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________________________ Chairperson
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Per GL de Lange Chartered Accountant (SA) Registered Auditor Director 01 September 2011
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Directors Report
for the year ended 31 May 2011 The directors have pleasure in presenting their report for the year ended 31 May 2011. Business activities Business Against Crime South Africas (BACSA) prime activity is to act as a strategic supporter of Government in leveraging a rapid and substantial reduction in crime to enable a safe and secure South Africa. Funding The Company is dependent upon raising sufficient donations, sponsorships and grants to meet its ongoing expenditure and settle its liabilities in the normal course of its operations. The directors believe that with the continued support of the business community and with Governments renewed commitment to work with the organisation in the fight against crime and the improvement of the Criminal Justice System, BACSA will be able to mobilise sufficient funding to ensure maintenance of its status as a going concern in the year ahead. For this reason the directors continue to adopt the going concern basis in preparing the annual financial statements. Financial statements During the year ended 31 May 2011, donations totalling R19.1 million (2010: R18.1 million) were received. These together with the deferred income in respect of core and non-core projects of R2.7 million (2010: R1.8 million) brought forward from the prior year, formed the core funding base for the Companys operations. Generally, BACSA limits its expenditure to the extent of funds on hand. Whilst the current year would have resulted in a shortfall of R2.7 million (2010: R1.8 million) being reflected, in line with our accounting policy on income, all surplus donor funds at year end 31 May 2011 (on hand and invoiced) have been accounted for on the statement of financial position as funds received in advance or deferred funding. As a result, a nil amount is reflected in the statement of comprehensive income. As BACSA does not have retained earnings, nor any other form of equity, a statement of changes in equity is not presented as part of the annual financial statements. Nothing came to the attention of the board in regard to any material breakdown in financial controls during the year. Directors Directors in office during the year are: MJ Lamberti (Chairperson) GM Ralfe SS Nzimande (Deputy Chairperson) SM Seabi (Chairperson Business Against Crime Northwest) RC Andersen WJH Scholtz LL Dippenaar YZ Simelane FV Dlamini DR Smollan AKL Fihla MDJ Steenkamp (Chairperson Business Against Crime Northern Cape) MB Glatt J Sturgeon MC Joshua (Chairperson Business Against Crime Western Cape) JS Vilakazi PM Maduna BP Vundla ACG Molusi GJ Wright* (Chief Executive Officer) TP Moseki OB Smith (Chairperson Business Against Crime Mpumalanga) *Executive Director Secretary The company secretary at the date of this report is Nexia Levitt Kerson. Business Address: Fourth Floor, Aloe Grove 196 Louis Botha Avenue Houghton Estate, 2198 Tel: 011483 4000 Postal Address: Private Bag 1523 Johannesburg 2000
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Non-current assets Property, plant and equipment 10 780 006 780 006 51 354 51 354
Current assets Other receivables Current tax assets Cash and cash equivalents 11 3 742 832 359 6 519 154 10 262 345 2 711 636 26 990 8 799 813 11 538 439
Total assets
11 042 351
11 589 793
Equity
Liabilities
Current liabilities Other payables Deferred funding 13 12 1 955 420 9 086 931 11 042 351 1 231 680 10 358 113 11 589 793
11 042 351
11 589 793
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Revenue
21 970 854
20 300 846
5 9
Finance income Finance costs Profit before income tax Income tax expense Profit for the period Other comprehensive income for the period Total comprehensive income for the period
7 7
_ _ _ _
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Cash utilised in operating activities Interest received Interest paid Net cash utilised from operating activities
15
Proceeds on sale of property, plant and equipment Acquisition of property, plant and equipment Net cash (utilised)/generated from investing activities 10
(2 280 659)
(3 210 108)
Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period 11
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1.
Business Against Crime South Africa (the Company) is a company domiciled in South Africa. The address of the Companys registered office is 4th Floor Aloe Grove, 196 Louis Botha Avenue, Houghton Estate. The financial statements of the Company as at the year ended 31 May 2011 comprise the Company only. The Company is primarily involved in supporting Government in an endeavour to rapidly and substantially reduce the levels of crime in South Africa.
Reporting Entity
2. 2.1
Basis of Preparation
Statement of Compliance The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and its interpretations adopted by the International Accounting Standards Board (IASB), and in the manner required by the Companies Act in South Africa. The financial statements were authorised for issue by the Board of Directors on 1 September 2011.
2.2
Basis of Measurement The financial statements have been prepared on the historical cost basis as modified for the revaluation of financial assets and financial liabilities. Functional and Presentation Currency The financial statements are presented in South African Rand, which is the companys functional currency. Use of Estimates and Judgements The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. No critical estimates or judgements were made in preparing these financial statements.
