The Standing Committee on Public Accounts (SCOPA) was briefed by the Unemployment Insurance Fund on the COVID-19 relief operations for businesses and employees affected by the national lockdown regulations. The UIF COVID-19 Temporary Employer-Employee Relief Scheme (TERS) had received 456 698 valid applications, covering a potential number of 4 447 722 employees. As a result, the UIF had disbursed over R27 billion. It had received 462 248 applications in total of which 456 698 had been valid.
The Committee was told that the UIF Risk, Anti-Corruption and Integrity Management Unit had received 75 reported cases of potential fraudulent claims made by employers under the TERS scheme – 16 of the 75 cases had been finalised by 19 July 2020, with two resulting in criminal cases. Cases of concern to the Committee included suspected fraud where R700 000 had been paid into the incorrect bank account; a R4.7 million payment into an incorrect bank account where the UIF had recovered R4.6 million; and a R5.7 million payment into an incorrect bank account where the UIF had been working with the Hawks and an imminent arrest was expected. Challenges of the TERS payment processes also identified there were instances where employers received funds from the UIF but these funds did not reach the employees or there had been over-claims that did not match staff complement or time period.
The UIF had implemented a strategy termed Follow the Money to monitor compliance of employers benefitting from the COVID-19 TERS scheme. This strategy had issued a tender for a panel of chartered accountant/auditor service providers to do this. The tender had been amended to allow for international accredited auditing firms without the South African Institute of Chartered Accountants (SAICA) accreditation to apply as well and 31 companies had thus far been assessed.
Committee members voiced concern about the seeming lack of severity of consequence management in response to attempts at defrauding the UIF. They also voiced frustration that the TERS scheme had not been implemented paying the employees directly to avoid these challenges or by providing employees with the ability to track money paid out to employers and owed to employees within the UIF system.
The UIF noted that it had shifted from its usual mandate of paying out money to employees after they lost their jobs. This mandate was increased as a result of the response to COVID-19 and the national lockdown, enabling as many businesses as possible to continue paying their workers. The employers were paid as the lockdown affected 5.7 million employees at once and the lockdown prevented them from applying. Various bargaining councils had assisted the Department in extending its reach to employees that had previously not been registered for UIF by their employers.
Due to the problem of employers using the COVID-19 TERS initiative but not paying out their employees, the UIF had moved to passing the funds directly to some employees. R695 184 081 had now been paid directly to employees. The Committee was told that 35 374 domestic workers had been paid R128 904 782, while 114 059 foreign nationals had been paid R534 530 553 after verification by the Department of Home Affairs and the South African Revenue Service (SARS).
Members identified shortcomings in the UIF information technology (IT) systems that had preceded COVID-19 that left it vulnerable to fraud and needed to be addressed. The UIF had been subjected to fraudulent claims by employees and employers looking to take advantage of the COVID-19 TERS benefits scheme. Members requested the UIF swiftly formulate a migration plan to an updated system to increase security and urged the UIF to improve communication to employees. Members requested detailed reports on 16 cases of erroneous TERS scheme payments, in particular, the Hawks’ investigation into R5.7 million case. Consequence management needed to be swift and severe.
The Committee was also briefed on the Auditor-General South Africa (AGSA) special audit for the UIF COVID-19 extraordinary operations. The initial outcomes of the audit were expected in August 2020. AGSA would test the implementation of preventative controls, identify high-risk audit items, tabling a special audit report in Parliament which would outline consequence management measures. SCOPA would be guided by the findings of the special audit to avoid duplication of scarce resources.
The Chairperson noted apologies from the Minister but welcomed the Deputy Minister, Director-General and the UIF team. The Committee had been following UIF matters, including the 2018/19 qualified audit opinion. This would be interrogated.
Deputy Minister opening remarks
Deputy Minister of Labour and Employment, Ms Boitumelo Moloi, acknowledged the UIF team, led by the Department Director-General, Thobile Lamati. She thanked the Committee for this rare opportunity as it was her first time before SCOPA – which had always sounded like a scary exercise. She apologised for the Minister who was temporarily indisposed.
In summary to date, the UIF had distributed R24 billion in COVID-19 tax benefits, covering 330 000 employers and benefitting a number of employees in an unprecedented manner. There had been challenges and delays, particularly at the beginning when developing appropriate policies and directions and repurposing the UIF for its new mandate.
Three months into the state of national disaster, there had been a massive and targeted response from the UIF to support laid off workers. This included those who had not been registered for UIF and those who were not necessarily laid off. This would not happen with any other insurance company – paying out to non-contributing beneficiaries was what the crisis had required of the UIF.
There had been a rapid policy response and directions to guide the UIF and beneficiaries to access benefits. This had been developed through the National Economic Development and Labour Council (NEDLAC) in consultation with Cabinet and other stakeholders.
Initially the scheme had involved employers applying on behalf of employees laid off. This had however been followed by complaints from employees, requiring amendments. There had also been top up amendments. There had been a clear and expanded definition of the term 'worker', with new policies and directions. There had been a tenfold increase in payments of benefits. There had been engagements with business and labour for bulk disbursement of benefits. Due to these payments being on a massive scale, there had been a learning curve from the UIF’s side, with delays for the repurposing process lasting into May 2020. There had also been many instances where employers had received funds from the UIF but had failed to pay their employees, necessitating changes to make direct payments to employees.
