16 September 2022
Audit of the financial statements of
the Hotazel Manganese Mine Education Trust (HMMET)
The Hotazel Manganese Mine Education Trust (HMMET) is governed by the Broad-Based Black Empowerment Act (2003) and is registered as a Public Benefit Organisation (PBO) with SARS. The Trust was established in 2009 as a vehicle to introduce black participation into the Hotazel Manganese Mine (HMM). It must be noted that the Trust is not owned by HMM nor South32. The core mandate of the Trust is to uplift historically disadvantaged persons, primarily from the Joe Morolong Local Municipality (JMLM), and the broader John Taolo Gaetsewe (JTG) District of the Northern Cape.
The Trust has been established as a public benefit organisation under Section 30 of the Income Tax Act, for the provision of select public benefit activities stipulated in Part One of the Ninth Schedule to the Act, including grants to other public benefit organisations undertaking activities under the same part of the Act. The Trust is exempt from taxation in terms of section 10 (1)(cN) of the Income Tax Act.
The Trust aims to distribute a minimum of 85% of its annual income earned. The Trust has a social investment strategy that guides its expenditure. This work of the Trust is managed by Tshikululu Social Investments. Tshikululu is South Africa’s leading social investment fund manager and advisor, working alongside investors and other development partners to achieve sustainable social impact. Tshikululu plays a role in the identification, governance and monitoring of projects that respond to local needs in a strategic way and is mandated to report to the Trustees on the investment portfolio.
The Trust is governed by a board of trustees, deriving its mandate from its Trust Deed. One of the prescripts in complying with its mandate is to undertake an audit of its financials on an annual basis.
Invitation to submit proposals
It is the intention of the Trust to invite firms to submit a proposal for the audit of annual financial statements for a three-year period (commencing 1 July 2022 for the year ending 2023). The Trust is committed to black economic empowerment (BEE) as an essential ingredient of its business, and therefore expects the applicant to demonstrate its commitment and track record to BEE in the areas of ownership (shareholding), skills transfer, employment equity and procurement practices (small, medium and micro enterprise/SMME development).
The objective of the audit of the Trust’s financial statements is to enable the auditors to express an independent professional opinion(s) on the financial position at the end of each financial year.
The Trust requires the following services:
1. annual financial statement audit; and
2. management letter.
All of the above must be completed within three months after the end of each financial year in order for the trustees to review each document prior to its submission to the Board of Trustees for approval. . In addition, the trustees requires that a meeting of the auditors and members of the Risk, Audit and Governance subcommittee of the Trust be held to discuss the final version of the financial statements before submission to the Board.
Preparation of the annual financial statements
The responsibility for the preparation of financial statements, including adequate disclosure, is that of the Trust; furthermore, the Trust is responsible for the selection and application of accounting policies. The Trust will prepare the annual financial statements in accordance with the International Financial Reporting Standards (IFRS).
The auditor is responsible for forming and expressing opinions on the financial statements. The auditor will carry out the audit of the Trust in accordance with the International Standards on Auditing (ISA), as promulgated by the International Federation of Accountants (IFAC). As part of the audit process, the auditor may request from the Trust written confirmation concerning representations made in connection with the audit.
Scope of the audit
As stated above, the audit of the Trust will be carried out in accordance with the ISA, as promulgated by the IFAC, and will include such tests and auditing procedures as the auditor considers necessary under the circumstances.
In complying with the ISA, the auditor is expected to pay particular attention to the following matters:
- Fraud and corruption: Consider the risks of material misstatements in the financial statements due to fraud, as required by ISA 240: The Auditor’s Responsibility to Consider Fraud in an Audit of Financial Statements. The auditor is required to identify and assess these risks (of material misstatement of the financial statements) due to fraud, obtain sufficient and appropriate audit evidence about the assessed risks, and respond appropriately to identified or suspected fraud.
- Laws and regulations: In designing and performing audit procedures, evaluating and reporting the results, consider that non-compliance by the Trust with laws and regulations that may materially affect the financial statements as required by the ISA 250: Consideration of Laws and Regulations in an Audit of Financial Statements.
- Governance: Communicate audit matters of governance interest arising from the audit of financial statements with those charged with governance of an entity, as required by the ISA 260: Communication of Audit Matters with Those Charged with Governance.
- Risks: To reduce audit risk to an acceptable low level, determine the overall responses to assessed risks at the financial statement level, and design and perform further audit procedures to respond to assessed risks at the assertion level, as required by International Standard on Auditing 330: the Auditor’s Procedures in Response to Assessed Risks.
In addition to the audit report, the auditor will prepare a management letter, in which the auditor will:
- give comments and observations on the accounting records, systems and controls that were examined during the course of the audit;
- identify specific deficiencies or areas of weakness in systems and controls, and make recommendations for their improvement;
- give comments on the extent to which outstanding issues/qualifications issues have been addressed;
- bring to the Trust’s attention any other matters that the auditor considers pertinent; and
- provides a comprehensive assessment of the adequacy and effectiveness of the accounting and overall internal control system to monitor expenditures and other financial transactions during the period under review.
The management letter should also include responses from the Trust and Administrator to the issues highlighted by the auditor.
Access to information
The auditor will have access to all legal documents, correspondence and any other information associated with the Trust as deemed necessary by the auditor for the completion of the audit.
The financial statements, including the audit report, management letter and management response, should be received by the Trust no later than three months after the end of the financial year to which the audit relates.
All proposals must include:
- evidence of the firm’s qualifications to provide the above services;
- the firm’s background and experience in auditing PBO/trust clients;
- the size and organisational structure of the firm;
- statement of the firm’s understanding of the work to be performed;
- a proposed timeline for fieldwork and final reporting;
- a proposed fee structure for each of the three years of the proposal period, including whatever guarantees can be given regarding increases in future years, and the maximum fee that would be charged;
- a description of the firm’s billing rates and estimated costs, together with procedures for technical questions that may come up during the year, or whether these occasional services are covered in the proposed fee structure;
- the names of the partner, audit manager and field staff who will be assigned to the Trust’s audit, and provide resumés;
- a declaration of independence by the team in the audit engagement;
- a copy of the firm’s most recent peer review report, the related letter of comments and the firm’s response to the letter of comments;
- references and contact information from at least two comparable PBO/trust audit clients; and
- the firm’s BEE level of contribution, clearly articulated, and the corroborating evidence.
Proposals will be evaluated in accordance with the criteria as follows:
|Quality of the proposal||25%|
|BBBEE status||Minimum level 2 compliance|
Proposals must be received no later than 16 September 2022 addressed to:
Mr. Saleh Coovadia
Email address: SCoovadia@tshikululu.org.za
Proposals received after the deadline, will not be considered. The trustees will make a final decision on the choice of auditors.
If you have any questions or would like further clarification of any aspect of this request for bid, please contact me at +27 11 544 0300. I look forward to receiving your proposal.