Compensation Fund turnaround strategy

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Employment and Labour

24 August 2016
Chairperson: Ms L Yengeni (ANC)
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Meeting Summary

The new Compensation Fund Commissioner noted that improvements had been made by the Compensation Fund in processing claims but the Fund was still not out of its troubled status. Prior to his appointment, the Fund had been in a chaotic financial state for many years, receiving repeated adverse opinions from the Auditor-General. Claims by injured workers, hospitals and doctors had taken a long time to pay out, which resulted in litigation. The Commissioner described the initiatives which had been introduced to strengthen the Fund’s administration. The action plan was launched in July 2015. The results of the action plan and various initiatives and projects are already being felt as can be seen in the improvements. The internal controls had improved and a total of R211 million due as far back as 2012 had been credited back to employer accounts. The Fund paid out R3.9bn in medical compensation and pension payments in 2015/16 compared with R2bn the previous year. The capacity of the financial management unit had been strengthened. The Compensation Fund has introduced a new IT system which would enable it to process claims on time and checks have been put in place to detect dubious and invalid claims.

These improvements were corroborated by the Director General of the Department of Labour, who stated there had been improvements in dealing with claims since their processing had been automated. The Fund was also responding more quickly to complaints received. However, the Auditor-General still had issues with the Fund such as the way it accounted for revenue and the capacity in its finance department.

The interaction between the Committee and the Department gave rise to questions about the claim backlogs, handling of documents, the workability of the new IT system, invalid and dubious claims, and human capacity. Questions were also asked about the bill which was to provide cover for domestic workers so they could also access the Compensation Fund.

Meeting report

Opening remarks by Director General of Department of Labour
Mr Thobile Lamati, Director General, stated it was common knowledge that for some time the Compensation Fund had not been doing well and efforts were put in place after the appointment of the new Commissioner to tackle some of these problems. This led to the development of the action plan which was launched in July last year. The role of the Fund is to pay compensation to workers who have been injured in the course of duty and also the medical practitioners who treat such workers. For some time, this had not been possible. When he became the DG, an assessment was done and one of the decisions that was taken was to remove the entire top management of the Compensation Fund and replace them with people who were deemed more competent. Another thing that was changed was the full automation of claims. In the process a lot of arguments were encountered with third party companies although this had been sorted out. There has also been a lot of improvement in the relationship with service providers and an improvement in the amount of time taken to process claims. The Compensation Fund had improved a lot from the various interventions in the action plan. All the matters raised by the Auditor-General were being looked into to ensure improved service delivery performance of the Fund.

Compensation Fund Commissioner presentation
Mr Vuyo Mafata, the Compensation Fund Commissioner, who joined the Commission in June 2015 after a successful three-year stint as CFO at the Unemployment Insurance Fund, and who was appointed as Commissioner in March 2016, gave the presentation. The action plan of the Fund was developed around four areas which are: financial administration, customer focus and service delivery improvement, people management and internal business process administration. A total of 39 initiatives were developed under the action plan for the Compensation Fund: 14 were related to financial management, 7 on customer focus and service delivery improvement, 10 on internal business process and 8 on people management. These were further broken down into 109 planned activities. There has been a completion of 59% of these planned activities while 41% of them are still in progress.

In financial administration, the projects/initiatives that have been finalised are the implementation of the employer discount, approval of financial policies, finalising the merit rebates, improving the bulk payment process on the online claims management system, uMehluko, and building capacity within the financial management unit. This represents a 41% completion of the planned activities while 59% of the activities are still in progress. All the projects in progress are ICT based projects.

Talking about customer service delivery improvement and focus, projects planned include participation in the Department of Health contract for the supply of chronic medication, engagement with hospitals, health associations and key stakeholders to improve relations, develop and implement the Return to Work programme, development of the rehabilitation and reintegration of injured employees, the establishment of a panel of experts for post-traumatic stress disorder and the restructuring of the query resolution process to improve the turnaround time for customer queries and complaints. The last two projects/initiatives have been completed. A further breakdown showed that 45% of planned projects under customer focus and service delivery improvement have been completed while 55% are still in progress.

On internal business process and administration, projects initiated include the restructuring of employer registration and compliance functions to align core business, eradicating claims backlogs, improving functional knowledge of team through multi skilling, allocating project team to process open items from the SAP system, filling of medical posts at provincial offices, improving hospital case management to introduce efficiency, implementing the CCMA case management system for hearings and objections, implementing fraud prevention and detection measures, and developing and implementing a business continuity programme. 47% of these have been completed while 53% of these activities are still in progress.

On people management, projects included improving staff morale, implementing change management on current projects, the development of a change management framework for the Fund, adherence and implementation of performance management policies, enhancing training and development, improving internal and external communication , assessing the impact of decentralisation on staff and embarking on projects for the review of organisational structure. 74% of the activities have been completed with just 26% of the activities in progress.

