The Parliamentary Research Unit gave a comprehensive comment on the Private Security Industry Regulatory Authority (PSIRA) Annual Report for 2011/12. PSIRA was listed as a public entity under the Public Finance Management Act, but did not receive state funding, deriving its revenue from levying fees and fines on the security industry. PSIRA had embarked upon a turnaround in 2010, and the aims were outlined. However, in 2011/12 only 14 of the 46 measurable targets were achieved. The Auditor-General (AG) had commented on the inadequacy of the targets, and the fact that budget and strategic plan were not aligned, and a number of other concerns were raised. PSIRA failed to budget for a number of ongoing lawsuits, despite a previous recommendation from the Committee. There were significant concerns about its ability to continue as a going concern, as it showed a net loss of R9.28 million, and its liabilities exceeded assets by R8.23 million. The AG was particularly concerned at the absence of any risk management strategy, and the failure of management to ensure that performance information and financial information was reliable. Various frameworks and policies were needed. PSIRA had increased its fees by 75% for business fees, and 900% for security officers hired by companies, in conflict with the National Treasury recommendations of 9.1%. It had written off R82.5 million debt as irrecoverable, in over 6 000 accounts. Rent and staff expenses had doubled, and there were serious concerns around its lease agreements, although this Committee had asked the AG to do a performance audit on the lease. There were concerns around the salary of the Chairperson, who was paid R1.39 million in 2011/12, but this had been raised as a question to the Minister, who had confirmed that the Office of the Accountant-General was doing an investigation. Various questions arose around staffing, including the asset management and events management positions, and fixed contracts. Nothing was contained in this Annual Report around the Council and Senior Management emoluments. Irregular expenditure amounted to R1.17 million, and fruitless and wasteful expenditure to R17 220. Although a breakdown of its operations was provided, there was conflicting information on page 18 of the Annual Report.
PSIRA gave a very lengthy presentation, made up largely of statistics and tables. The pillars of the turnaround were described as the legislative mandate, establishment of effective and efficient law enforcement strategies, establishment of a capable and ethical workforce, with adequate financial resources, and innovative business processes supported by cutting edge technology. PSIRA was moving away from the dysfunctionality of the past. Its focus areas in this year were outlined. Key performance indicators for each of the programmes, together with the targets, and an indication of whether these were fully, partially, or not achieved were tabled, and reasons for the variance, and the steps taken to address the concerns, were given. Most of the comment was directed to the initiatives that had been taken in the current financial year, to improve the deficiencies shown in the Annual Report. Budgetary constraints were frequently cited. The presentation also outlined the law enforcement and compliance activities, with a number of graphs on performance. The PSIRA activities in relation to firearms were explained. The growth in companies and officers was not only attributed to crime, but other matters such as new shopping malls, increased pressure from insurance companies and the fact that locksmiths, private investigators and electronics industry were now included. PSIRA had a national footprint and had introduced a new model in January 2012, which was explained. 240 criminal cases were opened in 2011/12, and 117 of the 771 criminal cases pending had been finalised. The standard offences being prosecuted were set out. Concerns in relation to firearms were that 19% of businesses allowing their officers to carry their own firearms were not complying with regulations, and 12% of those carrying arms were not competent to use them. PSIRA was currently analysing the SAPS database of all businesses licensed for firearms, and establishing one specific to the security industry. A summary was given of the internal Inquiries, and it was noted that 272 business registrations were suspended. The financial report was briefly summarised, and some explanations were given on the concerns expressed by the AG, with the remark that PSIRA was taking steps to address those findings. Lack of capacity was again cited as a contributory factor. At this point the Chairperson noted that what was being said during the presentation was not in line with what was reported in the Annual Report, and this would be taken up during the questions. Finally, a report on the human resources was given.
