Government Pensions Administration Agency 2011 Annual Report & 2012 Strategic Plan: Deputy Minister of Finance briefing

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Finance Standing Committee

15 May 2012
Chairperson: Mr T Mufamadi (ANC)
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Meeting Summary

The Deputy Minister of Finance noted this was the first time the Government Pensions Administration Agency had interacted with Members separate from the Government Employees' Pension Fund (GEPF). The Deputy Minister reported that the GPAA had evolved into a fully-fledged component of Government charged with the responsibility of providing administrative services to the GEPF and Programme 7 of the National Treasury. Its function was regulated by service level agreements. The first two or so years had seen the Agency developing capacity and building systems. The GPAA could not achieve optimum service levels without the cooperation of other Government departments, who were the direct employers of the members that the GPAA serviced. Therefore it sought to synchronise systems and operations and thereby address the backlogs that occurred as a result of inadequate information and the inability to trace beneficiaries. The modernisation programme was at an advanced stage.

The GPAA management reported that it had been given permission to incorporate the Temporary Employees Pension Fund and the Associated Institutions Pension Fund into the GEPF and this was in process. After separating from the GEPF, the GPAA, in line with Government requirements, now had programmes rather than divisions. The GPAA adapted to changing requirements as its task was to administer pensions, not to define policy. it now had a proposed fifth programme - to ensure that all its modernisation efforts were properly managed to improve services and automation of some of its processes. There was an improving trend of performance. The backlog had decreased by 2010/11 to 4 741 outstanding claims. The call centre would be upgraded as part of the modernisation process to work faster and not drop any calls. A particular achievement for GPAA was that it now had regional offices, which had improved access for stakeholders, clients and members. At the regional offices the GPAA had appointed client liaison offices to improve employer interface and who visited departments to train staff on handling member documentation. The GPAA had attained an unqualified audit opinion, with no matters of emphasis. It had a fraud prevention plan and it had mitigated risks. The GPAA spent R460 million as against the budget of R582.5 million allocated. The main was on the Service Delivery Improvement Programme (SDIP) which was now known as 'Modernisation'. Equity figures were given. Challenges and remedial actions included the membership data since complete data expedited processing of exit applications. Information and Communication Technology was currently outsourced and the GPAA wanted to increase its capacity to manage it by itself.

The GPAA management presented the 2012/15 Strategic Plan. The GPAA had five objectives: increase customer and client satisfaction through operational excellence; to have efficient corporate governance and financial management frameworks, with correct books and no audit queries, and risks minimised; to enhance service delivery through enabling technology and well-documented processes; to develop skills and human capability to achieve professional administration services; and enhance mutual beneficial partnerships with the employer community. A good working relationship with departments was key. The Strategic Plan described a journey that included an efficient funding model. GPAA wanted to integrate systems while automating. GPAA wanted to comply with the service level agreements that it had signed. Complaints should be resolved quickly. Employees should be geared to execute the massive tasks on the GPAA's table. GPAA had engaged with the Department of Public Service and Administration to conclude formalised agreements with department. Automation had begun with a live verification interface with the Department of Home Affairs. No longer was it necessary to send certificates by post for pensioners to come and confirm that they were still alive. 2012/13 financial figures were given. In future, GPAA anticipated charging fees to National Treasury and GEPF instead of receiving a budget.

National Treasury explained its responsibilities in prescribing the format and the content of documentation such as the annual report and the strategic plan, not only for the GPAA but also across Government, public entities, and constitutional institutions.

A Member of COPE asked why the GEPF could not and should not do the GPAA's job. ANC Members commended the presentation, and supported GPAA doing the administration for the GEPF, were concerned how GPAA could provide excellent service with limited resources, especially human capital, were concerned at 'abandoned calls' and asked why the volume of calls handled by the call centre decreased by 42 per cent, required more details on employees with disabilities and asked if GPAA's offices were user friendly for people with disabilities, questioned the high rate of vacancies at levels nine to 12, asked what happened to the contractual arrangements after 31 March 2015, asked if the GPAA was just integrating the TEPF and AIPF into the GEPF for administrative purposes, requested that GPAA, on its next visit, give 'a clear, flowing, financial briefing', and asked how the strategy would assist GPAA in such a highly competitive arena with well-established private competitors. Perhaps GPAA was not aggressive enough in its approach. DA Members questioned the cost effectiveness in-house administration of the funds and thought that the private sector would be quite enthusiastic to manage those pensions. What was the justification for having this as a Government function? Surely the private sector could be held to account on deliverables and would do the work at a better price.

