ATC200618: Report of the Portfolio Committee on Employment and Labour on an Oversight Visit to the Compensation Fund Head-Quarters, Dated 10 June 2020

Employment and Labour

REPORT OF THE PORTFOLIO COMMITTEE ON EMPLOYMENT AND LABOUR ON AN OVERSIGHT VISIT TO THE COMPENSATION FUND HEAD-QUARTERS, DATED 10 JUNE 2020

 

The Portfolio Committee on Employment and Labour, having conducted an oversight visit to the Compensation Fund Head-Quarters on 13 March 2020, reports as follows:

 

1. Introduction

 

The Portfolio Committee on Employment and Labour undertook an oversight visit to the Compensation Fund Head-Quarters, in Pretoria. The decision to undertake an oversight emanated from the discussions following the presentation by the Fund on its second quarter performance report. The meeting of the Portfolio Committee on Employment and Labour where the presentation was made took place on 26 February 2020 and was attended by a number of stakeholders. One of the issues discussed at this meeting was the migration from uMehluko to Comp-Easy information system, where there was a major disagreement among Members of the Committee on the efficiency of the new system. This report aims to highlight the observations of the Committee following engagements with the officials of the Fund and make some recommendations.

 

1. Objectives of the visit

 

The objectives of the visit were informed by, among others things, the following facts:

• The Fund received disclaimers with findings in all their audit outcomes over the past five years i.e. 2014/15 to 2018/19.
• The Auditor-General reported some of the non-compliance areas to include: Poor quality of financial statements with material misstatements not corrected; irregular expenditure; fruitless and wasteful expenditure; inability to collect debts; lack of consequence management; and inadequate management of contracts.
• The Fund identified the following service delivery challenges:
  • Inadequate ICT infrastructure resulting in volumes of unpaid medical claims and infrequent payment of benefits.
  • Refusal by medical providers to assist CF clients.
  • Medical service providers who destabilise the Fund’s systems for their own advantage.
  • Unregulated involvement of third parties in the claims process.
  • Claims data is still in three systems (e-Claims, ICM and uMehluko).
  • Limited medical professionals for assessment of medical claims.

 

In response to the above-mentioned challenges, the Fund developed an Action Plan, which was implemented in phases. Phase 1 was implemented from July 2015 to April 2018. The entity is currently implementing Phase 2 of the plan.

 

In view of the above-mentioned challenges, the purpose of the visit was to assess the implementation of the Action Plan so as to ascertain whether there is improvement in service delivery. Furthermore, it was also to expose the Members of the Portfolio Committee on Employment and Labour to the operations of the Compensation Fund, including operations of the new Comp-Easy system.

 

1. Delegation

 

1. Portfolio Committee on Labour

 

The delegation comprised the following Members:

 

• Hon ML Dunjwa, MP (ANC) (Chairperson and Leader of Delegation)
• Hon NP Nkabane, MP (ANC)
• Hon NL Hermans, MP (ANC)
• Hon M Nontsele, MP (ANC)
• Hon AS Zuma, MP (ANC)
• Hon NE Hinana, MP (DA)
• Hon H Denner, MP (FF Plus)

 

Apologies were received from the following Members:

• Hon. Mdabe (ANC)
• Hon. Bagraim (DA)
• Hon. Cardo (DA)
• Hon. Ngwezi (IFP)

 

Support Staff:

• Mr Z Sakasa (Committee Secretary)
• Mr S Ngcobo (Content Advisor)
• Mr T Mokoena (Researcher)

 

1. Visit to the Compensation Fund (CF)

 

The Department of Employment and Labour (DEL), was led by the Director-General (DG), Mr T Lamati and the CF was represented by, among others, the following:

• Mr V Mafata, Commissioner of the CF;
• Ms T Nene-Shezi, Chairperson of the CF Board;
• Ms L Francois, Chairperson of the Internal Audit Committee;
• Mr Sihlangu, Claims Registration;
• Ms Ruiter, Medical Benefits; and
• Mr Fakier, Rehabilitation Services.