The UIF was not a money tree with unlimited resources. As the fund had been repurposed to deliver to laid off workers, financial control for liquidity and long term sustainability of the Fund had been implemented. The UIF did not have to start paying out benefits before the controls were in place. It had been flagged that from the start the UIF was aware of risks of fraud, particularly given COVID-19 and the large sums involved. A strategy was developed and implemented to 'follow the money'. The UIF had budgeted for a complete audit to account for all money paid out. This had been made clear to employers in the NEDLAC engagement. The UIF would support employers and employees; when the COVID-19 crisis was over, the employers would be fully audited. Controls had been put in place such as: the use of reference and ID numbers to prevent duplications; the verification of bank details; password protections; and verification of applicants against the SARS database. The UIF had also employed an independent contractor to conduct data analytics to investigate fraud.
The UIF internal audit had picked up 75 suspicious transactions. Some recent cases had featured in the media. Deputy Minister Moloi assured the Committee that fraud would not go undetected. There was no room for complacency. In light of the breaches, further controls had been implemented such as passwords, tracing of IP addresses, weekly meetings with the Hawks, and discussions with banks to discuss early warning systems. Control measures were constantly strengthened.
Special COVID-19 TERS benefits had been implemented for three months. These had been extended to cover domestic workers and foreign nationals, as well as giving a break to unregistered employers. The opportunity had been given to register and pay past debts. The UIF had received support from SARS in conducting prompt verification of applications. The Department of Home Affairs had also assisted in validating the IDs of foreign nationals. Harambe Youth Employment Accelerator call centres were used to manage support communications. This period had shown that public-private partnerships could work very well in the role to improve and support service delivery.
The Chairperson thanked Deputy Minister Moloi. The Committee had now heard about the controls in place. However, the taste of the pudding was in the eating. This was why the Committee was there. He assured Deputy Minister Moloi there was no reason to be scared. SCOPA was just ordinary people doing their work. He welcomed her to her first SCOPA meeting.
Deputy Minister Moloi requested that Mr Lamati provide an introduction to the Committee before giving over to the UIF Commissioner.
The Chairperson said the meeting would move straight to UIF Commissioner’s presentation on the substantive matters as the Committee knew the lockdown background. Mr Lamati would be available for questions after the presentation.
UIF Disbursement of Funds During COVID-19 Lockdown
UIF Commissioner, Mr Teboho Maruping, introduced the UIF delegation and began the presentation.
Directives for COVID-19 TERS Benefit and Progress
The Directives spoke to the journey touched on by the Deputy Minister. These encompassed Directives 1 to 6 that had been progressively implemented between 26 March 2020 and 25 May 2020. Since opening towards the end of March 2020 for COVID-19 benefits, there had been 462 248 applications from employers, covering 5.7 million employees. There had been invalid applications for the COVID-19 TERS, where employees had not been found in the Siyaya database. The April and May 2020 applications and payments made were outlined.
The UIF was also paying directly to employees, amounting to R695 184 081. Domestics workers had been paid R128 904 782. Foreign nationals had been paid R534 530 553. The UIF processed all applications it received. This included foreign nationals who were contributors to the UIF. This was verified through Home Affairs and SARS comparative databases.
Payment of Ordinary Unemployment Insurance Benefits
Close to R4 billion in normal UIF claims had been paid. The UIF was still responsible for ensuring that its normal UIF claims were received, processed and paid out to beneficiaries.
COVID-19 TERS Controls Implemented
To combat fraud, the UIF reference number could only be used once. If the number was repeatedly used, the claim was declined and the anomaly identified and corrected. Employee ID numbers could only be paid once. If the number was repeated, the claim was declined and could easily be identified and corrected. Employee declarations were checked against the UIF and SARS databases to confirm that only employees attached to the employer in question were considered. Employee identification was checked against the normal Siyaya payment to identify if the employee's services had been terminated. The UIF paid only employees that were still in employment. Banking details were verified at the time of registration and changes could only be made by dedicated staff members. Passwords were reset by dedicated staff.
Follow the Money Approach
The UIF had the right to audit companies applying for the TERS scheme. This was coordinated under the Follow the Money Approach.
COVID-19 TERS Fraud Report
The UIF Risk, Anti-Corruption and Integrity Management Unit had received 75 reported cases. 16 cases had been finalised by 19 June 2020. Two criminal cases had been instituted by complainants.
COVID-19 TERS Cases Trends
The trends identified overpayments of the period of lockdown. These had been picked during the Follow the Money approach. Employees or analysts would pick up the suspected fraud where the employer had used an incorrect UIF reference number, the employer had been withholding or underpaying employees, incorrect banking details had been provided, there had been non-compliance of employers to the UIF Acts, there had been overpayment of benefits, or there had been suspected fraudulent claims.
COVID-19 TERS Fraud Report
A suspected R700 000 had been paid into an incorrect bank account. The matter was under investigation. A suspected R4.7 million had been paid into an incorrect bank account. The UIF had managed to recover R 4.6 million with banks’ assistance. The matter remained under investigation. A suspected R5.7 million had been paid into an incorrect bank account. A criminal case had been opened by the employer and the UIF was working with the Hawks on the matter. An arrest was imminent.
Role of Internal Audit During COVID-19
The UIF Internal Audit helped the UIF to close gaps. The Internal Audit was actively involved. It had the responsibility to provide assurance and consulting activities on the effectiveness of the risk management controls and governance processes.
AGSA Interim Audit Focus
AGSA was auditing all COVID-19 related account balances. It would provide assistance through the performance of an interim audit as part of the current annual audit on transactions which would be included in the financial statements and the controls to prevent fraud, misuse, non-compliance or misstatement.
