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BRIEFING TO BRIEFING TO THE PARLIAMENTARY PORTFOLIO COMMITTEE: THE PARLIAMENTARY PORTFOLIO COMMITTEE:

TRADE AND INDUSTRYTRADE AND INDUSTRY

On the On the

33rdrd QUARTER REPORT (2013-14) QUARTER REPORT (2013-14)

of the of the

NATIONAL CONSUMER COMMISSION NATIONAL CONSUMER COMMISSION

12 March 201412 March 2014By By

Mr EBRAHIM MOHAMEDMr EBRAHIM MOHAMED

COMMISSIONERCOMMISSIONER

OUTLINE OF PRESENTATION

• Overview of 3rd Quarter Report

• Achievements against Planned Targets

• Financial Management

• Progress against AGSA findings

• Key Challenges

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Overview of 3rd Quarter Report

OVERVIEW OF 3rd QUARTER REPORT..(1)• The Deputy Commissioner, Ms Thezi Mabuza commenced duties in February 2014.• The NCC is extremely grateful for the additional funds it has been allocated as from

2014/15 onwards. • Disciplinary proceedings have commenced against the Chief Financial Officer of the

NCC and one other senior employee. • Progress in the management of risks and the vast majority of findings by the Auditor

General of South Africa (AGSA) has continued. • Applications for condonation of certain irregular transactions that took place in

previous financial years are underway. • The finances of the NCC have been properly accounted for. • The financial records of the NCC have improved dramatically and are reliable; • The cost containment measures introduced by Treasury has been implemented in its

entirety.

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OVERVIEW OF 3rd QUARTER REPORT..(2)

• The contact centre, email and telephone system has been functioning without any disruption, albeit minor sporadic hiccups.

• Complaints backlog no longer a challenge with the vast majority (73%) dealt with. (This would not have been possible without the assistance rendered by Alternate Dispute Resolution Agents within key industries who are committed to working closely with the NCC).

• Attorneys have been engaged to recover fruitless and wasteful expenditure incurred in previous years.

• Finance service providers have been engaged for a period of 6 months to assist with processes, asset management and supply chain processes.

• Internal Audit and the Audit Committee has been functional.

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Achievements against planned targets

Achievement against Targets- Summary• In terms of Annual Performance Plan there were 12 targets to be

achieved.• Meat Investigation report was used to inform labelling requirements

published by the dti• 2 out of 12 targets not met:

– 44% of Complaints resolved in 80 days as opposed to 60%. Due to lack of drafting skills within Enforcement Division. Legal Division is assisting with drafting of Non Referral letters.

– Three(3) investigations were finalised and approved by Commissioner as per the quarterly milestone instead of six (6). In addition, thirteen(13) Investigations and Inspections were finalised and reports drafted. Only approval outstanding- to be secured in next quarter.

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Achievement against Planned TargetsPerformance Indicator/

MeasureQ3 Milestone Actual Achievement Reasons for Variance Corrective Action

Percentage (%) of complaints received registered

95% of complaints received registered on an average of three days

100% of complaints received registered on an average of three days

Target exceeded The Commission received a smaller number of Complaints due to the December Holidays

None

Percentage (%) of registered complaints analyzed in a pre-defined time period

95% ofregistered complaints analysed on an average of eight days

100% ofregistered complaints analysed on an average of five days

Target exceeded The Commission received a smaller number of Complaints due to the December Holidays

None

Percentage (%) of complaints resolved in a pre-defined time period

60% of complaints resolved on an average of 80 days

44% %of complaints resolved on an average of 80 days

Non referrals letters not drafted due to lack legal drafting skills

To request the assistance of Legal Division of NCC in drafting non-referrals.

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Achievement against Planned Targets

Performance Indicator/ Measure

Q3 Milestone Actual Achievement Reasons for Variance Corrective Action

Number of investigations and Inspections finalised and Approved by the Commissioner

06investigations and Inspections finalised and approved by the Commissioner

Three(3) investigations Finalised and approved by the Commissioner Thirteen(13) Investigations and Inspections finalised and reports drafted

Editing of reports outstanding.

None

Percentage (%) of complaints backlog finalized in a defined turn-around time

Commence project. Establish referral partnerships

Backlog of 6045complaints reduced by 4408 in the third quarter Pending 1637Percentage reduced: 73%

Target met

Recommendation of codes to the Minister

Receipt of codes. Perusal of codes. Consultation with stakeholders. Recommendations of code within 6 months

No Codes received in past 6 Months.

