Co-operative Banks Development Agency Annual Report Annual Report 2011... · Co-operative Banks...
Transcript of Co-operative Banks Development Agency Annual Report Annual Report 2011... · Co-operative Banks...
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
i
Co-operative Banks Development AgencyAnnual ReportFor the year ended 31 March 2012
Co-operative Banks Development AgencyAnnual Report
For the year ended 31 March 2012
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
iv
Vision
Creating a strong and vibrant co-operative banking sector that broadens access to and participation in diversified financial services to
achieve economic and social well-being.
Mission
The mission of the Co-operative Banks Development Agency (CBDA) focuses on the development of the co-operative banking sector
in the context of protecting those who participate in it through:
• appropriateregulationandsupervision;
• innovativecapacitydevelopmentandsupport;
• promotingco-operativevaluesandprinciples;
• promotingasavingscultureandfinancialliteracy;and
• protectingdepositors.
Values
The CBDA values:
• passion:tobedrivenanddedicated,withasenseofurgencyandencouragingfullparticipationandaspiritofcelebration;
• integrity:tobehonest,frank,accountableandtransparent;
• mutualrespect:tobetrustworthy,selfless,willingtoserveandcompassionate,withsharedvaluesandrespectfordecisions;
• commitmenttosolidarityandco-operation:tobecommittedtoteamwork,whichincludesbeingsupportive,havingacommon
purpose,sharinginformationandtakingresponsibility;
• excellence:tobevalue-adding,diligent,professional,punctualandcompetent.Itincludespayingattentiontodetailandbeing
committedtoknowledgeandlearning;and
• confidentiality:tomaintainprivacyindealingswithallstakeholders.
Vision, mission and Values
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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Theco-operativemovement,broadly,andthefinancialco-operativesector inSouthAfrica (SA)specificallyareat the thresholdof
significantdevelopmentswhich.willenablethemtomakeabiggerimpactinSA.
The past year has seen a hive of activity in the co-operative financial service sector with the very successful launch of the first Financial
Co-operativesIndaba,underthetheme“Enhancing financial inclusion through a vibrant co-operative banking sector in South Africa”, held
in Cape Town in October 2011.
The indaba allowed the sector to discuss issues of common concern and strategies to create sustainable and compliant co-operative
financialinstitutions(CFIs),andaself-sustainingmovementinSA.Theindabarealisedtwoveryimportantmilestones,thefirstbeing
the agreement by CFIs to establish aNational Association as a representative organisation for the sector; and the second being
NationalTreasury’slaunchofanewinvestmentproduct,namelytheFinancialCo-operativesRetailSavingsBond.TheBondisaimedat
providingasecure,affordablesavingvehicleforCFIs.
ThisyeartheworldcelebratestheInternationalYearofCo-operatives(IYC),whichisintendedtoraisepublicawarenessoftheinvaluable
contributionsofco-operativeenterprises,includingfinancialco-operatives,topovertyreduction,employmentgenerationandsocial
integration. The year will also highlight the strengths of the co-operative business model as an alternative means of doing business
and furthering socio-economic development. The Co-operative Banks Development Agency (CBDA) is playing an important role in
localinitiativesintheIYCbyparticipatinginthedti’sIYCtaskteamandco-ordinatingcommittee,aswellashostingitssecondannual
indabainKwaZulu-Natalunderthetheme“Financial Co-operatives building better communities”.
AsweconsiderthechallengesaheadfortheCBDA,theexperienceandknowledgeof itsboard,managementandstaff,aswellas
collaborationbetweentheCBDAandotherkeyroleplayers,suchaslocalandprovincialgovernment,providereasonstobepositive
about the future of the co-operative banking sector. Let us harness the commitment and energy within the sector to bring financial
co-operativesinSouthAfricatothesamematurestageofdevelopmentweseeinmovementsinternationally.
Pravin J. Gordhan
Minister of Finance
minisTeR’s sTaTemenT
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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TotheMinisterofFinance,MrPravinGordhan:
Ihavethehonourofsubmittingtoyou,inaccordancewiththePublicFinanceManagementAct(1999),theannualreportoftheCo-
operative Banks Development Agency for the period 1 April 2011 to 31 March 2012.
SifisoNdwandwe
Chairman and Accounting Authority
Co-operative Banks Development Agency
suBmission oF THe annual RePoRT To THe eXeCuTiVe auTHoRiTY
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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Bankers
FirstNationalBankLimited
External Auditors
AuditorGeneralSA
Physical Address
27thFloor,NationalTreasury
240VermeulenStreet
Pretoria
Postal Address
Private Bag X 115
Pretoria,
0001
Telephone
+27 12 315 5367
Fax
+27123155905
Website
w w w . t r e a s u r y . g o v . z a /
coopbank
Acting Managing Director
MsIngridGoodspeed
Director: Capacity Building and Information
MrRobertMbeza
Supervisor Co-operative Banks
Mr David de Jong
adminisTRaTiVe inFoRmaTion
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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aCRonYms used in THis RePoRT
CBDA Co- operative Banks Development Agency
ACCOSCAAfrican Confederation of Co-operative Credit
andSavingsAssociation
BANKSETA BankingSectorEducationandTrainingAuthority
ATM Automated Teller Machines
CFI Co-operativeFinancialInstitution
CFFCentralFinanceFacilitySavingsandCredit
Co-operative
CIPCCompaniesandIntellectualProperty
Commission
dti DepartmentofTradeandIndustry
FSC FinancialServicesCo-operative
GP Gauteng
GRAP GenerallyRecognisedAccountingPractice
HR HumanResources
IT InformationTechnology
IYC InternationalYearofCo-operatives
KZN KwaZulu-Natal
Lim Limpopo
MOU Memorandum of Understanding
MP Mpumalanga
MTEF MediumTermExpenditureFramework
NEHAWUNationalEducation,HealthandAllied
Workers’UnionofSA
NQF NationalQualificationFramework
NT NationalTreasury
NW NorthWest
OSK OranjekasSpaarenKrediet
PAA PublicAuditActofSouthAfrica
PEARLS
Protection,EffectiveFinancialStructure,
AssetQuality,RatesofReturnLiquidity,Signs
of Growth
PFMA Public Finance Management Act
ROACRegulatoryandOversightAdvisory
Committee
SA SouthAfrica
SACCASavingsandCreditCo-operativeAssociation
Africa
SACCO SavingsandCreditCo-operative
SACCOLSavingsandCreditCo-operativeLeagueof
SouthAfrica
SAICA SouthAfricanInstituteofChartered
Accountants
samaf SouthAfricanMicro-financeApexFund
SAMWU SouthAfricanMunicipalWorkersUnion
SARB SouthAfricanReserveBank
SCM SupplyChainManagement
SME SmallandMediumEnterprise
SMME SmallMicroandMediumEnterprise
SRO Self-regulatoryOrganisation
WC Western Cape
WOCCU World Council of Credit Unions
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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1. REPORTOFTHEACCOUNTINGAUTHORITY ...................................1
2. REPORTOFTHEMANAGINGDIRECTOR ............................................3
3. HUMANRESOURCES .....................................................................................7
4. CORPORATEGOVERNANCE ...................................................................10
5. PERFORMANCEAGAINSTSTRATEGICTARGETS .........................13
6. CO-OPERATIVEBANKSSUPERVISIONREPORT ............................19
7. CAPACITYBUILDINGANDINFORMATIONREPORT .................29
8. STATEMENTOFRESPONSIBILITY .........................................................34
9. REPORTOFTHEAUDITCOMMITTEE ................................................36
10. REPORTOFTHEAUDITOR-GENERALTOPARLIAMENT
ONTHECO-OPERATIVEDEVELOPMENTAGENCY ...................39
11. FINANCIALSTATEMENTS ..........................................................................45
TABles AnD FiguRes
Figure1:StructureoftheCBDA ..................................................................... 8
Table 1: CBDA committees .......................................................................... 10
Table 2: Board and committees attendance ..................................... 11
Table3: MDandCorporateServices ...................................................... 13
Table4: Co-operativeBanksSupervisionUnit ................................. 16
Table5: CapacityBuildingInformationUnit ..................................... 17
Table6: StatisticsforCFIsasat29February2012 ..........................19
Figure2:ConsolidatedstatisticsforeligibleCFIs.............................. 20
Figure3:MostprevalentweaknessesofCFIs ..................................... 21
Table7: Ratingandfrequencyofon-siteexaminations ............ 23
Table8: ThegrowthandfinancialperformanceofCFIs
(including co-operative banks) ............................................... 30
Table9: Statusofco-operativebanksandCFIseligible
for registration as co-operative banks ................................ 30
TaBle oF ConTenTs
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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1. RePoRT oF THe aCCounTinG auTHoRiTY
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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TheCo-operativeBanksDevelopmentAgencyhasbeeninexistenceforjustunderfouryears.Duringthisperiod,thefocushasbeen
onestablishingtheinstitutionalstructure,gettingtherightpeopleintotherightpositions,gettingeligiblefinancialco-operativesto
applyforregistrationasco-operativebanks,understandingthefinancialco-operativessectoranddoingthegroundworkfortackling
the challenges that lie ahead. What has been abundantly clear during this period is that financial co-operatives in the country are still
developing.Asaresult,thedevelopmentalmandateoftheAgencybecomesimperative,buttressedbyafitandappropriateregulatory
framework.
TheAgencyhasgoneaboutensuringitmeetsitsmandatebyregularandconsistentdialoguewithvariousroleplayersinthesector,
notably the financial co-operatives themselves, self-regulatory bodies and relevant local government departments.The intended
outcome is a more co-ordinated and systematic approach to addressing the needs of co-operative financial institutions.
Duringthecourseofthefinancialyear,MrNkosanaMashiya,asecondmentfromNationalTreasury,wastheManagingDirectorofthe
CBDAonashort-termcontract,astheboardworkedonalong-termsolution.Beforetheboardcouldfinaliseitsrecruitmentprocess,
MrMashiyawasappointedastheDeputyRegistrarofBanksattheSouthAfricanReserveBank.NationalTreasuryprovidedasecond
secondment,Ms IngridGoodspeed, to steer theorganisation for the remainderof thefinancial yearuntil theappointmentofMs
OlaotseMatshaneasManagingDirectorinMay2012.Despitethesesignificantchangesatstrategiclevel,theAgencyhasremained
focused on attaining its vision of “creating a strong and vibrant co-operative banking sector that broadens access to and participation in
diversified financial services to achieve economic and social wellbeing.”
SifisoNdwandwe
Chairman and Accounting Authority
Co-operative Banks Development Agency
1. RePoRT oF THe aCCounTinG auTHoRiTY
1. RePoRT oF THe aCCounTinG auTHoRiTY
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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2. RePoRT oF THe manaGinG diReCToR
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2. RePoRT oF THe manaGinG diReCToR
The essence and importance of co-operative bankingThe 2007/08 financial crisis and ensuing economic crisis had a negative impact onmost enterprises across theworld. However,
co-operative financial institutions (CFIs), including co-operative banks, savings and credit co-operatives and financial services co-
operatives,allovertheworldarereportingnotonlythattheyarestillfinanciallysound,butthatcustomersareflockingtobankwith
thembecause they arehighly trusted.Theessenceof co-operativebanking is simple:members,whohavea commonbond, are
owners andcanbeboth savers andborrowers; theyuse theco-operativefinancial institution to intermediatemoney from those
memberswhohaveittothosememberswhoneedit,withoutanybodyexternaltotheCFItakingaprofitandwithinterestratessetso
thatthemodelworksineverymember’sinterest.Importantly,eachCFIisdemocraticallygovernedbyitsmembers,witheverymember
havinganequalvoiceregardlessoftheamountofsavingsorloanstheyhavewiththeCFI.
Inaddition,CFIsareparticularlygoodatreachingthepoorandvulnerable,particularlyinruralareas.Theyareabletoprovidearange
ofaffordablefinancialservicestomemberswhilekeepingcostslow.Thustheydeliverqualityproductsandservicestocommunities
whilestillbeingprofitable.Furthermore,theco-operativebankingmodelhasthepotentialtobegoodnewsforemploymentcreation,
asCFIsareidealvehiclesforenablingsmall,microandmediumenterprisestoexpand.InEurope,forinstance,29%ofco-operativebank
lending is to small and medium enterprises.
ItisinthiscontextthattheCo-operativeBanksActprovidesspaceforcommunitiestoparticipateintheirownco-operativebanksthat
canbegearedtowardstheirfinancialservicesneeds,intheprocessallowingforempowermentandself-determination.
Fulfilling CBDA’s mandateIfthepotentialofCFIstoimproveaccesstofinancialservicesistoberealised,thedevelopmentoftheco-operativebankingsector
becomescritical.TheCBDA’smandate,asprovidedinsection2oftheCo-operativeBanksActof2007,istopromotethedevelopment
of sustainable and responsible co-operative banks. This will be achieved by putting in place robust, achievable andmeasurable
actionplans,deliverablesandtargetstoadvanceCFIsthatareeligibletobeco-operativebanks,totherequiredlevelofsoundness,
sustainability and governance to register as co-operative banks.
The year under reviewOn14June2011oneco-operativebank,OSKCo-operativeBank,with379membersandR42.1million indeposits,wasregistered
bytheSupervisorattheSouthAfricanReserveBank,bringingthetotalnumberofco-operativebankstotwo.Duringtheyearunder
review,thenumberofCFIseligibleforregistrationasco-operativebankswas19.
NoneoftheCFIseligibletoberegisteredasco-operativebanksthatwereassessedduringthe2011/12financialyearmanagedto
addresstheweaknessespointedoutbytheSupervisorssufficientlyandhencenonewasregisteredasaco-operativebank.Themost
prominentareasofweaknesswereinadequatecapitallevels,weakgovernancestructures,insufficientoperationalcapacityandpoor
managementinformationsystems.TheseshortcomingswerebroughttotheattentionoftheCapacityBuildingUnittoenableit,as
partofitsdevelopmentalobjectives,toimplementappropriatestrategiestosupportsuchCFIsinaddressingthesedeficiencies.
2. RePoRT oF THe manaGinG diReCToR
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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Duringtheyearunderreview,theCapacityBuildingUnitcontinuedtofocusoninitiativessupportingandpromotingfledgingCFIsand
acceleratingCFIperformancetowardsregistrationassafeandreliableco-operativebanks.Theseinitiativescentredon(i)improving
datacollection,managementanddissemination in theCFI sector; (ii)establishinganationalassociationwithprovincial structures
tobringtogetherallCFIs intheprovincesandanationalstructurewithrepresentatives fromallnineprovinces; (iii) facilitatingthe
developmentoflearningprogrammesandimplementingtrainingarrangementsthroughuniversitiesandcolleges;and(iv)improving
CFIcompliancerateswiththerules,regulationsandstandards.
The year ahead
In the year ahead, the legislative environment inwhichCFIsoperate is to change.TheCo-operativeBanksAct is expected tobe
amendedtomovethesupervisoryfunctionoftheCBDAtotheSouthAfricanReserveBank(SARB).Also,anewBanksActexemption
noticeistobeputinplacetoassigntheregulationandsupervisionofallCFIs,thatis,potentialco-operativebanks,totheCBDA.
The CBDA looks forward to the challengesposedbythesechanges.Itisenvisagedthattheywillfosterthedevelopmentmandateof
the CBDA and allow both the supervision and capacity building functions to put in place programmes to ensure a healthy pipeline of
viableandsustainableCFIsthatwilleventuallyberegisteredasco-operativebanks.
Nextyear, theCBDAwillseektoensureaCFIsector that is institutionallysoundbyregistering, regulatingandsupervisingCFIsand
therebyimprovingtheirsafetyandsoundnessandthefinancialstabilityofthesectorasawhole.Furthermore,theCBDAwillstrivefor
avibrantandgrowingCFIsectorthatbroadensaccessandmobilisessavingsatcommunitylevel.TheCBDAwillachievethisthrough:
(i) establishing and implementing training programmes to address the low levels of skills and competencies in the management
and leadershipofCFIs; (ii) putting inplace a national bankingplatformwith administrative capabilities and access to thenational
paymentsystemtoallowCFIstokeepappropriaterecords,producemanagementinformationandtoissuedebitcardswithfullaccess
toautomatedtellermachines,pointsofsaleatmerchantsandmobilebankingservices;and(iii)strengtheningthenationalassociation
ofCFIsasarepresentativeandsupportorganisationforthesector
Organisational authority and financial managementThe CBDA is a statutory body registered as a public entity in terms of section 3 (a) of the Public Finance Management Act. The CBDA is
funded by transfer paymentsthroughNationalTreasury.TheCBDAmaintainedadequateaccountingrecordsandaneffectivesystem
ofinternalcontrolsandriskmanagementandcomplied,inallmaterialrespects,withapplicablelawsandregulations.
