Presentation to the Parliamentary Portfolio Committee on Energy

Presentation to the Parliamentary Portfolio Committee on Energy SANEDI Annual Report 2012/13 MR KM NASSIEP CEO 17 OCTOBER 2013

CONTENTS Production / Costs Reducing the Carbon Footprint Corporate Information SANEDI’s Assets – its People Management of Income , expenditure , transfers , cash and assets Inputs to different sections of the Financial Statements Report on Financial Misconduct Highlights Achievements as per the APP Audit and Risk Committee Audit Findings and Action Plan

PRODUCTION/COSTS Production • 100 hard copies • 400 copied to USB Costs of Production • Hard copy – R 425. 00 each • USB – R 95. 00 each

REDUCING THE CARBON FOOTPRINT Environmental responsibility Collective responsibility Recycled paper Benefits of using recycled paper Other initiatives too to reduce company’s carbon footprint Actions of today will save the environment tomorrow Using e- annual reports reduces company overheads – savings could be utilised elsewhere in the organisation

CORPORATE INFO Vision To serve as a catalyst for sustainable energy innovation, transformation and technology diffusion in support of South Africa’s sustainable development that benefits our nation. Mission Advance innovation of clean energy solutions and rational energy use that effectively supports SA’s national energy objectives and the transition towards a sustainable , low carbon energy future Values Innovation, Accountability, Transparency, Integrity, Professionalism, National Interest , Batho Pele

SANEDI’s ASSETS – IT’s PEOPLE Category WM IM CM BM WF IF CF BF Executive Management 0 0 1 0 0 0 Senior Management 4 1 0 0 0 1 Acting CFO 0 0 0 1 0 Manager : Corporate Support 0 0 0 1 0 0 IT Manager 0 1 0 0 0 Accountants 0 0 0 1 System Administrator 0 0 0 0 1 Centre Managers 1 0 0 0 2 0 0 0 Project Managers 0 0 0 2 0 0 Public Awareness Officer 0 0 0 2 Project Officers 0 0 0 2 0 0 0 1 Admin Officer 0 0 0 1 0 0 Research Assistants 0 0 1 Personal Assistant 0 0 0 1 1

SANEDI’s ASSETS – IT’s PEOPLE. . cont… Category WM IM CM BM WF IF CF BF Receptionist 0 0 0 0 1 Interns 0 0 0 2 0 0 Consultants 5 0 0 1 0 0 Refreshment 0 0 0 0 2 10 1 1 11 4 2 2 11 Officers TOTAL

SANEDI’s ASSETS – IT’s PEOPLE. . continued Permanent staff = 8 Contract = 14 = 75% Female representation = 53% staff HDI representation Total staff compliment = 42

Management of income, expenditure, transfers, cash and assets Income/Accumulated surplus Expenditure DOE Transfer 50, 110 33, 552 IT Infrastructure 6, 000 4, 430 EU AIM project (smart grids 71, 800 - SDC 4, 258 1, 852 SACCCS 22, 426 6, 282 WFE 34, 294 6, 477 Green Transport 1, 712 2, 380 • • • Application in terms of section 53(3) was made to National Treasury for R 16, 558 surplus for the year. SANEDI is currently busy with implementation of its own ERP system; expected roll-out of the new system is November 2013. Processes used during the implementation is based on best practice; including PFMA, Treasury Regulations for Schedule 3 A and all GRAP reporting requirements.

Inputs to different sections of financial statements Commitments: SANEDI has entered into various contracts with service providers for the achievement of its key deliverables Working for Energy programme (R 19. 6 m) Centre for Energy Systems Research (R 2. 2 m) Hub for Energy Efficiency & Demand Side Management (R 4. 2 m) Clean Energy programme (R 1. 6 m).

Inputs to different sections of financial statements…cont… Irregular expenditure: SANEDI incurred R 12. 6 m irregular expenditure as a result of Procurement processes not being followed which are detailed below: – R 3. 3 m – no notification for deviations from procurement process above R 1 m. The procurement decision enacted while SANEDI was still a Schedule 2 public entity within the CEF Group; – R 0. 3 m – three responsive quotes were not obtained in all instances; – R 7. 6 m – procurement of goods and services above R 30, 000. 00 from 8 December 2012 were not evaluated as per PPPFA legislation; and – R 1. 4 m – no approval of application in terms of Treasury Regulation 16 A 6. 4 to deviate from the standard procurement process.