Members asked a number of far-reaching questions, but the answers were to be delivered on the following day. Firstly, the Chairperson read out the AG’s remarks, and stressed that the greatest concern was the failure of management to ensure compliance. She complained that in many respects the presentation now given was simply not correct, as it was not true that matters had been resolved; some issues continued year after year, and the comment was often misleading. PSIRA failed to explain findings on non-compliance, and findings on fruitless and wasteful expenditure and other issues. Council failed to explain why it had not provided oversight. Other specific questions related to the call-centre, how the strategic plan was drawn, given the number of times that “financial constraints” were cited as the reason for non-achievement, questioned the lease, and the huge amounts paid out for items such as air-conditioning and salaries, especially in light of the precarious financial position. Members also pointed out that PSIRA was in dire straits, and although it claimed to have made plans, this was not borne out by the fact of recurrences of the same problems. The value that management was bringing was questioned, in light of the hiring of consultants, and Council was asked to explain who took the decision to appoint the Chairperson at this salary, as well as the senior management, and against what criteria. Risk management and the lack of budgets for contingent liabilities were issues raised by this Committee that had been ignored. The justification for the raising of tariffs was requested, as well as comment on leave and sick leave, why event managers were deemed necessary, the move of staff to the enforcement unit, details of amounts written off and an explanation of the figures for staff and expenditure, including the fixed term contracts and the consultants, and the number of people employed, and their salaries, in the Director’s Office. Specific comment was sought on the AG’s remarks about lack of proper management. The Chairperson stressed that PSIRA should not have presented financial figures now that differed from those in the Annual Report. More detail was requested on “sundry income” and more detail as to who was dealing with risk and asset management, and the senior management emoluments. The Chairperson was adamant that these matters should not have been listed as “fully achieved”. She was also very concerned that although explanations were given for irregular expenditure, the fact remained that these matters had not been attended to for two years. The registration data on page 18 of the Annual Report must be explained.
Private Security Regulatory Authority Annual Report 2011/12: Parliamentary Research Unit briefing
Ms Nicolette van Zyl-Gous, Parliamentary Researcher, outlined the mandate of the Private Security Industry Regulatory Authority (PSIRA). She noted that the Council was appointed by the Minister of Police in consultation with Cabinet. Council was tasked with the governance of PSIRA, was the accounting authority and was accountable to the Minister of Police. It was listed as a public entity in Schedule 3A of the Public Finance Management Act. It was funded through levies and fees recoverable from the security industry, and did not receive funding from the State.
She noted that in 2010/11, PSIRA had embarked on an organizational turnaround to improve service delivery. Seven strategic objectives were introduced. 46 measurable targets were set for 2011/12, but only 14 were achieved, or 30.4%. PSIRA had reported on targets achieved, not achieved and partially achieved, whereas the Research Unit felt that partially-achieved targets should not be counted.
There were many questions arising from the targets achieved. She ran through each of the strategic priorities, indicating the achievements. The objective of the first strategic priority was to ensure a fully understanding of the industry and respond to industry needs and challenges. Seven targets were set, and one was realised, apparently due to budgetary constraints. Strategic Priority 2 related to stakeholder and customer relationship management. Eight targets were set but three were achieved. Strategic priority 3 related to financial management and funding, and was intended to make PSIRA a financially sustainable and stable organisation. Seven targets were set, and three were achieved.
Strategic priority 4 related to excellent service delivery, by enabling effective compliance and enforcement of PSIRA legislation. Five targets were set, of which four were achieved. This was by far its best achievement, and it was in the core business. Strategic priority 5 was to have efficient and effective processes and systems, and of the six targets, two were achieved.
Strategic priority 6 related to an effective organisational structure with a skilled, competent and motivated workforce. Nine targets were set but only two were achieved, representing a success rate of 22.2%. Strategic priority 7 was to have a good organisational culture to support the vision and strategy. Four targets were set, but none were achieved. It was therefore clear that the performance was lacking and PSIRA would have to improve the improvements on pre-determined targets.
Turning to the Auditor-General’s (AG) report, Ms van Zyl-Gous noted that the AG made reference to significant uncertainties; PSIRA was the defendant in a number of lawsuits but failed to make any provision for contingent liability, despite this being raised as a Committee recommendation in the past, and she suggested that it be asked to explain its failure to comply. The AG also pointed to concerns that PSIRA had incurred a net loss of R9.28 million during the year, which, although this was an improvement on its loss position in the previous year, nonetheless raised questions around its ability to survive as a going concern. The current liabilities exceeded current assets by R8.23 million. In addition, during the year, material losses of R82.48 million were incurred, of which R24.08 million was written off in the current year, and the rest was to decrease through impairments.
The PSIRA had various findings in relation to performance. The targets were not specific, measurable, indicators were not verifiable, well defined or time bound.
The AG found that the Accounting Authority did not have a risk management strategy. It did not focus on predetermined objectives and ensure full compliance. The AG commented that management had failed to ensure that performance information was reliable and so it should be held accountable for reporting unreliable information. A large amount of bad debt was written off. The AG pointed out that there was a need to monitor compliance with due procurement processes. Senior Management should monitor and review day-to-day financial activities to ensure that monthly financial information was accurate and reliable. It must approve and implement an IT governance framework and monitor the effectiveness of IT systems.
