COVID-19 TERS & Compensation Fund; UIF response to audit; with Minister

NCOP Trade & Industry, Economic Development, Small Business, Tourism, Employment & Labour

06 October 2020
Chairperson: Mr M Rayi (ANC, Eastern Cape)
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Meeting Summary

The Committee convened on a virtual platform to receive briefings by the Department of Employment and Labour on its post COVID-19 job plan. The presentations also included that on the administrative, leadership and governance issues at the Unemployment Insurance Fund (UIF), in consideration of the Auditor-General’s findings and the entity’s corrective measures. Another presentation was on the Compensation Fund’s response to the COVID-19 pandemic. The Minister, Mr Thulas Nxesi, and Deputy Minister, Ms Boitumelo Moloi, were both present.

The Department responded on corrective measures undertaken by the UIF on the issues identified by the Auditor-General’s report. The Department provided a performance report relating to the Compensation Fund regarding its responses to COVID-19. The report made a number of observations, including that UIF beneficiaries also received COVID-19 temporary emergency relief scheme (TERS) benefits. There were overpayments and underpayments on some claims, and also discrepancies in relation to the appointment of service providers. Key areas moving forward were: Stringent preventative controls should be implemented in order to minimise the risk of fraud and error in the application, verification and payment processes; design and implement detective controls in the application, verification and payment systems in order to enable the identification of errors as well as potential fraudulent claims; and institute a process of investigation and recoup the monies paid for the COVID-19 TERS benefit to ineligible beneficiaries.

The UIF presented audit observations and system application controls were enhanced in the following categories: Payment made to deceased persons; payment made to minors; payment made to government employees; payment made to prisoners; and payment made to South African Social Security Agency beneficiaries.

The Compensation Fund gave an update and progress report on COVID-19 related claims received and processed under the Compensation for Occupational Injuries and Diseases Act by the Compensation Fund Rand Mutual Association and Federated Employers who are licensed by the Minister to administer legislation in the mining, iron and steel and construction sector. Challenges with COVID-19 claims included: Incomplete documentation, and failure to prove workplace exposure. Resolutions involved Compensation Fund has embarking on stakeholder outreach programmes through webinars, radio and TV interviews.

Members were concerned about students who were receiving National Student Financial Aid Scheme funding, the social grant, while also receiving UIF benefits. Members asked how many prisoners and deceased persons received UIF benefits, and who applied on their behalf. There was also a question about benefit payments made to foreign nationals, particularly those whose work permits expired and could not be immediately renewed due to lockdown.

There were questions on how many fraud cases there were in relation to COVID-19 benefits, and how many cases had been finalised. There was concern over whether the Auditor-General’s report addressed the aspect of consequence management in relation to the various compensation systems. Members also asked if there were any irregularities around the procurement of the Compensation Fund’s CompEasy system, and the Departments response was that all necessary processes were followed.

Meeting report

Opening Remarks by the Chairperson
The Chairperson opened the virtual meeting, welcoming the Members, the Minister, the Department delegates and support staff. He said that the Select Committee (SC) was originally going to meet with the Department on the issue of the UIF (Unemployment Insurance Fund) response to COVID-19, as well as the compensation fund. When the SC received a report from the Auditor-General (AG) on the audit being conducted on all departments, the SC said that it should then, instead of having a separate meeting on the audit outcome, combine that meeting with the meeting originally scheduled for the Department to brief the SC on the UIF and compensation fund performance. The SC will receive a report from an AG office representative on the UIF, and then on the compensation fund. The Department would then respond on the UIF and compensation fund. A discussion on the presentations would follow.

There was an apology from Mr Dangor (ANC, Gauteng) who was in bereavement.

Ms Sibongile Lubambo, Corporate Executive: Audit, Office of the Auditor-General of South Africa (AGSA), was leading the delegation from AGSA. Also present were Ms Kgabo Komape, Business Executive: Labour Portfolio, AGSA, as well as another executive responsible for stakeholderse.

The Minister of the Department of Employment and Labour (DEL), Mr Thulas Nxesi, and Deputy Minister Boitumelo Moloi were both present.

Briefing by the AGSA: Unemployment Insurance Fund during COVID-19
Ms Lubambo introduced the presentation. She reminded Members what the scope was in terms of the work done on UIF. When the AG talked to the special report, he did talk to the period that AGSA would be covering; it would have looked at iterations (payments) one and two, which are the claims for the April and May period. AGSA looked at the payments made up until 09 July 2020. The work covered was categorised into three areas. The starting point for AGSA was to understand the processes from the Department; i.e. how it is planning to implement the process from the application side to payments. AGSA would be looking at that process and identifying risks; it refers to that as preventative controls. AGSA said that these are the controls that one needs to have in place to avoid fraud and errors from happening in the process, so there would have been a discussion around preventative controls, where it would have flagged risks that the Department would need to respond to.

The second part is that the Department would have had to put together an IT system where it would process the applications for the TERS (Temporary Employee Relief Scheme) system. AGSA looked at the IT controls; it looked at whether the controls around the system are strong enough to ensure the integrity of the transactions that would be done. AGSA did work on the supply chain, where procurement has been done. The biggest part of the work done was data analytics. The main part of that work involved taking information from UIF’s side, namely information on the application up until the payment. AGSA has done data analytics, where it analysed the information, and tried to pick up challenges around that, where what is being presented has gaps and some things do not make sense; there are weaknesses. It has also used that information to compare to government databases that AGSA has access to, to flag additional areas that the UIF has to focus on. To do that, AGSA had to use a number of experts that it had within the organisation. It put together a multidisciplinary team that was made up of fraud experts, supply chain experts; but mainly IT auditors that helped AGSA with the IT side of the audit. That team helped to bring forth the weaknesses in the system.

Ms Kgabo Komape took over the presented. She would take the SC through the observations from the UIF audit; in particular, the information was shared with the Department, the UIF itself and the Minister at the end of August. By now, there would have been enhancements made. The AG tabled a report around 02 September.

The report would be in three parts. The first part would deal with the entire control observations; there, AGSA would look at the issue of preventative control that is required to ensure that it says that is in the fiscus. The second part would deal with the key observations from the data analytics, and also the possible fraud risk that AGSA indicated through the fund to the Department. Lastly, AGSA would indicate that it had started the process with some of the selected employers, where the latter could give the UIF feedback on some of the things AGSA was picking up when it visited the premises of those who benefited from the COVID-19 TERS benefits.

Key Audit Observations – Preventative Controls
Each observation in the presentation appeared with an explanation of the issue, recommendations, and planned actions. “The UIF implemented a new system to aid the processing of TERS claims. The TERS process was found to have the following control weaknesses”:
1. Lack of verification of applicant representing employers
2. Incorrect system calculations of the TERS benefit payment for the first lockdown period
3. Inadequate verification of employer details
4. Inadequate system functionality for bank confirmation of uploaded documents
5. Lack of consideration of salary portion paid by employer in the calculation of pay-out for first lockdown period
6. Lack of verification of employee salaries submitted during benefit claims.

Key Audit Observations – Data Analytics
Each observation in the presentation appeared with an explanation of the issue, recommendations, and planned actions. “[AGSA] analysed the TERS payments made by verifying the details of the employers, bargaining councils and employees against various existing government databases such as those of Home Affairs, the South African Revenue Services [SARS] and the CIPC [Companies and Intellectual Property Commission] to confirm the eligibility of the beneficiaries, identify double dipping, and so forth. [It] found the following with regards to payments made up to 30 June 2020”:
7. Applicants that are below the legal age of employment
8. Identity number same as that of a UIF employee
9. Deceased individuals were paid TERS benefit
10. Individuals who are imprisoned were paid TERS benefit
11. Individuals with invalid identity numbers
12. Payments to foreign nationals (The UIF did not confirm whether or not these non-South African citizens were possibly refugees or had valid work permits.)
13. Double dipping (where there were individuals benefiting from different government schemes, e.g. NSFAS students and SANDF beneficiaries.). There may not be a law against double dipping, but it was highlighted because AGSA was saying as Government that the UIF needs to reflect on whether it was the UIF’s intention to keep on benefiting certain individuals on multiple benefit schemes. If that was the intention, it is fine as long as government streamlines the process.
14. Banking details [the] same as those UIF employees
15. Individuals sharing banking details
16. Double dipping within [the] UIF (Some individuals were indicated to have received payments on claims submitted for both normal benefits and TERS benefits.)
17. Payments above maximum threshold
18. Overpayments
19. Underpayments
20. Duplicate payments (the system should be able to prohibit multiple applications)
21. Unsubstantiated payment made (Some transactions paid could not be reconciled back to the applications on the system.)
22. Unsubstantiated applications made (Transactions identified on the application system with no invoices numbers.)
23. Claims with an application date after payment date.