Other Board Members representing Organised Labour and Business were also present.

 

4.1.       Opening remarks by the Director-General

 

The Director-General (DG), as the Accounting Officer at the Department of Employment and Labour (DEL), welcomed the delegation of the Portfolio Committee to the Head-Quarters of the Compensation Fund (CF). The CF is one of the entities of the DEL. The DG gave a comprehensive background on the history of the CF, which led to the challenges the entity finds itself in today. The DG started by explaining that the CF performs functions of a medical insurance, pension fund, medical benefits as well rehabilitation functions. Further he explained that before 2014 functions were centralised and currently they are decentralised. Previously operations were manual, currently they are automated. When the current GD started in 2014, he changed the management structure, except risk management. The medical services, claims as well as disability and rehabilitation management structures were changed. Medical doctors were appointed in provinces when the new structure was introduced. Third parties have been involved in the claims process for a long time. The involvement of the third parties resulted from the inefficiencies of the Fund. The third parties employed the previous employees of the Fund who knew the inefficiencies of the Fund and exploited them to the benefit of the third parties. The CF realised that uMehluko system was not what it needed, hence the introduction of Comp-Easy. The transition from uMehluko to Comp-Easy started on 1 October 2019. The uMehluko system was switched of but migration of data to the new system is ongoing. Therefore, there is currently one system that is operational. The DG explained that the current complaints from the third parties are as a result of the leaks in the system being closed.

 

The DG explained that the purpose of introducing the Compensation for Occupational Injuries and Diseases (COID) Amendment Bill is to eliminate having to deal with third parties in future.

 

The DG explained that the root course of ICT related problems is that SITA is responsible for facilitating ICT related matters in government departments. Therefore, providers of ICT services are sourced by SITA. The system experiences downtimes on several occasions resulting in Labour Centres being unable to work. The DG proposed the separation of the Department from SITA as proposed by the Minister of Home Affairs.

 

4.2.       Opening remarks by the Chairperson

 

The Chairperson outlined the objectives and the purpose of the oversight visit and requested for introductions. and the entity to proceed with presentations. 

 

4.3.       Presentation by the CF Board

 

The Chairperson of the CF Board, Ms Thembi Nene-Shezi, briefed the Committee on problems encountered by the entity. She mentioned

 

As part of its deliberations, the Committee agreed to request the Department of Employment and Labour to investigate the third party service providers and report to it in its next engagement. The Committee also recommended that the CF should not entertain these third party service providers since workers can make their own claims through the legal processes.

 

4.4.       Presentation by the Internal Audit Committee

 

The Chairperson of the Internal Audit Committee, Ms Lorraine Francois, presented on the internal processes followed by the Internal Audit Committee. The Chairperson of the Internal Audit Committee alluded to the necessity of restructuring the Fund so as to separate it from the DEL. This proposal was rejected by the DG. He explained that he is the chairperson of the Fund in accordance with King Report IV. However, he has too much on his plate and as a result has delegated the function. The DG further asserted that the independence of the Fund does not guarantee that it will be out of the woods.

 

According to the DG, the Fund needs competences that it does not have. These competences are available in the country but the Fund has to compete with the Department of Health, Medical Aids and others for these skills. Hence, the CF has introduced bursary schemes for studies towards these competences.

 

The Chairperson of the Fund explained that her proposal was a review of the structure to ensure that it is fit for purpose. Further, she explained that currently the CF has to go through DEL to procure most of the resources including human resource. The current structure result in delays in decision making.

 

With regard to the consolidated action plan that was not seen by the Internal Audit Committee, the Chairperson explained that the plan came in when the Auditor General came for audit, before the Committee had seen the plan.

 

The Chairperson of the Internal Audit Committee proposed a model similar to State Owned Entities, where government departments are shareholders in entities.

 

 

 

 

 

 

4.5.       Presentation by the Commissioner of the Compensation Fund

 

Mr Mafata explained that the end-date of the Action Plan is March 2022. He stated that there were 84 000 claims registered at the end of Q2 under uMehluko. Many claims were rejected by Comp-Easy system, which started in October 2019.

