ATC201124: Report of the Standing Committee on Public Accounts on its oversight visit to the Unemployment Insurance Fund (UIF) in Pretoria, on 30 October 2020, dated 17 November 2020
Report of the Standing Committee on Public Accounts on its oversight visit to the Unemployment Insurance Fund (UIF) in Pretoria, on 30 October 2020, dated 17 November 2020
The Standing Committee on Public Accounts (the Committee) undertook an oversight visit to the Unemployment Insurance Fund (UIF) in Pretoria on 30 October 2020. The Special Investigation Unit (SIU) performed an investigation at the request of the Minister of Employment and Labour. This investigation was further based on the special audit outcomes by the Auditor-General (AG) relating to an allegation of financial misconduct involving previous key officials. The Committee hereby reports its findings and recommendations to the House in terms of Part 13, Section 245 (1) (d) of the Rules of the National Assembly as follows:
The Committee engaged with the Unemployment Insurance Fund, on the 26 of June 2020 regarding the disbursement of Covid-19 funds. During the engagement the Committee learned that the UIF COVID-19 Temporary Employer-Employee Relief Scheme (TERS) had received 456 698 valid applications, covering a potential number of 4 447 722 employees. As a result, the UIF had disbursed over R27 billion. It had
received 462 248 applications in total, of which 456 698 were valid
The Committee had a follow-up engagement with the Special Investigating Unit on their on-going investigation, and the Auditor General on the Special Audit conducted and tabled in Parliament.
Following the briefings, the Committee undertook a site visit to the UIF to investigate the issues raised regarding internal controls, IT systems and Supply Chain Management. Section 55(2)(b)(i) of the Public Finance Management Act (PFMA), No.1 of 1999 requires public entities to keep proper records and adequate systems of internal control, a requirement which the Fund was found not to have complied with.
SIU was also invited to the oversight visit to give input on the cases that had been referred to it.
3.Objectives of oversight visits
The main objectives of the oversight visit to the Fund were to:
- Assess the level and effectiveness of internal controls;
- Assess the effectiveness of the internal audit;
- Assess supply chain management policies.
- Ascertain the scope of the SIU before the proclamation is concluded.
Mr M Hlengwa (IFP), Chairperson, leader of the delegation Mr M Dirks (ANC)
Mr S Somyo (ANC) Mr B Hadebe (ANC) Ms N Tolashe (ANC) Ms B Swarts (ANC)
Mr A Lees (DA)
Ms V Mente (EFF)
Ms N Nkabinde Committee Secretary
Delegation for Department of Employment and Labour as well UIF
Mr T Nxesi Minister of Employment and Labour
Ms Marsha Bronkhorst Acting Commissioner Ms Aggy Moiloa Deputy Director-General Ms Ditoro Makgato Deputy Director: Claims Ms Hlalisa Aderibigbe Director: Finance Ms Kholeka Maholwana Acting Director: SCM
Mr Nkosana Mthembu Deputy Director: Call Centre Mr Viwe Gqoli Deputy Director: ICT
Special Investigation Unit delegation
Mr Leonard Lekgetho Chief National Investigation Officer Mr Abraham Maboko Chief Forensic Investigation Officer Mr Sihle Abraham Chief Forensic Investigation Officer
4.Findings by the Committee
The Committee made the following findings:
- The UIF had distributed R24 billion in COVID-19 tax benefits, covering 330 000 employers and benefitting several employees in an unprecedented manner. There had been challenges and delays, particularly at the beginning when developing appropriate policies and directions and repurposing the UIF for its new mandate;
- Five service providers were required to conduct advertising campaigns in order to create awareness about the UIF Covid-19 TERS, for the duration of 45 seconds, three (3) spots per day, for four (4) weeks on their respective radio channels and related television channels;
- The UIF’s BAC requested a deviation from the normal procurement processes in order to appoint the service providers. All the service providers were appointed on a deviation basis;
- The SCM staff complained about the deviation and the interpretation of National Treasury policies;
- The entity’s ICT unit is responsible for Systems development, Networking and Business Support. This is where the wrongful payments were authorised and there are flaws on the entire system. All the same, a consulting company, Vindhya, is in its third year and was appointed to manage risk. They claimed that a risk register is updated weekly, the employees of Vindhya did not advise management about the shortcomings of the system;
- The Acting UIF Commissioner also acknowledged that payments to SANDF members were as a result of a database not updated to verify ID numbers;
- There was no verification of applicants representing employers;