Key Audit Observations – Procurement and contract management
“[AGSA] reviewed the appointment of service providers through deviations to assist with a campaign to create awareness of the UIF CO-VID 19 TERS initiative and noted the following”:
24. Non-compliance with the instruction note (When securing media houses to assist with the awareness campaign, the service providers were procured as sole providers. However, the UIF did not provide evidence to justify the selected service providers as sole providers.)
25. Discrepancies relating to the appointment of service providers
26. Unfair awarding of contract (This is in contravention of section 51 of the PFMA [Public Finance Management Amendment Act] and the Preferential Procurement Regulations.)

Key Audit Observations – Risks and controls deficiencies identified
“[AGSA] identified the following the following additional fraud risks in the TERS application process. [It] has reported these and the related control weaknesses to the accounting authority”:
27. Fraud risks related to the manual application process
28. Fraud risks related to the manual and online application process

AGSA advocated for preventative controls because it believes that if the UIF implements the right internal control system beforehand, the UIF will alleviate a lot of pressure from itself as a fund when it comes to going after certain individuals in an attempt to get its money back. The UIF would also discourage the people who may be taking advantage of the deficiencies in the system, and would make sure that the money is channelled to the people to whom the money was rightfully intended.

Key Audit Observations – Employer visits
“[AGSA] started a process to visit the premises of the employers and bargaining councils to obtain assurance regarding the validity and existence of employees related payments received from the UIF for COVID-19 TERS benefit. The audit entails verifying whether TERS benefits were paid to legitimate beneficiaries. To date, site visits to various employers and bargaining councils in Gauteng, North West and Western Cape have taken place. Although most of the verifications were still in progress, the following are some of the observations thus far”:
29. Employer site visits.

Way forward and conclusion
In summary, the following are the key in ensuring a sound internal control environment:
- Stringent preventative controls should be implemented in order to minimise the risk of fraud and error in the application, verification and payment processes
- Design and implement detective controls in the application, verification and payment systems in order to enable the identification of errors as well as potential fraudulent claims
- Institute a process of investigation and recoup the monies paid for the COVID 19 TERS benefit to ineligible beneficiaries

Audit scope for the second special report:
- Follow-up work, including assessment of enhancements made to the IT systems as part of the next report.
- Testing of the additional payments made.

Compensation Fund
Ms Komape presented a short presentation on the Compensation Fund. She said that AGSA did the work but it was on a limited scale. In the main, the fund paid R404 255 (111 beneficiaries). The claims submitted were R 3 650 898 (1 542 beneficiaries).

The work itself would not have been in detail, primarily because there was not much activity as far as COVID-19 payments went. When one looks at the second report, the AGSA opted to leave out the Compensation Fund from the special report of AGSA (intended for 30 November 2020), but it is hoping to incorporate the elements of the COVID-19 fund in the normal report.

Key Audit Observations
1. Inadequate access controls (related to the CompEasy system)
2. Inadequate application controls to prevent duplication of claims being processed
3. Inadequate controls over receiving and adjudicating of claims.

The Compensation Fund will be left out of the special report primarily because there is not much traction from the COVID-19 payments as far as the Compensation Fund is concerned.

The Chairperson said that the SC would allow the Department to make a presentation on TERS, and on the Compensation Fund. Afterwards, there would be an opportunity to ask questions of the AG and the Department.

Briefing by the Department of Employment and Labour

Minister’s Remarks

The Minister of Employment and Labour, Mr Thulas Nxesi, made his opening remarks. The Deputy Minister, the DG (Director-General) and senior management of the Department, the UIF and the Compensation Fund were also in attendance.

He said that he takes the engagements with Parliament very seriously, where the Committee holds the Executive and the officials to account. The SC is doing its job, namely following up on the findings and recommendations of the AG, particularly in relation to the payment of the UIF COVID-19 benefit, and the COVID-19 Compensation Fund for those affected employees. The SC would want to hear from the Department and the UIF the steps taken to address and remedy the issues raised by the AG, and the officials would provide those answers.

The Minister wanted to provide a broad context on government’s response to COVID-19 and the lockdown required to slow the spread of the pandemic. DEL was directly involved in the following areas: UIF distribution of COVID-19 benefits, the Compensation Fund, and supporting workers infected at the workplace. It was also involved in the inspection and enforcement brands for enforcement services brands; the development, regulations and directions to keep workplaces safe during the pandemic; inspecting workplaces and enforcing existing health and safety regulations, as well as COVID-19 regulations. It is important to acknowledge DEL’s role in the frontline. It recruited health and safety inspectors, and strengthened health and safety capacity. It was also DEL’s task to deliver TERS benefits. This provided income support to laid-off workers. There was collective support of all social partners. The UIF was faced with a 10-fold increase in disbursements, and it had to make mass disbursements. This allowed the COVID-19 benefit to be disbursed in a short space of time. There was the problem of labour centres being overwhelmed by claims, which prevented social distancing. Even now, not all members of staff are back at work. R4 million in COVID-19 benefits have been disbursed. Over R7 billion has been disbursed in UIF benefits. For millions of laid-off workers and families, these benefits are a lifeline. There has been positive feedback from many employers; UIF payments have been a success. However, criminals saw loopholes and took advantage. It was then decided not to make payments until there were mitigation measures in place to prevent fraud.

The AG report indicated that there were holes in the system and that there was a failure to put in controls. There will be a follow-up investigation. Financial laws in the country are very stringent, and one can lose something on a technicality. The DEL is making good progress, but it will wait for second report from the AG.

On the verification of identity documents, the Minister said that each department maintains its own database. Another issue raised was double dipping. There is also the issue of foreign workers, where it was not clear in some cases if people had work permits or were refugees. Some of these people get employed illegally. Employers or the UIF must then pay those employees. There are loopholes when dealing with foreign workers. The hospitality, farming, and other sectors have many foreign workers.

In cases concerning recovering money, such money has been returned, and people were charged. DEL was a bit slow but the problem was that stringent procedures have to be followed. Some of the PFMA processes are not made for urgent processes. If one tries to short-circuit such processes, one will be denied.

There were fusion centres created that have brought together all parts of law enforcement, and can fast track certain processes.

COVID-19 TERS 2020
Mr Thobile Lamati, Director-General, DEL, introduced the presentation and said that the Minister had covered the background of the presentation.

Ms Marsha Bronkhorst, Acting UIF Commissioner, Department of Employment and Labour (DEL) presented.

The contents of the presentation were as follows:
1. Purpose of the report
2. Directives
3. Applications Closing Dates
4. ICT Development
5. COVID-19 TERS Progress Report
6. COVID-19 TERS Audit Action Plan
7. Overall Control Improvement

COVID-19 TERS Progress Report

Valid Applications COVID-19 TERS

This was the information that the Department had as at 28 September. Since then, the numbers have increase, and the Department has paid just under R49 billion under the COVID-19 TERS.

COVID-19 TERS Benefits Provincial Breakdown
A table (page ten) showed the amounts paid out by province – how many employers were paid benefits, how many employees were paid benefits, and the monetary amount itself. At that stage, the total amount paid out was R43 532 125 278.30.

Cumulative Non-COVID-19 Benefit Payment since Lockdown Inception
The table (page 11) depicted non-COVID 19 payments from 26 March 2020 25 September 2020, where the benefits types were unemployment, maternity, dependent, and illness and adoption. The Department made payments to 1 224 495 beneficiaries, to the value of R6 924 255 442.40

COVID-19 TERS Audit Action Plan

Audit Observations
Each of these areas was shown in a table which showed the audit observation, AG recommendations, action plan, progress status as at 28 September 2020, and the time frames for the action plan.
1. Non-compliance with the instruction note
2. Discrepancies relating to the appointment of service providers
3. Unfair awarding of contract
4. Fraud risks related to the manual application process
5. Fraud risks related to the manual and online application process
6. Fraud risks related to the manual application process (with different action plan to 4.)
7. Inadequate verification of employer details
8. Lack of verification of applicant representing employer
9. Inadequate system functionality for bank confirmation of uploaded documents
10. Lack of verification of employee salaries submitted during benefit claims
11. Incorrect system calculations of the TERS benefit payment for the first lockdown period
12. Applicants that are below the legal age of employment (Individuals below the legal age of employment of 15 years were paid by the UIF; progress made on this observation included all affected reference numbers being blocked on the COVID-19 TERS system.)
13. Identity number same as that of a UIF employee
14. Deceased individuals were paid TERS benefit
15. Individuals who are imprisoned were paid TERS benefit
16. Double dipping

Where students can earn enough to contribute to the UIF, the NSFAS does not have any prohibition for students. The Department has received communication from SASSA that says that there is nothing that prevents a grant beneficiary from working; beneficiaries must just pass the means test. If someone is 80 years old and still has the energy, drive, etc. to work, then they can still work. Such a person can also claim benefits but they must pass the SASSA means test. An agreement was reached that the Department would provide SASSA with its database of beneficiaries, and SASSA would engage such people in terms of whether they would still pass the means test for the receipt of a grant.

