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PRESENTATION TO PRESENTATION TO THE PARLIAMENTARY PORTFOLIO THE PARLIAMENTARY PORTFOLIO COMMITTEE: COMMITTEE: TRADE AND INDUSTRYTRADE AND INDUSTRY

ANNUAL REPORT 2012-13 ANNUAL REPORT 2012-13

NATIONAL CONSUMER COMMISSION NATIONAL CONSUMER COMMISSION

02 OCTOBER 201302 OCTOBER 2013

Mr EBRAHIM MOHAMEDMr EBRAHIM MOHAMED

COMMISSIONERCOMMISSIONER

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OUTLINE OF PRESENTATIONOUTLINE OF PRESENTATION

• Overview of annual report• Strategic objectives

• Achievements against planned targets

• Financial management• Key challenges and financial projection

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Overview of Annual Report

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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.

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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;

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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

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Strategic Objectives

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STRATEGIC OBJECTIVES

The following are the revised strategic objectives that will be pursued by the Commission over the next five years.

•Strategic Objective 1o To promote compliance with the Consumer Protection Act•Strategic Objective 2oTo be a well governed and capacitated organisation

•NCC has the following divisions in order to give effect to the strategic objective 1: oEnforcement and InvestigationsoAdvocacy, Education and AwarenessoResearch oLegal

•Corporate services- including- IT, HR and Finance largely gives effect to Strategic objective 2

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Achievement against Targets

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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

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Achievement against TargetsObjective 1:To promote compliance with the Consumer Protection Act

Performance indicator & target Achievement Reasons for variance

25% of complaints received registered and analysed within 10 days

19% of complaints received registered and analysed within 10 days

The assessment and analysis only began in Q3 and Q4 after review of the strategic plan.

80 business days to facilitate settlement of complaints and to communicate outcome of settlement

47% of matters settled and communicated within 80 days

Inadequate Human resources and IT Support

50% of complaints referred within defined turn-around times

9% Referrals were intensified in Q3 and Q4 after review of the strategic plan.

90 Reactive Investigations:Number of matters escalated for investigation that are finalised

36 Investigations approved and certificated in the latter part of the year under review

Investigations Incomplete- Investigations were approved in the fourth quarter of the year under review

9 proactive investigations conducted 3 investigations finalized and reports approved by the Commissioner

Investigations Incomplete Investigations were approved in the fourth quarter of the year under review

Recommendation of all industry codes to Minister within 6 months of receipt  

Three applications received in terms of the guidelines in Q3 and Q4 One application for exemption received, processed and advice given to the Minister

Partially achieved due to lack of human resource.

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Achievement against TargetsObjective 1:To promote compliance with the Consumer Protection Act

Performance indicator & target Achievement Reasons for variance

Develop draft policy on accreditation of consumer protection groups

Not achieved Project moved to new financial year due to late inclusion in revised APP.

3 research reports completed and signed off by the executive authority

Completed three (3) sector research studies in the following sector industries:• Health and Medical Industry• Timeshare; and• Travel and Tourism

Target not fully achieved as research not approved by Executive Authority

12 consumer awareness initiatives conducted

Various projects in relation to the following were undertaken:PublicationsConsumer & Business WorkshopsSpecial ProjectsMall/ Train/ Taxi/ ExhibitionsSchool Consumer ClubCapacitation of Consumer Protection GroupsStakeholder Engagement:Create the brand of the NCC as SA consumer voiceInternal CommunicationMedia engagement/ responses

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Achievement against TargetsObjective 1:To promote compliance with the Consumer Protection Act

Performance indicator & target Achievement Reasons for variance

10% of positions filled There are 132 positions on the approved organisation structure. 32 positions were filled and that makes it to be 24% of positions filled as of 31 March 2013

Finalise terms of reference and appoint service provider relating to skills development plan

Terms of reference has been finalised and the service provider has not yet been appointed

Target not achieved. Funds were not available in 2012/13 financial year.

Development of ICT strategy The ICT strategy was not developed Target not achieved. Funds will be requested in the MTEF during 2013/14 financial year.

Bi- annual meetings with provinces

Meetings with 3 regulators2 Industry meetings

Planning of meetings with each Provincial Consumer Protection Authority finalized. Referral Protocols drafted in preparation for Provincial meetings. Meetings held with 5 RegulatorsMeetings held with 4 industries

Meetings of Provincial Consumer Protection authorities planned for 1st Q of next financial year

Update risk register and monitor compliance with commitments

Draft Risk Management Plan and Strategy is in place but not updated

Target not achieved due to the resignation of the Risk Manager.