AcknowledgementsDuringtheyearunderreview,MrNkosanaMashiya,theCBDA’sactingManagingDirector,lefttheCBDAtojointheSARB.TheCBDAis
gratefulforthestrategicguidanceanddirectionprovidedbyMrMashiya,whoreinforcedimplementationofthemandateoftheCBDA
topromoteanddevelopthesector,inclusiveofbothco-operativebanksandprospectiveco-operativebanks.
2. RePoRT oF THe manaGinG diReCToR
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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Wearegratefulforthewisdom,supportandguidanceofourchairmanMrSifisoNdwandwe,andtherestoftheboard.Bymaintaining
focusonprovidingstrategicdirection,theboardhasensuredthattheCBDAhasputinplaceinitiativesthatwillnotonlyproduceCFIs
thataresufficientlyviableandsustainabletoberegisteredasco-operativebanks,butwillsecurethefutureoftheCFIsectorasawhole.
Inaddition, Iwish to thank the staffof theCBDA for theirenormousdedicationandhardwork inadifficult andat timesvolatile
environment.ItisthroughtheireffortsthattheCBDAhasmadetheprogressithas.
IngridGoodspeed
Acting Managing Director
2. RePoRT oF THe manaGinG diReCToR
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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3. Human ResouRCes
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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3. Human ResouRCes
TheCBDA’s staff complement is 10 (2011 – 8).The increase in the staff complement is to cater for assigning the regulatory and
supervisoryfunctionintermsoftheBanksActexemptionnoticetotheCBDA.Futurestaffincreaseswillbeinlinewiththedevelopment
of other programmes.
The current organisational chart of the CBDA is outlined in Figure 1:
TheCBDA’smanagingdirectorissupportedbyaCorporateServicesUnit,SupervisionUnitandCapacityBuildingUnit,
Corporate services unitThe corporate services unit comprises:
• thefinancialfunction,whichisoutsourcedtoRossalNo98(Pty)Ltd;
• thehumanresourcesfunction,whichisoutsourcedtoNationalTreasury;
• theprogrammeadministrator,MrPercyMolokoane;and
• thepolicyandresearchofficer.Thispositionisvacant.
supervision unit TheSupervisionUnitisheadedbytheSupervisor,MrDaviddeJong,andissupportedbyoneseniorexaminer,MrMKuhlengisa,and
oneinspector,MrMfundoZama.AdministrativeassistanceisprovidedbyMsMokgadiMafojane.
Two additional posts (an examiner and an inspector) have been created in the unit for the next financial year in anticipation of the
CBDA’sassumptionofadditionalregulatoryresponsibilitiesforallCFIsnotregisteredasco-operativebanks.
Capacity Building unitTheCapacityBuildingUnit isheadedbyMrRobertMbeza,whoissupportedbyhisdeputy,MsNomadeloSauli,andanofficer,Mr
TimothyMutyavaviri.Administrativesupportwasprovided,atvarioustimesoftheyear,byMrPercyMolokoane,MsMokgadiMafojane
andMsShirleyMolongoana.Theadministrativeassistantpositionwillbefilledin2012.
3. Human ResouRCes
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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Figure 1: Structure of the CBDA
3. Human ResouRCes
Human Resources(OutsourcedtoNationalTreasury)
Financial management(OutsourcedtoRossalNo98(Pty)Ltd)
Programme AdministratorPercy Molokoane
Policy and ResearchVacant
ExaminerM Kuhlengisa
ExaminerVacant
InspectorVacant
InspectorMfundo Zama
Team AssistantMokgadi Mafojane
Capacity BuildingDirector
RobertMbeza
Capacity BuildingDeputy
NomadeloSauli
Capacity Building OfficerTimothy Mutyavaviri
Office AdministratorShirleyMolongoana
Board
Acting Managing Director IngridGoodspeed
Corporate Services
Supervision & RegulationSupervisor
David de Jong
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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4. CoRPoRaTe GoVeRnanCe
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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TheCBDAisapublicentityestablishedintermsoftheCo-operativeBanksActof2007(theAct).ItisapublicentityunderSchedule
3aof thePublic FinanceManagementAct 1999, as amended (PFMA).As such,Treasury regulations impose certain statutory and
regulatoryrequirementsontheCBDA.
Board of DirectorsThe Board of Directors of the CBDA is appointed by the Minister of Finance (the Minister) in terms of section 58 of the Co-operative
Banks Act of 2007. The Board is the accounting authority of the CBDA and must fulfil certain duties and responsibilities provided for in
thePFMA.Inaddition,theActrequirestheBoardto:
• provideeffective,transparent,accountableandcoherentcorporategovernanceandconducteffectiveoversightoftheaffairsof
theCBDA;
• complywithallapplicablelegislationandagreements;
• communicateopenlyandpromptlywiththeMinisterandanyministerialrepresentatives;
• dealwiththeMinisterandanyministerialrepresentativesingoodfaith;and
• atalltimesactinaccordancewiththecodeofconductformembersoftheCBDAasmaybeprescribedbytheMinister.
Membership of the CBDA Board of directors as at 31 March 2012:
MrSNdwandwe(Chairperson)
Adv.EJZKuzwayo(DeputyChairperson)
MrVSatgar
Mr K Mahuma (resigned on 30 March 2012)
Mr J Theron
Ms D Hamilton
Mr P Koch
Ms O Matshane (appointed as Managing Director from 14 May 2012)
Acting Managing Directors during the financial year:
MrNMashiya(appointedasActingManagingDirectorfrom14April2011to31October2011)
MsIGoodspeed(appointedasActingManagingDirectorfrom8November2011to13May2012)
CBDA Board committees as at 31 March 2012Table1indicatestheCBDA’scommitteesandmembershipofthosecommittees.
Table 1: CBDA committees
HR & Remuneration Committee
Audit Committee (combined with that of national Treasury) in terms of section 77(c) of PFMA
Risk Committee (combined with that of national Treasury) in terms of section 77(c) of PFMA
Regulatory Overview & Advisory Committee (ROAC)
AdvEJZKuzwayo Ms O Matshane MsIGoodspeed AdvEJZKuzwayo
Mr J Theron Mr P Koch (alternate)
MrSNdwandwe
TheBoardcommitteesenabletheBoardtodischargeitsresponsibilitiesanddutiesproperly.Eachcommitteeactsinaccordancewith
its charter and is chaired by an independent non-executive director.
4. CoRPoRaTe GoVeRnanCe
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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4. CoRPoRaTe GoVeRnanCe
Board and Board committee meeting attendanceBoard and committeemeetings are scheduled annually in advance. Boardmembers’ attendance of Board and Board committee
meetings is outlined in Table 2.
Table 2: Board and committees attendance
Board and committee meeting attendance
Board HR and Remuneration Committee
Audit Committee ROAC
MrSifisoNdwandwe 5/5 3/3
Adv. Jabu Kuzwayo 5/5 3/3 1/1
Ms Daphne Hamilton 5/5
Mr KeaObaka Mahuma 0/5
Mr Jan Theron 5/5 3/3
Ms Olaotse Matshane 3/5 1/3
Mr Peter Koch 4/5
MrVishwasSatgar 4/5
Remuneration of Board membersCBDABoardmembersareremuneratedatratesdeterminedandissuedbytheNationalTreasuryintermsofservicebenefitpackages
foroffice-bearersofcertainstatutoryandotherinstitutions.
The remuneration of Board members is summarised in note 25.2 in the annual financial statements.
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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5. PeRFoRmanCe aGainsT sTRaTeGiC TaRGeTs
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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5. PeRFoRmanCe aGainsT sTRaTeGiC TaRGeTs
Tab
le 3
: MD
and
Cor
por
ate
Serv
ices
Ob
ject
ive
ind
icat
ors
Act
ual p
erfo
rman
ce a
gai
nst
targ
etRe
ason
s fo
r var
ian
ce a
nd
oth
er c
omm
ents
Targ
etA
ctua
lVa
rian
ce
1.EstablishtheDep
osit
InsuranceSche
meforthe
CFIsector
Afu
ndwith
1.25%
coverageof
insu
rabl
e de
posi
ts b
y 31
Mar
ch
2012
Securefinancing
tosetup20%
com
plet
e by
31
Mar
ch 2
012
Non
eNoap
proved
fu
nd a
nd s
ecur
ed
fund
ing
TheNationalTreasurywillestab
lishasing
leinsurance
fund
with
inth
eSA
RBto
protectdep
osito
rsofall
banks,includ
ingco-ope
rativeba
nks.
2.Streng
then
strateg
ic
rela
tions
hips
with
st
akeh
olde
rs
Num
bero
fstakeho
lderm
eetin
gs/
cons
ulta
tions
hel
d an
d M
OU
si
gned
by
31 M
arch
201
2
12 s
take
hold
er
cons
ulta
tions
1 M
OU
sig
ned
12 s
take
hold
er
cons
ulta
tions
1 M
OU
sig
ned
0One
MOUsigne
dwith
BANKSETA
Num
bero
fstakeho
lderindaba
she
ld b
y 31
Mar
ch 2
012
1 st
akeh
olde
r Indaba
1stakeh
olde
rInd
aba
0
3.
Dev
elop
a s
trat
egic
leadership,financial
managem
ent,administrative
supp
ort t
o en
sure
that
the
CBD
A m
eets
it s
tatu
tory
m
anda
te b
y M
arch
201
2
Securedbu
dgetallocatio
ninline
with
requ
estedbids
9.3million
9.3million
0
Num
bero
fnew
position
sfilled
21
-1Th
is p
ositi
on w
as re
prio
ritis
ed fo
r the
201
2/13
fin
anci
al y
ear.
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
14 Ob
ject
ive
ind
icat
ors
Act
ual p
erfo
rman
ce a
gai
nst
targ
etRe
ason
s fo
r var
ian
ce a
nd
oth
er c
omm
ents
Targ
etA
ctua
lVa
rian
ce
4.Establishsoun
dgo
vernance
structures;internalcon
trols
and
finan
cial
man
agem
ent
that
adh
ere
to la
ws
and
regu
latio
ns(PFM
A);Treasury
Regu
latio
nsbyMarch2012
.
HRPlanestab
lishe
d50%com
plete
0%com
plete
-50%
TheHRPlanisinpartadd
ressed
bytheHRsectionof
the
2012
/201
5 st
rate
gic
plan
. Oth
er c
ompo
nent
s of
theHRPlanwillbede
velope
dincon
sultatio
nwith
NationalTreasuryHRandtheCBD
AHRCo
mmittee.
RetentionStrategyestab
lishe
d50%com
plete
0%-50%
TheRetentionPlanisstilltobe
develop
edafter
consultatio
nwith
NationalTreasuryHRandtheCBD
A
HRCo
mmittee.
Frau
d Pr
even
tion
Plan
est
ablis
hed
and
impl
emen
ted
100%
0%-100%
Thedraftp
lanwastabled
toth
ebo
ard.Itwill
be re
view
ed b
y th
e au
dit c
omm
ittee
bef
ore
it is
im
plem
ente
d.
Compliancewith
SCMpolicies
100%
com
pliance
100%
com
pliance.
0%Fi
nal c
onfir
mat
ion
subj
ect t
o au
dit fi
ndin
gs
Upd
ated
pol
ices
on:
Insuranceon
com
puterassets
100%
0%-100%
Afteracost-be
nefitanalysis,CBD
Adecided
toado
pt
theNationalTreasury’spo
licyofreplacingcompu
ter
asse
ts in
stea
d of
insu
ring
them
.
Intang
ibleassets-amen
dcurren
tfin
anci
al p
olic
ies
100%
100%
0%
Jour
nal p
olic
ies
100%
100%
0%
Tab
le 3
: MD
and
Cor
por
ate
Serv
ices
- co
ntin
ued
5. PeRFoRmanCe aGainsT sTRaTeGiC TaRGeTs
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
15Ob
ject
ive
ind
icat
ors
Act
ual p
erfo
rman
ce a
gai
nst
targ
etRe
ason
s fo
r var
ian
ce a
nd
oth
er c
omm
ents
Targ
etA
ctua
lVa
rian
ce
5.
Dev
elop
and
impl
emen
t eff
ective,efficien
tand
tr
ansp
aren
t sys
tem
s of
inte
rnal
con
trol
s on
pe
rfor
man
ce m
anag
emen
t by
Mar
ch 2
012
Polic
ies
and
proc
edur
es fo
r qu
arterlyperform
ancerepo
rting
100%
0%-100%
TheCBD
Aado
pted
theNationalTreasurypo
sitio
nofusing
theNationalTreasuryFram
eworkfor
PerformanceInform
ation,whichwasdevelop
edin
2012
as
a gu
idin
g do
cum
ent
Quarterlyrepo
rtssubm
itted
toth
een
titie
s un
it100%
100%
0%
Ann
ual p
erfo
rman
ce p
lan
that
linksto
thequ
arterlyperform
ance
repo
rt
100%
50%
-50%
Thequ
arterlyperform
ancerepo
rtte
mplatethatwas
used
pre
sent
ed s
ome
of th
e ta
rget
s at
a c
onso
lidat
ed
levelw
hichm
adesomeofth
equ
arterlyrepo
rttargets
not t
o al
ign
to th
e ta
rget
s as
doc
umen
ted
in th
e an
nual
per
form
ance
pla
n.
Note:The
introd
uctio
nofadep
ositinsurancesche
meforco-op
erativebanksisnolong
erinclud
edinth
estrategicob
jectivesofthe
CBD
Aasaseparatedep
ositinsurancesche
meforco-op
erative
banksmaynotbene
cessary.In
itspo
licydo
cumen
t“AsaferfinancialsectortoserveSou
thAfricabetter”,the
NationalTreasuryrecogn
ised
thatap
artfro
mprotectingba
nkdep
osito
rs,the
introd
uctio
nofdep
ositinsuranceisim
portantforencou
raging
new
entrantstoth
eba
nkingsector.Suchne
wentrantscouldbe
co-op
erative,m
utualand
ded
icated
banks.H
oweverinsteadofa
depo
sitinsurancesche
meforeachtype
ofbanktheNationalTreasuryiscon
side
ringasing
ledep
ositinsurancesche
methatprotectsa
llba
nkdep
osito
rs,in
clud
ingde
positorsofco-op
erativeba
nks.
Tab
le 3
: MD
and
Cor
por
ate
Serv
ices
- co
ntin
ued
5. PeRFoRmanCe aGainsT sTRaTeGiC TaRGeTs
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
16 Tab
le 4
: Co-
oper
ativ
e Ba
nks
Sup
ervi
sion
Uni
t
Ob
ject
ive
ind
icat
ors
Act
ual p
erfo
rman
ce a
gai
nst
targ
etRe
ason
s fo
r var
ian
ce a
nd
oth
er c
omm
ents
Targ
etA
ctua
lVa
rianc
e
1.Registerand
sup
ervise15co-
oper
ativ
e ba
nks
by 2
016
App
licat
ions
are
resp
onde
d to
with
in tw
o w
eeks
of
rece
ipt
2 w
eeks
2 w
eeks
0
Nosupe
rvised
co-op
erativeba
nkfallsbelow
a
CAMELratin
gof3
3 ra
ting
3 ra
ting
0
Co-ope
rativeba
nkoff-sitereturnsareanalysed
an
d re
port
ed w
ithin
thre
e m
onth
s to
Min
iste
r and
Bo
ard
4 re
port
s4
repo
rts
0
2.
