A culture of impunity reigns within the department of employment & labour and its entities because there is little consequence management for wrongdoing, MPs were told on Wednesday.
This exposed the department, the Unemployment Insurance Fund (IMF) and the Compensation Fund in particular to fraudulent activities by external and internal parties, officials of the auditor-general’s office said in a presentation to parliament’s employment & labour committee on the audit outcomes for the portfolio.
Opposition MPs were dissatisfied at the non-appearance of employment & labour minister Nomakhosazana Meth at the meeting.
Particularly disturbing, the officials noted, was the state of the Compensation Fund, which once again after several years received a disclaimer on its financial statements because of its inadequate record-keeping.
Deputy business unit leader in the auditor-general’s office Zamahlangu Mditshwa recommended that a forensic investigation into the fund be undertaken — possibly by the Special Investigating Unit (SIU) — to determine the cause of the malaise and facilitate consequence management.
Poor record-keeping and delayed payments
The fund is responsible for the payment of claims for injuries or illness at work but has been criticised by medical practitioners and service providers for the late payment of claims. MPs heard that the fund did not keep adequate records to substantiate compensation benefits recorded in the financial statements.
Senior audit manager Delta Rapitsi briefed the committee on the audit outcomes of the department of employment & labour and its entities, which include the UIF, the Compensation Fund, the National Economic Development and Labour Council (Nedlac) and the Commission for Conciliation, Mediation and Arbitration (CCMA).
The audit outcomes of Nedlac and the CCMA were the best in the portfolio, both receiving unqualified opinions with no findings, but the department itself, which received an unqualified report with findings, had regressed, Rapitsi noted. The UIF received a qualified audit opinion with findings.
The department was found to have notched up R1.3bn in uncompetitive and unfair procurement processes, the Compensation Fund R623m and the UIF R65m, while the department incurred R275m in irregular expenditure due to noncompliance with supply chain management prescripts and a lack of monitoring of its budget. Irregular expenditure still under assessment or investigation amounted to R638m.
Rapitsi noted that consequence management was not adequate across the portfolio, and this encouraged wrongdoing and compromised the ability of the entities to recover the money lost. Fruitless and wasteful expenditure was not being investigated or dealt with.
“A culture of strong performance, accountability, transparency and consequence management is not embedded within the department and key entities within the portfolio, resulting in the lack of improvement in the audit outcomes and performance of the portfolio,” she said.
A culture of strong performance, accountability, transparency and consequence management is not embedded within the department.
— Delta Rapitsi
Senior audit manager
Also of concern was the slow response and non-implementation of actions to resolve material irregularities. Material irregularities reported between 2021 and 2024 remained unresolved.
Another problem was the persistent leadership instability, with the director-general of the department and commissioners of the two funds working in an acting capacity for long periods; in the latter case, for more than 12 months. Rapitsi stressed the need for suitably qualified leaders to be appointed in the next six months.
Another key concern raised by the auditor-general’s office was the number of impairments in the unlisted investments made by the Public Investment Corporation (PIC), which acts as the asset manager for the UIF and the Compensation Fund. In October last year News24 reported that about one-third of the PIC’s R100bn unlisted portfolio was in trouble and was not expected to deliver a positive return.
Mditshwa questioned the qualifications and skill of the investment committees of the UIF and Compensation Fund, which should be holding the PIC to account over the poor performance of the unlisted investments. Adequately qualified investment committees should enforce the service level agreements with the PIC, she said.
The chair of the department’s audit committee, Jabulile Nkosi, highlighted the capacity constraints in the internal audit unit, which was suffering from limited resources.
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