SANBS Digital Integrated Report | Board Committees Focus and Future Focus

Our value creation is underpinned by good governance

Board committees’ current and future focus

Audit Committee

The role of the committee includes, but is not limited to, carrying out the responsibilities outlined in section 94 of the Companies Act as well as to assist the Board in the effective discharge of its responsibilities which includes the effectiveness of assurance functions and services as well as the integrity of reports issued.

Rob Theunissen
Chair: Audit Committee

Members
who served on HRRC over period ending 31 March 2021

A Ramalho
(until 22 January 2021)
Prof W Gumede
(retired 9 July 2020)
F Burn

G Leong
S Fakie
(from 22 January 2021)
T Mokgatlha
(from 16 April 2021)

Declaration

The Committee reports that for the year ended 31 March 2021, it is satisfied that it has fulfilled its responsibilities in accordance with the Companies Act, the Board Charter, the Committee Terms of Reference, King IV™ and other applicable standards and codes.

Background statement (Aligned to the amended terms of reference)

The overarching role of the Committee entails assisting the Board in providing independent oversight of:

The effectiveness of the Company’s assurance functions and services, with particular focus on combined assurance arrangements, including external service providers, internal audit service providers, management and the finance function
The integrity of the annual financial statements (‘AFS’) integrated annual report (‘IAR’) and other financial reports issued by the Company

Specific Responsibilities of the Committee:

The Committee has the following specific responsibilities in respect of the external audit: » Read More

Ensuring that the external auditor's appointment complies with the Companies Act and any other legislation pertaining to the appointment of auditors
Assess the external auditor’s independence from the Company. In doing so it should consider the following:
- The policy and controls that address the provision of non-audit services by the external auditor, and the nature and extent of such services rendered during the financial year
- The tenure of the external audit firm and, in the event of the firm having been involved in a merger or acquisition the tenure of the predecessor firm
- The rotation of the designated external audit partner
- Consider significant changes in the management of the organisation during the external audit firm’s tenure which may mitigate the attendant risk of familiarity between the external auditor and management
Determine the fees to be paid to the auditor and the auditor’s terms of engagement
Ensure that any non-audit services performed by the external auditors are pre-approved after consideration of the nature and extent of the services
Consider audit findings, qualifications and reservations arising from the external auditor’s management letters/reports
Annually review the quality and the effectiveness of the external audit
Recommend to Council the appointment of the external auditor every year

The Committee has the following specific responsibilities in respect of internal audit: » Read More

Ensure that the arrangements for internal audit provide the necessary skills and resources to address the complexity and volume of risk faced by the Company
Final approval of the appointment, remuneration, performance management and dismissal of the Chief Audit Executive (‘CAE’), including that the position has the necessary competence, gravitas and authority
Approval of the internal audit charter
Approval of the scope and plan of internal audit
Review of the effectiveness of the CAE and the arrangements for internal audit

The Committee has the following specific responsibilities in respect of finance function: » Read More

Review annually the effectiveness of the Chief Financial Officer (‘CFO’) and the finance function
Monitoring implementation and compliance with the business plan and budget, and considering the appropriate corrective actions in the case of a deviation or variation from these
To receive and deal appropriately with any concerns or complaints, whether from within or outside the Company relating to accounting practices and internal control, content or auditing of the financial statements, the internal financial controls or any related matter
Oversight responsibilities over supply chain management which includes recommending tenders for approval to the Board as required by the Procurement Policy and oversight of contracts management

The Committee has the following specific responsibilities in respect of reporting: » Read More

Review the AFS, focusing on:
- Ensuring that any change in accounting policies and practices and the consequences thereof are reported upon
- Significant financial estimates, based on judgement, which are included in the AFS
- The appropriateness of major adjustments processed at year-end
- The going concern assumption
- Assurance that the internal financial reporting controls are adequate and form a reliable basis on which the AFS are produced
- Compliance with accounting standards, local and international
- Compliance with statutory and other relevant requirements
- Details of remuneration paid to directors and management
Oversee the integrity of the Annual Integrated Report including:
- Evaluating the significant judgements and reporting decisions made by management affecting the Annual Integrated Report
- Establishing and recommending the extent that assurance is required on the matters recorded in the Annual Integrated Report through internal or external assurance providers
The review of the Annual Integrated Report and annual financial statements taken as a whole to ensure that they present a balanced and understandable record of the company’s position, performance and prospects
Consider the arrangements in place for combined assurance and furnish views on its effectiveness
The Committee has a general responsibility to oversee and report to the Board on the effectiveness of the design and implementation of internal financial controls and on the nature and extent of any significant weaknesses in the design, implementation or execution of internal financial controls that resulted in material financial loss, fraud, corruption or that may have affected the integrity of external reports issued by the Company

