Action Plan of CF in view of audit outcomes by AGSA; Labour Activation Programme of the UIF: DoL briefing

Meeting report

The Chairperson remarked this was the most important meeting he ever attended as it seeks to actively change the lives of the country’s workers. Quarter Four Performance Report, which was to be considered for adoption today, had already been surpassed by the Budgetary Review and Recommendations Report (BRRR) and the Committee needed to adopt the former in order to become lawful and binding.

Compensation Fund: Action Plan Two - Progress Report as at the end of September 2018
Mr Thobile Lamati, Department of Labour Director-General, gave a short background on where the Compensation Fund has come from and the reason for the Action Plan. In 2015, the Fund presented the first iteration of the Action Plan to the Committee. Shortcomings were identified that were a challenge at the Compensation Fund. The Fund was struggling to pay benefits. Other matters were raised by the Auditor-General. The Fund decided to systematically address those disclaimers by the Auditor-General.

The objectives of the Fund are, amongst others, improve service delivery and fight fraud and corruption to deliver on the Fund’s mandate. It was found the structure of the Fund was not suited to its delivery model. The Fund now comprises three units, Compensation Benefits, Medical Services and Disability and Rehabilitation. The three units enable the Fund to do its work. Since then, there has been much improvement but there is still much to achieve.

Mr Vuyo Mafata, Compensation Fund Commissioner, gave the presentation to the Committee. He spoke to the four pillars of the programme:  financial management and governance, service delivery and performance improvement, anti-corruption and integrity management and organisational culture renewal and capacity building. The outcomes had timeframes targeted for 31 July 2018, 31 July 2019, 31 July 2020, and 31 July 2021. With targeted outcomes, looking at challenges of the Compensation Fund, the Fund is unable to deal with them in 12 months. With critical success factors, the Compensation Fund wants to enhance controls on systems and needs control interventions. With restructuring is the need to recruit sufficiently enabled persons. With change management matters, the Compensation Fund has learnt from previous change management programmes which were unsuccessful. In giving a summary of the Compensation Fund’s progress to date, two activities were completed and finalised by September 2018 while 57 activities have not started yet and are dependent upon others. With financial management and governance, there is an issue across the business to make sure all conduct audits.

Pillar 1: Financial Management and Governance
The Compensation Fund wants to improve debt collection through greater automation. The Fund was unable to collect on the Road Accident Fund. The Fund needs to make recovery. Referring to the accounting process, the way the Compensation Fund assesses revenue is complex and the Fund wants to simplify the process to improve the accounting process for revenue. Trying to deal with estimations requires some adjustments.

Pillar 2: Service Delivery and Performance Improvement
Mr Mafata said the Fund has been improving access and ensuring access to services, since June, with the use of walk-in facilities, which can resolve client problems on the spot and take services to the people. There were other matters related to customer care services. In terms of improving stakeholder relations, the Fund has introduced customer care - this is appropriate for a specific sector of clients. In respect to employer services, a system has been piloted in the past months. This is to reduce bottlenecks around legislation. He referred to the memorandum of understanding (MOU) with the Companies and Intellectual Properties Commission (CIPC) for assisting with an online system which can verify information and reinforce compliance.

Mr Mafata said he can understand customer complaints as documentation is not available and employees are not aware what documents are needed to make a claim. He also referred to fraudulent medical practitioners. With the case management approach, the Fund wants to ensure people get adequate treatment.

In terms of the return to work policy, Mr Mafata indicated the Fund is introducing the COIDA Amendment Bill, which will be brought to Parliament for processing. With reference to short payments, and where medical practitioners were not paid, the Fund has a process for short paid invoices in the past. Dimension Data has been appointed to develop the claims management system. From the pilot, the Fund has systems that can deal with claims from the Fund.

Pillar 3: Anti-Corruption and Integrity Management
Mr Mafata said the Fund is implementing corrective action to deal with conflict of interest (of officials). The Fund has launched the fraud hotline service for use by clients and staff. Senior managers have Key Performance Indicators (KPI’s) dealing with fraud and corruption to ensure the Fund has zero tolerance

Pillar 4: Organisational Culture Renewal and Capacity Building
Accounting training was identified as a skills gap in the skills audit.

Discussion
The Chairperson asked why the action plan goes to 2021 and whether there were no activities which could be run concurrently. He questioned why the assessment is done on a six-month basis and indicated it would be more effective if done on a three-month basis to tie in with the quarterly reports. He asked if all activities have to follow each other on the PERT network.

