Employment and Labour Minister Thulas Nxesi has told his ministry’s parliamentary oversight committee that his department needs to “talk less” and do more to combat the years of irregular expenditure and mismanagement that have plagued the Compensation Fund.
“[T]here must be less talk now. And there must be, actually, acting involved,” he said on Tuesday.
The portfolio committee on employment and labour had called the managers and heads of department to account before it after a damning May presentation by the auditor general regarding the Unemployment Insurance Fund (UIF) and the Compensation Fund (CF).
The Compensation Fund has received disclaimers from the auditor general for several years because of insufficient information being provided on its financial statements.
When the auditor general appeared before the committee on May 28, it said that internal controls at the UIF and Compensation Fund were “weak” and “concerning” and had “resulted in a prolonged situation of unauditable information for a period of 10 years, especially from the CF”.
The auditor general’s business executive, Michelle Magerman, told the committee in May: “Financial statements are submitted late and contain errors that could not be corrected, this often results in qualified opinions. The CF could not provide credible information, this is concerning and requires intervention.”
The auditor general found “material misstatements identified by the auditors in the submitted financial statements were not adequately corrected and the supporting records could not be provided for audit”.
It was further found that the Compensation Fund’s financial statements did not reflect the full extent of irregular expenditure and that “effective steps were not taken to prevent fruitless and wasteful expenditure”.
On the issue of consequence management, the department was unable to provide audit evidence that disciplinary steps were taken against officials who had permitted irregular expenditure amounting to more than R86-million in previous years.
The chief director of human resources at the department, Ntombekhaya Qamata, told the committee on Tuesday that, after establishing an anti-corruption integrity management structure in 2017, the department had dismissed 10 officials since 2018.
The committee also heard that fruitless and wasteful expenditure increased from R9-million in 2018-19 to R27-million last year, and that irregular expenditure had only decreased from R12.6-million to R11.7-million in the same period.
The Compensation Fund’s financial head, Vinay Ramnath, told the committee that several of the cases of irregular and wasteful expenditure in the register were dated between 2009-10 and 2013.
Ramnath added that despite incomplete registers for 2019 and 2020, the Compensation Fund was now in a position to ensure complete registers for the 2021 financial year.
Committee chairperson Mary-Ann Dunjwa expressed concern about the findings in auditor general’s report, saying: “If you have a disclaimer of so many years it talks of the leadership of the organisation.”
Compensation Fund commissioner Vuyo Mafata told the committee that the department had two turnaround strategies, the first dating back to 2015, but that during the first strategy, the department “had an issue of shortage of skills in terms of the organisation, as well as some of the basic functions of finance”.
He said that despite this, it had been possible to “stabilise the operations of the fund, start producing monthly financial accounts” and pay benefits on a regular basis. The strategy also allowed the department to conduct skills’ audits “that led to the restructuring, or the new structure, of the Compensation Fund”.
Nxesi told the committee that the department was finalising its latest plans for submission to the standing committee on public accounts (Scopa).
On 19 May, Scopa ordered the department to facilitate a forensic investigation into the affairs of the Compensation Fund.
“We are hard at work coming up with the action plans which have to be submitted. We were given 21 days from the day we appeared [before Scopa]. And even those action plans as we finalise them we have to also show the AG [auditor general that the plans] are addressing what is supposed to be addressed,” said Nxesi.
“I think even this portfolio committee must demand those [action plans] from us so that they can be able to hold us accountable.”
Dunjwa said the department must provide information on its plans to parliament by the end of July, before it met again in August.