Key focus areas for the period under review (1 April 2020 to 31 March 2021)

The primary concern of the committee was to ensure effective internal controls and accounting systems as well as effective governance. This was considered in the light of disclaimed audit opinions which were issued by the external auditors for the years ended 31 March 2018, 2019 and 2020 -which were essentially due to credit notes that had been incorrectly issued as invoices resulting in monies paid to SANBS that were not due, coupled with concomitant concerns.

The committee deliberated extensively with management, the external auditors and internal auditors to fully understand the reasons for the deficient controls and to oversee the implementation of remedial action to ensure effective controls over the issuing of credit notes, accounts receivable as well as other accounting transactions with potentially ineffective controls.

Both internal and external audit significantly increased their scope of assurance work, particularly in the areas of revenue and receivables. This was burdensome on all concerned but ultimately bore fruit albeit that a qualified audit opinion has been issued by the external auditors for the year ended 31 March 2021. The qualification is due to the potential impact of the disclaimed audit opinion in the prior year and the resultant effect on the opening balances for the year ended 31 March 2021 in respect of trade receivables, detailed above, and the non-adoption of IFRS9 (Financial Instruments) from the year ended 31 March 2019.

Although a qualified external audit opinion is regrettable it is pleasing that the qualification pertains to prior financial years. The committee considers that an unqualified opinion could be obtained for the year ending 31 March 2022. It should be noted that independent forensic investigations were performed and that there is no evidence of any fraudulent activity.

Other focus areas of the committee for the year were:
- Reviewing the effectiveness of the combined assurance framework, internal control environment and overseeing that identified weaknesses were appropriately and expeditiously addressed
- Overseeing adherence to all applicable legislation and prescripts
- Ongoing assessments regarding whether or not SANBS is a going concern
- Assessing the independence and objectivity of the external auditors and meeting with the external auditors in closed sessions
- Considering the external auditors’ audit scope and plan
- Approving the external auditors’ fees and pre-approving the non-audit scope and fees for managing the Whistle-blowing hotline
- Assessing the skills and effectiveness of the internal auditors and considering the overall internal control environment within SANBS
- Ensuring that the internal audit plan is risk-based and monitoring adherence to the plan by internal audit
- Liaising with the Risk Committee in terms of existing and emerging risks and mitigating controls
- Considering internal audit reports together with management’s comments and overseeing that control deficiencies identified by internal audit are appropriately and timeously addressed
- Inducting two new board members into the audit committee viz. Messrs Shauket Fakie and Thabo Mokgatlha
- Assessing the skills and competencies of the Chief Financial Officer, Ms Tshepi Maesela, and key finance team members
- Reviewing the budget for the year ending 31 March 2022 and recommending the budget for approval by the Board
- Considering any procurement expenditure in excess of R25 million and recommending such expenditure for approval by the Board
- Receiving and attending to reports emanating from the Fraud hotline which were the remit of the committee
- Considering, reviewing and recommending the annual financial statements for approval by the Board

Future focus areas of the Committee (1 April 2021 to 31 March 2022)

RISKS

CAPITALS

KING IV^TM

STAKEHOLDERS

Human Resources and Remuneration Committee

The Committee has the task of ensuring that all Human Resource policies and practices are fair, competitive and in line with best practice and current legislation to enable the organisation to recruit and retain the best talent for optimal performance against its strategic objectives. The Committee also ensures that staff members are fairly and equitably remunerated for their contribution, both in respect of guaranteed and variable pay.

