PRESENTATION ON THE STATUS OF THE MLRF TO THE PORTFOLIO COMMITTEE

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PRESENTATION ON THE STATUS OF THE MLRF TO THE
PORTFOLIO COMMITTEE
3 November 2006
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The Marine Living Resources Fund (MLRF)

• The MLRF was established in terms of the Marine
  Living Resources Act o 1998.
• MLRF was listed as a Public Entity in 2001.
• The fund generates its income from levies on fish
  products, license fees and permits, fines and
  confiscations, harbour fees transfers from DEAT

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Figure 1 Sources of Income
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Income

• The largest source of income is levies on fish
  products (this ranges from R45 000 in 2002 R75
  000 in 2006)
• 2006 figure includes old debts paid to avoid
  penalties on LTRAMP process
• 2004/5 figure includes sale of stockpiled fish
  products, especially abalone

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Figure 2 Income with DEAT Grant
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Figure 3 Income without DEAT Grant
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Income vs Expenditure 2002 - 2006

• The income for the fund exceeds expenditure for
  the years up to 2006 IF the amounts transferred
  from DEAT for vessels is included (figure 1)
• Figure 2 (income without the DEAT Grants) shows
  that expenditure has always exceeded income

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Income vs Expenditure (cont)

• Self-generated revenue (excl DEAT transfers) does
  not cover expenditure
• Deployment of compliance vessels meant that
  operating costs increased by 65
• Vessel costs 80 of MLRF and 35 if DEAT
  transfers are included

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Vessel Operating Costs

• The main expense is the operation of the new
  R500m EPVs commissioned in 2001
• Fuel is the major cost driver 60 of the vessel
  operating costs
• Fuel increased by 192 over past 4 years (by
  about R35m) this could not be recovered from
  the industry

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Auditor Generals Comments

• In the financial years 2002-2005 and the year
  ending March 2006 the fund received qualified
  Reports from the AG with Emphasis of Matter
• All the Reports from 2002-5 show the following
• Lack of internal controls
• Lack of compliance to the PFMA

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Auditor Generals Comments (cont)

• No proper accounting fixed asset system
• Lack of historical data supporting
  documentation
• Insufficient control on Debtors income
• Failure to adhere to principles of accrual
  accounting
• Staffing issues

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Strategies and Way Forward

• Finalisation of a cost recovery framework this
  will determine the public good that should be
  funded from Treasury
• Appointment of a service provider to maximize
  revenue collection
• Speed up sales of abalone
• Treasury has agreed to fund R35m shortfall for
  vessels in 2006/7 year

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Strategies and Way Forward (Cont)

• Treasury has also agreed to assist with vessel
  costs over the next 3 financial years
• A service provider has been appointed to assist
  with the development implementation of a new
  financial management system. The system will go
  on trial in November 2006 with full
  implementation on 1 April 2007.

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Strategies and Way Forward (Cont)

• The development of new policies to deal with
• Revenue and asset management
• Debtor management
• Vessel management
• Levy collection and management a tender has
  been awarded to assist with the development of a
  model to ensure efficient levy collection. This
  model will be presented in Treasury in February
  2007

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Strategies and Way Forward (Cont)

• Marine Activity System (MAST) this is a
  consolidated database that will be tested in
  November and implemented on 1 April 2007
• Additional staff have been appointed in the
  office of the CFO to deal with financial
  accounting and supply chain management. Contract
  staff will also be appointed to assist in data
  capturing

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Strategies and Way Forward (Cont)

• Capacity building for staff, particularly in the
  office of the CFO
• Training in GAAP
• Financial management
• Accrual accounting
• Management Control of the fund
• DG assumed role of Accounting Officer
• CFO DEAT assumes Project Manager role

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• THANK YOU