Report on financial misconduct There was no financial misconduct

Highlights : SACCCS Core Parties – SANEDI – SASOL – Norwegian Embassy – Eskom – Do. E Participants – Anglo American – Xstrata Coal – Total Coal – Petro. SA – Exarro – Alstom

Highlights : Carbon capture and storage globally and in South Africa Large-scale carbon capture and storage (CCS) plants have been operating globally since 1996 South African has been looking at CCS since 2002 CCS may enable South Africa to continue utilising local, abundant coal reserves while reducing CO 2 emissions In 2009, the South African Centre for CCS was established In 2010, the Atlas on Geological Storage of CO 2 in South Africa was released The next step in the South African CCS Roadmap (endorsed by cabinet in 2013) is the Pilot CO 2 Storage Project

Highlights : The Pilot CO 2 Storage Project (PCSP) aims to store 10 – 50, 000 t. CO 2 in South Africa Work is underway by SACCCS to identify a site for the PCSP with KZN and EC showing potential SACCCS is currently analysing existing geological data while planning further data acquisition The Department of Energy has committed R 197 million to the PCSP with the World Bank allocating another USD 25 million Legal and regulatory clarity as well as positive public engagement are crucial for the success of the PCSP

Highlights : French-funded Technical Advisory Facility, (TAF) A soft-credit facility to finance sustainable energy initiatives in South Africa, with the purpose of alleviating the current energy situation and addressing future supply concerns. The AFD credit line will finance small and mediumsized investments in the field of energy efficiency and renewable energy made by private South African companies in the industrial and commercial sectors, through 3 participating banks, (namely ABSA Bank Ltd, IDC Ltd and Nedbank Ltd). Projects qualify for Energy Efficiency funding to retrofit existing installations, including on-site cogeneration, rehabilitation of boilers, regenerative burners, commercial energy efficient building construction and design, such as energy efficient heating and ventilation systems, construction materials, as well as combined heat and power generation. Renewable Energy investments, including power generation for own consumption or for sale to the national grid, also qualify. 16

Highlights : Technical Advisory Facility, (TAF). . cont…. The implementation of this form of financing requires a Technical Assistance Facility (TAF), to support the emergence of targeted investments and the evaluation of their technical eligibility for the credit line. SANEDI will provide the required technical assistance in support of the sustainable energy credit line in South Africa and together with a consortium of local and international expertise, we will offer the service to the broader public, including educational, technical and communications support to the South African public. AFD (Agence Française de Developement), is a French public bi-lateral development finance institution, acting on behalf of the French government in various countries throughout the world. Key strategic objectives of the AFD include poverty reduction, economic growth and combating climate change. 17

Residential Sector - ‘Limited Offer’ Tax Incentives SANEDI believes that in-line with international trends, ‘limited offer/ duration’ tax incentives should be offered on specified energy efficient household appliances, including SWH’s. This can be aligned to the imminent compulsory implementation of the Energy Efficient Appliance Labelling Programme by the Do. E and dti, in South Africa. SANEDI will submit a proposal to National SANEDI Treasury, via the Do. E, in the 1 st quarter of the 2014/15 business cycle, to consider such an option, ie. to first assess the implementation of the 12 -L Tax Rebate system, as well as progress with the finalisation of the National Appliance Labelling roll-out. 18

Highlights : Corporate Social Responsibility Children of Fire Under privileged children who have been burnt Staff contributed Company contributed

ACHIEVEMENTS AS PER APP Objectives Administration and Corporate Governance Indicator Executive support Target Performance Result Reason for non – achievement of targets Responses and presentations to Achieved Do. E and the Minister of Energy as and when required EXCO minutes completed and distributed on a monthly basis Achieved Support Services (services dependent on CEF) Quarterly evaluation of services as Achieved documented in the SLA Corporate Governance Compliance to relevant legislation Achieved Effective and efficient operations /administration Achieved Corporate Not Achieved Corporate and Programme Marketing and communication services Monitoring and evaluation of Not Achieved corporate and programme marketing and communication plan Financial Management and management accounting SANEDI budget coordinated and aligned to strategic plan and annual performance plan by 30 November 2012 Achieved The corporate communication plan is complete but has not been approved and implemented. The plan will be approved in the first quarter in 2014. As above

ACHIEVEMENTS AS PER APP…. cont… Performance Result Objective Indicator Target Spending monitored and financial performance reported on the monthly basis at the Budget Sub Committee Achieved Debt and revenue due to SANEDI Achieved managed and accurately and timeously recorded and the cash book managed on a monthly basis SANEDI assets managed on a monthly basis Achieved SANEDI expenditure and creditors Achieved managed on a monthly basis Programme Management Accounting reported monthly IT infrastructure and systems Achieved ICT strategic plan developed, approved and implemented Achieved Mechanisms to enhance energy data collection and storage provided Achieved Project Management system implemented SLA with CEF for ICT services approved Achieved Reason for non – achievement of targets

ACHIEVEMENTS AS PER APP…. cont… Objective Indicator Target Performance Result Reason for non – achievement of targets IT Disaster Recovery plan developed, approved and implemented The SANEDI IT Disaster Recovery Plan has not been developed due to the delay of the Enterprises Resources Management system. SANEDI has adopted the CEF ICT Disaster Recovery Plan until the SANEDI ICT plan is developed Enterprises resources management system implemented Applied Research : Advanced Fossil Fuels Not achieved Not Achieved The Enterprises Resources management system has not been implemented due to delays in the procurement process and funding received Clean Coal technologies Complete 4 existing CCT (CCT) to facilitate the projects by 31 March 2013 optimisation and efficient use of coal and decrease greenhouse gas emissions Achieved