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FINANCIAL MANAGEMENT

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Budget vs. expenditure for the 2012/13 year

Approved Budget Adjustments Final budgetActual amounts on comparable basis

Difference between final budget and

actualReceiptsRendering of services - - - - - Investment revenue - - - 101 667 101 667 Grant revenue 41 577 000 - 41 577 000 48 296 490 6 719 490 Total Receipts 41 577 000 - 41 577 000 48 398 157 6 821 157 PaymentsEmployee costs 22 547 000 - 22 547 000 22 991 100 444 100 Operating expenses 17 004 000 - 17 004 000 16 603 419 -400 581 Finance charges - - - 26 872 26 872 Materials and bulk purchases - - - - - Other expenditure 2 026 000 - 2 026 000 5 056 957 3 030 957 Total Payments 41 577 000 - 41 577 000 44 678 348 3 101 348 Net Receipts/ (payments) - - - 3 719 810 3 719 810

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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.

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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 dti to commence proceedings against suppliers and certain employees.

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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 to submit 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 TreasuryApplication has been made to Treasury.

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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.

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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 servicesLegal 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 dti adopted. Due process followed in appointment of 6 skilled employees since September 2012. 33 employees previously irregularly employed outside structure now placed within structure.

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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.

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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.

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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.

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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.

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Revenue Projection against allocated budget

R 000 

2013/2014 2014/2015 2015/2016 2016/2017

Revenue 44 516 43 376 45 596 48 013         Salaries and wages 19 410 19 948 20 732 23 251 Social contributions 5 593 5 052 5 000 5 315 Administrative fees 1 217 1 849 1 450 1 086Advertising 500 47 64 68Assets less than R5 000 100 98 107 113Audit costs 1 700 1 792 1 888 1 899Bank charges 122 118 128 135Bursaries (employees)       - Catering: internal activities 85 61 53 56Communication 774 588 640 674Computer services 340 294 320 337Consultants 2 100 1784 2212 2381Contractors 1 339 1147 1300 1500Entertainment

100 150 85 90

Inventory 120 701 763 803Lease Payments 5 378 5 668 5 974 6 036Legal fees 2 600 980 1 567 1 124Non life insurance 180 147 160 168Printing and publication 680 627 683 719

Property payments 116 78 85 90Repairs and maintenance 90 78 85 90

Research and development 60 59 64 67

Training and staff development

80 507 353 67

Travel and subsistence 960 692 906 915

Venues and facilities 450 466 508 535Depreciation 422 445 469 494

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Key Challenges

Staff Required 2013/14 Office of Commissioner

Supply Chain HR Finance Cost

Deputy Commissioner (1) 568 455 568 455

Executive Assistant (1) 142 117 142 117

Director (1) 385 653 (1) 385 653 771 306

Deputy director/s (2) 495 603 495 603

Assistant Director (1) 166 407 166 407

Admin Officer (2) 284 235 284 235

Payroll Officer (1) 117 058 117 058

Staff Required 2013/14 Adv and Educ Legal Research Investigation

Director (1) 385 653 1) 385 653 (1) 385 653 1 156 959

Deputy director/s (1) 247 500

247 500

Assistant Director (2) 332 814 (2) 332 814 (6) 998 442 1 664 070

8 additional Contact centre agents

1 129 317 1 129 317

Total half year Costs R6 743 027

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Additional Budget Request

Description 2013/2014

Graduates to assist with backlog R958 200International Travel R270 000

Domestic Travel R3 575 670

Strategic planning Session R250 000

Financial Consultants R1000 000

IT consultants (ICT Strategy) R1 500 000

Consultants (Change Management) R100 000Venues & Facilities R1 415 000

Consultants (Review of performance management) R100 000Consultants (Business process re-engineering) R400 000Consultants (Research) R2 000 000Consultants (Codes of good practice) R540 000

Consultants (Legal Cost) R1 162 000

Consultants and Special Services (Investigation) R400 000

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Additional Budget Request

Description 2013/2014

Consultants (Red meat and Poultry)/ Subject experts R500 000

Consultants (Adv; Education and Awareness) R1 245 000

Training (Staff) R1 120 000

Microsoft Licences R500 000Call Centre Licences R100 000VIP Licences R80 000Accpac Licences R80 000Printing Management Application R50 000Printing and Publications R220 000Advertising R570 000

Computers R100 000Coffee Machine R60 000

Additional Printer R60 000

First Aid Kit R5 000

NCC Website R400 000

Intranet R300 000

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Additional Budget Request

Description 2013/2014

Anti Virus R100 000

Fire wall software R100 000

Backup Software R100 000

Electronic Security R500 000

Bio-metric access system R216 445

Shredder R32 890

Records Management Solution R476 000

Zippel Filling Cabinet *2 R72 000

Accpac upgrade R230 000

Franking Machine R60 000

Filling Cabinet *24 R85 500

Employee Cost R6 743 027

TOTALR 27 776 732

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Thank You