Han
dle
trou
bled
co-
oper
ativ
e ba
nks
Lett
ers
issu
ed w
ithin
thre
e m
onth
sle
tter
s is
sued
to
trou
bled
co-
op
erat
ive
bank
s
0 le
tter
is
sued
0Th
ere
was
no
trou
bled
co-
oper
ativ
e ba
nk
3.
Com
plia
nce
with
and
revi
ew o
f re
gula
tory
fram
ewor
k90%com
pliancewith
BaselPrin
ciplesford
eposit-
taki
ng m
icro
finan
ce in
stitu
tions
70%
com
plia
nt
Mar
ch 2
012
85%
com
plia
nt
Mar
ch 2
012
15%
TheSupe
rvisionun
itwascom
pliantwith
21ou
tof
the
25 B
asel
Prin
cipl
es
Acc
ount
abili
ty a
nd s
ubm
ittin
g st
atut
ory
repo
rts
on ti
me
4 re
port
s to
M
inis
ter
4 re
port
s to
M
inis
ter
0
Ensureself-reg
ulatoryorganisatio
nsectorreturns
with
inth
reemon
thsafterend
ofthe
quarter
00
0Exem
ptionmanagem
entp
rogram
mebe
comes
effectiveJune
2012
5. PeRFoRmanCe aGainsT sTRaTeGiC TaRGeTs
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
17Tab
le 5
: Cap
acit
y Bu
ildin
g In
form
atio
n U
nit
Ob
ject
ive
ind
icat
ors
Act
ual p
erfo
rman
ce a
gai
nst
targ
etRe
ason
s fo
r var
ian
ce a
nd
oth
er c
omm
ents
Targ
etA
ctua
lVa
rian
ce
1.Im
provedatacollection,
man
agem
ent a
nd
dissem
inationinth
eCFI
sect
or
Registered
CFIsrepo
rtingon
financialstatusby
Mar
ch 2
012
1531
16Targetexceede
d-1
6CFIswereassisted
toprodu
ceth
ere
port
s by
a s
ervi
ce p
rovi
der
2.
Ass
ist s
econ
dary
in
term
edia
ry c
o-op
erativesand
otherCFI
repr
esen
tativ
e bo
dies
to
improvetheirleade
rship,
man
agem
ent a
nd
oper
atio
nal c
apab
ility
Securin
gfund
ingtosetupaba
nkingplatform
by
Mar
ch 2
012
R1.84M
R2M
R0.16M
Budg
et a
ppro
ved
in th
e 20
12-2
013
oper
atio
nal p
lan
Trai
ning
pro
gram
mes
and
dire
ct te
chni
cal
assi
stan
ce c
ondu
cted
by
the
Leag
ue b
y M
arch
201
23
1-2
Budg
et m
oved
to th
e de
velo
pmen
t of c
urric
ulum
and
training
ofm
anagersbu
tsolicitedfund
ingfro
mBANKSETA
for o
ne tr
aini
ng p
rogr
amm
e co
nduc
ted
by a
ser
vice
pr
ovid
er s
ince
the
Leag
ue w
as n
ot fu
nctio
ning
CFIperform
ancem
onito
ringcond
uctedbySACC
OL
by 2
012
416
12Performanceassessm
entscon
ducted
byCBD
Astaff,since
theLeague
wasfacing
ope
ratio
nalchalleng
esand
staffused
everyop
portun
ityth
eyhadwith
theCFIstoassesstheir
perf
orm
ance
Streng
then
ingthefin
ancialco-op
erative
mov
emen
t thr
ough
est
ablis
hmen
t of a
pro
ject
torevitaliseSA
CCOLorestab
lishon
enatio
nal
repr
esen
tativ
e bo
dy b
y D
ecem
ber 2
011
11
0Achieved.CFIsresolved
toform
one
unifiednatio
nal
associationthatbrin
gsto
getherSavingsand
CreditC
o-op
eratives(SACC
Os),FinancialServicesCo
-ope
ratives(FSC
s)
and
co-o
pera
tive
bank
s
Stud
ytourforthe
estab
lishm
ento
fstudycircles
10
-1Th
e st
udy
circ
le p
rogr
amm
e ha
s be
en p
ut o
n ho
ld
3.
Faci
litat
e th
e de
velo
pmen
t of l
earn
ing
prog
ram
mes
and
im
plem
ent t
rain
ing
arra
ngem
ents
thro
ugh
existin
gun
iversitie
s,co
llege
s an
d su
ppor
t or
gani
satio
ns
Fina
ncia
l co-
oper
ativ
e se
ctor
cur
ricul
um/
qualificatio
nsdevelop
edand
training
toCFI
man
ager
s pr
ovid
ed b
y M
arch
201
2
One
cu
rric
ulum
de
velo
ped
and
20
man
ager
s tr
aine
d
One
cu
rric
ulum
de
velo
ped
and
20
man
ager
s tr
aine
d
0A
chie
ved
4.Im
proveratesof
com
plia
nce
with
exi
stin
g rules,regu
latio
nsand
st
anda
rds
CFIsregistered
asco-ope
rativeba
nksbyMarch
2012
10
-1Morethan70%ofthe
eligibleCFIshavealowto
neg
ative
capitalade
quacyratio
,makingitim
possibleto
registerth
em
asco-op
erativeba
nks;ho
wever,one
CFI’sap
plicationis
bein
g pr
oces
sed
but n
ot y
et re
gist
ered
.
5. PeRFoRmanCe aGainsT sTRaTeGiC TaRGeTs
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
18
6. Co-oPeRaTiVe BanKs suPeRVision RePoRT
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
19
6. Co-oPeRaTiVe BanKs suPeRVision RePoRT
introductionTheSupervisorsofco-operativebanks,appointedbytheCBDAandtheSARB,followacoordinatedapproachtoensuretheconsistent
applicationoftheCo-operativeBanksAct,2007(ActNo.40of2007–theAct),andtocircumventregulatoryarbitrage.TheSupervisors’
objective is to gain proper understanding of the operation of co-operative banks and to apply and where necessary adapt international
regulatoryandsupervisory standards tocater for theuniqueneedsof thedomesticco-operativebankingsector.TheSupervisors
operate through a relationship ofmutual trust and co-operation with all role players in an effort to promote and enhance the
accessibilityofsoundfinancialservicestoallSouthAfricans.
The Supervision Unit within the CBDA is responsible for the regulation and supervision of CFIs thatmeet the requirements for
registrationasco-operativebankshavingmobilisedbetweenR1millionandR20millionindepositswithaminimumthresholdof
200 members.
Performance of eligible CFis during the year under reviewConsistentwith Section 41 (2) of theCo-operative BanksAct, supervisory activitieswere limited toCFIs thatmeet theminimum
requirementsforregistrationasco-operativebanks,thatis,morethanR1millioninmemberdepositsandatleast200members.Details
oftheseCFIsarereflectedinTable6.
Table 6: Statistics for Co-Operative Banks and Eligible CFIs as at 29 February 2012
CFi Type Prov Member Deposits loans Total assets
OSK Co-op Bank NC 593 R48,986,108 R36,382,615 R54,021,899
Ditsobotla Co-op Bank NW 980 R6,523,744 R5,515,084 R7,569,026
Total co-op banks 1,573 R 55,509,852 R 41,897,699 R 61,590,925
Oranjekas SACCO GP 732 R38,684,394 R27,301,589 R41,179,597
Kleinfontein SACCO GP 356 R36,673,229 R32,778,407 R37,443,039
Kathorus SACCO GP 1,911 R10,458,640 R6,174,568 R9,889,423
Motswedi FSC NW 3,632 R7,121,614 R202,000 R8,284,101
NEHAWU SACCO NAT 4,536 R7,106,412 R4,623,715 R6,473,097
Sibanye SACCO WC 3,002 R5,389,434 R5,033,546 R6,358,548
SAMWU SACCO SA 2,267 R5,066,731 R1,866,609 R5,317,959
Flash SACCO WC 4,845 R1,832,277 R316,483 R4,634,780
Ziphakamise SACCO KZN 480 R3,071,787 R1,556,944 R4,059,632
CFF SACCO NAT 34 R 2,898,007 R 2,404,422 R 3,442,571
LotlhakaneFSC FSC NW 1,251 R1,538,638 R72,030 R2,275,161
Mathabatha FSC Lim 2,191 R1,682,638 R957,972 R1,954,670
Kraaipan FSC NW 1,392 R3,551,207 R212,500 R1,907,663
Mayibuye SACCO EC 223 R1,315,290 R1,054,126 R1,475,283
Boikago SACCO NW 671 R1,182,365 R935,440 R1,460,830
K.LadiesEmpower FSC KZN 528 R1,003,474 R383,125 R1,407,841
Disaneng FSC NW 495 R1,451,752 R191,775 R1,034,577
Beehive SACCO MP 1,056 R1,235,261 R561,075 R824,631
Lehurutshe FSC NW 306 R1,176,242 R209,797 R808,744
Total SACCOs+FSCs 29,908 R132,439,392 R 86,836,123 R140,232,147
TOTALS 31,481 R187,949,244 R 128,733,822 R 201,823,072
Note1: Statistics collated from compliance reports submitted to self-regulatory bodies SACCOL and samaf and the CBDA capacity building section
Note 2: NAT = National footprint
Note 3: Statistics as at 29 February, as it is the financial year end for the CFIs
6. Co-oPeRaTiVe BanKs suPeRVision RePoRT
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
20
Duringtheyear,threeadditionaleligibleCFIswereidentified.OneeligibleCFIbecameaco-operativebank(OSK),bringingthenumber
ofco-operativebankstotwoandthenumberofeligibleCFIsto19.ThethreeadditionalCFIsarestilltoapplyforregistrationasco-
operative banks according to section 3 (1) of the Act.
Membershipofco-operativebanksandeligibleCFIsincreasedby12.5percent,from28,034membersto31,481membersyearon
year.TheincreasewasdrivenbysignificantgrowthinmembershipnumbersatthreeCFIs,namelyNehawu,SibanyeandFlash,aswell
astheincreaseineligibleCFIs.
Depositsofthetwoco-operativebanksand19eligibleCFIsincreasedby17percenttoR187.9millionduringtheyearunderreview,
fromR161millioninthepreviousyear.Thisisduetothelargerinstitutionsshowingstrongdepositgrowth.
Figure 2: Consolidated Statistics for Eligible CFIs
R250,000,000
R200,000,000
R150,000,000
R100,000,000
R50,000,000
R0Total Deposits
2011 2012
Total Loans Total Assets
Totalnetloanlevelsincreasedby20percentyearonyearandtotalledR129millionattheendofFebruary2012.
Assessment of eligible CFisNoneoftheeligibleCFIsassessedduringthe2011/12financialyearmanagedtoaddresstheweaknessespointedoutbytheSupervisors
sufficientlyandhencetheywerenotregisteredasco-operativebanks.
Institutionalassessments1werejointlyconductedbytheCapacityBuildingandSupervisoryUnitsinrespectofthreenewlyidentified
eligibleCFIsthathadnotappliedforregistration,butmettheminimumregistrationcriteria(ofR1millionindepositsand200members).
TheCapacityBuildingUnitisnowprovidingthesethreeCFIswithdevelopmentalsupporttoassisttheminqualifyingforregistration
as co-operative banks.
TheweaknessespreventingeligibleapplicantCFIsfromregisteringasco-operativebankswerehighlightedintheSupervisors’2010/11
Combined Annual Report.Aswas thecaseduring thepreviousfinancial year, theprimarychallenges facedbyapplicantCFIswere
inadequatecapital,poorgovernanceandweakmanagementinformationsystems.Themostprominentweaknessesidentifiedduring
theassessmentsofeligibleCFIsarereflectedinFigure3.
6. Co-oPeRaTiVe BanKs suPeRVision RePoRT
1 InstitutionalassessmentsareconductedatCFIstodetermine,interalia,thereasonsfornon-compliancewithsection3oftheAct,thatis,tosubmitanapplicationtotheSupervisorforregistrationasco-operativebank.Pre-registrationassessmentsareconductedonCFIsthathavesubmittedallthedocumentsrequiredforregistration.
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
21
Figure 3: Most prevalent weaknesses of CFIs
Reasons preventing registration
16
14
12
10
8
6
4
2
0
No.ofo
ccurances
CapitalAdequacy Govern/Management Operations Legal MIS
TheCapacityBuildingUnitiscurrentlyworkingwithalleligibleapplicantCFIstoaddressidentifiedweaknesses.
launch of the Ditsobotla Co-operative Bank
TheDitsobotlaPrimarySavingsandCreditCo-operativeBankLtd,thefirstco-operativebanktoberegisteredinSouthAfrica,celebrated
itsofficiallaunchon5November2011.TheMECofEconomicDevelopmentandTourism,theHonourableTebogoModise,officiated
attheceremony,whichwasattendedbyco-operatorsfromaroundthecountryaswellasfromSwazilandandBotswana,themayorof
theareaandinvitedguestsfromtheCBDA,theSARBandtheSouthAfricanMicro-financeApexFund(samaf).
TheDitsobotlaCo-operativeBank,withabout913membersatthattime,registeredasaco-operativebankwiththeCDBASupervisor
in February 2011. The Ditsobotla Co-operative Bank originated when the union encouraged employees of the then Blue Circle Cement
Factorytobeginaneducationalfundtoassistemployees.Asthefundgrew,theysoughtalternativeinvestmentopportunitiesand
optedtoformtheItirelengSACCO.Soonafterthat,municipalemployees intheareaformedtheirownIkagengSACCO,whilstthe
AngloAlphacementfactoryemployeesformedtheAganangSACCO.
6. Co-oPeRaTiVe BanKs suPeRVision RePoRT
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
22
ThethreeSACCOsrealisedthatiftheyweretomakeameaningfulcontributiontoservicingallpeopleintheLichtenburgarea,even
thoseoutsidethemunicipalityorcement factories, thingswouldhavetobedonedifferentlyandtheybeganmergerdiscussions,
whichbroughtabouttheDitsobotlaSACCO,whichservicestheDitsobotladistrict.
The launch was a real celebration of the achievement of these financial co-operative pioneers in South Africa. Dancing and
entertainment at the launch epitomised the joy of their collective achievements to date.
Performance against targets
strategic goal 1: Register and supervise co-operative banks
Sub-goal 1: Applications are responded to within two weeks of receipt.
TheunithasinplaceacomprehensivesystemformonitoringalleligibleCFIsforregistrationasco-operativebanks.Allapplicationsare
respondedtowithintwoweeksofreceipt.Further,regularreportingonperformancestandardstotheCapacityBuildingUnitallows
theCBDAtokeeptrackofCFIsthataregettingclosetomeetingtheminimumregistrationrequirementsforco-operativebanks,i.e.R1
millionindepositsand200members.However,theonusremainsoneligibleCFIstosubmittheirapplicationsforregistrationinterms
of section 3 of the Co-operative Banks Act within two months of meeting the minimum criteria.
Duringtheyear,applicationsforregistrationasco-operativebankswerereceiveddirectlyfromtwoCFIsthatmettherequirements
ofsection3(a)oftheAct.Followingpre-registrationassessment,itwasnotedthatthetwoCFIsexperiencedsignificantoperational
andlegaldifficultiesthatdemandedattentionbeforeaco-operativebankinglicensecouldbegranted.TheSupervisorstillawaitsthe
successful resolution of the supervisory concerns raised during the assessments.
FiveinstitutionalassessmentswereconductedduringtheyearforCFIsthatwereeligiblebuthadnotappliedforregistrationinterms
ofSection3oftheAct.TheseassessmentswereheldjointlywiththeCapacityBuildingUnit,thesupervisoryintentbeingtoestablish
thereasonwhytheCFIsfailedtocomplywiththeregulatoryrequirement.Inallinstances,theCFIshadaweakcapitalposition.Inthe
interim,theseCFIsremainoperationalintermsofexemptionnoticeswhiletheCapacityBuildingUnitisworkingwiththemtoaddress
the weaknesses.
In addition to the five mentioned above, two other CFIs received formal letters from the Supervisor to apply for registration.
Simultaneously,theCapacityBuildingUnitinitiatedfinancialauditsofthetwoCFIstoverifytheirfigures.Theauditandsubsequent
assessment revealed that oneof theCFIswasbelow theminimumdeposit threshold,while theotherwasoperating anopaque
investmentstructuremasqueradingasaCFI.TheCapacityBuildingUnitisworkingwiththeCFIconcernedtoregulariseitsoperations.