There were 30 observations in total, which can be seen in the presentation. The following observations were highlighted:

Payments to foreign nationals
The Department has spoken to the Department of Home Affairs and is currently finalising the issue of foreign nationals. With foreign nationals, one would need to check if there is a passport linked to a work permit. There are a number of different databases with the Department of Home Affairs; for example, there are asylum seekers, workers who have passports, but are not citizens at the point when the Department verifies the documents with Home Affairs. Those issues are currently being finalised, and DEL hopes to start paying beneficiaries.

Individuals who are imprisoned were paid TERS benefit
In the first payment run, DEL’s controls put in place have picked up people who have been incarcerated. Such people were not those who were incarcerated in the period that COVID-19 TERS has been active but people who were in prison since 2013, and there were claims lodged against those identity numbers. Those are the cases that have been referred for fraud investigation. DEL had to put controls in place around the issue of identity numbers. Government does not have one common database, so DEL had to engage these organs of state separately.

There was also the issue of bank verifications. DEL went through a massive process of verifying bank details in two ways: Firstly, it did it through the automatic banking system, where it dealt with the big banks that could do that for DEL quickly. Secondly, it had to do manual banking verifications, where a person banks with a bank that is not part of the automated system. DEL had to then ask the banks to do these verifications for it, which took a bit longer, but that has been finalised. If one looks at the payment runs that DEL has had since September, the number of applications that came back from banks as non-verified banking details are marginal. Some days, there are none that are returned by the banks due to banking details being unverified.

Ms Bronkhorst said that she had received DEL’s internal audit report, which is the Department’s additional assurance in terms of the controls put in place; the report gives assurance that the controls are effective.

Ms Bronkhorst gave feedback on the Special Investigating Unit (SIU). She said that the SIU gave access to a substantial amount of documents. She would have a meeting with the SIU the following day (Wednesday, 07 October 2020) to receive an update. The Unit is busy with the process of doing interviews; Members would be aware of how an investigation takes place. When she engaged the SIU, it told her that its reports would fall under three areas: Firstly, there would be the criminal case against an individual if there was proof of wrongdoing; secondly, it would do the recovery of the funds linked to that. Thirdly, there is the internal departmental disciplinary process; it would be up to each individual department to take that action against officials who defraud the Compensation Fund. DEL has also requested assistance from GTAC (Government Technical Advisory Centre) at National Treasury to assist DEL with its IT systems, to make sure that it can use what it has learned going forward. Treasury is busy with developing an app, and DEL is busy integrating this to run a pilot. This app is called “Check My File”, where someone can access the records from their phone and see what is happening with the COVID-19 TERS. Treasury is also finalising short videos on the frequently asked questions on COVID-19 TERS.

Briefing by the Department of Employment and Labour on the Compensation Fund
Mr Vuyo Mafata, Compensation Fund Commissioner, did this presentation.

The presentation contained the following:
1. Background Information
2. Directive on Workplace Acquired COVID-19
3. COVID-19 Claims Statistics
4. AGSA Audit on COVID-19 Claims
5. Conclusions and Challenges

The purpose of the presentation was to provide updates and progress on COVID-19 related claims received and processed under the Compensation for Occupational Injuries and Diseases (COID) Act by the Compensation Fund (referred hereafter as the Fund) and the Mutuals (Rand Mutual Association [RMA] and Federated Employers [FEM]) who are licensed by the Minister, in terms of section 30 of the COID Act, to administer legislation in the Mining, Iron and Steel and Construction sector.

- The Directive deals with workplace-acquired Covid-19 resulting from work-related exposures; exposure to suspected or confirmed case(s) of Covid-19 in the workplace; or while travelling on an official trip to high risk countries or areas on work assignment or while performing any duty in pursuance of the employer’s business.
- In terms of section 45 of COID the Compensation Fund is obliged to consider all claims submitted for compensation and adjudicate all claims to determine liability. In carrying out this task the Fund peruses all information to make an objective decision.
- In addition to exposure and clinical history, the Fund also considers inherent risk posed by various categories of work and occupations.

To enable the Compensation Fund to deal with claims effectively, the Department stratified the occupational categories:

Very High Exposure:
Occupations with a much higher potential for exposure to known or suspected sources of COVID-19 during specific medical, post mortem or laboratory procedures. Employees in this category include Healthcare workers, laboratory workers and morgue employees.

High exposure:
Occupation with high potential for exposure to known or suspected patients with COVID-19 due to the link their job has to the employees in the first category. Employees in this category include healthcare delivery and support employees, medical transport employees and mortuary employees involved in preparing bodies which are known to have or suspected of having COVID-19 at the time of their death.

Medium Exposure:
Occupations include those that require and/or have close contact with people who may be infected with covid-19. They may have contact with travellers who return from locations with widespread COVID-19 transmission or with the general public in areas with widespread transmission of COVID-19.
Low Exposure:
Occupations are those that do not require contact with people known to be or suspected of being infected with COVID-19, nor frequent close contact with the general public.

The above categorisation is not meant to exclude any worker from claiming; it is meant to assist employers in assessing the risk of their employees contracting COVID-19 in the workplace. The categories also help the Department to assess claims when looking at exposure questionnaires attached to the claim.

The categories were:
- Temporary Total Disablement
- Permanent Disablement
- Medical Aid (which made up the bulk of the benefits paid out)
- Death Benefits

Reporting Claims
The necessary documentation was detailed on pages 12 to 13.

COVID-19 Claims Statistics

Claims stratification
As on 28 September 2020, a total of 7 966 COVID-19 claims were received with respect to COID Act.
1. The Compensation Fund received 62% (4 929) of the claims.
2. The Rand Mutual received 35% (2 792) of the claims.
3. The Federated Employers received 3% (23645) of the claims.

The Minister issues licences to compensation schemes in specific sectors. Rand Mutual Assurance is licensed to provide a compensation scheme in the mining sector, and in the iron and steel sector. The Federated Employers Mutual Assurance is licenced to provide workman’s compensation to the construction sector; this is done under supervision of the Compensation Fund. The construction industry has not returned to full production until recently, which is one of the reasons why the Federated Employers Mutual Association’s claims are less than those of the other funds.

A breakdown (table and graph) of the claims made to the Compensation Fund were given, with numbers for each province. The Western Cape is the province with the highest number of cases reported, followed by the Eastern Cape, KwaZulu-Natal, and Gauteng; those provinces also had the highest number of claims registered. Of the total claims received, 69.8% (3 443) were accepted, and 11.0% (554) of claims were rejected. Those rejected were deemed not to be workplace-acquired COVID-19; those claimants also had the right to submit objections, and to a tribunal hearing presided over by the Department. There was 19.2% (942) pending adjudication. The slides following the Compensation Fund breakdown showed tables and graphs of the claims received by Rand Mutual Assurance, and the Federated Employers Mutual Assurance.

The Compensation Fund had the largest share of claims because it deals with all the sectors.

To date (as at the end of September), an amount of R5 007 464.01 has since been paid towards benefits. The distribution of payments is as follows:
- R664 322.20 paid for temporary total disablement and this constitutes 13% of the total amount paid.
- R51 477.53 paid towards permanent disability lump sum and this constitutes just above 1% of the total amount paid (this point should be read together with the bullet point that talks to funeral costs and dependent benefits).
- R18 251.00 paid out in funeral costs and constitutes just below 1% of the total amount paid.
- R1 015 555.16 paid out in medical aid costs and constitutes 20% of the total amount paid.
- R3 257 858.12 paid out in dependents benefits costs and constitutes 65% of the total amount paid.

There was a case where there was a fatality, and Rand Mutual Assurance had to pay dependents benefits, which would be paid in the form of a pension to the surviving dependents as well as the permanent disability lump sum (R51 477.53). The amount of R18 251.00 was paid out for funeral costs.

