by Pietman Roos

Setas' cash balance analysis

SACCI to probe dormant funds

SACCI volunteered to research most of the annual reports of the 21 setas to determine the dormant funds.

There have been numerous complaints from the private sector regarding the poor service delivery since the introduction of the Seta system, particularly that funds are not released to facilitate in-house training.

Against this background, the Department of Higher Education and Training has published regulations that provide for a change in the composition in which funds are released to businesses (mandatory versus voluntary grants).

The general view of civil society is that such an amendment would only worsen the poor service delivery history of the Setas.

The South African Chamber of Commerce and Industry (SACCI) has volunteered to conduct research of the most recent annual reports of the 21 Setas in order to estimate the amount of dormant funds in each and cumulatively.

This is important because the size and the most recent increase in these amounts are an accurate proxy of the poor service delivery by the Setas.

The 2011/12 annual reports of the 21 Setas were analysed to obtain information on their cash and cash equivalents.

The Auditor-general reports on any irregularities and investigations that are currently underway were also included.

‘Cash and cash equivalents’ is a balance sheet item that reflects the amount of funds within a company or organisation that can easily be used to pay for expenses.

A large amount of cash in any kind of environment whether commercial, government or non-profit in general reflects poorly on the management of the organisation as dormant funds should normally be put to better use.

This principle is all the more relevant for the Setas as their primary role is to release funds to employers who want to train their employees.

The data capturing exercise reveals that the 21 Setas have a total of R8 billion cash and cash equivalents on their balance sheets.

The Seta with the largest cash reserve is the FoodBevSETA with just below R1.2 billion, and the lowest is Teta Seta with R14.5 million.

The accumulated cash reserve amount increased by R1.6 billion between the 2010/11 and 2011/12 financial years, a 20.2% annual increase.

Only two of the 21 Setas showed a decrease in their cash reserves in the last financial year.

The estimate of the dormant funds (using the cash reserves as proxy) assumes that the financial statements are in order.

Unfortunately, this is yet another accusation of incompetence that can be levelled against some Setas, as many have qualified audit opinions.

The best outcome of an audit is to receive an unqualified opinion, which means that the auditor (in this case the Auditor-general) is satisfied that the financial statements of the Seta are an accurate reflection of the true state of affairs.

In general, it is frankly unacceptable for a government agency to receive a qualified audit, so this is another related argument to show how poor the service provision of the Setas truly are.

Of the 21 audit reports it was found that only 13 reports received an unqualified opinion, seven received a qualified opinion and one audit did not provide enough information for an audit opinion.

The audit reports indicate that 16 investigations took place, mainly due to the mismanagement of funds. The majority of these cases were still on-going at the time of publishing.

Other issues were also pointed out by the audit report. Firstly, six of the Setas had not followed procurement procedures stated in the Public Finance and Management Act.

One training authority was cited for not following revenue management procedures and eight of the training authorities did not follow expenditure management procedures or failed to adequately develop them.

In terms of internal controls, 10 of the Setas did not meet all the requirements.

The Auditor-General reports also indicated that 12 of the Seta’s did not have adequate leadership and financial controls.

In addition, five of the Setas did not meet the governance requirements.

Only four Setas had no matters of concern in their audit reports.

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