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The Ports Regulator Overview and Presentation on 2009/10 Annual Report. Portfolio Committee on Transport 22 October 2010. Index. National Ports Act and Regulator mandates Regulator Programmes and Main Activities Financial Year 2009/2010 Annual Financial Statements. - PowerPoint PPT Presentation
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The Ports Regulator Overview and Presentation on 2009/10 Annual
Report
Portfolio Committee on Transport
22 October 2010
Index
• National Ports Act and Regulator mandates• Regulator Programmes and Main Activities• Financial Year 2009/2010 Annual Financial
Statements
www.portsregulator.org 2
Objects of the National Ports Act
• Development of effective and productive ports industry for economic growth and development
• Promote and improve efficiency and performance in the management and operations of ports
• Promote the development of an integrated regional production and distribution system in support of government policies
www.portsregulator.org 3
Functions of the Ports Regulator In terms of the Ports Act
• Exercise economic regulation of the ports system in line with government’s strategic objectives
• Promote equity of access to ports and to facilities and services provided in ports
• Monitor the activities of the National Ports Authority to ensure compliance with the Act
• Adjudicate complaints and appeals against the Authority• Approve or reject the Authority tariffs• Promote regulated competition• Regulate the provision of adequate, affordable and efficient
port services and facilitieswww.portsregulator.org 4
Objectives of economic regulation
• Promotion of efficiency• Promoting investment• Protection of port users• Prevention pricing and service discrimination• Prevention of anti-competitive practices• Competition amongst ports • Competitive and affordable tariffs
www.portsregulator.org 5
Regulator programmes
• Administration• Economic Regulation and Tariffs• Monitoring and Compliance• Tribunal and Regulatory development• Industry Development
www.portsregulator.org 6
Current activities
• Economic review of participation in Ports System
• Implement Ports Regulatory framework• Adjudication of appeals and complaints • Maintain the Regulator secretariat and
systems• Implement tariff regulation framework• Port monitoring
www.portsregulator.org 7
Financial Year 2009/10 Annual Financial Statements
www.portsregulator.org 8
2009/2010 Overall Audit Opinion
• Clean Audit• No disclaimers or qualifications• 100% Audit• Some matters emphasised
www.portsregulator.org 9
Overall Audit Opinion (2)
• Additional matter Unaudited supplementary schedule
The public entity provided supplementary information in the financial statements on whether resources were obtained and used in accordance with the legally adopted budget, in accordance with GRAP 1 Presentation of Financial Statements. The supplementary budget information set out on page 59 does not form part of the financial statements and is presented as additional information. Accordingly I do not express an opinion thereon.
www.portsregulator.org 10
Matters of Emphasis
• Matters of emphasis and explanationsMaterial underspending of the budget– As disclosed in note 23 to the financial statements, the entity has
materially under-spent its budget in the amount of R2,843 million. This is attributable to the fact that the entity is not fully operational in terms of its mandated function and key positions were still vacant due to the organisational structure not yet being approved by the executive authority.
– Mainly in the area of staff costs and indirect costs, some capital expenditure accelerated to reduce under-spending
www.portsregulator.org 11
Emphasis of matters – 2009/10
Unaudited supplementary schedule • The public entity provided supplementary information in the
financial statements on whether resources were obtained and used in accordance with the legally adopted budget, in accordance with GRAP 1 Presentation of Financial Statements. The supplementary budget information set out on page 59 does not form part of the financial statements and is presented as additional information. Accordingly I do not express an opinion thereon.
• Requirement under Ports Act, but not auditable in accordance with PFMA
Submission of strategic plan • The accounting authority of the Ports Regulator of South
Africa (listed in schedule 3A of the PFMA) submitted its strategic plan after the start of the financial year (that is, 30 April 2009) to its executive authority, contrary to Treasury Regulation 30.1.1 of 2005.
• The Strategic Plan was submitted for comment to the Department of Transport prior to the required date, for feedback. The Plan was finally submitted on the date set out above, after amendments as required by the DOT.