ACHIEVEMENTS AS PER APP…. cont… Objective Indicator Target Technical support to the Coal Road Map Oil and Gas R&D Frameworks – to facilitate the optimisation and efficient use of oil and gas and decrease greenhouse gas emissions Carbon capture and storage (CCS) to determine the potential and appropriateness of technologies for the geological storage and carbon dioxide in SA Performance Result Reason for non – achievement of targets Achieved Financial Management of Achieved the South African Coal Road Map (SACRM) Framework for oil and gas Partially Achieved R&D frameworks and submission to Do. E by 31 March 2013 Sourcing of funding Achieved Completion of current projects Not Achieved The frameworks was completed by 31 March 2013 but the reports to the Do. E were only submitted in the first quarter of 2013/14 financial year The draft final report was received but was returned to the consultant to revise after review by Technical Committee

ACHIEVEMENTS AS PER APP…. cont… Performance Result Objective Indicator Target Preparation of further exploration of the Zululand Basin International cooperation Applied Research : Smart grids SA smart grid vision which will set the direction to enhance supply reliability and the effective operations of the electricity distribution industry (EDI) Achieved Minutes of stakeholder workshops Achieved Report and presentation to SANEDI Board of Directors Submit a briefing document to the Do. E by 31 March 2013 Current state assessment to amongst Terms of reference others define the EDI constraints from a document s holistic system reliability and real time data availability perspective Achieved Reason for non – achievement of targets

ACHIEVEMENTS AS PER APP…. cont…. Objective Indicator Target Performance Result Resource requirement identified Smart grid scoping document Technology, governance and service gap analysis and defined solutions /actions to realise the smart grid vision Achieved Minutes of work group Achieved Technology, regulatory , institutional policy , skills , ICT gaps and propose solutions identified Smart grid business case Motivation for smart grid with clearly defined project proposals including a funding plan Smart grid Implementation Pilot project running , applied research plan and results as defined in respect of the pilot project demonstrated Optimised solution Documented results and defined smart portfolio to underpin the grid benefits business case Achieved Reason for non – achievement of targets

ACHIEVEMENTS AS PER APP…. cont… Objective Indicator Target Performance Result Data enhancement , energy management improvement, reliability improvement and contribution to effective energy planning documented Consolidated smart grid industry guideline Applied Research : Renewable Technologies /Clean Energy Solutions Achieved Business case and guidelines and National strategy for smart grids developed by 31 March 2013 Achieved Co ordinate RE (renewable energy)research in South Africa , facilitate RE research , collaboration, participation, standards development and technology evaluation, contribute to RE skills development , support RE business development and RE awareness creation to stakeholders and students Projects, pilots and demonstrations – Wind Atlas South Africa (WASA) , Waste to Energy plant, Algal biofuels and solar road map RECORD RE research co ordination mandate Achieved is confirmed, a co ordinated renewable energy research effort in SA with stakeholder buy in and support , a number of research projects are funded by RECORD, value offering to serve RE research paying clients , a platform for international inter-institutional research is expanded and RECORD participates effectively in standard development and technology evaluation Continue as per work plan and seek funding extension from RDE for WASA Achieved Pre- feasibility investigations Achieved Reason for non – achievement of targets

ACHIEVEMENTS AS PER APP…. cont…. Objective Indicator Target Performance Result Set – ups Achieved Support to Solar park Meteorological (MET) station Set up solar measuring station Not Achieved Representation of South Africa in an international forum whereby technical knowledge is gained and skills are transferred. Globalisation of expertise and leveraging of research funding Maintain IEA and EU FP 7 agreements, build up more collaborations and attempt to increase funding Achieved Develop a national Green Transport strategic vision and technology development plan including a status quo and gap analysis for alternate fuels and propulsion systems in SA by 31 March 2013 Not Achieved Reason for non – achievement of targets Applied Research: A national Green Transport strategic vision and Programme technology development plan including a status quo and gap analysis for the alternate fuels and propulsion systems in RSA developed Project delayed due to land matters that need to be addressed at the solar park. Delays in funding and scope definition with the Department of Transport. Until funding is secured the sustainability of the project is not guaranteed and it can result in wasteful expenditure to commence the programme until a funding stream has been secured

ACHIEVEMENTS AS PER APP…. cont… Objective Performance Result Reason for non – achievement of targets Indicator Target Develop a technology development incubation centre to offer “Soft Start” facilities to companies and technology partners who are entering the Green Transport sector Develop the institutional framework and participation Charter for the incubation centre by 31 March 2013 Not Achieved The terms of reference and request for proposals are being prepared Initiate the call for proposals and expression of interests for prospective partner organisations n or benefactors Operate the Centre Not Achieved As above Not Achieved Delays in funding and scope definition with the Department of Transport. Until funding is secured the sustainability of the project is not guaranteed and it can be wasteful expenditure to commence the programme until a funding stream has been secured

