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The Ports Regulator Overview and Presentation on 2007/08 and 2008/09 Annual Report

The Ports Regulator Overview and Presentation on 2007/08 and 2008/09 Annual Report. Parliamentary Portfolio Committee on Transport 27 October 2009. Index. National Ports Act and Regulator mandates Regulator Programmes and Main Activities

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The Ports Regulator Overview and Presentation on 2007/08 and 2008/09 Annual Report

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  1. The Ports Regulator Overview and Presentation on 2007/08 and 2008/09 Annual Report Parliamentary Portfolio Committee on Transport 27 October 2009

  2. Index • National Ports Act and Regulator mandates • Regulator Programmes and Main Activities • Financial Year 2007/08 and 2008/09 Annual Financial Statements www.portsregulator.org

  3. Objects of the National Ports Act • Development of an effective and productive ports industry for economic growth and development • Promote and improve efficiency and performance in the management and operations of ports • Promote the development of an integrated regional production and distribution system in support of government policies www.portsregulator.org

  4. Background • The Act contains mandates and functions of Ports Regulator and National Ports Authority • Enacted on the 26th November 2006 • Not fully implemented i.e. • NPA not corporatized • Ports Regulator not yet fully operational in all mandate areas • Structure • Act – Parliament • Regulations – Minister of Transport • Directives – Ports Regulator www.portsregulator.org

  5. Functions of the Ports Regulator In terms of the Ports Act • Exercise economic regulation of the port system in line with government’s strategic objectives • Promote equity of access to ports, facilities and services provided in ports • Monitor the activities of the National Ports Authority to ensure compliance with the Act • Adjudicate complaints and appeals against the Authority • Approve or reject the Authority tariffs • Promote regulated competition • Regulate the provision of adequate, affordable and efficient port services and facilities www.portsregulator.org

  6. Objectives of economic regulation • Promotion of efficiency • Promoting investment • Protection of port users • Prevention of pricing and service discrimination • Prevention of anti-competitive practices • Competition amongst ports • Competitive and affordable tariffs www.portsregulator.org

  7. Purpose of access to port facilities and services • Movement of goods for the import and export markets as well as domestic and regional distribution • Access by SMMe’s and BBBEE companies • Improve international trade • Promote efficiency and reliability of port services and facilities www.portsregulator.org

  8. Competition in the port system • The Ports Act requires the Regulator to promote regulated competition • The port system must be locally, regionally and globally competitive • NPA is the monopoly which has to be regulated and monitored • The port user must have choice in facilities and services www.portsregulator.org

  9. Functions of the National Ports Authority in terms of the Ports Act • The main function of the Authority is to own, manage, control and administer ports to ensure their efficient and economic functioning • The detailed functions of the Authority are outlined in Chapter 3 of the Act www.portsregulator.org

  10. How does NPA discharge its functions • Entering into agreements with third parties to provide port services and facilities • Issuing licences through competitive bidding for provision of port facilities and services • Self –provision of services and facilities www.portsregulator.org

  11. Regulator programmes • Administration • Economic Regulation and Tariffs • Monitoring and Compliance • Tribunal and Regulatory development • Industry Development www.portsregulator.org

  12. Regulator’s role in NPA agreements and licenses • The Regulator shall monitor the issuing of licenses and conclusion of agreements with third parties for provision of port facilities and services • The appeal process shall also be an intervening platform • The Regulator has powers to ensure that SMMe’s and BBBEE companies are provided with access www.portsregulator.org

  13. Port Compliance Monitoring • The Regulator shall monitor the NPA compliance with the Ports Act • The Regulator can monitor compliance through complaints and appeal processes as well • Reporting on compliance will be on an annual basis commencing 2010/2011 www.portsregulator.org

  14. Economic participation in the port system • The Regulator shall ensure participation of private operators, SMMes and BBBEE companies in the port system by creating an enabling environment • The port market structure shall be determined by the framework for participation that is issued by the Minister of Transport • Barriers to entry must be addressed • Employment creation and economic growth through the port system must be key www.portsregulator.org

  15. Assessment of Authority’s Tariffs • In terms of the Act, NPA to submit proposed tariffs to Ports Regulator • Tariffs cover all NPA activities as a Port Authority • NPA to publish for comments • Regulator to hold hearings and invite submissions on proposed tariff increases • After consideration of submissions, Regulator shall approve or reject some or all of the tariff increases • Elements of proposed tariff- • Manner of calculation and model • All financial information and valuations • Reinvestment of profits and revenues • Impact on port activity cost structures www.portsregulator.org