Emphasis of matters – 2009/10 (cont.)
13www.portsregulator.org
Emphasis of matters – 2009/10 (cont.)
Non-adherence to legislation • The entity’s audit committee was not properly constituted in terms of
Treasury Regulations 27.1.3 and 27.1.4. Moreover, it did not substantially fulfill its responsibilities, contrary to the requirements of Treasury Regulation 27.1.8 as well as sections 51(1)(a)(ii) and 76(4)(d) of the PFMA.
• The Regulator interprets the Members as non-executive, due to the special nature of the Regulator structure. The Regulator acted in accordance with this interpretation in establishing and managing the Audit Committee. The interpretation of the AG, classes Members as Executive. The Regulator to take opinion on the matter and change composition and operation of the Audit Committee in accordance therewith. Due to their not being permanent staff, business continuity plans could not be developed and implemented.
14www.portsregulator.org
• The entity’s internal audit function did not have an internal audit charter as required by Treasury Regulation 27.2.5. Moreover, it did not substantially fulfil its responsibilities, contrary to the requirements of Treasury Regulation 27.2.10 as well as sections 51(1)(a)(ii) and 76(4)(b) and (e) of the PFMA.
• The Internal Audit function was outsourced due to the organisation being so small and thereby not justifying the establishment of an in-house internal audit. The internal audit report was not signed off by the end of the financial year. This has been corrected.
Emphasis of matters – 2009/10 (cont.)
15www.portsregulator.org
•The entity did not settle payments due to creditors within 30 days from date of receipt of invoices, contrary to the requirements of section 38(1)(f) of the PFMA. Consequently, fruitless and wasteful expenditure amounting to R6 219 was incurred.
16www.portsregulator.org
Emphasis of matters – 2009/10 (cont.)
Supplier Category Amount Penalty / Interest Reason
IT Service Provider Late payment R 3 454.20R 570.00
R 0.00R 0.00
New contract, S.P. delayed submitting banking confirmation form.
Travel Agency Late payment R 5 698.55 R 0.00 Queries on account
Online Legal SP Late payment R 5 678.60 R 0.00 Queries on account
Electricity Provider Fruitless &Wasteful
R 2 627.53 Account disputed
Rental Fruitless &Wasteful
R 2 505.39 Late payments
Communication SP Fruitless &Wasteful
R 1 086.27 Late payments
R 6 219.19
• The entity did not formally approve and implement a fraud prevention plan during the year under review, contrary to the requirements of section 51(1)(a)(i) of the PFMA.
• DOT policies followed in periods up to 1 January 2010(DOT managed the payments). Subsequent to that internal audit outsourced, but had not been signed off by year end.
17www.portsregulator.org
Emphasis of matters – 2009/10 (cont.)
Internal control• I considered internal control relevant to my audit of the financial
statements and the report on predetermined objectives and compliance with the PFMA, but not for the purposes of expressing an opinion on the effectiveness of internal control. The matters reported below are limited to the deficiencies identified during the audit:
Leadership– Leadership did not design and implement an appropriate internal control
system to monitor and ensure that the entity complies with all applicable laws and regulations.
– The current staffing levels including contract staff, does not allow the formal process separation necessary between procurement and financial transactions. The CEO signs off all payments to ensure oversight, until such time as staffing all in place. No irregularities encountered in any transactions that were the result of a lack of internal controls.
18www.portsregulator.org
Emphasis of matters – 2009/10 (cont.)
Governance• The internal audit function and audit committee did not substantially fulfil
their functions to management/those charged with governance in maintaining and ensuring an efficient and effective system of internal control during the year under review. Moreover, the systems necessary to mitigate the risk of fraud have not been implemented.
• The internal audit function was out-sourced as the organisation is too small to justify a stand alone full time internal audit function. The internal audit function of the DOT managed the oversight of payments till 1 January 2010. The financial systems that were implemented did not have an audit function that met the requirements of the AG, although documentary records recorded the classes of transactions referred to.