ACHIEVEMENTS AS PER APP…. cont… Performance Result Objective Reason for non – achievement of targets Indicator Target Develop various demonstration projects in the various alternate fuels and propulsion systems to showcase these technologies and create an enabling environment to bring these alternatives to the market Develop various demonstration projects in the various alternate fuels and propulsion systems to showcase these technologies. Standards and best practices developed Not Achieved Funding constraints Modelling and regulation frameworks developed Not Achieved Funding constraints Situational Analysis completed Not Achieved Funding constraints Demonstration projects commissioned Not Achieved Funding constraints Lessons learnt and best practices communicated through Public Advocacy Programme Participate in international collaboration partnerships Not Achieved Funding constraints Participate in international knowledge sharing for a to bring best of breed to full commercialisation Achieved

ACHIEVEMENTS AS PER APP…. cont… Performance Result Objective Indicator Target Establish knowledge sharing clusters Achieved Participated in both Achieved local and international events and activities Develop a substantive public advocacy programme to create market acceptability for alternate fuels and propulsion systems to allow successful market penetration and sustainability Promote technology Achieved and knowledge sharing through the SANEDI website and communicated through the Public Advocacy Programme Viral portal platforms Achieved developed Print media platforms Achieved developed Reason for non – achievement of targets

ACHIEVEMENTS AS PER APP…. cont… Objective Indicator Target Events and exhibitions staged Performance Result Achieved Feedback loops created Applied Research : Data Knowledge management Applied Research : Working for Energy Achieved Development of the integrated data repository – functional , accurate , integrated and user- friendly database Coordinate and facilitate development of database by 31 March 2013 and oversee project Achieved Review and develop a strategic plan and develop a funding plan by 31 March 2013 Renewable Energy : Invite tenders, process, assess and approve project proposals Renewable Energy : Kwa- Mashu Biomass to Energy project Review strategic direction , develop a strategic plan and develop a funding plan by 31 March 2013 Not Achieved Approve project proposals to develop 5 megawatt (MW) by 31 March 2013 Achieved Negotiated Management and operational agreement for the Kwa- Mashu biomass to energy plant Not Achieved Reason for non – achievement of targets A proposal has been sent to the DST and DEA for funding. Discussions being held The governance process of the project (PPP) is currently in the hands of Ethekwini Metro. Once this process is complete , SANEDI will contribute towards the project

ACHIEVEMENTS AS PER APP…. cont… Objective Bela Biogas (Phase 2) Phillipi Biogas Project Reason for non – achievement of targets Not Achieved Project is delayed due to non – responsiveness of the service provider Reticulation of the biogas to Not Achieved the neighbouring community Indicator Performance Result Project is delayed due to non – responsiveness of the service provider Implementation of the revised interventions Delayed due to the prioritisation to streamline learning from the Bio energy cluster project Target Procurement and implementation Not Achieved University of Fort Hare – Implementation of revised Achieved Renewable Energy interventions Research Facility Rehabilitation of the bio- Achieved digester for research and development under faculty of science

ACHIEVEMENTS AS PER APP…. cont…. Performance Result Objective Indicator Target Melani Village Biogas Project Implementation of the Not Achieved revised interventions Fort Cox Bio energy Project Phase 2 Mpfuneko Biomass Project Implementation of the Not Achieved revised interventions , addition of 1 digester , connection of the gas to the kitchen and other facilities for utilisation Implementation and Not Achieved roll out of community bio- digesters Reason for non – achievement of targets The contract has been concluded between SANEDI and Fort Cox College. The College is finalising BEE accreditation The contract has been concluded between SANEDI and Fort Cox College. The College is finalising the BEE accreditation A contract has been concluded between SANEDI and the service provider – implementation will commence in 2014

ACHIEVEMENTS AS PER APP…. cont… Objective Indicator Lucingweni Project Target Performance Result Biomass Implementation and Not Achieved rehabilitation of control battery room to become a community early childhood centre retrofitted with energy efficiency and renewable energy technologies Walter Sisulu University Implementation and re- Not Achieved RECORD Establishment establishment of the renewable energy facility for rural energy research under the facility of science Coal Fuel Tablet (CFT) Implementation and Not Achieved feasibility study using coal dust to produce alternative energy Working for Energy Implementation of the Not Achieved Outreach programme outreach programme for the WFE programme Reason for non – achievement of targets Stakeholder consultation completed and the agreement reached for the establishment of the ECD centre. Community negotiations are on –going with the Nyandeni District Municipality for the joint implementation of the Green ECD Centre Delayed due to the slow response form the University contact persons. A decision has been taken to establish a parallel facility at the Nelson Mandela University Project delayed due to non – responsiveness of the service providers. Finalisation of the proposed roll out plan with the Department is still work in progress

