The Committee was briefed by the Department of Employment and Labour on the current action plan being implemented to deal with challenges at the Compensation Fund.
The Department stated that Phase 1 of the plan had been implemented from July 2015 to April 2018 in order to stabilise the operations of the Fund and put in place basic fundamentals. Phase 2 was now focused on building on the progress made, and incorporated all the weaknesses identified in the Auditor General’s (AG’s) reports, strategic and operational risk assessment processes and service delivery improvement plans.
The challenges facing the fund were grouped into four main categories. These were financial management, administration issues, service delivery and human resources. The action plan was anchored on four pillars -- financial management and governance; service delivery and performance improvement; anti-corruption and integrity management; and organisational culture renewal and capacity building. To achieve the necessary results, a number of interventions were highlighted. These included improved controls and policies aimed at reducing irregular, fruitless and wasteful expenditure, implementation of a chronic medication dispensing system, and medical personnel being deployed to the provinces to deal with claims and case management.
During discussion, a Member strongly criticised the fact that existing legislation did not make provision for domestic workers to be recognised as employees, even though the courts had found this provision to be unconstitutional. He described this as old apartheid legislation that was being endorsed by the current government, and needed to be corrected. Other issues raised focused on wasteful expenditure, fraud, prosecutions and effective consequence management.
The meeting was attended by Mr Thulas Nxesi, Minister of Employment and Labour, and Ms Boitumelo Moloi, Deputy Minister.
Minister Nxesi made a brief announcement about Cabinet concurring with the extension of the term of Mr Thobile Lamati, the Director General (DG), for another five years. He said he wanted to focus on the financial controls of the action plan, and commented that the critical information technology (IT) issues were being addressed.
Mr Lamati said that Phase 1 of the action plan had been implemented from July 2015 to April 2018 in order to stabilise the operations of the Fund and put in place basic fundamentals. Phase 2 of the action plan was now focused on building on progress made, and to enhance the control environment within the Fund and ensure that it delivers according to its mandate, with a high level of ethics. All projects and activities that were not completed during Phase 1 had been incorporated into this phase, including all the weaknesses identified in the Auditor General’s (AG’s) reports, strategic and operational risk assessment processes and service delivery improvement plans.
The financial management issues that were identified were:
- Poor quality of information used for financial reporting;
- Inability to produce accurate monthly financial statements;
- Inability to carry out some of the financial management functions on the financial system;
- Non-compliance with supply chain management policies and regulations, resulting in a high number of financial misconduct cases;
- A high number of AGSA audit findings that had not been dealt with over a number of years; and
- Inadequate capacity in the Chief Directorate: Financial Management.
The Administration issues identified were:
- Poor communication within the Fund;
- Oversight committees highly involved in operational management of the fund;
- Organised structures for management interaction were in existence but not fully functional;
- Consultants being engaged, with duplicated scope in some cases and no effective skills transfer; and
- An inadequate information communication technology (ICT) environment, thus contributing to poor system deployment and poor record management processes.
The service delivery issues identified were:
- Inadequate ICT infrastructure, resulting in volumes of unpaid medical claims, including legal challenges;
- Infrequent payment of benefits;
- Refusal by medical providers to assist the Fund’s clients;
- The risk of overreliance on the ICT service provider for the claims systems (a licensee of the Fund);
- A lack of integration of the systems of the Fund to allow for seamless reporting and monitoring of performance;
- Medical service providers who destabilised the Fund’s systems for their own advantage;
- Unregulated/undefined involvement of third parties in the claims process;
- Claims data still being in three systems -- eClaims , ICM and uMehluko;
- Limited medical professionals for assessment of medical claims; and
- Inadequate training on the systems of the fund.
The people issues included:
- Low staff morale;
- Unintended consequences of decentralisation;
- Relations between staff and management;
- A breakdown in relationships between organised labour and management due to a lack of trust;
- Silo operations among the different units in the fund and a lack of accountability;
- Poor change management efforts for all transformation projects, including system deployment;
- General unhappiness with salary levels in the organisation, and poor management of personal development plans.
Mr Lamati referred to the achievements of Phase 1 of the action plan, such as 33 200 employers receiving discounts amounting to R211 million in March 2016. There had been a correction of the interest and penalty system functionality, resulting in R2.4 billion of incorrectly calculated interest being corrected, leading to an improved and accurate debtors’ book. Incidents of irregular, fruitless and wasteful expenditure had reduced significantly from 2015/2016 financial year as a result of improved controls and policies. Disclaimers on bank reconciliations had been eliminated.
