ATC130416: Report of the Portfolio Committee on Police on the Annual Report on the Private Security Industry Regulatory Agency (PSIRA), dated 12 February 2013
Police
Report of the Portfolio Committee on Police on the Annual Report on the
Private Security Industry Regulatory Agency (PSIRA), DATED 12 FEBRUARY 2013
The Portfolio
Committee on Police reports as follows:
1.
Introduction
The Private Security Industry Regulatory Authority (PSIRA)
was established in terms of Section 2 of the Private Security Industry
Regulation Act, No. 56 of 2001. It is mandated to regulate the private security
industry in
As part of its oversight function, the
Committee considers the Annual Report of the Authority on an annual basis and believes
that its engagements with the Authority have been robust throughout the 2011/12
financial year. Hearings were held with the Authority over a three-day period
during which the Authority presented on its performance for 2011/12, both in
terms of service delivery targets, as well as in terms of its financial
statements.
Structure of
Report:
This
Report comprises nine sections:
·
Section 1:
Introduction.
·
Section 2:
Financial performance of the Authority for 2011/12.
·
Section 3:
Summarises the 2011/12 report of
the Auditor-General for the Authority.
·
Section 4:
Provides a broad overview of the
changing strategic and operational environment of the Authority for 2011/12.
·
Section 5:
Performance information for each Strategic Priority in 2011/12
·
Section 6:
Highlights key observations of
the Committee with respect to financial and performance information for 2011/12.
·
Section 7:
Summarises additional
information requested from the Authority in deliberations and other reporting
requirements.
·
Section 8: Summarises recommendations of the Committee with a focus on the
2012/13 Annual Report.
·
Section 9: Conclusion
2.
Financial performance
2.1
Issues identified as significant concern
Tariff increase:
In January 2012, the PSIRA
effected tariff increases of 75% for standard business fees and 900% for fees
paid by the companies for each security officer hired. This was done regardless
of the fact that National Treasury recommended an inflation-related adjustment
of 9.1% across all categories. The PSIRA went ahead with the increases and
ignored the suggestions proposed by the National Treasury. Moreover, the PSIRA
did not seek the concurrence of the Minister of Finance for the increase of
tariffs in terms of Section 2 (3
)(
a) of the Private
Security Industry Levies Act No 23 of 2002, which states that
The Minister [of Police] mustwith the concurrence
of the Minister of Finance, within a period of 60 days after receiving a notice
referred to in subsection (2)(c), give the Council notice approving or
rejecting the proposed imposition, variation or determination.
The management of PSIRA
indicated that whilst the Private Security Industry Levies Act No 23 of 2002
was promulgated, it was never enforced. Therefore, the PSIRA did not need to
seek the concurrence of the Minister of Finance. Following the introduction of
the tariff increases in January 2012, legal action was instituted by the
Security Industry Alliance (SIA) against the PSIRA, Minister of Police and the
chairperson of the Council, to set aside the 2011 Annual Fee Regulations. The
SIA indicated that the proposed annual fee increases were too high and
threatened the financial viability of their organisations. (The fees are set
out in section 5.3 of this paper). The management of PSIRA has admitted that
there is a high probability that the court will set aside the 2011 Annual Fee
Regulations.
Expenditure:
Various issues
pertaining to expenditure are highlighted. These are: (1)
Significant increase in consulting and professional fees between
2008/09 and 2009/10, which recorded a doubling of the expenditure. However, the
Authority managed to reduce this expenditure from R10.641 million to R5.379
million in 2011/12; (2) A doubling of office and other rent between 2008/09 and
2009/10. This further escalated significantly in 2011/12 recording a total of
R10.904 million compared to the R3.257 million spent in 2010/11; and (3)
Employee related costs increasing by 47% from R39.2 million (in 2009/10) to
R57.5 million (in 2010/11) and further increased by 10.8% in 2011/12 to R63.7
million.
Debt
management:
Debt
is a source of pressure in
the PSIRA budget. Debt arises from the annual fees, fines, penalties and
interest that are billed to registered security service providers, but due to
the lack of capacity in the revenue management department of PSIRA they use an
agency to collect long-outstanding debt. For the year ended 31 March 2012,
PSIRA wrote off uncollected debt to the amount of R82.5 million (2010/11: R75.5
million). The number of accounts written off as
uncollectable
is 6 005. PSIRA reported that bad debt write-offs results in the
withdrawal of registration of the service providers who fail to pay in terms of
the PSIRA Act.