P Mthethwa
Chair: Human Resources and Remuneration Committee

Members
who served on HRRC over period ending 31 March 2021

P Mthethwa
(Chair from 27 August 2020)
Prof W Gumede
(Chair until 9 July 2020)
G Simelane
(until 21 January 2021)

R Theunissen
G Leong (since 22 January 2021)
S Fakie
(since 22 January 2021)

Declaration

The Committee has executed its responsibilities in accordance with an approved mandate.

Background statement (Aligned to the amended terms of reference)

The overarching role of the Committee is tasked by the Board with, amongst others, the responsibility to ensure that:

A suitable strategic human resources framework is in place to deliver the organisational objectives agreed by the Board
A competent executive management team is in place with reference to appointment, competency, remuneration and performance management
A Remuneration policy for all employees is in place to assist in achieving the Company’s strategy
Remuneration of non-executive directors’ is approved

Specific Responsibilities of the Committee:

The Committee has the following specific responsibilities in respect of the management of human resources: » Read More

At the instruction of the Board, to facilitate and coordinate the recruitment of the CEO and the Company Secretary, it being recorded that the appointment of executive managers (other than the CEO) must be the responsibility of the CEO and where appropriate in consultation with the Board
To oversee development, implementation and regularly review succession plans for executive managers, including the CEO and any other position of strategic importance to the Company
To receive and consider recommendations from the CEO on the executive management structure and where appropriate, recommend any changes to the Board
At the instruction of the Board, oversee the development, implementation and the monitoring of programmes and policies designed to attract and retain high calibre executive managers to lead the Company towards successfully achieving its objectives
To review performance measurement criteria and/or process for executive management and other employees, where appropriate
To regularly review key human resources related policies and where appropriate, recommend changes to the Board
To receive and consider employee wellness and employment equity reports, skills development and learning
To oversee the implementation of the SANBS THREAD values which are:
- Transparency
- Honesty
- Respect
- Excellence
- Accountability
- Diversity

The Committee has the following specific responsibilities in respect of remuneration: » Read More

Regular review of remuneration policies that will promote the achievement of the Company’s strategic objectives and encourage individual performance. The policies contemplated herein may:
- Oversee the remuneration packages of executive management, including but not limited to basic salary, fees, allowances, benefit in kind, annual bonuses, performance-based incentives, pensions, long-service awards and any other benefits;
- Set remuneration principles at all employment levels; and
- Oversee any other matter relevant to remuneration;
To assist the Board in ensuring that employees are fairly but responsibly rewarded;
To recommend the approval of non-executive directors’ remuneration at the appropriate National Council meeting;
To recommend for final approval to the Board, the annual wage mandate prior to negotiation with representative of trades union and in consultation with the CEO, Chief Financial Officer and Human Resources Executive, taking into account affordability.

Key focus areas of the Committee for the period under review (1 April 2020 to 31 March 2021)

Oversight of leadership appointments:
- Ravi Reddy - appointed as CEO effective 1 January 2021
- Avril Manduna - appointed as Company Secretary effective 1 August 2021
Ensured a continued focus on the well-being and safety of all staff, especially heightened with the ongoing impact of the COVID-19 pandemic, giving rise to an increasing number of staff contracting the virus and unfortunate staff fatalities as a result
Oversight of filling vacant positions with fixed term contracts
Considered and made recommendations on the annual wage mandate prior to negotiation with representative trade unions
Approved performance bonus metrics
Commissioned a staff turnover benchmarking exercise
Oversight and support of the continued implementation of the SANBS Culture DNA process and the #360 Degree Leadership Assessments
Retained oversight of the implementation of the BBBEE Transformation Framework with emphases on skills development, employment equity and gender and race parity
Provided guidance and support of the RAD Academy to transform learning and innovation
Oversight and monitoring of tip-offs anonymous reports and investigations and review of relevant HR policies to promote the highest level of ethics and integrity among all SANBS employees
Review of employment related policies to enhance equality, diversity and inclusion in the workplace
Continued oversight of succession planning with a focus on business imperative roles
Review and approval of post-retirement medical aid benefits
Oversight of labour matters with the CCMA and the Labour Court
Review of the Committee’s Terms of Reference

Future focus areas of the Committee (1 April 2021 to 31 March 2022)