2.3 2.4
2.5
BACSA doesnt have any profits or losses as they only recognise revenue on a systematic basis in the same periods in which the expenses are recognised. For this reason the retained earnings balance is zero. Due to the retained earnings balance being zero and BACSA not having any other forms of equity, a statement of changes in equity has not been presented as part of the annual financial statements.
3.
The accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied consistently by the Company.
3.1
Financial Instruments
(i) (ii)
Non-derivative financial assets The Company initially recognises receivables and deposits on the date that they are originated. Loans and receivables Loans and receivables comprise trade and other receivables. Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less.
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3.2
Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within other income in profit or loss. Subsequent costs The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company, and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. Depreciation Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term. The estimated useful lives for the current and comparative periods are as follows: Computers 3 Years Office equipment 3 Years Furniture 6 Years Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
3.3
Leases in terms of which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Other leases are operating leases and, except for investment property, the leased assets are not recognised in the Companys statement of financial position.
Leased assets
3.4
The Company considers evidence of impairment for receivables at both a specific asset and collective level. All individually significant receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified.
Impairment
3.5 3.6
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.
A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
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3.7
Revenue comprises sponsorships, donations and other income received from donors to be utilised by Business Against Crime. Invoiced funding is recognised initially as deferred income at fair value when there is reasonable assurance that they will be received and the Company will comply with the conditions associated with the funding. Funding received by the Company is initially recognised as deferred income and is then recognised in profit or loss as revenue on a systematic basis in the same periods in which the expenses are recognised. Conditional income grants are recognised when the related expenditure has been incurred.
Revenue
3.8
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Determining whether an arrangement contains a lease At inception of an arrangement, the Company determines whether such an arrangement is or contains a lease. A specific asset is the subject of a lease if fulfilment of the arrangement is dependent on the use of that specified asset. An arrangement conveys the right to use the asset if the arrangement conveys to the Company the right to control the use of the underlying asset. At inception or upon reassessment of the arrangement, the Company separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Company concludes for a finance lease that it is impracticable to separate the payments reliably, an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. Subsequently the liability is reduced as payments are made and an imputed finance charge on the liability is recognised using the Companys incremental borrowing rate.
Lease payments
3.9
Finance income comprises interest income on funds invested, changes in the fair value of financial assets at fair value through profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Finance costs comprise interest expense on borrowings, changes in the fair value of financial assets at fair value through profit or loss, and impairment losses recognised on financial assets.
3.10
A number of the Companys accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. Property, plant and equipment The fair value of items of plant, equipment, fixtures and fittings is measured at cost less accumulated depreciation and accumulated impairments. Trade and other receivables The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. Trade and other payables Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method.
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3.11
The company has exposure to the following risks from its use of financial instruments: credit risk liquidity risk This note presents information about the Companys exposure to each of the above risks, the Companys objectives, policies and processes for measuring and managing risk, and the Companys management of capital. Further quantitative disclosures are included throughout these financial statements. Risk management framework The Board of Directors has overall responsibility for the establishment and oversight of the Companys risk management framework. The Board has established the Audit and Risk Committee, which is responsible for developing and monitoring the Companys risk management policies. The committee reports regularly to the Board of Directors on its activities. The Companys risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Companys activities. The Company Audit and Risk Committee oversees how management monitors compliance with the Companys risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. Credit risk Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Companys receivables from customers and bank balances. The demographics of the Companys counterparties indicate that there is no concentration of credit risk. Trade and other receivables Management considers the demographics of the Companys customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk, particularly in the currently deteriorating economic circumstances. Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Companys approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Companys reputation.
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4.
Revenue
Donations from Companies Deferred Income Agencies Industry bodies Total Donations Revenue 19 182 847 2 774 140 13 867 21 970 854 15 653 309 1 776 317 402 669 2 468 551 20 300 846
At 31 May 2011 the Company has deferred revenue of R9.1 million which represents the fair value of that portion of the consideration received or receivable in respect of donations made for which expenditure has as yet, not been incurred.
5.
Other income
Government-reimbursement Net gain/(loss) on sales of property, plant and equipment Sundry income 521 672 1 193 203 110 (5 338) 8 829 206 601
6.
Personnel expenses
Staff costs Remuneration (20 employees) Increase/(Decrease) in liability for annual leave Directors remuneration for services as executive directors 10 478 261 71 521 2 117 500 10 723 160 (83 835) 2 927 583
The executive director is employed on a three-year contract with the current directors contract expiring on 31 August 2012.
