BOXING SA ANNUAL REPORT 2008/09

Presentation to the Sport Portfolio Committee

17 November 2009

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

MISSION To enhance the capacity of all stakeholders to

improve the quality, passion, and popularity of professional boxing in South Africa and internationally

Key Objectives of BSA Create an organized and regulated environment for

professional boxing Design an appropriate structural arrangement for

boxing Improve quality of tournaments Enhance the popularity of boxing (Continues)

Key Objectives of BSA (Continuation)

Develop high performing boxers Create an enabling environment for the increased

welfare of licensees Provide for the seamless transition of boxers from

amateur to professional ranks

ESTABLISHMENT OF BOXING SA

Boxing Commission which is a juristic person known as Boxing SA was established in terms of the South African Boxing Act, 11 of 2001

Duties of Boxing SA Duties and powers of BSA per Section

8 of the Act :(a)Compile and publish information statistics and annual

report on its activities(b)Assist the establishment of associations or federations(c)(i) Hold meetings at least four times a year (ii) Hold meetings at its request, or requested by

associations(d) Consider applications for recognition of international

boxing bodies, organizations, and their champions

Funding of BSA The funds of BSA in terms of section 15 of the

Act consists of: Money appropriated by Parliament Fees payable to BSA in terms of the Boxing Act Grants, donations and bequests made to BSA Income earned on the surplus money invested by

BSA Money generated from sponsorship and

fundraising

STAFF MATTERS

BOXING TECHNICAL ASSISTANT NOMSA MDHLULI

FINANCIAL CONTROLLER

TUMELO KEKANA

ASSISTANT FINANCIAL OFFICER

THABO NALA

IT SPECIALISTSKHUMBUZO MOTHA

RECEPTIONISTVERQUELENE JACOBS

GENERAL ADMINISTRATIVE ASSISTANT

MAJORIE THEBE

ADMIN OFFICE ASSISTANTABRAM KAMBULE

PA TO THE CEOGUGU RADEBE

DIRECTOR: OPERATIONSLOYISO MTYA

CFO (VACANT) DIRECTOR: COMMUNICATION & MARKETING (VACANT)

DEPUTY MINISTER OF SPORT AN RECREATION HON. GERT OOSTHUIZEN

BOXING SA ORGANOGRAM

CEOBONGANI KHUMALO

BSA BOARD

MINISTER OF SPORT AND RECREATION SAREV. DR MAKHENKESI STOFILE

PROJECT MANAGERVUVU MALLIE

FINANCE & ADMIN OFFICER

HENRY MOTSEPE

STAFF MATTERS BSA adopted a total of 20 policies which include the BSA

Disciplinary Code and Grievance Procedure. Job evaluation system which is aligned to the Equate

System used in the public service has been implemented. Job descriptions and key performance areas (KPA’s) have

been developed and implemented A three year human resources plan has been developed For the period under review, BSA continued operating

with the CFO position being vacant. However, it must be noted that the organogram

provided in this presentation is no longer a true reflection of BSA staffing (Continues).

STAFF MATTERS (Continuation)Current staffing has changed as follows: There has been a number of resignations; (a) Mr. Bongani

Khumalo resigned as the CEO on 6 May 2009, (b) Mr. Thabo Nala resigned as Financial Officer on 30 April 2009, and (c) Mrs. Gugu Radebe also resigned as Admin Manager on 25 September 2009.

After B. Khumalo’s resignation the BSA Board appointed Mr. L Mtya as the Acting CEO.

He therefore filled the position left vacant by the resignation of Mr. T. Nala, by way of recruiting Talifhani Khubana as well as appointing him in the interim to take up admin duties left vacant by the later resignation of Mrs. Gugu Radebe.

(Continues)

Current staffing (Continuation)• The combination of these two positions under one office was

aimed at cutting the costs of employing new staff during this difficult financial period, as well as taking advantage of the financial & admin skills he brought along with him.

No of EmployeesFemale Male Black (African) Coloured

10 6 4 2

Gender RaceCurrent Staff Statics

STAFF: TRAINING AND DEVELOPMENT

• For 2008/09 financial year there has been no training and development programme due to financial constrains.

