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2. ANNUAL REPORT 2009/2010 PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY PRESENTATION TO THE PORTFOLIO COMMITTEE ON POLICE 2 November 2010 2

3. ANNUAL REPORT 2009/2010 PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY REPRESENTATIVES NamePosition Mr. T BopelaChairperson of Council Lt. General. A DramatCouncil member Mr. G MnisiCouncil member Mr. SM ChaukeDirector Mr. DKN LigegeDeputy Director – Finance Ms S ZumaManager – Communications Ms Z NgcoboOffice of the Chairperson 3

4. OVERVIEW OF THE PRESENTATION PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY Introduction by the Chairperson of Council Who is PSIRA Last Briefing – 27 October 2009 2009/10 Organisational performance Progress with implementing Audit Matters Financial Results Situational analysis (Where is PSIRA) Policy developments Strategic direction and Turnaround (Where is PSIRA going) Conclusion 4

5. Who is PSIRA PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY The Council was appointed on January 2010 –Full-time Chairperson: Mr. T Bopela –Vice Chairperson: Ms Z Holtzman –Council member : Lt. General A Dramat –Council member : Mr. G Mnisi –1 Vacancy PSIRA administration led by the Director Supported by 3 divisions –Law Enforcement –Finance and Administration –Communications and Training Staff complement of 210 (March 2010) The organisational structure is as follows: 5

6. The Organisational Structure PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY 6

7. The last briefing PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY CategoryItem DescriptionProgress since last briefing Non-Compliance with Treasury RegulationsAbsence of Council - Accounting Authority Resolved. New Council has been appointed by the Minister : Police effective January 2010 Non-Compliance with Treasury RegulationsAbsence of an Audit Committee Resolved. On 25 October 2010, the Council held interviews for members of the Audit Committee. A resolution was taken to appoint 3 (three) independent persons, one will serve as a Chairperson and the two as Deputy Chairperson and additional member. Non-Compliance with Treasury RegulationsAbsence of an Internal Audit function Resolved. The internal audit function has been outsourced since October 2009, for a period of 3 years. Irregular expenditure Cartridges bought amounting to R617,043 are irregular expenditure. Unresolved. The case has been referred to the SAPS. Investigation in progress Irregular expenditureLease agreement (JHB Office ) Unresolved. The case has been referred to the SAPS. Investigation in progress Vat liability Partially resolved. PSIRA has applied for the deregistration for Vat, due to it being listed as a Schedule 3A public entity. In September 2010, SARS refunded PSIRA so as to close the Vat account. The process of audit is underway at SARS to finalise the VAT deregistration process. Unallocated deposits Unallocated deposits R12 million, and current 2008/9 Resolved. Unallocated deposits from previous financial year have been allocated. 7

8. Core Business Report PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY Compliance Inspections per Active Business 8

9. Core Business Report PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY First Time Inspections Compared To New Business 9

10. Core Business Report PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY Infrastructure Compared to New Business 10

11. Core Business Report PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY Dockets Opened Compared to Prosecutions 11

12. Core Business Report PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY Registered Cases Compared to Finalised Cases 12

13. Organisational performance PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY LAW ENFORCEMENT Strategic objective / goal ResultsReason for variance Reduce registration time taken to register security officers and security businesses to not more than seven days Not achieved. Registration time has been reduced to 1 month No CRM strategy in place Improve quality and operational efficiency and effectiveness Not achieved.Poor data integrity. Grow business as per legal mandate by ensuring compliance with existing legislation by security service providers through comprehensive enforcement of the provisions of the Act and statutory Code of Conduct Not achievedGoal not aligned to expected outcomes Achieve targeted metrics of stakeholder satisfaction by establishing productive relationships with key stakeholders who have a vested interest in the Department’s success and effective engagement to build the Authority’s reputation and encourage a spirit of voluntary compliance Not achievedThe process was largely reactive; No planning place to drive achievement of goal 13