In January 2012, PSIRA had effected tariff increases of 75% of standard business fees and 900% for fees paid by the companies for each security officer hired. This was regardless of the fact that National Treasury recommended an inflation adjustment of 9.1% across all categories. Various issues pertaining to expenditure were highlighted. There were significant increases in consulting and professional fees in 2009 and 2010, but PSIRA had managed to reduce this to R5.37 million in 2011/12. There had been doubling of office and other rent between 2008 and 2010, and this escalated still further in 2011/12, with R10.9 million spent. The employee related costs rose by 57% between 2009-2012, reaching R63.7 million in 2012.
Debt was a serious source of pressure in the budgets. For the 2011/12 year, PSIRA wrote off uncollectible debt of R82.5 million, in 6 005 accounts. It had withdrawn the registration of service providers who had failed to pay.
The lease agreements were also of serious concern. The current lease agreement had been entered into for five years, at a cost of R61,24 million over that period. This related to 5 070 metres of office space and 160 parking bays. The lease was structured so that there would be very high increases in years three to five, but National Treasury also commented that the payment arrangement resulted in a 268% increase over the first 18 months. Lease payments excluded operational costs, and it was not clear what these included, as air-conditioning, for instance, a fixed part of the building, was attracting further costs of R10 140. If this lease was renewed, the charges would rise again. Another concern was that although the lease should have been arranged through a competitive bidding process, PSIRA had insisted that there was significant urgency, following an engineering evaluation that showed its building was not safe. However, Ms van Zyl-Gous pointed out that the engineer’s report was finalised in November 2010, the decision to deviate was made in February 2011 and the lease was only finalised in April 2011, so in fact there was ample time for PSIRA to have held a competitive process. She added that the AG had found that the lease costs did not amount to irregular expenditure, but the Portfolio Committee had asked the AG to do a performance audit, to establish if value for money was achieved. Further to the lease, there was also significant expense incurred for relocation and R717 000 was spent on upgrading the new building.
The next concern related to the salary package of the Chairperson of the Council, who served full time, and was paid R1.39 million in 2011, increasing to 1.442 million in 2012. This salary was much higher than comparable salaries in other entities; a Director General was earning around R979 596. Given the PSIRA’s precarious financial position, it was suggested in the past that the Chairperson should be part-time only, and paid for attending meetings. Ms van Zyl-Gous recommended that this issue had to be interrogated again. All the financial concerns put the entity in a precarious situation.
She summarised the overall financial performance, dealing with the deficit, the revenue increase of R17.1%, and other income increase of 146.3%. Debt impairment increased by 24.4%. She listed the sources of revenue. The Research Unit had done an analysis of the personnel costs appearing on page 30 of the PSIRA Annual Report (AR). She pointed that there were vacancies in the Internal Audit and Risk Management Division, and the AG had found that there was no risk management strategy. One staff member was reflected as appointed to Asset Management, at a cost of R1.328 million. All positions in the prosecuting division were shown as vacant, which would have made it impossible to do the inquiries. Five extra staff had been appointed to IT. Three were appointed to “ events management”, and she suggested that the Committee should ask why these appointments were necessary. PSIRA had also noted R2.97 million spent on fixed-term contracts, but no details were given of who these people were and why they were appointed.
Although the 2009/10 AR contained a full breakdown of the Council and Senior Management Emoluments, such as travel reimbursed, nothing on this was contained in the next two ARs.
The AG had reported on irregular expenditure of R1.17 million in 2011/12. In the previous financial year, an amount of R3.6 million was condoned, which included condonation of an opening balance. The final amount still to be condoned was R3.56 million. Instances of irregular expenditure in relation to cash collection services and domestic flights were noted. Fruitless and wasteful expenditure of R17 220 was incurred, of which R1 440 was identified by PSIRA and R15 780 by the AG. This was a 39% increase from the previous year. This was made up of salaries paid after contract end dates, and interest on amounts owed to creditors.
Whilst some contingencies were identified, the value was not shown of those addressed in the financial year, and those accumulating.
In August 2012, PSIRA had stated that R9.496 million was paid, in 2010/11, to consultants, and this included R4.198 million for an IT contract, which was supposed to have been terminated in August 2011. She suggested that the Committee make enquiries which consultancy contracts were still running.