The UIF would honour June 2020 payments. The tender advert had been issued and was closing at the end of June 2020 on the panel of providers to Follow the Money. The probity service provider had started data analytics on the April 2020 payments in preparation for the final panel of providers. The UIF would continue attending meetings with the Hawks on COVID-19 reported fraud cases. It would report further fraud cases to the Hawks. The UIF would continue to support AGSA and the Internal Audit in their audit processes.
The Chairperson said the presentation should not gloss over important or substantive matters such as changes to the tender. Mr Maruping should take the time to unpack such matters.
Mr Maruping explained the tender was for Follow the Money. It had been advertised two weeks ago. On 19 June, the UIF had held a briefing for potential applicants. SAICA registration had been set as a requirement. This had excluded people who may have registered with the Institute of Internal Auditors. This had led to a review and removal of the SAICA requirements.
A probity service provider had been appointed to ensure quality assurance on all tenders issued. They were walking through all tenders to ensure no supply chain processes were compromised. Quality assurance would be conducted in the form of data analysis of payments, picking up potential irregularities. The UIF had established a relationship with the Hawks. This enabled the UIF to report cases as and when they were picked up. The UIF had weekly Wednesday meetings with the Hawks where cases were reported. Any UIF TERS fraudulent activities received high priority. Arrests had already been made. The UIF continued to support AGSA as this worked in the UIF's favour.
Probity Review for COVID-19 TERS Process
The UIF had partnered with a probity service provider to conduct a probity review on the whole process. This was data driven. This helped determine the scope for the panellists coming on board. By the time the panellists came on board, the key statistics, templates and reporting formats would have been assembled. This allowed them to get to work as soon as possible.
Purpose of Toll Free Hotline Services
There had been complaints about call centres. The UIF was bringing in experts on toll free hotline and emails for turnaround solutions. This allowed the public to follow the progress of their cases. This was the reason for conducting the tender process. The toll free hotline service allowed for the reporting of all fraud and corruption allegations, including COVID-19 TERS fraudulent allegations. The hotline would be utilised to receive calls, faxes, post, email, and other web-based queries from UIF stakeholders wishing to report fraud and corruption activities. Feedback or insight was reported as quickly as possible to the Hawks.
The Chairperson thanked the UIF and asked for comments from the Director General before the discussion.
Department of Labour and Employment, Director-General, Thobile Lamati, said that one area Mr Maruping had not spoken to were the fraud cases experienced by the UIF. The R5.7 million fraud case reported to SAPS had arisen because a company employee had created a UIF profile but had captured their own banking details instead of the employer banking details. Mr Maruping had mentioned the only way to access the system was if one had the UIF reference number to create a profile. The UIF reference number had been confirmed as correct. The employee had been declared by the employer and so was already on the UIF system. When the company accountant had then attempted to register for the TERS scheme, he had been blocked by the system as the UIF reference number of the company had already been used. The company had then contacted the UIF and requested to reset the password. After this, the employee’s details were found displayed under the false account. The company could see the employee had accessed the company profile on the system. The case was under investigation. There were two suspicions. In the process of resetting the password, there could have been collusion with a UIF official; or the employee accessed the company profile with the express knowledge of the company. This signalled collusion to defraud the Fund. This was the subject of the investigation. He wished to indicate inasmuch as the employee could access the UIF; they were only able to do so because of access to the UIF registration number.
On the overpayments, UIF had picked up that because it had been publicising Follow the Money, some companies got cold feet and had been in contact saying they had been overpaid. Some had claimed for lockdown periods exceeding the number of days their employees should have been paid for. He welcomed that they were coming forward. The issue was why apply for a longer period in the first place. Why apply for the UIF benefit knowing their employees were at work at the time?
Mr A Lees (DA) thanked the UIF for the presentation. It was a mammoth task to deal with the TERS programme and understood the strains. The question remained that April and May 2020 payments had been very delayed. What would happen with the June 2020 programme? Had the TERS programme completed the May 2020 payments? Would June 2020 be handled more swiftly?
On process matters, he had received many complaints that when people logged in using their reference number; they got into other employee profiles. This meant they could change details. Had this been reported and dealt with? Secondly, a letter of approval had to be downloaded and signed and submitted when applying for TERS. When on the site, a message of approval read that the acceptance letter had been downloaded automatically but this could not be found on one's computer. Had others reported this problem?
The tender had highlighted a SAICA registration requirement. What was the new requirement that replaced the SAICA qualification? How was it worded? The Commissioner had said that it had been the “main change” to the tender, what were the other changes?
Ms V Mente-Nqweniso (EFF) asked for clarification on the 3 500 figure. What were the baselines for calculating TERS? It did not quantify all notches in terms of salaries. How was TERS calculated? A gazette had been released, but it was unclear how the benefits were determined. On slide 40 dealing with the Follow the Money recourse, what was happening with all those employers who had not paid out the UIF funds in full to their employees? How much could the employer take of this? Was that even legal?
On the choice of employees applying for TERS funding themselves, at the beginning of COVID-19 there had been a problem with UIF queues. What online systems were in place for employees wanting to apply for themselves? The majority of employers were not paying what was due to their workers in the exact amount. What systems were in place for workers who wanted to get out and apply for themselves?
On double dipping for TERS funding, she had forwarded a case to the Office of the Minister because the subsidiary of big company had been given money to pay workers by the main company. However, the subsidiary had also applied for TERS funding. Double dipping was criminal, how was it stopped? There were cases where people had made income on this. They had paid their workers and were defrauding the system. This was not disclosed to workers.
