SAMSA Annual Report 2015 - 2016

Budget Variances Explanations
ANNUAL FINANCIAL STATEMENTS
CHAPTER 06
APPENDIX 1
BUDGET VARIANCES
EXPLANATIONS FOR THE PERIOD ENDED 31 MARCH 2016
1. INTRODUCTION
It has been another very difficult financial year for the Authority as its tariff structure still remained unadjusted against increasing costs
of running the organisation. Since 2009, the tariffs have only been adjusted by CPI only once and it became very difficult to
adequately deliver on the mandate of the organisation under the circumstances. For the organisation to be sustainable and deliver
on it mandates, tariff adjustments and development of the new funding models are very critical.
The organisation strived to do its best under the circumstances to continue to deliver on its mandates. The financial year ending 31
March 2016 has seen the reduction of the deficit to R29 million (2014/15: 81 million). This reduction was achieved by further cost
cutting measures to ensure that the organisation continued to operate without a complete breakdown of service delivery capabilities.
The major variances in revenue and expenses are analysed in full detail below.
APPENDIX 1
BUDGET VARIANCES
EXPLANATIONS
FOR THE YEAR ENDED 31 MARCH 2016
2. REVENUE
The organisation collected more revenue by R6.4 million during the financial year which was due to the contributions received from
the Maritime Fund for the settlement of the debt owing to Smit Amandla. Revenue was also boosted by the increase in management
fees which were earned from the contract with the Department of Agriculture and Fisheries for the management of their ships. The
SAMSA core revenues remained at the same levels due to continued non-adjustment of tariffs. In this regard, SAMSA Levies, which
contributes the highest portion of revenue earned remained pegged at R250 million.
3. EXPENDITURES
During the course of the financial year, the primary focus remained on the management of increasing costs against stagnant revenue.
More strict measures had to be taken towards the end of the financial year as it became clear that a tariff adjustment was not going
to be approved and implemented during the financial year. Despite these extraordinary measures, the organisation continued to
struggle with the settlement of creditors which is reflected in the creditor days ratio. Payment plans have been agreed upon with
some service providers which slightly eased the cash flow pressure. In analysing the variances for costs, it is important to take into
account the fact that when the 2015/16 balanced budget was finalised, it was reasonably expected that the long outstanding tariff
adjustment would be approved and some budgets would be reviewed by the Board at mid-term review. The tariff adjustment did
not materialise and so the budgets had to stay at the same levels. While some costs could be cut without severely affecting the
organisation, it was impossible to cut costs such as those relating to internet and e-mail amongst others, because without them the
organisation could not simply operate.
3.1 STAFF COMPENSATION
The Authority underspent on its staff compensation budget by R7.7 million as result of a deliberate decision to slow down on the
recruitment of new staff members to address the current financial challenges.
3.2 COMPUTER EXPENSES
The budget overspent of R4 million resulted from the fact that the new system implemented did not achieve lower costs to the
expected levels. In addition, the budget for this line item had been set with the intention to review it after the approval of the new
tariffs. It was not however, possible to stop the spending on internet and e-mail facilities as this would have led to the organisation
not being able to operate. Therefore, despite the budget overrun, additional costs continued to be incurred up until year-end.
SAMSA ANNUAL REPORT | 191