Compensation Fund

Annual Report Presentation

10 October2013

Overall Responsibility:Compensation Commissioner: Mr. S. Mkhonto

2

Table of Contents Slide1. Overview & Objectives of the Fund 3

2. CF Measurable Objective 4

3. Service Delivery Outcomes 5

4. Situational Analysis 6

5. 2012/13 Major Achievements 7

6. Performance Information 8

7. Budget Allocation and Utilisation 30

8. Auditor-General Report 33

3

Overview & Objectives of the Fund• The Compensation Fund is a public entity of the Department of

Labour.

• The Fund administers the Compensation for Occupational Injuries and Diseases Act no. 130/1993 as amended by the COIDA 61/1997.

• The main objective of the Act is to provide compensation for disablement caused by occupational injuries or diseases sustained or contracted by employees, or for death resulting from such injuries or diseases, and provide for matters connected therewith.

4

CF Measurable Objective

“To pay compensation for death or disablement caused by occupational injuries and diseases

sustained or contracted by employees within 90 days of receipt of full documentation”

5

Service Delivery OutcomesGovernment Service Delivery Outcomes

DOL Strategic Objectives CF Strategic Objectives Accountable Programme

Outcome 4: Decent employment through inclusive economic growth

Strategic Objective 3: Protecting vulnerable workers

Promote policy advocacy Communication

Strengthening corporate governance Risk Management, Internal Audit

Integration of CF with the comprehensive social security reforms

Legal Services

Strategic Objective 5: Strengthening social protection

Providing an efficient social safety net Compensation, Medical

Improve financial viability Finance

Outcome 12: An efficient, effective and development oriented public service and an empowerment and inclusive citizenship.

Strategic Objective 8: Strengthening the institutional capacity

Provide professional, efficient and client orientated human resources

HRM

Improve corporate support and services ICT

Enhance quality and access to COIDA services and information

Organisational Effectiveness, PMO, ICT

6

Situational Analysis• IT Systems.• Turnaround time in processing of compensation claims.• Backlog in processing claims and payments.• Delay and/or non-reporting of accidents.• Human capacity constraints.• Document management.• Records management system.

7

2012/13 Major Achievements

• Implementation of the ROE Website.

• 21 Strengthening of Civil Society Fund (SCSF) projects were funded and monitored.

• Sections for of COID Act to be amended and ready for consultation.

PERFORMANCE INFORMATION

Compensation Claims Registered and Adjudicated for 2012/13

SystemClaims Registered

Claims AcceptedClaims Repudiated

Outstanding information

E-claims 26 584 15 408 112 12 911

SAP 169 925 113 997 244 63 226

Total 196 509 129 405 356 63 226

Compensation Fund Claims (Comparison with previous financial years)

COMPENSATION FUND NOT ACCEPTED

PERIOD CLAIMS REGISTERED

CLAIMS ACCEPTED CLAIMS REPUDIATEDOUTSTANDING INFORMATION

1 April 2012 to 31 March 2013 196 509 129 405 356 63 226

1-APR-2011 TO 31-MAR-2012 141 437 110 180 129 31 128

1-APR-2010 TO 31-MAR-2011 215 493 190 168 447 24 878

1-APR-2009 TO 31-MAR-2010 200 560 178 293 361 21 906

1-APR-2008 TO 31-MAR-2009 203 711 182 788 740 20 183

Benefit Type

Total number of payments (Number awarded)

Amount(R)

Additional Compensation3 2 753 026

Burial Expense207 1 686 996

CAA7 257 13 847 778

Lump sum To widows459 5 913 711

Partial Dependency14 437 870

PD Lump sum Payment 3 547 95 708 018

Pension to employee and fatal295 752 791 291 057

TTD18 722 79 534 725

Widow Pension18 245 1 138 681

TOTAL325 502 992 311 862

Compensation benefits processed : April 2012- March 2013

Claims breakdown and comparison with the previous years

Benefit typeAwards 2011/2012

Awards2012/2013

Amount awarded 2011/2012

Amount awarded 2012/2013

Additional Compensation

sect 56 1 3 200 000 275 3026

Burial Expenses 184 207 1 372 866 1 686 996

CAA 8 641 7 257 12 520 809 13 847 778

Lump sum to Widows 240 459 2 467 344 5 913 711

Partial Dependency 7 14 77 843 437 870

PD Lump sum payment (30%)