On the R5.7 million fraud case, she appreciated Mr Lamati explaining how it had occurred. She had reservations that UIF controls could not detect the employee applying on behalf of the company. There could and should be systems detecting a person did not own the company. How was it possible that the employee could apply for TERS undetected? This opened possibilities for other fraudulent activities. Employees were creating fake profiles under their companies and could go undetected.
Ms B van Minnen (DA) said Ms Mente-Nqweniso had covered her on the R5.7 million matter. She had two questions remaining. When was the due date for the AG special audit? How would UIF ensure payments made to companies got paid to the company employees?
She referred to the slide dealing with the conveyancers and the Deeds Office which the Law Society was investigating. How did the UIF ensure that between registering and payment, one did not have a situation where bank details were fraudulently changed? How was the UIF dealing with this?
The Chairperson noted that if AGSA was present, he would give them an opportunity to respond.
Mr B Hadebe (ANC) noted three cases of payments involving incorrect banking details. One was of R400 000, another R4.7 million with R100 000 outstanding, and the third was R5.7 million. Out of the three only one criminal case had been opened. Why had nothing been mentioned about opening criminal cases on the other two cases? The R5.7 million had occurred when the employee had made an application on behalf of the business. Had the employee applied on behalf of the company or on their own? How had the company not picked up the discrepancy?
Mr S Somyo (ANC) asked how far the process was in enabling the employees to apply. He asked this due to the huge outcry from employees having difficulties accessing labour centres or being able to log onto the online system and access forms.
On the fraud cases, both the UIF Commissioner and DG had mentioned investigations. They were the custodian of the UIF system; they would know where the first button had been touched and who the feeder of the information had been. Why was it so slow in consequence management that could assist in holding back the thirst for defrauding the system as well as derailing access to funds belonging to the employees?
He appreciated the interventions that had been made to stop fraud. He asked for more detail to be provided on each case, what steps had been taken. This would be appreciated. Information included could also detail the individuals involved for example.
Ms B Swarts (ANC) noted that 16% of employers did not distribute the UIF funds to employees. What would the Department do to fast track that process as employees were left in limbo? They had not been paid but money had been paid out that was rightfully owed to them. On the Follow the Money initiative, how long would the process take bearing in mind the employees were waiting to be paid?
On money refunded by employers who had been overpaid, the Department had cited there was a good system in place. How did the overpayments happen? How much did the overpayments amount to? By checking the system; how had this happened? The Department said the system had been strengthened and tightened up. She still did not have comfort that there was a system in place to avoid overpayments.
On the huge amounts paid to the incorrect bank account, this could be fraud done by officials in collusion with businesses and employers. This could not be labelled as incorrect bank details. Officials knew well what was being done. They would simply be suspended with pay; and get paid to sit at home whilst investigations took place. Officials knew what they were doing; this was defrauding the system. For the Follow the Money initiative, how long would the service providers be in place to recover the money?
Ms H Mkhaliphi (EFF) agreed that employees were having problems with their employers during COVID-19. Had the Department improved their systems as there was generally a crisis with UIF claims. She recounted an incident where Minister Nxesi had intervened prior to lockdown. The person had not received UIF money. Ms Mkhaliphi had taken the matter to the KZN UIF management who could not help. She had then been given the contact of the UIF Chief Director who told her the money had been given to a beneficiary. Ms Mkhaliphi had then been forced to go to the Minister to resolve the matter. This was a general problem within the UIF. How was the Department going to address this problem?
She wished to check about the capacity of the Department. Every day workers called to complain about employers who did not pay them. This could be seen in the Bidvest case. An employee had managed to check on the system that she had been paid but it was not reflecting in her account. She asked the Department to protect workers; the workers did not want to be named due to the risk to their jobs. She asked for an update on a similar situation with Joburg Metal Works. Workers had been threatened with going to the UIF themselves.
Ms Mente-Nqweniso said employers were threatening the workers. Some employees had realised they were not being paid and had gone to a UIF branch in Gauteng. They had been told the TERS had been paid to the employers, and that they should go to the police. This was not the right attitude. What recourse was provided by the Department for such people? What could be done? Would the money be taken from the employers and paid to the employees, or should the employees go on their own?
Mr Hadebe said the report had indicated 75 cases and 16 of these had been finalised. He asked for details of the 16 concluded cases which included the offense committed, the outcome and the sanction.
The Chairperson said his colleagues had been thorough and asked a full spectrum of questions. On the 75 suspected fraud cases; the Committee needed the status of each of these transactions. This required a specific focus on the 16 with a detailed breakdown of these cases. How many companies had been audited? Mr Maruping had said there would be an audit of the companies. Had it started? If yes, where was the process? He would give AGSA the opportunity to speak on the scope of auditing being done.
The biggest frustration confronting workers was that the money reached employers, but from there it did not reach employees. If it did, it reached them in half measure. A report had been received the previous day from the Western Cape where employees were receiving half of what was expected. What was preventing the UIF from mimicking SASSA, who were paying employees themselves? Either this option, or payment through employers was accompanied by a countersigning process where the employee could follow the processing of the money. Clearly the current system placed employers on top of employees in a manner which was not desirable. Employees continued to complain and raise problems of non-payment. It was regrettable that many cases required the intervention of the Minister to rectify.
He wished the Committee to unpack the foreign nationals section. He had read media reports that foreign nationals had wanted the R350 government grant paid to them. Foreign nationals had found themselves categorised and receiving payments. When did funds flow to foreign nationals in the greater scheme of what government was doing?