Although PSIRA had given a breakdown of the operational review, the information on page 18 of the Annual Report did not make sense. Details were given of the compliance inspections, enforcement inspections, dockets for improper conduct, and dockets relating to alleged failure of security companies to comply with statutory minimum wages. She suggested that PSIRA must be asked why it had targeted so many small businesses in this year. 771 criminal cases were pending with SAPS, of which 117 were finalised in the year, and 240 were opened from inspections of the authority.
Ms van Zyl-Gous said that the highest number of human resources (HR) vacancies were in IT technology and communications. PSIRA should be asked to explain the filling of the posts, and whether funding was available. PSIRA should be providing details on sick leave, and more had to be done to try to reach equity targets. Overall, greater attention was needed to proper performance and increasing the PSIRA’s effectiveness.
Mr D Stubbe (DA) noted the number of permanent staff members listed on page 20, and said that the schedules did not make sense, since the increase in numbers was not matched by increases in costs. He felt that the tables could not be accepted.
Ms van Zyl-Gous responded that PSIRA reported on personnel in a very confusing way. It did not give details of the full salary package, but the number of months the staff held positions.
Mr M George (COPE) commented that the notation of figures was not correct in the written comment (not the presentation) from the Research Unit, on page 18.
The Chairperson asked how PSIRA measured whether it had achieved targets – for instance, how it assessed “excellent” service delivery. She did not think it was measurable.
Ms van Zyl-Gous agreed that the measurement of targets for strategic priority 4 was unclear. The table presented raised a number of questions. The targets were not time bound and were not reliable.
Mr V Ndlovu (IFP) asked what would happen if the Committee did not agree with the Annual Report.
The Chairperson said that this would go into the Committee Report. There was nothing stopping the Committee from asking questions to amplify the Report. She commented that this was the only AR she had seen that the Minister had not signed.
The Chairperson noted that Mr Stubbe had asked questions about the salary of the PSIRA Chairperson, to the Minister of Police. She read out the answer from the Minister, which indicated that although PSIRA was a public entity, its founding Act had not been aligned with this declaration, and this was a matter to be addressed in the Amendment Bill. The Minister confirmed that concerns around the salary of the Chairperson and senior management were raised, and the Minister of Finance had been asked to set up an investigation team, under the Office of the Accountant-General, and report back. She added that Council had appointed the senior management team and it should be asked to explain what informed the decisions.
The PSIRA delegation was invited in to the meeting.
Private Security Industry Regulatory Authority presentation on Annual Report 2011/12
Ms Zelda Holtzman, Deputy Chairperson, PSIRA Council, introduced the team and tendered the apologies of the PSIRA Chairperson. She noted that this had been a difficult year, with some of the challenges including those raised in the discussions around the management and the functionality of Council. She set out the historical background (see slide 4), which it was important to understand to give context to the PSIRA position. During 2010 PSIRA had tried to stabilise and in 2011 had presented the Turnaround Strategy. The key pillars of that remained as the legislative mandate, establishment of effective and efficient law enforcement strategies, establishing a capable and ethical workforce, with adequate financial resources, and to have innovative business processes supported by cutting edge technology.
PSIRA was moving from a system of “complete dysfunctionality”. She indicated some of the challenges in the stabilisation phase. Most of the necessary processes to improve had been identified under the headings of stakeholders, financial, business processes and governance and human perspectives, and they were listed in slide 6. Business processes and governance were areas of ongoing concern, and would be addressed in the PSIRA Amendment Bill (the Bill). The IT infrastructure had formerly lacked integrity and was outdated. The lack of a debt collection strategy was of concern. This Portfolio Committee had commented that it was difficult for any business to operate in deficit, and this was a continuing concern, but it was being addressed. There were attempts to improve staff morale, management skills and there put necessary policies in place.
Ms Holtzman noted that the five-year Turnaround Path was divided into phases of stabilisation, running in 2010/11, a transitional phase from the 2012 to 2015 financial years, and optimisation phase in 2015/16. In the current year, PSIRA was concerned with implementation of enforcement and compliance strategies, increasing financial resources through effective revenue management, improvement of management controls, management of governance and risk, building capacity in law enforcement and achieving customer satisfaction. PSIRA recognised that it was still facing challenges.
The Chairperson interjected to note that the presentation was very long (60 slides) but asked PSIRA to restrict its presentation to 40 minutes.
Mr Marabela Chauke, Director, PSIRA, highlighted some of the outcomes of the turnaround. He listed the improvements in respect of revenue, achieving operational efficiency and debt collection. He noted that 84% of billed revenue was collected. He said that the prosecution backlog was addressed, and there was a 90% increase in fine income. PSIRA had reviewed the policy of enforcements, conducted investigations and replaced ageing IT infrastructure.