Mr M Bagraim (DA) asked about the daily queries from the public – each time he goes to the Compensation Fund the problem gets resolved but what happened to members of the public who did not approach the Committee for assistance?

The Chairperson said the system should be functional, not just when buttons are pushed.

Ms F Muthambi (ANC) congratulated the Commissioner and said the action plan is responding to the Auditor-General’s report. She said the presentation does not indicate clear timelines when work will be completed - specific dates are needed to follow up on matters. She referred to where the presentation indicated problems in the programme. The action plan must be clear on when delivery is to occur – without this one would not be able to assess management on the performance management programme.

Ms Muthambi asked why certain matters, namely effective management of the supplier database and improved stakeholder relations with financial institutions, had not started and was if there was an appetite to address these matters. These matters are regulated by the Public Finance Management Act (PFMA) and labour relations. She was concerned about the status of the programme.

The Chairperson found it difficult to see what the status is on an activity showing in progress – could it be that no work has been done on this activity in last three months? He suggested putting activities in bar form and to explain why an activity is delayed by 25%. The progress report must show progress, where there was stagnation and where activities were ahead of schedule.

Mr P Moteka (EFF) said the action plan must be revised. The Compensation Fund has not been doing well in the past four years. Corruption is endemic and the Auditor-General has touched on that but the action plan does not address it. He wanted to see progress made in the next three to six months and if change is really coming.

Mr D America (DA) said things have changed since the appointment of Mr Mafata and the Director-General -matters were much worse four years ago. With the 130 activities, he wanted to know the degree of progress, especially with key activities, and tracking them to completion date. He confirmed this is the best leadership he has seen of the Compensation Fund since joining the Committee.

Ms S Van Schalkwyk (ANC) welcomed the presentation and acknowledged the improvement made since the appointment of the Director-General and his leadership. Much needs to be done in comparison with 2014/15. She agrees with other Members on the need to see timelines, progress and how much is completed. The 1% of completed activities is a cause for concern. She was glad to see there is action taken with funds overpaid. She was concerned about management’s slow progress to deal with consequence management procedures. With respect to affected managers who committed financial misconduct, the Auditor-General reported new cases of financial misconduct – were all the cases mentioned reported in the last financial year? The message is not getting to the public about initiatives the Compensation Fund is taking to the people.  The requirements for pre-authorisation and new policies have been finalised and gazetted but are not necessarily known by service providers. She asked how the Compensation Fund will conscientise employees on the role they need to play as one does not want to see clients disadvantaged. With regard to payroll audit, she enquired about the reason for under spending on vacant, funded posts and whether there was a timeline for filling these posts. The posts were created yet one cannot measure the performance of filling these posts.

The Chairperson enquired who amongst management is concerned about the action plan and its implementation. He also enquired whether the Compensation Fund has dealt with internal audit and whether it is populated with the right personnel. Why did it take more than six months to a year if the Fund was not happy with the internal audit? He found that the outcomes in stage three and four of the anticorruption and integrity management pillar should come much earlier. He was concerned the level of bureaucracy may hinder service delivery.

Mr Lamati responded that the Compensation Fund has identified short, medium and long-term activities to establish what the Fund needs to urgently do in order to ensure it is doing what it is meant to. In all matters related to IT, the Commissioner said he is appointing a service provider. In August 2014 there was a problem with system capability. The RMA system worked well, away from a paperless environment. Now, the Fund is in the process of developing a system. There are a number of matters to be addressed in 12 months but from now until October 2019 the Fund will still use the uMehluko system. Once accepted, the new system will roll out. There is a dependency here so some matters were pushed to a later date. The goal is to improve the control environment - he expected the control environment to improve. In the next financial year, matters may change but this is not to say it cannot be achieved in the short term. He emphasised the life of the action plan.

Mr Lamati stated that internal audit is fully capacitated and keeping management of the Fund on its toes. Internal audit is pointing out areas which management is not doing properly – this was also confirmed by the Auditor-General.  He agreed the report should have timelines and will correct this. With consequence management, one expects personnel will be dismissed however the Fund has to follow due process. Anyone identified with fraud is taken to task with investigations underway. He confirmed that doing a thorough investigation takes a long time, however the Fund is doing its best to finalise cases.