 

The students who are supported through bursaries offered by the Fund are at Pretoria University, University of Cape Town, University of KwaZulu-Natal and Tshwane University of Technology. Mentoring and support for students is provided.

 

Mr Mafata reported as follows with regard to fraud investigations:

• Two (2) cases were referred to the HAWKS.
• Three (3) officials were dismissed from the Public Service.
• R160 million case was finalised internally and 8 officials were dismissed. Three officials were exonerated.
• Eight (8) cases were referred to Commercial Crimes Unit.
• Twenty-one (21) cases were referred to South African Police Service (SAPS).
• There were 21 cases of fraud against medical doctors. R170 000 was returned to the CF with interest.
• Fine of R500 000 and 10 years suspended sentence for some officials for colluding with service providers.

 

In response to why the PIC is not held to account by the Fund, Mr Mafata explained that the PIC is a fund manager and a minimum service level agreement was concluded with it. The agreement provides for penalties for non-performance. The relationship with the PIC might not be managed well.

 

4.6.       Comp-Easy system demonstration

 

The demonstration on how the Comp-Easy system works was conducted for the members of the delegation. The demonstration covered:

• User registration approval
• Registration of a claim
• Claim adjudication
  • First medical report
  • Progress medical report
  • Final medical report
• Medical claims adjudication
  • Delegations according to salary levels
• Create pre-authorisation assessment letter
• Schedule case management/ Disability manager
  • Presentation by Occupational Therapist

 

It was explained that the employment of orthoptists has saved the Fund approximately R7 million in the past six months since they were employed.

 

4.7.       Walk-about by Chairperson of the Portfolio Committee and Honourable Hermans

 

The Chairperson gave a feed-back on their walk-about on the head-quarters of the Fund. The Chairperson and Honourable Hermans met the reception staff who informed them about challenges they encounter with walk-in clients. While the members were there, they engaged with one walk-in client who had administrative challenges. The client was assisted and the problem was escalated to the relevant manager. The client was satisfied with the assistance she received.

 

They were also taken to where claims are processed. This is where they were informed about the required information for a claim to be adjudicated. They were informed that failure to provide all the required information result in a claim being rejected. When a claim is rejected the claimant is informed of outstanding information. Some claimants resubmit the claim with outstanding information while others don’t.

 

The members also visited the Call Centre where one of the attendants received a complaint regarding access to the system. The client was informed that he was not registered as the user and was assisted to register. The client confirmed while the members were still there that she could access the system after she was assisted with registration.

 

Overall the Members were impressed with the demographic profile of the staff establishment of the Fund.

 

1. Committee observations

 

The Committee made the following observations:

1. Migration from uMehluko to Comp-Easy system has some challenges.
2. Despite challenges with regards to Comp-Easy, the system is functional on the internal user side and has resulted in open leaks being closed.
3. The closure of leaks in ICT system has resulted in frustration of the third parties.
4. The separation of the CF from the DEL is not necessary at this stage.
5. The challenges of the service level agreement between the Compensation Fund and Public Investment Corporation (PIC) were noted.
6. The CF is still grappling with historical inefficiencies.

 

1. Committee Recommendations

 

The Committee made the following recommendations, that the Minister of Employment and Labour ensures that:

1. A full forensic report be provided on all investigations and cases of fraud against the Compensation Fund.
2. Nationwide inspections and investigations be continued with, particularly with regards to fraudulent medical claims; and IT support is provided for end-users of Comp-Easy system.
3. Internal Audit should visit provinces in order to investigate what is happening at provincial level.
4. The Committee is updated on processes regarding resolution of challenges with SITA.
5. The minimum service level agreement concluded with the PIC is monitored and there are consequences for non-performance.
6. CF tables the implementation report of the Action Plan on a quarterly basis.

 

The Department of Employment and Labour should report back to the Portfolio Committee on Employment and Labour on progress made with regard to the above-mentioned recommendations within one month after this report has been adopted in the National Assembly.

 

 

Report to be considered.