The Deputy Minister of Finance was convinced that it was the right decision to separate the GPAA from the GEPF. It was established as a Government component so that this Parliament could continue to hold this pension administration to account. One could never hold the private sector to account in this way.

The Chairperson commended the progress thus far. There was nothing better than having in-house capacity. However, he requested an analysis of GPAA's administrative costs.

Meeting report

Introduction
The Chairperson noted that it was the first time the GPAA had interacted with Members as a standalone entity. In the past it had appeared as part of the Government Employees' Pension Fund (GEPF) or in relation to Public Investment Corporation (PIC) issues. As GPAA was the administrator of pension funds, it was important that the Committee have a direct link with it.

Deputy Minister of Finance's introduction
The Deputy Minister of Finance, Nhlanhla Nene, introduced the presentation of the GPAA 2012/15 Strategic Plan which was tabled before the Committee in terms of the Public Finance Management Act (No. 1 of 1999). This Plan was an update of the 2011/14 Plan. Members had already been provided with a copy of the Annual Report 2010/11, since logically the Strategic Plan (see second presentation) built on the Annual Report. As the Chairperson had pointed out this was the first engagement of the Committee with GPAA by itself; previously GPAA had engaged under the umbrella of the Government Employees Pension Fund (GEPF) or National Treasury. The update took into account the ever-increasing challenges and responsibilities of which it was necessary to keep abreast in the interests of the GPAA's clients. The GPAA had evolved into a fully-fledged component of Government charged with the responsibility of providing administrative services to the GEPF and Programme 7 of the National Treasury. Its function was regulated by service level agreements signed between the GPAA and its clients – the GPEF, which constituted about 93 per cent in terms of volume while National Treasury's Programme 7 constituted the remainder of the funds, 7 per cent, under administration. The GPAA was established with the sole purpose of ensuring efficiency in the administration of the GEPF outside of the GEPF itself. The first two or so years had seen the Agency developing capacity and building systems yielding the desired objective of servicing the beneficiaries with the dignity and respect that they deserved. It was desirable that the GPAA at this formative stage should position itself as per its vision which was, as described in the Strategic Plan, to be the leading and preferred fund and benefits administrator. What had emerged from the Deputy Minister's regular engagements with the GPAA was that it could not achieve the optimum service levels without the cooperation of other Government departments, who were the direct employers of the members that the GPAA serviced. Therefore it was making a concerted effort to forge relationships with Government departments to synchronise systems and operations. This would go a long way to address the backlogs that occurred as a result of inadequate information and the inability to trace beneficiaries. The modernisation programme was at an advanced stage and would be crucial in improving the quality of service and reducing the turnaround time and backlogs, as Members would see in the Strategic Plan. The Strategic Plan sought to build on previous engagements to provide a platform for transparency and accountability to the Committee as representatives of South Africans, and, in particular, the beneficiaries of the funds that the GPAA serviced.

GPAA 2010/11 Annual Report Presentation
Mr Phenias Tjie, GPAA CEO, gave the first presentation, on the GPAA's Annual Performance 2010/11 [Annual Report 2010/11]: agenda (slide 2), the legislative mandate (slide 3), the funds and schemes currently administered (slide 4), the GPAA programme overview (slide 5), benefit payments - backlog reductions (table, slide 6), client interface: channel operations and employer department interface (slide 7), governance achievements for 2010/11 (slide8), departmental expenditure (table, slide 9), employment vacancy rate and equity (table, slide 10), modernisation approach, (chart, slide 11), challenges and remedial actions (slide 12), and the strategic journey 2011 to 2016 - indicating the aim from 2011/12 to 2015/16 to modernise capacity and capability and to sustain high performance beyond 2015/2016 (chart, slide 13); with additional information, in the document, on current benefit payments - backlog reduction (table, slide 15), employment vacancy rate and equity (table, slide 16), challenges and actions 2009/10 (slide 17), and a note that the R30 per cent risk was not mitigated for 2010/11 (slide 18).

