by Michael Bagraim
We had an interesting week last week when Parliament’s standing committee on public accounts investigated and conducted and an oversight visit to the Unemployment Insurance Fund (UIF).
There was first an investigation into the auditor-general’s report, and some interesting observations.
The Department of Employment and the portfolio committee on labour did a similar oversight visit to the UIF offices. I need to reiterate that the auditor-general has a constitutional mandate and, as the supreme audit institution of South Africa, it exists to strengthen our democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence. It has to be recognised by all stakeholders as a relevant supreme audit institution that enhances public sector accountability.
The auditor-general has done us proud in that it has spoken truth to power. The auditor-general highlighted the importance of preventive controls to accounting officers and authorities. There were many shortcomings and the A-G asked them to tighten controls to prevent a recurrence. The audit was performed by multidisciplinary teams made up of fraud, IT and sector-specific experts, who supported the financial auditors to dig deeper and provide relevant insights on the auditees’ risks and operations.
This audit wasn’t just to find the culprits but also to prevent further fraud, misuse and non-compliance. It is hoped that the lessons learnt from the Covid-19 crisis will stand the country in good stead.
Sadly, the audit was delayed as the initial engagement with management took longer than expected and the information required was submitted late. It is not clear why the UIF management were reluctant to engage and hand over information immediately. The delay spoke volumes about some of the problems with management. Even after seven months, the UIF management did not seem to have complete control over the systems and controls and was in a state of disarray. More distressingly, the payment process was continuously updated and unsuccessful. Horrifically, there was limited availability of staff and most of the offices were closed during the first few stages of the lockdown.
It is fantastic to report that, after the suspension of the management team, the new management have been receptive to the control deficiencies and are keen to implement the A-G’s recommendations. The new UIF leadership has expressed their support for the audit.
Although the investment portfolio held through the PIC was R122 billion as at June 30, the investment value will probably decrease. This will threaten the viability of the fund and its ability to effectively carry out its mandate. It is said that the market value of the investments held with the PIC is expected to decline by R23.5bn in 2020/2021.
Many individuals and groupings called for the South African Revenue Service (Sars) to effect the payments on behalf of the UIF.
The request was turned down, leading to a massive disaster. Millions of workers suffered because of the UIF management’s incompetence. It is common knowledge that there has been fraud and incompetence. Many individuals were paid who shouldn’t have been paid, and hundreds of thousands haven’t been paid as yet.
All the payments made to illegitimate beneficiaries must be investigated and appropriate action taken, and the underlying control deficiency should be improved.
A total of R30 million was made to individuals with invalid ID numbers when checked against the Department of Home Affairs’ database. It is horrific to think that the UIF paid R140m to individuals who were receiving benefits from other state institutions. Obviously, management should further implement consequence management if officials are found guilty of misconduct.
We are all watching this space and hopefully will be seeing disciplinary action taken soon.
The private sector was also to blame for many of the problems. For instance, auditors were denied entry to the premises of certain employers. Officials used the excuse that the company was not sufficiently prepared to accommodate the auditors and provide the required information. In another anecdotal story, the auditors arrived at an employer’s premises to find them deserted.
It is vital for the department to verify the legal status and activities of all the companies and to verify which companies are operational. I recommend spot checks on the employers. They should be visited as part of the UIF post-validation process.
In April, I wrote that the UIF was incapable of handling the emergency payout and I drew the wrath of the department and the portfolio committee of employment and labour. I was told throughout those first six months that the Department of Employment and Labour was doing a good job in effecting the payments to workers. My experience showed me this was not the case.
Many readers of Independent Media contacted me about their horrific experiences. I have written at least 10 000 emails to the department with all these various complaints. It appears my 10 000 complaints are a mere drop in the ocean. Happily, I can report that I am getting results and we are having many of the complaints cleared. This is going to take us many months to sort out properly.
* * Michael Bagraim is a labour lawyer. He can be contacted at [email protected].
** The views expressed here are not necessarily those of Independent Media.
Cape Argus
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