  16. Purpose of NPA tariffs • To enable the NPA to- • Recover its investment in owning, controlling and administering ports and its investment in port services and facilities • Recover its costs in maintaining, operating, controlling and administering ports and its costs in providing port services and facilities • Make a profit commensurate with the risk involved in ports services and facilities www.portsregulator.org

  17. What is the Regulator’s role in NPA tariffs? • To ensure that NPA tariffs are utilised in ensuring that the port system is efficient • To ensure that the tariffs are affordable to port users • To ensure that the tariffs are predictable and non-discriminatory • To prevent the utilisation of tariffs for cross-subsidisation unless in the public interest www.portsregulator.org

  18. Filing of Prices by Service Provider • All port service providers must lodge a detailed and comprehensive list of prices charged for port services within 6 months of the publication of the Directives(6 August 2009) or within 6 months of commencement of a port service • Port Service Definition (Ports Act) • “port services” means stevedoring, cargo handling, terminal operations, storage of cargo within a port, tug services, floating crane services, berthing services, fire fighting, security, radio and radar services, waste disposal, vessel repairs and any other services provided within a port which are designated as such by the Authority by notice in the Gazette www.portsregulator.org

  19. Appeals and Complaints • The Regulator shall also adjudicate appeals from port users and complaints from any person affected by decisions and actions of NPA respectively • The Regulator can issue appropriate orders in resolving appeals and complaints • The Regulator accepts appeals and complaints in line with its Directives published in the gazette www.portsregulator.org

  20. Current activities • Economic review of participation in Ports System • Implement Ports Regulatory framework • Adjudication of appeals and complaints • Maintain the Regulator secretariat and systems • Implement tariff regulation framework • Port compliance monitoring www.portsregulator.org

  21. Phases of the Regulator Establishment of operations Define regulatory policy issues 2005 to present Act promulgated 2006 First Meeting March 2007 Offices Established December 2007 CEO July 2008 Directives and Principles August 2009 Finalising Initial Regulatory framework Implementation Level and emphasis of effort Developing second round regulatory framework elements www.portsregulator.org

  22. Financial Year 2007/08 and 2008/09 Annual Financial Statements www.portsregulator.org

  23. Overall Audit Opinion • 2007/08 No disclaimers or qualifications • 2008/09 No disclaimers or qualifications • Emphasis of matters in both years, dealt with below • Fruitless expenditure of R 13 000,00 • Related to interest on late payment of rental for offices • Resulted from dual compliance • Ports Regulator processed payment • DOT processed and checked • DOT paid www.portsregulator.org

  24. Overall Audit Opinion (2) • Material amendment to accounts • 2007/08 and 2008/09 - Auditor’s fees accounted for in financial year assessed • Auditor’s fees changed to be accounted for in year following assessment • 2007/08 - Accounted for total budget allocation • Changed to only reflect amount transferred to Regulator www.portsregulator.org

  25. Matters of Emphasis • Matters of emphasis and explanations 2007/08 • Matters of emphasis and explanations 2008/09 www.portsregulator.org

  26. Financial Management Report as per Annual Report - Emphasis of matters – 2007/08 Basis of Accounting The entity’s policy is to prepare financial statements on the basis of accounting determined by the National Treasury, as set out in accounting policy note 1.1. Auditor’s fees accounted for in financial year assessed Auditor’s fees changed to be accounted for in year following assessment Accounted for total budget allocation Changed to only reflect amount transferred to Regulator

  27. Emphasis of matters – 2007/08(cont.) Material under spending of the budget • The entity has materially underspent its budget to the amount of R 7,3 million. This is attributable to the fact that the entity is in its infancy stage and is not fully operational in terms of its mandated function. • Budgetary control ensured that funds were not wasted on unused functions of the Ports Regulator. • As the Ports Regulator becomes more operational its financial performance will improve to ensure that the Ports Regulator’s expenditure remains within its approved budget. www.portsregulator.org

  28. Emphasis of matters – 2007/08 (cont.) Public Finance Management Act • The accounting authority does not have effective, efficient and transparent systems, of financial and risk management and internal control in place, contrary to section 51(1)(a) of the PFMA. • Department of Transport procedures followed since regulatory documentation needs to be approved and policies and procedures of the Regulator put in place. www.portsregulator.org