Mr Tjie commented that, besides the GEPF, the GPAA managed two small pension funds which fell under the ambit of National Treasury – the Temporary Employees Pension Fund (TEPF) and the Associated Institutions Pension Fund (AIPF); the GPAA had been given permission by the Minister after agreement with the GPAA Board to incorporate these two small pension funds into the GEPF and this was in process. The TEPF would be incorporated this year; for incorporation of the AIPF an amendment to the relevant legislation would be required. It was expected that the process would take two years. The GPAA was also managing on behalf of the National Treasury the Post-Retirement Medical Subsidies for public servants. The GPAA also looked after the Military Pensions in terms of the Military Pensions Act (No. 84 of 1976) and 'this contentious matter' of Special Pensions in terms of the Special Pensions Act (No. 69 of 1996) which the GPAA was managing as part of its responsibilities for the National Treasury. Finally, the GPAA looked after what it called Injury on Duty payments: this applied only to civil servants who were injured while on duty; the GPAA administered this under the ambit of National Treasury, but it was supposed to be the work of the Compensation Commissioner. Mr Tjie emphasised that the GPAA did this only for civil servants, as the Compensation Commission handled all the other cases involving injuries. (Slide 4)

After separating from the GEPF, the GPAA, in line with Government requirements, now had programmes rather than divisions. He gave details. He noted that the GPAA in its programmes adapted to changing requirements as its task was to administer pensions, not to define policy. The GPAA now had a proposed fifth programme - for modernisation. This was to ensure that all the GPAA's modernisation efforts were properly managed to improve services and automation of some of the GPAA's processes. (See slide 5).

Members would observe the improving trend of performance. The backlog had decreased by 2010/11 to 4 741 outstanding claims. At GPAA itself there were 1 728 backlogs. With the employers, as the Deputy Minister had, there were 3 013 backlogs. The GPAA processed only that came to it. As to claims between departments, the GPAA had no knowledge. (See table, slide 6).

The main channel of operations was the call centre. The volume of calls taken was indicated. It was not an advanced call centre, but it would be upgraded as part of the modernisation process to work faster and not drop any calls. The target was to answer calls within two minutes; however, this was not achieved: the average was three and a half minutes to four minutes. In this reporting period there were 12 regional offices of which three were satellite offices. This was an achievement for GPAA as in the past it did not have regional offices. Everyone had to work through the head office in Pretoria. The regional offices had spread and improved access to GPAA's services for stakeholders, clients and members. At the regional offices the GPAA had set up client liaison offices to improve employer interface. These were the officials who visited departments to train them on how to fill in forms, on what information the departments must keep for members, and on how to fill in the exit forms. (Slide 7)

In the reporting period, the GPAA undertook 1 071 visits to all the Government departments. It had 420 training sessions with departments. GPAA collected 53 000 exit document forms as compared with 39 712 in 2009/10. The error rate was 16 870 out of the 53 000 as compared with 23 774 in 2009/10. However, it must be emphasised that, if GPAA discovered errors, the liaison officers could follow-up errors quickly so that the employers did not leave the documents pending for a long time. (Slide 7)

As to governance, GPAA was pleased to inform the Committee that it had attained in this reporting period an unqualified audit opinion, with no matters of emphasis – a clean audit. Because of the nature of the GPAA's work, the GPAA had a fraud prevention plan that it implemented continuously to minimise any opportunities for fraud and corruption. However, Members would agree that this was a very difficult topic. Of its 14 top TEPF risks, the GPAA had mitigated 70 per cent. GEPF and National Treasury and the Service levels were at 95% compliance for National Treasury and for the GEPF 90% versus the 80% target for 2010/11 (see slide 8).

