The hearing was attended by the Minister of Health, the Director-General of the Department of Health, the Commissioner, the Chairperson of the Portfolio Committee on Health and officials from the Office of the Auditor-General.
The Compensation Commissioner for Occupational Diseases was the responsibility of the Department of Health. The Commissioner had dual accountability as the Accounting Officer in terms of the Public Finance Management Act and the Occupational Diseases in Mines and Works Act.
The Compensation Commissioner for Occupational Diseases in Mines and Works received an adverse opinion from the Auditor-General on the financial statements for the 2009/10 financial year. In the opinion of the Auditor-General, the financial statements did not fairly present the financial position of the Commissioner. The adverse opinion was issued for the third consecutive year. The compilation of the financial statements was outsourced to an external contractor but the Commission was unable to verify the accuracy of the opening balances because of a lack of financial management skills.
The transfer of responsibility for the Compensation Commissioner to the Department of Labour had been mooted a few years ago. The transfer did not materialise but in the interim, the Department of Health was reluctant to appoint a new Commissioner and staff to fill the vacant positions. The Department of Health was legally responsible for the Commission and the decision was taken to resume full responsibility. Corrective action included the appointment of a new Commissioner with financial management skills and strengthening the financial management capacity. The Department of Health was confident that the issues highlighted by the Auditor-General would be addressed by the beginning of the following fiscal year.
Members were critical of the appointment of a relatively junior person as the Acting Commissioner, the failure of the Department to effect the necessary legislative changes to rationalise the function of the Accounting Officer, the failure to conduct research into the number of mines that should be making levy payments, the failure to obtain an actuarial valuation of the Commission, allowing the situation to continue for a number of years and the failure of the Department to take disciplinary action against the persons responsible for the Commission. Note 20 to the financial statements dealt with the Commission as a going concern but had been omitted from the annual report. Members requested clarity on the Eastern Cape Project referred to in the annual report.
The Department undertook to provide the missing note and a report on the corrective action taken to address the findings of the Auditor-General to the Committee within one week.
The Chairperson welcomed Dr Aaron Motsoaledi, Minister of Health, Ms Precious Matsoso, Director-General, Department of Health (DOH), Ms Pumla Mzizi, Compensation Commissioner for Occupational Diseases (CCOD), Mr B Goqwana (ANC), Chairperson of the Portfolio Committee on Health and the officials from the Office of the Auditor-General.
Hearings with Minister and Department of Health on Compensation Commission for Occupational Diseases 2009/10 Annual Report
In his opening remarks, the Chairperson expressed the concern of the Committee that the CCOD was not meeting its mandate. The intention of the hearing was to determine what action had been taken to address the issues raised by the Auditor-General in the preceding fiscal years and what leadership support was available to the Commission.
Mr S Thobejane (ANC) asked how the Commissioner managed the parallel responsibilities as the Accounting Officer in terms of both the Public Finance Management Act (PFMA) and the Occupational Diseases in Mines and Works Act (ODMWA).
Ms Matsoso replied that the Department shared the concern over the dual accountability. The matter was being dealt with administratively and the Department provided additional support to the CCOD. The functions remained separated but the Commissioner was the responsible officer. The situation was not ideal and was exacerbated by regarding the CCOD as a trading entity. The Commissioner needed to be granted full powers in order to carry out her responsibilities.
Ms M Matladi (COPE) asked how long the current scenario had been in place and when the matter would be resolved.
Ms Matsoso advised that the DOH had discussed the matter with the National Treasury and was in the process of preparing a bid for additional funding of R18 million in the first year and R19 million in the following year to establish the additional office. There was a proposed amendment to the legislation in progress but the matter was a Ministerial policy issue and it was premature to speculate on what the eventual outcome would be.
Mr Thobejane suggested that the Chairperson of the Portfolio Committee on Health flag the matter. The responsibilities of the Commissioner as the Accounting Officer in terms of the ODMWA should not contradict the provisions of the PFMA.
Mr Thobejane referred to the report of the Auditor-General in the 2009/10 annual report of the CCOD. The Auditor-General had the same adverse opinion for three consecutive years, which was not acceptable. It would appear that the responsible Department had taken no action to address the problems and he wanted to know what corrective action had been taken.
Ms Matsoso replied that the DOH was disturbed by the adverse report and the consistent under-performance of the CCOD was unacceptable. A Chief Director was appointed to conduct oversight over the Commission. The CCOD had 42 administrative personnel, which was not an adequate staff complement to effectively manage the substantial amounts of money involved. The CCOD required more competent financial management expertise but there were certain technical problems as well. The DOH had undertaken a thorough investigation of the Auditor-General’s report to establish the exact nature of the underlying problems. A new Commissioner was appointed in 2010. There should be a risk management and risk evaluation function in place. A report on the interventions that had been made was compiled.