Mr Lamati indicated great improvement in the Fund since presentation of the first action plan. He has taken cognisance of the need for timeframes in the action plan. In regard to Mr Bagraim’s query he commented that people do not want to report to a labour centre about a complaint but write to the Minister, Director-General, or Commissioner i.e. not stand in a queue. These latter queries are then given priority over those on the system. The difficulty is to refer people back to a labour centre. The Fund deals with queries brought to its attention. If processes are not helping, the system should be changed.

Mr Mafata dealt with the issue of completion by 2021 noting he took note of improvements needed. The impact will be seen in the Auditor-General’s report in 2021. Matters require a policy change in terms of activities the Fund wants to see. A minority of activities have timelines closer to 2021. Some activities showing amber, namely progress, have verifications, audits on a quarterly basis and corrective action where required.  To Mr Bagraim he said the Fund wants to engender accessibility, hence kiosk management and talking to people on the ground.

Mr Mafata answered Ms Muthambi’s question about collaboration with financial institutions noting there was a lot of fraud in the Fund, as experienced by other medical aids and financial institutions. He wants to address concerns with those financial institutions, and medical health care SA, and report on that output next time.

Mr Mafata said the Fund is not where it was, having been in that state since the late 1980s. He mentioned the commitment of employees to address matters the Fund faces and to improve its service delivery track record. The action plan shows commitment to anticorruption. Activities will be split per pillar. He has taken note of the concern about timelines. The Fund never lacked the ability to identify and recover. The Executive is now busy with reports. There has been an increase in third party debts and collections. On the question raised about creating access and creating a bureaucracy, he said a lot of documents are required and because of this people complained. With a claim in the system, the Fund needs all the information from the client. People pay an arm and a leg to get documents. The Fund is putting information in libraries and trying to use the media (adverts on radio, SABC education) to give the public the opportunity to call and access the Fund and raise awareness of red tape.

Mr Mafata mentioned that in regard to filling of posts, the Fund has filled nearly 100 posts. The posts will report to Inspection. He wants to give information to the auditors to work on. The Commissioner and senior management take the action plan very seriously and pay it much thought. Each pillar has a responsible official. Each addresses risk, audit and service delivery matters. There is an agenda item on EXCO to give feedback on the action plan. The Fund management is applying zeal now as with the first the action plan, which worked well. On the question of stage three and four of the pillars, he reassured that certain activities will be realised earlier. The Fund will consider those activities that can run in parallel and then stage three and four will realise earlier. In regard to Pillar Three, in stage four, it speaks of an environment free of fraud and corruption. The Fund aspired to realise it more around 2019, making an improvement on timelines. He confirmed those activities with dependencies cannot be done earlier. Those that can be done in parallel will be fast tracked.

A representative of the Compensation Fund responded on the matter of fraud outlining eight cases were finalised, 45 criminal cases were opened with the SA Police Service (SAPS) and two were opened with the Hawks. The Fund is constantly in liaison with SAPS on cases. Of seven cases, five have received court outcomes with imprisonment for 10 years, suspended for five years. The Asset Forfeiture Unit has recovered property of R529 000 for one perpetrator with an amount disclosed for a second perpetrator. All in all, nearly R1 million was recovered.

The Chairperson appreciated the recoveries.

Ms Muthambi agreed with the Director-General in having timelines in the action plan. Outcomes outlined in the presentation, which are due on 31 July, were mentioned in the earlier action plan as being due in May. The Fund has a record of disclaimers and its Annual Report had a disclaimer. This action plan should have assisted to move away from the disclaimer. She questioned whether the action plan is yielding any fruit. There is a need to put targets in the plan. There is no compelling reason that it is not achievable or realistic - she called it malicious compliance. Senior managers have performance contracts – what is the Fund doing to give it effect? As the Fund was not delivering on its targets, the Committee was failing in its oversight role. The Committee needs to get a clear indication of what things need to be done. With the delay in the briefing meeting, the Fund did have time to sort this out.

Mr Moteka touched on what the Mr Lamati had said, namely that internal audit had never been a problem and was always capacitated - if the unit was well oiled, why was the Fund receiving a disclaimer and said to not be performing? The main aim of internal audit, outside of the audit, was to find that matters in order.

The Chairperson raised that reports of internal audit were not being utilised by organs of state, but he did not know if the Fund was one of them. If so, the reports are ignored.