The GPAA spent R460 million as against the budget of R582.5 million allocated. The main underspending was on the Service Delivery Improvement Programme (SDIP) which was now known as 'Modernisation', because the SDIP had just been in its infancy. (See table, slide 9).

The GPAA's concentration of employees was at levels six to eight and nine and 12, as could be seen from (slide 10). Equity figures were given.

Mr Tjie referred to the principles of the modernisation, but would deal with this in more detail in the Strategic Plan presentation (see below). The main aim was to automate the repetitive work so that it could be executed with ease and speed. Repetitive tasks required many hands. The other aim was to improve the skills and capacity of the staff to perform better. The third area was employer compliance since if they submitted all required information on time there would be no reason for backlogs. Lastly, the GPAA wanted to leverage more on technology, current or future, to do some of the work that now had to be done manually. (Slide 11).

Challenges and remedial actions included the membership data since complete data expedited processing of exit applications. Member and pensioner education was continuous and emphasised to ensure that members and pensioners knew what they had to do to assist the GPAA to process their applications and pay their pension benefits speedily. Family disputes and cases of death were expected to continue to be a challenge. A high level of cooperation was sought from employer departments. Gradually the GPAA was achieving that, though more needed to be done. Departments now knew, at least, their role in assisting the GPAA to administer the pension funds. Timely submission of exit documents was essential, and employer departments knew this. The GPAA's administrative system and platform was old but this would be corrected. E-mail capacity through the modernisation programme would be increased through training and filling critical positions. Information and Communication Technology (ICT) was currently outsourced and the GPAA wanted to increase its capacity to manage it by itself (slide 12). This was all in the new Strategic Plan (see slide 13, and second presentation).

GPAA 2012/15 Strategic Plan Presentation
Mr Tjie gave the second presentation: agenda (slide 2), the legislative mandate (slide 3), funds and schemes currently administered (slide 4), vision, mission, goals and values (slide 5), GPAA programme overview (slide 6), strategic foundation and modernisation approach (slide 7), desired state 2010/16 and beyond (slide 8), strategic journey 2010/16 and beyond (slide 9), and financial resource allocation (table, slide 10); with additional information on the GPAA footprint (slide 12), agility forecast 2010/16 and beyond (graph, slide 13), statement of financial position (table, slide 14), administration budget Medium Term Expenditure Framework (MTEF) (table, slide 15), targets 2011/15 Objective 1 (slide 16), targets 2011/15 Objective 2 (slide 17), and targets 2011/15 Objectives 3, 4 and 5 (slide 18).

This strategy formed the basis of executing the GPAA's plans for the medium term. As a new organisation, as the Deputy Minister had indicated, the GPAA had separated from GEPF. It had a new vision to be the leading and preferred fund benefit administrator on behalf of clients and stakeholders. The GPAA was confident that it could realise its vision after achieving timely payment of exit benefits, achieved a high level of client satisfaction, where its employees were satisfied and did their jobs well, with satisfied stakeholders, and a modernised system and organisation. The GPAA had five objectives, which took account of the modernisation programme: increase customer and client satisfaction through operational excellence; to have efficient corporate governance and financial management frameworks, with correct books and no audit queries, and risks minimised; to enhance service delivery through enabling technology and well-documented processes; to develop skills and human capability to achieve professional administration services – now that the GPAA was an administrator, the GPAA must benchmark itself on the lines of Sanlam, Old Mutual, Liberty; and enhance mutual beneficial partnerships with the employer community, because without the employers the GPAA could not achieve much. A good working relationship with departments was key (slide 7). The Strategic Plan described a journey (see slide 9) that included an efficient funding model, since for the future the GPAA believed that National Treasury and the Board would not continue to give the GPAA its budget. They would instead ask the GPAA to charge them fees in order to prove that the GPAA really knew what it was doing. So it was the aim of GPAA eventually to charge fees, from the National Treasury and the GEPF, to administer the funds. GPAA wanted to integrate systems while automating. GPAA wanted to comply with the service level agreements that it had signed. Complaints should be resolved quickly. Employees should be geared to execute the massive tasks on the GPAA's table. GPAA had engaged with the Department of Public Service and Administration to conclude formalised agreements with departments so that employers knew what they had to submit to the administrator to enable it to execute its responsibilities. In the Strategic Journey, GPAA was now in the period 2011/13, in which it wanted to automate most of its repetitive tasks and improve its service delivery. He emphasised that automation had begun with a live verification interface with the Department of Home Affairs (DHA). No longer was it necessary to send certificates by post for pensioners to come and confirm that they were still alive. Instead the GPAA could auto-verify that pensioners were living, or establish if they were dead by reference to the DHA's database. This cooperation had already reduced and assisted pensioners a great deal. Previously the GPAA was suspending on average around 4 700 pensioners per month. Now, through the automation, the GPAA suspended only the pensioners who were confirmed to be dead. Beyond 2013 the GPAA wanted to conform to best practices and continuously improve service delivery, and even further beyond 2016. (Slide 9).