  29. Governance framework The PFMA tasks the accounting authority with a number of responsibilities concerning financial and risk management and internal control. Fundamental to achieving this is the implementation of key governance responsibilities: The annual financial statements were not submitted for auditing as per the legislated deadlines, as set out in section 55 of the PFMA. (Page 28) •Late submission due to no staff in place. Emphasis of matters – 2007/08 (cont.) www.portsregulator.org

  30. The public entity had no audit committee in operation throughout the financial year. Finance, Audit and Risk Management Committee was a single Committee. The audit committee does not operate in accordance with approved, written terms of reference. Terms of reference was for integrated committee. Emphasis of matters – 2007/08 (cont.) www.portsregulator.org

  31. The audit committee did not substantially fulfil its responsibilities for the year, as set out in section 77 of the PFMA and Treasury Regulation 27.1.8. The Audit Committee will be fully functional once the Chairman has been appointed and the TOR approved The public entity had no internal audit function in operation throughout the financial year. Limited operation in place, DOT performs de facto financial oversight wth respect to internal audit. Emphasis of matters – 2007/08 (cont.) www.portsregulator.org

  32. The internal audit function does not operate in terms of an approved internal audit plan. Limited operation in place, DOT performs de facto financial oversight with respect to internal audit. The internal audit function did not substantially fulfil its responsibilities for the year, as set out in Treasury Regulation 27.2. Limited operation in place, DOT performs de facto financial oversight with respect to internal audit. There are significant deficiencies in the design and implementation of internal control in respect of financial and risk management. Risk management system was being developed. Emphasis of matters – 2007/08 (cont.) www.portsregulator.org

  33. There are significant deficiencies in the design and implementation of internal control in respect of compliance with applicable laws and regulations. Limited operation in place, DOT performs de facto financial oversight with respect to internal audit. No risk assessment was conducted on a regular basis and no risk management strategy, which includes a fraud prevention plan, is documented and used, as set out in Treasury Regulation 27.2 (Page 28) Not in place for that year, corrected. The information systems were not appropriate to facilitate the preparation of a performance report that is accurate and complete. Information systems not implemented at that time. Emphasis of matters – 2007/08 (cont.) www.portsregulator.org

  34. No adequate control processes and procedures are designed and implemented to ensure the accuracy and completeness of reported performance information. Information systems not implemented at that time. System was not in place yet. No strategic plan was prepared and approved for the financial year under review for purposes of monitoring the performance in relation to the budget and delivery by the Ports Regulator of South Africa against its mandate, predetermined objectives, outputs, indicators and targets, as set out in Treasury Regulation 30.1. (Page 29) This was the first year of existence of the organisation. Emphasis of matters – 2007/08 (cont.) www.portsregulator.org

  35. There is no functioning performance management system and performance bonuses are only paid after proper assessment and approval by those charged with governance. A performance management system is being developed for implementation. Emphasis of matters – 2007/08 (cont.) www.portsregulator.org

  36. Emphasis of matters – 2008/09 Basis of Accounting The entity’s policy is to prepare financial statements on the basis of accounting determined by the National Treasury, as set out in accounting policy note 1.1. Regulator moved from GAAP, to GRAP on recommendation of Auditor General

  37. Emphasis of matters – 2008/09 (cont.) Fruitless and wasteful expenditure • Contrary to section 76(4)(b) of the PFMA, payments to a supplier were made after 30 days resulting in fruitless and wasteful expenditure to the amount of R 13 000.00. This was due to penalty interest paid, arising from the late payment of the rental for the premises occupied by the entity. • Delayed payments due to multiple control systems of the Department of Transport and the Ports Regulator being applied to each payment. Therefore over-control and checking is responsible. • Implementation of financial policy, procedure and system at Regulator completed. www.portsregulator.org

  38. Emphasis of matters – 2008/09(cont.) Material under spending of the budget • The entity has materially underspent its budget to the amount of R 2,8 million. This is attributable to the fact that the entity is in its infancy stage and is not fully operational in terms of its mandated function. • Budgetary control ensured that funds were not wasted on unused functions of the Ports Regulator. Expenditure was appropriate for level of legal instruments in place at that time. • As the Ports Regulator become more operational its financial performance will improve to ensure that the Ports Regulator’s expenditure remains within its approved budget. www.portsregulator.org

  39. Emphasis of matters – 2008/09(cont.) Public Finance Management Act • The accounting authority does not have effective, efficient and transparent systems, of financial and risk management and internal control in place, contrary to section 51(1)(a) of the PFMA. • Department of Transport procedures followed since regulatory documentation needs to be approved and policies and procedures of the Regulator put in place. All Regulator policies have subsequently been developed. www.portsregulator.org