Mr Lamati reiterated that internal audit is working. As far as he was concerned, the Fund should not have received a number of the audit findings it had. These were findings of management not doing what it was supposed to. The Auditor-General was not given the information. Out of 150 findings, 80 should not have been there. He has commanded an investigation into this matter.

Mr Lamati indicated the Commissioner tried to develop the action plan in line with the performance plan, with outputs, and impact. Referring to the presentation, in regard to outcomes by date, he explained this gives the turnaround time for a responsibility, what was done and the action in place.

The Chairperson hoped those findings will inform outcomes in the action plan as the Auditor-General will keep pointing them out. The previous state of the Fund was dysfunctional however improvement can be seen. The Committee expected that the Fund function efficiently.

Department of Labour on the Labour Activation Programme (LAP) of the Unemployment Insurance Fund
Ms Judith Kumbi, Acting UIC, UIF, gave the presentation focusing on the progress of the LAP since the last engagement with the Committee. The presentation addressed the Labour Activation Diagnosis results, work done to close gaps identified, the LAP 2018/19 first quarter performance (such as on the progress in the training of the unemployed), the LAP Action Plan status of completion and progress on the Labour Activation Programmes (towards the training of the unemployed). The presentation also covered strategies for the Turnaround Solutions process, progress on the turnaround solutions and performance indicators (particularly in relation to Productivity SA), financial projections, progress with Productivity SA (number of jobs saved), progress on engagement between Productivity SA and the UIF, current Turnaround Solutions projects, progress on the Training Lay-Off Scheme (TLS), training of the unemployed, (current projects), monitoring of projects by the Monitoring and Evaluation Unit and the action plan/intervention.

Labour Activation Diagnosis Results
In relation to the work done to close the gaps identified, Ms Kumbi mentioned detail is in the Action Plan.

LAP 2018/19 Quarter 1 Performance
Ms Kumbi said in the last meeting, the Fund had reported on the LAP performance standards while today’s briefing is on work on the programme, focusing on quarter one.

Ms Kumbi mentioned the indicator was not achieved related to training of the unemployed.

Labour Activation Programme Action Plan
Ms Kumbi noted each unit has an Action Plan, which is combined to give the status. She indicated that the slide relating to training of the unemployed should give the Committee confidence about the work done.

Ms Kumbi explained that the turnaround solutions (TAS) process would start in January. The Fund is busy with the Department of Higher Education and Training (DHET) and State Owned Enterprises (SOEs).   On the matter of the learner management system, the Fund invested in looking at a system.

Turnaround Solutions (TAS)
Referring to the presentation, Ms Kumbi stated that in the slide relating to TAS, the progress is based on LAP and Productivity SA.  The slide on 2018/19 key performance indicators related to Productivity SA indicators - the Fund is awaiting funds from Productivity SA.  Financial projections have been presented to the Board and required finance, management and the CFO of Productivity SA to get agreement on the costing. With one of the presentation slides on TAS, the progress in relation to Productivity SA showed the number of jobs saved. She gave progress on the engagement of Productivity SA and the Fund. At the latest meeting, the boards of Productivity SA and the Fund tried to address challenges faced by Productivity SA. They agreed in principle what the business case was trying to achieve. Productivity SA is still to pick up challenges faced with the audit. Referring to the presentation, she mentioned that progress on the LAP 2018/19 Annual Performance Plan for quarter one concerns Productivity SA and the Fund.

Monitored Projects by the Monitoring and Evaluation Unit
Ms Kumbi said Productivity SA would fund a company but there is no follow-up to monitor progress of implementation. A matter in the new business plan is to monitor the progress of implementation of funding from Productivity SA. She emphasised the need to monitor implementation of funding from Productivity SA.
Monitoring of matters in relation to learners raised concerns. There was no escalation of those concerns. Monitoring by LAP officials is to be done. The LAP programme must also visit companies to pick up issues of learners. The learner’s stipend is not enough to cover incidental cost. The UIF has engaged actuaries to look at increasing the stipend. Once the Fund has gone through the governance structures the stipend is to be revised.


Discussion
Ms Muthambi was concerned the presentation indicates eight TLS applications received, three applications approved and five turned back for more information, whereas later in the presentation this does not tally - it indicated two approved and six to be considered on 24 October 2018. She raised that the training of the unemployed is only reflected in five provinces and excludes Limpopo, Mpumalanga, North West and the Northern Cape but unemployment affects the whole country.