Lease
agreement:
The PSIRA entered into a lease agreement for a period of 5 years to the
value of R61.243 million (Annual Report, 2010/11:85) for 5 070 m
2
office space and 160 parking bays The lease is structured such that the costs
for the first 2 years are the same (R5.7 million per annum) with a steep
increase (R15.058 million) in the third year, after which the premium increases
by 10% in the fourth and fifth years. The lease should have been formulated
such that there would be a constant escalation of 10% from the second year.
This would have translated into a lease that commenced at R10.031 million in
the first year, increasing to R14.687 million in the fifth year. Other concerns
raised by the Public-Private partnership (PPP) unit within National Treasury
which examined the lease include the following:
-
The payment arrangement results in a huge increase
of more than 268% in the first 18 months from R241 066.67 to
R888 290.31 per month, which is not justifiable.
-
The lease payments exclude operational costs which
amount to R91 260.00, and it is not clear what this includes.
-
Air-conditioning is part of the building and there
is no justification as to why it should be paid separately, attracting a fee of
R10 140.00.
-
The 10% escalation is too high and significantly
above the CPI. Lease expenditure of over R100 million could be incurred if the
current lease is renewed for a further 5 years. The PSIRA could build its own
facility for that kind of money.
In terms of Treasury
Regulation 16A6 the procurement of the lease should have been done through a
competitive bidding process. However in terms of Practice Note 8 of 2007/08,
should it be impractical to invite competitive bids for specific procurement,
e.g. in urgent or emergency cases or in case of a sole supplier, the accounting
officer / authority may procure the required goods or services by other means,
such as price quotations or negotiations in accordance with Treasury Regulation
16A6.4. The reasons for deviating from inviting competitive bids should be
recorded and approved by the accounting officer.
The PSIRA asserts that
there was an urgency to relocate to new premises, as the building that it was
occupying was not safe. This followed an Engineering Evaluation of the building
in November 2010. However, it should be noted that while the engineers report
was finalised in November 2010 the decision to deviate from the normal procurement
process was approved by the Council in February 2011. The lease agreement was
only signed in April 2011. Therefore there was sufficient time for the PSIRA to
procure a lease through a competitive process. This could have resulted in the
PSIRA obtaining a more cost-effective lease.
The Office of the AG
conducted an audit into the lease agreement and found that it did not
constitute irregular expenditure. The Portfolio Committee on Police requested
the Office of the AG to conduct a performance audit on the lease agreement to
establish whether value for money was achieved through the process.
Office relocation costs:
The Authority incurred significant expense during the
relocation of offices from
Regional office lease agreement (
Salary package: Chairperson of the
Council:
The Chairperson of the Council has been appointed on a full-time basis
on an annual remuneration of R1.39 million (Annual Report, 2010/11:83), which
increased to R1 442 438 million in 2011/12 (3.5%). The remuneration of the
Chairperson is much higher than what is offered by other entities in the same
category (A1: R979
,596
thousand) in terms of the
Treasury Regulations. This is an additional amount of almost a half a million
2.2
Statement on Financial Performance
The table below illustrate the overall financial
performance of the PSIRA in 2011/12. It is clear that the overall deficit for
the year improved significantly in 2011/12 compared to 2010/11. The deficit
improved from R23
,045
million (2010/11) to R9,280
million (2011/12) representing an improvement of almost 60%.
Various issues to note on the overall financial
performance:
·
Revenue
increased by 17.1%
·
Other income
increased by 146.3%. Note 11 to the Financial Statements indicates a
significant increase in
Sundry income
(2010/11:R3
,25
million and 2011/12:R21,73 million). This represents an
increase of 568.0% in 2011/12 compared to the previous year.
·
Debt impairment
increased by 24.4%
2.3
Revenue
The Authority, as an industry regulatory authority,
receives no government funding and relies on various streams of revenue, which
are as follows:
·
Annual fees
from Security Providers. These companies pay R4, 250.00 per annum and R7.00 per
month for each Security Officer employed.
·
Annual fees
from active Security Officers payable monthly. These officers pay R84.00 per
annum through salary deductions.