The receipt of codes are dependent on industries or sectors applying for accreditation.

The annual target will be met.

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Achievement against Planned TargetsPerformance

Indicator/ MeasureQ3 Milestone Actual Achievement

Reasons for Variance

Corrective Action

Number of consumer awareness initiatives conducted

3 Workshops

• 2 induction workshops with the dti Field Workers.

• 2 workshop with: People living with Disabilities

• - Ennerdale Community• - Naledi Community

Target met

02 Mall/ Train/ Exhibitions

• 2 Exhibitions:o City of Tshwane in Fashion o Office of the Premier:

Enkangala, Bronkhorstspruit

Target met

N/A • 1 Workshop: Sunnyside Primary School

• 1 School Club Quiz Sunnyside Primary School

Target met and is part of ongoing work with the School

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Achievement against planned targets

Performance Indicator/ Measure

Q3 Milestone Actual Achievement Reasons for Variance Corrective Action

Number of codes of good practice developed

Develop Code of Good of Practice

Draft section 93 code of good practice for the return of vehicles within the motor industry is still under development

Target met

Percentage (%) of positions filled

39% 40% of positions filled in the new approved structure

Target met

Develop and Implement ICT strategy

Develop high level ICT strategy internally

Workshop held with the dti ICT team. Project plan developed. Strategic Plan to be drafted in 4th Q

Target met

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Achievement against planned targets

Performance Indicator/ Measure

Q3 Milestone Actual Achievement Reasons for Variance Corrective Action

Number of meetings with key stakeholders

Meeting with 1 stakeholder

Meetings held with Nedlac and NRCS

Target Exceeded meetings dependent on Diaries of leadership of entities

1 Internal Newsletter I internal Newsletter developed and distributed

Target met

N/A NCC addressed 2 conferences - World Retail conference; Complaints Management Conference

Although this was not part of 3rd Q target- the conferences were used to promote the NCC.

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Achievement against planned targets

Performance Indicator/ Measure

Q3 Milestone Actual Achievement Reasons for VarianceCorrective

Action

Media Responses

3 media responses issued.

• 1 media response on Return and Refunds relating to Cell phones and accessories.

• 1 Media Response on Opt Out Register. • 1 Article - Spend Wisely: Consumer Fair• Radio Interviews conducted

o 786 Cape Town: Food Labellingo Cape Talk: Airline s- Over bookingo 70 2- Non availability of stock

advertised on special (low prices) • 2 TV Interviews conducted

o Yilungelo lakhoo SABC 3 – Opt Out Register

2 TV Interviews

Target Exceeded The number of responses and requests for interviews are beyond the control of the NCC.

None

1 meeting with provincial consumer protection authorities

• 1 meeting held with Consumer Protection Forum involving all Provincial Consumer Protection Authorities.

Target met

Up to date risk register and risk strategy

Revised risk register and strategy in place

• Risk Register Revised. Strategy circulated to Audit Committee for Comments.

comments awaited to Strategy. To be adopted early in 4th Q.

None

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FINANCIAL MANAGEMENT

Financial Management Summary

• Applications for condonation of certain irregular transactions that took place in the previous financial years are underway.

• The finances of the NCC have been properly accounted for. • Fruitless and Wasteful expenditure in the sum of R26 418 was incurred

in the previous financial year. The case was closed this year. This related to SARS penalty and interest and is deemed recoverable.

• Non recurring Irregular Expenditure amounted to R 795 337.00 (Call Centre & Insurance)

• Recurring Irregular Expenditure amounted to R 4 132 333.00 (Lease & Telecommunication

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NATIONAL CONSUMER COMMISSION

STATEMENT OF FINANCIAL PERFORMANCE

31 December 2013

Dec-13 Mar-13

R R REVENUE Revenue 45 498 094 48 296 490 Other income 270 168 101 667

TOTAL REVENUE 45 768 262 48 398 157 EXPENDITURE Employee Related Costs 20 412 929 22 991 100 Amortisation and Depreciation 1 265 569 1 070 544 Operating Expenditure 11 453 579 20 616 704

TOTAL EXPENDITURE 33 132 078 44 678 348 SURPLUS/ (DEFICIT) FOR THE YEAR 12 636 185 3 719 810

Notes to Statement of Financial PerformanceRevenue – Transfer and Grants•Grant received from the DTI amounted to R44 516 000.00 as approved by National Treasury.•Additional R961 824.27 was received from SWEEEP Fund for IT infrastructure.•Transfers of assets received from the DTI amount to R20 270•Interest Income - interest received on current account based on the available balance from the bank amounted to R270 168•Employee related costs- R20 412 929 This is comprised of salary and social contributions which include medical aid, pension fund, PAYE and housing allowance.•Operating Expenditure R11 453 579 –constitutes fixed cost (office rental, printer, security & cleaning expense) and other administrative expense (audit committee, internal & external audit, publication, stationery, postage & courier, consultant cost, legal cost etc.)•Depreciation – The National Consumer Commission purchased assets, software and licenses which previously did not exist from SWEEP funds. Assets were purchased based on priority needs linked to available budget.