Mr Moteka asked how the recruitment of unemployed learners is done in order to reach everyone in the country.

Mr L Khorai (ANC) asked for clarity on the Labour Activation Programme’s Action Plan, as most activities had not yet started.

Ms L Theko (ANC) said the Director-General should consider a review of the labour centres to ensure they can be accessed by everyone. The areas which benefitted previously are still benefitting and Black people do not have access. In this regard she mentioned the challenge of transport. She also mentioned that on engagement of the UIF with Productivity SA, on the last report, the board was apparently meeting and the Committee would be updated today. How learners are assisted shows improvement.  She also remarked on a comment of the Director-General about the rollout of labour centres stating the labour centres’ total rollout of 32 should cover everybody.

Mr Bagraim said small businesses do not register on the UIF. There are long queues at the Fund when one makes a claim – the labour centres must be more efficient. He wanted to see the programmes in the DOL getting as many businesses under their umbrella as possible.

Ms Van Schalkwyk mentioned the new labour centres to be rolled out and the need for labour centres. She emphasised the place of the control environment to ensure good governance.

The Chairperson indicated, in regard to the labour centres, that the Committee Secretary should have communicated what the Committee wanted in the report. He would like to see offices of the DOL appropriately positioned to provide access to all who need it. He emphasised that as much as Members can assist people to get services from the Department, one should not undermine systems of the DOL. In the worst cases Members can intervene but then the DOL has to put other matters aside to deal with matters raised by the Members.

Mr Lamati responded that in relation to the long queues at labour centres, the Department was concerned by this however the length of time has improved for maternity benefits from 15 weeks to five weeks and for benefits the time has also decreased. He mentioned the problem of downtime and running out of WIFI. The Department is rolling out a queue management system to improve queues, trying its best to automate the process and leverage the system so that people do not come back to the Department to establish the status of claims.

Mr Mafata said that in relation to the number of small businesses not registered with the UIF, in reality the Department will not have enough inspectors and so relies on the public to be good corporate citizens. When found out, the employers cry foul that they are spending time on labour matters. He confirmed the Department will move labour centres to locations which carry more volumes, based on information the Department has.

Mr Mafata indicated on the UIF Productivity SA agreement, the Department was dealing with it for some time. As indicated, there was agreement between the UIF Commissioner and the Chief Information Officer for Productivity SA and the Board has agreed to the business plan. He elaborated that Productivity SA must comply with the laws and fully account for each cent. Each company it has dealings with must exist. He stressed the importance of turnaround solutions. When the Department does not get favourable outcomes with the audit, his head is on the block. Governance is to be observed.

Ms Mpumi Mnconywa, Chief Director, UIF, mentioned in relation to the provinces covered in the training of the unemployed, the Department advertises the request for proposals in the national press, namely the City Press and Sunday Times, to attract people to apply. Of active projects, those already completed are worth R1.8 million in TVET employment in construction.  In Limpopo, three are completed including Capricorn TVET and two others, one being Sekhukhune. There was also completion at a Northern Cape college. The Department invited proposals in October 2018 but failed to attract North West applications.  The Director-General said the Department must work ahead with Taletso TVET College in the North West. A number of projects are in the pipeline. The Free State had a high number of learners as this was indicative of response to applications. She also explained the other provinces not reflected in the presentation have completed the training.

The Chairperson asked why women are not applying. There should be a deliberate action to show that all provinces are included in the presentation. There must be equitable distribution and a deliberate action to speed up access. South Africa is in gear to correct the wrongs of Apartheid and this requires a forceful intervention or Apartheid’s effects will be perpetuated in full force. He requested a report on progress against targets.

Draft Quarter Four Performance Report of the Department of Labour
The Chairperson proposed the Committee speak to the Report’s observations and recommendations unless there were corrections in the other parts of the report.

Ms Van Schalkwyk moved to adopt the Report without amendment. Ms Theko seconded the motion.

The Draft Quarter Four Performance Report of the Department of Labour was adopted without amendment.

Draft Committee Minutes, dated 17 October 2018
The Committee went through the minutes page by page.

Amendments were proposed.

Ms Theko moved for adoption of the draft Committee minutes dated 17 October 2018 with amendments. The motion was seconded by Mr America.

Draft Committee Minutes, dated 17 October 2018 were adopted with amendments.

The meeting was adjourned.