Sub-Goal 2: No supervised co-operative bank falls below a CAMEL rating of 3
TheSupervisorshaveadoptedtheinternationallyrecognisedCapitalAdequacy,AssetQuality,Management,Earnings,andLiquidity
(CAMEL) rating system in theevaluationof theperformanceof co-operativebanks.The standardised rating system facilitates the
identificationof those institutionswhose financial, operational,managerial or complianceweaknesses require special supervisory
attentionand/orwarrantahigher-than-normaldegreeofsupervisoryconcern.Theratingsystem,onascalefrom1to5,isanimportant
tooltodeterminethefrequencyofon-sitesupervision.Asageneralrule,theexistingminimumfrequencyfortheconductofon-site
examinations based on the rating of co-operative banks is as follows:
6. Co-oPeRaTiVe BanKs suPeRVision RePoRT
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
23
Table 7: Rating and frequency of on-site examinations
safety and soundness rating* Frequency of on-site examinations
1 Once every 12 months
2 Once every 6 months
3 Once every 3 months
4 Once every 2 months
5 Once every month
* 1 = strong, 2 = satisfactory, 3 = fair, 4 = weak, 5 = critical
Accordingtothestandardprocess,theexaminersdiscusstheirfindingwiththemanagementoftheco-operativebankdirectlyafter
conductingtheexamination.AseparatemeetingisthenconductedbetweentheBoardoftheco-operativebankandtheSupervisor.
After the meeting the co-operative bank provides written response as to how it intends to attend to the identified shortcoming.
Duringtheyearunderreview,DitsobotlaCo-operativeBankwastheonlyco-operativebankregisteredbytheCBDA.Inlinewithits
previousCAMELrating,onefull-scopeandtwotargetedexaminationswereconducted.
Nosupervisedco-operativebankfellbelowaCAMELratingof3duringtheperiodunderreview.
Sub-Goal 3: Co-operative banks’ off-site returns are analysed and reported within three months to the Minister and Board.
TheSupervisionUnit, inconjunctionwith theSARB, ispilotinganelectronic returnsubmissionsystem for registeredco-operative
banks.The intention is that all financial information relating to co-operativebankswill be capturedona singleplatform, thereby
alleviatingthepotentialproblemsassociatedwith the futuremigrationofco-operativebanksbetweenSupervisorsandtoenable
macro prudential analysis of the co-operative banking sector.
The Supervisor has a statutory obligation to report to theMinister on theperformance of the co-operative banking sector on a
quarterlyandanannualbasis.Theunitdulycontributedtothe2010/11Combined Annual Report, which was submitted to the Minister
on31May2011,whilequarterlyfeedbackreportsontheperformanceandoperationsofco-operativebankswereprovidedforthe
periodsending31May2011,31August2011,30November2011and29February2012(tobesubmittedby30April2012).Allreports
were circulated to the board for noting.
strategic goal 2: Handling troubled co-operative banks.
Sub-Goal 1: Troubled CFIs dealt with within three months of identification of problem.
TheSupervisors,duringthisperiod,adopteda“problembanksresolutionframework”toco-operateinacrisisinordertoestablishand
facilitate the actions and the timely decision-making process of the authorities responsible for the management and resolution of the
crisis.TheframeworkwillbefinalisedoncetheCBDADepositInsuranceFundhasbeenestablished.
TheCBDAhasattemptedtobepro-activewithregardtoanumberoffailingCFIs.ThreeCFIswerefoundtobeinsolventfollowing
jointinvestigationsconductedbysamafandtheCBDASupervisor.TheCBDASupervisorrecommendedthattheseCFIsbeliquidated;
however,theprovincialDepartmentsofEconomicDevelopmentelectedtorehabilitatethem.TheCBDASupervisorwillliquidatethese
CFIs,shouldtheidentifiedinterventionsnottakeplaceinatimelymanner.Thiswillbedonetoprotectthedepositorsandmaintain
confidenceinthesector.SACCOLhasreportedtwofailingSACCOstotheSupervisorandtheyarecurrentlyreceivingattention.
6. Co-oPeRaTiVe BanKs suPeRVision RePoRT
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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strategic goal 3: Compliance with review of regulatory frameworks.
Sub-Goal 1: Ninety per cent compliance with Basel Principles for deposit-taking microfinance institutions
Duringtheyear,thejointSupervisorsconductedaninternalself-assessmentoncompliancetotheBaselCorePrinciplesforEffective
BankingSupervisionofDeposit-takingMicrofinanceActivities.Thedefinitionofmicrofinanceactivitiesincludesdeposit-takingfinancial
co-operatives.ThecoreprincipleshaveassistedtheSupervisors indevelopingacoherentapproachto regulatingandsupervising
financial co-operatives according to four main themes:
i) efficientallocationofsupervisoryresources;
ii) developmentofspecialisedknowledgewithinthesupervisoryteamtoevaluatetherisksofmicrofinanceactivitieseffectively,
iii) recogniseprovencontrolandmanagerialpracticesthatmaydifferfromconventionalretailbankingbutmaysuitthemicrofinance
businessbothinsmallandlargeinstitutions,specialisedornot,inmicrofinance;and
iv) achieveclarityintheregulationswithregardtomicrofinanceactivities,particularlythedefinitionofmicro-credit,andspecifywhich
activitiesarepermittedtodifferentinstitutionaltypes,whileretainingsomelevelofflexibilitytodealwithindividualcases.
ItwasfoundthatalthoughtheSupervisorswerefullycompliantwithmostoftheseprinciples,therewerestillsomecoreprincipleswith
whichtheywereonlyregardedaslargelycompliant.Inthisregard,attentionwillbepaidtoaddressingtheshortcomingsidentified
duringtheself-assessment.InlinewiththeBaselCommittee’srecommendations,themainfocuswillbeonissuingadditionalrules
that will provide legal backing to compel co-operative banks to follow prescribed procedures and to set minimum policy standards
relating to the risks to which they are exposed.
Theself-assessmentindicatedthattheSupervisorswereonlynon-compliantwithoneofthecoreprinciplesowingtothefactthat
co-operative banks are not defined as ‘accountable institutions’ in terms of Schedule 1 of the Financial Intelligence Centre Act,
SouthAfrica’santi-money-launderinglegislation.Thedecisionnottoincludeco-operativebanksasaccountableinstitutionscanbe
ascribedtothereducedriskofmember-basedinstitutions,giventheirnature,sizeandcomplexitycomparedtocommercialbanks.
Notwithstandinganylegalobligation,theknow-your-clientprincipleisenforcedbySupervisorsandco-operativebankshavebeen
instructedtoreportsuspicioustransactionswiththeassistanceoftheSupervisor,ifrequired.However,nosuspicioustransactionshave
been reported to date.
Sub-Goal 2: Accountability and submitting statutory reports on time
As reported in strategicobjective 1, Sub-goal 3 above, reportshavebeen submitted to theMinister of Finance. Furthermore the
Supervisory Unit held one ROACmeeting inOctober 2011. ROAC, primarilymeant to review and develop policy and legislation
applicabletoCFIsandco-operativebanks,isajointcommitteeoftheSARBSupervisor,theCBDASupervisor,theManagingDirectorof
theCBDA,theRegistrarofCo-operativesandrepresentativesoftheCBDABoardandNationalTreasury.
ToensureaconsistentapproachbybothSupervisors,ROACadoptedapolicyframeworkthatsetsoutthebroadframeworkforthe
Supervisorsinapplyingtheminimumprudentialrequirementsforregistrationpurposes,giventhenatureandsizeoftheapplicants.The
policydocumentalsosetsouttheactiontobetakenbytheSupervisorswithregardtonon-compliancewithregistrationrequirements.
up-to-date regulatory framework
TheCBDAandSARBarecognisantoftheproposedlegislativereviewscurrentlytakingplace.TheseincludeamendmentstotheCo-
operativeBanksActof2007,theCo-operativeActof2005andtheFinancialServicesLawsGeneralAmendmentBill,2012(Omnibus Bill).
AdetailedreviewoftheCo-operativeBanksActwasundertakeninordertodeterminethoseareasthatrequirerefinementoramendment
and the findings were published in the CombinedAnnualReportoftheSupervisorsoftheCo-operativeBanksDevelopmentAgency
andtheSouthAfricanReserveBank2011/12.
6. Co-oPeRaTiVe BanKs suPeRVision RePoRT
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Annual co-operation and co-ordination plan2
Intermsofsection52oftheAct,theSupervisorsreportedontheimplementationoftheCo-operationandCo-ordinationPlanreferred
to in section 42 of the Act.
Therehasbeengoodco-operationandco-ordinationbetweentheSupervisoryUnitsoftheCBDAandtheSARB.Someofthejoint
activities included:
· weeklyco-ordinationmeetings;
· meetings withstakeholders,interestedpartiesandregulatoryauthorities;
· commentsonrelevantfinancialregulationBills;
· issuanceofstatutoryreportsandguidancenotes;
· reviewofcompliancewithinternationalstandards;
· assessmentandevaluationofapplications;and
· co-ordination of manuals and administrative systems.
Sub-goal 3: Ensure self-regulatory organisations submit sector returns within three months
Duringtheyearthetwoself-regulatoryorganisations,–SACCOLandsamaf,agreedtorelinquishtheirroleofregulatingandsupervising
theactivitiesofFSCsandSACCOsinthenewfinancialyear.
InordertoensurethatCFIsremainregulatedandsupervised,theNationalTreasuryproposedthattheCBDAbedesignatedasthe
regulatoryandsupervisoryagencyforallCFIsthatdonotmeettheminimumrequirementstoregisterasco-operativebanks.The
Minister of Financewill repeal the exemption notices relating to FSCs, SACCOs and stokvels and replace themwith a proposed
exemptionnoticethatwilldesignatetheCBDAastheregulatoryagencyforCFIs.StokvelswillremaininthedomainoftheNational
StokvelsAssociationofSouthAfrica(NASASA).ThisexemptionwillassisttheCBDAtoperformitsfunctionofdevelopingfinancialco-
operatives as prescribed by section 55 of the Co-operative Banks Act.
Inanticipationofthismove, itwasagreedthattheregistrationandmonitoringofCFIswill fallundertheSupervisoryUnitwithinthe
CBDA.AnExemptionNoticePolicyframeworkhasbeentabledandapprovedbytheCBDABoardtogiveeffecttothisnewmandate.The
SupervisoryUnithasprepareddraftrulesonitsanticipatedregistrationandcompliancerequirementsfordiscussionwithallstakeholders.
Participation in national and international regulatory or supervisory forums
TheSupervisorsareexpectedtoparticipateintheactivitiesofinternationalbodiesandauthoritieswhosemainpurposeistodevelop,
advance and promote the sustainability of co-operative banks and to co-operate with international bodies and authorities in respect of
matters relating to co-operative banks.
TheCBDASupervisoryUnitparticipatedinthefollowing:
· WOCCUInternationalCreditUnionRegulators’Network(ICURN)heldinWashingtonD.C.,UnitedStates,from8to10June2011.
· FinancialCo-operativesIndabaheldinCapeTown,from19to21October2011.
· SACCAcongressheldinAccra,Ghana,from2to5October2011.
· ACCOSCAThirdSACCOLeadershipForum,heldinGaborone,Botswana,from21to23March2012.
6. Co-oPeRaTiVe BanKs suPeRVision RePoRT
2 Foradetailed reporton the jointactivitiesof theSARBandCBDAcapacitybuildingunits, refer to theCombinedAnnualReportof theSupervisorsof theCo-operativesBanksDevelopmentAgencyandtheSouthAfricanReserveBank2011/12place.
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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The Co-operative Financial institutions indaba 19 – 20 October 2011
TheCBDAorganisedandhostedanindabaforCFIsinCapeTownfrom19to21October2011.Thethemeoftheindabawas,“Creating
a strong and vibrant co-operative banking sector that broadens access to and participation in diversified financial services towards
economicandsocialwell-being”.Theconferencewasattendedbymorethan150representativesfromCFIsinSouthAfricaaswellas
otherkeystakeholdersinthesector,notablyrepresentativesfromtheDepartmentofEconomicDevelopment,localuniversitiesand
samaf.AlsoinattendancewereinternationalguestspeakersfromtheUSA,KenyaandMalawi.
TheHonourableMinisterofFinance,MrPravinGordhan,deliveredthewelcomingaddressviavideo.Heconfirmedthegovernment’s
commitmenttoensuringthateverySouthAfricanhasaccesstoaffordablefinancialproductsandservices.TheHonourableDeputy
MinisterofFinance,MrNhlanhlaNene,deliveredthekeynoteaddressandchallengedallthoseinvolvedwiththefinancialco-operative
sector to change their mind-set in order to make meaningful contributions to communities. He implored members to build a more
unified,inclusive,vibrantandself-sustainablemovement.
The indabaprovidedagreatopportunity for theCBDAto launchanAnnual IncentiveProgrammeforbestperformingCFIsbased
ontheirperformanceagainstthestandardssetforthesector.SixCFIs,whichincludedthetworegisteredco-operativebanks,were
awarded trophies for outstanding performance. The categories in which prizes were awarded were as follows:
a) BestPerformingCFIbasedonPrudentialRequirementsandRatioAnalysis
b) Highest Active Membership Growth
c) HighestSavingsGrowth.
Oneof the keyoutcomesof the conferencewas thedecisionby SACCOL, theonly surviving representativebody for SACCOs, to
dissolveandtoallowtheformationofanewinclusiverepresentativebody.Thenewbodyintendstoestablishitselfasthemovements’
representativeandsupportorganisationofallCFIsincludingSACCOs,FSCsandco-operativebanks.Theindabawillnowbeanannual
eventtobeheldinOctobertocoincidewithInternationalCreditUnionDayonthethirdThursdayofOctobereveryyear.
6. Co-oPeRaTiVe BanKs suPeRVision RePoRT
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launch of the Financial Co-operatives Retail Bond
TheNationalTreasury,throughitsAssetandLiabilityManagementdivision,createdanewinvestmentproduct,namelytheFinancial
Co-operativesRetailSavingsBond.ThisproductwaslaunchedduringtheCo-operativeFinancialInstitutionsIndaba,heldinCapeTown
from19to21October2011.Themainobjectiveistoprovideasecure,affordablesavingsvehicleforFSCs,SACCOsandco-operative
banks.ItwillalsoservetodiversifysavingsinstrumentsavailabletoCFIs.
ThebondsoffercompetitiveinterestratesandwillprovideCFIswithasafeinstrumentinwhichtoinvest,withnocharges.Additional
featurestakeintoaccounttheuniquenessofthefinancialco-operativemodel,throughtop-upsandearlywithdrawals.
6. Co-oPeRaTiVe BanKs suPeRVision RePoRT
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7. CaPaCiTY BuildinG and inFoRmaTion RePoRT
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7. CaPaCiTY BuildinG and inFoRmaTion RePoRT
introductionCapacitybuildingprogrammesduringtheyear2011/12continuedestablishinginitiativesthatsupport,promoteanddevelopCFIs
intobecomingsafeandreliableco-operativebanks;acceleratingperformancetowardsco-operativebankregistrationandpromoting
andsupportingfledglingCFIs.Toachievethesekeystrategic thrusts, theCapacityBuildingand InformationUnitset fourstrategic
objectivesforthereportingyear,vizto:
1. improvedatacollection,managementanddisseminationintheCFIsector;
2. assistsecondaryintermediaryco-operativesandotherCFIrepresentativebodiestoimprovetheirleadership,managementand
operationalcapability;
3. facilitatethedevelopmentoflearningprogrammesandimplementtrainingarrangementsthroughexistinguniversities,colleges
andsupportorganisations;and
4. improvecompliancerateswiththeexistingrules,regulationsandstandards.
Inaddition to theseobjectives, theunitwasalso involvedwith leveragingpartnerships toachievesynergyandperformance.The
unitcollaboratedcloselywiththetwoself-regulatorybodiesofthefinancialco-operativesector,SACCOLandsamaf,aswellasthe
DepartmentsofEconomicDevelopmentinalltheprovinces,DepartmentofTransportinKwaZulu-Natal,DepartmentofAgriculture,
ForestryandFisheriesandtheBANKSETA.
