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PRESENTATION TO THE PARLIAMENTARY PORTFOLIO COMMITTEE: TRADE AND INDUSTRY ANNUAL REPORT 2012-13 NATIONAL CONSUMER COMMISSION 02 OCTOBER 2013 Mr EBRAHIM MOHAMED COMMISSIONER. OUTLINE OF PRESENTATION Overview of annual report Strategic objectives Achievements against planned targets
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PRESENTATION TO THE PARLIAMENTARY PORTFOLIO COMMITTEE: TRADE AND INDUSTRY ANNUAL REPORT 2012-13 NATIONAL CONSUMER COMMISSION 02 OCTOBER 2013 Mr EBRAHIM MOHAMED COMMISSIONER
OUTLINE OF PRESENTATION • Overview of annual report • Strategic objectives • Achievements against planned targets • Financial management • Key challenges and financial projection
OVERVIEW OF ANNUAL REPORT • NCC received an unavoidable qualified opinion from the AGSA; • The AGSA was unable to obtain audit evidence for irregular expenditure amounting to R15 590 211- Approximately 38% of the total allocated budget; • Auditor General was armed with the results of an “as is” audit report and with an interim forensic report issued by external service providers; • The audit evidence was allegedly stolen during the course of the “as is” audit; • The irregular expenditure largely arose from supply chain processes not being followed, vat being paid to suppliers that did not possess valid vat certificates and breaches of the PFMA (Note 27) • The AGSA found that fruitless and wasteful expenditure amounted to R3 575 475. This included fruitless and wasteful expenditure amounting to R1 555 087 incurred during the 2011-12 year but not disclosed. • Fruitless and wasteful expenditure largely arose from assets paid for but not received and vat paid when it should not have been paid.
OVERVIEW OF ANNUAL REPORT • Altogether Irregular, Fruitless and Wasteful expenditure amounted to R20 720 773 inclusive of R1 555 087 incurred during the 2011-12 year; • The procurement of goods and services that resulted in the irregular expenditure has been investigated. An interim report has been provided and a final one is imminent. • Attorneys have been engaged to recover fruitless and wasteful expenditure; • Preparations for actions against staff allegedly responsible for irregular, fruitless and wasteful expenditure is underway. • Irregular Vat claims reported to SARS. • NCC’s financial records prior to audit were unreliable including the records for the 2011-12 financial year. (Prior period errors- Note 28) • Service providers were engaged to produce reliable financial records; • The financial records for the prior year had to revisited and corrected resulting in additional costs and delays in finalising financial statements for the 2012-13 year;
OVERVIEW OF ANNUAL REPORT • A sound foundation with regard to financial records has however been established; • Audit was extremely thorough and arduous, but necessary; • In order to comply with the PFMA and Treasury Regulations the following have been dealt with since latter part of the last financial year: • Internal Audit function which was non existent has been outsourced; • Additional members have been appointed to the Audit Committee; • Regular Audit Committee meetings are now held; • Various policies that were non existent have been drafted and implemented; • Internal processes in finance have been revised and implemented including debtor and creditor management; payments; asset management; • Internal processes in HR relating to recruitment, leave management, travel etc have been drafted and implemented; • Processes relating to Supply Chain Management have been revised and implemented • Complaints handling and investigation processes revised
STRATEGIC OBJECTIVES The following are the revised strategic objectives that will be pursued by the Commission over the next five years. • Strategic Objective 1 • To promote compliance with the Consumer Protection Act • Strategic Objective 2 • To be a well governed and capacitated organisation • NCC has the following divisions in order to give effect to the strategic objective 1: • Enforcement and Investigations • Advocacy, Education and Awareness • Research • Legal • Corporate services- including- IT, HR and Finance largely gives effect to Strategic objective 2
Achievement against Targets • The NCC was obliged to report on its revised Annual Performance Plan which was amended fairly late in the year under review- thus some of the work done by the NCC in the course of the year could not be reported on; • Achievement against strategic objective 1- To promote compliance with the Consumer Protection Act
Achievement against TargetsObjective 1:To promote compliance with the Consumer Protection Act
Achievement against TargetsObjective 1:To promote compliance with the Consumer Protection Act
Achievement against TargetsObjective 1:To promote compliance with the Consumer Protection Act
Overview of Expenditure Summary: • Actual expenditure exceeded allocated budget by R3 101 348 • Executive Authority provided an additional- R6 719 490 • Investment income amounted to R101 667 • Balance remaining R3 719 810 • The accounts payable at the end of the financial year was R 2 758 187. These funds constitute contingent liabilities- being amounts that are subject to legal action. • Actual Unspent funds amounted to R 961 623 • The under expenditure is 2.3% of the funds received; and is mainly as a result of savings on lease payments- approximately R170 000 per month.