AGSA Audit on Covid-19 Claims
Audit Findings
1. Inadequate access controls:
When the Department implemented the new system in October 2019, one of the things that were not prioritised was the governance of scheme control and compliance functionality, which is a functionality that assists the Department to manage user access, and making sure that users have the right access where there are conflicting authorisations that have been given to users. The system needs to be able to pick it up and correct it. The reason that the module was not implemented at the time was that the Department had to prioritise specific modules, because it was moving from the old system to the new system. There were inadequate controls from a user access point of view. The governance risk and compliance module was then only worked on in 2020. At the time when the AG was auditing, the module had just been completed, and it was going through the user acceptance testing. That module has since gone live, on 20 August 2020. This module is used for management of access control to ensure that users have the right permissions for transactions that they are carrying out.

2. Inadequate application controls to prevent duplication of claims being processed:
There are no preventative automated controls to restrict duplication of claims from being registered and processed on the CompEasy system. The control weakness was that duplicate claims may be created. When the system was developed, part of the user requirements was that the claims processor should be allowed to create additional claims for a single claimant. The reason for this was that it may happen that a one individual can have multiple claims in the Compensation Fund for various injury incidents that have occurred in the past. Because of the potential control weaknesses picked up after the report from the AG, the Department worked on a solution to amend the rules in the system around the duplication of claims; this new rule was implemented on 10 September 2020, which does not give the claim handlers an option anymore. If it is a different case for the same worker, there are additional tools that the worker can use to be able to then create such claims.

3. Inadequate controls over receiving and adjudicating of claims:
A lack of controls over the receiving of claims was identified; claims are received electronically. However, there are no controls to ensure that all claims are registered before sent for further processing.  This may also lead to the duplicate processing of claims as well as fraudulent claims being processed. The Terms of Reference for the functioning of the Provincial Rapid Adjudication Panels have been reviewed and amended to ensure that the claims process is controlled while still achieving the same benefit of efficiency and speed in attending to claims. New Terms of Reference were circulated to Provinces on 26 August 2020.  The control implemented to restrict duplicate claims in CompEasy will also address the risk identified above, thus allowing the claimants to still submit their claims to any office of the Department or dedicated email addresses.

Incomplete Documentation
The Fund received some claims that have incomplete documents as prescribed by the Directive, thus causing delays in adjudicating. Some of the information that is often missing in the claim documents is laboratory results, exposure questionnaires or no first medical report and some critical fields in the claim forms left blank.

Failure to Prove Workplace Exposure
Some employers submit COVID-19 claims for infections that have not occurred at work-place (community acquired infections). In some cases, receiving claims even though the employee was off work.

Resolution of the Challenges
The Fund has embarked on stakeholder outreach programmes through webinars (e.g. webinars with employer organisations), radio and TV interviews.

- The Fund has put systems, processes and measures in place to ensure that all claims are attended to efficiently and effectively.
- Progress is monitored daily and where there are bottlenecks they are attended to.

The Chairperson asked the DG if he wanted to add anything else; the DG said that the two commissioners had covered everything.

The Chairperson said that there had been a problem of communication. He reiterated that the meeting consisted of two parts, one dealing with the AG report and the other on response of the Department to the AG’s observations. The SC would then release the AG, and would continue the meeting with the Department. The letter that was sent initially before the AG report said that the Committee was going to meet with the Department on the issue of the current and post-COVID-19 interventions to maintain existing jobs and to create new jobs. Additionally, the Department would provide a performance report relating to the Compensation Fund, referring to its COVID-19 response, which Mr Mafata had done. The SC does not have information outlining the current and post-COVID-19 interventions to maintain existing jobs, and to create new jobs. At some stage, the SC will follow up on that aspect so that it can get a debriefing. The focus will be on the AG report and the response of the Department in addressing the issues highlighted by the AG.

Ms H Boshoff (DA, Mpumalanga) thanked the AG for a comprehensive report. She said that there are many discrepancies in the UIF system. What is of concern is that right in the beginning, the SC had its first meeting with the Minister, and the question was asked whether he and his Department is ready to be able to handle all of these claims that are going to be submitted. The Minister’s answer was “yes” but clearly that this is not the case.

The Committee has seen that many fraudulent activities were possible. This has meant that many people who have not been able to work have not received the lifeline that the Minister spoke of. She asked what the consequence management processes put in place were, and whether the Committee will be provided with a report once the SIU has completed its investigation.

She then asked who applied on behalf of the prisoners and the deceased beneficiaries. It did not make sense how people can apply and get paid out without having those control measures in place. She wanted to know how it was possible to pay out R685 million to foreign nationals without having any deductions from their salaries being paid over. With these employers that applied on the foreign nationals’ behalf, has an investigation taken place, or was it a scam that was initiated by an official? She also had a problem regarding over- and underpayment. If an overpayment has been made to an employer and the money has been paid over to the employees, then it is money that was given out, and the fault does not necessarily lie with the employer; the mistake or fault could lie with the Department. It is unfair to expect an employer and an employee to repay money, because it has already been spent.

About students that have received NSFAS benefits, she said that she understood from the DG that students can work. These students that have claimed: are they contributing to the UIF? If so, how many of them have contributed? How many received UIF benefits? What was worrisome as well was that the Acting Commissioner said that many of the public servants that applied did so as employees. Could the Acting Commissioner give the Committee the total number of employees that did that? What will be done with regard to such public servants? It is “absolutely unfair”.

Ms Boshoff asked how many SASSA beneficiaries were above working age applied and passed the means test. Her last question was on the Compensation Fund. The Fund moved from one system to another, and those in charge of it did not apply to the advisory board when they changed the systems; why was this not done? There should be policies in place that say that approval should be given when systems are changed. Could the Compensation Fund presenter please inform the SC how this system differs from the Umehluko system? On the alleged fraud cases: How many are there, and how many have been finalised? What is the outcome of those alleged cases?

Mr M Mmoiemang (ANC, Northern Cape) reckoned that what was critical were the areas identified by the AG with regard to TERS. It was indicated that the audit is not yet complete. An issue is that the new system for SARS incorrectly calculated the benefits for the first lockdown period, which was 27 March to 30 April. It did not take into account the actual period of inactivity in the salaries paid by employers. It made significant overpayments and underpayments. The question on overpayments is regarding the engagement between the UIF and those employers and bargaining councils. Can the SC say that there is progress in terms of who overpaid to whom?

The second question was on the analysis between the payment data and checking the beneficiary information against other government department databases; a high number of payments were flagged and required further investigation. It was indicated to the SC that the investigation continues. This includes people who are below the legal age of employment, those working in government departments, those receiving social grants, and the students funded by NSFAS. He got the sense that the Acting Commissioner had downplayed this aspect. That was the impression that he got.

With regard to the first lockdown period, he thought that it was important that a message must be sent given the vulnerability of the institution in which the government is operating, specifically at lockdown level five; there cannot be any room for downplaying the perceived issues. If there is criminal activity on the part of all these categories a message that must be sent that criminals must be pursued so that money will be returned. Taking a cue from what the AG said, the AG also flagged the fact that there are those criminals that will always be “waiting in the wing” to take advantage of the situation.

The liquidity of the UIF is an area of concern, given that R27 billion was paid to employers. They were paid approximately R762 million; the bargaining council was paid R235 million. He got the sense that thus far, government has paid R45 billion with regard to this. His concern was around the liquidity of the fund. It was indicated to the SC that the fund’s value is approximately R140 billion. Given the outstanding period that must still be paid for, can the SC get certainty that some of the investments that were cashed by the PIC (Public Investment Corporation) would be paid for. What threat does it pose to the liquidity of the UIF?

His next point was on the Compensation Fund. He noted that the challenges relating to the CompEasy System were raised, namely, its vulnerabilities. Can the new challenges be attributed to the arbitrary change by the management, or is it a matter that relates to challenges around how it was procured? There are question marks on irregularity. It is important to get a sense as to whether it relates to the current system going live, and the system’s deficiencies as alluded to by the AG. What is also critical is what needs to be done to avoid challenges identified by the Umehluko system. It continues to be an issue that is coming through.

Ms B Mathevula (EFF, Limpopo) asked her questions via the chat box on Zoom: How many employers benefit from COVID-19 relief and did not pay their employees? What is the Department planning to do to recover the monies? How many fraud cases have been reported and how many have been resolved? How many people have been arrested? How many business premises did the Department visit per province, and what does the Department do to inspect those premises? Is the Department inspecting farms and making sure that they are compliant in safety and health standards? What is the Department’s plan in assisting those foreign workers whose permit expired, and could not go to renew their permits due to lockdown?

