1. Presentation to the Portfolio Committee on Trade and Industry NRCS Annual Report FY October 2012

2. In attendance from NRCS
Mr. Nico Vermeulen (Apology)
Chairperson of NRCS Board (Acting)
Mr. Katima Temba
Chief Executive Officer (Acting)
Ms. Reshma Mathura
Chief Financial Officer
Ms Trish Pillay
Chief Financial Officer (Acting) - Outgoing

3. Purpose To brief the Portfolio Committee on Trade and Industry
on the Annual Report of the NRCS
for financial year ending 2012

4. 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

5. Organisational Mandate

6. Organisational Mandate Mission and Vision
To Protect the interests of South Africans by developing and ensuring compliance with a system of compulsory specifications and technical regulations
NRCS Mission
A safe, competitive and prosperous South Africa in which we collaborate with our partners to promote environmental sustainability and contribute to a world class technical infrastructure.
NRCS Vision

7. Organisational mandate Legislative mandate
Mandate of the NRCS is derived from the following Acts.
National Regulator for Compulsory Specifications Act
(Act No. 5 of 2008)
Trade Metrology Act
(Act No. 77 of 1973)
National Building Regulations and Building Standards Act
(Act No. 103 of 1977)
The Foodstuffs, Cosmetics and Disinfectants Act
(Act 54 of 1972)
The Public Finance Management Act
(Act 1 of 1999)

8. Background

9. Background Pre 2008 FY 2009 FY 2010 FY 2011 FY 2012
Functions of NRCS housed within the SABS as Regulatory Division
Pre 2008
NRCS formed on 1 September 2008
Schedule 3A Public Entity in terms of the PFMA
Appointment of the Interim Management Committee
FY 2009
Interim Management Committee became the NRCS Board
Interim Structure for NRCS,
Appointed a CEO
FY 2010
NRCS Regulations came into effect on 1 January 2011
Appointed new Acting Board Chairperson
Implementation of IPAP2
FY 2011
Suspension of CEO, Resignation of other key staff (CFO, SCM)
Implemented updated 5-year strategic plan
DTI, Public Protector and other investigations initiated
Industrial Action
FY 2012

10. Organisational Challenges

11. Organisational Challenges
Current challenges faced by NRCS include:
Organisational maturity as NRCS is still in infancy stage
Organisational transition from SABS to stand-alone entity
Delivery of NRCS mandate and achievement of performance targets for operational units
Internal stability resulting from investigations and uncertainty iro outcomes of these investigations.
Stability of organisational structure and staff turnover
Generation of revenue reliant on trends and markets
Internal control weaknesses including procurement, asset management and HR
Labour relations and a range of staff and HR issues

12. Overview of strategic outcomes

13. Overview of strategic outcomes Per the Strategic Plan FY2012-FY2017
Goals
Adopt a risk based approach to maximise compliance with all specifications and technical regulations falling under the mandate of the NRCS
Optimise the scope of NRCS’s regulatory activity to protect people and the environment on South Africa
Inform and educate industry and customers regarding their rights and obligations wrt. Specifications and technical regulations
Ensure that highly engaged, competent people are in the right place at the right time to enable effective execution of the NRCS strategy
Ensure that the NRCS is a capacitated organisation with “fit for purpose” resources available to support decision making and action

14. Performance against strategic plan

15. Performance against strategic plan (1)
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 Inspections
Automotive: 7650 Inspections
Electrotech: 7600 Inspections
CMM: 7288 Inspections
Automotive: 5408 Inspections
Electrotech: 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

16. Performance against strategic plan (2)
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
11 compulsory specifications / technical regulations approved by the Board
2 compulsory specifications approved by the Board
8 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.

17. Performance against strategic plan (3)
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 structure
Competent and motivated staff
Corporate Services
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
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
Operational 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
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

18. Report of the Auditor-General

19. Action Plans: Auditor General report (1)
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

20. Action Plans: Auditor General report (2)
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

21. Action Plans: Auditor General report (3)
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.

22. Action Plans: Auditor General report (4)
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.

23. Action Plans: Auditor General report (5)
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.

24. Control framework and high-level action plans

25. Actions to address issues
Enforce accountability
Maintain responsibility
Appoint capable staff
Review adequacy of current systems and related controls
Implement controls where necessary
Monitor non-compliance
Review and implement new structure
Appoint competent leadership and staff
Manage labor relations issues
Reduce number of vacancies
Implement policies and procedures
Review for compliance and relevance
Comply and report non-compliance
Policy & process
People, structure, capacity
Accountability and responsibility
Systems and controls

26. Financial overview

27. Financial Overview: Revenue (3)
Composition of revenue for FY 2012

28. Financial Overview: Revenue (1)
Monthly revenue collection trends reflect peak periods for revenue collection

29. Financial Overview: Revenue (2)
Cumulative revenue collection for the financial year show the total revenue
collected in the year

30. Financial Overview: Expenditure (1)
Expenditure makeup for FY 2012

31. Financial Overview: Expenditure (2)
Expenditure makeup for FY 2012 – FY 2009

32. The end