Report of the auditor-general to Parliament on National Lotteries Commission Report on the audit of the
consolidated and separate financial statements
QUALIFIED OPINION
| 1. | I have audited the consolidated and separate financial statements of the National Lotteries Commission and its subsidiaries (the group) set out here which comprise the consolidated and separate statement of financial position as at 31 March 2018, the consolidated and separate statement of financial performance, statement of changes in net assets, statement of cash flows and statement of comparison of budget and actual amounts for the year then ended, as well as the notes to the consolidated and separate financial statements, including a summary of significant accounting policies. | ||||||||
| 2. | In my opinion, except for the effects of the matter described in the basis for qualified opinion section of my report, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of National Lotteries Commission as at 31 March 2018 and its consolidated financial performance and consolidated cash flows for the year then ended, in accordance with the South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) and the requirements of the Public Finance Management Act of South Africa, 1999 (Act No. 1 of 1999) (PFMA). | ||||||||
| 3. | In my opinion, the separate financial statements present fairly, in all material respects, the separate financial position of National Lotteries Commission as at 31 March 2018 and its separate financial performance and separate cash flows for the year then ended, in accordance with the SA Standards of GRAP and the requirements of the PFMA. | ||||||||
BASIS FOR QUALIFIED OPINION |
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| Consolidated financial statements | |||||||||
| 4. | The National Lotteries Commission has not consolidated its subsidiary the National Lotteries Participants Trust that had been formulated for the purpose of the protection of the participant’s prize monies and sums for distribution. Under the SA Standards of GRAP 6, the National Lotteries Commission should have consolidated this subsidiary. Had the subsidiary National Lotteries Participants Trust been consolidated, many elements in the accompanying consolidated financial statements would have materially changed. The effects on the consolidated financial statements of the failure to consolidate have not been determined for 31 March 2018 and corresponding figures. | ||||||||
| Context for the opinion | |||||||||
| 5. | I conducted my audit in accordance with the International Standards on Auditing (ISAs). My responsibilities under those standards are further described in the auditor-general’s responsibilities for the audit of the consolidated and separate financial statements section of this auditor’s report. | ||||||||
| 6. | I am independent of the group in accordance with the International Ethics Standards Board for Accountants’ Code of ethics for professional accountants (IESBA code) and the ethical requirements that are relevant to my audit in South Africa. I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA code. | ||||||||
| 7. | I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my qualified opinion. | ||||||||
| Responsibilities of the accounting authority for the financial statements | |||||||||
| 8. | The board, which constitutes the accounting authority is responsible for the preparation and fair presentation of the consolidated and separate financial statements in accordance with the SA Standards of GRAP and the requirements of the PFMA, and for such internal control as the accounting authority determines is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error. | ||||||||
| 9. | In preparing the consolidated and separate financial statements, the accounting authority is responsible for assessing the National Lotteries Commission’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going-concern basis of accounting unless the accounting authority either intends to liquidate the group or to cease operations, or has no realistic alternative but to do so. | ||||||||
| Auditor-general’s responsibilities for the audit of the consolidated and separate financial statements | |||||||||
| 10. | My objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements. | ||||||||
| 11. | A further description of my responsibilities for the audit of the consolidated and separate financial statements is included in the annexure to this auditor’s report. | ||||||||
| Report on the audit of the annual performance report | |||||||||
| Introduction and scope | |||||||||
| 12. | In accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA) and the general notice issued in terms thereof, I have a responsibility to report material findings on the reported performance information against predetermined objectives for selected objectives presented in the annual performance report. I performed procedures to identify findings but not to gather evidence to express assurance. | ||||||||
| 13. | My procedures address the reported performance information, which must be based on the approved performance planning documents of the group. I have not evaluated the completeness and appropriateness of the performance indicators included in the planning documents. My procedures also did not extend to any disclosures or assertions relating to planned performance strategies and information in respect of future periods that may be included as part of the reported performance information. Accordingly, my findings do not extend to these matters. | ||||||||
| 14. | I evaluated the usefulness and reliability of the reported performance information in accordance with the criteria developed from the performance management and reporting framework, as defined in the general notice, for the following selected objectives presented in the annual performance report of the group for the year ended 31 March 2018: | ||||||||
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| 15. | I performed procedures to determine whether the reported performance information was properly presented and whether performance was consistent with the approved performance planning documents. I performed further procedures to determine whether the indicators and related targets were measurable and relevant, and assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete. | ||||||||
| 16. | I did not raise any material findings on the usefulness and reliability of the reported performance information for the following
objectives:
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| OTHER MATTER | |||||||||
| 17. | I draw attention to the matter below. | ||||||||
| Achievement of planned targets | |||||||||
| 18. | Refer to the annual performance report here for information on the achievement of planned targets for the year and explanations provided for the over achievement of a number of targets. | ||||||||
| Report on the audit of compliance with legislation | |||||||||
| INTRODUCTION AND SCOPE | |||||||||
| 19. | In accordance with the PAA and the general notice issued in terms thereof, I have a responsibility to report material findings on the compliance of the group with specific matters in key legislation. I performed procedures to identify findings but not to gather evidence to express assurance. | ||||||||
| 20. | I did not identify any instances of material non-compliance with selected specific requirements of applicable legislation, as set out in the general notice issued in terms of the PAA. | ||||||||
| OTHER INFORMATION | |||||||||
| 21. | The accounting authority is responsible for the other information. The other information comprises the information included in the annual report. The other information does not include the consolidated and separate financial statements, the auditor’s report and those selected objectives presented in the annual performance report that have been specifically reported in this auditor’s report. | ||||||||
| 22. | My opinion on the consolidated and separate financial statements and findings on the reported performance information and compliance with legislation do not cover the other information and I do not express an audit opinion or any form of assurance conclusion thereon. | ||||||||
| 23. | In connection with my audit, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements and the selected objectives presented in the annual performance report, or my knowledge obtained in the audit, or otherwise appears to be materially misstated. | ||||||||
| 24. | As a result of the qualified opinion expressed on the financial statements, I do not conclude on material misstatements of the other information relating to the financial statements. If, based on the work I have performed relating to the audit of performance information and compliance with legislation, I conclude that there is a material misstatement of this other information, I am required to report that fact. | ||||||||
| 25. | I have no matters to report in this regard. | ||||||||
| Internal control deficiencies | |||||||||
| 26. | I considered internal control relevant to my audit of the consolidated and separate financial statements, reported performance information and compliance with applicable legislation; however, my objective was not to express any form of assurance on it. The matter reported below is limited to the significant internal control deficiencies that resulted in the basis for the qualified opinion and the findings on compliance with legislation included in this report. | ||||||||
| LEADERSHIP | |||||||||
| 27. | Leadership did not exercise oversight responsibility regarding financial reporting. | ||||||||
| FINANCIAL AND PERFORMANCE MANAGEMENT | |||||||||
| 28. | Management did not ensure that the applicable reporting framework, SA Standards of GRAP, was correctly applied in terms of consolidation of annual financial statements of the group. | ||||||||
AUDITOR-GENERAL SOUTH AFRICA
Auditing to build public confidence
20 August 2018
