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ANNUAL REPORT 2009/2010PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

PRESENTATION TO THE PORTFOLIO COMMITTEE ON POLICE

2 November 2010

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ANNUAL REPORT 2009/2010PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

REPRESENTATIVES

Name Position

Mr. T Bopela Chairperson of Council

Lt. General. A Dramat Council member

Mr. G Mnisi Council member

Mr. SM Chauke Director

Mr. DKN Ligege Deputy Director – Finance

Ms S Zuma Manager – Communications

Ms Z Ngcobo Office of the Chairperson

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OVERVIEW OF THE PRESENTATIONPRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

• Introduction by the Chairperson of Council

• Who is PSIRA

• Last Briefing – 27 October 2009

• 2009/10 Organisational performance

• Progress with implementing Audit Matters

• Financial Results

• Situational analysis (Where is PSIRA)

• Policy developments

• Strategic direction and Turnaround (Where is PSIRA going)

• Conclusion

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Who is PSIRAPRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

• The Council was appointed on January 2010 – Full-time Chairperson : Mr. T Bopela

– Vice Chairperson : Ms Z Holtzman

– Council member : Lt. General A Dramat

– Council member : Mr. G Mnisi

– 1 Vacancy

• PSIRA administration led by the Director

• Supported by 3 divisions– Law Enforcement

– Finance and Administration

– Communications and Training

• Staff complement of 210 (March 2010)

• The organisational structure is as follows:

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The Organisational StructurePRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

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The last briefing PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

Category Item Description Progress since last briefing

Non-Compliance with Treasury Regulations Absence of Council - Accounting AuthorityResolved. New Council has been appointed by the Minister : Police effective January 2010

Non-Compliance with Treasury Regulations Absence of an Audit Committee

Resolved. On 25 October 2010, the Council held interviews for members of the Audit Committee. A resolution was taken to appoint 3 (three) independent persons, one will serve as a Chairperson and the two as Deputy Chairperson and additional member.

Non-Compliance with Treasury Regulations Absence of an Internal Audit function

Resolved. The internal audit function has been outsourced since October 2009, for a period of 3 years.

Irregular expenditureCartridges bought amounting to R617,043 are irregular expenditure.

Unresolved. The case has been referred to the SAPS. Investigation in progress

Irregular expenditure Lease agreement (JHB Office )Unresolved. The case has been referred to the SAPS. Investigation in progress

Vat liability  

Partially resolved. PSIRA has applied for the deregistration for Vat, due to it being listed as a Schedule 3A public entity. In September 2010, SARS refunded PSIRA so as to close the Vat account. The process of audit is underway at SARS to finalise the VAT deregistration process.

Unallocated depositsUnallocated deposits R12 million, and current 2008/9

Resolved. Unallocated deposits from previous financial year have been allocated.

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Core Business ReportPRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

Compliance Inspections per Active Business

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Core Business ReportPRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

First Time Inspections Compared To New Business

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Core Business Report PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

Infrastructure Compared to New Business

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Core Business Report PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

Dockets Opened Compared to Prosecutions

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Core Business Report PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

Registered Cases Compared to Finalised Cases

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Organisational performance PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

LAW ENFORCEMENT Strategic objective / goal

Results Reason for variance

Reduce registration time taken to register security officers and security businesses to not more than seven days

Not achieved. Registration time has been reduced to 1 month

No CRM strategy in place

Improve quality and operational efficiency and effectiveness

Not achieved. Poor data integrity.

Grow business as per legal mandate by ensuring compliance with existing legislation by security service providers through comprehensive enforcement of the provisions of the Act and statutory Codeof Conduct

Not achieved Goal not aligned to expected outcomes

Achieve targeted metrics of stakeholder satisfaction by establishing productive relationships with key stakeholders who have a vested interest in theDepartment’s success and effective engagement to build the Authority’s reputation and encourage a spirit of voluntary compliance

Not achieved The process was largely reactive; No planning place to drive achievement of goal

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Organisational performance PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

LAW ENFORCEMENTStrategic objective / goal

Results Reason for variance

Equip PSIRA officials with skills and knowledge to promote and achieve the values of professionalism, integrity, diligence and competence in the performance of functions and the exercise of powersby inspectors and to shape the Authority’s organisational culture

Partially achieved HR skills audit pending

Develop a competent private security industry by promoting high standards in the training of security service providers and prospective security service providers

Not Achieved Training Regulations regarding new standards have not been promulgated

Implement a risk- based supervision approach to regulation

Not achieved Implementation deferred due to moratorium placed on new appointments (i.e. Chief inspectors)