He noted that overall the performance against objectives was 52%. PSIRA acknowledged that this was not acceptable. He tabled key performance indicators for each of the programmes, together with the targets, and an indication of whether these were fully, partially, or not achieved. Reasons for the variance were given. He also noted what had been done subsequently to address the issues (see slides 9 to 16 for full details). He highlighted, in particular, the movement of staff to the prosecuting unit. Most of his comment was directed to the initiatives that had been taken in the current financial year, to improve the deficiencies shown in the Annual Report. In many areas, he noted that budgetary constraints were the reason for non-achievement. He summarised that PSIRA took its performance very seriously, and had now appointed a performance monitoring committee, which was sitting every quarter. It was satisfied that its targets were now achievable.
Mr Stefan Badenhorst, Manager: Law Enforcement and Training, PSIRA, delivered the next part of the presentation, which contained details of PSIRA’s law enforcement activities. PSIRA had a mandate to prosecute security providers or individuals who were not compliant with the PSIRA Act, but PSIRA had no control over the number of prosecutions finalised. He explained that the distinction between small, medium and large service providers lay in how many people they employed, and these were, respectively, up to 20, up to 50 and over 50 employees. A number of statistical graphs were tabled, indicating the inspections conducted, dockets according to size of service providers, criminal cases, firearm applications processes, and registered active security businesses per province. He explained what activities PSIRA regulated in relation to firearms. There were now 9 364 active security businesses, across various classes of services and the geographical spread was outlined. He explained that the growth reflected the increase of the scope of activities regulated by PSIRA, and it was not only crime that led to growth, but the prevalence of, for instance, new shopping malls requiring security, new complexes and pressure from insurance companies to install security systems. The numbers also included private investigators, locksmiths and the electronics industry. Limpopo province numbers had grown in both the numbers of businesses and registered security officers. A distinction was drawn between active and non-active companies.
PSIRA had to ensure a national footprint to ensure effective regulation of the industry. The satellite offices dealt largely with administrative matters. The inspectors had to travel very far to regulate the industry properly. At Head Office, for instance, the inspectors were responsible for Gauteng, Limpopo, Free State, North West and Northern Cape. A new law enforcement model was introduced in January 2012. The compliance perspective was generally aimed at ensuring that the industry complied with rules and regulations. Education was an important aspect, to promote voluntary compliance. However, PSIRA also conducted investigations into companies and individuals, and the new security officer inspection programme allowed for face-to-face engagement. Reprimands and warnings could be given, and other prosecutions could be instituted if there was non-compliance. There were currently 43 inspectors (of whom 3 were deployed in Legal Services, and 3 in regulatory subcommittees). A breakdown of the compliance inspections conducted was given. These included inspections at businesses, security officer investigations and site inspections. PSIRA stressed that it wanted to ensure a linkage between officers and registrations. The inspections were divided into those that were total security investigations, complaint driven, first time inspections and infrastructural inspections, which were required to get registration. The majority of businesses (80%) fell into the small business environment, so the majority of the inspections were directed to that.
The enforcement figures showed that 240 criminal cases were opened, with 117 being finalised, and 110 resulted in successful prosecutions. 771 criminal cases were pending, but in this year the relationship with the South African Police Service (SAPS) had improved. The dockets related to offences by security officers, and offences by companies who had failed to comply with legislation, including registrations and labour legislation. PSIRA was now able to extract statistics on various offences, and a table was shown of the offences by companies (deploying unregistered, or untrained, security officers, failing to pay annual fees, failing to submit documents, failure to pay minimum wage and non-compliance with the Provident Fund). A compliance analysis on security officers inspected indicated that the offences included lack of registration and training, failure to carry PSIRA ID cards, and failing to comply with uniform requirements. PSIRA felt that it efforts were bearing fruit, because non-compliance had declined.
Compliance inspections into firearms related to businesses using firearms, and it was of concern that 19% of businesses allowing their officers to carry their own firearms were not complying with regulations, and 12% of those carrying arms were not competent to use them. This would be a focus area for the future. PSIRA responded to enquiries from SAPS about firearm compliance, and would submit recommendations to SAPS. In this year it had recommended declining 762 applications for registrations, and approving 556. PSIRA was currently analysing the SAPS database of all businesses licensed for firearms, which included game reserves and veterinarians. PSIRA wanted to establish a separate database for security firms.