Mr Thobejane asked for comment on the finding of the Auditor-General that the Department was not adequately monitoring the levy revenue account.
Ms Mzizi replied that the accounting processes for levy revenue had been inadequate. The process to raise an accrual based on the prior month’s revenue had been put in place. It was necessary to reconstruct the levy revenue account from 2005 and the exercise would be completed by May 2011.
Mr Thobejane acknowledged the intention to address the problems. He asked who was responsible for the state of affairs and what disciplinary action had been taken against the person concerned.
Dr Motsoaledi said that the structuring of the CCOD was unfortunate and the level of the responsible official was inappropriate for an entity that dealt with such a large amount of money. He queried the matter when he took office and was informed that the transfer of responsibility for the CCOD to the Department of Labour had been mooted some time ago. The DOH was reluctant to make any appointments or changes in the interim. The matter remained unresolved for a number of years. The DOH had since resumed complete responsibility for the CCOD. He felt that the junior officials should not be punished for the decision made by the senior management of the Department.
Mr Thobejane asked if it was possible to determine who was responsible for the decision to transfer responsibility to the Department of Labour and effectively relinquishing the responsibility of the DOH. The DOH was legally the responsible department in terms of the ODMWA.
Ms Matsoso undertook to investigate what had occurred and submit a report to the Committee by the following week. The
Mr Thobejane asked for comment on the finding that levy revenue amounting to R129.9 million could not be verified as supporting documents were not provided. He asked who was responsible for failing to carry out this duty.
Ms Matsoso replied that the Department had compiled a report on the audit findings and would make it available to the Committee.
Ms Mzizi explained that the Auditor-General was unable to verify the opening balances of the levy revenue account. The preparation of the financial statements had been outsourced as the CCOD did not have the necessary internal skills to compile the statements. The CCOD had approached the service provider but was unable to obtain information on how the opening balances were determined.
Mr M Steele (DA) said that the CCOD lacked the necessary skills and capacity to function properly and nobody was held accountable for allowing the situation to continue for a number of years. It was not sufficient to state that a report would be forthcoming. He asked the Minister what action would be taken against the former Director-General of the DOH for allowing the unacceptable situation and the failure to implement the PFMA to continue.
The Chairperson noted that there had been no attempt made to amend the legislation, which would have indicated that measures were taken to remedy the situation.
Dr Motsoaledi conceded that the neglect of the CCOD had been mismanagement by the Department. He was not sure if disciplinary action could be taken against someone for transgressions after the person concerned had left the employ of the Government.
Mr R Ainslie (ANC) said that the reason for the engagement was to identify the problem areas and to suggest a plan of action. The CCOD relied totally on levy revenue from mines. The Committee realised in 2005 that the CCOD did not know which mines were required to pay the levy and was unable to determine its expected income. The Committee requested the CCOD to conduct research urgently but to his knowledge, this was not done. The Commissioner was appointed one year ago and it should have been her first priority to determine the source of revenue for the Commission and to implement the SCOPA resolution.
Ms Mzizi replied that there were currently 260 mines controlled by the ODMWA. The Chief Inspector of Mines was responsible for calling the risk committee that decided whether or not a mine was controlled by the Act. The CCOD did not control the process of making a mine subject to the ODMWA but was considering amendments to the Act. The Chief Inspector of Mines reported to the Department of Minerals and Energy (DME).
The Chairperson established that the CCOD had not conducted any research and was guided by the report of the Chief Inspector of Mines in determining the number of controlled mines. The CCOD had no authority to ensure that the reports of the Chief Inspector of Mines were submitted to the DOH.
Ms Matladi asked who the external service provider was that was appointed to compile the financial statements and what the cost was. She asked if the reason for outsourcing the function was the lack of internal skills or the high number of vacant positions.
Ms Mzizi replied that both reasons were applicable. Most of the vacant posts were in the finance unit. The consultant concerned was KPMG and the total cost incurred in 2009/10 was R245,000.
Ms F Muthambi (ANC) noted that the previous meeting with the CCOD was held in March 2009. At the time, the Acting Commissioner was Ms T Khaka. She understood that Ms Khaka was still employed by the Department and had co-signed the report of the Accounting Officer on page 25 of the annual report. Ms Khaka was the responsible official at the time and should therefore be held accountable. She was not convinced by the argument that the CCOD was unable to determine how the consultant had determined the opening balances of the levy revenue account as the necessary supporting documents had to be provided by the Commission to the consultant. She questioned how the CCOD was managing the work done by the external consultant.