·
Revenue from
services rendered, i.e.:
-
Registration
fees
-
Disbursement
fees issuance of ID cards, Certificates
-
Processing of
training (course) reports
-
Fines issued at
code of conduct enquiries
The table above show that the revenue of PSIRA increased by
17.1% in 2011/12 compared to 2010/11. Issues to note:
·
Significant
increase of 90% in fines.
·
Significant
decrease of 39.8% in registration fees.
2.4
Employee related costs/Salary expenses
The analysis of personnel cost per division of the
Authority revealed various issues of concern regarding organisational aspects
of the PSIRA. These include:
·
The 100%
decrease in salary cost within the
Internal
Audit and Risk Management
division indicates that the position(s) are
vacant (The AG made a significant finding on the lack of a Risk Management
Strategy in terms of National Treasury prescripts);
·
Appointment of
a staff member in
Asset Management
to the cost of R1.328 million per
annum (2011/12);
·
All positions
in the
Prosecution
division are
currently vacant;
·
The number of
personnel employed in the
Information Technology
division increased from one to six in 2011/12 compared to the previous
financial year;
·
Three staff
members were appointed in
Events
Management
at an annual cost of R766,626 thousand;
·
The Authority
recorded an expenditure of R2
,973
million on
Fixed term contracts
in 2011/12
compared to 2010/11 in which there was no expenditure recorded for fixed term
contracts.
Basic salaries paid by the Authority in 2010/11 were
R37.021 million and increased by 18.6 per cent to R43.918 million in 2011/12.
Council and
Senior Management Emoluments
In the 2009/10 Annual Report of PSIRA, the Authority
provided a detailed report and full cost-breakdown of Council and Senior
Management emoluments for the 2009/10 financial year. This included expenditure
incurred in terms of council fees, salary, travel costs, bonuses and car
allowances. This detailed cost-breakdown was omitted in both the 2010/11 and
2011/12 Annual Reports of PSIRA.
2.5
Debt impairment
The table below indicates that the Authority recorded an
increase of 24.4% in debt impairment in 2011/12 compared to 2010/11.
2.6
Irregular expenditure
Irregular expenditure of R1, 178 million was incurred in
2011/12 (in comparison to the R865 thousand in the previous financial year). A
total of R3, 612 million was condoned in 2010/11 which included
condonation
on the opening balance of R5, 129 million. None
of the irregular expenditure incurred in 2011/12 was condoned. The final
balance on irregular expenditure still to be condoned was R3, 561 million. Two
incidents where irregular expenditure was identified were reported as follows:
·
Cash collection
service to the value of R400,531.00
·
Domestic
flights to the value of R778,373.00
2.7
Fruitless and wasteful expenditure
Fruitless and wasteful expenditure to the amount of
R17 220 (thousand) was incurred in 2011/12. Of this amount, R1, 440.00 was
identified by PSIRA and R15, 780.00 by the AG. This is a 39.3% increase
compared to the R12, 356 (thousand incurred in 2010/11). The amount was made up
of the following:
·
Salaries paid
after contract end date (R15,780.00)
·
Creditors
(R1,440.00)
2.8
Contingent liabilities
Contingencies are identified in Note 18 of the financial
statements. However, this note does not reflect the value of contingencies
addressed during the financial year and accumulated contingencies. It has been
requested previously that these values should be provided and it is reiterated.
2.9
Consultants
In a response from PSIRA in August 2012, the Authority
stated that an amount of R9
,496,705
million was paid
to consultants in the 2010/11 financial year. Among the cost-breakdown for
services provided, an amount of R4
,198,267
million was
paid towards an Information Technology contract/service. The Authority further
stated that the contract was terminated in August 2011.
3.
Audit findings
PSIRA received an unqualified audit opinion for 2011/12
with emphasis of matters. The 2011/12 Report of the Auditor-General pertaining
to PSIRA reflects the following:
3.1
Report on Financial Statements
Significant
Uncertainties
The AG made mention of significant uncertainties in terms
of lawsuits in which the Authority is the defendant. These are stipulated in
note 18 of the Financial Statements of the 2012 Annual Report:
1)
De Beer v PSIRA (Defamation of character claim of R1
million);
2)
Mavana
v PSIRA (Wrongful termination CCMA found in favour of
PSIRA, but applicant referred the matter to the
3)
Mogapi
v PSIRA (Wrongful dismissal); and
4)
Security Industry Alliance v PSIRA (Dispute pertaining to
the 2011 Annual Fee Regulations).
