Department of Labour and Compensation Fund progress reports

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24 May 2010
Chairperson: Ms L Yengeni (ANC)
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Meeting Summary

The Department of Labour and Compensation Fund gave an update on issues that had been raised at earlier meetings with the Committee. The Compensation Fund reported to the Committee on the clearing of the suspense account, noting that this had been achieved by March 2010, and noted that the main reason for the suspense accounts was that deposits were made without reference numbers or names to allow the Compensation Fund to make the correct allocations. The Compensation Fund also reported on its total staff establishment, the filling of vacancies, and the organogram. It noted that the vacancy rate had fallen to 7.8% in May 2010, and that 24 reports were still awaited from the National Intelligence Agency before appointments could be finalised, with 28 posts having been advertised and three still to be advertised. Claim statistics for the 2007 to 2010 financial years were tabled, with breakdowns of compensation benefits tabled. Financial information in relation to investment income, contributions revenue, medical claims, other income, administration, surplus and deficits, as well as compensation claims, was also presented. The Compensation Fund gave a report back on the Siemens contract, what was covered by it, the operational challenges experienced, the reasons why this system was preferred to the Rand Mutual system, and the customisation of the model to suit the business requirements of the Compensation Fund, together with the project schedule. Members sought clarity on some dates and details, noting that it was imperative for the Committee to receive full details. Members also wanted more clarity on the issues around vacancies, commented that the organogram seemed top-heavy and asked what value the appointments would add to service delivery, and noted the aim of the Compensation Fund to decentralise and have offices throughout the country. Members also enquired what strategy would be employed to deal with the National Intelligence Agency and South African Qualifications Authority. 

The Department of Labour was asked to elaborate on the progress and current status in regard to the Commission for Conciliation, Mediation and Arbitration (CCMA), but reported that the Auditor-General was finalising the report, after which the Minister and Director General of the Department of Labour would meet to discuss future actions. The Department also reported that four Bills would shortly be presented to Cabinet, and would then go through the National Economic Development and Labour Council (Nedlac) process.

Meeting report

Department of Labour (DoL) and Compensation Fund (CF) progress reports
Mr Shadrack Mkhonto, Compensation Commissioner, Compensation Fund, tabled the Compensation Fund (CF) update report on its earlier presentation to the Portfolio Committee.

He made reference to the clearing of suspense accounts, which had to be reconciled on a monthly basis. He noted that the items needed to be identified before they could be cleared to the correct accounts. R87 million had been held in the suspense account, but this amount had been cleared by March 2010.

He explained that the amounts were held due to the beneficiary payments that had been made in March 2008. Mr Mkhonto said that the proper accounting treatment of the transaction at year end should have been classified as “outstanding payments”, as opposed to a classification as “suspense account” amounts.

He noted that deposits into the CF's bank account had been made with no reference numbers from employers. Mr Mkhonto said that the bank had since assisted the CF with the tracing and allocation of the unknown deposits to relevant employers. This enabled the amounts to be put to the correct accounts.

Mr Mkhonto also gave a follow up report on the total CF staff establishment, and the filling of vacancies within the CF. He noted that as at 31 March 2009, the total number of approved posts was 707, with 584 of those having been filled, and 123 still described as vacancies. This resulted in a vacancy rate of 17.3% as at 31 March 2009. The vacancy rate, which was at 9% in March 2010, had, by 24 May 2010, dropped to 7.8%. Nine new appointments had been made on 1 April 2010. 24 of the vacancies were still awaiting report backs from the National Intelligence Agency (NIA). 28 posts had already been advertised, with interviews scheduled for the month of May, and there were still three vacancies that still needed advertising. Tables were shown of the previous and current staffing status, and the statistics in regard to directorates, components, sections, interview dates and comments were also tabled to the Committee (see attached presentation for details).

Mr Mkhonto then tabled claim statistics, as at 31 March 2010, for the 2007/08, 2008/09, and 2009/10 financial years. He also noted trends on claims information as well as compensation benefits that had been processed in the 2009 financial year. A breakdown of compensation benefits processed payments was also noted.

