011

Name Non-executive members

Honorarium Other allowances

Total

Dr. P. Ngatane Chairperson 21 156 - 21 156

S. Sodo Board member 7 869 - 7 869

A. Jonas Board member 7 869 - 7 869

C. Bassuday Board member 2 623 - 2 623

A. Sidinile Board member 15 738 - 15 738

M. Syfris Board member 7 869 - 7 869

S. Selebi Board member 15 738 1 463 17 201

78 862 1 463 80 325

2010

Name Non - executive members

Honorarium Other allowances

Total

Dr. P. Ngatane Chairperson 13 308 - 13 308

S. Sodo Board member 9 900 - 9 900

A. Jonas Board member 9 900 - 9 900

C. Bassuday Board member 9 900 - 9 900

A. Sidinile Board member - - -

M. Syfris Board member - - -

S. Selebi Board member - - -

43 008 - 43 008


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2011

Name Executivemember

Basic salary

Acting allowance

Other allowances

Total

L. Mtya Acting CEO 395 137 297 928 102 957 796 022

2010

Name Executivemember

Basic salary

Acting allowance

Other allowances

Total

L. Mtya Acting CEO 233 632 248 273 77 877 559 782

20. Risk management Financial risk management

Boxing South Africa (BSA) is exposed to financial risk through its financial assets and financial liabilities.

The board members have overall responsibility for the establishment and oversight of BSA’s risk management framework. The board has established the Audit committee, which is responsible for monitoring BSA’s risk management policies.

BSA’s risk management policies are established to identify and analyse the risks faced by BSA, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in BSA’s activities. BSA, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

BSA’s Audit committee oversees how management monitors compliance with BSA’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by BSA. BSA’s Audit committee is assisted in its oversight role by Internal audit. Internal audit undertakes both regular and ad-hoc reviews of risk management controls and procedures, the results of which are reported to the Audit committee.

BSA’s exposure to risk, its objectives, policies and processes for managing the risk arising from its financial instruments and methods used to measure BSA’s exposure to these risks, have not changed significantly from the prior year. BSA does not have major exposure to credit, liquidity and market risk, which is described in more detail below.


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Figures in Rand 2011 2010

Liquidityrisk

Liquidity risk is the risk of not being able to meet commitments, repayments, withdrawals and insurance claims payable in full at any time. Liquidity risk in relation to BSA is that the entity will not meet its obligations as they become due because of the inability to obtain adequate funding or liquidate assets. The entity manages liquidity risk through an ongoing review of future commitments and credit facilities.

Cash flow forecasts are prepared and adequate utilised borrowing facilities are monitored.

Interest rate risk

BSA has limited exposure to interest rate risk. Cash and cash equivalents carry interest at a variable rate. The entity is not permitted to have an overdraft facility, in terms of the PFMA.

Financial risk sensitivity analysis Interest rate sensitivity Interest received for the period 5 407 16 287

A change of 100 basis points in South African prime interest rate at the reporting date would have increased or decreased the surplus by amounts shown below. The analysis assumes that all other variables remain constant. The analysis assumes that all other variables remain constant. The analysis is performed on the same basis for 2009 and 2010.

Increase of 100 basis points 49 564 49 564

Decrease of 100 basis points (49 564) (49 564)

Credit risk

Credit risk is the risk that one party to the financial instrument will cause a financial loss for the other party to a financial instrument by failing to meet an obligation.

Credit risk arises from cash deposits with banks and financial institutions, cash and cash equivalents, outstanding receivables and committed transactions. The entity only deposits cash with major banks with high quality credit standing. BSA management evaluates


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credit risk relating to customers on an ongoing basis.

The credit quality of the customer is assessed taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is regularly monitored. No credit limits were exceeded during the reporting period, and management does not expect any deficits from non-performance by these counterparties.

Financial assets which potentially subject the company to concentrations of credit risk consist principally of trade receivables from boxing promoters.

BSA’s exposure to credit risk is influenced mainly by advances to boxers and staff debt. The credit risk will increase should BSA not fullfil its obligation.

Market risk

Market risk is the risk that changes in market prices, such as interest rate, foreign exchange rates and equity prices will affect the value of BSA’s financial assets and the amount of BSA’s financial liabilities.

The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk. The nature of BSA’s exposure to market risk and its objectives, policies and procedures for managing market risks have not changed significantly from the prior period.


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Financial assets by category

The accounting policies for financial instruments have been applied to the line items below:

2011

Figures in Rands Total

Trade and other receivables 1 153 928

Cash and cash equivalents 3 646 088

Financial asset 247 036

5 047 052

2010

Figures in Rands Total

Trade and other receivables 1 198 655

Cash and cash equivalents 4 925 942

Financial asset 126 335

6 250 932

Financial liabilities by categoryThe accounting policies for financial instruments have been applied to the line items below:

2011Figures in Rands TotalTrade and other payables 11 254 964Finance lease obligation 189 217Operating lease liability 13 202Provisions 125 694

11 583 077

2010Figures in Rands TotalTrade and other payables 10 190 040Finance lease obligation 300 084Provisions 27 117

10 517 241


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21. Going concern

In the current year the entity incurred a net deficit of R 2 709 332 (2010: R 2 176 810 surplus) and the total liabilities exceed its total assets by R 6 248 040 (2010: R 3 538 708). The going concern risk has been assessed as high.