The Chairperson said that the major issue is consequence management. There is also the issue of further investigation and relaying charges with the law enforcement offices. The other critical area is to address the risks that have been identified by the AG, so that these things do not happen again. His worry is not only about the TERS. When he looked at the AG’s report, the worry he had was, for example, the ordinary benefits that the UIF has been giving out to the beneficiaries. With these kinds of systems that funds are using, what could have been the situation? Could it be that the Department or the UIF has lost money? The issues of ineligible beneficiaries that could not be picked up; the issue of overpayments and underpayments; invalid rejections and issues of fraud. Those things could happen with the ordinary benefits. Are the Department and the UIF able to check whether the system was able to prevent fraud and the risk areas the AG identified before TERS? He was concerned about what happened regarding the TERS, and what happened over the years before the TERS in these systems, particularly where there is no sharing of information.

On the role of internal audit: Why could it not pick up these things that are now being picked up by the AG? He said that it was impressive that the AG was able to do this audit within a short period of time. Usually Members of Parliament would deal with an annual report of the previous financial year. But now the AG was able to audit what happened in the last three or four months. He wondered if this could happen in future, where departments and entities are audited, say, on a quarterly basis. He thought that internal audit committees should be doing that kind of work (auditing more regularly).

The Chairperson pointed out that there was a standard that the Department had suspended on funds, which has now been lifted. Does it mean that those areas of controls have been addressed now, and that the SC will not find itself in a similar situation? On the matters that the Department was supposed to have dealt with, he saw that the Acting Commissioner had interacted with, e.g. Home Affairs – the challenge that Home Affairs had was addressed in 24 hours; why could it not do that itself before these matters were raised by the AG? It should have been part of the Department’s normal work. The Chairperson thought that it took the Department long to verify and validate these applications.

He agreed with Mr Mmoiemang’s view that the Acting Commissioner was downplaying the ineligible beneficiaries, particularly the NSFAS students and the SASSA beneficiaries. He asked a question of the AG: The SC should know that the Acting Commissioner is clarifying that some of these NSFAS students are also working and are therefore eligible for TERS. Things cannot just be general; the SC needs to be specific. This group of NSFAS students qualifies for TERS: the AG must assist the SC with regard to this matter, and the one of the SASSA beneficiaries. Does the latter group automatically qualify? If qualifying is generalised, then everybody getting SASSA benefits can apply, as well as people receiving NSFAS benefits. The SC needs clarity on whether there are specific students on NSFAS who qualify for benefits, as well as people on SASSA grants. He also wanted to know if the AG had made observations or findings on this. In terms of the New Audit Amendment Act, would one be able to use section 1.8 as well as section 5.1(B)(E)?

Mr T Brauteseth (DA, KwaZulu-Natal) gave the analogy of buying a used car and taking it for a test drive. He said that he usually tests the car on highways, driving it at high speeds over short distances to see how it reacts under stress. The point he was making was that systems can fail when under stress. The Minister was previously the Minister of Public Works, and he was under pressure because it was at the time when the Nkandla issue happened. Now, the Minister proclaimed at the beginning of lockdown that his Department would be up to the task, but once again, tested under pressure, it failed. The Minister needs to reflect on how this kind of thing “always comes out in the end”. It appears that the Minister did not pressure test his Department properly with COVID-19 happening. Many people have said that COVID-19 was unexpected and there was no idea of what was going to happen, but given the predictions at the beginning, it was not a difficult assumption to make that a lot of people would lose their jobs. A lot of people had their economic activity severely depressed.

He knew that the Minister is an honourable person who was just trying his best. But somebody in his Department must have given him advice which told him that this system will work. It appears that those officials have misled him; the system has now proved that it could not handle the pressure. It proved that it could not handle the attempts by “corrupted hyenas” to come in and steal money. Mr Brauteseth wanted to put it to the Minister that he needed to reflect very carefully on who he takes advice from, which officials assured him that the system would work, and what action will be taken against those officials – not only in terms of corruption, but also professional negligence. The people appointed to work in departments are supposed to be professionals. Such people are supposed to know what they are doing, and they are supposed to give Ministers proper advice. If they have given poor advice, they need to be taken to task on professional negligence, and the “gross negligence” that allowed the system to fail; they did not give the Minister the proper advice that he needs. He asked if the Minister could comment on that, and widen his enquires not only to thefts irregular payments and irregular claims, but also to the professional negligence that took place in his Department that allowed the situation to occur. Everything relates to an environment; if one creates an environment that will allow corruption, which will allow maladministration, it will happen.

The Chairperson said that the SC would allow the AG to respond, followed by the Acting Commissioner of the UIF, the Commissioner of the Compensation Fund, and then the Minister. The Members would then be allowed to ask follow-up questions.

Ms Lubambo responded to questions. She first dealt with the question of the feedback on normal benefits, as far as the system facilitating that process is concerned. She indicated that the normal audit for the UIF is still under way, which would give more insights into the ordinary benefits. Based on AGSA’s previous reviews and audits, the biggest benefit that the UIF had with regard to ordinary benefits (prior to COVID-19) was that such benefits ordinarily functioned as an insurance institution. UIF would only be paying people who are insured with it. The biggest benefit with that is that one has all of the data and information on a particular beneficiary. The UIF has such information beforehand as part of the contribution process. That would not have left room for deficiencies related to making payments to people who are not entitled to such payments. But if one looks at the COVID-19 situation, the UIF expanded to cover people who may not have been insured by the UIF, meaning that employer may not have declared that person, or the employer did not comply, but a decision was taken to say that employees should not suffer on the basis of the noncompliance of the employer; that is where the biggest risk exposure was. One would now deal with the biggest numbers of people for whom one does not have a reference, history, and one is receiving some of the person’s information right now under pressure. That is where AGSA found a lot of deficiencies coming through. If one is married to the people who were insured, the risk that comes with that is more manageable. She thought that that was why one would see ordinarily in AGSA’s previous report, on the normal benefits, that there would not have been too many issues and deficiencies. This was mainly because the UIF was an insurance fund, and one knows who is insured, and who one is paying. AGSA did not neglect some of the deficiencies that it is aware of now; as part of its normal audit, it is running some of the tests to ensure that the system is still as AGSA knows it.

On the role of the internal audit, Ms Lubambo said that AGSA engaged a lot with the internal audit. For AGSA to understand the system, it was crucial to have discussions with its teams, and for the internal audit to take the teams through the preliminary work done. The AGSA tried to make sure that it pooled some of the observations that the internal audit would have had on account of being in the system before AGSA came to do the audit. AGSA then leveraged the observations to give them more value in terms of the outcome. The entity partnered with the internal audit.

On whether the AG can audit on a quarterly basis, she explained that it is a difficult question to answer primarily because the key aspect of the AGSA is that it must be independent of management. AGSA must not find itself being under management’s fist so much that the decisions that are made collectively with the AGSA, because it will deprive all other users of that independent perspective. AGSA approached this particular audit from the audit perspective, with the understanding that it is not expressing an opinion up until it does the follow-ups for the 2020/2021 financial year, whereupon it would be able to express an opinion accordingly. It is correct to ask if AGSA can use internal audit; this is a perfect opportunity to use internal audit, which is there to give assurance or at least feedback on a quarterly basis. AGSA will do its status of the records review, where it comes on a quarterly basis to monitor if the analysis is on the right track, and to ask if there is high-level risk; that feedback can then be implemented accordingly. With doing the actual audit on a quarterly basis, AGSA would be depriving users of its independence, so it would try and manage it, but it will not be doing it.

On NSFAS and SASSA beneficiaries, she clarified that for all the items that AGSA termed double dipping, it had a detailed list indicating the person, the name and the ID number; the UIF has those details. AGSA then went and checked if people were part of the insured; were they contributing to the UIF before? The moment that AGSA sees that there is a large number that has not been contributed before, it signals a red flag because these people are entering the system for the first time under COVID-19. AGSA is privy to the fact that such people are getting benefits from the government somewhere else. For AGSA it was not so much the law and legislation that says a person cannot “double dip”; AGSA was saying to reflect on whether it was the intention as part of the COVID-19 relief to benefit the people who were otherwise being supported by government. AGSA was not saying that a certain law had been breached. In the area of double dipping, there is a high risk of fraud. Government needs to probe such cases and make sure that it is comfortable, and check that its intentions were to benefit certain people.

There was a question on using the new PAA (Public Audit Act). She replied that as part of the amendments of the AGSA of the PAA, the Committee would appreciate that because the audit that the AGSA is doing ordinarily falls under the audit of the 2020/2021 financial year, then that process of using the new PAA will follow. All other prescripts that would ordinarily need to be at play, where the AGSA would also be following up the issue of material irregularity, will automatically fall under the 2020/2021 audit by the time AGSA gets to that process. All these transactions will be subject to that audit. In instances where AGSA identifies that there is a need for it to flag some of these material irregularities, and the UIF happened to be part of that implementation, AGSA would put it through that process.