• However, in the current year (2009/10 Financial Year) BSA successfully revived relationship with the National Lottery Fund.

• As from 2010 January staff members will be trained in order to improve their skills and enable them to successfully execute their duties.

Staffing Action Plan

• Recruitment: BSA will not be embarking on recruiting new staff members. However, there is an agreement between BSA and SRSA that SRSA would second the CFO, but it has recently come to the light SRSA will second an independent Financial Management & Administration team to assist BSA as a turn around strategy.

• We view this as a step by government towards laying down the foundation of injecting more funds into BSA.

• BSA warmly welcomes this initiative.

RESIGNATIONSResignations

• There has been a 40% of staff member resignations due to better offers from other companies with benefits that we do not have at BSA.

• Such benefits include amongst others; medical aid, pension fund, bonus etc.

Retention Action Plan• The MANCO meeting held on 7 July 2009 resolved that BSA

salaries and perks will be in parity with other public entities' salary scales.

OPERATIONAL RESULTS 2008/09

OPERATIONAL RESULTS 2008/09 Successful annual Boxing Awards were held in Carnival

City on February 2009 BSA managed to stage 107 tournaments in total, of

which 30 were international (Statistics provided below). Baby champs project’s fourth year was a success story. Theta Skills development project is still on going. There has been increased participation in international

events by boxers and ring officials Sixteen girls representing all racial groups in the country

were adjudicated good enough to turn professional, and two of them (Unathi Myekeni & Noni Tenge) won International Titles i.e. WBF Junior feather weight and Welterweight title respectively.

Statistics Of Boxing Tournaments From 1 April 2008 To 31 March 2009

Province Development Sa Title International TotalsEasten Cape 21 8 8 37Gauteng 20 8 6 34Kwazulu Natal 5 0 0 5Limpopo 0 0 0 0Mpumalanga 0 1 1 2North West 0 2 5 7Western Cape 6 0 0 6Free State 4 2 10 16Northern Cape 0 0 0 0TOTALS 56 21 30 107

Statistics Of Boxing TournamentsChallenges

• BSA did not have tournaments in Limpopo and Northern Cape Province.• A few were held in Western Cape and KZN province.• This was due the fact that there has been little or no funding from the

provincial government to develop boxing.Tournaments Action Plan

• As from January 2010 BSA will visit all the provinces especially the ones where there has been little or no boxing activity.

• This is aimed at proposing for provincial government involvement that will result in activity in provinces.

• The envisaged end result is the government involvement in the promotion of provincial titles and more opportunities for local boxers and officials.

• Sponsors have been approached and positive responses have been received for the year 2010.

FEMALE BOXINGChallenges

• We did not achieve the target set out for female tournaments. The main reason is that promoters have not really accepted or warmed up to the idea of female boxing.

• That has resulted in BSA having to seek financial assistance from provincial governments and private donors to make female boxing a reality.

Action Plan• Promoters will be requested to include one or two female

bout(s) in their tournaments as a prerequisite for sanctioning.• The circular will be sent to the promoters on 16th November

2009.• The prerequisite will be effective as from January 2010.

OPERATIONS :TRAINING & DEVELOPMENT

The SLA between BSA and Theta has resulted in the ongoing process BSA licensees are trained and accredited according to their respective disciplines.

We are now preparing for the first graduation before spreading the program nationwide.

As from January 2010 the National Lottery Fund will be utilised to conduct house training so as to develop licensees as follows:

• Boxers – Technical knowledge, boxing skills and rules.• Trainers – Technical Knowledge, training programs and corner

management• Managers – Boxer business management and guidance.• Promoters – Promotion management and tournament Compliances• Ring Officials – Ring management and Fight Rules and Regulations

FINANCIAL MANAGEMENT AND ADMINISTRATION

FINANCIAL MANAGEMENT AND ADMINISTRATION

The 2008/09 Annual Financial Statement was submitted on time to both Auditor General and National Treasury.