Establish Ombudsman office in order to increase protection to consumers ofsecurity services

Not achieved Pending legislative review (Consumer Protection Act)

Develop enabling IT architecture by liaising with IT Department to ensure that the authority’s IT infrastructure supports the Department’s objectives

Not achieved Output not aligned to goal

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Organisational performance PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

LAW ENFORCEMENTStrategic objective / goal

Results Reason for variance

Ensure an enabling legal and regulatory framework

Not achieved No proper consultation with stakeholders

Implement effective performance management

Achieved n/a

Develop high engagement working environment

Not achieved Output not aligned to goal

Align staff, systems and organisational design behind the PSIRA strategy

Partially achieved Organisational structure not review in line with strategy

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Organisational performance PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

FINANCIAL AND ADMINISTRATIONStrategic objective / goal

Results Reason for variance

Increase operating revenue to ensure financial stability

Target achieved n/a

Collect PSIRA’s outstanding and recoverable debt

Target achieved n/a

Collect fees due timely Not achieved 80% collected

Comply with PFMA requirements Target achieved n/a

Maintaining effective corporate governance Partially achieved Fraud prevention plan drafted. Policies identified by Internal audit were not drafted

Comply with PFMA / Unqualified audit report Not achieved Qualified report 2008/09

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Organisational performance PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

HUMAN RESOURCESStrategic objective / goal

Results Reason for variance

Right people in place at the right time Not achieved Output not aligned to goal

Implement effective performance management

Partially achieved A comprehensive performance management will be implemented in the new financial year, given that the Department has appointed an HR Manager

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Organisational performance PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

INFORMATION TECHNOLOGYStrategic objective / goal

Results Reason for variance

Develop IT plan with costing to support re-registration

Partially achieved A further study on an electronic document management system must still be conducted

Develop plan to ensure overall data integrity Partially achieved

Ensure that the target of 95% system uptime is achieved

Partially achieved IT performance not monitored

Annual IT reviews and recommendations Achieved ICT governance review was conducted

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Progress with implementing Audit mattersPRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

Item Description Progress since 31 March 2010

Fruitless and Wasteful expenditure Assets purchases for branch offices

The two generators were for Durban and Eastern Cape office premises. These assets have not been used, however ,management has decided to keep the generators with a view to use them when office premises are sought in the future. This decision was taken after considering the loss (approx 60% of retail value) if disposal via auction is done.

Irregular expenditure

Acquisition of software licences amounting to R1 245 114, without informing National Treasury of the deviation from inviting competitive bids

Three quotations were obtained. No loss suffered by PSIRA as a result of the non-compliance.

Irregular expenditure

Outsourcing of professional accounting assistance during year end, which amounted to R1 589 105, without informing National Treasury of the deviation from inviting competitive bids.

Three quotations were obtained. No loss suffered by PSIRA as a result of the non-compliance.

Irregular expenditureLegal fees amounting to R683 000, without following Treasury Regulations.

The new policy on procurement will make provision of a panel of legal advisers and attorneys, such that legal services will be used on a rotational basis.

Material losses through impairmentsImpairment of debtors amounting to R208 million due to poor collection practices.

A debt collection agent has been appointed in September 2010 to collect all outstanding debt.

Inadequate quarterly reporting of performance information and formal systems

The PSIRA does not have proper system of collecting, collating, verification and reporting of performance information.

The procedure is in process of being developed by management for approval by Council at its next meeting scheduled for December 2010.

Non-Compliance with Treasury Regulations

Lack of proper risk management processes and procedure including a fraud prevention plan.

Resolved. The fraud prevention plan and policy was approved by Council on 25 October 2010.

Non-Compliance with Treasury Regulations

PSIRA did not have a system for properly evaluating major capital projects

Management have developed procurement procedures that will cover the inadequacies identified by the AG, for approval by Council at its next meeting scheduled for December 201019

Financial resultsPRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

31-Mar-10 31-Mar-09% Change

R R

Revenue

Sale of goods and services 5,077,831 2,943,462 73%

Fines 3,019,918 3,481,115 -13%

Infrastructure assessment fees 2,810,730 2,190,376 28%

Levies received 59,758,576 52,575,376 14%

Registration fees 12,746,332 10,789,144 18%

83,413,387 71,979,473 16%

Other income

Rental income 171,930 0 100%

Interest and penalties interest 7,126,662 6,014,538 18%

Interest received 2,018,780 3,598,096 -44%

Sundry Income 1,155,533 2,827,542 -59%

10,472,905 12,440,176 -16%

Expenses (97,773,693) (96,803,992) 1%

   