Mr Badenhorst finally noted that PSIRA would partner with other departments for law enforcement. It had arrested 169 individuals, of whom 148 were unregistered officers, and 65 were foreigners. There were also 13 firearm-related arrests. Some licensed businesses were passing on firearms to non-registered businesses.
Mr Howard Thwane, Senior Legal Officer, PSIRA, summarised the dockets perused, charge sheets issued, summonses issued, cases finalised at Code of Conduct Inquiry stage, and cases finalised by settlement, explaining that the latter were those cases where the parties agreed to forego the Code of Conduct Inquiry, because the cases were generally of a minor nature and did not warrant all the processes of prosecution. He set out the geographical spread but explained that the large number from Gauteng arose because this province also dealt with a number of other provinces. He explained that fines could be levied after the Code of Conduct inquiries were finalised. A Regulatory Sub-Committee would deal with processing of withdrawals of security business and individuals. There were 515 businesses withdrawn, some as a result of non-payment of annual fees, and some voluntary. 44 companies and 18 individuals were withdrawn after Code of Conduct inquiries There were also applications for lifting of suspensions. 272 business registrations were suspended.
Mr Nick Ligege, Deputy Director General: Finance, PSIRA, took Members briefly through the financial report. PSIRA had written off debts from the previous term, but was satisfied that its sustainability had improved, due to the increase in fees. He stressed that PSIRA did not receive any government grants. He summarised the revenue streams. There had been a 33% increase in revenue in the current year, and expenditure had been controlled (see attached presentation, slide 50, for details). The cost of living adjustments were below those in the Public Service. The operating deficit was reduced and in the next financial year PSIRA hoped to not have a deficit. The budget variance and expenditure breakdown were tabled, but not explained in depth. The write-offs would be concluded by March 2013. There had been a major increase in rentals because of the new Head Office premises. The cash collection trends were tabled. To date, 69% of the amounts billed had been collected in this year.
Mr Ligege then tabled a summary of the audit findings and acknowledged the concerns expressed by the AG. However, he noted that steps had been taken to address the findings, and the 2012/13 Annual Performance Plan was in line with the framework. The root causes of the findings on compliance were set out. Again, in respect of revenue, he outlined that the historical background must be taken into account, as well as the lack of capacity. The procurement policies and procedures had been amended, and a recruitment process had started for a management accountant.
In respect of irregular and fruitless expenditure, he noted that cash collection services included amounts compiled between 2009 and 2012. The same applied to the domestic flights, where competitive bidding processes were not followed in 2009. The steps taken to avoid, detect and correct irregular expenditure were set out. This included checklists, cancellation of the contract with the travel agency, a contract register, and a mechanism to check compliance in each case. The cumulative steps taken, that would ensure a clean audit by 2014/15, were summarised.
The Chairperson interjected that the statements in this presentation were not in line with the AR, particularly in relation to the financial statements. The difference in figures would be questioned by the Committee later.
Mr Chauke summarised the HR portion of the presentation. He tabled the employment equity profile, by occupational level, and the staff distribution by division. 67.7% were in law enforcement. The majority of staff (75%) were in Gauteng. There were 59% males and 41% female, of whom 77% were African, 13% White, 3% Indian and 6% Coloured. Representation of women at management level was 33%. The vacancy rates by division were also set out, but he pointed out that these figures reflected the position before the fully-fledged IT division was appointed. Most of the staff resigning from PSIRA were leaving to get higher remuneration or career advancement. The disciplinary steps related mostly to corruption and fraud. Some criminal cases were opened. Of the labour disputes, two were resolved at conciliation, five were resolved at arbitration and one was before the Labour Court. The training statistics were outlined. Finally, the personnel expenditure was set out.
The Chairperson said that it was important for the Committee to reflect upon what the AG had said. The presentation now given was not correct and it was not true that the matters had been resolved. The fact that the Minister had signed off on the increase did not mean that it had been resolved, as it remained a liability that was not budgeted for. The contradictions in the financial statements would have to be explained.
She reminded the Members, and PSIRA, of some of the AG’s comments. The AG had reported that performance targets were not specific, and although the AG had said that 52% of targets were reached, only 32% were actually achieved in full. The National Treasury framework performance targets were not measurable and 20% of the indicators were not verifiable. A particularly worrying point was that this was due to management not being aware of the requirements, which was set out on page 71 of the Annual Report. The performance indicators were not well-defined, because management was not aware of the requirements. The performance targets were not time-bound, because management was unfamiliar with the requirements of National Treasury. All the comments had to do with shortcomings of management. She stressed again that the AG had been kind in allowing partially-achieved targets to be reflected, but many of those were not valid.