The Qualified Audit Report issued by the Auditor General of South Africa was based on operating expenditure amounting to R346 239.00 without supporting documentations, as well as the following emphasis of matters:

1. Going Concern2. Fruitless and wasteful expenditure

BASIS OF AUDIT OPINION Pro-forma invoices existed, while the payment

requisitions that should accompany the invoices, were not there. (Qualified Opinion)

The entity’s liabilities exceed its total assets by 5 951 045.(Going Concern)

Fruitless & Wasteful expenditure is attributed to unfair dismissals and VAT & PAYE not paid on time.(Fruitless & Wasteful Expenditure)

AUDIT QUERIESNon-compliance with applicable legislationPublic Finance Management Act• “Quarterly reports to the executive authority were not submitted

within 30 days of the end of each quarter as required by Treasury Regulation 26.1.1.”

• CORRECTIVE ACTION • In the current financial year (2009/10) the last two quarterly

reports were submitted in time.

• Our accounting books are up to date.

• The next quarterly reports will also be submitted timely.

Non-compliance with applicable legislationPublic Finance Management Act

“ A framework of acceptable levels of materiality and significance, which must be agreed between the accounting authority and the executive authority, could not be provided as required by Treasury Regulation 28.3.1.”

CORRECTIVE ACTION BSA is in the process of reviewing its policies, therefore the

above matter will be addressed accordingly with the consultation of all stakeholders for advice.

Non-compliance with applicable legislation Governance Framework

• “The governance principles that impact the auditor’s opinion on the financial statements are related to the responsibilities and practices exercised by the accounting authority and executive management and are reflected in the internal control deficiencies and key governance responsibilities addressed below:

Internal control deficiencies• Section 51(1)(a)(i) of the PFMA states that the accounting

authority must ensure that the public entity has and maintains effective, efficient and control.

• Boxing South Africa did not conduct a risk assessment and a risk management strategy was not implemented which resulted in deficiencies in other key governance requirements as indicated in the table above.”

Non-compliance with applicable legislation Governance Framework

There root cause: Control Activity.CORRECTIVE ACTION• After prior year audit the finance department has ensured that

queries raised by AGSA are being addressed.• In order to enhance the mitigation of the aforesaid internal controls

deficiencies BSA has engaged Mazars Internal Auditors to assist in performance of the internal controls and risk assessment.

• The planned secondment by SRSA, of the Financial Management team which will inter alia assist with: (a) Corporate governance, and (b) Review of strategic plan, budget, business plan and other relevant documents, is welcomed as it will go a long way towards easing up BSA’s historic financial plight .

• It must also be noted that BSA staff will utilise the funds from the National Lottery Fund to embark on a training programme in January 2010 which will enhance the quality of their work with regards to financial reporting.

Going ConcernNote 24 Going Concern “In the current year the entity has incurred a net deficit of R4 327 497 (2008: R1 787

470) and the total liabilities exceed its total assets by R5 951 045 (2008: R1 623 548). Boxing SA receives financial support in the form of a

grant from Sports and Recreation South Africa. During the current year the entity’s operating expenses exceeded the grant received, which may indicate that the entity’s current business model is not sustainable on an ongoing basis. Additional funds will need to be secured in order for the entity to continue as a going concern.”

The last sentence in the AG’s going concern report attests to the fact that BSA needs more funds if it is to deliver on its mandate. In order to address this financial crisis more funds will have to be secured either from sponsorship or increased government grant.

It must, however, be noted that Sponsors are reluctant to assist BSA at this moment due to this accumulating deficit and media misconception.

It’s in the light of these aforesaid conditions that increased intervention by government is needed in order to sustain BSA.

BASIS OF AUDIT OPINIONAUDIT FINDING CONTEXT ACTION PLAN RESPONSIBILI

TYOperating Expenditure: BSA could not provide sufficient appropriate audit evidence for operating expenditure amounting to R346 239. (Qualification)

The trail for payments could only be traced by invoices based on quotations instead of Invoices or receipts based on actual payments

Plan: The filing system has improved drastically and by March 2010 all documents will be in place

BSA

EMPHASIS OF MATTERAUDIT FINDING CONTEXT ACTION PLAN RESPONSIBILITY

Going Concern: BSA incurred a net loss of R4 327 497 during the year under review. The liabilities of the entity exceeded R5 951 045. (Emphasis of matter)

Liabilities exceed Assets as a result of accumulating loss from prior years. While there were debts from prior years, obligations still existed that meant that services for the daily running had to be kept on course.