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STATEMENT OF FINANCIAL POSITION

at 31 December 2013

Dec-13 Mar-13 R ASSETS

CURRENT ASSETS Cash and Cash Equivalents 17 857 695 4 262 552

Trade and other receivables from exchange transactions 276 213 1 085 212

Trade and other receivables from non-exchange transactions 43 208 23 339

Current Assets 18 177 115 5 371 103

NON-CURRENT ASSETS Property Plant and Equipment 2 930 941 2 558 938 Intangible Assets 944 868 541 127 Rental Deposit - - NON-CURRENT ASSETS 3 875 810 3 100 064

TOTAL ASSETS 22 052 925 8 471 167

LIABILITIES CURRENT LIABILITIES

Trade and other payables from exchange transactions 930 831 1 504 364

Provision for Leave Pay 911 211 815 075 Deferred Operating lease liability 622 377 134 076

TOTAL LIABILITIES 2 464 420 2 453 515

Assets 22 052 925 8 471 167 Liabilities -2 464 420 -2 453 515

Net Assets 19 588 505 6 017 652

Notes to Statement of Financial Position• Cash and Cash Equivalent – The balance in the bank comprises of the surplus for 2012/2013

(Application for retention is still pending), interest earned and balance of grant income. • Trade and other receivable – Exchange transaction: relates to debtors to 2011/12 and 2012/13 which

was raised in 2012/13. These matters have been handed to attorneys for collections.• Trade and receivable – Non Exchange transaction: relates to staff debtors. Recovery is done on

monthly basis.• Property, Plant & Equipment – Relate to assets purchased from SWEEEP Funds and NCC Budget

amounting to R1 108 134.00 • Intangible assets - The entity purchased necessary software and licenses which previously did not

exist amounting to R933 181.00• Trade and other payables - Exchange transactions: Increase is due to increases in accruals• Provision for Leave pay – relates to leave taken by National Consumer Commission’s employees. • Deferred Operating lease liability - During the previous financial period, Depreciation on operating

lease expense on the building had been straight lined. Based on the previous contract, straight lining should never have taken place (no escalation, straight amount).

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7.1 Actual revenue and expenditure for the month of December 2013

Description of Item Annual Budgets

YTD Budgets for the Month of December 2013

YTD Actual Expenditure Dec 2013 Variance

Revenue 44 516 000 33 387 000 44 516 000 -11 129 000

Transfer received from Sweeep 91 824 Transfer of Assets received 20 270 Other Income 255 918 -255 918 Discount Received 14 250

Employee Related Cost 25 003 000 18 752 250 20 439 347 -1 687 097

Salaries & Wages 19 410 000 14 557 500 12 980 940 1 576 560 Social Contribution 5 593 000 4 194 750 7 458 407 -3 263 657

Use of goods and services 19 513 000 9 756 500 12 692 731 -2 936 231

Administrative Fees 1 217 000 912 750 697 645 215 105Advertising 500 000 375 000 48 872 326 128Assets less than R5000 100 000 75 000 - 75 000Audit Costs 1 700 000 1 275 000 1 239 941 35 059Bank Charges 122 000 91 500 83 576 7 924Catering:internal activities 85 000 63 750 58 804 4 946Entertainment 450 000 337 500 - 337 500Communication 774 000 580 500 906 498 -325 998Computer Services 340 000 255 000 108 624 146 376Consultants Cost 2 100 000 1 575 000 805 153 769 847Contractors 1 339 000 1 004 250 1 247 117 -242 867Inventory 120 000 90 000 3 945 86 055Lease Payments 5 378 000 4 033 500 4 190 980 -157 480Legal Fees 2 600 000 1 950 000 199 281 1 750 719Non-life Insurance 180 000 135 000 58 854 76 146Printing & Publication 680 000 510 000 681 094 -171 094Property Payments 116 000 87 000 338 580 -251 580Repairs & Maintanance 90 000 67 500 85 380 -17 880Research & Development 60 000 45 000 - 45 000Training & development 80 000 60 000 - 60 000Travel & Subsistence 960 000 720 000 602 173 117 827Venues & Facilities 100 000 75 000 70 645 4 356Depreciation 422 000 316 500 1 265 569 -949 069