The AG’s matter of emphasis opinions on reconciling items and unallocated receipts were now being dealt with. The allocation of receipts from employers was done accurately as a result of an improved referencing system/process developed. All payments for benefits had successfully been migrated to SAP, where payment validations were done on the Integrated Customer Database (ICD) to ensure the right creditors were paid. The finance team had been capacitated and a number of skilled professionals employed, which had resulted in improved financial reporting, a reduction in irregular expenditure and a reduction the overall audit findings.
A chronic medication dispensing programme had been implemented. Relations with the stakeholders who participated in the claims value chain had been restored. In order to improve the quality of service to injured workers, the Fund had employed medical personnel in provinces to deal with medical claims and case management functions. Provinces now had medical services, disability management and medical case coordination competencies. The Fund had implemented a new legal case management system that would be able to assist in managing and monitoring litigation as well as the Section 91objection cases.
A fraud prevention policy and strategy had been developed and implemented. A skills audit had been carried out, and had identified a number of skills and competency gaps in the Fund. Interventions had been put in place to address the skills gaps identified. These included a bursary programme in collaboration with the Thuthuka Bursary Scheme and the SA Institute of Chartered Accountants (SAICA) to train medical doctors, nurses, occupational therapists, actuaries and chartered accountants. The Fund had completed a review its functional structure, which had resulted in the restructuring of its core functions. The redesigned organisational structure provides clear accountability and reporting lines for improved service delivery and clear business processes.
Mr Vuyo Mafata, Compensation Fund Commissioner, took over the presentation and said the objectives of the action plan were to improve the systems of internal control within the Compensation Fund (CF), improve the poor service delivery to all stakeholders, address the poor organisational performance, eliminate occurrences of fraud and corruption, and develop the capacity of the Fund to deliver on its mandate.
The action plan was anchored on four pillars -- financial management and governance; service delivery and performance improvement; anti-corruption and integrity management; and organisational culture renewal and capacity building. There were 172 steps in the action plan. A large number of activities were in the first Phase 1 of the action plan, which had been divided into short term and medium term outcomes. The total number of planned action steps was 192, and the number of outputs was 67. The issues addressed were control weaknesses.
Mr Mafata highlighted issues with the CF, such as clever accountants who let clients know that they could be assisted to get a refund from the Fund in exchange for a portion of the refund. This was facilitated by the accountant approaching the CF and claiming that the employer was incorrectly registered. The action plan was to simplify the model and address service delivery and audit issues to prevent accountants from engaging in the above practice.
A few years ago, discussions were entered into with the South African Revenue Service (SARS) for assistance, but ultimately the model needed to be improved. The audit management functions in the Fund needed to be improved, which sometimes resulted from a lack of understanding of the functions by management. A lot of effort had been put into this. There were improved systems for debt collection, part of which included resuscitating the system. Improved accounting and processes for revenue, improved compliance for legislation, improved accounting for claims and pensions and awareness of accounting standards, would be addressed through training and capacity building for officials to improve operations.
In order to achieve the necessary outputs the following action steps would be implemented:
- All directorates in finance would perform a proper reconciliation to determine the completeness and accuracy of reported financial information.
- Improved controls in the management of the general ledger activities.
- Implementation of a revised assessment model.
- Development and presentation to AGSA of a standard operating procedure (SOP) for all processes with electronic records (online services) for easy understanding of the CF’s processes by auditors.
- The policy on unallocated receipts would be reviewed to reduce the waiting period.
- The State Attorney would be approached for exemption and to appoint a legal service provider for debt collection.
- The recovery of advance payments made in 2012 to medical service providers, which was also in the Public Protector’s report, would be finalised.
- Development of business processes to deal with return of earnings (RoEs), including accounting for provisions for assessment that were not raised.
- Developing and implementing a process to engage all related party service providers to address balance differences.
- System enhancement to allow for split payments for pension and CAA on the system.
- Configuring a new claims system that meets the Fund’s non-functional requirements of scalability.
- Introducing periodic verification of information submitted on electronic claims so that paperwork is not necessary and speed up the process of finalising claims.
- Cleaning up the irregular, fruitless and wasteful expenditure which the AG had mentioned before.
- Register and follow up on actionable transactions to raise debt where there was recovery, write-off/condonation where applicable, and apply consequence management.
- Implementation of a bank verification system for the Fund, and finalising the deployment of the role matrix on the claims system.