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7.
Finance income interest income on bank and call deposits Finance costs interest expense on financial liabilities Net finance costs recognised in profit or loss
8.
9.
Expenditure disclosure
Expenditure is arrived at after taking into account:
Consultancy fees Depreciation Management fees paid to BAC Provincial Cos Operating lease charges
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10.
58 202 58 202
Depreciation and impairment losses Balance at 1 June 2009 Depreciation for the year Disposals Balance at 31 May 2010 822 689 44 083 (213 540) 653 232 43 652 14 550 58 202 318 283 18 414 (8 523) 328 174 234 365 36 204 (88 183) 182 386 1 418 989 113 251 (310 246) 1 221 994
Balance at 1 June 2010 Depreciation for the year Disposals Balance at 31 May 2011
58 202 58 202
Carrying amounts
14 550
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11.
The monies held in trust were for the completed CJSP/USAID project and were due to be refunded to USAID on completion of the project close procedures. The monies in trust reconciled as follows: Trade and other payables Deferred funding (212991) (863657) 1076 648
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12.
Deferred funding
Balance at 1 June 2010 Transfer from deferred income account CJSP/USAID Deferred donations Core projects Balance at 31 May 2011 (863 657) 2 366 615 (2 774 140) 9 086 931 399 114 (512 368) (1 776 317) 10 358 113 10 358 113 12 247 684
Deferred funding represents ring-fenced income received for the Criminal Justice Strengthening Programme and core project initiatives. At year-end, the expenses relative to the funding have not yet been incurred. As and when this takes place, the funding will be allocated accordingly. The Deferred funding amount is made up as follows.: Business Against Crime Core Projects Outstanding Debtors CJSP/USAID 5 483 308 3 603 623 9 086 931 8 257 448 1 237 008 863 657 10 358 113
13.
Other payables
Other payables Non-trade payables and accrued expenses 1126 904 325 291 1452 195 Liability for service leave 503 225 1 955 420 393 630 406 346 799 976 431 704 1 231 680
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14.
Financial instruments
Credit risk Exposure to credit risk
The carrying amount of financial assets represents the Companys maximum credit exposure. The maximum exposure to credit risk at the statement of financial position date was:
Other receivables Current tax Total loans and receivables Cash and cash equivalents
Not past due Past due 0 30 days Past due 31 120 days More than 121 days
Based on historical default rates, the company believes that no impairment allowance is necessary in respect of trade receivables not past due date or past due date up to more than 121 days, as this relates to donations received subsequent to the reporting date therefore no impairment has been provided for.
Liquidity risk The contractual maturities of the financial instruments are equal to the carrying amount. There are no amounts payable past one year.
Interest rate risk At the reporting date the interest rate profile of the Companys interest-bearing financial instruments was:
There were no financial liabilities exposed to an interest rate risk at year end.
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15.
16.
Operating leases
Non-cancellable operating lease rentals are payable as follows: In respect of property rental
339 504
391 832
The company has two operating leases that are used as business premises and the details are as follows: Morning View Office Park, Sandton The lease is for 1 year and expires at 31 October 2011 with an option to renew for a further 1 year period. The annual escalation of the lease payments is 10%. 2 Hopendene Grove, Durban The 2-year lease expired on 31 May 2011. At the end of the contract period Business Against Crime South Africa has agreed to a monthly lease with a 60-day notice period. The annual escalation of the lease payments is 10%. During the year ended 31 May 2011, R995 145 was recognised as an expense in the statement of comprehensive income in respect of operating leases. (2010: R838 548).
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17.
Related Parties
Transactions with key management personnel There have been no transactions with Directors or key management personnel during the reporting period and as such no transactions have been reported. Other related parties Business Against Crime South Africa has cooperation and service level agreements in place with the following provincial structures: Business Against Crime Western Cape Business Against Crime North West Business Against Crime Mpumalanga Business Against Crime Eastern Cape
Payments to the respective provincial structures for services rendered on national projects on behalf of Business Against Crime South Africa were as follows:
2011 R Business Against Crime Western Cape Business Against Crime North West Business Against Crime Mpumalanga Business Against Crime Eastern Cape 888 000 432 000 420 000 432 000
18.
No events which would have been material to these financial statements occurred between balance sheet date and the date of this report.
Subsequent events
19.
In terms of the property operating lease contracts bank guarantees have been issued in favour of both the landlords in relation to the performance of such operating lease. Both the guarantees are substantiated by current cash holdings. In the event of default the maximum exposure would be R142 000. The terminations of the guarantees are to coincide with the termination of the operating leases.
Contingencies
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