2011/12 objectives, indicators and performance against targets
Objective 1: improve data collection, management and dissemination in the CFi sector
AccordingtotheCIPCdatabasethereare163registeredCFIs(112FSCsand51SACCOs).SomeoftheseCFIsarenotfunctionalandnot
affiliatedtoorworkingwitheitherSACCOLorsamaf.
Themajorityofthosethatarefunctionalarenotproducingconventionalfinancialstatements,whichisacompliancerequirement.
ResearchconductedbyDeloitteandTouché in2003and2006andconfirmedbytheCBDAin2010notedthatmanyCFIsarenot
reporting on their financial performance through the production of financial statements. The research established that:
1. FSCsdonotproduceconventionalbalancesheetsandincomestatementsbuttendtoreportforgrant-fundingpurposes;
2. SACCOsarenotconsistentinreportingtoSACCOL;
3. thereisadearthofexperienceandqualificationsinbasicaccountingskills;and
4. wherethereareauditedfinancialreports,theauditorsdonotunderstandthefinancialco-operativemodel.
In2010/11,theCapacityBuildingandInformationUnitsdevelopedamanualaccountingsystem,whichincludedanExcelversionfor
thoseCFIsthathavecomputerstoassistCFIstostartproducingfinancialstatements.However,mostCFIswerebehindinupdatingtheir
financialtransactionsandthis,coupledwithlackofaccountingknowledge,madeitdifficultforthemajorityofCFIstoproducefinancial
reports.Theunitthereforeassisted16CFIstobringtheirbooksofaccountsuptodateandproducefinancialstatements.Inaddition,
theunitconductedin-servicetrainingsothattheCFIscanproducefinancialreportsinfuture.Theunitcollectedfinancialstatements
fromanother15CFIsthatproducedthereportsontheirown,makingatotalof31accuratefinancialreports.
Aftercollectingthefinancialreports,theunitconductedratioanalysisusingafinancialperformancemonitoringtoolcalledPEARLS.
All31financialreportswereanalysedandreportswithrecommendationswereissuedto19CFIsthatareeligibleforregistrationasco-
operative banks and three that are just below the threshold for registration.
7. CaPaCiTY BuildinG and inFoRmaTion RePoRT
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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Theunitalsocompiledfinancialinformationcollectedfromtheself-regulatoryorganisations–SACCOLandsamaf-andtogetherwith
thefinancialstatementscollectedfromtheCFIs,producedfourquarterlyfinancialgrowthtrendanalysesforthesector.
SamafandSACCOLinformedtheCBDAthat15CFIshadbeenclosedbecauseofnon-performance,reducingthereportednumberof
CFIsfrom121in2010/11to106in2011/12.Thetablebelowshowsthegrowthtrendforthesector.
Table 8: The growth and financial performance of CFIs (including co-operative banks)
2010/11 2011/12 gROWTH PeRCenTAge
No.ofCFIs 121 106 -12.4%
Membership 59,394 53,240 -10.4%
Savings R175,265,000 R196,230,000 12.0%
Loans R116,577,000 R132,227,000 13.4%
Assets R195,213,000 R217,506,000 11.4%
sector classification by assets
CFIs Assets No.ofCFIs TotalSectorAssets(%)
Very large >R20million 3 61.0%
Large R1million–R20million 18 32%
Small R150,000–R1million 13 5%
Very small <R150,000 72 2.0%
106 100%
Table 9: Status of co-operative banks and CFIs eligible for registration as co-operative banks
2010/11 2011/12 growth %
No.ofCFIs 18 21(Note1) 16.7%
Membership 28,034 31,481 12.3%
Savings R160,996,000 R187,949,000 16.7%
Loans R107,261,160 R128,733,822 20%
Assets R175,897,017 R201,823,000 14.7%
Note 1: A detailed breakdown per CFI is provided in Table 6 above
RespondingtotheinadequaciesoffinancialstatementsfromtheCFIsduringtheyear,theunitdevelopedafinancialreportingtool,
whichwillprovideguidancetoaccountingofficersandauditorsoftheCFIs.TheunitiscollaboratingwithSAICA,whichisreviewing
the tool to ensure compliance with all accounting standards.
TheunitalsodevelopedaframeworkforauditpreparationtoassistCFImanagersandmanagingdirectorsofco-operativebanksto
prepare for audits. The objectives of the framework are to:
a) serveasahandbookforguidingCFIsinpreparingforaudit;
b) equipCFIswithskillsnecessarytogetaclean(unqualified)audit;and
c) serveasareferencebooktothosepreparingtheauditfilesoftheCFIs.
7. CaPaCiTY BuildinG and inFoRmaTion RePoRT
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Objective 2: Assist secondary intermediary co-operatives and other CFi representative bodies to improve their leadership, management and operational capability
Theonlysurvivingself-regulatorybody,SACCOL,continuedtofaceoperationalandfinancialchallenges.However,theCBDAassisted
SACCOLinitsattempttoestablishanationalassociationthatwillrepresentallCFIs.
The national associationwill have representatives andprovincial structures for CFIs in all nine provinces.TheCBDA supports the
initiativeandencouragesprovincialgovernmentdepartmentsthatarepromotingthedevelopmentofCFIstosupporttheinitiative
too.TheresolutiontoestablishtheNationalAssociationwasmadeduringtheCFIIndabainOctober2011.
Through the benchmarking workshops conducted in 2010/11, the unit developed performance standards for the sector and a
performanceassessmenttoolformonitoringtheperformanceofCFIsagainsttheseperformancestandards.Theunitusedthistoolto
conductperformanceassessmentof18CFIs.Thepurposeoftheassessmentswastoestablish:
· acomprehensivepictureofhowCFIsaremovingtowardsachievingtheirperformancegoals;
· amechanismforrespondingtoissuesthatmayrequireremedialaction;
· thepotentialoftheCFIstoimprovetheirperformanceagainstthestandards;and
· theperformanceoftheCFIsinsixkeystrategicareasofgrowth,i.e.management,financialmanagement,policiesandprocedures,
governance,marketingandproductsandco-operativeprinciples.
RegularevaluationoftheperformanceoftheCFIsisexpectedtopromotegrowthandsustainability.TheCFIsarelikelytoimprove
compliancebyproducingtimelymanagementreports.Intermsofregistration,allqualifyingCFIswillstrivetoimproveperformance
againstthestandardsinordertosatisfytherequirementstoberegisteredasco-operativebanks.Theassessmentsalsohelptoidentify
non-performingCFIsandenabletheCBDAtoputinplacesolutionstostopmemberslosingtheirdeposits.
Objective 3: Facilitate the development of learning programmes and implement training arrangements through existing universities, colleges and support organisations
ResearchconductedbytheCBDAonmanagementpracticesamongCFIsshowedthatmostCFIstaffhave insufficientknowledge
aboutthelegislativeframeworkthatgovernsCFIs,lackunderstandingofprudentialrequirements,humanresourcemanagement,risk
management,accountingandfinancialmanagement,aswellasdelinquencymanagement.ThemanagersofmostCFIsareunable
todirectandcontroltheirCFIstowardsoperationalandfinancialsustainability.TheCBDAthereforefacilitatedthedevelopmentofa
financial co-operatives sector curriculum by the University of Pretoria in an attempt to address the skills gaps in the sector.
The certificate course in CFIManagement is directed at CFImanagers, especially thosemanagingCFIs eligible to register as co-
operativesbanks.Afterattendingthecourse,themanagersareexpectedtobeabletomanagelendingpractices;identify,avertand/or
mitigaterisks;producetherequiredmonthlyfinancialreportsandcomplywiththeminimumprudentialstandards,thusdirectingthe
CFIstooperationalandfinancialsustainabilityandregistrationasco-operativebanks.TheBANKSETAprovidedfundingforthetuition
of the 20 participants.
Furthermore,theunitobtainedadditionalfundingfromtheBANKSETAforatrainingprogrammeongovernance,whichwasattended
by 24 participants.
7. CaPaCiTY BuildinG and inFoRmaTion RePoRT
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Certificate course in Co-operative Financial institution Management
The CBDA launched a certificate course in Co-operative Financial Institution Management at the University of Pretoria. The
universitydevelopedthematerialswiththeaimofprovidingmanagersofCFIswiththoroughknowledgeandunderstandingof
effectivemanagementtechniquesforfinancialco-operativesandofthelegislativeandcompliancerequirementsforregistration
as co-operative banks.
The course includes the following learning outcomes:
• Understandingthelegislativeframeworkgoverningfinancialco-operativesandco-operativebanks;
• Understandingprudentialrequirements;
• Developingskillsineffectivemanagementofhumanresources;
• Developingskillsinthecompilationoffinancialandmanagementaccounts;
• Understandinghowtomeasureandmanageloandelinquencyandmanagelendingpracticesefficiently;
• Understandinghowtomanagetheoverallrisksfacingaco-operativefinancialinstitution;and
• Knowinghowtoguideaco-operativefinancialinstitutiontowardsinstitutionalandfinancialsustainability.
Theinauguralcoursewasrunwithtwentyparticipants.Seventeenparticipantspassed.Sixtypercentoftheparticipantswereallocated
thehighestmarkpossibleforsatisfyingtherequirementsoftheprogramme.Themaincriticismofthecoursewastheshortageoftime
to cover the range of topics.
Objective 4: improve compliance rates with the existing rules, regulations and standards
OneofthekeyfocusareasoftheunithasbeensupportfornineteenCFIseligibletoregisterasco-operativebanks.Twelveexperience
capitaladequacyconstraints,whiletheothersfaceavarietyofchallenges,includinginabilitytoprovideauditedfinancialstatements
and lack of strategic plans. The unit assisted seven of them to produce financial statements and seven to draw up strategic plans.
TheunitalsoassistedsomeCFIstodeveloppolicies,includingloansandsavingspoliciesandprocedures.
7. CaPaCiTY BuildinG and inFoRmaTion RePoRT
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8. sTaTemenT oF ResPonsiBiliTY
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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TheCBDABoardisresponsibleforpreparingandpresentingfinancialstatementsthatareafairrepresentationofthefinancialposition,
performanceandcashflowsfortheperiod.TheCBDABoardwouldliketodrawattentiontothefollowingwithregardtotheannual
financial statements:
TheCBDAhadasurplusofR1095000forthefinancialyear2011/12.Aftertakingintoconsiderationaccrualsandprovisions,thenet
surplusisR197,000.TheBoardhasapprovedtherequestforexcessfundstoberolledoverinthe2012/13financialyeartobeusedto
fundastabilisationfundforthesector.FinalapprovalfromNationalTreasuryispending.
TheCBDAmaintainedadequateaccountingrecordsandaneffectivesystemofinternalcontrolsandriskmanagementandcomplied,
inallmaterialrespects,withapplicablelawsandregulations.
Theannualfinancialstatements,presentedfrompages38to69,arepreparedusingthestandardsofGenerallyRecognisedAccounting
Principles (GRAP), in themannerprescribedby thePFMA.Appropriateaccountingpolicies, supportedby reasonableandprudent
judgementsandestimates,havebeenusedconsistently.
TheCBDAisfinanciallydependentonatransferpaymentfromtheNationalTreasury.Onthebasisthatthetransferpaymenthasbeen
listedintheEstimatesofNationalExpenditure,theBoardbelievesthattheCBDAwillcontinuetobeagoingconcernintheyearahead.
Forthisreason,theannualfinancialstatementsarepreparedonagoingconcernbasis.
TheexternalauditoroftheCBDAfortheyearunderreviewwastheAuditorGeneralSA.TheAuditorGeneralisresponsibleforreporting
onwhetherthefinancialstatementsarefairlypresented.ThereportoftheAuditorGeneralispresentedonpage39.
The annual financial statements for the year ended 31 March 2012 were approved by the Board of Directors on 31 May 2012 by round
robin and were signed on its behalf by:
SifisoNdwandwe
Chairman of the Board
Co-operative Banks Development Agency
8. sTaTemenT oF ResPonsiBiliTY
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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9. RePoRT oF THe audiT CommiTTee
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36
9. RePoRT oF THe audiT CommiTTee
Audit Committee Members and attendance:The Audit Committee consists of themembers listed hereunder and hasmet as reflects below, in linewith its approved terms
of reference.
Table 10: Audit Committee Meetings 2011/12
name of member number of meetings attended
Mr Vuyo Jack 4 of 4
Ms Mamoroke Lehobye 3 of 4
Ms Lesibana Fosu 1 of 4
Mr Joe Lesejane 1 of 4
MrZachLeRoux 4 of 4
Ms Berenice Francis 4 of 4
The Audit Committee responsibilityThe Audit Committee reports that it has complied with its responsibilities arising from section 51(1)(ii) of the PFMA and Treasury
Regulation3.1.TheAuditCommitteealso reports that ithasadoptedappropriate formal termsof referenceas incorporated in its
audit committeecharter.TheAuditCommitteehas regulated its affairs in compliancewith this charter andhasdischargedall its
responsibilities as contained therein.
The effectiveness of internal controlsTheAuditCommittee isof theopinion,basedon the informationandexplanationsgivenbymanagement, the internal auditors,
anddiscussionswith the independentexternalauditors (Auditor-General)on the resultsof itsaudits, that the internalaccounting
controlsareoperatingtoensurethatthefinancialrecordsmayberelieduponforpreparingtheannualfinancialstatements,andthat
accountabilityforassetsandliabilitieshasbeenmaintained.FromthevariousreportsoftheInternalAuditors,theAuditReporton
theAnnualFinancialStatementsandthemanagementletteroftheAuditor-General,itwasnotedthatnosignificantormaterialnon-
compliance with prescribed policies and procedures have been reported. We can report that the system of internal control for the
periodunderreviewwaseffective.However,attentionisdrawntothefollowingareasofconcern:
• Asdisclosedinnote53tothefinancialstatements,theCo-operativeBanksDevelopmentAgencyincurredirregularexpenditureof
R596000.
• Intermsofthesection25oftheCo-operativeBanksActofSouthAfrica2007,theagencymustestablishandmanageafundtobe
knownastheCo-operativeBanksDepositInsuranceFund.TheCo-operativeBanksDevelopmentAgencydidnothaveaDeposit
insurancefundasrequiredbytheCo-operativeBanksAct.
• TheAuditCommitteenotesthelackofmeasurabletargetsintheperformanceagainstpredeterminedobjectivesreportasreported
by the Auditor-General. We see this as a weakness in controlling performance and ensuring accountability and discipline.
• InternalAuditdidnotevaluatecompliancewithlawsandregulations,asrequiredbyTreasuryRegulation27.2.10(e).
Other than these matters, nothing significant has come to the attention of the Audit Committee to indicate that any material
breakdowninthefunctioningofthesecontrols,proceduresandsystemshasoccurredduringtheyearunderreview.
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
37
9. RePoRT oF THe audiT CommiTTee
The effectiveness of internal AuditTheAuditCommitteereviewedtheeffectivenessofinternalaudit.Notwithstandingthis,theAuditCommitteereceivedawiderange
of internal audit reports and feels comfortable that the areas covered provided us with good insight into the internal controls of the
agency. Areas that are weak and needs improvement have been discussed with management and actions plans have been agreed. The
Audit Committee will continue to oversee and monitor the disposition of these findings.
The risk areas of the institution’s operationsRiskmanagement isstill relativelynewwithintheCo-operativeBanksDevelopmentAgency.Howeverthere isaRiskManagement
Committee that meets on a regular basis and shares its reports with the Audit Committee. A risk register is kept and updated
continuously to ensure that all the major risks facing the agency are recorded.
Accounting and auditing concerns identified as a result of internal and external auditsFromthevariousreportsoftheInternalAuditors,theAuditReportontheAnnualFinancialStatementsandthemanagementletterof
theAuditor-General,itwasnotedthatnosignificantormaterialaccountingorauditingconcernswereidentified.