The Authority has made no provision for any liability
(contingent liability) that may result from these legal actions in their
financial statements.
Going Concern
The Statement of Financial Performance for the year ended
31 March 2012 on page 80 of the Annual Report indicates that PSIRA incurred a
net loss of R9,280 million (2011: R23, 763 million) during the year. The
current liabilities exceed the current assets by R8, 266 million as per the
statements of financial performance. The AG reported that these conditions,
along with other matters as set forth in the note 21 of the Financial
Statements of the Authority, indicates the existence of a material uncertainty
that may cast significant doubt on the public entity ability to operate as a
going concern.
Material Losses
As disclosed in note 13 of the Financial Statements of
PSIRA, material losses to the amount of R82
,487
million were incurred of which R24,065 million was written off in the current
year and the balance adjusted through a decrease in the impairment provision.
3.2
Report on other legal and regulatory requirements
Predetermined
objectives
The reported performance of the Authority against
predetermined objectives was evaluated by the AG against the overall criteria
of usefulness and reliability. The material findings made by the AG are as
follows:
Usefulness of
information
·
Performance
targets are not specific
·
Performance
targets are not measurable
·
Indicators not
verifiable
·
Performance
indicators not well defined
·
Performance
targets are not time bound
3.3
Key concerns and recommendations:
·
Leadership:
The AG
found that the accounting authority did not have a risk management strategy in
place as per National Treasury prescripts.
·
Predetermined objectives:
The AG found that the Authoritys focus was not on predetermined
objectives and ensuring full compliance with laws and regulations, in terms of
irregular expenditure. It is recommended that the accounting authority ensure
predetermined targets meet SMART criteria. Senior management should take
responsibility to ensure performance information reported on is reliable and
should be held accountable for reporting unreliable information.
·
Bad debt:
A large amount
was written off as bad debt as was the case in the previous year management
is anticipating that this trend will decrease as most of these bad debts are
historic of nature.
·
Supply Chain Management:
PSIRA should continuously monitor compliance with due procurement
processes.
·
Financial Management:
Senior management should monitor and review day to day financial
activities to ensure monthly financial information are accurate and reliable.
·
Information Technology:
Approve and implement an IT governance framework and monitor the
effectiveness of IT systems.
4.
Overview of the Strategic and
Operational environment of the Authority
In 2010/11 the
Authority embarked on an organisational turnaround to improve service delivery
and establish a standing as an effective regulator of private security in
The Strategic
Plan introduced seven strategic priorities for PSIRA based on a situational
analysis of the industry environment. The following strategic priorities
resulted from this process:
·
Strategic Priority
1: Industry Stewardship (Knowledge and Advocacy);
·
Strategic
Priority 2: Stakeholder and Customer Relationship Management;
·
Strategic
Priority 3: Financial management and funding;
·
Strategic
Priority 4: Excellent Service Delivery (Effective Regulation);
·
Strategic
Priority 5: Efficient and Effective Processes;
·
Strategic
Priority 6: Effective Organisational Structures with Skilled, Competent and
Motivated Workforce; and
·
Strategic
Priority 7: Enabling Environment (Organisational Culture).
5.
Performance Information for each
Strategic Priority in 2011/12
The Private Security Industry Regulatory Agency (PSIRA) determined
a total of 46 measurable targets for the 2011/12 financial year. Of the total
planned targets, 14 out of 46 were achieved during the period under review,
which represents a success rate of 30.4 per cent. The remaining 32 targets were
not achieved, which represents 69.5 per cent of total planned targets.
Strategic Priorities 1 and 7 achieved none of their targets.
There are discrepancies in the calculation of achieved
targets for 2011/12, in that the Authority reported a different performance
rating/grading structure. Instead of reporting targets achieved or not
achieved, the Authority graded the achievement in the following manner: The
number 1 was given to targets not achieved; 2 was given to targets partially
achieved and 3 was given to targets achieved. Targets are either achieved or
not achieved and must be clearly reported in the Annual Report. Additionally,
the Auditor-General counted those targets partially achieved as achieved
and thus came to a success rate of 68 per cent (23 targets achieved).
