FASSET ANNUAL REPORT

27. Contingencies Discretionary projects First time employer registrations

The Skills Development legislation allows an employer, registering for the first time, 6 months to submit an application for a Mandatory Grant. At the reporting date it is estimated that, as a result, additional Mandatory Grant expenditure of R 561 000 (2020: R1 288 000) will be payable. The amount is contingent on the number of submissions received and approved. Legal case In October 2019, BUSA won a court case against DHET where the department’s decision to decrease the mandatory grant levies and grants percentage was decreased from 50% to 20% in terms of section 4(4) of the SETA grant regulations was set aside. . The court did not decide on the mandatory levy or grant percentage to be applied from the court date onwards. The effect of the ruling is that the Minister would have to decide on the percentage for mandatory grants in consultation with the sector. The Minister has not yet made the decision in regard to the mandatory grant percentage. DHET continued to show the mandatory levies portion as 20% in 2020/21 year in the levy download information.The SETA continued to pay and accrue mandatory grants at 20% in the 2020/21 financial year in the absence of a revised percentage which is aligned to the approved annual performance plan. The mandatory grant expenditure in Note 3 as well as the mandatory grant liability in Note 11 were calculated using mandatory grant percentage of 20%. The SETA therefore discloses a contingent liability in regard to the amount of the mandatory grants payable to qualifying levy payers from the date of the court decision to the year end. This is disclosed as a liability as the intention of the litigants, BUSA, was to increase the mandatory grant percentage from 20%.The timing and amount of this contingent liability is uncertain and no reasonable estimate can be made at this point. Currently the department is in discussions with BUSA in regard to the mandatory grant percentage.

Surplus Funds Retention of cash

In terms of section 53 (3) of the PFMA, public entities listed in Schedule 3A and 3C to the PFMA may not retain cash surpluses that were realized in the previous financial year without obtaining the prior written approval of National Treasury. During May 2017, National Treasury Issued Instruction No.12 of 2020/21 which gave a revised definition of a surplus.

According to this instruction, a surplus is based on cash and cash equivalents, plus receivables, less current liabilities at the end of the reporting period.

Application to retain accumulated surplus at year-end The FASSET will be applying for the retention of its accumulated surplus at the financial year ending 31 March 2021 in terms of section 53(3) of the PFMA from National Treasury during the second quarter of the 2021/22 financial year. The accumulated surplus as at year-end is therefore disclosed as a contingent liability until approval has been obtained. On 30 November 2017, DHET issued Skills Development Circular No. 15/2017 which requires SETAs to continue to apply for the retention of surpluses in terms of section 53(3) of the PFMA and should observe National Treasury Instruction No.12 of 2020/21.

FASSET Annual Integrated Report 2020/21

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