14. Organisational performance PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY LAW ENFORCEMENT Strategic objective / goal ResultsReason for variance Equip PSIRA officials with skills and knowledge to promote and achieve the values of professionalism, integrity, diligence and competence in the performance of functions and the exercise of powers by inspectors and to shape the Authority’s organisational culture Partially achievedHR skills audit pending Develop a competent private security industry by promoting high standards in the training of security service providers and prospective security service providers Not AchievedTraining Regulations regarding new standards have not been promulgated Implement a risk- based supervision approach to regulation Not achievedImplementation deferred due to moratorium placed on new appointments (i.e. Chief inspectors) Establish Ombudsman office in order to increase protection to consumers of security services Not achievedPending legislative review (Consumer Protection Act) Develop enabling IT architecture by liaising with IT Department to ensure that the authority’s IT infrastructure supports the Department’s objectives Not achievedOutput not aligned to goal 14

15. Organisational performance PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY LAW ENFORCEMENT Strategic objective / goal ResultsReason for variance Ensure an enabling legal and regulatory framework Not achievedNo proper consultation with stakeholders Implement effective performance management Achievedn/a Develop high engagement working environment Not achievedOutput not aligned to goal Align staff, systems and organisational design behind the PSIRA strategy Partially achievedOrganisational structure not review in line with strategy 15

16. Organisational performance PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY FINANCIAL AND ADMINISTRATION Strategic objective / goal ResultsReason for variance Increase operating revenue to ensure financial stability Target achievedn/a Collect PSIRA’s outstanding and recoverable debt Target achievedn/a Collect fees due timelyNot achieved80% collected Comply with PFMA requirementsTarget achievedn/a Maintaining effective corporate governancePartially achievedFraud prevention plan drafted. Policies identified by Internal audit were not drafted Comply with PFMA / Unqualified audit reportNot achievedQualified report 2008/09 16

17. Organisational performance PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY HUMAN RESOURCES Strategic objective / goal ResultsReason for variance Right people in place at the right timeNot achievedOutput not aligned to goal Implement effective performance management Partially achievedA comprehensive performance management will be implemented in the new financial year, given that the Department has appointed an HR Manager 17

18. Organisational performance PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY INFORMATION TECHNOLOGY Strategic objective / goal ResultsReason for variance Develop IT plan with costing to support re- registration Partially achievedA further study on an electronic document management system must still be conducted Develop plan to ensure overall data integrityPartially achieved Ensure that the target of 95% system uptime is achieved Partially achievedIT performance not monitored Annual IT reviews and recommendationsAchievedICT governance review was conducted 18

19. Progress with implementing Audit matters PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY ItemDescriptionProgress since 31 March 2010 Fruitless and Wasteful expenditureAssets purchases for branch offices The two generators were for Durban and Eastern Cape office premises. These assets have not been used, however,management has decided to keep the generators with a view to use them when office premises are sought in the future. This decision was taken after considering the loss (approx 60% of retail value) if disposal via auction is done. Irregular expenditure Acquisition of software licences amounting to R1 245 114, without informing National Treasury of the deviation from inviting competitive bids Three quotations were obtained. No loss suffered by PSIRA as a result of the non- compliance. Irregular expenditure Outsourcing of professional accounting assistance during year end, which amounted to R1 589 105, without informing National Treasury of the deviation from inviting competitive bids. Three quotations were obtained. No loss suffered by PSIRA as a result of the non- compliance. Irregular expenditure Legal fees amounting to R683 000, without following Treasury Regulations. The new policy on procurement will make provision of a panel of legal advisers and attorneys, such that legal services will be used on a rotational basis. Material losses through impairments Impairment of debtors amounting to R208 million due to poor collection practices. A debt collection agent has been appointed in September 2010 to collect all outstanding debt. Inadequate quarterly reporting of performance information and formal systems The PSIRA does not have proper system of collecting, collating, verification and reporting of performance information. The procedure is in process of being developed by management for approval by Council at its next meeting scheduled for December 2010. Non-Compliance with Treasury Regulations Lack of proper risk management processes and procedure including a fraud prevention plan. Resolved. The fraud prevention plan and policy was approved by Council on 25 October 2010. Non-Compliance with Treasury Regulations PSIRA did not have a system for properly evaluating major capital projects Management have developed procurement procedures that will cover the inadequacies identified by the AG, for approval by Council at its next meeting scheduled for December 2010 19