Mr Tjie gave financials for 2012/13. National Treasury and the GEPF had given GPAA R660.670 million by way of budget, not fees (slide 10). However, in future, GPAA anticipated charging fees to National Treasury and GEPF instead of receiving a budget. 93 per cent of the R660.670 million came from the GEPF, and 7 per cent from the National Treasury.

Discussion
Mr N Koornhof (COPE) asked why the GEPF could not and should not do the GPAA's job. 93 per cent of GPAA's work came from GEPF. Secondly, would it not be cheaper for GEPF to do GPAA's work? If GPAA could convince him that it could administer the funds more cheaply than the GEPF then he would be very happy.

Mr Tjie replied that the GEPF in conjunction with the Association for Savings and Investment South Africa (ASISA) completed research last year to examine the cost of administering members' pensions. The outcome was that it took and administrator between R26 and R36 to administer a member per month. The GPAA had a membership base of 1.2 million. There were 365 000 pensioners. If one divided the cost in terms of numbers by what GEPF and National Treasury allocated to the GPAA, GPAA had concluded that it was currently cheaper to administer a GEPF member internally than to do so through an outside administrator. GPAA was the biggest pension administrator in rand value and numbers. No other came close. The GPAA had advantages of economy of scale.

The Deputy Minister added that the GPAA did not establish itself; it was established by Government after Parliament's approval – the Committee should take pride in its decision - with the sole purpose of separating administration from the GEPF. This dedicated administration agency was beginning to see improvements in services.

Ms Z Dlamini-Dubazana (ANC) struggled to understand the financials. She referred to the administrative MTEF budget, departmental expenditure, and assets and liabilities (for 2012/13). Were the figures for the assets and liabilities correct?

Ms Hannah Ntshingila, GPAA CFO, explained, in detail, why, in a financial statement, assets had to balance liabilities.

Ms Dlamini-Dubazana commended the presentation, and supported GPAA's doing the administration for the GEPF. She was concerned how GPAA could provide excellent service with limited resources, especially human capital. GPAA was running short of time. She noted that GPAA's main focus was on customer care, but was concerned at 'abandoned calls' which denoted poor service delivery, and had, perhaps, resulted in a decreased number of calls.

Ms P Adams (ANC) asked why the volume of calls handled by the call centre decreased by 42 per cent. Did this correlate with the establishment of the regional offices, where there was an increase in the same period of 8 per cent in the walk-ins of clients (Annual Performance 2010/11, slide 7).

Mr Tjie replied that the spread of the regional offices had reduced the demands on the call centre. In two years time one would see the fruits of these improvements.

The Deputy Minister suggested that the fall in the number of calls was because people were beginning to receive services that did not necessitate calling the GPAA.

Ms J Tshabalala (ANC) imagined that the education of employers from the departmental, in particular, human resources (HR) perspective, required much capacity, and asked if there was a specific budget. (Annual Performance presentation (slide 7).

Ms Adams asked about the challenges of educating members and pensioners (slide 12). How often was this done? Was this measurable?