Strategic
Priority 1: Industry Stewardship (Knowledge and Advocacy)
The objective of the first Strategic Priority: Industry
Stewardship (Knowledge and Advocacy) is to ensure a full understanding of the
industry and to begin to respond to industry needs and challenges, so as to be
recognised as the industry experts. A total of 7 targets were set for
2011/12, of which the Authority realised none. The Authority reported that the
poor performance on this strategic priority was due to budgetary constraints
experienced in the financial year under review. As mentioned above, Strategic
Priority 1: Industry Stewardship (Knowledge and Advocacy) achieved none of the
predetermined targets in 2011/12.
Strategic
Priority 2: Stakeholder and Customer Relationship Management (CRM)
The objective of Strategic priority 2: Stakeholder and
Customer Relationship Management, is to ensure meaningful and successful
engagement with all stakeholders. A total of 8 targets were set for 2011/12, of
which 3 were achieved representing a success rate of 37.5%.
Strategic
Priority 3: Financial management and funding
The objective of Strategic priority 3: Financial management
and funding is for PSIRA to be a financially stable and sustainable
organisation (to increase revenue, decrease costs and achieve at least
breakeven). A total of 7 targets were set for 2011/12 and 3 of these were
achieved, representing a success rate of 42.8%.
Strategic
Priority 4: Excellent Service Delivery (Effective Regulation)
The objective of Strategic priority 4: Excellent Service
Delivery (Effective Regulation) is to enable effective compliance and
enforcement of PSIRA legislation in order to achieve behavioural changes in the
industry. A total of 6 targets were set for 2011/12 of which the Authority
achieved 4, which represents a success rate of 80%.
Strategic
Priority 5: Efficient and Effective Processes and Systems
The objective of Strategic priority 5: Efficient and
Effective Processes and Systems are to ensure that adequate processes and
systems are in place to effectively carry out the mandate of PSIRA. A total of
6 targets were set of which 2 were achieved, representing a success rate of
33.3%.
Strategic
Priority 6: Effective Organisational Structures with Skilled, Competent and
Motivated Workforce
The objective of the Strategic priority 6: Effective
Organisational Structures with Skilled, Competent and Motivated Workforce is to
ensure that PSIRA has competent and skilled employees that are able to execute
their tasks effectively. A total of 9 targets were set for 2011/12 of which
only 2 were achieve, which represents a success rate of 22.2%.
Strategic Priority
7: Enabling Environment (Organisational Culture)
The objective of Strategic priority 7: Enabling Environment
(Organisational Culture) is to ensure that the Authority has a culture of
learning embracing excellence that supports its vision and strategy. A total of
4 targets were set for 2011/12 of which none were achieved, representing a
success rate of 0%.
Operational
overview:
Registration
Department (Customer Relationship Management)
A total number of 80,315 individual applications were received
during the 2011/12 financial year:
·
71,397 were
registered as security guards;
·
1,552 were
rejected because of criminal records and non-compliance to the PSIR Act; and
·
7,366 are
currently pending and will be carried over to the next financial year.
Compliance and
Enforcement Department
Compliance
Inspections:
During the period 1 April 2011 to 31
March 2012 a total of 7,669 compliance inspections were conducted on security
service providers, or inspections which formed part of investigations by the
Enforcement Unit, compared to 6,611 inspections conducted during the previous
financial year. The most inspections were performed at Small Businesses
(employing less than 20 security officers), a total of 2,997 inspections were
conducted at these classification of businesses.
Enforcement
Inspections:
During the 2011/12 financial year,
a total of 514 enforcement inspections were conducted by PSIRA.
Improper
conduct investigations:
During the
2011/12 financial year, a total of 1,530 dockets were compiled against security
businesses relating to improper conduct compared to the 1,446 dockets for the
previous financial year (2010/11).
Improper
conduct investigations pertaining to Minimum Wages:
A total of 524 dockets relating to improper conduct pending against
security providers for allegations of failing to pay the statutory minimum wage
to employees.
Criminal
Investigations:
As at 31 March 2012, a total of 771
outstanding criminal cases were pending with the SAPS, compared to 648 cases in
2010/11. During the period 1 April 2011 to 31 March 2012, a total of 240
criminal cases were opened by inspectors of the Authority. During this period,
117 criminal cases were finalised by the SAPS and/or National Prosecuting
Authority. The Authority reported that this is partly due to an audit conducted
on pending cases on the Authoritys records in the
6.