Other reports• No matters to report.
19www.portsregulator.org
Emphasis of matters – 2009/10 (cont.)
Achievements – 2009/10
www.portsregulator.org20
Key Result AreaKey Performance Objective
Key Performance Indicator Output
Establishing and operating a tribunal to hear complaints and appeals under the National Ports Act
Commence hearing of Appeals and Complaints
Develop Tribunal procedure manuals Internal procedures and simplified Access Guide developed. Directives published in Government Gazette and in force, that set out formal processes.
Tribunal training for Regulator Members Training to be scheduled with first hearing. No matters ripe for hearing as yet.
Establish Tribunal to hear complaints and appeals under the NPA Act
16 Complaints and 2 Appeals were received. These matters are in process to hearing or decision. No matters ripe for hearing as yet, therefore no hearings had been held in period under review.
www.portsregulator.org21
Key Result AreaKey Performance Objective
Key Performance Indicator Output
Establish all elements of the Regulatory framework within its mandate
Finalisation of Ports Regulatory Framework
Finalise Directives Directives developed, consulted and approved. Published in Government Gazette and in force. Subsequent technical amendment approved and published as well.
Finalise Regulatory Principles Paper
Regulatory Principles Paper published
Finalise and implement tariff regulation framework
Finalise and implement the interim Tariff regulation framework
Completed assessment of 2010/2011 Port Tariffs. Tariff hearings held in all port cities. Asset valuation accepted pending valuation to be completed in subsequent tariff years.No rebasing done or planned over medium term. This is as a result of a technical amendment to the Directives that removes the requirement for a re-basing.
Finalise and implement tariff regulation framework
Economic review of participation in the port environment
Economic review research and analysis complete. Consultation with industry to be completed in next financial year.
Achievements – 2009/10 (cont.)
www.portsregulator.org22
Key Result AreaKey Performance Objective
Key Performance Indicator Output
Develop the capacity to deal with all the output requirements of the organisation
Establish and maintain Regulator Secretariat to deal with the establishment requirements of the PR
Human resource acquisition and capacitation and Staff benefits and conditions regime
Human resource regime not approved as yet.HRD Strategy and Skills plan await staff appointments to commence.Internship Programme commenced.
Develop systems architecture and user requirements for next 3 years
Desktop components and interim system in place
Acquire platform for MSP MSP System research is on-going. 1st round assessments too expensive
Finance Management System Financial and HR modules acquiredRevised Delegations developed (Interim Financial Delegations in place)
Financial Policy and procedures developed and approvedNot all responses to previous year’s audit in place (Internal Audit function outsourced)
Achievements – 2009/10 (cont.)
www.portsregulator.org23
Key Result AreaKey Performance Objective
Key Performance Indicator Output
Support the development of the port system and the port Regulatory system architecture.
Establish Stakeholder engagement processes and fora
Establish stakeholder fora and engagement processes.
Currently PCC’s launched(DOT) but NPCC not yet established. PCC’s to be port level fora of engagement for Regulator. Specific interest group fora to be established in next financial year.
Roadshow was held covering all port cities, informing industry and communities of Regulator functions and methods of accessing Regulator services.
Assess NPA Infrastructure
High level NPA Infrastructure assessment
Initial benchmarks developed, data gathering commenced.Valuation methodology and assessment for RAB moved to outer years. Not completed in this year.
Achievements – 2009/10 (cont.)
www.portsregulator.org24
Key Result AreaKey Performance Objective
Key Performance Indicator Output
Ensure that all port sector participants comply with the National Ports Act
Establish the initial port compliance, monitoring and performance measurement framework and system
Benchmarking study to establish performance indicators of port environment (Economic and Social).
Initial economic benchmarks identified and data collection commenced.Baselines defined and set.Baselines for comparables not set as yet
Development and maintenance of the port performance measurement system
Initial development only on port performance measurement, no system developed as yet.