There has been progress with the Compensation Fund and a turnaround with the action plan. Internal controls improved with the introduction of 20 new policies to address a number of areas that had been the cause of noncompliance with the Public Finance Management Act (PFMA) and its regulations. All the infrastructure solutions recommended by an independent assessor for the effective implementation of uMehluko were implemented by the end of December 2015 and payments have since improved. A total of R211 million has been credited back to employer accounts in discount that had been due since 2012. A system enhancement process to correct the interest and penalties since 2011 has been completed and the users are signing off. The configuration/development which commenced in March 2016 is due for completion in September 2016.

A revised assessment model for the Fund has been submitted for a socio economic impact study and for consultations at NEDLAC. This will commence in September 2016. Capacity in the Financial Management Unit has been increased with the appointment of key personnel in Financial Reporting, Revenue Management and Internal Control. There are on-going interactions with key medical service providers and industry bodies that represent the Compensation Fund clients to address concerns and bottlenecks. This has yielded positive results in the operations of the Fund.

There are also various enhancements of the uMehluko system that have assisted with the faster processing of claims and more enhancements are planned and on-going. The development of a programme for the dispensing of chronic medication to Compensation for Occupational Injuries and Diseases (COIDA) clients has been completed and will be implemented from September 2016. COIDA patients will have chronic medication delivered at home and in some cases within close proximity of their residential areas. A Panel to deal with Post Traumatic Stress Disorder claims has been appointed and has already commenced with the work on backlog claims. The Fund has absorbed the 90 interns appointed during 2015 as part of the measures to improve the rate at which the benefits are processed and paid. This has resulted in the elimination of backlogs on uMehluko. Claims received prior to 2014 are now being worked on.

A new functional structure which focuses the business of the Compensation Fund into three functional units (Compensation Benefits, Registrations & Pensions, Medical Services as well as Orthotic, Prosthetic and Rehabilitation Services) has been developed and is undergoing approval processes before implementation. The skills audit and change management projects have been completed and the Fund is in the process of implementing the recommendations made while human resources intervention to deal with the unintended consequences of the decentralisation process have been implemented to improve the organisational climate and improve work ethic.

In 2015/16, the Fund witnessed a significant progress with regards to the processing of forms when compared to 2014/15. R2 800 022 044 was paid out in medical payments compared to R1 266 821 980 paid in 2014/15. Compensation benefits paid stood at R137 843 156 compared to R103 056 177 paid in the previous year and pension claims paid was R968 534 369 as against R671 753 911 paid in 2014/15

Mr M Bagraim (DA) appreciated Mr Mafata and the Director Gneral for a job well done so far with the Compensation Fund. He pointed out that he had been in communication with Mr Mafata and applauded him for the timely responses to issues he raised with him. He talked about the new computer system which was introduced over four months ago and was of the view the system had been a complete failure. He further stated the system was not reflecting the hard work being put into it and perhaps proper training is needed for it or perhaps a claim should be made against the people who sold the system to the Department. He stated that there was over a 20-year backlog but exonerated the DG and Mr Mafata because they “were the new boys on the block”. He was of the opinion the private sector could help offset these backlogs even if it meant having a short term contract with them. He also spoke about the interview he saw where the Minister of Labour stated he would like to add more responsibilities to the job function of the Director General. He asked for the view of the DG on this and how he intended to cope with this. Moving to training, Mr Bagraim stated there was a need for financial, computer and budget training. Another issue he raised was that of invalid claims. He stated there was no gate keeping on the Compensation Fund and people were trying to rip off the Compensation Fund by pretending to have injuries at the workplace. He suggested that the law needs to be looked into in this regard. He also stated that post traumatic stress was the easiest to lay claim to, and in his opinion a lot of people are jumping on this to lay claims.

The Chairperson responded shortly to the question about the interview granted by the Minister. She asked Mr Bagraim to ask that question directly to the Minister of Labour and directed that the question be removed from the records of proceedings of the Committee sitting for the day.

Ms F Loliwe (ANC) was of the opinion that the backlog was worrying and the earlier that claims are paid, the better. Responding to the statement that 90 interns are employed by the Compensation Fund, she said that in the previous presentation, the Department stated they had over 110 interns. What had happened to the other 20? The presentation showed that medical payments are high; she asked if this was a result of the inspectors not doing their work in ensuring compliance. She also asked about the rate of using consultants.

Mr I Ollis (DA) noted two massive problems in the Fund. One was the lack of skills which had been pointed out. Previous Commissioners and DGs appearing before the Committee had always lied about the availability of skilled people for the job. It was discovered the Fund had only 30% of skilled persons available for the job. The second problem was the document handling ability of the Fund. He asked what process was being put in place at local and regional offices to capture data. He stated that in every local office he had visited, there was always a corner where papers were stacked and these documents go missing because they had to be transported to the nearest Provincial Office for capturing. Until there is a system put in place to capture claims on site then the challenge of claim documents going missing will remain. He particularly mentioned the Eastern Cape offices. On service providers, he asked what had been done to resolve the backlogs for doctors. He referred to the court cases where judgements were obtained against the Fund and asked what the current status of these judgements is. He also talked about his Private Member Bill which was introduced in 2011 to cater for domestic workers but was rejected by Parliament. He asked for an update on legislation which will cover domestic workers who are not covered by the Compensation Fund.