The reason for the deficit incurred in this financial year is as a result of a decrease in revenue generated as well as excessive interest incurred on overdue account with SARS. No payment to SARS has been made this year since a settlement amount is being negotiated.

BSA receives financial support in the form of a grant from Sports and Recreation South Africa. An additional grant of R4,5 million has been approved in this financial year but not received as at 31 March 2011. This grant will be used to settle excessive liabilities i.e. SARS and AGSA in the next financial year.

22. Fruitless and wasteful expenditure

Suspended employee salary - 550 000

HR consultant costs 37 919 -

Insurance claims 90 000 -

SARS interest and penalties 1 425 475 615 622

AGSA interest 50 415 -

1 603 809 1 165 622

BSA did not have sufficient funds available to pay AGSA and SARS during the year therefore interest and penalties were incurred on these overdue accounts.

BSA is negotiating with SARS on a settlement amount to be paid up in the next financial year with additional funding to be received from National Treasury.

BSA has agreed on a payment plan to settle AGSA in the next financial year.

BSA incurred the cost of an HR consultant while 2 employees had been trained to perform the relevant duties.


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23. Irregular expenditure

Unapproved finance lease payments 138 197 -Expenditure in contravention of Supply Chain Management (SCM) regulations 582 111 -

720 308 -

24. Material loss

Licence fee loss 132 335 37 204

25. Subsequent eventsNon-adjusting events

- 18 April 2011 - The Acting CEO Mr. Loyiso Mtya was suspended by the board. The financial manager, Ms. Tumelo Kekana was appointed as the Acting CEO by the board thereafter.

- 20 April 2011 - An amount of R 1 008 050 was paid to SARS in settlement of the amount owing for the 2010/2011 financial year only.

- 6 May 2011 - The board approved BSA current policies that have been revised and new policies that were created to address control weaknesses existing in the entity.

- 1 June 2011 - The new CEO, Mr. Moffat Qithi was appointed by the Minister of Sports and Recreation and resumed duty.

- 20 June 2011 - An amount of R 4 500 000 was paid to SARS, in full settlement of the balance owing.


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Figures in Rand 2011

26. Reconciliationofbudget(deficit)/surpluswiththe(deficit)/surplusinthestatementoffinancialperformance

Net (deficit) as per the statement of financial performance (2 709 332)

Adjusted for differences between the budget and actual:

Fair value adjustments 82 624

Decrease in provisions 205 551

Other adjustments:

Decrease in revenue (R10 118 066 – R7 884 988) 2 233 078

Increase in expenditure (R10 118 066 – R10 306 145) 188 079

Netsurplus/(deficit)perapprovedbudget -


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DETAILED STATEMENT OF FINANCIAL PERFORMANCE


Operating expenses

Accounting fees (11 576) (484 650)

Advertising (80 193) -

Auditors’ remuneration (902 653) (250 116)

Bad debts (141 211) (334 657)

Bank charges (46 378) (39 312)

Consulting and professional fees (128 458) (57 199)

Consumables (20 604) (3 823)

Donations (5 000) (1 229)

Entertainment - (4 550)

Conferences and workshops (11 033) (3 470)

Skills development - National Lotteries (648 250) (47 915)

Skills development - Eastern Cape (1 000 000) -

Members emoluments (78 862) (43 008)

Tournament expenses - Baby Champs - (1 970)

Hire (34 840) -

Insurance (274 677) (294 756)

Lease rentals (173 453) (112 039)

Licence fee loss (132 335) (37 204)

Assets written off (5 226) -

Loss on derecognition of leased asset (148 730) -

Legal expenses (72 954) (189 732)

Petty cash expense - (30 000)

Storage costs (31 610) (6 237)

Repairs and maintenance (48 627) (5 678)

Subscriptions (7 642) (5 702)

Training - (100 442)

Travel and accommodation (625 951) (241 340)

Accrued expenses - (70 025)

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BSA annual awards (428 826) -

Boxing belts (31 008) -

General expenses (91 245) (8 890)

Utilities (59 943) (22 032)

Postage and courier (9 457) (15 690)

Printing and stationery (182 193) (177 683)

Publications (3 420) -

Telephone and fax (211 091) (236 079)

Website (73 250) (2 250)

Computer support (91 353) (49 719)

(5812046) (2877396)

DETAILED STATEMENT OF FINANCIAL PERFORMANCE (continues)

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Notes

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