- 4 878 250.00 12 636 185

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Explanation on Variances Item Explanation

RevenueThe dti transferred SWEEEP funds in the sum of R961 824.27 in addition to R44 516 000 transferred during April to October 2013 . It also transferred assets to the value of R20 269.91

Salaries & WagesIn April 2013 there was a general salary increase of 6.5% & back pay made to employees. The salaries of all 33 employees who were employed outside the structure were also increased.

Social Contribution

The overspending on this item is due to additional staff who previously fell outside the structure being incorporated into the structure. Moreover- a cellphone policy and allowance was adopted and implemented.

Administrative FeesThese costs relate to internal audit costs, postage and petties, sheriff costs etc. There was underspending during this period.

AdvertisingThere was underspending during this period. Virements will be performed to remedy this- to cancel over expenditure on certain items.

Assets less than R5000 No expenditure was incurred during this period. This will be spent in the next quarter.

Audit Costs

There were errors in respect of previous financial year 2011/2012 & also incorrect depreciation calculation, misstatement of Financials. Audit costs increased due to the additional time that auditors spent.

Bank Charges

There was underspending during this period. Virements will be performed to remedy this- to cancel over expenditure on certain items. The underspending was actually due to a reduction in the number of payments made by NCC.

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Explanation on Variances

Catering: internal activitiesThere was underspending during this period. The budget may have to be moved to a different quarter that will be supported by relevant activities to ensure that costs are incurred and compared at the correct month/quarter.

Entertainment Entire budget for this line item will be moved to cover over expenditure on other items.

CommunicationThis relates to invoices received from Neotel. This is currently being negotiated with Neotel in that services of Neotel were not utilised. A true figure owing to Neotel will not be known until the negotiations are finalised.

Computer Services

Savings were realised following the use of Microsoft Outlook as opposed to a service provider. There was underspending during this period. The budget may have to be moved to a different quarter that will be supported by relevant activities to ensure that costs are incurred and compared at the correct month/quarter.

Consultants CostThere was underspending during this period. These funds will be utilised for financial support service consultants that are already being appointed for six months.

Contractors The overspending was due to a miscalculation of actual costs. Shifting of funds will be done.

ConsumablesThere was underspending during this period. The budget may have to be moved to a different quarter that will be supported by relevant activities to ensure that costs are incurred and compared at the correct month/quarter.

Lease Payments There was overspending during this month. However, the rental increased from October 2013.Legal Fees There was underspending during this period. These funds will be spent in the next two quarters.

Non-life InsuranceThere was underspending during this period. The budget may have to be moved to a different quarter that will be supported by relevant activities to ensure that costs are incurred and compared at the correct month/quarter.

Printing & PublicationThere was overspending during this period. Two industry codes have not yet been published. This will be done in the next two quarters.

Property Payments There was overspending during this period. Each year the rate increase & management should prepare movement of budget.

Repairs & Maintanance There was overspending during this period.

Research & DevelopmentNo expenditure was incurred during this period as the budget allocation is too low. Virement will be done once quotations are received from Service providers.

Training & developmentNo expenditure was incurred during this period. EXCO will discuss way forward to ensure that budget allocated is spent.

Travel & Subsistence There was underspending during the Quarter. The entire budget is expected to be utilised in the next two quarters.

Venues & FacilitiesThere was underspending during this period. The budget may have to be moved to a different quarter that will be supported by relevant activities to ensure that costs are incurred and compared at the correct month/quarter.

Depreciation The NCC bought new assets during quarter one from SWEEEP funds and quarter two from funds received.

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Progress against AGSA Findings

Progress on AGSA Findings Summary

• There has been full, open and transparent cooperation with the Auditor General of South Africa;

• All previous findings of the Auditor General have been tracked and genuine progress has been made against all findings;

• These findings related to the absence of policies, revision of internal processes in supply chain management, finance, asset management, recruitment of personnel, leave management, travel; etc.

• Action Plans have been drafted and the vast majority have been implemented.