Ms Bronkhorst responded to some of the questions. On prisoners and who applied on their behalf, she said that was employers who had applied. She had a printout with the names of the employers who applied on the prisoners’ behalf. There were a small number of prisoners, specifically four of them. It is not a “massive number” compared to the number of “10 million” that the Department had been dealing with.

With deceased people, she said that one needs to make a distinction between people who had passed on before the start of the COVID-19 TERS, and people who passed on during the period. During the period, such people’s beneficiaries or estates will be entitled to the payments up to the day before the person passed on. People who passed on before the period have no entitlement to payments. It is employers who applied for deceased people. All of these scenarios are considered as risk investigations to make sure that the UIF checked whether there was a finger error of it there were any other errors. But it becomes difficult if one sees that that there is one employer who has applied for “four to ten” deceased ID documents.

On the millions that were paid to foreign nationals in the beginning, she confirmed that the Member who asked the question was correct. The payments were made before the UIF had to start the processes of verification. There was a decision taken that said, because of the nature of this COVID-19 TERS, the employer must declare that there is an employer-employee relationship between the employer and the worker that the employer is applying for. On that basis, the fund will then pay the COVID-19 TERS, and follow up any potential fraudulent transactions through the UIF’s inspectorate, through the UI auditors and through forensic investigations. Even though there might not have been deductions paid over, that was the decision that was taken.

On overpayments and underpayments, she said that once an overpayment is identified, the UIF offsets it against future benefits paid to a particular employer. The UIF also writes letters to the employer asking them for the refunds. Up to 01 October, employers have refunded R3.2 billon in overpayments to the fund. Employers have started repaying and the UIF is also following up with overpayments.

Ms Bronkhorst said that at this stage she could not give a number of NSFAS students who are receiving benefits, because the UIF’s system does not allow it to give out numbers of specific categories of beneficiaries. With the SASSA means test, Ms Bronkhorst said that her SASSA colleagues would be better-suited to give an indication of who has passed the means test after they had received the UIF benefits.

On the number of public servants who have claimed, she indicated that there are 8 732 people as at 05 October 2020. This forms part of the SIU investigation to follow all these cases in terms of public servants to determine whether they were legitimate claims or not.

On the verification of the beneficiary information, she said that one wonders why it could not have been done from the start. It would be difficult for her to answer in a factual way because she had been the Acting Commissioner only for a few weeks. One would have expected that the verification would have been done. She suspected that one of the reasons why things happened the way they did was that because of the huge number of payments, there was something overlooked in the process.

On the liquidity of the UIF she indicated that at this stage, the UIF can continue paying the TERS benefits up to 15 September 2020, and it has enough funds to pay the commitment to people who going to be retrenched. If one looks at the numbers from Statistics South Africa, UIF will have to pay those who will be retrenched, but “it is going to be tight”. The liquidity has taken a substantial knock in terms of available money. Ms Bronkhorst could not give an indication of numbers of employees that have not been paid by employers because the UIF is relying on complaints from offices. There is not definite number at this stage; as and when the UIF gets these numbers, it follows them up and make sure that its sorts this out and addresses the issues.

On fraud cases, she said that the UIF has received a total of 157 cases which relate to employers and not individuals. Of these cases, 90 were suspected of fraudulent claims, which included, for example, ghost employees, working and drawing (where companies were fully operational but claimed for COVID-19 TERS), and claiming for employees whose services they had terminated before the period. There were also employers who gave the UIF the wrong salary information. Of the cases, 67 have been finalised, nine people have been arrested thus far, and the UIF is expecting more arrests by the end of this month in order for the UIF to make sure that people are taken to task for fraudulent and corrupt activities.

Ms Bronkhorst was not able to give the number of business premises that have been inspected, or the inspections at farms. The DG might have that information available.

On the role of internal audit, she explained that internal audit is the first-line watchdog. The UIF uses internal audit to show it where its control deficiencies are. With the implementation of the additional controls, the UIF used internal audit to show it whether these controls are indeed working. The UIF is using internal audit to make sure that it addresses control inefficiencies.

On the suspension of payments, she said that there was an instance when certain payments were suspended because the UIF wanted to address system weaknesses. That was why Ms Bronkhorst requested internal audit to audit the UIF’s new controls to make sure that it does not have control weaknesses. Internal audit has provided a report that assures that those control deficiencies have been addressed. That was the reason for the suspensions, and why the UIF then started paying. The bank verifications are working, since a very small number are being returned by the banks; those that were returned did not pass the bank account verification.

On people who can apply, she said that there must be proof of an employer-employee relationship. Because of the nature of the pandemic, and the hardships that people would suffer, the UIF decided that there should be proof of an employer-employee relationship. That is being done by the declaration from an employer to say that a person is indeed working for them, and this is the salary that this person is earning. One of the additional controls put in place is that if an employer declares an employee and says “she is earning R20 000 per month”, the UIF checks if that is the salary that the employer has been paying the employee in the period preceding (the pandemic). The UIF has found employers that claim for R20 000 per month, but have been paying someone R7 000 per month, or they have been declaring R7 500 preceding. These are also cases that get referred for further investigation, because clearly there is some intent of trying to get the maximum amount out of the UIF.

The Chairperson responded that there was also the issue of consequence management, especially on general employees. The DG or the Minister could perhaps assist with that question.

Mr Thobile Lamati, DG, DEL, responded to questions. On payments to NSFAS students, SASSA recipients and others, she said that the question is whether or not one was intending to pay these people. If one was intending to pay those people, there is nothing wrong with what has been done. From the beginning, the purpose of TERS was to put money in the hands of people, especially the workers. One of the constraints the Department had is the level of noncompliance by the employers, e.g. employers who came to the UIF and declared ten people, but have 25 people on their payroll. In that case, there would be 15 people who had not been declared. The Minister urged employers to apply on behalf of employees and to declare employees on the system. For the Department, the declaration plays a very important role. This declaration says that if one has not been contributing enough, then one owes the UIF money. The second important thing about the declaration is that it says that an employer is acknowledging that their employees should not be disadvantaged because an employer has not been living up to their obligations as an employer to contribute on behalf of the employees. In consultation with the employers and workers at NEDLAC, the Department agreed that it will not disadvantage any employee. That is why the Department came up with Directive 6, which says that the Department needs to make sure that it pays everybody, and then raise a debt. If someone comes to the Department and says that “I know Mr Rayi (using the Chairperson’s name as an example), and that he works for us, and he has proof that he works for us; we have not been contributing”. The Department would pay and raise a debt, and that means that that employer owes the Department money.

On NSFAS and SASSA: when the AG asked the question of whether the Department was intending to pay such people, the Department had to ask NSFAS if it allowed student beneficiaries to work. If the students are allowed to work then the employer has an obligation to comply with the UIF Act, because such employers are not exempted from contributing. It is on that basis that NSFAS students and SASSA beneficiaries were paid. One may be drawing a grant but there is nothing that precludes one from being employed. If a person is employed, and the employer is deducting UIF contributions, then the Department is obligated to pay that person.

On foreign nationals: What the AG was flagging in the report was that one is paying people, and one is not sure if these people are in country legally. The Department understands the basis of that finding because the basis of that finding is that in terms of the prescripts that South Africa has, a person can either be in the country if they are an asylum seeker, or they have a work visa and are therefore allowed to work, or if the person falls into a special category such as Zimbabweans, Lesotho nationals, and others. The AG was saying that the Department needs to check if people are in the country legally, and secondly, the other prescript is that South Africa can import skills, such as those included on the list of scarce and critical skills. The Department’s approach has always been that if one is employed, one enjoys same rights as any other employee, whether one is in the country legally or illegally. It is the responsibility of the employer to see to it that a person’s appointment complies with all of the laws of South Africa, including the Home Affairs-related laws. There is nothing in the law that says before a person is paid; a person must be in the country legally. That is why when the Department does an inspection, it will bring immigration officials to come in and do their part.

On overpayments, the DG noted how Ms Boshoff said it was unfair that the Department blamed the employers and employees, and that it wants those groups to pay the money back. He disagreed with that. The lockdown started on 27 March. The applications that the Department got were those that indicated that people were on lockdown, even though the Department knew that some of the employees said they were on lockdown and still worked. Now some employees are coming out and saying that they worked, and they do not know why their employers claimed benefits.