- Incorrect system calculations of the TERS benefit payment for the first lockdown period were made;
- There was no adequate verification of employer details;
- The system functionality for bank confirmation of uploaded documents was inadequate;
- Details of employee salaries submitted for benefit claims were not verified; l There were applicants whose age was below the legal age of employment;
m There was a case of an identity number being the same as that of a UIF employee; n Deceased individuals as well as imprisoned individuals were paid TERS benefits. o Double Dipping was identified;
- The operation centre was understaffed and there was a backlog of 4040 claims, emails, ufiling systems;
- There was no integration of the system;
- The consultants (Vindiya) were not transferring skills to employees;
- There were several Acting personnel in key positions where appointments for permanent staff were not made;
- There was no training of staff, lack of skills and low morale among staff; u There was no real leadership to set the tone from the top;
v The Filing Room was full of boxes piling up against the walls. A safe where tender documents were said to be kept was openly accessible inside the Filing Room, with the keys carelessly hanging on the key-slot.
5.The final session with the Minister
In a final rounding up session with the Minister the following undertakings came about:
- The Minister acknowledged that a forensic investigation to acquire sufficient evidence is required since it is clear that some of the wrongdoings have surfaced even before Covid-19.
- A move for a complete overhaul of the UIF structures, IT systems, correct skills, and business model was necessary. IT expert's models from various Departments will be roped in as soon as the right model has been identified.
- The Labour Activation Programme is under investigation since they failed to roll out their programmes effectively.
- Private sector skills have to be roped in to assist with the backlogs at the Call Centre and Labour Centres.
The Committee recommends that the Executive Authority ensures the following:
- The Fund’s audit committee oversees, controls weaknesses and takes corrective action concerning internal control deficiencies;
- The entity implements a business process engineering by fundamentally rethinking and reinventing the way in whih it operates in order to dramatically improve the entity operations, specifically within revenue and benefit claims;
- Skills audit is conducted to determine whether the current staff have the required skills set for the Fund;
- The Head of Human Resources and senior management fill vacant posts as a matter of urgency;
- In the event of poor performance, the Fund implements consequence management not limited to disciplinary action but also including training interventions;
- Control activities are identified and developed with consideration of their cost and their potential effectiveness in mitigating risks;
- Management establishes, documents and implements a fraud prevention plan;
- Management maintains an effective risk management policy which continuously evaluates and updates the financial management and internal control risks;
- Reasonable steps are taken to recover debts before they are written off, and debts are recovered from the individuals responsible for the loss;
- Criminal charges are laid against individuals who have committed financial misconduct;
- Internal control deficiencies are identified and communicated in a timely manner to those parties responsible for taking corrective action.
- An effective and well capacitated internal audit division is established;
- Management implements regular assessment of supply chain performance to ensure that deficiencies are identified;
- The entity's organisational structure addresses areas of responsibility and establishes lines of reporting in order to support effective internal control over financial reporting; and
o Effective policies and procedures relating to financial reporting are established and communicated.
The Committee was generally disappointed by the extent to which the Executive Authority and management seem to have addressed the financial management weaknesses identified in the audit report, especially as some of these matters had been raised in the audit report of previous years.
In the light of the above, SCOPA resolves that the Auditor-General should conduct a follow-up special audit into the matter of financial weaknesses of the entity.
The Committee further recommends that the Executive Authority submits a quarterly progress report on the implementation of the above recommendations to the National Assembly within 30 days of the adoption of this report by the House.
Report to be considered.
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