Ms Mantiti Kola, GPAA Chief Operating Officer (COO) replied that, on employer interface, the employers were a cardinal input into all GPAA's processes. GPAA had seen a considerable improvement in collaboration. At the last engagement on 06 May 2011 the backlog in terms of employers was 6 000 and now it was at about 1 005. The channels used included individualised training through a dedicated section – the Employer Government Liaison Department (EGLD). Also in all the regional offices there were officers who liaised with the departments. In total there were 41 such officers who conducted individualised training for the HR sections. The turnover of the HR employees was a reality but it was under control now, but as soon as such an employee left, the liaison officer concerned picked it up. Also GPAA held HR forums. It also held pre-retirement seminars in those departments. Moreover departments had demonstrated considerable support by submitting documents on time. In the new strategy the GPAA sought to deepen this relationship further and ensure that agreements were formalised.

Ms Tshabalala required more details on employees with disabilities. Were GPAA's offices user-friendly for people with disabilities?

Mr Tjie replied that it was GPAA policy that two percent of the work force should be constituted by people with disabilities. GPAA acknowledged that it had not met its target. Unfortunately GPAA did not have a disabled user -friendly building. A modernised office park was in the strategy.

Ms Adams questioned the high rate of vacancies at levels nine to 12 (slide 10).

Ms Tshabalala asked about the employment vacancy rate (slide 10) in which the GPAA seemed to be falling short of meeting targets to fill vacancies. How far the GPAA had progressed in filling vacancies since January 2012 (slide 12)?

Mr Tjie replied that GPAA had wanted to fill the vacancies by January 2012, but it had not done so because when it had started automating late last year, it realised that it would have excess staff who would not be fully engaged. GPAA wanted to redeploy them to the other vacancies, and had reached agreement with the unions. So GPAA had decided to not to fill some of these positions. In the long term, GPAA would not need as many staff members as it had now as a result of the automation. He gave examples. However, GPAA still needed managers and would advertise in the next two weeks to fill the critical positions.

Mr Koornhof asked if, when the GPAA's contractual arrangement came to an end in 2015, that would not be the time for a review of the costs?

Ms Adams asked what happened to the contractual arrangements after 31 March 2015.

The Deputy Minister replied that it was important that the GPAA performed well, so that when the contract expired, if Government was unhappy with GPAA's performance, it would be prudent for the Committee to decide whether to continue the present arrangements.

Mr Tjie replied that it was agreed between the parties that the GPAA would receive budget-based fees for five years, after which the GEPF and National Treasury would review the situation and decide if they wanted to give the GPAA fees instead. It was standard practice to have a separate administrator. He gave the example of Old Mutual and Sanlam which thrived on administering the pensions of employees. It was the normal industry practice.

The Deputy Minister further noted that this was why the GPAA was established as a separate Government component instead of outsourcing it completely. Most of the funds outsourced their administration completely. There were companies that thrived on administering funds for others. The GEPF dealt with policy. The issue of pulling together all Government departments had actually been a nightmare. Most of the errors actually arose from the departments themselves. In the modernisation process what the GPAA was trying to do was to ensure that the exit benefit form was electronically submitted to avoid delays in reaching GPAA. Also GPAA was working with the South African Revenue Service (SARS) in the modernisation process. Members would bear testimony to the efficiency of e-filing in SARS. The Deputy Minister commended Parliament's decision.

The Deputy Minister noted also that pensioners no longer received a life certificate renewal, which used to take much administrative effort. The link with DHA assisted in simplifying the process of confirming eligibility. When Government departments learned from other departments that were doing well, such as SARS, this sharing of experience was of great benefit.

The Chairperson asked for a second round of questions.

Mr E Mthethwa (ANC) understood that GPAA would integrate the TEPF and the AIPF into the GEPF (Annual Performance presentation, slide 4). What happened to their surpluses? Would these funds add value? Were they audited in the main fund? Or was GPAA just integrating them for administrative purposes.

Mr Mthethwa asked if there was any reason why GPAA was apparently not targeting the backlog. Why was there a fragmentation of problems?