Some employers claimed for days when employees were at work. If one has claimed for those days, and the Department has no way of knowing that from the start, the Department said that it will rely on the employers because they know their businesses very well, and that is why it opted to use them as disbursement agents. Employers have the proper infrastructure, and can give the Department the payroll data on the system. If one claimed knowingly then he must pay the money back; otherwise he should have used the correct days when one submitted the claim. That is why the Department is insisting that it must get the money back. The Minister is on record as saying that the Department will follow the money and make sure that the money goes to those who were supposed to benefit, and to make sure that people honoured the memorandum of agreement that the Department had with them, that they will pay the money over to employees within two days. The Department will also make sure that this money will not be used by employers to solve their financial problems in cases where they were in debt.

On consequence management, the DG said that the Minister will share the report with the SC once the SIU has completed its investigation. The Department has an obligation to act when the findings are out.

On the Compensation Fund and the CompEasy system, the DG said that there were alleged irregularities with the procurement of this system. He said that he was hearing this for the first time. There had never been an issue that had been brought to his attention, and the Commissioner has never brought up that there are question marks around the procurement of the system. The DG was of the view that the Department followed all of the processes. The Department can investigate such allegations, because any allegations that seem to cast aspersions on the integrity of the processes that the Department followed, they are worth being looked at. The Department is trying to run a clean organisation.

On whether the system was approved without getting any approval from the board, he said that anyone who has gone through the Compensation for Occupational Injuries and Disease Act will know that the Compensation Fund Board is an advisory board. Its functions are clearly stated in the law. That does not include involving itself in operational issues. There was no need for the Compensation Fund to get approval from the Board, because the DG granted that approval as the accounting authority of the Compensation Fund. The Board was taken through the reasons why the Department would want to have a system that is different from the Umehluko system. It was also informed about how the procurement process would unfold and the challenges the system would seek to address when the system is deployed. The DG knew that a number of service providers found it very easy to access Umehluko. Those service providers caused a lot of challenges by dumping duplicated claims on the system. The CompEasy system has rules that have been developed to eliminate the duplication of claims that third parties lodged on the system. It is for that reason that the Department worked with Business Unity South Africa during the lockdown to resolve a number of these complaints that some service providers had, because they said that with the lockdown, their outstanding claims sitting with the Compensation Fund would impact negatively on them because they have not been paid. After those service providers had worked with the Compensation Fund, they were told how to register on the system, and how to comply with the rules of the system. A number of service providers are registered with the system and are now transacting with the Compensation Fund. As far as the Department is concerned, the system was not implemented arbitrarily; it was implemented because there was a need identified. Such a need was discussed with the Board. Secondly, the stakeholders were also engaged. There were a number of instances where the Commissioner was communicating with the parties that would have ordinarily have been affected by any change of system in the compensation environment.

On inspections, the Department said that the focus during this period was on occupational health and safety inspections. A total of 5 406 employers were visited, and of that, only 3 158 were in compliance with the directions that the Department issued, and the guidelines that the Department of Health issued. That translated to 58% compliance. The Department visited a number of farms. There was a complaint of farmers who were taking people from one province to another, in this case from the Eastern Cape to the Western Cape, and the Department had to go and do an inspection as a way of following up that complaint.

On assisting foreigners to acquire legal documents, the DG said that the DEL does not do that as a department. It is the responsibility of that foreigner to ensure that they have legal papers to be in the country. The Department does not get involved. The only time that it gets involved is with work visas, where it makes a recommendation to Home Affairs after the Department has done its investigation.

Mr Mafata said that the DG had covered all the issues related to the Compensation Fund.

Follow-up discussion
The Chairperson wanted to check what DG said in relation to a document (page 13 of the document the Chairperson referred to). He was looking at the observations on the noncompliance with the instruction note, discrepancies relating to the appointment of service providers. He did not know if those related to the issue that the DG said he wanted more information about. He also mentioned the unfair awarding of contracts. Mr Mafata said that those matters related to the UIF.

The Chairperson said that there was the issue of consequence management, on whether there had been any negligence and what the consequences are with regard to that. The SC wanted to hear from the Department about the issue of the issue of the (former) Commissioner. He also asked about the issue of raising debts. He also asked if the Department could categorise that in terms of employers who are employing students, for example, under NSFAS. What is the process, especially those who have not met obligations for deducting contributions? How far is the Department with raising debts?

Concerning employers who are employing foreign nationals, the Chairperson said that the report of the AG expressed concern that such employers are not contributing to the fund. What is the situation with regard to raising debt with the employers of the foreign nationals? Generally, with those employers who are not contributing, but employees were paid through COVID-19 TERS, how far is that process? The four areas that the Chairperson was concerned about were negligence, consequence management, and the raising of debt, generally and specifically NSFAS and foreign nationals.

The Minister asked to respond to questions.

Mr Mmoiemang had follow-up questions. He said that the DG must look at the AG’s report. When the SC has a meeting of this nature it also looks at, as part of preparation, the previous AG’s report. On the issue of CompEasy in the AG’s report, he said that the only advice that the SC can give to the DG is that it is important that there is an interaction, because in the 2019/2020 audit, deficiencies in terms of the previous report were identified within the procurement process of the new CompEasy system. It is a matter where the DG must probably interact with the Compensation Fund so that it is much clearer in terms of the observation by the AG on the CompEasy system.

Mr Mmoiemang had a point on what the Minister raised earlier on around consequence management, particularly around the suspension of the Commissioner. He reckoned that it will be important to get a sense from the Minister in terms of the report the SC received from the AG of the basis for the suspension of the Commissioner. One of the issues that the AG raises relates to the complexity of the environment in which the Department is operating, and the challenges of the disaster itself. It is an emergency type of environment.

There has been good work done at the UIF, particularly the response, given the challenges that were there. A number of areas identified in the AG’s report were flagged around the areas that need further attention – unless there is a basis of either theft or fraud allegations that could be the basis for the suspension of the Commissioner. He asked the Minister to take the SC into confidence on why the Commissioner was suspended. On a number of occasions, the SC had an induction of the delegation and so from where he was coming from, he thought that the team had done relatively well, and in the response from the audit findings, a number of areas were identified. He did not necessarily think that the Commissioner should have been suspended.

The Chairperson said that the AG report did not indicate whether there is any negligence, and there should be consequence management, or if it is the weaknesses of the system. That is an absence in the report of the AG. Perhaps after the Minister had responded, the AG could comment on that aspect.

Ms Boshoff wanted to correct the DG. She never said that anybody must not repay. But if it was done erroneously by the Department, the Department cannot expect those employees to repay. Those that were done on an irregular basis were fine. The delegation must not turn her words around. The DG said that every Department is governed by different legislation. Is there no way that his Department, with these other departments, could enter into discussions and see how to address different legislations, so that each department can reach a common goal?

Concerning the Acting Commissioner, she said that R3.2 billion has already been recouped. What is the outstanding money that the UIF thinks it will recoup, and by when could the SC be provided with a report?

The Minister said that if one has been overpaid through an irregularity or in error, once that is discovered, the money must be paid back. During the apartheid regime, the government would not negotiate with a person; it would just deduct its money back. Now, under the current regime, Government has to negotiate the terms of repayment. It was the Labour Court’s decision. The example of Nkandla was an unfortunate example. He wanted to put it on record that Nkandla spending took place before his tenure. That matter started in 2008, but he got into Public Works in November 2011. He only had to deal with the consequences of that matter. He was the first to investigate, and his findings were similar to the Public Protector (PP) investigation. Where the PP issued findings and recommendations, these were immediately implemented. That is why the Department of Public Works (DPW) then was not cited in the Constitutional Court. The Member who mentioned Nkandla would be able to verify that with the lawyers of the Democratic Alliance (DA). Even those who were supposed to be disciplined; the Minister took disciplinary action against the officials who were involved before the Constitutional Court ruling.