The AG had commented about compliance with laws and regulations. PSIRA had failed to explain the finding about fruitless and wasteful expenditure. The fact that no competitive bids were invited, despite these being required by Treasury, was also not explained. There were other findings around revenue management, again a requirement of section 5(1) of the PFMA. The financial statements were not prepared in accordance with the regulatory requirements. Material mis-statements were identified. The fundamentals of internal control were affected by significant deficiencies. Findings on laws and regulations were included.
The AG had found that the Accounting Authority (the Council) did not provide oversight in terms of the responsibility over performance reporting, by ensuring that the reports followed SMART objectives of National Treasury. Record management and compliance monitoring suffered because of inadequate systems. The AG’s report, in summary, was damning.
Ms A Molebatsi (ANC) asked the Director to explain how many calls were received in 2012 via the hotline. She requested the name of a company where the end-user feedback was outsourced, and asked what service was provided. She wanted comment and clarification on the research items.
Ms Molebatsi commented on the number of times when “budgetary constraints” were listed as reasons for variance.
Mr M George (COPE) also took up the point, and said budgetary constraints were listed continuously as a challenge. However, this raised the question of how PSIRA did its planning. He would have thought that planning should always be done bearing in mind what total amount was available. Mr George asked for an honest assessment of the problems. The AG had commented on the lack of a risk management strategy, and whilst the PSIRA claimed to have “embarked” on a turnaround, he felt that there was a lack of specifics, and no indication of what had been achieved.
Mr George commented on the salary for the Chairperson, and asked for the job description. This was not in line with other comparable positions.
The Chairperson noted, at a later stage, that this had been asked as a question to the Minister and it was noted that an investigation was being done.
Mr George felt that what had been presented here was more a response of what had been discussed over the last couple of weeks.
The Chairperson said the Committee had asked for these responses. The biggest problem, to her mind, was that the report delivered today was not factually correct, especially in regard to the finances.
Mr George noted that huge amounts were being paid for air-conditioning and salaries, and said this was even more surprising in light of the fact that financial constraints were cited as a challenge. He was very concerned about the lease agreement, which was approved and signed in April 2011, and asked for the figures and the apparent discrepancies here to be explained.
Ms D Kohler-Barnard (DA) was concerned that one target after another was not achieved. She said that had PSIRA been a private business, it would be under administration. Every year, it claimed to have made a plan. This was not borne out by the facts; for instance this year it had higher amounts of uncollected debt than in the previous year. Although 84% of debt had been billed, there was no indication of what was collected.
Ms Kohler-Barnard noted that PSIRA also kept hiring consultants to do the jobs, and she therefore questioned what value the management structure itself was bringing. She asked who took the decision to appoint the Chairperson, full time, at a salary way above that prescribed by National Treasury. She asked if he had been part of the decision.
Ms Kohler Barnard said that risk management was a problem and concern raised now for several years in succession, yet still there appeared to be no strategy. Another matter raised for several years, on which the Committee had specifically made recommendations, was that there were four cases in court, yet PSIRA had not budgeted for contingent legal liabilities.
Ms Kohler-Barnard questioned what possible justification there could be for increasing the tariffs so dramatically, particularly as this was in direct conflict with the Treasury recommendation. She did not understand how any company could raise the fees by 900%.
Ms D Sibiya (ANC) wanted comment on the leave and sick leave.
Mr V Ndlovu (IFP) wanted to know who was doing event management, and why this was deemed necessary. He asked for specific comment from Mr Chauke and his senior managers on the AG’s concerns about lack of management capacity in PSIRA. Mr Ndlovu also addressed the point made earlier by Ms Kohler-Barnard of the PSIRA financial position, and questioned if PSIRA was a going concern or should be closed down. He asked how it could possibly do business in these circumstances. He wanted specific comments on the main problems outlined in the AG’s report
Mr G Lekgetho (ANC) said that the challenges were set out on page 3, but the presentation should have demonstrated what was being corrected. The Committee would be following up on this in the following year also. He asked how PSIRA would account for failing to meet its targets.
Mr Lekgetho shared Ms Kohler-Barnard’s concerns about the tariff increases.
Mr Lekgetho was concerned as to how PSIRA was doing prosecutions, and asked how many people were moved across to the prosecutions and enforcement unit, and if they were now placed there permanently.