Observations of the Committee
The following are key observations of the
Committee with regard to the performance and financial issues of the Authority
for 2011/12:
Leadership and
capacity of Council:
The Committee raised concerns around the apparent lack of leadership and
the inadequate capacity of the Council of the Authority, as the Council is
mandated with the governance of the Authority. The Council stated that the
composition of the Council is currently problematic as there are various
vacancies in the Council, which makes having quorum at Council meetings
difficult It was further stated that there is currently a blur of functions
between the Chairperson of the Council and the Director of the Authority, with
no clear lines of responsibility. It is hoped that the Amendment Bill currently
before Parliament will address this situation. The term of the current serving
Council will come to an end in December 2012 and it was stated that the new
executive will have a difficult time in addressing the issues identified in the
Authority. The Committee stated that the Council must hand the Minister of
Police a hand-over report, which clearly states the practical difficulties
experienced by the Council as well as the various issues of concern pertaining
to the governance of the Authority in an effort to empower the Minister to
effectively address the situation from escalating.
Measurement of performance
targets:
The
Committee stated that the measurement of performance targets is problematic; as
targets are either achieved or not achieved and stated that the Authority
cannot report on targets as partially achieved. The Committee stated that the
Authority must refrain from reporting in this manner in future Annual Reports.
Determination
of Salaries for the Senior Management Structure (SMS):
The Committee raised a variety
of serious concerns on issues pertaining to the appointment of the SMS as well
as the accompanying salary packages of the SMS members. Members of the
Committee wanted to know whether the Council were aware of the decision to
outsource the job grading and whether Council approved the salary scales on
which the SMS of the Authority was appointed. The Council indicated that the
appointment process was broken in two and that Council members were only part
of the interview process, but not of the salary package approval process.
Council acknowledged that the Council is not currently functioning optimally
and that due to this; the Council was unaware of many decisions taken by the
Authority.
The Committee expressed concern to
the evident nature of the dysfunction of the Council as there were no minutes
available for the Council meetings in which salary packages were decided and
stated that this was clearly a unilateral decision by the Chairperson and
Director of PSIRA. The Committee further stated that the decision taken by the
Minister of Police to request the Accountant-General of
The second issue of concern raised by the
Committee was related to the fact that the function of job grading was
outsourced to a private company, namely PricewaterhouseCoopers (PWC), and indicated
that the Committee finds this extremely problematic. The job grading was done
on a different grading system than that used by the Department of Public
Service and Administration (DPSA) for government employees. PWC used the
Patterson Grading System to determine job grading opposed to the Equate Grading
System, which is used by the DPSA. The use of private companies to grade jobs
for public entities is highly irregular
as the mechanism for oversight and accountability is largely lost through
the process chosen by PSIRA. The Council stated that the currently serving
members of the Council was not yet appointed when the decision to use PWC for
job grading was taken and further stated that at the time the decision was
taken s Ministerial Task-team was appointed to PSIRA and noted that the
Authority was completely dysfunctional and could not perform the task of job
grading in-house. The Committee questioned why the Authority did not approach the
Department of Public Service and Administration for assistance in the process
of job grading and why the Authority did not benchmark their salaries against
similar public entities. The Authority stated that they were not aware that they
could approach DPSA. The Council stated that PSIRA is under the impression that
the Authority is not like other public entities, in that they generate most of
their own funds and that it is crucial for this mindset to change and accept
the assistance available from Government. The Authority stated that they have
paid
PwC
at total of R603 thousand to date for
services provided in terms of job grading (R603 146.30).
Allowances to
Council:
The
Committee questioned what allowances are paid to Council members in 2011/12 and
why this information is no longer included in the Annual Report as was done in
2009/10. The Authority stated that the information should not have been
reported in 2009/10 and hence the reason for not including such in the years
since.
ETHICS HOTLINE:
Members of the
Committee raised concern about the ethics hotline.
The Authority outsourced this function to a
private company (KPMG) for managing a complaints hotline pertaining to the
private security industry. The Committee questioned the amount of complaints
received through the hotline and whether the Authority considered the
R47 000.00 spent on the hotline as value for money. The Authority stated
that they could not provide the total amount of calls received through the
hotline, but confirmed that a total of 26 case reports were generated in the
2011/12 financial year. The Committee noted that it is a very expensive
hotline, as so few case reports were generated in the space of a year and
further questioned why an independent body was necessary to establish a hotline
within a body like PSIRA already mandated to be an independent body to regulate
the industry. The Authority stated that the Law Enforcement division of PSIRA
also have a complaints line. However, the Council stated that they were not
aware of the hotline managed by KPMG and that the Council was not part of the
decision to establish such hotline. The Council further stated that the hotline
was not cost effective and that there exists no motivation why such an
outsourced hotline was necessitated by the Authority.
