Presentation to the Portfolio Committee on Trade and Industry

NRCS Annual Report FY 2012

11 October 2012

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In attendance from NRCS

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Mr. Nico Vermeulen (Apology)Chairperson of NRCS Board (Acting)

Mr. Katima TembaChief Executive Officer (Acting)

Ms. Reshma MathuraChief Financial Officer

Ms Trish PillayChief Financial Officer (Acting) - Outgoing

Purpose

To brief the Portfolio Committee on Trade and Industry on the Annual Report of the NRCS

for financial year ending 2012

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Scope

Organisational mandate Background Organisational challenges Overview of strategic outcomes Performance against strategic plan Report of the Auditor-General Control framework and high-level action plans Financial overview

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Organisational Mandate

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Organisational MandateMission and Vision

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Organisational mandateLegislative mandate

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Mandate of the NRCS is derived from the following Acts.

Background

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Background

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Organisational Challenges

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Organisational Challenges

Current challenges faced by NRCS include:

Organisational maturity as NRCS is still in infancy stage Organisational transition from SABS to stand-alone entityDelivery of NRCS mandate and achievement of performance targets for operational unitsInternal stability resulting from investigations and uncertainty iro outcomes of these investigations.Stability of organisational structure and staff turnoverGeneration of revenue reliant on trends and marketsInternal control weaknesses including procurement, asset management and HRLabour relations and a range of staff and HR issues

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Overview of strategic outcomes

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Overview of strategic outcomesPer the Strategic Plan FY2012-FY2017

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Performance against strategic plan

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Performance against strategic plan (1)

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Strategic Goals

Outcome Division Targets Actual performance Achieved Comments

To Maximise compliance with all specifications and technical regulations falling under the mandate of the NRCS

Maximum coverage

Perishable Division

100% of all production & consignments inspected for compliance to the minimum compulsory specification requirements

Local products: 100%Imported products: 100%Exported products: 100%

Non-Perishable Division

CMM: 8160 InspectionsAutomotive: 7650 InspectionsElectrotech: 7600 Inspections

CMM: 7288 InspectionsAutomotive: 5408 InspectionsElectrotech: 6419 Inspections

• Resignation of staff• Staff suspensions• Strike action by staff• Other Border

enforcement project

Legal Metrology Division

5438 Inspections 5621 Inspections

Ensure common understanding and application of NBR by industry and authorities

National Building Regulations

100% of all Review Board cases requests, investigated and recommended to the Review Board within 60 Days

11 Cases submitted to Review Board.77.8% of these cases were investigated and recommended to the Review Board within 60 days

• External factors, including awaiting documents from stakeholders

Performance against strategic plan (2)

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Strategic Goals Outcome Division Targets Actual performance Achieved Comments

To Maximise compliance with all specifications and technical regulations falling under the mandate of the NRCS

Finalise and publish informative research

RRD 2 research papers published

No research papers produced, 3 impact assessments conducted

• Impact assessments are pre-cursors to research papers

Prosecute non-compliances in accordance with NRCS Act

Special Investigation Unit

50% of cases investigated

No cases investigated • Unit not properly resourced• Unit in the process of being

resourced

To extend the scope of the NRCS regulatory activity to increase the protection of South African Citizens

Build a regulatory framework that is sustainable and that protects South African citizens

RRD 11 compulsory specifications / technical regulations approved by the Board

2 compulsory specifications approved by the Board8 awaiting Board approval

• Timing difference between Board approval and preparation of specifications

To implement a Risk Based Approach to regulation that informs all regulatory activity

Effective and efficient inspections and resource utilisation

All Operational Business Units

Board approval of the Risk Based Strategy

Risk Based Approach was not approved by the Board, however the project plan was approved by the Board

• Approval of the plan allowed the approach to be piloted.

Performance against strategic plan (3)

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Strategic Goals Outcome Division Targets Actual performance Achieved Comments

To ensure the “right people are in the right place at the right time” to enable effective execution of the NRCS Strategy

Appropriate organisational structureCompetent and motivated staff

Corporate Services

Organisational structure approved by the Board

Organisational structure approved by the Board

50% implementation of the HR strategy

25% implementation of HR strategy

• Structure placed on hold• Job grading and profiling

currently at tender stage

To inform and educate stakeholders, industry and consumers regarding obligations of the NRCS with respect to specifications and technical regulations

Increase consumer and industry awareness

Corporate Services

5% increase in benchmark survey score

Benchmark survey was not conducted

• Quotations received higher than amount budgeted

• To be combined with reputational model

Enhance consumer education

Corporate ServicesOperational Business Units

100% of all confiscations and product recalls covered

100% of alerts on non-compliances, confiscated products and recalls were issued

NRCS recognised as an effective regulator by stakeholders

Corporate Services

Develop reputational model

Reputational model not developed

• No quotations were received.