He handed over to the UIF Board and Commissioner and AGSA could comment on audit matters. These matters were fully supported and welcomed in a time where corruption was rearing its ugly head to take advantage of opportunities afforded by COVID-19. There needed to be a closing of the gaps. The Committee was in full support of an audit in real time.
The UIF Chairperson, Mr Welcome Nzimande, replied that if foreign nationals had come into the country and registered in the correct manner, as well as contributing to the UIF, they would be paid.
UIF Commissioner Maruping asked the UIF COO to walk the Committee through the fraud cases.
UIF COO, Ms Judith Kumbi, went through the process of applying for the UIF COVID-19 benefit. There was a distinction between employer and employee. The UIF reference number was used to determine this. Prior to COVID-19, companies registered with the UIF gave the profile of the employer together with employees. The person providing details of the UIF reference number and employees’ salaries was the employer.
The Chairperson asked Ms Kumbi to specifically deal with the R5.7 million case. How was an employee been able to repurpose R5.7 million. The Committee had seen the presentation’s outline of the operations process prior to and during COVID-19.
Ms Kumbi replied about the R5.7 million case, saying the employee had the UIF reference number, trading name, contact detail and trading address of the company. Using these, the employee had created an account for the company and had provided the employee’s banking details under the company’s profile. This was seen by the UIF as the banking details of the employer. The employee had then applied for the salaries of the company.
The Chairperson asked if the company in question was real.
Mr Lamati explained that the company was a real employer. The person used to work for the company.
The Chairperson said that if he understood correctly, the employee had stolen the log in details of the company. He said the matter could be parked as a case study of all the problems confronting the UIF. The Committee would return to it in greater detail. He asked the delegation to respond to other questions.
UIF Director: Risk Management, Mr Tshepiso Maphatane, replied about the 16 finalised cases. The summary of the cases could be found on slide 30. Companies had approached the UIF struggling to claim COVID-19 TERS. There had been fraudulent activity as employees had been claiming the TERS instead.
The Chairperson interjected and said the UIF had 16 cases that were finalised, the Committee wanted to go through the cases one by one.
Mr Maphatane asked for time to retrieve and download the spreadsheet of cases.
UIF Commissioner Maruping addressed outstanding questions. Given the April and May 2020 delays, he anticipated a faster processing of the June 2020 payments. The same employers had applied for benefits in April and May 2020 that would be applying for June 2020. These details had already been captured on the database and the processing would move faster. The processing challenge of non-declaration had been dealt with for the most part, making this faster.
On the letter of approval, initially the UIF had merely issued a statement on the front end stating the application had been successfully processed. Users were now able to download that letter.
On the SAICA registration requirement for the panel of providers which had been removed, the UIF had instead emphasised the qualifications of the owners of the applying company. These included qualifications such as being a chartered accountant, an auditor with at least five years’ experience, and the relevant experience in quality assurance verification.
For those companies who had not registered and paid UIF contributions, the employees were suffering due to the delinquency of the employer failing to declare and pay UIF for them. Once TERS was paid, the UIF would pursue the employer. This was captured under the Follow the Money concept. The UIF would pay the employees but would pursue the company to pay the outstanding UIF amounts with interest and penalties.
Directives had been issued for the calculation of benefits with a sliding scale between 38 and 60%. The income replacement scheme had always been in the Act. If the benefit calculated as per the formula fell below the R3 500 threshold, it was lifted to R3 500 to allow for replacement. This was because the UIF was aware of the situation in companies and the plight of workers who were trying to survive. COVID-19 was requiring workers to purchase things to survive the pandemic. Therefore in the spirit of the pandemic, the UIF had introduced a minimum of R3 500 and a maximum of R6 700.
The whole point of Follow the Money was employees not being paid their UIF TERS money by the employer. Employees were needing money immediately to survive. Call centres had been arranged for employees to complain anonymously. The cases was registered and the Commission for Conciliation, Mediation, and Arbitration (CCMA) offices were open. Once cases were registered, these were taken through the formal processes where employees would be paid directly.
On double dipping, the UIF ensured that employees already getting UIF maternity or ordinary benefits did not double dip and receive anything under TERS. The UIF had developed a database that removed such people from the system before the TERS payment was even made.
There had been improved controls implemented on the user profile page for banking account changes. Employees could not change their details as easily. The profile cell phone numbers and email addresses were locked. The new password was sent to these contact points when changing the profile. This eliminated someone using another person’s account using another cell phone number to access the profile.
The panel of service providers would be appointed within a month. They would be given six months to conclude their investigation. This process would be concluded in March 2021 and a report would be given to the AG. The UIF would be able to account exactly for how the money it had provided had been spent.
On the main change about the SAICA registration requirement, the UIF had held a meeting with AGSA at its Audit Committee. There the need had been noted for finding a way to avoid duplication of efforts and cleaning up the scope of audit providers. Therefore, under Follow the Money, the UIF was not doing the job of the internal audit bodies of the companies in question.
Consequence management would be implemented once the investigations had been concluded.
UIF Commissioner Maruping replied on how to protect workers where the employer applied for the workers but did not pay them. The UIF always encouraged workers and made them aware that the UIF had inspectors across the country at most labour centres. The workers were requested to go to labour centres and report cases. These were treated as anonymous and the UIF would investigate their companies. 31 companies had been audited thus far under Follow the Money. Six had been in contact for guidance on the process of declaring themselves and workers to the UIF. Once they had been declared, it was an automated process that reconciled with the database and conducted the payment. There was constant engagement with employers to ensure money ended up in the hands of employees.