AGSA’s Report Matters raised: • Irregular expenditure: R15 590 211 • The AGSA was unable to obtain sufficient appropriate audit evidence for irregular expenditure as supporting information was stolen from the premises and due to inadequate filing of information. In order to deal with this- locks have been changed in offices where vital information is kept. The security companies services were terminated. Where service providers were unable to provide contracts/ service level agreements- these were cancelled and new service providers were duly procured. The sub lease contract was cancelled- NCC now dealing directly with owner of premises. • A legal team has been procured on behalf of NCC by the dtito commence proceedings against suppliers and certain employees.
AGSA’s Report Matters raised: • The audit committee failed to perform as required by Treasury Regulation 27.1.8(a), (b), (c), (e) and (g); 27.1.8(d); 27.1.8(f) • The audit committee was barely functional during the year. No proper records of meeting were kept. A new chairperson and additional members were appointed in the latter part of the year. Meetings now quorate and proper records are kept. • The Internal audit function was not established • Function has been outsourced since May 2013 for a period of one year. • Budgets- failure tosubmit quarterly reports on actual and projected revenue and expenditure to the dti. • The CFO has been suspended. An Acting CFO has just been appointed and commenced with submitting proper financial statements and reports. • The public entity accumulated surpluses without the approval of National Treasury • Application has been made to Treasury.
AGSA’s Report Matters raised: • The financial statements submitted for auditing were not fully prepared in all material respects. • the financial records of NCC has been poor. Previous years financials had to be corrected. Service provider called in to assist. Finance unit consisted of two persons. Now has one. New service provider in process of being procured. • Effective steps not taken to prevent and detect irregular and fruitless and wasteful expenditure. • Goods and services of a transaction value of above R500 000 were procured without inviting competitive bids. • Goods and services with a transaction of value below R500 000 were procured without obtaining the required price quotations. • New processes in finance and supply chain implemented- continuous improvement- all done in line with PFMA and Treasury Regulations. • Literature and processes relating to irregular, fruitless and wasteful expenditure provided to employees.
AGSA’s Report Matters raised: • Effective and appropriate disciplinary steps were not taken against officials who incurred and/or permitted irregular and/or fruitless and wasteful expenditure & payments were made in advance of the receipt of goods or services • Legal team procured with assistance of Executive Authority for this purpose. Process underway. • Proper control systems to safeguard and maintain assets were not implemented. • Asset register revised and updated. Goods insured • The accounting authority did not exercise adequate oversight responsibility regarding financial reporting and compliance with laws and regulations and related controls. • With assistance of Acting CFO and GCFO- the dti- this is now in place. • The accounting authority did not implement effective human resource management to ensure that adequate and sufficiently skilled resources are in place and that performance is monitored. • Human resource management policy similar to dtiadopted. Due process followed in appointment of 6 skilled employees since September 2012. 33 employees previously irregularly employed outside structure now placed within structure.
AGSA’s Report Matters raised: • The accounting authority did not develop and monitor the implementation of action plans to address internal control deficiencies. • Action plans have been developed and implemented. Monitoring is done by risk manager. • Management did not implement proper record keeping in a timely manner to ensure that complete, relevant and accurate information is accessible and available to support the procurement of all goods and services. • Records now properly maintained. Procurement and payment not permitted unless all documents in place. Checklists created and implemented. • Management did not prepare regular, accurate and complete financial and performance reports that are supported and evidenced by reliable information. • Management is not permitted to report on any matter without reliable evidence being available and set aside for audit purposes. • Management did not review and monitor compliance with applicable laws and regulations. • Review and monitoring underway. Comprehensive delegations for compliance with PFMA and Treasury Regulations drafted.
AGSA’s Report Matters raised: • The audit committee did not promote accountability and service delivery through evaluating and monitoring responses to risks and providing oversight over the effectiveness of the internal control environment, including financial and performance reporting and compliance with laws and regulations. • Audit committee now functional and liaison with internal audit well underway.
Key Challenges Vacancies • More than 70 per cent of its approved structure remains vacant, that is, 98 vacancies • This negatively impacts on its ability to deliver as per its agreed deliverables. • The key reason for the significant vacancy rate is due to the lack of an adequate budget. Skills • Whilst a skills audit has not yet been conducted at the NCC, it is apparent that a major skills shortage does exist within the entity. • A proper skills upgrade programme is not in place due to lack of funds. In the interim, training is arranged, for example, for investigators with other agencies of the dti. Training by international consumer protection experts at no cost to NCC is being discussed. Complaints Backlog • Backlog of complaints currently at approximately 8000. • Need 15 interns for approximately 6 months to assist in finalising this. • Approved by the dti- funds outstanding.
Key Challenges Funding • The current budget allocation over the next three years is insufficient to sustain delivery as expected. • Budget does not allow the filling of any of the 98 vacancies. As it is not expected that NCC will receive funds to fill all vacancies at once, it is prepared to do so incrementally over the next three years provided funds are made available. • An amount of R1.4m only has been set aside for projects this year. All of which has been consumed by one project- Meat investigation. • This means that no monies are available for any of the other projects contained in the APP. • Additional funds have been requested. The fund request for 2013/14 is supported by the dti. Outcome is awaited.