• To be combined with consumer industry awareness initiative

Conduct a survey for the benchmark

Benchmark survey not conducted

Report of the Auditor-General

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Action Plans: Auditor General report (1)

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Area of audit concern

Detail Management interventions

Revenue from services rendered from exchange transactions

• Non-accrual for revenue• Inspections conducted not

translated into revenue within the reporting period

• A manual weekly report on certification is in the process of being implemented. This will be reviewed weekly for revenue completeness.

Property, plant and equipment

• Useful life of assets not reviewed

• Accuracy of asset register

• Full asset count will be conducted by February 2013.

• A reconciliation is in process between the Asset Register and the General Ledger

Restatement of FY 2011 figures

• Correction iro. depreciation on investment property.

• Correction of bonus provision recognised as accrual.

• Figures were corrected in the AFS.• A financial manager is being appointed and

will add integrity to the AFS.• In the process of procuring an AFS software to

ensure accuracy of AFS

Action Plans: Auditor General report (2)

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Area of audit concern

Detail Management interventions

Predetermined objectives

• Usefulness of information• Performance indicators not

well defined• Performance targets not

specific• Reliability of information• Reported performance not

valid, accurate and complete• Achievement of planned

targets• 3 of 15 planned targets were

achieved – 80% non-achievement

• NRCS 2012/13 – 2014/15 Annual Performance Plan has addressed some of the identified problems.

• The NRCS 2013/14 – 2015/16 Annual Performance Plan will ensure that all identified performance targets are clearly defined

• NRCS has also defined an inspection and is in the process of documenting processes to ensure uniformity and clear understanding

• All responsible Heads are now required to sign-off their performance information reports

• NRCS is in the process of recruiting to enhance capacity in areas that has insufficient human resources

Action Plans: Auditor General report (3)

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Area of audit concern

Detail Management interventions

AFS, performance and annual report

• Not submitted in accordance with prescribed reporting frameworks

• A financial manager is being appointed and will add integrity to the AFS.

• In the process of procuring an AFS software to ensure accuracy of AFS

Asset management

• Systems not in place to safeguard assets

• An asset accountant will be appointed to manage the recording of all assets.

• Policies and procedures related to assets will be reviewed.• NRCS is in the process of commissioning a health check on JD

Edwards, financial system to determine the root cause of the ICT problems on the asset register.

• In the meanwhile, a manual reconciliation between the fixed asset register and the GL is being conducted.

Action Plans: Auditor General report (4)

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Area of audit concern

Detail Management interventions

Procurement and contract management

• Non-compliance with procurement thresholds, processes, requirements

• Awarding of contracts in accordance with legislative requirements

• The organisation’s procurement processes have been improved to ensure compliance to Treasury Regulations and Frameworks.

• The SCM policy has been revised and updated to incorporate all legislative requirements.

• The appointment of a SCM Manager has enhanced compliance and reporting of non-compliance.

• For all transactions initiated after 30 September 2012, the NRCS is now compliant to policies.

• The NRCS is further in the process of appointing a contract specialist who will both assist with management of contracts and assist in tender-related matters.

• The filing system will be upgraded, secured space for Procurement Department will be explored, and document movement to and from procurement will be managed more carefully.

Action Plans: Auditor General report (5)

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Area of audit concern

Detail Management interventions

Internal control • Leadership oversight

• Material misstatements in financial and performance reporting

• The appointment of a CFO has strengthened the Finance Department and general financial controls.

• Furthermore, the capacitation of the finance department with competent staff, will further enhance its effectiveness.

• The NRCS is in the process of consulting employees on the organisational structure. This will bring stability and ensure clear lines of responsibility

• All Acting Executives are required to sign-off their divisional reports. NRCS is in the process of aligning all performance agreements are in-line with the NRCS annual performance plan.

Expenditure management

• Irregular, fruitless and wasteful expenditure

• An SCM Manager has been appointed.• In addition, communication of the revised procurement policy is

an ongoing initiative to the management and staff of NRCS.• Instances of irregular, fruitless and wasteful expenditure are

recorded by procurement and relevant controls are being put in place to deal with these instances.

Control framework and high-level action plans

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Actions to address issues

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Financial overview

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Financial Overview: Revenue (3)

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Composition of revenue for FY 2012

Financial Overview: Revenue (1)

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Monthly revenue collection trends reflect peak periods for revenue collection

Financial Overview: Revenue (2)

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Cumulative revenue collection for the financial year show the total revenuecollected in the year

Financial Overview: Expenditure (1)

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Expenditure makeup for FY 2012

Financial Overview: Expenditure (2)

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Expenditure makeup for FY 2012 – FY 2009

The end

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