The institution’s compliance with legal and regulatory provisionsFromtheAuditReportontheAnnualFinancialStatementsandthemanagementletteroftheAuditor-General,itwasnotedthatno
significant or material non-compliance with legal and regulatory provisions have been reported other than reported in the Auditor-
General’sreportbelow.
evaluation of annual financial statementsThe Audit Committee has evaluated the annual financial statements of the Co-operative Banks Development Agency for the year
ended31March2012and,basedontheinformationprovidedtotheAuditCommittee,concursandacceptstheAuditor-General’s
conclusionsontheannualfinancialstatements,andwouldrecommendtotheboardthattheauditedannualfinancialstatementsbe
accepted and read together with the report of the Auditor-General.
Vuyo Jack
Chairperson of the Audit Committee
06 August 2012
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38
10. RePoRT oF THe audiToR-GeneRal To PaRliamenT on THe Co-oPeRaTiVe BanKs
deVeloPmenT aGenCY
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39
10. RePoRT oF THe audiToR-GeneRal To PaRliamenT on THe Co-oPeRaTiVe BanKs
deVeloPmenT aGenCY
RePORT On THe FinAnCiAl sTATeMenTs
introduction
1. Ihaveauditedthefinancialstatementsof theCo-operativeBanksDevelopmentAgencysetoutonpages45to69 ,
whichcomprisethestatementoffinancialpositionasat31March2012,andthestatementoffinancialperformance,
statementofchangesinnetassetsandthecashflowstatementfortheyearthenended,andthenotes,comprisinga
summary of significant accounting policies and other explanatory information.
Accounting authority’s responsibility for the financial statements
2. The accounting authority is responsible for the preparation and fair presentation of these financial statements in
accordancewithSouthAfricanStandardsofGenerallyRecognisedAccountingPractice(SAStandardofGRAP)andthe
requirementsof thePublicFinanceManagementActofSouthAfrica,1999 (ActNo.1of1999) (PFMA),and for such
internal control as the accounting authority determines is necessary to enable the preparation of financial statements
thatarefreefrommaterialmisstatement,whetherduetofraudorerror.
Auditor-general’s responsibility
3. My responsibility is to express anopinionon these financial statementsbasedonmyaudit. I conductedmyaudit
inaccordancewiththePublicAuditActofSouthAfrica,2004(ActNo.25of2004)(PAA),theGeneral Notice issued in
termsthereofandInternationalStandardsonAuditing.ThosestandardsrequirethatIcomplywithethicalrequirements
and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from
material misstatement.
4. 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
materialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,the
auditorconsidersinternalcontrolrelevanttotheentity’spreparationandfairpresentationofthefinancialstatements
inordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressingan
opinionontheeffectivenessoftheentity’s internalcontrol.Anauditalso includesevaluatingtheappropriatenessof
accountingpoliciesusedandthereasonablenessofaccountingestimatesmadebymanagement,aswellasevaluating
the overall presentation of the financial statements.
5. IbelievethattheauditevidenceIhaveobtainedissufficientandappropriatetoprovideabasisformyauditopinion.
Opinion
6. Inmyopinion,thefinancialstatementspresentfairly,inallmaterialrespects,thefinancialpositionoftheCo-operative
BanksDevelopmentAgencyasat31March2012,anditsfinancialperformanceandcashflowsfortheyearthenended
inaccordancewithSouthAfricanStandardsofGRAPandtherequirementsofthePublicFinanceManagementActof
SouthAfrica,1999(ActNo.1of1999)PFMA.
10. RePoRT oF THe audiToR-GeneRal To PaRliamenT on THe Co-oPeRaTiVe BanKs deVeloPmenT aGenCY
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10. RePoRT oF THe audiToR-GeneRal To PaRliamenT on THe Co-oPeRaTiVe BanKs deVeloPmenT aGenCY
emphasis of matters
7. Idrawattentiontothematterbelow.Myopinionisnotmodifiedinrespectofthismatter
irregular expenditure
8. Asdisclosedinnote26.3tothefinancialstatements,theCo-operativeBanksDevelopmentAgencyincurredirregular
expenditureofR596000.
RePORT On OTHeR legAl AnD RegulATORY ReQuiReMenTs
9. InaccordancewiththePAAandtheGeneral Notice issuedintermsthereof, Ireportthefollowingfindingsrelevantto
performanceagainstpredeterminedobjectives,compliancewithlawsandregulationsandinternalcontrol,butnotfor
the purpose of expressing an opinion.
Predetermined objectives
10. I performed procedures to obtain evidence about the usefulness and reliability of the information in the annual
performance plan as set out on pages 13 to 17 of the annual report.
11. The reported performance against predetermined objectives was evaluated against the overall criteria of usefulness
and reliability. The usefulness of information in the annual performance report relates to whether it is presented
inaccordancewith theNationalTreasuryannual reportingprinciplesandwhether the reportedperformance is
consistent with the planned objectives. The usefulness of information further relates to whether indicators and
targetsaremeasurable(i.e.welldefined,verifiable,specific,measurableandtimebound)andrelevantasrequired
by the National Treasury Framework for managing programme performance information.
Thereliabilityoftheinformationinrespectoftheselectedprogrammesisassessedtodeterminewhetheritadequately
reflectsthefacts(i.e.whetheritisvalid,accurateandcomplete).
12. The material findings are as follows: concerning the usefulness of the information.
usefulness of information Consistency
13.Treasury Regulation 30.1.3(g) requires that the strategic plan should form the basis for the annual report, therefore
requiringtheconsistencyofobjectives,indicatorsandtargetsbetweenplanningandreportingdocuments.Atotalof
45%ofthereportedtargetsarenotconsistentwiththetargetsaspertheapprovedannualperformanceplan.Thisisdue
to the lack of a policy on reporting of predetermined objectives and the lack of a review processes in the Co-operative
Banks Development Agency.
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10. RePoRT oF THe audiToR-GeneRal To PaRliamenT on THe Co-oPeRaTiVe BanKs deVeloPmenT aGenCY
Measurability
14.TheNationalTreasuryFrameworkformanagingprogrammeperformanceinformation(FMPPI)requiresthatperformance
targetsbespecificinclearlyidentifyingthenatureandrequiredlevelofperformance.
Atotalof49%ofthetargetsrelevanttoCorporateServices,SupervisionandCapacitybuildingprogrammeswerenot
specificinclearlyidentifyingthenatureandtherequiredlevelofperformance.Thiswasduetothefactthatmanagement
wasnotawareoftherequirementsoftheFMPPI.
15.TheNationalTreasuryFramework formanagingprogrammeperformance information (FMPPI) requires that thetime
periodordeadlinefordeliverybespecified.Atotalof50%ofthetargetsrelevanttoCorporateServices,Supervisionand
Capacity building programmes were not time bound in specifying a time period or deadline for delivery. This was due to
thefactthatmanagementwasnotawareoftherequirementsoftheFMPPI.
Additional matter
16. Idrawattentiontothefollowingmatterbelow.
Achievement of planned targets
17.Ofthetotalnumberofplannedtargets,only29wereachievedduringtheyearunderreview.Thisrepresents21%of
total planned targets that were not achieved during the year under review. This was as a result of the institution not
consideringrelevantsystemsandevidentialrequirementsduringtheannualstrategicplanningprocess.
Compliance with laws and regulations
18.Iperformedprocedurestoobtainevidencethattheentityhascompliedwithapplicablelawsandregulationsregarding
financialmatters, financialmanagementandother relatedmatters.Myfindingsonmaterialnon-compliancewith
specific matters in key applicable laws and regulations as set out in the General Notice issued in terms of the PAA are
as follows:
Procurement and contract management
19.Thepreferencepointsystemwasnotappliedintheprocurementofonecompetitivebidastheexpenditureincurred
wasincontraventionofTreasuryRegulation16A.6.3(b)relatingtosupplychainmanagement.Theexpenditureincurred
wasincontraventionofthePPPFActsection2(a).Theaccountingofficerdidnotexerciseoversightresponsibilityover
reporting and compliance with laws and regulations and internal control.
A recommendation to the accounting authority and the final award of a contract was not made by an adjudication
committeeconstitutedinaccordancewiththeSCMpolicy.ThemanagingdirectordidnotdevelopanSCMsystemthat
provided for the approval of bid evaluation and adjudication committee recommendations in procurement processes.
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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internal Audit
20. Internalauditdidnotevaluatecompliancewithlawsandregulations,asrequiredbyTreasuryRegulation27.2.10(e).
21. Internal audit did not evaluate the reliability and usefulness of the operational information as required byTreasury
Regulation3.2.11(b).
strategic planning and performance management
22. Intermsofsection30.1.1TreasuryRegulationsstatesthat:“TheaccountingauthorityforapublicentitylistedinSchedule
3A or 3C must annually submit a proposed strategic plan for approval by the relevant executive authority. Co-operative
BanksDevelopmentAgency’sStrategicPlanfor2011/12wasnotapprovedbytheMinisterofFinance.
Annual financial statements
23. The financial statements submitted for audit did not comply with section 55(1) (b) of the PFMA and material misstatements
were identified during the audit. Material misstatements of income and expenditure and disclosure items identified by
theauditorsweresubsequentlycorrected,resultinginthefinancialstatementsreceivinganunqualifiedopinion.
Co-operative Banks Act of south Africa, 2007
24. Intermsofthesection25oftheCo-operativeBanksActtheagencymustestablishandmanageafundtobeknown
astheCo-operativeBanksDepositInsuranceFund.Co-operativeBanksDevelopmentAgencydidnothaveaDeposit
InsuranceFundasrequiredbytheCo-operativeBanksAct.
internal control
25. Iconsideredinternalcontrolrelevanttomyauditofthefinancialstatements,annualperformancereportandcompliance
with laws and regulations. The matters reported below under the fundamentals of internal control are limited to the
significantdeficienciesthatresultedinthebasisforqualifiedopinionontheannualperformancereport.Howeverthere
werenosignificantdeficienciesininternalcontrolsthatresultedinaqualificationoftheauditor’sopiniononthefinancial
statements and the findings on compliance with laws and regulations included in this report.
leadership
Oversight responsibility regarding reporting and compliance
26.Theaccountingauthoritydidnotexerciseadequateoversightoverthefinancialstatements,reportingonpredetermined
objectivesandcompliancewithlawsandregulations.Thishasresultedinmaterialadjustmentstothefinancialstatements,
findings on the predetermined objectives and non-compliance with laws and regulations.
10. RePoRT oF THe audiToR-GeneRal To PaRliamenT on THe Co-oPeRaTiVe BanKs deVeloPmenT aGenCY
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Financial and performance management
Regular, accurate and complete financial and performance reports
27. Management did not follow policies and procedures to complete the reporting performance report as a result a
numerousinstancesofnon-compliancewithTreasuryRegulationswereidentified.
Review and monitor compliance with laws and regulations
28. Management did not follow policies and procedures to review internal controls of the Agency regarding compliance
with laws and regulations and as a result a number of recurring non-compliances were identified.
Pretoria
31 July 2012
10. RePoRT oF THe audiToR-GeneRal To PaRliamenT on THe Co-oPeRaTiVe BanKs deVeloPmenT aGenCY
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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11. FinanCial sTaTemenTs For the year ended 31 March 2012
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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11. FinanCial sTaTemenTs For the year ended 31 March 2012
statement of Financial Position 2012 2011
notes R’000 R’000
Assets
non-current assets
Property,plantandequipment-SPO 2 70 100
Intangibleassets 3 3 6
73 106
Current assets
Cashandcashequivalents-SPO 4 1,870 31
Trade and other receivables –Cu 5 44 19
1,914 50
TOTAL ASSETS 1,987 156
liabilities - -
non-current liabilities - -
Current liabilities
Trade and other payables –SPO 6 822 804
Provisions-CurrentSPO 7 557 133
DeferredIncome 8 294 -
1,673 937
TOTAl liABiliTies 1,673 937
net assets
Accumulated surplus/(deficit) -SPO 314 (781)
314 (781)
–SPO
TOTAl neT AsseTs 314 (781)
TOTAl neT AsseTs AnD liABiliTies 1,987 156
11. FinanCial sTaTemenTs For the year ended 31 March 2012
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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11. FinanCial sTaTemenTs For the year ended 31 March 2012
statement of Financial Performance 2012 2011
notes R’000 R’000
Revenue
Non-exchange revenue 9,516 8,200
Transfers and subsidies–SPR 9 9,310 8,200
GrantIncome 8 206 -
Exchange revenue 162 78
Saleofgoodsandrenderingofservices–S 10 9 35
Interest,dividendsandrentonland-SPR 11 153 43
9,678 8,278
expenditure
Goods and services–SPR 12 (4,272) (4,677)
Compensation of employees –SPR 13 (4,042) (3,947)
Depreciation/amortisation and impairment– (63) (52)
GrantExpenditure 8 (206) -
(8,583) (8,676)
suRPlus/DeFiCiT FOR THe YeAR 1,095 (398)
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11. FinanCial sTaTemenTs For the year ended 31 March 2012
statement of Changes in net assets
Accumulated surplus/deficit
Total
notes R’000 R’000
Balance at 1 April 2010 as originally stated (383) (383)
As restated (383) (383)
Surplus/(deficit)fortheyear (398) (398)
Balance at 1 April 2011 as originally stated (781) (781)
As restated (781) (781)
Surplus/(deficit)fortheyear 1,095 1,095
Balance on 31 March 2012 314 314
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11. FinanCial sTaTemenTs For the year ended 31 March 2012
Cash Flow statement 2012 2011
notes R’000 R’000
Cash flow from operating activities
Cash receipts 9,973 8,278
Transfers and subsidies 9,310 8,200
Saleofgoodsandrenderingofservices 9 -
Interest,dividendsandrentonland 103 43
GrantRevenue 500 -
Other operating revenue 51 35
Cash payments (8,104) (8,219)
Compensation of employees (3,474) (3,814)
Goods and services (4,630) (4,405)
net cash generated from operating activities 15 1,869 59
Cash flow from investing activities
Purchase of assets (30) (28)
net cash used in investing activities (30) (28)
net (decrease)/increase in cash, cash equivalents and bank overdrafts 1,839 31
Cash,cashequivalentsandbankoverdraftsatbeginningoftheyear 31 -
Cash, cash equivalents and bank overdrafts at end of the year 1,870 31
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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11. FinanCial sTaTemenTs For the year ended 31 March 2012
notes to the annual financial statements
1. Accounting Policies
1.1 Basis of preparation
Theannualfinancialstatementshavebeenpreparedusingtheaccrualbasisofaccounting,intermsofwhichitemsarerecognisedas
assets,liabilities,netassets,revenueandexpenseswhentheysatisfythedefinitionsandrecognitioncriteriaforthoseelements,which
inallmaterialaspectsareconsistentwiththoseappliedinthepreviousyear,exceptwhereachangeinaccountingpolicyhasbeen
recorded.
ThefinancialstatementsarepreparedinSouthAfricanrand(R).
TheannualfinancialstatementshavebeenpreparedinaccordancewiththeeffectivestandardsofGRAP,includinganyinterpretations
anddirectivesissuedbytheAccountingStandardsBoard.
The principal accounting policies adopted in the preparation of these financial statements are set out below.
Assets;liabilities;revenuesandexpenseshavenotbeenoffsetexceptwhenoffsettingisrequiredorpermittedbyastandardofGRAP.
1.2 Changes in accounting policy and comparability
The CBDA is preparing the second set of financial statements since its inception. The accounting policies have been applied consistently.
TheCBDApreparedthefinancialstatementsinaccordancewithGRAP.
The entity will change an accounting policy if the change results in the financial statements providing reliable and more relevant
informationabouttheeffectsoftransactions,othereventsorconditionsontheperformanceorcashflow.
1.3 going concern assumption
The annual financial statements have been prepared on the assumption that the CBDA will continue to operate as a going concern
for at least the next 12 months.
1.4 Revenue recognition
Revenue from exchange transactions
Revenuefromexchangetransactionsreferstorevenuethataccruedtotheentitydirectlyinreturnforservicesrenderedorgoodssold,
thevalueofwhichapproximatestheconsiderationreceivedorreceivable.Revenueisrecognisedtotheextentthatitisprobablethat
theeconomicbenefitswillflowtoCBDAandrevenuecanbereliablymeasured.Revenueismeasuredatfairvalueoftheconsideration
receivableonanaccrualbasis.Revenueincludesinvestmentandnon-operatingincomeexclusiveofvalueaddedtaxation,rebatesand
discounts. The following specific recognition criteria must also be met before revenue is recognised:
a. Revenue from sale of goods
Revenuefromthesaleofgoodsisrecognisedwhensignificantriskandrewardsofownershipofgoodsaretransferredtothebuyer.
