ATC210203Report of the Portfolio Committee on Employment and Labour on a Joint visit with the Standing Committee on Public Accounts to the Unemployment Insurance Fund Head-Quarters, Dated 3 February 2021

Employment and Labour

REPORT OF THE PORTFOLIO COMMITTEE ON EMPLOYMENT AND LABOUR ON A JOINT VISIT WITH THE STANDING COMMITTEE ON PUBLIC ACCOUNTS TO THE UNEMPLOYMENT INSURANCE FUND HEAD-QUARTERS, dated 3 February 2021

 

The Portfolio Committee on Employment and Labour, having collaborated with SCOPA, conducted a joint oversight visit to the Unemployment Insurance Fund (UIF) Head-Quarters on 30 October 2020, reports as follows:

 

1. Introduction

 

The Portfolio Committee on Employment and Labour undertook, jointly with SCOPA, an oversight visit to the Unemployment Insurance Fund Head-Quarters, in Pretoria on 30 October 2020. The purpose of this Report is to highlight the issues raised by the various units at UIF (Online Claims, Registrations and Declarations; Finance; Call Centre; ICT; Filing and Records Management; and SCM), as well as service delivery observations made by the Committee Members during the visit and to make some recommendations.

 

1. Objectives of the visit

 

The main objectives of the oversight visit to the UIF 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.

 

2.1        Background

 

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

• SCOPA was following up on some irregularities within the UIF, reported to them in June 2020.
• The Auditor-General reported, to the Portfolio Committee in September 2020, some serious financial misconduct and fraudulent investigations against the UIF.
• Some Senior Management officials of the UIF are on suspension following the investigations.
• Lack of consequence management; and inadequate management of contracts and systems, that led to wrongful payment of COVID-19 Temporary Employer/Employee Relief Scheme (TERS) to illegal and unauthorised beneficiaries.

 

In view of the above-mentioned challenges, the visit aimed to assess the implementation of the intervention strategies and consequence management, so as to ascertain some improvements in service delivery. The Committees oversight approach entails continued monitoring and overseeing the implementation of key priority areas and legislation.

 

1. Delegation

 

1. Portfolio Committee on Employment and Labour

 

The delegation comprised the following five Members:

• Hon ML Dunjwa, MP (ANC) (Chairperson and Leader of Delegation)
• Hon NL Hermans, MP (ANC)
• Hon. SW Mdabe, MP (ANC)
• Hon NE Hinana, MP (DA)
• Hon C Mkhonto, (EFF)

                       

Support Staff (1): Mr ZC Sakasa (Committee Secretary)

 

The delegation from Parliament also included eight Members of SCOPA, as well as two of their Support Staff.

 

3.2        Delegation from Department of Employment and Labour and UIF

• Mr TW Nxesi                                   : Minister of Employment and Labour
• Ms M Bronkhorst                             : Acting Commissioner, UIF
• Ms A Moiloa                                   : Deputy Director-General
• Ms D Makgato                                : Deputy Director: Claims
• Ms H Aderibigbe                             : Director: Finance
• Ms K Maholwana                             : Acting Director: SCM
• Mr N Mthembu                                : Deputy Director: Call Centre
• Mr V Gqoli                          : Deputy Director: ICT

 

1. Visit to the Unemployment Insurance Fund (UIF)

 

4.1      Opening remarks

 

The Minister of Employment and Labour, accompanied by the Acting Commissioner, welcomed the joint delegation of the Committees to the Head-Quarters of the Unemployment Insurance Fund (UIF). The UIF is one of the entities of the DEL. The Minister gave a comprehensive background on the history of the UIF, which led to the challenges the entity finds itself in today. The Acting Commissioner mentioned how the lack of accountability and incapacity amongst personnel, led to the ICT systems challenges at the entity.

 

Both Chairpersons of SCOPA and the Portfolio Committee co-chaired the session where the objectives and the purpose of the oversight visit were outlined and introductions made.  The delegation, then undertook a walk-about of the UIF headquarters, which has various units and sections situated in different floors of the building, as listed below.

 

4.2        Walk-about of the facility

4.2.1     Online Claims, Registrations and Declarations

Situated on the 14th Floor this section deals with online claims, registrations and declarations.            

4.2.2       Finance

This section is situated on the 13th Floor, processes the payments of daily benefits. For example most of the claims processed here are escalated from the various Labour Centres in different provinces.

4.2.3       Call Centre

The Call Centre is found on the 8th Floor and has 8 supervisors and 39 agents, who are inundated with calls and emails, on a daily basis, either registering complaints; requesting TERS pay-outs; or normal UIF claims. Currently there is a backlog of about 440 000 plus, emails that have to be processed by 8 of the 39 agents.