Research:
The Committee raised concern
regarding the lack of performance in the Strategic Priority 1:
Industry Stewardship (Knowledge and Advocacy), in which
priority research projects to be completed was prioritised and only topics were
identified.
Planning:
Members of the Committee
expressed concern regarding the apparent lack of cohesion between the budget process
and established priorities of the Authority and questioned why there is an
apparent disjoint between the funding available and the priorities/ performance
targets set by the Authority and that this leads to priorities not being
achieved as various targets were not met due to budgetary constraints.
The Council indicated that the funding model
on which the Authority operates is not ideal, but that the budgeting process
will be reviewed and will enjoy increased focus in coming years. PSIRA is a
trading entity which generates some of its own income.
New corporate
head office in Centurion:
The Committee raised several issues of concern regarding the relocation
of
PSIRAs
corporate head office from
·
Lease agreement:
The Committee raised significant
concern regarding the excessive cost incurred in entering into a new lease
agreement for the Authoritys corporate head office in Centurion to the cost of
R87 million over a five-year period. The Committee further stated that the fact
that the Authority specified an AAA-graded building was unacceptable for any
entity finding itself in financial difficulty. The Authority stated that they
wanted to improve the corporate image of PSIRA and thus decided on an
AAA-graded building. The Committee was surprised by this response and stated
that the improvements they speak of is cosmetic and that the Authority can only
better their image by improving on service delivery.
·
Cost of relocation:
The Committee expressed further concern
regarding the R4
,7
million spent on procurement of new
furniture and relocation costs incurred by the Authoritys in moving offices
from
·
Disposal of building:
Various issues of concern were further
raised regarding the disposal of the condemned (previous) corporate head office
of PSIRA in
Contingent liability:
The Committee expressed
concern regarding the fact that the Authority is not budgeting for contingent
liabilities and further stated that the Authority has continuously ignored the
recommendation made by the Committee to budget for contingent liabilities.
Use of
Consultants:
The
Committee expressed concern pertaining to the excessive use of consultants and
questioned why these consultants are seemingly doing the work for which PSIRA
employees are being paid for. The Committee expressed approval of the fact that
the Authority halved the cost of consultants since 2010/11, but stated that the
amount spent on consultants remained too high.
Difference
between satellite and regional offices:
The Committee questioned what the difference
between satellite offices and regional offices are. The Authority stated that
satellite offices deliver all primary functions of the Authority, much the same
as regional offices. The Authority further stated that these offices serve as a
meeting-place for security companies and security guards looking for
employment. The Committee expressed extreme concern regarding this practice as
it verges on labour brokering. The Authority indicated that this is an
unintended consequence and not promoted by the Authority, however the Council acknowledge
the potential for corruption through this practise and that it has the
potential of placing the integrity of PSIRA in jeopardy. The Council further
indicated that the Committees concern is noted and that the practice will be investigated.
Personnel
expenditure:
The
Committee raised various concerns regarding the information reported on page 50
of the Annual Report regarding personnel expenditure for 2011/12. The Authority
indicated that the table included in the Annual Report contains various
mistakes and that an erratum was sent to the Minister, subsequent to the
Committee demanding that the erratum be done. The following specific issues of
concern were raised by the Committee:
·
Inconsistencies in expenditure:
Members of the Committee raised
concern pertaining to the apparent inconsistencies contained in the personnel
expenditure table reported on page 50 of the Annual Report. Especially in the
case of Asset Management for which expenditure increased from R371 016 to
R1.32 million between 2010/11 and 2011/12, while only one person was appointed
in this division. The Authority acknowledged that it was a mistake on their
part and that the figures for Asset Management and Facilities Management must
be swapped. However, the Committee indicated that it did not make much of a
difference as the increase remains significant.
·
Fixed term contracts:
The Authority reported on 27
fixed term contacts in 2011/12, which was never done in the past and the
Committee questioned why the Authority had such a large number of fixed term
contracts as this is the first time reported as such. The Authority indicated
that it was a mistake on their part and that the fixed term contact employees
have been included in the various divisions in the past.