Saleofgoodsincludespublications.
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11. FinanCial sTaTemenTs For the year ended 31 March 2012
b. Interest income
Revenueisrecognisedasinterestaccruedusingtheeffectiveinterestrate,andisincludedinotherrevenueinthestatementoffinancial
performance.
c. Revenue arising from application of tariff
Revenuearisingfromtheapplicationoftheapprovedtariffofchargesisrecognisedwhentherelevantserviceisrenderedbyapplying
therelevantgazettetariff.Thisincludesregistrationofco-operativebanks.
d. Revenue from non-exchange transactions
Revenuefromnon-exchangetransactionsreferstotransactionswheretheentityreceivedrevenuefromanotherentitywithoutdirectly
givingapproximatelyequalvalueinexchange.Revenuefromnon-exchangetransactionsisgenerallyrecognisedtotheextentthatthe
relatedreceiptorreceivablequalifiesforrecognitionasanassetandthereisnoliabilitytorepaytheamount.
1.5 Taxes
CBDAisexemptfromincometaxintermsofsection10(1)oftheIncomeTaxActNo58of1962.
1.6 Property, plant and equipment
initial recognition
Property,plantandequipmentaretangibleassetsthatareheldforuseintheproductionorsupplyofgoodsorservices,rentaltoothers
orforadministrativepurposes,andareexpectedtobeusedmorethanoneyear.Itemsofproperty,plantandequipmentareinitially
recognised asassetsonthedateofacquisitionandareinitiallyrecordedatcost.Thecostofanitemofproperty,plantandequipment
is the purchase price and other costs attributable to bring the asset to the location and condition necessary for it to be capable of
operating in the manner intended by the entity. Trade discounts and rebates are deducted in arriving at the cost. The cost also includes
the necessary costs of dismantling and removing the asset and restoring the site on which it is located.
When significant componentsof an itemofplant, property andequipmenthavedifferentuseful lives, they are accounted for as
separateitemsofproperty,plantandequipment.
Whereanassetisacquiredbytheentityfornooranominalconsideration(non-exchangetransaction),thecostisdeemedtobeequal
tothefairvalueofthatassetonthedateacquired.
Whereanitemofproperty,plantandequipmentisacquiredinexchangeforanon-monetaryassetormonetaryassets,oracombination
ofmonetaryandnon-monetaryassets,theassetacquiredisinitiallymeasuredatfairvalue(thecost).Iftheacquireditem’sfairvalueis
notdeterminable,itsdeemedcostisthecarryingamountoftheasset(s)givenup.
subsequent measurement
Subsequenttoinitialrecognition,itemsofproperty,plantandequipmentaremeasuredascostlessaccumulateddepreciationand
impairment losses.
Wheretheentityreplacespartsofanasset,itderecognisesthepartoftheassetbeingreplacedandcapitalisesthenewcomponent.
notes to the annual financial statements - continued
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11. FinanCial sTaTemenTs For the year ended 31 March 2012
Subsequentexpenditure incurred on an asset is capitalised when it increases the capacity or future economic benefits associated with
the asset.
Depreciation and impairment
Depreciation is calculated on the depreciable amount, using the straight linemethod over the estimated useful lives of
the assets. Components of assets that are significant in relation to the whole asset and that have different useful lives are
depreciated separately.
The annual depreciation rates are based on the estimated average asset lives stated below.
Repairsandmaintenancecostsarechargedtothestatementoffinancialperformance.
equipment, furniture and fittings
Theannualdepreciationratesappliedtothevariouscategoriesofequipmentare:
• Computerequipment3years
• Furnitureandfittings5years.
Derecognition
Anitemofproperty,plantandequipmentisderecognisedupondisposalorwhennofutureeconomicbenefitsorservicepotential
isexpectedfromtheuseoftheasset.Thegainorlossarisingondisposalorretirementofanitemofproperty,plantandequipment
isdeterminedasthedifferencebetweenthesalesproceedsandthecarryingvalueandisrecognisedinthestatementoffinancial
performance.
Assets’residualvalues,usefullivesandmethodsofdepreciationarereviewedateachfinancialyearendandadjustedprospectivelyif
appropriate.
1.7 intangible assets
Softwareisclassifiedasintangibleassets.Initialexpenditureonsoftwareisrecognisedatcostandcapitalised.Subsequentexpenditure
is capitalised only when it increases the future economic benefits embodied in the asset to which it relates. The amortisation is
calculated at a rate considered appropriate to reduce the cost of the asset less residual value over the shorter of its estimated useful life
or contractual period.Residualvaluesandestimatedusefullivesarereviewedannually.
Intangibleassetsthatmeettherecognitioncriteriaarestatedinthestatementoffinancialpositionatamortisedcost,beingtheinitial
cost price less any accumulated amortisation and impairment losses.
Amortisationisprovidedtowritedowntheintangibleassets,onastraightlinebasis,totheirresidualvaluesasfollows:
• ITsoftware 3years
notes to the annual financial statements - continued
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11. FinanCial sTaTemenTs For the year ended 31 March 2012
1.8 impairment of non-financial - assets
TheCBDAassessesateachreportingdatewhetherthereisanyindicationthatanassetmaybeimpaired.Ifanysuchindicationexists,
theentityestimatestherecoverableamountoftheindividualasset. If it isnotpossibletoestimatetherecoverableamountofthe
individualasset,therecoverableamountofthecash-generatingunittowhichtheassetbelongsisdetermined.
Acash-generatingunitisthesmallestidentifiablegroupofassetsthatgeneratescashinflowsthatarelargelyindependentofthecash
inflowsfromotherassetsorgroupsofassets.
Therecoverableamountofanassetoracash-generatingunitisthehigherofitsfairvaluelesscoststosellanditsvalueinuse.Ifthe
recoverableamountofanassetislessthanitscarryingamount,thecarryingamountoftheassetisreducedtoitsrecoverableamount.
That excess is an impairment loss and it is charged to the statement of financial performance.
An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in
the statement of financial performance. Any impairment deficit of a revalued asset is treated as a revaluation decrease in the
revaluation reserve.
The CBDA assesses at each reporting date whether there is any indication that an impairment loss recognised in previous periods for
assetsmaynolongerexistormayhavedecreased.Ifanysuchindicationexists,therecoverableamountsofthoseassetsareestimated
and matched against their carrying values and any excess of the recoverable amounts over their carrying values is reversed to the
extent of the impairment loss previously charged in the statement of financial performance.
1.9 leases
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified
as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership. The classification of leases is
determinedusingGRAP13-Leases.
a. Operating leases - lessee
Lease agreements are classified as operating leases where substantially the entire risks and rewards incident to ownership remain with
thelessor.Operatingleasepaymentsarerecognisedasanexpenseonastraight-linebasisovertheleaseterm.Thedifferencebetween
the amounts recognised as an expense and the contractual payments is recognised as an operating lease asset/liability. The asset is
not discounted.
b. Finance leases - lessee
Financeleasesarerecognisedasassetsandliabilitiesinthestatementoffinancialpositionatamountsequaltothefairvalueofthe
leasedpropertyor,iflower,thepresentvalueoftheminimumleasepayments.Thecorrespondingliabilitytothelessorisincludedin
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 market-related interest rate approved by
the CBDA. The lease payments are apportioned between the finance charge and reduction of the outstanding liability. The finance charge
is allocated to each period during the lease term so as to produce a constant periodic rate on the remaining balance of the liability.
notes to the annual financial statements - continued
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11. FinanCial sTaTemenTs For the year ended 31 March 2012
1.10 employee benefits
a. Short-term employee benefits
Thecostofshort-termemployeebenefits(thosepayablewithin12monthsaftertheserviceisrendered,suchaspaidvacationleave,
bonuses) is recognised in the period in which the service is rendered and is not discounted.
1.11 Foreign currency transactions
Transactions in foreign currencies are accounted for at the rate of exchange ruling on the date of the transaction. Liabilities in foreign
currencies are translated at the rate of exchange ruling at the reporting date or at the forward rate determined in forward exchange
contracts.Exchangedifferencesarisingfromtranslationsarerecognisedinthestatementoffinancialperformanceintheperiodin
which they occur.
1.12 Provisions and contingencies
Provisions are recognised when:
• theCBDAhasapresentobligationasaresultofpastevents;
• it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the
obligations;and
• areliableestimatecanbemadeoftheobligation.
Provisions are not recognised for future operating losses.
IftheCBDAhasacontractthatisonerous,thepresentobligationunderthecontractisrecognisedandmeasuredasaprovision.
Contingent assets and contingent liabilities are not recognised.
1.13 Financial instruments
initial recognition
Financial instruments are initially recognised at fair value.
subsequent measurement
Financialassetsarecategorisedaccordingtotheirnatureaseitherfinancialassetsheldatfairvaluethroughprofitorloss–tomaturity,
loans and receivables - or available for sale. Financial liabilities are categorised as either at fair value through profit or loss or financial
liabilitiescarriedatamortisedcost.Thesubsequentmeasurementoffinancialassetsandliabilitiesdependsonthiscategorisation,in
theabsenceofanapprovedGRAP
a. Trade and other receivables
Tradereceivablesarecategorisedasfinancialassets:loansandreceivablesareinitiallyrecognisedatfairvalue,andaresubsequently
measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts
are recognised inprofitor losswhenthere isobjectiveevidencethat theasset is impaired.Significant financialdifficultiesof
thedebtor, anddefault or delinquency inpayments (more than 120days overdue) are considered indicators that the trade
notes to the annual financial statements - continued
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11. FinanCial sTaTemenTs For the year ended 31 March 2012
receivable is impaired.Theallowancerecognisedismeasuredforalldebtorswith indicationsof impairment. Impairmentsare
determined based on the risk profile of each debtor. Amounts that are receivable within 12 months from the reporting date are
classified as current.
Thecarryingamountoftheassetisreducedthroughtheuseofanallowanceaccount,andtheamountofthelossisrecognisedin
thestatementoffinancialperformancewithinoperatingexpenses.Whenatradereceivableisuncollectable,itiswrittenoffagainst
theallowanceaccountfortradereceivables.Subsequentrecoveriesofamountspreviouslywrittenoffarecreditedagainstoperating
expenses in the statement of financial performance.
b. Trade and other payables
Financialliabilitiesconsistoftradepayablesandborrowings.Theyareinitiallymeasuredatfairvalue,andaresubsequentlymeasuredat
amortisedcostusingtheeffectiveinterestratemethod,whichisinitialcarryingamount,lessrepayments,plusinterest.
c. Cash and cash equivalents
Cashincludescashonhand(includingpettycash)andcashequivalentsinthestatementoffinancialposition,comprisingcashatbanks
andonhand,including investments and short-term deposits with an original maturity of three months or less. For the purpose of the cash
flowstatement,cashandcashequivalentsconsistofcashandcashequivalentsasdefinedabove,netofoutstandingbankoverdrafts.
These are initially andsubsequentlyrecordedatfairvalue.
1.14 unauthorised expenditure
Unauthorisedexpenditure isexpenditurethathasnotbeenbudgeted for,expenditurethat isnot in termsof theconditionsof the
allocationreceivedfromanothersphereofgovernment,municipalityororganofstateandexpenditureintheformofagrantthatisnot
permitted in terms of the Public Finance Management Act. Unauthorised expenditure is accounted for as an expense in the statement
offinancialperformanceandwhererecovered,itissubsequentlyaccountedforasrevenueinthestatementoffinancialperformance.
1.15 irregular expenditure
Irregular expenditure is expenditure that is contrary to the Public FinanceManagementAct (Act 1 of 1999 as amended) or is in
contraventionof theCBDA’s supplychainmanagementpolicy. Irregularexpenditureexcludesunauthorisedexpenditure. Irregular
expenditure is accounted for as expenditure in the statement of financial performance andwhere recovered, it is subsequently
accounted for as revenue in the statement of financial performance.
1.16 Fruitless and wasteful expenditure
Fruitless and wasteful expenditure is expenditure that was made in vain and would have been avoided had reasonable care been
exercised. Fruitless and wasteful expenditure is accounted for as expenditure in the statement of financial performance and where it is
recovered,itissubsequentlyaccountedforasrevenueinthestatementoffinancialperformance.
1.17 Related parties
The CBDA operates in an economic sector currently dominated by entities directly or indirectly owned by the South African
government.AsaconsequenceoftheconstitutionalindependenceofthethreespheresofgovernmentinSouthAfrica,onlyentities
within the national sphere of government are considered to be related parties.
notes to the annual financial statements - continued
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11. FinanCial sTaTemenTs For the year ended 31 March 2012
Keymanagementisdefinedasindividualswiththeauthorityandresponsibilityforplanning,directingandcontrollingtheactivitiesof
the entity. All individuals from the level of Managing Director to the board members of the CBDA are regarded as key management
according to the definition of the financial reporting standard.
Closefamilymembersofkeymanagementpersonnelareconsideredtobethosefamilymemberswhomaybeexpectedtoinfluence,
orbeinfluencedbykeymanagementindividuals,intheirdealingswiththeentity.
notes to the annual financial statements - continued
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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11. FinanCial sTaTemenTs For the year ended 31 March 2012
notes to the annual financial statements - continued
2. Property, plant and equipment
Reconciliation of carrying value
Opening net carrying amount - 100 100
Gross carrying amount - 167 167
Accumulated depreciation - (67) (67)
Additions & revaluations 22 8 30
TransferfromNationalTreasury - - -
Additions 22 8 30
Disposals & adjustments - - -
Depreciation (2) (58) (60)
Closing net carrying amount 20 50 70
Gross carrying amount 22 175 197
Accumulated depreciation (2) (125) (127)
Reconciliation of the carrying values of property and equipment
2012
Carrying value beginning of the
year
Additions Depreciation Carrying value end of the year
Computerequipment 100 8 (58) 50
Officeequipment - 22 (2) 20
100 30 (60) 70
Reconciliation of the carrying values of property and equipment
2011
Carrying value beginning of the
year
Additions Depreciation Carrying value end of the year
Computerequipment - 148 (48) 100
Officeequipment - - - -
- 148 (48) 100
2012
Office
equipmentComputer
equipmentTotal
R' 000 R' 000 R' 000
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
57
11. FinanCial sTaTemenTs For the year ended 31 March 2012
notes to the annual financial statements - continued
3. intangible assets
Reconciliation of carrying value
Opening net carrying amount 6
Gross carrying amount 10
Accumulated amortisation (4)
Additions & revaluations
TransferfromNationalTreasury -
Amortisation (3)
Closing net carrying amount 3
Gross carrying amount 10
Accumulated amortisation (7)
Reconciliation of the carrying values of property and equipment
2012
Carrying value beginning of the
year
Additions Amortisation Carrying value end of the year
Computer software 6 - (3) 3
6 - (3) 3
Reconciliation of the carrying values of property and equipment
2011
Carrying value beginning of the
year
Additions Amortisation Carrying value end of the year
Computer software - 10 (4) 6
- 10 (4) 6
2012
Computer
software
R’ 000
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
58
11. FinanCial sTaTemenTs For the year ended 31 March 2012
notes to the annual financial statements - continued
4. Cash and cash equivalentsCash at bank 1,870 31
Total 1,870 31
5. Trade and other receivables from exchange transactionsTrade receivables - 2
Prepayments 4 -
Staffloans 40 17
44 19
5.1 Trade receivables: Ageing
Current(0–30days) - -
31 - 60 days - -
61-90days - -
91-120days - -
121 - 365 days - 2
+ 365 days - -
- 2
Tradereceivableswhicharelessthan3monthspastduearenotconsideredtobeimpaired.Asat31March2011,R2400werepast
due but not impaired.
5.2 Trade receivables impaired
Receivablearenotconsideredtobeimpaired.
The ageing of these receivables is as follows:
3 to 6 months - 2
- 2
The fair value of trade receivables approximates their carrying amounts.