ACHIEVEMENTS AS PER APP…. cont… Performance Result Objective Indicator Tshireleco Renewable Demonstration project Target School Implementation and Not Achieved Energy establishment of a Centre demonstration centre for renewable energy and energy efficiency under the department of science within the school Energy Management : Invite Approved project Partially Achieved tenders , process, assess, proposals to deliver 500 approve project proposals kilowatt energy management projects Reason for non – achievement of targets The Mo. A between SANEDI and Tshireleco High School has been finalised – implementation will commence in the first quarter of 2014 The Mo. A negotiations with the Gauteng department of Infrastructure Development (DID) is in the process for the greening of at least 4 schools. Technology supply tenders will be issued between SANEDI and DID

ACHIEVEMENTS AS PER APP…. cont…. Performance Result Objective Applied Research : Energy Efficiency Indicator Target Integrated public advocacy plan, draft consultation paper in place, coordinate and facilitate implementation and overseeing implementation Measurement and verification – integrated on line system developed Integrated plan developed and submitted to Do. E Achieved Integrated on line system fully operational Achieved Demand side energy diversification ; Multi Stakeholder Advisory Group in place and fully functional Achieved Ad hoc project development and 2 projects developed technical support : Number of and proposed to the projects proposed Do. E International collaboration : Contributions to international collaboration efforts Achieved Membership and Achieved participation in CEMGSEP activities and IEA 4 E Implementing Agreement on behalf of Do. E Reason for non – achievement of targets

Audit and Risk Committee The Audit and Risk Committee currently consists of two independent non-executive members. The Chairperson is a CA(SA) and a CIA (Certified ) Internal Auditor) – Mr Viren Magan Other member is a registered CA(SA) – Ms Mizeria Nyathi Regarding independence - Members sign declaration of interests. They are also not involved in daily activities of SANEDI nor do they have any business with SANEDI

Audit and Risk Committee. . cont… The audit committee has noted that the system of internal controls that is in place needs to be reviewed and improved to ensure that it is appropriate in all material respects to: ‑ reduce risks to an acceptable level; ‑ meet the business objectives; ‑ ensure all assets are adequately safeguarded; and ‑ ensure that transactions undertaken are recorded in the accounting records.

Audit and Risk Committee. . . cont… Internal and external audit provides the audit committee with reasonable assurance that the majority of internal controls are appropriate and effective. This is achieved by means of the risk management process, as well as the identification of corrective actions and suggested enhancements to the controls and processes. From the various reports of the internal and external auditors, the Audit Committee noted that matters which indicated any deficiencies in the system of internal control have been brought under management's attention and corrective measures are being implemented.

Audit and Risk Committee …. . cont… The company implemented a risk management strategy which includes the fraud prevention plan. A formal risk assessment was undertaken for the year ended 31 March 2013 with quarterly reviews, updates and reports. Consequently, internal audit used this data to prepare the 3 year rolling strategic plan and the annual operating audit plan. The risk committee monitored the significant risks faced by the company through reviewing risk reporting and participation in the risk assessment workshop. The Committee is satisfied that significant risks were managed to an acceptable level.

Audit and Risk Committee …. . cont… The Committee acknowledge that the company continues to strive towards complying sound principles of corporate governance. As per our discussions with management, management confirms that the content and quality of monthly and quarterly reports prepared and issued by the Chief Executive Officer during the year under review were properly formulated and have complied with the PFMA in this regard.

Audit and Risk Committee …. cont… • • • The Committee have: Reviewed and discussed the audited annual financial statements to be included in the annual report, with the Auditor‑General of South Africa and the Accounting Officer; Reviewed the entity's compliance with legal and regulatory provisions; Reviewed the Auditor‑General of South Africa's management report and management's responses thereto; Reviewed changes in accounting policies and practices; and Reviewed significant adjustments resulting from the audit. The Committee concurs and accepts the Auditor‑General of South Africa's (AGSA) report on the annual financial statements, and is of the opinion that the audited financial statements be accepted and read together with the report of the AGSA.

Audit and Risk Committee…. . cont… The following major findings were discussed at the Audit and Risk Committee meeting held on 30 July 2013: Irregular expenditure on Procurement; this resulted in disclosure in the annual financial statements of R 12. 6 million. Fruitless and wasteful expenditure of R 0. 02 million. A penalty of 5%, amounting to R 2, 090. 18, was raised for late payment of a previous supplier invoices. Restating of prior year figures due to error identified.

Audit and Risk Committee. . cont… The Audit and Risk Committee concluded the following : Proper Procurement processes need to be put in place. The procurement policy needs to be aligned to prevent; detect and mitigate any fruitless and wasteful; unauthorised and irregular expenditure. The revised procurement policy and procedure should also include all recommendations made by AG. All staff to undergo training on Procurement process for Schedule 3 A public entity. The Board will need to condone the irregular expenditure incurred in 2012/13.