Mr D America (DA) talked about segmentation of the business into various business units and stated it was exciting because it would lead to a lot of efficiency. However, he wondered how the available skills supported the proposed segmentation? He also asked how the segmentation aligned with the Annual Performance Plan and key performance indicators.

The Director General, Mr Thobile Lamati, responded to the comments made by Mr Bagraim, appreciating his noticing the efforts that had been put in place to ensure the Fund worked better. Responding about the IT system put in place, he stated that the agreement made was for a pilot project to be developed and tested in the compensation environment. This involved scaling up to ensure the system worked. One of the things which posed a problem was the financial module which was not available. This made the Compensation Fund work manually in this regard. He dispelled the myth that the system was a complete failure. He agreed the system may have had its own downtime but it had actually helped a lot with many of improvements recorded in the rate of processing and payments to an extent that the Fund can pay claims worth about R30 million per week. In the change management, he had stated that not much was done there earlier and this was what prompted the introduction of change management in the action plan. He was also very confident the 20-year backlog would be eradicated. Talking about training, he stated that the Fund had a budget for this and certain people had been moved to places and areas where their skills were actually needed. On fraudulent claims, he stated this was a legal issue and there were systems in place to check for this. On the slow pace of processing claims, he was referring to the past and stated that the issues raised by Mr Ollis were issues which were being looked into and with the use of technology, this will be corrected. On the high medical claims being paid, he stated that at some a point there was a disconnect between the Fund and the inspection managers but this had been addressed. He hoped that the incidence would go down which would mean a decrease in the claims being paid. On consultants, he stated that the Compensation Fund tries as much as possible not to use consultants. Talking about the 30% skilled workforce available, he stated there were a lot of people removed because they did not have the requisite skills and qualifications needed to occupy the office they occupied. On the coverage of domestic workers, he told the Committee this had been included in the new amendment bill. Private homes have been classified as work places hence domestic workers will be covered in this new bill.

Mr Mafata in his own response on claims stated that a panel with requisite expertise has been appointed to look at medical reports which will help the Fund to make an informed decision about the claimants. The measures put in place will help in dealing with the validity of claims. This also covers people seeking to be declared as fully disabled so they can get life pensions without working. With regards to the 90 interns, most of the interns are given a one-year contract and a lot of them apply for jobs within this period and become employed outside of the Fund. On consultants, he stated this has been reduced and it is limited to specialised areas such as forensic audits, technological audits and some of the more complex investigations which involve fraudulent claims and efforts are being made to build capacity and reduce the dependence on consultants. About documents at local branches, this was one of the reasons the new system was introduced. Most of the papers lying around in these local offices are claims that had been submitted manually in the past. Another reason some of these documents cannot be submitted electronically is they are invoices and a scanning functionality is being proposed to address this which hopefully would begin before the end of the current financial year. Training is also being put in place at these local offices to ensure workers there are trained. Regarding the court cases, most of the court cases in the past were those involving service providers claiming payments but these had reduced significantly. Most cases now are those about claim adjudications. On the bill covering domestic workers, it was awaiting certification before being sent to Cabinet for approval to start the public participation process. Speaking about the benefits of the new system, he stated this has made it possible to speedily process claims. Everything now happens electronically with good controls making the possibility of fraud very low.

Mr Bagraim wanted a comment on the Ability system. He asked when the bill covering domestic workers will be ready because domestic workers cannot make claims. He noted this was an apartheid problem and over 70 000 people were not paid.

Mr Ollis asked if the revised assessment model would require changes to the existing legislation.

The DG responded that what the Fund did was to discontinue the financial module that dealt with claims payment and adopted the Ability system. The system also has its drawbacks so it would revert to using the SAP system which could deal with mass payments and isolate those instances where there were problems with a claimant's bank account details. The Ability system could not do this and slowed the processing of payments down.

The bill is currently waiting certification from the state law adviser and this will lead to public consultation before it is sent to Parliament. The revised assessment model would not need any changes to the existing legislation. He stated that the 70 000 claims not dealt with is worrying but it is one of the legacies of the past that needs to be addressed. Advertisements were placed in the media in June 2016 providing the public with telephone numbers to reach the Fund and an email address through which they could send queries and have their matters addressed by the Compensation Fund. Just under a thousand queries were received and half of these had already been processed. He still hopes people can come forward and have their matter addressed. He also stated the dilemma with the 70 000 claims is that it would be impossible to know if the Compensation Fund would have to take on liability for those claims since most of those claims still had to go through adjudication. It is possible the Fund might not be responsible for half of them and there was also the possibility of a duplication of claims. When the claims are put through the system then all duplicate claims will be detected.

Mr T Rawula (EFF) asked how long these claims had existed and if the new claims would be affected by these. He asked if there was a system in place to distinguish between the old and new claims.

Mr Mafata replied that they were very distinct claims as the Fund had put in place various funds to deal with the old and new claims differently.

The Chairperson in her closing remarks told the DG that the Committee was monitoring the action plan and the Committee was happy with how far they had gone. Things were better than before.

The meeting with the Department was adjourned.

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