The reason that UIF was not paying employees directly was that the UIF paid R14 to 17 million daily to the individual accounts of 15 000 to 30 000 employees. The ability for the creation of an individual account had been available over the years. However, under the COVID-19 lockdown, it would be difficult for the UIF to receive 3.7 million new applications, particularly as the labour centres and companies were closed and applicants could therefore not get the U-19 form required to undertake the application during lockdown. As applicants could not get the necessary documents, it had been determined that companies apply on their behalf. This logic was in support of the lockdown for people to stay at home. Towards the end of April 2020, individual applications had been opened.
On foreign nationals, the UIF system/main database did not include foreign national passport numbers. This was only captured on the front end and had meant delays. The back end could not support foreign national passport numbers. The system was now however able to pay foreign nationals. It was important to be able to confirm the employer-employee relationship. Once they confirmed with Home Affairs, the UIF was able to pay them normally.
The Chairperson asked Mr Maruping to address the questions with reference to SAA / SA Express.
UIF Commissioner Maruping replied that it was a non-contribution case, he had not mentioned SAA by name. The principle of the decision taken in terms of paying benefits under Directive Six was of the redefinition of the 'worker'. If a worker did not qualify for benefits due to lack of compliance by the employer, the Department would recognise the worker as long as the employee-employer relationship could be confirmed. Once paid, the UIF pursued the employer to account for the underpayment with interest and penalties. This was why the UIF was able to pay the likes of SAA.
The Chairperson said the basis for payment came in ascertaining the employer-employee relationship. Then all other matters would be solved subsequently? Why did the Minister say that “unfortunately 965 751 employees had been unable to receive payment” due to outstanding information from employers? Had the UIF been unable to verify the employer-employee relationship in these cases?
The UIF Commissioner replied that this was correct. The employer needed to confirmed the relationship so they could pursue the employer.
The Chairperson said R5 million had been paid to a bogus person. This was cold comfort. There were serious and major loopholes in the UIF internal controls. AGSA would speak to that matter, but if determination for the employer-employee relationship was the sole basis for payments, this was an issue.
Ms Mente-Nqweniso said the TERS calculation had not been adequately addressed. She had not been told how the scale worked overall.
Mr Maruping replied that the calculation was done on a sliding scale between 38 and 60%. The more money the applicant earned, the closer they were to the lower end of the scale. This was also based on the number of credits they accumulated. This incorporated the average salary and the time the person had been employed at the company. These were plugged into the formula and it calculated the amount of benefit due to the individual.
Ms Mente-Nqweniso asked if the formula could be provided.
Ms Mkhaliphi said it was clear that the system was ailing. The Commissioner needed to come clean and tell the Committee about the challenges of the UIF. There were people struggling to get UIF. There was a capacity challenge in the system. It was not a healthy situation where Committee members needed the intervention of the Minister to resolve individual cases as had been showed. These examples predated COVID-19’s additional strains.
Mr Maruping replied that factors delaying payment were often due to employer non-compliance. Employees went into the UIF offices and found their employers had never paid into UIF. The systems had however not been as good as he would have liked. They were slow and the UIF was addressing this. The previous day, for example, there had been a meeting to discuss a roadmap for technology implementation at the UIF.
Mr Maphatane presented the spreadsheet on the 16 cases:
- Case One, the employer had complained that someone had lodged a COVID-19 TERS benefit without consent. A profile had been created on the COVID-19 TERS platform; no claim had been submitted. The profile was deleted and the employer was able to claim for the benefit.
- Case Two, the employer alleged that a former employee had fraudulently lodged a COVID-19 TERS claim. The employer opened a criminal case. It had been found that the former employee had created a profile as well. The profile was deleted from the UIF platform and the employer was able to proceed with the COVID-19 claim.
- Case Three, the employer alleged that another person had lodged a fraudulent claim on the COVID-19 TERS system using the employer’s reference number. It was found that an employee of the company had independently claimed on the UIF Ufiling platform. This action had blocked the employer from claiming benefits on behalf of the other employees. This was a matter that needed a system enhancement. If an employee had lodged an individual claim, the employer needed to be able to come in and claim for other employees. This was due to the reference number being able to be used only once; system controls needed to be enhanced so that employers could still claim for other employees if one employee claimed independently.
- Case Four, the employer claimed an employee had lodged a claim with the company’s reference number. The employer had not understood how the system worked and there had been no foul play. The employer was assisted to make the claim.
- Case Five, there had been a complaint that a company had deducted UIF from workers but had not contributed to the UIF. The employer had not applied for UIF COVID-19 TERS benefits. The matter was referred to the Compliance Unit for enforcement under the Unemployment Insurance Act.
- Case Six, there had been a complaint of a fraudulent claim on the benefits system. An employee had claimed on both profiles (theirs and the company’s). A claim had been confirmed and had been put through under the company. The employee was able to claim on normal and TERS benefits. This matter had been recommended to Operations Department to raise as an overpayment matter.
- Case Seven, the employer and employee had colluded to defraud the Fund. When going into the system, it was found that no claim had been lodged for COVID-19 TERS. The case had been recommended to the Compliance Unit for enforcement.
- Case Eight, a company bookkeeper had added herself as an employee and added herself to the company’s TERS profile. No claim was submitted. The profile had been deleted and the employer had been assisted to access the system and make the claim.