AUDIT FINDINGS AND ACTION PLAN AUDIT FINDINGS SUMMARY COMPONENT MANAGEMENT RESPONSE Material adjustments made to the financial statements after submission Financials In its establishing business case, SANEDI proposed that a transitional plan be implemented that would see a gradual shift away from the dependence on CEF (SOC) Ltd. An 18 month period was originally envisaged. ACTION PLAN PROPOSED The SANEDI policies and processes will be drafted to specifically include the appropriate processes to be followed during the preparation of annual financial statements. Controls should be put in place to ensure proper financial management and reporting lines to be communicated to all staff The following policies and /or procedures have been drafted and will be submitted to EXCO for approval • Journal Management • Revenue Management • Asset Management • Petty Cash • Fruitless and wasteful expenditure A copy of all contracts and agreements must be submitted to Finance to ensure that the accounting treatment is in terms of the GRAP statements Request copies of all contracts from CEF Legal All draft contracts will be submitted to the CFO office before sending to the CEO for signature

AUDIT FINDINGS AND ACTION PLAN …cont… AUDIT FINDINGS SUMMARY COMPONENT Incorrect accounting for Financials the Centre for Carbon Capture and Storage : the assets , liabilities and income are to be recognised separately with SANEDI showing liability for any funds invested on behalf of CCS MANAGEMENT RESPONSE ACTION PLAN PROPOSED SANEDI established SACCCS as an instrument to Awaiting the Governance review for house and administer funds and activities on behalf SACCCS. of donors and private sector partners. At no stage , was the Centre intended to be an autonomous structure outside of SANEDI. The SANEDI Board on the strength of a previous recommendation fro m the AG insisted that the annual workplan be approved by the SANEDI Board as this is the accounting authority responsible for the budget since neither SACCCS nor its Board of Governance are a legal entity. All procurement over R 1 m is sent to the SANEDI Board for approval. Some of the staff costs are paid directly from the SANEDI base allocation from MTEF. Unauthorised Financials accumulation of surpluses All procurement above R 1 m must be tabled at the SANEDI Board for approval. National Treasury and AG should be notified The surpluses as well as the contingent liability will be disclosed in the financial statements and a request will be done to NT to retain the surpluses Commitments which relate to the following financial year must be disclosed as Contingent Liability. Application for surplus funds or accumulated deficits should be sent to NT by 31 May (together with unaudited financial statements )

AUDIT FINDINGS AND ACTION PLAN …cont… AUDIT FINDINGS SUMMARY COMPONENT MANAGEMENT RESPONSE ACTION PLAN PROPOSED SANEDI specific policies and procedures SANEDI entity SANEDI currently still has a SLA in place with CEF (SOC) Ltd for support services , therefore the CEF systems , policies and procedures are still being used The current SLA with CEF needs to be revised. The following services should be housed within SANEDI – Procurement , Finance , Logistics and Facilities, Secretariat and IT SANEDI is currently in the process of implementing its own ERP system and the policies and procedures will be drafted during this process to be in line with PFMA requirements for Schedule 3 A public entity and industry best practice The ERP implementation is scheduled for 25 November 2013. As the system is tested, the policies and procedures will be amended. Assets not in the Assets Register Assets A reasonableness calculation was submitted to the Auditors taking the opening balances and any additions and disposals into account. The balance was then compared to information in the asset register. The difference between the reasonableness calculation and the asset register was not material. All assets are to be delivered to Logistics for receipting and then to Finance to barcode before issuing to user. Assets not bar coded Assets There is a control deficiency identified by management due to the fact that SANEDI was operating using a decentralised process. SANEDI has now implemented controls to ensure that one line function is responsible for receiving and bar coding assets All assets are to be delivered to Logistics for receipting and then to Finance to barcode before issuing to user.

AUDIT FINDINGS AND ACTION PLAN …cont… AUDIT FINDINGS SUMMARY COMPONENT MANAGEMENT RESPONSE ACTION PLAN PROPOSED Depreciation of assets bot done according to policy Assets The tangible asset policy used by SANEDI will be amended to reflect the correct depreciation rates for all assets. This will be submitted to the Board for approval SANEDI to relook at the Asset Management policy and ensure depreciation rates are amended accordingly. This will be submitted to Board for approval SANEDI is currently busy with the implementation of a new ERP system. Busy with the exercise to determine the correct depreciation period for all assets as well as the residual life for assets. . When the exercise is completed , all amendments to assets will be revised and correcting entries processed before implementation of the new system Differences between the fixed assets register and the financial statements Assets The office equipment costs were incorrectly mapped to the office furniture. , hence the difference. The computer equipment difference is merely a rounding difference as caseware rounds off to the nearest rand. The IT infrastructure costs are for IT software which were purchased for the new ERP system. The disclosure in the AFS was corrected. Segregation of duties- Accountant should prepare the financial statements , Finance Manager should review and the CFO must perform the final review

