Michael Bagraim writes that AG audited the Compensation Fund and the Unemployment Insurance Fund, and in both the entities, which fall under the Department of Employment and Labour, there was a finding of the worst-case scenario. Picture: Karen Sandison/African News Agency(ANA)
Michael Bagraim writes that AG audited the Compensation Fund and the Unemployment Insurance Fund, and in both the entities, which fall under the Department of Employment and Labour, there was a finding of the worst-case scenario. Picture: Karen Sandison/African News Agency(ANA)

Annual audits for UIF and Compensation Fund of concern

By Michael Bagraim Time of article published Jun 10, 2021

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In a previous article, I spoke about the Auditor-General of South Africa (AG) who has a constitutional mandate and, as the Supreme Audit Institution of South Africa, exists to strengthen our country's democracy by enabling oversight, accountability and the government in the public sector through auditing, thereby building public confidence.

The AG does annual audits and examines whether there is fair representation and absence of significant misstatements in financial statements. The AG also looks at the reliable credible performance, information or predetermined objectives.

Above that, they need to ensure that there is compliance with the laws and regulations governing financial matters. We have spoken about some of the audits and the problems the AG experienced with the Department of Employment and Labour.

They can express different opinions, ranging from an unqualified opinion with no findings, that is a clean audit, to the other end of the scale where there is a disclaimed opinion, which means that they failed their audit.

Last week, a report was tabled after the AG audited the Compensation Fund and the Unemployment Insurance Fund.

In both the entities, which fall under the Department of Employment and Labour, there was a finding of the worst-case scenario. They have shown that the Compensation Fund remains weak which they state is “very concerning”. They say that management shows a complete lack of urgency to improve their control environment.

Furthermore, there has been an adverse opinion from the auditors for the previous eight financial years. Every year was disclaimed.

Above this, there were material misstatements in the UIF and, even worse, the UIF is accumulating additional qualification areas which indicate a regression in the control environment.

Shockingly, the AG said: “Material non-compliance with legislation was identified at both these entities”.

Independent Media readers would have seen my comments over the past few months, about the UIF and the way in which the workers of South Africa have been maltreated. Almost daily, many readers have come back to me via email, explaining how badly they have been treated and how they have suffered because of the non-payments from the UIF.

It would also have been noted from many of my previous comments that the Compensation Fund has been dysfunctional for the past 20 years. Once again, our readers have been diligent in reporting many of the mistakes and incompetencies to me which I have, in turn, sent to the commissioners of the UIF and the Compensation Fund.

With regard to credible financial reporting, both entities received a disclaimer. In particular, the Compensation Fund obtained a disclaimer of opinion because they did not provide appropriate audit evidence to support amounts reported in the financial statements.

This has been the case for more than five years, and is therefore extremely concerning and requires urgent intervention.

Unfortunately, when faced with these problems it appears that the Labour Ministry is hamstrung. Very little has been done, over the past eight years, to try to improve the situation.

In some cases, the AG has noted a regression. There has been fruitless and wasteful expenditure and even some of the claims of the previous years were incorrectly included in the current year expenditure. Amazingly, investment properties values are incorrect and there appears to have been material problems in the final submission after the audit on reliability of the reported information. There was insufficient supporting evidence to support the performance achievement.

Every year, the commissioners give glowing reports on their achievements to the portfolio committee of employment and labour and Parliament. When one digs deeper there is insufficient supporting evidence.

The worst-case scenario is that consequence management does not seem to have found its way into the management of the Compensation Fund. The officials who had incurred irregular expenditure and fruitless and wasteful expenditure don’t seem to have faced disciplinary steps.

The AG pointed out that there was no maintenance of proper and complete records to support that investigations had taken place. The same was said about the UIF. I quote from the report: “Disciplinary hearings were not held for confirmed cases of financial misconduct committed by some of the officials.”

The Compensation Fund has had wasteful expenditure of R21 million for the current year.

All the above seems to translate into enormous problems for the workers of South Africa. When workers are injured or when they get dismissed or retrenched, they expect help from the very funds that they and the employers contribute to. This contribution is the workers' money and does not belong to government.

Despite this, it appears that both entities have squandered the workers' money and, at the very time in history when the workers of South Africa really need help, that help is not forthcoming.

* Michael Bagraim is a labour lawyer. He can be contacted at [email protected]

** The views expressed here are not necessarily those of Independent Media.

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