4.2.4       ICT

The entity’s ICT unit is situated on the 5th Floor and 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 on a weekly basis, the employees of Vindhya did not advise management about the shortcomings of the system.

4.2.5       Filing and Records management

The Filing Room is situated on the 11th Floor and is full of boxes piling up 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.

 

1.       Session with Supply Chain Management

The joint delegation moved back to the 4th Floor, where it met in a session with the SCM personnel. Communication lines between senior and junior staff are very strained and in general officials are scared to take decisions for fear of victimisation since there are a lot of suspensions going on. The SCM staff complained about deviation and interpretation of National Treasury policies. The AG findings suggested that no proper SCM processes were followed to appoint at least 5 companies for awareness campaigns and that appointments were made based on motivation for sole service providers.

 

4.4        Final session with the Minister and Acting Commissioner

 

In a final rounding up session with the Minister and current Senior Management of the UIF the following undertakings came about:

 

• The Minister acknowledged that a meticulous investigation to acquire sufficient evidence is required, since it is clear that some of the shenanigans have surfaced even before COVID-19.
• During level 5 lockdown already, the idea of “Follow the Money”, was agreed to at Nedlac, to identify fraudulent payments needed to be brought to speed. Companies nominated to follow the money acted very late.
• A move for a complete overhaul of the UIF structures, IT systems, Correct Skills, and Business Model, has put before the DG and Senior Management to start the wheels rolling. IT experts from various Departments will be roped in as soon as the right Model has been identified.
• The Labour Activation Programme is also under investigation since they failed to roll out their programmes effectively.
• Private Sector might have to be roped in to assist with the backlogs at the Call Centre and Labour Centres.

The Acting UIF Commissioner concurred adding that the UIF will commence with the training of 300 Call Centre agents to strengthen their capacity to deal with the backlog.

• Acting UIF Commissioner also acknowledged that payments to, SANDF members, was as a result of a database not updated to verify ID numbers.

 

4.5        Overall Committee Observations

 

The Committee made the following overall observations:

 

1. The UIF had distributed R24 billion in COVID-19 TERS 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.
2. The 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;
3. 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;
4. Lack of verification of applicants representing employers.
5. Incorrect system calculations of the TERS benefit payment for the first lockdown period.
6. Inadequate verification of employer details.
7. Inadequate system functionality for bank confirmation of uploaded documents.
8. Lack of consideration of salary portion paid by the employer in the calculation of pay-out for the first lockdown period.
9. Lack of verification of employee salaries submitted during benefit claims.
10. Applicants that are below the legal age of employment.
11. Identity number same as that of a UIF employee.
12. Deceased individuals were paid TERS benefit.
13. Individuals who are imprisoned were paid TERS benefit
14. Double Dipping, where companies would claim but not pay out to the employees.
15. The operation centre is understaffed and there was a backlog of 4040 claims, emails, u-filing systems.
16. Employees did advise management about the shortcoming of the system.
17. There was no integration of the system.
18. The consultants (Vindhya) were not transferring the skills.
19. Acting key positions without appointing permanent staff.
20. Lack of training, skills, and low morale of staff.
21. Lack of leadership to set the tone
22. The Acting UIF Commissioner said that the Fund will commence with the training of 300 call centre agents to strengthen the call centre capacity to deal with the backlog.
23. Acting UIF Commissioner also acknowledged that payments to, SANDF members, was as a result of a database not updated to verify ID numbers.

 

4.6        Committee Recommendations

 

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

 

1. The UIF’s audit committee oversees, controls weaknesses, and takes corrective action concerning internal control deficiencies;
2. The entity implements a business process engineering by fundamentally rethinking and reinventing the way in which it operates in order to dramatically improve the entity operations, specifically within revenue and benefit claims;
3. A skills audit is conducted to determine whether the current staff have the necessary skills required by the UIF;
4. The Head of Human Resources and senior management fill vacant posts as a matter of urgency;
5. In the event of poor performance, the UIF implements consequence management not limited to disciplinary action but also including training interventions;
6. Control activities are identified and developed with consideration of their cost and their potential effectiveness in mitigating risks;
7. Management establishes, documents, and implements a fraud prevention plan;
8. Management maintains an effective risk management policy which continuously evaluates and updates the financial management and internal control risks; and
9. Reasonable steps are taken to recover debts before they are written off, and debts are recovered from the individuals responsible for the loss.
10. DEL appears before the Portfolio Committee to present a strategy on how to turn around the current situation at UIF.
11. A full report on the investigations by the Special Investigating Unit and cases of fraud against the UIF is provided to the Committee as soon as it is finalised.
12. An electronic filing system is installed to avoid the pile of boxes in the Filing Room.

 

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 the report has been adopted in the National Assembly.

 

 

Report to be considered.