- Case Nine, the UIF had received a complaint that a company had registered a claim with UIF after 12 April 2020. The claim had been registered for two employees whose contracts had already expired. This had been investigated and found that it was not a COVID-19 related matter. The matter had been referred to Compliance for enforcement.
- Case Ten, the UIF had received complaints that the reference number was an employer and employee and had declared salaries of zero. There was no COVID-19 TERS benefit on the application. The matter was referred to Compliance for enforcement.
- Case Eleven, the employer had not paid employees after receiving money from the UIF. The UIF had found that the employer had applied for COVID-19 benefits and had been paid for the employees that had been declared. For those who had not been declared, they had not been paid. The matter had been referred to Operations to inform and guide the company on the reasons the others had not been paid.
- Case Twelve, the employees who made the claim did not work for the company, despite having access to the company’s UIF reference number. It transpired that another company had claimed using the reference number of the other company due to the accidental switching of company reference numbers by a bookkeeper, resulting in incorrect declarations and payments. The matter had been submitted to Operations to correct the declarations and payments.
- Case Thirteen, the UIF had received a complaint that a company had submitted a fraudulent claim for over 60 employees. The investigation had found that the claim was processed. It had been identified that overpayments needed to be raised on some of the claims. The employer and employees had been operational during the lockdown. The claim had been put through by the company, but because the employer and employees had worked during the lockdown period, they should not have lodged the claim. It had been logged as an overpayment.
- Case Fourteen, two companies had been using the same reference number.
- Case Fifteen, the company had been paid TERS, the employees had not been paid by the company. The case had received a compliance referral and an enforcement order.
- Case Sixteen, the employer had been unable to register for TERS, as the system said the company was already registered. The employer profile had been dated under COVID-19 by an unknown person. The profile was deleted and the company given access to register their own account.
The Chairperson thanked Mr Maphatane and asked how many arrests had been made.
Mr Hadebe said it was concerning that in most cases that the profiles were simply deleted. The Committee was not told what the sanctions were for those who had created fraudulent profiles. The profiles were simply deleted. The UIF needed to determine who the culprits were who defrauded the system. Otherwise, the chance for repeat offenders was high. What happened to those who consistently tried to defraud the UIF? Why were they not investigated?
He was concerned about the company fraudulently claiming for 16 employees which had been regarded as an overpayment. Was the company aware that it could not claim for employees working during lockdown? All employers ought to be made aware that they could not claim for those working during lockdown.
What had happened to the bookkeeper creating a profile for a company which UIF had subsequently deleted? The UIF could not tolerate corruption, this needed to be followed up with to deal with fraud.
Mr Maphatane replied that only one of the 16 cases was with SAPS, which was Case Two. In some instances, what had been found going through the case was that the people had been unknown. The information had been given to companies to follow internal processes. He took the message from the Committee on taking further consequence management measures for attempts at defrauding the UIF. Where the people responsible could not be identified, the profile was deleted.
In response to Mr Hadebe interjecting and asking why these people were unknown as they were registering their details, Mr Maphatane noted that Ms Kumbi had outlined the system requirements for registering before loading the TERS application on the system. If any person had the company UIF reference number and other company information, it was possible to register on their profile. However, these people could not claim because this required the payroll information of the company. Therefore, they could register but not claim.
The Chairperson wanted a report-back on the UIF following up the fraudulent profile matters. With the creation of a fraudulent profile, the assumption was that it was done to loot. People would try again if not deterred. There needed to be an investigative process with consequence management. This could not just be left to the prerogative of that company. Where it was found the person was not part of the company, there needed to be stronger capabilities to prevent formation of a fraudulent profile. This included strengthening IT capabilities of operations. The Committee members all supported the Fourth Industrial Revolution but it “could not be a runaway train”.
Mr Lees noted that Mr Maruping had not replied to the question of how one was able to log into another’s profile. This was not an isolated case.
Ms Swarts said it seemed the Department was going around in circles in not responding conclusively on what was being asked. For example, what Mr Hadebe had asked – the answer was referred to someone who had said what the compliance was. The Committee understood there was compliance, but the UIF was telling the Committee that it had cases or officials who were able to create fraudulent accounts. This was not whether the accounts received money, the bottom line was that the system was loose. People were able to create fraudulent profiles acting as businesses.
Why were April 2020 applications still being dealt with in June? How long would it take to round off April applications? Backlog applications infringed on the rights of employees to get benefits. A six-month timeline had been given for Follow the Money but the UIF was still dealing with April applications. How long did applications take to process? The UIF had not been formed at the beginning of COVID-19, the loose controls were not suddenly a problem. They had been around prior to COVID-19. She wanted a full list of controls.
The verification process via Home Affairs and SARS seemed a long process for foreign nationals who qualified for benefits. The Committee needed time frames, how long did it take? Where did it leave these people? How many domestic workers at this point had received UIF from employers complying with the UIF?
Mr Maruping replied that R128 million had been paid to employers applying for domestic workers. Validation with SARS and Home Affairs was in real time, it happened as the application was processing. Confirmation with Home Affairs was critical. To determine if the application was made for someone who had died required verification from the Department of Home Affairs database. The UIF was an overnight payment and the comparison with Home Affairs was run overnight; with the payment ready the next morning.
On the April 2020 payments, COVID-19 had caught everyone by surprise. The UIF had changed directives a number of times. The last change was 25 May 2020. Directives had changed before that on 30 April 2020. It had been identified in April that the changes being made had affected those who were applying for UIF. It was in the spirit of the pandemic to review as many as possible. There had been engagement with social partners at NEDLAC, with the changes being concluded soon after.