He also agreed with a Member that the Department is required to hold officials to the highest professional standards; that is why the Minister placed the UIF management on precautionary suspension, pending the completion of the current investigation. It is the Commissioner, the CFO (Chief Financial Officer), the COO (Chief Operating Officer), and the head of the supply chain. There is an issue which has been flagged by the AG on the appointment of a service provider. That is not a small matter. What the Minister cannot do at this stage is to say that he was misled professionally or otherwise. He cannot pre-empt the investigations, which are going to determine whether the Department will charge or not charge. Apparently, those people have been put aside, so that the investigation will be allowed to take its proper course. Once one has a plethora of operational issues raised by the AG, those who are at the level of that particular operation are the ones who are supposed to give the answers. If one looks at the recommendations from the AG, those talk about a lot of follow-up in terms of the investigation. It was his very strong view that the Department could not investigate while those people were there. He requested that when it came to this particular area, the Department requested the MPs to be very cautious. The Minister could not be able to give reasons; he would just be compromising the old process at this stage. He said to wait for the process, and stick to the timeframes which are in the log, and as there is an outcome, the Department will be able to come and report back and say “this is what has happened”, whether people were charged or could not be charged, and where the processes would be at that particular time. This is a very sensitive area which falls within the scope of the Executive once it starts talking charges. But the outcome of the processes thereof definitely should be discussed, and those employers, if the Department happens to take action against them, they have all the recourse in the law all of the disparate resolving mechanisms and appeal processes. It cannot be by an organ of Parliament the issue of the charges by the Department, suspensions, etc. is discussed, nor the merits and demerits. He reiterated that he could not say that he was misled professionally, but added that all need to be held responsible.

The Chairperson said that when it came to issues of consequence management, the concern as Members of Parliament is to ensure that it does not interfere with the role of Government. MPs tend to be worried when a person is suspended and for a long time nothing happens. Members have previously served Department of Public Works and they know of the suspensions of that particular Department. It has been more than three months, and nothing is happening; why should the SC not “interfere” with the work of government, or departments? The SC is raising concerns as Members of Parliament; for it, it will be good if processes could be fast-tracked. He knew that the AG had indicated that no opinion was being expressed so far.

The Minister wanted to make one last input. He said that the law gives the Department 60 full days, and he did not think that the Department had finished even the first 30 days.

The Chairperson replied that he was just making an example of another department where it was more than 60 days. Fortunately, Members of this Committee also serve on the Public Service and Administration Committee; the Members also do oversight on that department and always get reports on what the departments are doing with regard to suspensions, disciplinary processes, etc. He understood that the AG did not want to express an opinion; the expression of the opinion will be part of the whole audit of the financial year. The Committee wanted to check if the AG was making recommendations, especially when it comes to consequence management.

Ms Komape said that the Chairperson had summarised what she had hoped to share with the SC. The AG was not expressing an opinion, but Ms Komape noted the point on clarifying if there was negligence when the system fails. The audit by its nature is not an investigation. Therefore, at any point in time, the AG would never get to the point of articulating whether there was intention, or whether there was negligence. The AG will tell the SC about the control in the system that did not work. It would also recommend an improvement that could help in improving. But as part of the consequence management, the AG would always recommend that the findings have been stated, an investigation be done. The investigation will also assist in determining the consequences that must happen. The AG leaves the latter as a matter between management and the Executive, because the AG is cognisant that an audit invitation can only give an observation in an audit finding, and can never get to the point where the AG says what the intention was behind a certain action; that is something that the investigation can also probe around. That is why the AG will struggle from audit to say whether an item is error or fraud. The AG will reveal what did not happen. But the issue around intention is what an investigation would indicate. It is a space that the AG respectfully leaves to management and the Executive. The AG understood that it had given a picture of its observations and recommendations.

The Chairperson asked if Members had follow-up questions. He said that the SC had released the Minister, but the Deputy Minister, Ms Boitumelo Moloi, would make closing remarks on behalf of the Department.

The DG commented on employing foreign nationals and raising debt. The way the UIF works, is that it has officials that are entrusted with the responsibility to assist the UIF, and those officials are called payroll auditors. Such officials would go to these companies. One of the approaches that the UIF took in asking employers to assist with the disbursement, as well as bargaining councils; that allowed the UIF to have a picture of the level of compliance in the different sectors. The UIF then knew of the employers who were not complying who were also part of a bargaining council, so it was easy to follow up on those employers, with the assistance of the bargaining councils. The UIF will then follow upon these matters with the employers, using the payroll auditors. Out of this exercise of following the money, the UIF will be able to deal with the issue of how much the UIF is owed by these employers. This is not something that is new; this is something that has been done for the ordinary UIF benefits. The UIF has followed the same approach mentioned above, and that is why the Acting Commissioner spoke about when the UIF has picked up overpayments to the beneficiaries, because people are not coming to the UIF to say that they have now found a job. People do not declare, and the UIF picks up that they are working, and the UIF has been paying them; from the next claim that they make, the UIF deducts the money.

From the employee side, it is much easier to do that. With the employer, the UIF will ask them to engage the debt, and make an arrangement concerning when they are going to pay. It is the same thing with foreign nationals who have not contributed. Of those who were paid, the UIF could pay them because they were declared through SARS (South African Revenue Service). The UIF did verification with SARS, and the UIF could pick up that these employers did have the specified employees; the employers are paying a contribution. SARS also collects on behalf of the UIF. The UIF could pick up that those employers were contributing. There were those who were not contributing, because even South Africans were not contributing. Because the UIF took a decision that no employee must be disadvantaged, they were then paid, because some employers could prove that those people were their employees. He said that the Minister had dealt with the issue of whether a person had made an error or not. If the bank makes an error and deposits R1 million into one’s account, one owes the bank and the bank takes the money even though it made the error. Equally, government can make an error; if it has made an error it will assume that a person is honourable and will say that there is an error and money was deposited into their account, and therefore they would pay the money back. The standards are the same; the UIF cannot have different standards for the private sector and government for dealing with these issues.

The UIF has spoken to other departments about sharing data. It has indicated that the reason that it could resume payments was because it has gone through a number of departments such as Home Affairs to verify the data that it has. On the basis of that, it was able to pay. On the report sent on 21 September on the payments that have been made, he noted that the system could pick up, e.g., deceased persons, 193 applications of that nature were rejected because of the controls that have been put in place, and because of the interactions that the UIF has had with the Department of Home Affairs. The system could pick up government employees, and 1 668 applications were rejected, because the UIF wrote to the DG of Public Service and Administration, and was allowed to access PERSAL. Two inmate applications were rejected and there were application rejections due to invalid IDs. This is because of the collaboration that the UIF has. Besides that, the Department of Monitoring and Evaluation coordinating all departments to make sure that there is ability for systems to interface.

On outstanding monies that need to be recouped, the Department said that the UIF does not have a picture of that now, unless it does the exercise of following the money and also the inspections that the payroll auditors are going to do; the auditors are currently doing inspections.

Ms Lubambo said that AGSA appreciated the opportunity to clarify some of the matters in its report. One of AG’s requests as the report was tabled is for the oversight committee to use the report as a tool to do its work in line with AGSA’s reputational promise that talks to AGSA doing the work that it does to enable governance in the public sector. She hoped that the information provided would assist the SC in taking the process forward, and support DEL to close the gaps, and ensure that the errors that have been picked up do not recur.

The Deputy Minister said that to realise some of the issues that were raised by the SC, there is a need to also speed up the Department’s own internal processes. The Department agrees that at some point in the next meeting, some of the actions plans, which must be consistent with the recommendations of the AG, should be realised, and the Department should be able to present them. All other outstanding information, and questions which the Department did not adequately respond to, will be responded to in the next meeting. She said that the SC is doing good work on oversight, and the Department is committed to cooperating fully with the SC. The Department will do everything in its power to make sure that all outstanding and necessary information will be made available to the SC.

Closing Remarks by the Chairperson
The Chairperson thanked the Department and Commissioners, and the leader of the delegation from AGSA and the team. The President had said in one of his briefings that he did not want to wait until the normal audit is done by the AG. But in this particular context, it was important to reassure that the COVID-19 resources put forth as interventions got audited, to fight corruption and fraud. There was also the fact that government made sure that those affected by the lockdown, those that did not have anything to eat; it made sure that there were intervention resources. It is unfortunate that there are these challenges of fraud and corruption. Otherwise, this was a noble idea to ensure that South African people do not go hungry because they cannot work. He thanked AGSA for highlighting the weaknesses in the system, and appreciated that the Department was working on the issues that were highlighted.

There will be another report in November. The SC might have the opportunity towards the end of January to consider that report. In the thick report that the AG published, the SC looked at the departments that are part of the SC, e.g., Tourism, Small Business Development, Trade, Industry and Competition. With Tourism, the AG said that there is nothing untoward. It was the same with Small Business Development. There are observations with regard to the entity of DTIC; there are challenges where the money that was allocated as a COVID-19 intervention was not spent (that was an observation from the AG). The SC would follow up the departments under it. It is only the UIF and the Compensation Fund, under the DEL, where there are weaknesses that have been identified by the AG. Hence the SC decided to have a meeting to get a briefing from the AG as well as responses on how those issues that are raised by the AG are addressed by the Department.

The meeting was adjourned.

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