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Progress against AGSA’s findings• The external audit conducted for the financial year 2012/2013 by the Office of the Auditor General raised

96 findings and recommendations.• This necessitated 96 action plans.• Progress against the findings are depicted as follows:

• From the analysis performed on the outstanding matters which constitute 18% of the total action plans, it is evident that there has been some delays in implementation.

• However there has been a genuine improvement in implementation of the outstanding matters in Q4. • A few matters require more time than was initially envisaged, for examples:

– Neotel (contractual dispute), negotiations are currently on course – Recovery of funds, matters are with lawyers– Aligning of budget and performance, this can only be resolved fully and correctly in the next

financial year

Number of action plans Status Percentage

79 Implemented 82%

17 In progress 18%

96 Total number 100%

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AGSA’s Report March 2013

LEADERSHIP

Movement from previous assessment:

1.a Provide effective leadership based on a culture of honesty, ethical business practices and good governance, protecting and enhancing the best interests of the entity

1.b Exercise oversight responsibility regarding financial and performance reporting and compliance and related internal controls

1.c Implement effective HR management to ensure that adequate and sufficiently skilled resources are in place and that performance is monitored

1.d Establish and communicate policies and procedures to enable and support understanding and execution of internal control objectives, processes, and responsibilities

1.e Develop and monitor the implementation of action plans to address internal control deficiencies

1.f Establish an IT governance framework that supports and enables the business, delivers value and improves performance

FINANCIAL AND PERFORMANCE MANAGEMENT

Movement from previous assessment:

2.a Implement proper record keeping in a timely manner to ensure that complete, relevant and accurate information is accessible and available to support financial and performance reporting

2.b Implement controls over daily and monthly processing and reconciling of transactions

2.c Prepare regular, accurate and complete financial and performance reports that are supported and evidenced by reliable information

2.d Review and monitor compliance with applicable laws and regulations

2.e Design and implement formal controls over IT systems to ensure the reliability of the systems and the availability, accuracy and protection of information

GOVERNANCE

Movement from previous assessment:

3.a Implement appropriate risk management activities to ensure that regular risk assessments, including consideration of IT risks and fraud prevention, are conducted and that a risk strategy to address the risks is developed and monitored

3.b Ensure that there is an adequately resourced and functioning internal audit unit that identifies internal control deficiencies and recommends corrective action effectively

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AGSA’s Report- as at December 2013LEADERSHIP

Movement from previous assessment:

1.a Provide effective leadership based on a culture of honesty, ethical business practices and

good governance, protecting and enhancing the best interests of the entity

1.b Exercise oversight responsibility regarding financial and performance reporting and compliance and related internal controls

1.c Implement effective HR management to ensure that adequate and sufficiently skilled resources are in place and that performance is monitored

1.d Establish and communicate policies and procedures to enable and support understanding and execution of internal control objectives, processes, and responsibilities

1.e Develop and monitor the implementation of action plans to address internal control deficiencies

1.f Establish an IT governance framework that supports and enables the business, delivers value and improves performance

FINANCIAL AND PERFORMANCE MANAGEMENT

Movement from previous assessment:

2.a Implement proper record keeping in a timely manner to ensure that complete, relevant and

accurate information is accessible and available to support financial and performance reporting

2.b Implement controls over daily and monthly processing and reconciling of transactions

2.c Prepare regular, accurate and complete financial and performance reports that are supported and evidenced by reliable information

2.d Review and monitor compliance with applicable laws and regulations

2.e Design and implement formal controls over IT systems to ensure the reliability of the systems and the availability, accuracy and protection of information

GOVERNANCE

Movement from previous assessment:

3.a Implement appropriate risk management activities to ensure that regular risk assessments, including consideration of IT risks and fraud prevention, are conducted and that a risk strategy to address the risks is developed and monitored

3.b Ensure that there is an adequately resourced and functioning internal audit unit that identifies internal control deficiencies and recommends corrective action effectively

3.c Ensure that the audit committee promotes 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

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Key Challenges• 182 Positions are approved• 71 Positions are filled• 111 Positions are vacant in the overall establishment.• 28 Positions have been advertised. • Several positions would be abandoned shortly. • Skills are lacking at the NCC- internal training has been made

compulsory on a weekly basis. • The complaints backlog has almost been resolved.

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Mr Ebrahim Mohamed- Commissioner- E.Mohamed@thencc.org.za - 0837865239

Ms Thezi Mabuza- Deputy Commissioner- T.Mabuza@thencc.org.za - 0836532391

Mr Babs Kuljeeth- Company Secretary- N.Kuljeeth@thencc.org.za - 0832739647

Delegation Details

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Thank You