Operating deficit (3,887,401) (12,384,343) 69%

Finance Costs (3,725) 0 -100%

Loss on disposal of fixed assets (361,614) 0 -100%

(365,339) 0 -100%

Deficit for the year (4,252,740) (12,384,343) 66%

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Financial resultsPRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

• Detailed expenditure

OPERATING COSTS 2010 2009 % Change

Employee related costs 39,236,712 38,544,142 2%

Provision for bad debts 15,948,964 27,601,164 -42%

Fingerprint costs 8,313,834 5,155,323 61%

Consulting and professional fees 7,211,449 4,461,476 62%

Legal fees 3,748,371 2,727,906 37%

Travelling - local 2,555,271 2,190,936 17%

Auditors remuneration 1,562,364 729,881 114%

Other operating costs 19,196,728 15,393,164 25%

97,773,693 96,803,992 1%

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Financial resultsPRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

• The graph below represents the breakdown of significant operating costs for 2009/10

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Financial positionPRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

STATEMENT OF FINANCIAL POSITION

31-Mar-10 31-Mar-09ASSETSCurrent AssetsTrade and other receivables 8,105,054 6,004,184Cash and cash equivalents 23,941,101 31,964,146

32,046,155 37,968,330

Non-Current AssetsProperty, Plant and Equipment 17,150,122 18,972,478Intangible Assets 57,698 68,492

17,207,820 19,040,970

Total Assets 49,253,975 57,009,300

LIABILITIESCurrent LiabilitiesTrade and Other Payables 34,089,128 34,695,267Lease obligations 285,432 184,878

34,374,560 34,880,145

Non-Current LiabilitiesRetirement benefit obligation 1,193,000 4,190,000

Total Liabilities 35,567,560 39,070,145

Net AssetsAccumulated surplus 13,686,415 17,939,155

Total net assets and liabilities 49,253,975 57,009,300

Current ratio 0.93 1.09

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Financial position PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

• PSIRA ‘s ability to settle current obligations has worsened

• Current ratio 0.93: 1 compared to 1.09:1 (2008/09)

• Net assets declined R13.6m and 17.9m (2008/09)

• Attributable to deficit posted in 2009/10

• The financial position is attributable to :– Poor debt collection practices

– Funding model not reviewed

– Increased operating costs

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Financial results – trend analysis PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

• The graph below represents revenue and opex since 2004 to date

R'000 2004 2005 2006 2007 2008 2009 2010Revenue 44,409 48,888 53,840 58,533 95,017 84,420 93,886Operating expenditure 32,636 41,361 50,302 60,492 94,341 96,804 98,139Surplus / (deficit) 11,773 7,527 3,538 -1,959 676 -12,384 -4,253

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Financial results – trend analysis PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

• From 2004 – 2006 PSIRA has been posting surpluses

• From 2007 – 2009 PSIRA has been posting deficits with exception of FY 2008

• Mainly attributable to the following:– Funding model i.e. levies not reviewed

– Increased workforce for law enforcement

– Provisions for doubtful debt

– Rising Fingerprinting costs

– Increased legal fees

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Situational analysisPRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

Stakeholder perspective•National footprint•Lack of Law enforcement strategy•Lack of CRM •Unacceptable registration turnaround times•No Industry research•Lack of communication with Industry•Corporate identity (contact centers)

Financial perspective•Lack of debt collection strategy•No real time billing•Financial distress – operating in deficits (2 years)

Business processes & resources•Lack of ERM framework•Lack of ERP systems •Ageing IT infrastructure •Database integrity

Human perspective•Organisational structure not aligned to objectives•Low morale•Lack of management skills•Lack of corporate and HR policies

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Strategic direction and turnaroundPRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

• The approved strategic plan for 2010 -2012

• Strategic objectives– Ensure PSIRA’s financial viability and sustainability

– Reduce the risks to the state and South Africa’s citizens through industry compliance with PSIR Act

– Develop an enabling environment for PSIRA to be able to operate effectively and efficiently

– Develop effective stakeholder relationships through effective communication and engagement

– Ensure the right people in the right place at the right time to deliver on PSIRA’s strategic and operational requirements

– Develop and implement the strategic capabilities required for PSIRA future strategic success

– Develop an appropriate, enabling regulatory environment

– Establish PSIRA as an example of exemplary governance in the public sector

• Management will continue to build on the current strategic plan

• A turnaround strategic to address the current crisis is being developed

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THE END29