AUDIT FINDINGS AND ACTION PLAN …cont… AUDIT FINDINGS SUMMARY COMPONENT MANAGEMENT RESPONSE ACTION PLAN PROPOSED Appropriate procurement processes not followed : City Square Procurement In its establishing business case , SANEDI proposed that a transitional plan be implemented that would see a gradual shift away from dependence on CEF (SOC) Ltd. An 18 month period was initially envisaged. Seeing that the budget required to ensure independence from CEF was not secured through the MTEF , a more gradual move away from CEF was required. The business case that refers to the independence from CEF and the related transitional plan was approved by National Treasury. All SANEDI staff are to undergo training on Supply Chain Management. SANEDI to establish relevant committees as recommended in the PPPFA, namely BEC and BSC. Active interactions with the AG and NT regarding specific procurement matters within SANEDI. Due to the abovementioned , SANEDI had to acquire premises in close proximity to CEF as we shared telephony, network and other support services. An underground cable serves to connect the two buildings in terms of the network and telephony network. SANEDI is highly dependent on CEF for financial management systems and HR systems as well as Legal, Secretariat, and Internal Audit services.

AUDIT FINDINGS AND ACTION PLAN …cont… AUDIT FINDINGS SUMMARY COMPONENT MANAGEMENT RESPONSE ACTION PLAN PROPOSED Incorrect scoring of bids Procurement The SANEDI policy does indicate a scoring process and the requirements of the 80/20 principle for bids below R 1 m and the 90/10 principle for bids over R 1 m The revised policy aligned to PPPFA submitted to EXCO and then Board for approval A scoring criteria practice note is also operationalised. As the bid was not based on commercial scoring only, the base score was not material to the outcome Incorrect thresholds used when evaluating bids Procurement In terms of Practice note 8, entities may use lower thresholds than that stipulated in the Treasury Regulations. SANEDI therefore took a prudent approach and used lower thresholds as SANEDI is still in its infancy stage as a schedule 3 A entity. The Procurement policy was approved by the SANEDI Board. Limit will remain R 200 000. 00 until the ERP system is fully operational and procurement irregularities identified, mitigated and prevented Supplier SBD 4’s do not contain correct information- bidders do not supply correct bidding documentation Procurement The SBD 4 document was attached to Bid documents as the CEF standard document. When tenderers were tested for responsiveness this conflict was not raised. A SANEDI staff member acted inappropriately by declaring her knowledge of this company. This SANEDI staff member who has knowledge of this company played no part or influence in the award. Ensure that the SBD 1 -9 documents are aligned to the prescripts of National Treasury Regulations. SBD forms are used as per National Treasury’s guidelines

AUDIT FINDINGS AND ACTION PLAN …cont… AUDIT FINDINGS SUMMARY COMPONENT MANAGEMENT RESPONSE ACTION PLAN PROPOSED Errors in request for proposal documentation – Software tender Procurement The RFP was issued by CEF Procurement office without being submitted to the Procurement Committee for review. The use of a base document and a cut and paste probably led to the errors in the document which was further exacerbated by the lack of proof reading All Bid documents to be tabled before the Procurement Committee for vetting prior to release Functionality not used to evaluate Microsoft tender Procurement The Bid Evaluation Committee as chaired by CEF Procurement erred in this regard as functionality was determined on limited criteria which was not consistent with the RFP. The remedial steps as reflected hereunder will prevent recurrence. Complete bid documents to be tabled at the Procurement Committee before authority to release is granted. . A standing Bid Evaluation Committee is constituted to ensure consistence. Members appointed July 2013. Unfair disqualification of bidders Procurement The Bid Evaluation Committee as chaired by CEF Procurement erred in this regard as functionality was determined on limited criteria. , which was not consistent with the RFP. It is not fair to expect their Procurement Manager to lead the process with due diligence and procedural correctness Complete bid documents to be tabled at the Procurement Committee. Before authority to release is granted. A standing bid evaluation is constituted to ensure consistence. Information Technology Service Continuity – Management have nit tested the IT disaster recovery plan SANEDI entity Shortcomings of the current Disaster Recovery Plan were identified and are being addressed. The new plan will be tested by the end of Q 3 Need to draft a disaster recovery plan and business continuity for tabling at EXCO once the ERP system is implemented – Dec 2013 or Jan 2014