Mr Mkhonto also tabled slides dealing with financial information pertaining to investment income, contributions revenue, medical claims, other income, administration, surplus and deficits, as well as compensation claims.

He noted that the actuarial valuations for the 2009/10 financial year were in the process of being finalised by the actuaries. The valuation would, however, only be available after August 2010.

The Commissioner noted variances between processed amounts, and actual amounts paid, as well as issues pertaining to money that had been unclaimed.

Mr Virkash Sirkisson, Chief Information Officer, Compensation Fund, then reported back to the Committee on the contractual obligations to Siemens.

He noted that Siemens had been contracted to provide optimised and documented business processes for automation and to ensure user and management participation in systems automation. The purpose of the contract was also to ensure the timely payment of the unitary fee and to compensate for delays caused by the Department of Labour (DoL). The contract further provided for the transfer of legacy assets to Siemens. Other reasons for the contract were to ensure that the change management governance processes were in place, and also to ensure a secure working environment and for the management of third party service providers.

Operational challenges from Siemens pertained to the employment services system, as well as the Compensation Fund’s systems. There were some general problems with the bandwidth at labour centres, which in turn had contributed to slow responses. According to Mr Sirkisson, the bandwidth at 109 centres had been upgraded during the last nine months.

Mr Sirkisson said that the Rand Mutual System had asked the CF to conduct a “Proof of Concept” exercise regarding the planning of the piloting of the system. He noted that a budget of R2 million had been approved for the process, and that total costs to Rand Mutual were R524 427.10. These costs were for systems setup, resources and user training.

A Rand Mutual project audit had reflected a negative finding. The decision had been taken to implement the Siemens solution.

There would be an implementation decision, based on the CF's business requirements and processes, and this would be customised for the CF. He reported that this would be a fully integrated system which would include a financial module, for example the Customer Relationship Module. This system would also be aligned to DoL systems architecture and functions. The support and maintenance would be from one service provider.

Mr Sirkisson tabled the high-level project schedule and the CF claims system in relation to a requirements workshop, solution integration design, realisation, final preparation, blueprint sign-off and data migration (see attached presentation for full details).

The Chairperson asked the Department of Labour to elaborate on the progress and current status in regard to the Commission for Conciliation, Mediation and Arbitration (CCMA).

Mr Jimmy Manyi, Director-General, Department of Labour, responded that the process was currently out of his hands and that the Auditor-General (AG) was in the process of finalising the report with the board members of the CCMA. He would still need to meet with the Minister of Labour on the matter. After this meeting, the Minister would provide guidance on future actions.

Mr Manyi noted that the Minister was also working on four other Bills, which the Minister would table to Cabinet the following Wednesday. He added that once these were approved by Cabinet, they would be referred to the National Economic Development and Labour Council (Nedlac) process.

Mr I Ollis (DA) sought clarity on the financial details and dates of the DoL's update to the Committee. He noted the Committee's imperative oversight role towards the DoL and said that it was crucial that the Members received full and clear financial details.

Mr Mkhonto noted that the dates should have read “31 March 2009”, and not 2010.

Mr A Louw (DA) said that he needed the DoL to be more clear on issues pertaining to vacancies that were being filled.

Mr Mkhonto said that new appointments had been placed at the top end structure of the organogram. Most of the staff who had been promoted had been contract workers.

The Chairperson wanted to know what values were being added to the lower end structures of the organogram. She was concerned how this would change the ground level situation, in terms of service delivery.

Mr Mkhonto noted that the Compensation Fund was aiming to decentralise its structure and that the plan for 2010/2011 was for the Compensation Fund to have offices throughout the country.

Mr Louw noted that it was important to know what the strategy was with regards to the South African Qualifications Authority (SAQA) and the National Intelligence Agency (NIA). He also commented that the compensation staff organogram looked top heavy.

The meeting was adjourned.


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