When registering on any website, controls had been introduced to track the IP address. The UIF also captured mandatory details. Group executives were leaving company details at risk. Gaps were however being identified and being closed, making it more difficult to take advantage of the system.
The formula for doing calculations would be attached as part of the detailed risk report. The income replacement rate was determined by the UIF actuaries.
Of the overpayments picked up to date, R166 million had been paid back to the UIF. There were two main reasons. The first was that the employer applied for people working during lockdown. The second was that the employer had not applied for the correct period.
AGSA Labour Portfolio Stakeholder Manager, Ms Kabelo Makitla, replied to the question around scope. AGSA had started with the UIF special audit recently. The scope targeted three elements:
1. The control environment articulated to the Committee and the IT platform put in place;
2. The payments made and AGSA had just received the data for all payments made up to end April / mid-May 2020. The data was run through several platforms to validate and ensure credibility.
3. Compliance pertaining to the tender processes and sustainability whether payments had landed at the correct employer. The AG was checking the correctness of the details provided, and whether employees received payments. The UIF had access to the accounts of the employers who had been given money. The AG would work through the UIF to access the employers flagged as high risk who would be investigated.
AGSA had received the payments data. It still awaited access to the UIF IT environment to be able to run the tools to validate the IT controls. The reporting process meant there would be a preliminary report by mid-July 2020. AGSA would provide Parliament with the first report in August 2020, the second in November 2020. This depended on how long the UIF would continue to make payments. AGSA would look at suspicious areas. Data from SARS and SASSA would be used to ensure there had been no double dipping.
The Chairperson said the Committee awaited the August 2020 AGSA report. One area to add was to look at the manner in which consequence management had been handled; whether investigations of the UIF had been done correctly, and whether corrective actions and recommendations had been correctly implemented. He did not think the responses / corrective actions for the 16 confirmed cases were satisfactory.
Ms Makitla, AGSA Manager, remarked that this was definitely an area to look at.
UIF Audit Committee response
The UIF Audit Committee Chairperson, Dr Prittish Dala, replied to the question on the 100% sample, that the internal auditors would fill the gap. The 100% sample would be achieved by the panel of service providers that would be appointed. This would be the management assurance. The independent assurance would come from AGSA partly given its sample and the internal auditors would fill the gap. The objective was to ensure that 100% was covered and minimise duplication of effort. AGSA would remain independent from management as well as the internal audit.
The Chairperson thanked Dr Dala. He wished to zoom into the R5 million case.
Mr Somyo said he was not necessarily speaking to the R5 million, he was thinking about the process going forward for both AGSA and the UIF in terms of their own accountability. Was there a possibility to have their own process to deal with mishaps and provide a clear frame of what had gone wrong. He asked if it was not possible to be done no later than 30 September 2020 to interrogate the conclusions from the audit process.
The Chairperson said the Committee meeting was limited by time. There were questions about the R5.7 million payment but they would flag the matter for AGSA. When the Committee received the AGSA report, the Committee would proceed review that matter. In the committee proposals for oversight visits, the UIF was included and this covered Mr Somyo’s proposal.
During the lockdown period, there had been abuses to systems, fraud, mismanagement; a vast spectrum of shortcomings. He asked Mr Maruping to provide a detailed written report to the Committee by 1 July on the R5 million so when receiving the AGSA report, the Committee could read the UIF submission against it.
UIF Commissioner Maruping thanked the Committee for the chance to report back. He assured the Committee that the UIF was doing its best to get South Africans relief.
Mr Lamati appreciated the oversight. The Committee sometimes appeared harsh, but it gave the UIF a “third eye”. The UIF would attend to all items raised and submit the necessary report.
In response to the Chairperson saying the Committee was not harsh, they were nice people; they were just ensuring that “everyone did right”, Mr Lamati added that was what he had meant.
Deputy Minister Moloi stated that the Committee was doing its best, whether it was harsh or not; it was doing its job. She thanked the Committee for its work in ensuring financial accountability. She had noted all the shortcomings based on the probing questions asked by Members. She would ensure the report was returned to and cleaned up, with more details provided. The UIF would return more prepared for the next meeting.
The Chairperson said that the issue for the Committee was that the UIF had been a permanent feature of the SCOPA Members’ lives. At some point, things had to be done. Changing the UIF for the better could not be prolonged. It needed to be placed on a trajectory of efficiency and effectiveness. The Committee could not be meeting the UIF all the time. Meetings with SCOPA needed to be the exception not the norm. The Committee had spoken at length about the IT capabilities of the UIF. This needed to be the apex priority of the UIF. The Committee had been to the UIF and Compensation Fund for oversight. It would be disappointing to find the same challenges on the next visit. The meeting had dealt with the audit outcomes. COVID-19 did not suspend the day to-day realities of the UIF. Something needed to shift in the operations of the UIF. This encompassed technology, IT, access, lack of consequence management, and not beefing up of preventative measures and controls. He always said prevention was better than cure. Preventative capabilities saved money. The loopholes in the UIF would be taken advantage of.
The Chairperson requested Members that any outstanding matters or questions be forwarded by the following day which would be sent through to the UIF Commissioner and the DG. The majority of people living in dire conditions of desperation due to the impact of lockdown on their livelihood depended on UIF to survive. This did not take away from what had been disbursed already. He wanted systems to be effective and efficient to build on this. He thanked the UIF, Department, Ministry, AGSA and the support staff.
The meeting was concluded.
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