AUDIT FINDINGS AND ACTION PLAN …cont… AUDIT FINDINGS SUMMARY COMPONENT MANAGEMENT RESPONSE ACTION PLAN PROPOSED Procurement Control Deficiencies Procurement The CEF Procurement staff should be competent and current on all matters, Treasury Regulations , practice notes and guidelines irrespective of the different classifications of a schedule 2 or 3 public entity and be able to handle the matters pertaining to the procurement requirements for SANEDI in accordance with the SLA. CEF no longer involved in SANEDI Procurement. All SANEDI staff to undergo training on Supply Chain Management. SANEDI to establish relevant committees as recommended in PPPFA, namely the BEC and BSC. Active interactions with the AG and NT regarding specific procurement matters with SANEDI Bids not evaluated in required time period Procurement Bids will be evaluated within 14 days as per Treasury guidelines No Bid Adjudication Committee Procurement SANEDI is busy building capacity to take over the entire SCM functionality Operational 1 st July 2013. Enhanced by training sessions and monthly dialogue session. Delays in awarding of tenders Procurement A Bid Evaluation Committee was constituted although a record of proceedings was not adequate. Procurement process enhancement Development of a template to ensure all relevant information is recorded BEC appointed 18 July 2013 Meetings are now being recorded. Minutes need to be circulated to members and should be signed by the Chair

AUDIT FINDINGS AND ACTION PLAN …cont… AUDIT FINDINGS SUMMARY COMPONENT MANAGEMENT RESPONSE ACTION PLAN PROPOSED Poor IT controls over tender submission email address Procurement The Procurement buying office is outsourced to CEF Procurement under a SLA. It is not fair to expect their Procurement Manager to lead the process with due diligence and procedural correctness As from July 2013 , SANEDI will be responsible for its own buying. A Procurement Officer and a Procurement Manager should be appointed. Development of a control sheet for all bids to be signed off by the BSC , ICT, Procurement and the Senior Manager responsible before tabling at the Procurement Committee and bid documents released Only submissions that comply with the required sign offs are considered at the Procom meetings Functionality criteria not objective Procurement When purchasing a commercially developed and off the shelf product one needs not specify too deeply for such items. For instance , when wanting to purchase Microsoft office , it would be reasonable to assume that this is the sole developer and that one would need to specify would be the level of package. Complete bid documents to be tabled before the Procurement Committee before authority to release is granted Misstatements in the bonus provision Provision Internal Audit checked the calculation and based on the outcome adjustments have been processed SANEDI Finance to submit bonus provision calculation to Internal Audit for review before passing entry in financial statements

AUDIT FINDINGS AND ACTION PLAN …cont… AUDIT FINDINGS SUMMARY COMPONENT MANAGEMENT RESPONSE ACTION PLAN PROPOSED Inadequate evidence for performance appraisals CEF HR will ensure that senior and line managers are well informed about the performance review policy and their respective monitoring role/responsibility in this regard. The GM Corporate Services will be the accountable officer in this regard. All staff to submit quarterly reviews to the Manager : Corporate Services by 15 th of month after expiry of the last quarter. This will then be submitted to HR. Once SANEDI ha s the ERP system implemented , quarterly reviews will be done electronically and available on the system. Provision of receivables understated Receivables The journal for provision for bad debt for Do. E, Alstom and NYSDP was submitted on 3 July 2013 Debtors outstanding for longer than 60 days are followed up by the Accountant during the year. This should be reported to the FM or the CFO on a quarterly basis. Interest not levied on long overdue debtors Receivables The nature of a majority long overdue invoices is in respect of grants, donor funds and membership fees that SANEDI receives for its operations and applied research and therefore no interest is charged on this. The debtors management procedure will be updated to include interest to be charged to other debtors. The nature of the debtors will be specified in the revised SANEDI debtors policy The Revenue Management policy drafted will indicate the nature of SANEDI’s debtors and stipulate the interest clauses for debtors where interest will be applicable

AUDIT FINDINGS AND ACTION PLAN …cont… AUDIT FINDINGS SUMMARY COMPONENT MANAGEMENT RESPONSE ACTION PLAN PROPOSED Creditors reconciliations not done correctly Payables Auditors findings noted. With the implementation of the new ERP system the monthly reconciliations will be done monthly and not when payments are made only. The intern and /or creditors clerk will prepare monthly creditor reconciliations and submit to the Accountant for review. Any long outstanding creditors should be followed up by the Accountant. Accruals are overstated Payables Various Accruals will only be raised for PO’s where the invoice is still outstanding. All other invoices should be raised in AP. Incorrect accounting for Donor Funding Income The deferred income for SANEDI and Green Transport has been corrected All finance staff to attend GRAP training No accounting policy for membership fees Income SANEDI will also draft its own Revenue Policy which will include the recognition and measurement criteria for membership fees Revenue management policy should address all items of income for SANEDI

AUDIT FINDINGS AND ACTION PLAN …cont… AUDIT FINDINGS SUMMARY COMPONENT MANAGEMENT RESPONSE ACTION PLAN PROPOSED Interest expense not valid Expenses In terms of the agreements signed with the third parties it specifically states that any interest accrued on surplus funds must be accounted for in that specified period Interest should be accounted for as per the signed agreements Expenses not correctly classified The accounting fees were for an external company to provide assistance with the SACCCS reporting and were not services provided by CEF in terms of the SLA. The classification between advertising and marketing was corrected All items must be correctly classified. Monthly review by the Accountant of reconciliations will identify and prevent possible incorrect classification Expenses