Plan: BSA has applied for increase of grant by Government and is also working hard on securing sponsorships as there are services that, if left unattended, would lead to the total collapse of boxing.

BSA and SRSA

Fruitless and wasteful expenditure of up to R1 313 226 was incurred. This relates to dismissals, vat and PAYE including interests and penalties incurred. (Emphasis of matter)

Expenditure which could have been avoided

Plan: BSA has made arrangements with SARS regarding the terms and conditions of repayments of vat, PAYE, interest and penalties and BSA still awaits correspondence from SARSA

BSA

OTHER MATTERSAUDIT FINDING CONTEXT ACTION PLAN RESPONSIBILITY

Quarterly Reports to the Executive Authority not submitted within 30 days at the end of each quarter in line with the PFMA and the Treasury Regulations. (Other matter).

Non Compliance to PFMA and Treasury Regulation

Plan: BSA has re-programmed its timetable for services in order to submit statutory document on time. Copy from presentation submitted on time.

BSA

The Budget and the Strategic Plan were not submitted to the Executive Authority as required by the PFMA and the Treasury Regulations. (Other matter).

Non Compliance to PFMA and Treasury Regulation

Plan: BSA Board and CEO (Acting CEO) to engage SRSA -SRSA has conducted a workshop to address Strategic Planning. The Board will further engage SRSA in this regards.

BSA Board and The Acting CEO

BSA budgeted for a deficit without obtaining prior written approval from the National Treasury as prescribed by the PFMA.

Non Compliance to PFMA and Treasury Regulation

BSA will engage National Treasury and SRSA regarding the budgeting process. BSA will have to use a zero base budget method in future

BSA

OTHER MATTERSAUDIT FINDING CONTEXT ACTION PLAN RESPONSIBILITY

Levels of materiality and significance could not be provided as required by the Treasury Regulations.

Non Compliance to PFMA and Treasury Regulation

Plan: (1) Engage Auditor General and National Treasury. (2)Financial policies will be reviewed on yearly basis. (3) BSA is in the process of reviewing policies and Internal Auditors recommendations will be considered.

BSA and Board

Internal control deficiencies: Control activities and monitoring.

Weak Internal controls due to CFO position being vacant

BSA has an Internal Auditing team while also being informed that a Financial Management team will be appointed by SRSA to assist in this regard.

BSA

The financial statements were subject to material amendments resulting from the audit.

BSA statements were prepared in/on GAAP basis which led to the said amendments.

Plan: BSA Financial Statements will be prepared on GAAP basis

BSA

OTHER MATTERSAUDIT FINDING CONTEXT ACTION PLAN RESPONSIBILITY

The Audit Committee did not substantially fulfill its responsibilities as set out in the PFMA and the Treasury Regulations. .

Non Compliance to PFMA and Treasury Regulation

Plan: To engage internal Auditors and enable the Audit Committee to fulfill its responsibilities. BSA has engaged the services of Mazars Internal Audit

Audit Committee

The public entity did not have an internal audit function in operation throughout the financial year..

Non-compliance with regulatory requirements.

Plan: Engagement of Internal Audit BSA has engaged Mazars Internal Auditors

BSA

There are significant deficiencies in the design and implementation of internal control in respect of financial and risk management.

Non-compliance with regulatory requirements.

Plan: Engagement of Internal Audit BSA has engaged Mazars Internal Auditors

BSA

OTHER MATTERSAUDIT FINDING CONTEXT ACTION PLAN RESPONSIBILITY

No periodic risk assessments were performed, no risk management strategy (including a fraud prevention plan), is documented and used as set out in the Treasury Regulations.

Non-compliance with regulatory requirements.