Mr Stubbe wanted a detailed list of the material losses and amounts written off. He asked for more detail also on the rise in office expenditure, from R2.2 million to R10.9 million over one financial year, as well as the increase in personnel costs, and a breakdown of the personnel costs.
Mr Stubbe questioned why the AR noted that R666 000 was spent on the Internal Audit Unit, when the AG had commented that no such unit was functioning. He wanted more details of the person employed for Asset Management, as the salary details of R1.3 million did not seem correct. He also questioned the apparent discrepancy between number of staff members and costs. For instance, in law enforcement, the original 29 staff members had been increased to 33, but not even R1 million extra was paid in salary. In registration, despite the increase of staff members from 21 to 26, there was a decrease of about R40 000 in salary. He called for explanations on all of these. He said the IT figures also could not be correct.
Mr Stubbe wanted more details on the fixed term contract and how many people and what posts this covered. Finally, he wanted detail on the consultants. The contract was terminated, and an amount was paid out. He asked how long these periods had run, whether they covered the whole year, and the reasons for termination.
The Chairperson noted that the Council appointed management and determined the salaries. She asked what informed the salary level of management and what procedures were followed to determine them. Most of the management was being paid at the level of Deputy Director Generals, with the Director being paid in excess of Director-General level. The salaries were not in line with other A1 entities. Members had also been concerned with the Chairperson’s salary, but, as indicated earlier, that was subject to an investigation.
The Chairperson referred PSIRA to page 108 of the Annual Report, and page 25 of the current presentation. These showed a disparity. She knew that the training income had been included in the presentation, but this was not reflected in the audited financial statements. She stressed that PSIRA should not present a different set of financial statements to this Committee.
The Chairperson noted that page 24 of the presentation listed the AG’s comment about the going concern as “partially resolved” but this was not correct, as it had been raised again by the AG for this year. She was very concerned also about the write off of debt.
The Chairperson noted that, similarly, the strategic planning problems apparent in the last year were not “partially resolved” as they were raised again in this year and the AG had commented that the strategic planning did not speak to the budget. There were several instances where matters were raised time after time, and clearly had not been resolved. Risk assessment was one of the greatest concerns.
The Chairperson found it interesting that 3% of staff were in the Director’s Office, and requested a further breakdown of how many staff this comprised and the cost of this Office, in terms of salaries.
The Chairperson noted the questions on the leases, and said that the AG had been asked to do a full performance audit around the new building. The Committee had also asked that any reluctance or lack of cooperation on the part of PSIRA must be reported back to the Committee. She asked if the old building had been sold, to whom, and whether PFMA processes for that process had been followed.
The Chairperson asked what the regional offices were doing. On a previous occasion, she was told that there was a distinction between regional and satellite offices, and questioned now how many staff were in the regional, and how many in the satellite offices, their positions and their salaries.
The Chairperson wanted whatever was included in “sundry income” to be specified. She pointed out that this amounted to R27 million, and that, if not listed, such income could simply disappear. This was also a large increase on the amounts listed for the previous year.
The Chairperson noted the comment on building relationships but did not see much evidence of this being done.
A major concern was that although the AG had reported that internal audit and risk management were not in place, PSIRA had listed them as “100% achieved”. She wanted to know exactly who was attending to asset management, and if the costs were the salary. The AR noted that “a” staff member with “a” salary of R1.3 million was in place. She also noted the concerns around the events management positions, raised earlier. She agreed that more details were needed on the Fixed Term Contract of R2.9 million, and who was in these posts.
The Chairperson commented that the previous AR of 2009 had contained a detailed report on the costs and breakdown of senior management emoluments, including travelling expenses. She questioned why it was not shown in the two subsequent reports, and said that this Committee had a duty to investigate these amounts.
The Chairperson noted that National Treasury still had to consider condoning R3.56 million of irregular expenditure, and she said also that she found it disturbing that officials sought to explain that it was “signed for” in 2009. That may be so, but the fact was that it was only in March 2012 that the current management actually addressed the issues, after they had been extant for two years.
The Chairperson pointed out that the registration data did not make sense. She asked PSIRA to look at page 18 of the Annual Report, since the table did not speak to other matters listed on that page. Two separate figures were given for the applications rejected. No business applications were shown, in the AR, as “in progress” for 2012.
The Chairperson ruled that full, clear and unambiguous answers from PSIRA were expected by the Committee on the following day. Further questions would also be asked.
The meeting was adjourned.
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