·
Events management:
The Committee expressed concern
regarding the establishment of an events management office in PSIRA and
questioned what the function and job descriptions of the three personnel
appointed in this office are. The Authority responded that the events
management office was primarily established to manage the Industry Forums, but
seeing that these forums was not yet established, the office currently have no
measurable outputs. The Committee questioned why the Authority, while in a
financially precarious situation, spent R700 thousand with no measurable
outputs. The Committee requested that the events management outputs must be
included as a measurable target in the 2013/14 Annual Performance Plan of
PSIRA.
Business
Applications:
The Committee
raised concern regarding the incorrect information contained in the Authoritys
Annual Report regarding the mistake made regarding the number and status of
business applications in 2011/12. The Authority apologised for the mistake and
indicated that an erratum will be affected.
Lack of reporting
on sick and incapacity leave:
The Committee questioned why the Authority does not report on sick and
incapacity leave taken by employees as required. The Authority stated that they
were not aware that they had to report on it and indicated that it will be
included in coming Annual Reports.
7.
Summary of the Authoritys additional
reporting requirements
|
Reporting
matter
|
Action
required
|
Timeframe
|
|
Detailed breakdown of
Consultancy fees. The report must include the following:
·
Appointment date of service
provider/consultant;
·
Purpose of service to be
provided;
·
All bids or quotes received
for each service from other service providers or consultants;
·
Total cost of the contract
awarded, including length of contract; and
·
Expenditure to date.
|
Written report
|
05 December 2012
|
|
Copy of letter to
|
Written report
|
05 December 2012
|
|
A full breakdown of all
allowances paid to the Senior Management Structure (SMS) of PSIRA, besides
their cost-to-company salary packages.
|
Written report
|
05 December 2012
|
|
Detailed breakdown and
explanation on the discrepancy in the calculations of personnel expenditure
which appeared in the Annual Report and the subsequent erratum by PSIRA.
|
Written report
|
05 December 2012
|
|
Detailed report on the sale of
the condemned PSIRA corporate head office in
|
Written report
|
Once sale is finalised
|
8.
Recommendations
The following recommendations were made by the Portfolio
Committee on Police:
Financial
statements:
The Portfolio Committee recommends
that the financial statements of the Authority must be further interrogated by
the Select Committee on Public Accounts (SCOPA).
Consultants:
The Committee recommends that the Authority should rely
less on consultants and that the expenditure on consultancy fees should be
further reduced in the coming years.
Annual
Performance Plan 2013/14:
The Committee
recommends that measurable outputs be identified for the events management office
and included in the Annual Performance Plan of the Authority for the 2013/14
financial year as well as all subsequent years.
Annual Report
2012/13:
The Committee recommends that the
following information must be contained in the 2012/13 Annual Report of the
Authority:
·
Foreword by
Minister;
·
Detailed report
by the Council of PSIRA;
·
Organogram of
the Authoritys structure;
·
A detailed
breakdown of registration fees not collected;
·
Employment vacancies
broken down into divisions as well as provincial offices;
·
Applications
for registration approved and those not approved;
·
Applications
approved or not approved for training institution accreditations;
·
Budgetary
information for contingent liabilities;
·
Sick and
incapacity leave taken by employees; and
·
The Authority
must refrain from reporting on targets as partially achieved and only report
on targets as achieved or not achieved.
The Committee further recommends that specific attention
must be given to the following aspects of future Annual Reports:
·
Quality
control;
·
The correctness
of Notes on financial statements; and
·
Adhering to
Government resolutions in that all Departmental Annual Reports must be produced
in a cost effective manner.
9.
Conclusion
The Committee expressed their dissatisfaction with the performance
of the Private Security Industry Regulatory Agency (PSIRA). The Council of
PSIRA must be blunt in its hand-over report to the Minister and clearly state
the problems experienced in PSIRA to enable the Minister to address the
situation. The Committee stated very clearly that the Council of PSIRA will
have to account for the failure or successes of the Authority in coming years,
as the Council is mandated to exercise oversight over the Authority in terms of
governance issues.
The Authority has to
take their responsibility in terms of regulating the private security industry
seriously and realise that change in PSIRA must come from the inside through
improved service delivery and not merely cosmetic changes.
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