Report of the Portfolio Committee on Defence on the 2007/2008 annual report of the Castle of Good Hope
The Portfolio Committee on Defence, having considered
the 2007/2008 Annual Report and the financial statements of the
The Defence Endowment Property Act (Act 33 of 1922)
The 2007/2008 Annual Report of the
2. 2007/2008 ANNUAL REPORT OF THE
2.1 OVERVIEW OF PERFORMANCE
The period under review was characterised by the possible transfer of the management of the Castle from the Department of Defence (DOD) to the Department of Arts and Culture (DAC) before the Castle Management Act Repeal Bill was withdrawn.
The following matters regarding the functioning and service delivery of the CCB were highlighted:
· The CCB received an unqualified audit report from the Auditor-general.
· The CCB increased its annual net profit by 14 percent, reporting a R1.871 million profit, which reflects a sound financial position.
· The Good Hope Art Studio has been actively involved in supporting the arts through assisting communities for non-commercial purposes, assisting the Castle to create a friendly environment for visitors.
· The CCB co-hosted the Cape Town Military Tattoo with the South African National Defence Force (SANDF).
· The CCB is heavily reliant on the SANDF for the day to day maintenance of facilities.
· The non-essential maintenance was suspended which resulted in a maintenance backlog in the Castle.
· While strides in the filling of vacancies were made, the CFO and CEO have not yet been appointed.
· The CCB spent 10 percent of its annual income on salaries. The entity has 18 fulltime employees with seven being remunerated by the CCB, and the remaining 11 being remunerated by the DOD.
The following achievements against stated objectives were presented to the Committee. These broad objectives are stipulated in the Castle Management Act.
2.1.1 To preserve and protect the military and cultural history of the
(a) Key objectives:
o To preserve Cape Military Heritage.
o To maintain, preserve and protect the Castle.
o To ensure good governance.
(b) Actual performance:
The completion of
the exhibition on the Wars of the
education and preservation of
o The day to day maintenance of the exterior walls, woodwork and slated pathways of the Castle as well as increased security.
o Systems put in place to improve the governance of the Castle include:
(a) The imminent appointment of an audit committee;
(b) The finalisation and implementation of a Supply Chain Management Policy as well as the Conservation Management Plan;
(c) The Department of Defence and CCB intend to identify and clarify relations with stakeholders.
2.1.2 To optimise the tourist potential of the Castle.
(a) Key objective:
o To create a professional and competent corporate image.
(b) Actual performance:
o An increase of 5% in visitors (excluding functions and events) to 130 000 visitors.
2.1.3 To maximise the accessibility to the public.
(a) Key objectives:
o Increase the Castle’s public profile and create a positive perception of the Castle across all sectors of the community.
additional services to visitors at the
(b) Actual performance:
A 5 percent
increase in visitors’ figures generated from tourists (local/foreign) visiting
3. FINANCIAL PERFORMANCE
3.1.1 FINANCIAL STATEMENTS
The CCB reported a significant improvement in its financial position especially its cash position which allows the Castle to cover for contingencies in the future. The following can be highlighted:
· A 14 percent increase in the annual net profit mainly due to the income generated from the Military Tattoo, ticket sales, and other investment income.
· A 10 percent increase in profits from its operations.
· Increased expenditure on maintenance. Maintenance is reported as the biggest expenditure item, namely 23 percent of total expenditure. A 543 percent increase in the maintenance costs of buildings and properties.
· While trade receivables decreased by R20 000, payables increased by R8000. This means that debt owed to the Castle decreased, while debt owed by the Castle increased.
· Due to an increase in short-term investments, the CCB reported a 35 percent increase in cash and cash equivalents.
3.1.2 REPORT OF THE AUDITOR-GENERAL
· No audit committee was appointed as required by Treasury Regulations and the PFMA.
· No internal audit function was in place as required by Treasury Regulations and the PFMA.
· An executive director has not been appointed to the Board as required by the Castle Management Act.
· A vice-chairperson to the Board has not been appointed as required by Treasury Regulations.
· A Chief Financial Officer has not been appointed as required by Treasury Regulations.
· A supply chain management policy has been developed but not yet implemented.
· Five vacancies on the CCB are reported for the period under review. No supporting letters for the appointment of the Board members are available.
· No risk management policy exists as required by the PFMA
· According to the Income Tax Act, the Castle should apply for income tax exemption if it receives income that can be of a taxable nature. The revenue that is received by the Castle for making its venues available for hire, could constitute taxable income.
During the presentation to the Portfolio Committee, the acting Chairperson of the CCB informed Members of the mitigating measures taken to address matters raised in the A-G report. These were highlighted as follows:
· The development of a rectification plan that would address matters of non-compliance by the end of 2008/2009 financial year.
· The establishment of an audit committee.
· The development of an internal audit charter while the Department’s Inspector–General would assist in the establishment of an internal audit function.
· The appointment of a vice-chairperson on 4 April 2008.
· The filling of certain vacancies on the Board.
· The establishment of a management directive for the appointment of a CEO.
· The finalisation of a draft risk management policy.
· All relevant documentation for a tax exemption status will be completed for the submission to the South African Revenue Service (SARS).
4. COMMITTEE RECOMMENDATIONS
The Portfolio Committee on Defence makes the following
recommendations in respect of the 2007/2008 Annual Report and Financial
Statements of the
· The CCB must address the outstanding matters of non-compliance with applicable legislation and matters of governance as raised in the A-G Report.
· The CCB must develop a strategic business plan for the Castle to provide strategic direction towards the achievement of the CCB’s objectives.
· In order to achieve financial sustainability, the CCB must explore additional sources of funding.
· The CCB must ensure that all sources of income generated in the Castle are reinvested for the daily management of the Castle.
· Alternative international best management practices must be explored by the CCB, including the possibility of a Public Private Partnership (PPP).
· The CCB must consider the appointment of a CEO and CFO as a matter of urgency. These appointments should be based on adequate available resources, be sustainable, and must add value to the entity. These appointments must be made in the next financial year.
· The CCB must ensure that the necessary supporting documentation regarding appointments of Board members by respective stakeholders is available. Noting that the representative of the Western Cape Legislature to the CCB has not been appointed, the Committee urges the provincial legislature to finalise such an appointment as speedily as possible.
The DoD, with the active cooperation
and support of the Department of Public Works, should ensure the holistic
preservation and maintenance of the
· The DoD should ensure the responsible management of the Castle and all other immovable military heritage resources.
· The DoD (Minister of Defence) should continue to exercise strategic control and management of the Castle, and remain the Executive Authority of the Castle and the CCB.
The Committee commends the CCB on the following achievements:
· Improved management of the Castle
· An unqualified audit opinion by the Auditor-general, and
· The healthy financial position of the CCB
Report to be considered.