Perform a regulatory compliance review on major processes within the Ports industry
Preliminary indicators defined and awaiting timelines.None, as regulatory review to follow end of year post publication of Directives - 6 August 2010.
Achievements – 2009/10 (cont.)
11144 11382
13603
2390
5988
10413
8754
5394
2573
0
2000
4000
6000
8000
10000
12000
14000
Budget Expenditure Unspent
Comparison Budget v Expenditure
2007/08
2008/09
2009/10
www.portsregulator.org 26
Expenses 2007/08 2008/09 2009/10
Compensation of employees 423 1 934 3 000
Goods and services 1 915 3 656 6 821
Depreciation 52 398 592
Interest, dividends and rent on land – – –
Interest – – –
Dividends – – –
Rent on land – – –
Transfers and subsidies – – –
Total expenses 2 390 5 988 10 413
Ports Regulator – Financial Performance (cont.)
2390
5988
10413
4231934
3000
19153656
6821
52499
592
0
2000
4000
6000
8000
10000
12000
Total Expenditure Compensation ofEmployees
Goods &Services
Depreciation
Comparison in Expenditure
2007/08
2008/09
2009/10
www.portsregulator.org 28
Ports Regulator – BBBEE
0
2 000
4 000
6 000
8 000
10 000
12 000
2009/10
BBB-EE as a percentage of the Discretionary Expenditure
BBBEE R 4,860
TotalDiscretionaryExpenditureR 5,580
TotalExpenditureR 10,413
0
2,000
4,000
6,000
8,000
10,000
12,000
2009/10
Total Expenditure - Discretionary and Non Discretionary
NonDiscretionaryR 4,833
DiscretionaryR 5,580
TotalExpenditureR 10,413
0%
61.33%
30%
59.82%
50%
87.10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2007/08 2008/09 2009/10 to date
BBB-EE Actual vs Target
BBB-EETarget
BBB-EEActual
Technical & Management Staff (Support & Interns)
2007/08 Male Female Male Female
Black 100% 0% 0% 100%
White 0% 0% 0% 0%
2008/09 Male Female Male Female
Black 100% 0% 25% 50%
White 0% 0% 25% 0%
2009/10 Male Female Male Female
Black 67% 33% 0% 86%
White 0% 0% 14% 0%
Employment Equity(including contract staff)
Additional Issues
• Consultants and Lawyers– R 2.1 million
• Travel and Accommodation– R 1.4 million
• World Cup declarable– 14 Bafana Bafana T-Shirts (R 8 000.00)• International Port Company and Regulator Managers
– Singapore– Australia– Malaysia
www.portsregulator.org 31
Challenges in 2009/2010• Capacity a problem• First tariff assessment was difficult as Regulator
to act in the absence of historical precedent• Policy gaps eg. What is the perspective on Capital
Work in Progress?• Implementation of Act, questions as to speed and
possible policy shifts• Small organisation challenges such as scale
dependent systems eg. Information and data processing systems
www.portsregulator.org 32
Strategic Challenges• Budget constraints – long-term financial sustainability• Part-time Regulator issues and implications
– Time constraints– High requirement for Regulator Member time for tribunals eg: 5
day hearing = 1 Appeal, 16 complaints coming through process, 6 board meetings at least per year, plus
• Clarity on approach to port institutional structure• Impact of unified Transport Policy changes on PR?• Ensuring Regulator is not referee and player.• Balance of infrastructure programme in economic
development versus cost of doing business?• Determination of appropriate infrastructure build
programme against which Regulation occurs?
www.portsregulator.org 33
Interventions required• Consideration of additional members that have higher levels of
availability for tribunal• Consideration of structure eg. Secretariat and Commission
Structure • Revised income model for Regulator
– 2010/2011, requested R20m, allocated R8.8m• Infrastructure tariff approach by DOT• Amend Act to streamline administrative processes• Infrastructure sign-off to NPCC?• What does the state expect the outcome of the Regulator to be
over the first ten years of its existence?• Additional budgetary allocation?• How far do we want to take this?
www.portsregulator.org 34