20. Financial results PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY 31-Mar-1031-Mar-09 % Change RR Revenue Sale of goods and services5,077,8312,943,46273% Fines3,019,9183,481,115-13% Infrastructure assessment fees 2,810,7302,190,37628% Levies received59,758,57652,575,37614% Registration fees12,746,33210,789,14418% 83,413,38771,979,47316% Other income Rental income171,9300100% Interest and penalties interest 7,126,6626,014,53818% Interest received2,018,7803,598,096-44% Sundry Income1,155,5332,827,542-59% 10,472,90512,440,176-16% Expenses(97,773,693)(96,803,992)1% Operating deficit(3,887,401)(12,384,343)69% Finance Costs(3,725)0-100% Loss on disposal of fixed assets (361,614)0-100% (365,339)0-100% Deficit for the year(4,252,740)(12,384,343)66% 20

21. Financial results PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY Detailed expenditure OPERATING COSTS20102009% Change Employee related costs39,236,71238,544,1422% Provision for bad debts15,948,96427,601,164-42% Fingerprint costs8,313,8345,155,32361% Consulting and professional fees7,211,4494,461,47662% Legal fees3,748,3712,727,90637% Travelling - local2,555,2712,190,93617% Auditors remuneration1,562,364729,881114% Other operating costs19,196,72815,393,16425% 97,773,69396,803,9921% 21

22. Financial results PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY The graph below represents the breakdown of significant operating costs for 2009/10 22

23. Financial position PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY STATEMENT OF FINANCIAL POSITION 31-Mar-1031-Mar-09 ASSETS Current Assets Trade and other receivables8,105,0546,004,184 Cash and cash equivalents23,941,10131,964,146 32,046,15537,968,330 Non-Current Assets Property, Plant and Equipment17,150,12218,972,478 Intangible Assets57,69868,492 17,207,82019,040,970 Total Assets49,253,97557,009,300 LIABILITIES Current Liabilities Trade and Other Payables34,089,12834,695,267 Lease obligations285,432184,878 34,374,56034,880,145 Non-Current Liabilities Retirement benefit obligation1,193,0004,190,000 Total Liabilities35,567,56039,070,145 Net Assets Accumulated surplus13,686,41517,939,155 Total net assets and liabilities49,253,97557,009,300 Current ratio 0.93 1.09 23

24. Financial position PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY PSIRA ‘s ability to settle current obligations has worsened Current ratio 0.93: 1 compared to 1.09:1 (2008/09) Net assets declined R13.6m and 17.9m (2008/09) Attributable to deficit posted in 2009/10 The financial position is attributable to : –Poor debt collection practices –Funding model not reviewed –Increased operating costs 24

25. Financial results – trend analysis PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY The graph below represents revenue and opex since 2004 to date R'0002004200520062007200820092010 Revenue44,40948,88853,84058,53395,01784,42093,886 Operating expenditure32,63641,36150,30260,49294,34196,80498,139 Surplus / (deficit)11,7737,5273,538-1,959676-12,384-4,253 25

26. Financial results – trend analysis PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY From 2004 – 2006 PSIRA has been posting surpluses From 2007 – 2009 PSIRA has been posting deficits with exception of FY 2008 Mainly attributable to the following: –Funding model i.e. levies not reviewed –Increased workforce for law enforcement –Provisions for doubtful debt –Rising Fingerprinting costs –Increased legal fees 26

27. Situational analysis PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY Stakeholder perspective National footprint Lack of Law enforcement strategy Lack of CRM Unacceptable registration turnaround times No Industry research Lack of communication with Industry Corporate identity (contact centers) Financial perspective Lack of debt collection strategy No real time billing Financial distress – operating in deficits (2 years) Business processes & resources Lack of ERM framework Lack of ERP systems Ageing IT infrastructure Database integrity Human perspective Organisational structure not aligned to objectives Low morale Lack of management skills Lack of corporate and HR policies 27

28. Strategic direction and turnaround PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY The approved strategic plan for 2010 -2012 Strategic objectives –Ensure PSIRA’s financial viability and sustainability –Reduce the risks to the state and South Africa’s citizens through industry compliance with PSIR Act –Develop an enabling environment for PSIRA to be able to operate effectively and efficiently –Develop effective stakeholder relationships through effective communication and engagement –Ensure the right people in the right place at the right time to deliver on PSIRA’s strategic and operational requirements –Develop and implement the strategic capabilities required for PSIRA future strategic success –Develop an appropriate, enabling regulatory environment –Establish PSIRA as an example of exemplary governance in the public sector Management will continue to build on the current strategic plan A turnaround strategic to address the current crisis is being developed 28

29. THE END 29