Mr Mthethwa was concerned about levels 13 to 16. If the current employees were doing their work successfully, were the additional posts required?

Mr Mthethwa asked how the GPAA intended to give incentives directly to the members who were contributing to this fund, so that one could compare with private entities.

Mr D Ross (DA) asked if an informal procedure was followed in determining the costs of outsourcing. Was there not a formal procedure, to ensure that doing the administration in-house was really cost effective? However, apart from the costs, if might be a business decision for to manage one's own funds.

Mr Ross was concerned about the GPAA's expenditure. Was it a reasonable amount given that GPAA was subsidised to the extent of 93 per cent by GEPF and 7 per cent by National Treasury.

Mr Ross asked if GPAA was still in the founding stages of its modernisation process.

Mr T Harris (DA) asked if SDIP was the modernisation programme.

Mr Harris said that the figures given by the ASISA study were R26 and R26 per member per month. However, Mr Harris estimated GPAA's cost per member as about R46 per month. This raised the question of the cost effectiveness of this in-house administration of the funds. He thought that the private sector would be quite enthusiastic to manage those pensions. What was the justification for having this as a Government function? Surely the private sector could be held to account on deliverables and would do the work at a better price.

Mr Harris said that 4 700 member pensioners were suspended each month when member pensioners had to prove that they were alive. With the automated system, how many pensions were suspended each month?

Mr Harris asked how many calls were not picked up (Annual Performance Plan presentation, slide 7). The great decline in the number of calls could be the result of clients' just giving up. More details were required.

Mr Harris noted a problem of backlogs, although there had been an improvement. He could not find any mention in the Strategic Plan of memoranda of understanding (MOUs) with departments. If it was not a problem for the GPAA then it was a problem for the Minister.

Mr Harris asked further about the problem of backlogs. He did not understand the meaning of those two tables. The majority of backlogs were linked to employers who did not fill in the forms correctly. However, what were the causes of the backlogs that sat with the GPAA itself?

Mr Harris saw that there was R50 million budgeted for the SDIP in 2010/11, but R47 million was not spent. Could GPAA explain that huge variance of 96 per cent (slide 9).

Ms Tshabalala asked about 2009/10 actions on researching the possible impact of funds. Did the GPAA conduct customer surveys?

Ms Tshabalala asked for clarity on budget allocations.

The Deputy Minister of Finance said that the decision to split the administration from GEPF was a decision taken with the concurrence of Parliament. He was convinced that this was the right decision. It was established as a Government component so that this Parliament could continue to hold this pension administration to account. One could never hold the private sector to account in this way. The initial costs included the setting up of the GPAA, which was still in its formative stage. The backlogs had arisen because it had been under the GGEPF but backlogs were being rapidly reduced. Departments had varying systems; some had outsourced, but without good results. It was important to have all under one administration. This was why setting the targets was difficult in regard to departments over which the GPAA had no control. Hence this concerted effort to gain their cooperation, as alluded to by Ms Kola. The introduction of the electronic system would go a long way to addressing many of the backlogs. Keeping GPAA as a standalone agency but within the state was the best decision that this Parliament with the Ministry had taken to ensure the continued oversight of Parliament over the work that GPAA now did.

The issue of the need or not for new posts would remain for some time. It was a valid concern. GPAA might not actually need the new posts, because as had been indicated, some people might need to be retrained. The expenditure was not high, and as modernisation progressed, there would be a massive reduction in the amount spent per member. People would call the call centre only if they had queries. With reduced queries there were reduced costs. The establishment of the regional offices had also helped. There was not just an improvement, it was a significant improvement. He referred to past Committee reports on the GEPF, which had been the biggest challenge to National Treasury. Members should acknowledge this.

Ms Ntshingila said that 'administration fees' did not represent 'sale of goods' but services, which the GPAA classified under administration fees. It had to be remembered that GPAA was streamlining its processes and so initially it would be quite costly; thereafter GPAA would realise the benefits.