Mr Mafata said that sometimes the correct claim was processed to the correct person, but the payment went to the wrong person. The DF wanted to develop system reports on the claims system in order to identify motor vehicle accidents and claims from exempt employers. In the event of a motor vehicle accident, the claim had to be adjudicated by the Road Accident Fund (RAF) and the Compensation Fund, but the RAF would have to wait for the CF to finalise the claim, after which the claim could be approved and the CF reimbursed. The current system did not differentiate between the claims. The inefficiencies needed to be investigated in the way some claims were processed, and training needed to be given to staff in relation to claims processes.
The service delivery and performance improvement pillar would address challenges experienced by the Fund, and was divided into three sub sections: customer care, employer services and compensation and medical benefits.
The service delivery pillar would deliver improved access to CF services, improved client-stakeholder relations, and would look at how technology could be adopted to improve the capacity of the CF to ensure that client complaints regarding the operation of the call centre were addressed. This was in relation to clients waiting a long time to receive an answer on their enquiries. The Fund would develop a database of frequently asked questions with responses, and automate the database for the call centre.
One of the things the Fund had realised was done incorrectly was that it was far from the stakeholders who could assist with some of its issues. It would now assign key accounts managers for dealing with employer, employee and medical service provider groups on key accounts.
Mr Mafata said they also intended to develop a client relations management (CRM) tool for the Compensation Fund on the SAP system, so clients would not have to restate their issues, as there would be a record of this. Another issue discovered was developing and implementing the CF Service Excellence Awards programme, to motivate and inspire staff. The Fund needed to develop a knowledge management strategy and policy for CF, as a lot of the knowledge stayed with people when they left, so it was looking at a training manual to automatically insert this into the system.
The CF also needed to conduct business process re-engineering on the query resolution processes of the Fund; to develop and implement the service standards and service charter; procure mobile clinics and buses for increased accessibility of services, particularly for clients in rural areas; roll out kiosks in allocated labour centres, as businesses sometimes did not have internet access; and develop booklets to inform people about services offered by the Compensation Fund.
The Department also needed to improve compliance to legislation, enrich employment data, as a lot of it was manual, and to enhance the capacity of the ICT infrastructure. There was also an electronic filing system for employers. It wanted to develop an integrated and automated system for both claims and revenue management to enable links between claims and assessments. It needed to publish regulations on all instructions for all information to be submitted by employers so they could comply with legislation.
Mr Mafata said the CF needed to pursue a project to implement segregation of duties for employer services functions, and to implement provisions of the memorandum of understanding (MOU) with Inspection and Enforcement Services (IES) with whom it partnered, by submitting cases to IES for inspection and audit. It had performed a data cleansing exercise to improve the accuracy and completeness of the employers’ database. It had also automated the remaining manual employer services processes so they did not need to come to its offices. These had included implementing the CF-Filing Phase 2 project, and finalising the process to appoint payroll auditors. It looked at case management implementation to ensure clients got the correct medical treatment, and how it could implement rehabilitation into the labour market.
There was now a database of pensioners which was maintained, and medical practitioners could also submit claims electronically. There was a pilot project for rehabilitation and reintegration of injured employees. A post-traumatic stress disorder policy was drafted and published for the Fund. One of the things the CF wanted to do was develop a Compensation for Occupational Injuries and Diseases Act (COIDA) training programme for institutions of higher learning, as it had been said that the law was complex and was not understood, so there should be a module that dealt with employment. All gazetted medical tariffs were reviewed and aligned to best practice for procedures, devices and consultations. The Fund had developed a last call “Request for Information” programme to address all claims submitted prior to migration to uMehluko, as clients had complained about processes that were never completed. The first phase was not well-received by clients, but the second phase had been.
The Fund was investigating the possibility of building an electronic database of pensioners and their beneficiaries, so that the beneficiaries could come forward for assistance. It needed to develop an online portal for the training of staff and appointed skilled personnel to manage National Pharmaceutical Product Index (NAPPI) files on the claim system. It had enhanced the system to have an audit trail on invoices edited, segregating the duties of editor and processor so as not to reflect the processors’ information on invoices generated for external stakeholders. Sometimes it did not reflect who made certain changes on the system.
The anti-corruption and integrity management was comprised of activities aimed at addressing control weaknesses in the Fund and behavioural attitudes that led to fraud and corruption. These activities included working with staff to change the ways staff related so that they were not influenced by external parties to participate in fraudulent activities. The CF needed to improve and manage stakeholder relations with financial Institutions and effectively manage any conflict of interest, as the medical practitioners did mostly administrative work for the Fund, and thus could be doing clinical work elsewhere. It had also looked at improved staff morale and ensured everyone was doing the work they were supposed to do. A minimum qualification required was also developed for the different functions of the Compensation fund. It was found that a lot of bursary applications received from staff were in the social sciences, they needed to be for actuarial sciences, and ways had to be figured out to get staff to focus on the gaps. Of the planned activities, 40% had been completed and only 59% were in progress.
