Labour Minister Membathisi Mdladlana has ordered a forensic audit into an auditor-general finding that unknown net debit entries totalling R10-million in the Unemployment Insurance Fund’s (UIF) 2003/04 annual report were incorrectly accounted for as bank charges.
The probe would also look at a finding that debit entries totalling R4,1-million were incorrectly accounted for as contributions received, the minister told reporters in Pretoria on Tuesday evening.
Mdladlana said he was not satisfied with the explanation given to him by the UIF and departmental officials, and has instructed acting director general Vanguard Mkosana to initiate a forensic audit under way.
The director-general is the fund’s accounting officer.
”They have tried [to explain] but I am not satisfied at all. I must make sure that I am satisfied,” the minister said.
”If the results are serious, heads will have to be chopped. If a finger is pointed, we must ask the Scorpions [special investigating unit] to sting. Not only will heads be chopped, but there will also be a sting in the butt.”
Mdladlana expressed displeasure about the bad reflection cast on the UIF and his department by findings of anomalies in Auditor General Shauket Fakie’s report.
”One is dealing with human beings. We don’t want anyone to be seen chowing state money.”
Corrections had to be made to ensure future auditor general reports did not find similar problems with the UIF’s financial statements.
”We have to put this thing right. The UIF was in the red and we fought a big battle. Now we are doing well, we cannot have these little matters.”
Fakie said he was unable to express an opinion on the fund’s financial statements — the most serious criticism an auditor-general can make.
He found problems with processes involving the collection of contributions, interest and penalties, the reconciliation of bank accounts, a ”fundamental breakdown” in internal control systems and procedures, inadequate accounting processes, and general weaknesses in information technology.
Various sections of the Public Finance Management Act, Treasury regulations, the Unemployment Insurance Act and the Unemployment Insurance Contributions Act had not been complied with, Fakie said in his report.
But Mdladlana said there was an explanation for at least one of the shortcomings listed. Fakie found that benefits erroneously paid to people who had become re-employed, amounting to R44,7-million, were written off as uncollectable without the authorisation of the director-general — as required by law.
The minister said authorisation had been lawfully delegated by the director-general, but this was not communicated to the auditor general.
Mdladlana has instructed that this be done immediately. The money has also not been written off, but was merely not reflected in the balance sheet.
UIF commissioner Shakes Mkhonto told the same media briefing the UIF could be deemed as being on a sound financial footing. It was able to meet its obligations every month, and no longer had a bank overdraft.
In 2002 the fund had a deficit of R605-million. It now had reserves of about R7,4-billion.
”The kind of qualifications in the [auditor general’s] report are not the type of qualifications saying there is a lot of wrong happening in the fund. They relate mostly to corporate governance issues.”
Mkhonto conceded there were financial management and organisational shortages, but said these were being addressed — starting with the recent appointment of a new financial management team.
On criticisms of the fund’s internal control systems, he said the internal audit function was outsourced about three years ago, and a fraud prevention unit set up recently.
”It may not be a state-of-the-art unit, but it has had successes.”
In a bid to resolve capturing and reconciliation errors, a new single computer system was being introduced — eliminating the need to manually move data from one system to another.
Mdladlana said he was confident that misunderstandings would be cleared up with the auditor general.
Regarding the unknown debit entries, he stressed that corruption would not be tolerated.
”I don’t care if you are a director or a deputy director-general, if you are corrupt or suspected of something wrong, there will be a sting.
”If there are people who think this principal [himself] is micro-managing us — there is no choice, because this reflects badly on us.” – Sapa