Ms Mzizi replied that the CCOD did not efficiently manage the external consultants because of a lack of financial skills and capacity.
The Chairperson asked what assistance was provided by the DOH.
Ms Matsoso advised that additional posts were created and the Department hoped to deploy eight full-time Government accountants to fill the vacant accounting positions.
Mr P Pretorius (DA) felt that it was unfair to expect Ms Khaka to take the blame. She was only an Assistant Director at the time and the responsibility rested with the Director-General of the DOH. He noted that the annual report mentioned that there were 209 controlled mines and that the number was not increasing because of the dysfunction of the risk committee. He asked if the number of controlled mines was increasing or remained static.
Ms Mzizi explained that certain mines had separated from other mines but continued to be controlled.
Ms M Mangena (ANC) said that a person should not escape liability because he had left the Department. She felt that Ms Khaka should have attended the hearing as she was the best person to respond to the questions from the Members.
The Chairperson noted that the Accounting Officer’s report was signed by Ms Khaka in her capacity as Acting Commissioner. There should be some accountability even though her appointment was inappropriate. The Committee would like to know what the current situation was.
Mr Steele said that Section 81 of the PFMA defined financial misconduct as an offence and related to Sections 38, 40, 41 and 42 of the Act. He asked the Minister if he intended to prosecute the former Director-General in terms of Section 81 of the PFMA.
Mr Goqwana said that it was clear that there were problems with the CCOD and it was important to find out what corrective action had been taken. He asked what role was played by the internal auditor. He acknowledged that the Portfolio Committee on Health had not exercised sufficient oversight over the CCOD in the past but intended that oversight would be increased in future.
Dr Motsoaledi conceded that the structure of the CCOD was dysfunctional and that it was inappropriate to put a relatively junior person in charge of the entity. The DOH had appointed a new Commissioner, who was also a qualified Chartered Accountant (CA). Steps were taken to provide the CCOD with additional financial management skills, for example, the audit committee comprised highly skilled persons. The entity had to be re-engineered in order to function at the optimum level. The Chief Inspector of Mines should report to the DME but a memorandum of agreement with the Minister of Minerals and Energy could be entered into to ensure that the CCOD received the Chief Inspector of Mines’ reports at regular intervals so that the CCOD was in a position to collect the levy revenue that was due. He was not able to explain how the transfer to the Department of Labour arose but the DOH was legally responsible for the CCOD and had resumed full responsibility for the entity. He gave the assurance that the Department would take the necessary steps to ensure that the entity became fully functional.
The Chairperson suggested that the DOH attended to the outstanding matters mentioned in the Accounting Officer’s report, i.e. the amendments to the applicable legislation to rationalise the accountability of the Accounting Officer, improving communication with beneficiaries and ensuring that the actuarial valuation was completed.
Mr Ainslie asked for an update on the fraud reported on page 17 of the annual report and an explanation of the Eastern Cape Project mentioned on page 16. He asked if the Eastern Cape Project was related to the protest march of ex-miners from that province.
Ms Matsoso advised that the DOH had prepared a technical draft amendment of the ODMWA and submitted it to the legal division for drafting the Amendment Bill. The Bill would follow the normal legislative process. A person responsible for communicating with stakeholders and beneficiaries had been appointed. The Department had discussed the alignment of the procedures and systems for the administration of compensation by the Department of Labour, the Department of Minerals and Energy and the CCOD and the need for legislative changes with the National Treasury.
Ms Mzizi reported that workshops were held at the mines on the correct completion and submission of documents required by the CCOD. The fraud incident was reported to the SAPS and ABSA bank had subsequently refunded the full amount. The protest by the
Mr Ainslie asked if the issue was related to the protest of elderly and sickly people from the
Ms Mzizi advised that all payments had been made for the applications received from the
Mr Goqwana was the former MEC for Health in the
The Chairperson noted that reference was made to note 20 in the annual report on page 18. However, the note was not included in the report. He requested that the CCOD forward the relevant note to the financial statements to the Committee by the following week.
Mr Steele pointed out that the note was essential as it determined whether or not the entity was a going concern.
Ms Mzizi advised that the determination of the entity as a going concern was linked to the actuarial valuation. She undertook to provide note 20 to the financial statements to the Committee.
The Chairperson thanked the Minister for his input at the hearing. It was clear that some of the issues went beyond mere administrative issues. The Committee expected the Department to take full responsibility for the failure to effect the necessary legislative changes. As the political head, the Committee expected the Ministry to ensure that the CCOD was fully functional and operational. He thanked the Office of the Auditor-General and the Members for the input provided.
The meeting was adjourned.
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