Plan: Engagement of IA and review of fraud prevention plan and policy

BSA

The previous year’s audit findings have not been substantially addressed.

Previous year queries were not addressed in full.

Plan: There has been more MANCO Meeting from the beginning of this Financial year in order to address the Audit.

BSA

STATEMENT OF FINANCIAL PERFORMANCE

STATEMENT OF FINANCIAL POSITION

FINANCIAL STATUS REPORT Trade and Other Payables on 31 March 2008/09 = R 8 263

273.00 (Refer to Note 13) while Trade and Other Receivables = R 382 668.00 (Refer to Note 10)

With Creditor amounting to R2 656 877.00 and Debtors amounting to R1 031 170.00

BSA appropriation from SRSA = R 2.011 million BSA grant needs to be increased as it does not cover

operational expenses in full i.e. salaries, rent, water, electricity, etc.

Agents appointed to secure sponsorships on behalf of BSA in prior year were unsuccessful in this regard.

Fruitless & Wasteful Expenditure18. Fruitless and Wasteful Expenditure

2009 2008Suspended employee salary 425 991 512 432Court settlement(dismissed employee) 400 000 -CCMA settlement of unfair dismissal 28 937 -Interest accrued on VAT liability 98 737 -Interest & penalties on PAYE liability 359 226 - 1 313 226 512 432• Mr.Krish Nadoo is still being paid R50 000.00 per month to date• The settlement for unfair dismissal amounting to R28 937 as well as the

R425 991 were once off payments. • BSA has engaged SARS with regard to the tax settlement. The terms of

payment will be reached in due course. BSA still awaits response on settlement terms from SARS.

FINANCIAL STATUS TO DATE1. BSA has not yet received grant from SRSA for quarter

ending June and September 2009.2. National Lottery Fund sponsorship, which BSA has not

received for two years has been recovered. The amount R659 000.00 which was acquired will be used exclusively for training and development.

3. The remaining income is derived from sanctioning & licensing fees.

4. In an attempt to cut to cut costs, BSA decided to in future; (1)the designing & printing of annual reports will be done in house, (2) replace resigned staff with staff already in BSA service instead of recruiting new staff from outside. (3) negotiate ownership over the assets that are being leased, and (4) determine other expenses that can be done away with.

MISCONCEPTIONSArticle dated October 2009 “ The Star article titled Boxing SA lifts executive’s salary 45%

despite its insolvency” “ Current board members received a combine R117 000 for their duties to Boxing SA.

Former board chairman Dali Mpofu, who was paid R11 000 in 2008, received a further R6 700 in this past financial year, while current chairman Peter Ngatane was paid R21 000, up from the R10 000 he received in 2008.”

• BSA Response The BSA board members are non paid private persons who do the job of boxing

activities on a voluntary basis. They are neither paid by SRSA nor BSA, but are however, paid emoluments based on the meetings they attend and the hours thereof.

There has been reports that while BSA has been in financial crisis board members went on to pay themselves emoluments amounting to R117 000.

With an exception of Adv Dali Mpofu who is no longer a member of BSA, the amounts mentioned have not been paid to the board members accrue from the period of time they have been engaged and are still them. This is due to the financial crisis and will be paid to them when BSA recovers.

BSA is set to consider the tax implications of this situation as the members may still be taxed according to law even though they have not yet received the money.

MISCONCEPTION“.... chief executive Bongani Khumalo’s salary

rose from R624 000 in 2008 to more than R1 ,million in the past financial year.”

• BSA’ Response Mr Khumalo was appointed on January 2007, but only

commenced his duties in June 2007 due to ill health. This means for the first six months of his contract he did not work. The quoted amount of over a million is therefore the sum total of his annual salary, backpay, leave pay as well as his medical expenses which were recovered form his monthly salary.

Closing Remarks.

With five months to go, BSA is in an all systems go state for 2009/10 Financial year audit, the current work force has a passion, determination and a drive to go where there is no path so that they leave the trail.

"Failure is simply the opportunity to begin again, this time more intelligently." -Henry Ford.

Thank you for your time