  40. Governance framework The PFMA tasks the accounting authority with a number of responsibilities concerning financial and risk management and internal control. Fundamental to achieving this is the implementation of key governance responsibilities: The financial statements were subject to material amendments resulting from the audit. Auditor’s fees accounted for in financial year assessed Auditor’s fees changed to be accounted for in year following assessment Emphasis of matters – 2008/09(cont.) www.portsregulator.org

  41. The public entity had no audit committee in operation throughout the financial year. Finance, Audit and Risk Management Committee was a single Committee. Audit committee established and meetings held as component of combined committee. Committees now separated into 3 separate committees, with own TOR’s. The audit committee does not operate in accordance with approved, written terms of reference. Integrated terms approved and operated in accordance therewith. Committees now separated into 3 individual committees with own TOR’s. Emphasis of matters – 2008/09(cont.) www.portsregulator.org

  42. The audit committee did not substantially fulfil its responsibilities for the year, as set out in section 77 of the PFMA and Treasury Regulation 27.1.8. Finance, Audit and Risk Management Committee was a single Committee. Audit committee established and meetings held as component of combined committee. Committees now separated into 3 separate committees, with own TOR’s The public entity had no internal audit function in operation throughout the financial year. Multiple compliance and DOT financial oversight with respect to internal audit. Control measures in place that resulted in no deviations from SCM standards. Emphasis of matters – 2008/09(cont.) www.portsregulator.org

  43. The internal audit function does not operate in terms of an approved internal audit plan. Multiple compliance and DOT financial oversight with respect to internal audit. Control measures in place that resulted in no deviations from SCM standards. The internal audit function did not substantially fulfil its responsibilities for the year, as set out in Treasury Regulation 27.2. Multiple compliance and DOT financial oversight with respect to internal audit. Control measures in place that resulted in no deviations from SCM standards. There are significant deficiencies in the design and implementation of internal control in respect of financial and risk management. Risk management was being performed on high level, but was integrated into operations of organisation and not stand alone. Treasury’s Risk Management software being acquired. Emphasis of matters – 2008/09(cont.) www.portsregulator.org

  44. There are significant deficiencies in the design and implementation of internal control in respect of compliance with applicable laws and regulations. DOT policies utilised where Regulator policies being developed. Multiple compliance and DOT financial oversight with respect to internal audit. Control measures in place that resulted in no deviations from SCM standards. Appointment of staff delayed until regulatory instruments in place. No risk assessment was conducted on a regular basis and no risk management strategy, which includes a fraud prevention plan, is documented and used, as set out in Treasury Regulation 27.2. Risk management was being performed on high level, but was integrated into operations of organisation and not stand alone. Was not formalised to the extent required. Risk system being implemented. The information systems were not appropriate to facilitate the preparation of a performance report that is accurate and complete. System being developed and implemented. Emphasis of matters – 2008/09(cont.) www.portsregulator.org

  45. No adequate control processes and procedures are designed and implemented to ensure the accuracy and completeness of reported performance information. System being developed and implemented. Currently not automated, but occurring. No strategic plan was prepared and approved for the financial year under review for purposes of monitoring the performance in relation to the budget and delivery by the Ports Regulator of South Africa against its mandate, predetermined objectives, outputs, indicators and targets, as set out in Treasury Regulation 30.1. A strategic plan was developed and submitted to DOT for approval. No performance agreement concluded in terms thereof. Emphasis of matters – 2008/09(cont.) www.portsregulator.org

  46. There is no functioning performance management system and performance bonuses are only paid after proper assessment and approval by those charged with governance. A performance management system is being developed for implementation. Emphasis of matters – 2008/09(cont.) www.portsregulator.org

  47. Ports Regulator – Financial Performance • Compared year on year, the Ports Regulator’s budget increased by an amount of R 238 thousand or 2.14% from R 11,144 million in 2007/08 to R 11,382 million in 2008/09. • During the 2007/08 financial year the Ports Regulator expended R 2,390 million or 21.45% of its budget. The expenditure pattern improved during the 2008/09 financial year with expenditure of R 5,988 million or 52.61% of its budget. • The Ports Regulator’s under expenditure during 2007/08 was R 8,754 million or 78.55% of its budget. During 2008/09 the under expenditure was R 5,394 million or 47.39%. www.portsregulator.org

  48. Ports Regulator – Financial Performance (cont.) www.portsregulator.org

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