2012 2011
notes R’000 R’000
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
59
11. FinanCial sTaTemenTs For the year ended 31 March 2012
notes to the annual financial statements - continued
6. Trade and other payables from exchange transactionsTrade creditors 590 803
Accruals 232 1
822 804
The CBDA considers that the carrying amount of trade and other payables approximates their fair value.
7. Current provisionsProvision for leave 198 133
Provision for bonuses 359 -
557 133
The‘Provisions’balanceincludesleavepay,whichrelatestotheCBDA’sestimatedliabilitiesarisingasaresultofservicesrenderedby employees and bonuses which have not yet been paid.
Provision
1 April 2011 133 -
Contributions to provision 557 360
Unused amounts reversed (113) -
Expenditureincurred (20) (227)
31 March 2012 557 133
8. grant incomeGrant revenue 500 -
AccruedGrantExpenditure (206) -
DeferredIncome 294 -
TherevenueisaBANKSETAgrantreceivedforfundingGovernanceTrainingandAccommodationforCFIManagerattendingtheCertificateCourseinManagementofCo-operativeFinancialInstitution.
Atyearend,trainingexpenditureandaccommodationcoststotheamountofR206,000wererealisedasincome.
9. Transfers and subsidies TransferfromNationalTreasury 9,310 8,200
9,310 8,200
2012 2011
notes R’000 R’000
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
60
11. FinanCial sTaTemenTs For the year ended 31 March 2012
notes to the annual financial statements - continued
10. sale of goods and rendering of servicesApplication fee to register as a co-operative bank - 12
Workshop registration fee 9 23
9 35
11. interest, dividends and rent on landInterestreceived 103 43
Donation received 50 -
153 43
12. goods and services Administrative fees 39 80
Advertising 90 70
Assets less than capitalisation threshold 11 -
Audit fees 539 -
Bursaries (employees) 80 37
Netforeignexchangegains/(loss) - 1
Communication - 12
Computer services 19 -
Consultants,contractorsandagency/outsourced services
1,449 1,781
Maintenance,repairsandrunningcosts 41 11
Operating lease 41 38
Travel and subsistence 584 480
Trainingandstaffdevelopment 43 93
Venues and facilities 119 -
Other operating expenditure 1,217 2,074
4,272 4,677
13. Compensation of employeesEmployeecosts 3,372 2,842
ExecutiveDirector'semoluments 93 972
Provisions 577 133
4,042 3,947
2012 2011
notes R’000 R’000
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
61
11. FinanCial sTaTemenTs For the year ended 31 March 2012
notes to the annual financial statements - continued
14. Deficit/(surplus) for the previous yearAssetstransferredfromNationalTreasuryatcostlessaccumulateddepreciationintermsofGRAPStandard17recognitioncriteria
- 130
InvoicesaccruedintermsofGRAPStandard1 - (513)
Opening deficit as at 1 April 2011 - (383)
15. net cash flows from operating activitiesSurplus/(deficit)fortheyear 1,095 (398)
Adjustment for:-
Depreciation and amortisation 63 52
Increaseinprovisions 424 133
Operating surplus before working capital changes:
1,582 (213)
(Increase)/decreaseintradereceivables (25) (19)
Increase/(decrease)intradepayables 312 291
Cash generated by/(utilised in) operations 1,869 59
16. Operating lease arrangements as the lessee:-
16.1 Future minimum lease payments
Up to 12 months
Photocopier/printerequipment 41 41
41 41
1 year to 5 years
Photocopier/printerequipment 4 45
Minolta operating lease
4 45
Therentalagreementisforaperiodof36monthsending30April2013withfixedrentalpayments.Intheeventofa24-monthextensionperiod,therentalwillbereducedby75%.
2012 2011
notes R’000 R’000
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
62
11. FinanCial sTaTemenTs For the year ended 31 March 2012
notes to the annual financial statements - continued
17. Capital commitmentNocapitalcommitmentsweremadeinthecurrentorpreviousfinancialyear.
18. Contingent liabilitiesPending claims
Management is not aware of any pending contingent liabilities against CBDA.
19. events after the reporting date The managing director was appointed on 14 May 2012.
20. TaxationNoprovisionhasbeenmadefortaxation,astheCBDAisexemptfromtaxationintermsofsection10oftheIncomeTaxAct.
21. going concern assumption
2012
TheCBDAhasasurplusofR1097000anditstotalassetsexceeditstotalliabilitiesbyR314000.
TheCBDAwasestablishedintermsoftheCo-operativeBanksActof2007.ItistheintentionofthegovernmenttocontinuefundingtheentityinthefutureMTEFperiods.
The annual financial statements have been prepared on a going concern basis.
2011
TheCBDAhasadeficitofR398000anditstotalliabilitiesexceeditstotalassetsbyR781000.
TheCBDAwasestablishedintermsoftheCo-operativeBanksActof2007.ItistheintentionofthegovernmenttocontinuefundingtheentityinthefutureMTEFperiods.
The annual financial statements have been prepared on a going concern basis.
22. standards approved and effectiveThefollowingstandardsofGRAPareeffectiveforfinancialyearscommencingonorafter1April2012.
The CBDA has elected to continue applying the previous accounting policies.
GRAP21-ImpairmentofNon-cashGeneratingAssetsGRAP23-RevenuefromNon-exchangeTransaction(TaxesandTransfer)GRAP24-PresentationofBudgetInformationinFinancialStatementsGRAP26-ImpairmentofCash-GeneratingAssetsGRAP103-HeritageAssetsGRAP104-FinancialInstruments
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
63
11. FinanCial sTaTemenTs For the year ended 31 March 2012
notes to the annual financial statements - continued
22.1 standards issued but not yet effective
Atthedateofauthorisationofthesefinancialstatements,thefollowingaccountingstandardsofGRAPwereinissue,butnotyeteffective:GRAP18-SegmentReportingGRAP25-EmployeeBenefits
TheapplicationofalloftheaboveGRAPstandardswillbeeffectivefromadatetobeannouncedbytheMinisterofFinance.Thisdate is not currently available.
23. significant accounting judgements, estimates and assumptionsThepreparationofCBDAfinancialstatementsrequiresmanagementtomakejudgements,estimatesandassumptionsthataffectthereportedamountsofrevenues,expenses,assetsandliabilities,andthedisclosureofcontingentliabilities,atthereportingdate.
However,uncertaintyabouttheseassumptionsandestimatescouldresultinoutcomesthatrequireamaterialadjustmenttothecarryingamountoftheassetorliabilityaffectedinfutureperiods.
Judgements
Therewerenoitemsthatrequiredmanagement’sjudgementintheprocessofapplyingtheCBDAaccountingpolicies.
estimates and assumptions
Therewerenokeyassumptionsconcerningthefutureandotherkeysourcesofestimationuncertaintyatthebalancesheetdate,thatpose a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year.
24. Reconciliation of budget surplus/deficit with the surplus/deficit in the statement of financial performanceNetsurplus/deficitperthestatementoffinancialperformance 1,095 (398)
Adjustment for:
Increaseincurrentprovisions 65 133
Netforeignexchange(gain)orloss - 1
Depreciation 63 52
Interestreceived (103) (43)
Other income (59) (35)
Netsurplus/deficitperapprovedbudget 1,061 (290)
2012 2011
notes R’000 R’000
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
64
11. FinanCial sTaTemenTs For the year ended 31 March 2012
notes to the annual financial statements - continued
25. Related partiesTheCBDAisaschedule3ANationalPublicEntityintermsofthePublicFinanceManagementAct(Act1of1999asamended)andthereforefallswithinthenationalsphereofgovernment.AsaconsequencetheCBDAhasrelatedparties,whichareentitiesthatfall within the national sphere of government.
Unlessspecificallydisclosed,thesetransactionsareconcludedonanarm’slengthbasis.TherearenorestrictionsintheCBDA’scapacity to transact with an entity.
25.1 Transactions with related parties
BAnKseTA services rendered R’000 services received R’000
2012 2012
Transactions Balance Transactions Balance
- - 500 294
- - 500 294
sAMAF services rendered R’000 services received R’000
2011 2011
Transactions Balance Transactions Balance
69 - 65 -
69 - 65 -
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
65
11. FinanCial sTaTemenTs For the year ended 31 March 2012
notes to the annual financial statements - continued
25.2 Fees paid to the board members and executive Management salaries
2012
Allowance Travel Total
R’000 R’000 R’000
Mr.SMNdwandwe 76 19 95
Mrs. J Kuzwayo 35 1 36
Mr. P Koch 17 30 47
Mr. K Mahuma - - -
Mr.VSatgar 5 - 5
Mrs. D Hamilton 13 1 14
Mr. J Theron 22 45 67
Ms O Matshane 7 1 8
MrNMashiya(ActingManagingDirector) 56 - 56
MsIGoodspeed(ActingManagingDirector) 37 - 37
ExecutiveDirectors 1,596 - 1,596
1,864 97 1,961
2011
Allowance Travel Total
R’000 R’000 R’000
Mr.SMNdwandwe 74 5 79
Mrs. J Kuzwayo 37 1 38
Mr. P Koch 19 20 39
Mr. K Mahuma 21 1 22
Mr.VSatgar 14 1 15
Mrs. D Hamilton 15 3 18
Mr. J Theron 14 17 31
Ms O Matshane 8 - 8
Managing Director 952 - 952
ExecutiveDirectors 1,464 - 1,464
2,618 48 2,666
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
66
11. FinanCial sTaTemenTs For the year ended 31 March 2012
notes to the annual financial statements - continued
26. statement of unauthorised, irregular and fruitless and wasteful expenditure
26.1 unauthorised expenditure
31 March 2012 31 March 2011
R’000 R’000
Reconciliation of unauthorised expenditure
Opening balance 781 -
Unauthorisedexpenditure–currentyear - 781
Unauthorised expenditure approved by Parliament/legislature - -
Transfer to receivables for recovery (not approved) - -
Unauthorised expenditure awaiting authorisation (781) -
- 781
Incident Disciplinary steps taken/criminal proceedings
2012
The CBDA is not aware of any unauthorised expenditure that occurred during the financial period.
2011
Unauthorised expenditure occurred as a result of spending in excess of the allocated funds.
N/A
None
Comments
2012
Nounauthorisedexpenditureoccurredduringthefinancialyear.
2011
AsubordinationletterwaswrittenandsubmittedtothePublicEntitiesSupportunitinNationalTreasury.
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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11. FinanCial sTaTemenTs For the year ended 31 March 2012
notes to the annual financial statements - continued
26.2 Fruitless and wasteful expenditure
31 March 2012 31 March 2011
R’000 R’000
Reconciliation of unauthorised expenditure
Opening balance 55 -
Fruitlessandwastefulexpenditure–currentyear 18 55
Fruitless and wasteful expenditure condoned - -
Transfer to receivables for recovery - -
Fruitless and wasteful expenditure awaiting condonation - -
73 55
Analysis of current fruitless and wasteful expenditure
Incident Disciplinary steps taken/criminal proceedings
2012
Due to the late payment of salaries in October 2011 one of the CBDA employeeswaschargedR650bankchargesasaresultofhisdebitordersnotbeingpaidontime,forwhichCBDAhadtorefundhim. TheCBDApaymenttoSARSforNovember2011wasdelayedduetothefactthatthecomputerequipmentfortheManagerwhodoespayments was not functioning. The manager received a new laptop whichdidnothavetheFNBOnlinesystem.Theonlinesystemwassetup after the payment due date.
CBDA incurred an expense for Board member travel and board fee due theCBDABoardSelectionCommitteemeetingthatwascancelled.TheSelectionCommitteewasnotifiedaboutthecancellationontheirarrival at the meeting.
2011Anemployee’straveltickettoaconferenceintheUSAwasbooked.Theticketwascancelledbecausetheemployee’sVISAapplicationwasdeclined. The CBDA was not refunded since all travel agents had a rulingthatflightscancelledduringtheWorldCupperiod(June)wouldnot be refunded.
None
None
None
None
Comments
2012Nounauthorisedexpenditureoccurredduringthefinancialyear.
2011
A subordinationletterwaswrittenandsubmittedtothePublicEntitiesSupportunitinNationalTreasury.
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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11. FinanCial sTaTemenTs For the year ended 31 March 2012
notes to the annual financial statements - continued
26.3 irregular expenditure
31 March 2012 31 March 2011
R’000 R’000
Reconciliation of unauthorised expenditure
Opening balance 404 -
Irregularexpenditure–currentyear 596 404
Irregularexpenditurecondoned - -
Transfer to receivables for recovery - -
Irregularexpenditureawaitingcondonation - -
1 000 404
Incident Disciplinary steps taken/criminal proceedings
2012
TheAgencyincurredirregularexpenditureofR596,000.The preference point system was not applied in the procurement of one competitive bid as the expenditure was in contravention ofTreasuryRegulation16A.6.3(b)relatingtosupplychainmanagement
2011
A service provider who is the only supplier that could provide servicesofthenaturerequiredbytheCBDAonthebenchmarkingof co-operative banks in the country was appointed without a tax clearance certificate.
None
None
Comments
2012
Noirregularexpenditureoccurredduringthecurrentfinancialyear.
2011
AsubmissiontoNationalTreasurytorequestcondonationofnon-compliancewiththePFMAhasbeenwritten.Authorisationhasnot yet been obtained.
27. Comparative figures
Whenthepresentationorclassificationofitemsintheannualfinancialstatementsisamended,previousperiodcomparativeamountsarerestated,unlessastandardofGRAPdoesnotrequiretherestatementofcomparativeinformation.Thenatureofandreasonforthereclassificationaredisclosed.Wherematerialaccountingerrorshavebeenidentifiedinthecurrentfinancialyear,thecorrectionismaderetrospectivelyasfarasispracticable,andthepreviousyear’scomparativesarerestatedaccordingly.Wheretherehasbeenachangeinaccountingpolicyinthecurrentfinancialyear,theadjustmentismaderetrospectivelyasfarasispracticable,andthepreviousyear’scomparativesarerestatedaccordingly.
Co-operative Banks Development Agency Annual Report | For the year ended 31 March 2012
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11. FinanCial sTaTemenTs For the year ended 31 March 2012
notes to the annual financial statements - continued
28. Financial instruments
InthecourseoftheCBDA’soperationsitisexposedtointerestrate,credit,liquidityandmarketrisk.
The CBDA has developed a comprehensive risk strategy to monitor and control these risks. The risk management process relating to each of these risks is discussed under the headings below.
Credit risk
Financialassets,whichpotentiallysubjecttheCBDAtotheriskofnon-performancebycounter-partiesandthussubjectittocreditconcentrationsofcreditrisk,consistmainlyofcashandcashequivalentsandreceivablesfromexchangetransactions. Refertonote5fortheagingofreceivablesfromexchangetransactions. The CBDA manages/limits its treasury counter-party exposure by only dealing with well-established financial institutions approved byNationalTreasurythroughtheapprovaloftheirinvestmentpolicyintermsofTreasuryRegulations.
liquidity risk
TheCBDAmanagesliquidityriskthroughpropermanagementofworkingcapital,capitalexpenditureandactualvs.forecastcashflowsanditscashmanagementpolicy.Adequatereservesandliquidresourcesarealsomaintained.
Market risk
TheCBDAisexposedtofluctuationsintheemploymentmarket.Forexamplesuddenincreasesinunemploymentandchangesinthewagerates.NosignificanteventsoccurredduringtheyearthattheCBDAisawareof.
Fair values
TheCBDA’sfinancialinstrumentsconsistmainlyofcashandcashequivalents.Nofinancialinstrumentwascarriedatanamountin excess of its fair value and fair values could be reliably measured for all financial instruments. The following methods and assumptions are used to determine the fair value of each class of financial instruments:
Cash and cash equivalents
Thecarryingamountofcashandcashequivalentsapproximatesfairvalue.
Other receivables from exchange transactions
The carrying amount of other receivables from exchange transactions approximates fair value due to the relatively short-term maturity of these financial assets.
noTes
27th Floor240MadibaStreetPretoria0001
Telephone: 012 315 5367Fax:0123155905Website: www.treasury.gov.za/coopbankEmail: [email protected]