The new claims management system (COMPEASY) had been implemented and the following action of the action plan would be delivered:
- Implementation of a data analytics tool on SAP for development of exception reports on claims;
- Development of a data analytics tool to identify exceptions within claims;
- Development of a Compensation Fund switch for clients;
- Implementation of a scanning solution to upload documents; and
- Implementation of a dashboard report generated by the system, to assist with exception reports for the reconciliation or review of discrepancies.
Mr Mafata said the AG had raised a number of issues, including legal proceedings to recover funds. The CF had also done a lot of work on is SCM systems, and policies had been improved to effectively manage contracts and procurement, as recommended in the Public Protector’s report.
Mr Lamati commented that a domestic worker, Maria Masango, who worked for 20 years, had slipped on a step, fallen and died. Her family had enquired from the CF whether they could claim, but the existing legislation did not make provision for this as it did not recognise domestic workers as employees. The matter had been taken to court by a rights institution. The court had found this provision unconstitutional.
The Chairperson asked whether gardeners were classified, and if they were aware of this.
Mr M Bagraim (DA) commented that he was angry about the issue of domestic workers. He described it as dishonest and disingenuous, as the issue had been challenged five years ago already. This was old apartheid legislation that was being endorsed by the current government, and he thought this was wrong.
He referred to phase 1 of the action plan, and commented on the R300 million that was spent on the old system, saying he did not understand why they had not picked up sooner that it was not working. He said phase 2 had many incidences of fraud, and asked how many prosecutions had been made. There was a reluctance to act. There was a lack of communication on pension funds, as sometimes people were not informed of when they were not going to receive a pension.
Mr Lamati responded that it had been deliberate on the Compensation Fund’s part to highlight certain things, as the Committee was new. The issue of an amendment of the code had not been raised with him as he had been on the portfolio for less than five years. The process of developing legislation took a while, as there were a number of stages and processes that needed to be followed.
He said that fraud cases had been referred to SAPS and the National Prosecuting Authority (NPA), and that he had signed a submission this week which was going to the Minister of Police and the Minister of Justice. Due process was followed and cases were taken to court. A number of employees had been dismissed and a number of doctors had been found to have defrauded the Fund.
Mr Mafata said that this was the first month the new system for paying pensioners was being used. There may have been missing details, with the banks preventing the release of payments.
Adv T Mulaudzi (EFF) asked what was being done about consequence management, and what had caused the lack of payment of pension funds.
Mr Lamati referred the question of pension funds not paid to the commissioner.
Mr M Nontsele (ANC) asked about service delivery and procurement and spoke on the point of accessibility and the roll-out of the National Health Insurance (NHI) programmes, and buses going into certain areas to attend to patients. He said patients needed to be provided with medical cards to ensure access.
Mr Lamati said that It was impossible to place a brick and mortar structure in some of these areas, and the buses were equipped with facilities to attend to patients.
Mr Mafata said the buses would be used to check the patients’ general state of health, and not every patient would go through this as a treatment.
Mr S Mdabe (ANC) asked for clarity on the oversight committee and their interference in administrative processes. He asked about consultants that had been procured for the same service. He asked if there were no points of reference put in place for who would take responsibility. He said there was an issue of over-reliance on ICT service providers, and asked what the action plan was to deal with this issue in the fund. Third parties were unregulated and undefined, linking with the issue of possible fraud and collusion between doctors and patients. How had the department put in place mechanisms to detect this?
Mr Lamati responded that there had been consequences to deal with doctors, as one had been sentenced to seven years in prison in 2017 for defrauding the fund, and 35 employees had been placed on precautionary suspension. The audit committee would provide a solution to institutions, instead of recommending a service provider. The issue was about overstepping oversight boundaries.
The Fund could not produce financial statements at some point as it did not have the capacity to do this, as there were employees with social science skills and not financial and actuarial skills. He had removed the CFO and placed him elsewhere, as he had had no faith in his ability as a CFO.
Mr Mafata said that sometimes the system would be flooded with invoices, resulting in the CF taking longer to pay out. There were isolated incidents where COIDA patients were not being treated.
Mr Mafata said some patients went to doctors promising them money, and fraudulently submitted documents by doctors who had not treated them. A power of attorney must be signed by the employer if a third party was submitting documents on their behalf. No user profiles would be given on the system until the information submitted had been verified with the employers.
The meeting was adjourned.
Download as PDF
You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.
See detailed instructions for your browser here.