Mr D van Rooyen (ANC) noted that the GPAA had indicated the importance that it placed on remaining competitive (Strategic Plan presentation). How would this strategy assist in realising this, while GPAA was in such a highly competitive arena, with well-established private competitors? He did not detect a strong sense in the presentation of going beyond 2015. There was a certain lack of 'razzmatazz'. He saw GPAA's eventual goal as repositioning itself so that it could also administer funds for the private sector. However, perhaps GPAA was not aggressive enough in its approach.

The Deputy Minister replied that the GPAA did not intend to take on the private funds. It was established as a Government component and only to administer Government pensions. The intention was to save Government money by avoiding outsourcing pensions administration. Modernisation was at an advanced stage. The GPAA had procured the proper systems. He was confident that GPAA would have improved much further when it next reported to the Committee. For a newly established institution it had made tremendous progress.

Mr Tjie assured Members that GPAA would report progress next year. Since implementing a new system took a long time, it expected to be able to report completion by the end of 2015. There had been a capital injection of R180 million to acquire the systems. In the long run, this capital figure would not appear in the financial statements. He agreed that departments were responsible for backlogs. However, people saw GPAA as Government – this was why GPAA had taken upon itself to say that everything that was still owed to an eligible pensioner was part of its backlog. Moreover, GPAA could not give special pensions to the private sector and ask it to verify the political service period of a member. The two tables, he agreed, were confusing. The R471 was for the past financial year 2011/12 and was included for additional information. It was not really part of the discussion today.

Ms Tshabalala asked about current benefit payments in relation to the backlog. Who endorsed administratively the costs of the delay?

Ms Esti de Witt, GPAA Head: Legal Services, replied it was the GEPF that bore the cost of the interest, from the first day, if GPAA did not pay within the prescribed period of 60 days after the member exited employment.

Ms Dlamini-Dubazana requested that GPAA, on its next visit, give 'a clear, flowing, financial briefing'. The present briefing, she said, was 'so scattered and fragmented'. It was 'really confusing'.

The Chairperson recollected that when the Committee had interacted, for the first time, with the Financial Services Board (FSB), it had experienced some difficulty in understanding the organisation of the FSB's programmes. However, subsequent interactions gave Members a better understanding. He asked for Members to be patient with themselves and with the GPAA, and he was confident that GPAA would take account of Ms Dlamini-Dubazana's concern.

Mr Harris asked that the Minister send someone from National Treasury to help the GPAA develop its communications. It was very difficult to understand what was going on. There were many tables and plans the overall picture was not clear. Hence some of the Members were confused about what was actually happening. The documentation was 'very complicated'. Mr Harris recommended that GPAA follow National Treasury's practice in making everything absolutely crystal clear.

Mr Stadi Mngomezulu, National Treasury Deputy Director-General (DDG): Corporate Services, replied to Mr Harris on the clarity of documentation. One of National Treasury's responsibilities was to prescribe the format and the content of documentation such as the annual report and the strategic plan, not only for the GPAA but across Government, public entities, and constitutional institutions. There was a dedicated division in National Treasury that facilitated this, namely, the Office of the Accountant-General, which prescribed the format and content of the annual financial reporting. However, what National Treasury could not prescribe was the branding and the colouring of documentation. There was a reason, which GPAA could explain, for GPAA's choosing green. As for the strategic plan, National Treasury had a budget office that prescribed what should be contained in such documentation. National Treasury provided training to the communications sections of departments and entities. However, National Treasury could not prescribe for the presentations themselves. To do so would be too prescriptive. Nonetheless, the point was taken.

The Deputy Minister thanked the Committee and indicated that GPAA learned from the best, in particular, SARS. One also took the Committee's views seriously in order to improve.

The Chairperson commended the progress thus far. There was nothing better than having in-house capacity and, in that regard, SARS was a role model, as was now the DHA, in which the public had begun to feel the benefits of the turnaround strategy. People were able to be updated almost on a weekly basis on their applications. This move, of which Parliament had been a part, was commendable. However, it was important to ensure that GPAA matured; he also requested an analysis of its administrative costs. Otherwise GPAA's information could easily be misinterpreted.

The Chairperson adjourned the meeting.

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