4 206 3 567 93 395 328 95 708 018

Pension 168 310 295 752 344 526 553 798 291 057

TTD 23 561 18 722 94 439 959 79 534 725

Widow pension 140 18 245 147 913 1 138 681

Totals 205 150 325 502 549 000 702 999 311 862

Claims per Province April 2012 –March 2013

PROVINCE CLAIMS REGISTERED CLAIMS ADJUDICATED

Eastern Cape 276 114

Free State 212 117

Gauteng (Pretoria Office) 23 201 13 092

Gauteng (JHB Office) 750 447

Kwazulu-Natal 768 462

Limpopo 189 92

Mpumalanga 136 52

North West 166 97

Northern Cape 53 32

Western Cape 833 431

Other SAP 175 140 84 290

TOTAL 201 724 99 226

Claims Comparison per Provincial Office

Province Claims registered 2011/2012

Claims registered2012/2013

Claims accepted2011/2012

Claims accepted2012/2013

Eastern Cape 24,452 276 24,491 114

Free State 3,516 212 3,375 117

Gauteng Pretoria Office 93,407 23 201 103,974 13 092

Gauteng Johannesburg Office

1,685 750 1,332 447

Kwa -Zulu Natal 4,853 768 4,008 462

Limpopo 1,672 189 573 92

Mpumalanga 3,362 136 6,276 52

North West 870 166 1,983 97

Northern Cape 2,561 53 778 32

Western Cape 4,906 833 4,145 431

Other SAP-ICM 23248 175 140 13,647 84 290

Totals 164,532 201 724 160,554 99 226

STRATEGIC OBJECTIVE:PROVIDING AN EFFICIENT SOCIAL SAFETY NET

A total of 21 SCSF projects were funded and monitored namely, Qholaqhwe, Mangaung; Maokeng; Hope Town; Marydale; Sika Sonke; Mooi River; Bergville; UKZN; Himville; Matatiele; Aliwal North; Leandra; Nkomazi; Nkunzi; Opret; Mamadi; Community Regeneration; Swellendam; Lethabong and Workers World Media Productions.

All these projects have finalised their respective workshops for the first trench payment by 31 December 2012.

Reviewed compensation benefits by end of financial year. Proposal was signed by the Minister and already gazetted for public comments.

STRATEGIC OBJECTIVE:PROVIDING AN EFFICIENT SOCIAL SAFETY NET

Medical claims 2012 / 2013 Financial yearA 12 % increase noted in Invoices processed this financial year. A decrease of 22 % noted in Rand Value this financial year.

Over the last five financial years , the Fund has paid an average of 800 000 invoices per year.The Fund was experiencing a decrease in payments due to challenges on the implementation of the new IT system. This trend was noted up to Quarter 3 ,however there were mitigations such as the Medical Backlog project (Electronic processing of invoices), and the Claims backlog project in Quarter 4.The drop of Rand value is attributed to the project processing a high number of invoices with low monetary value and the controls on the electronic system used during the Backlog Project.

2011/2012 2012 / 2013

No. paid Amount No. Paid Amount

824 924 R 1 882 372 383. 00 934 834 R 1 501 616 165. 00

STRATEGIC OBJECTIVE: PROVIDE PROFESSIONAL, EFFICIENT AND CLIENT ORIENTATED HUMAN RESOURCE (HRM)

In contributing towards job creation, 111 interns were appointed by the end of 31st March 2013 against the annual target of 100 set by CF.

The Fund consistently maintained its vacancy rate. The vacancy rate is 2.25% against the 10% vacancy norm.

STRATEGIC OBJECTIVE: STRENGTHENING CORPORATE GOVERNANCE (RISK MANAGEMENT) Out of 142 cases of alleged fraud and corruption cases, 86 were internally finalized. Two medical practitioners were criminally convicted and sentenced to five years suspension

sentences, respectively. These medical practitioners were ordered to repay back the total amount of R 2.6 million which they

have defrauded. There are other five medical practitioners together with six ex-employees of the Fund whose cases are already at a trial stage at the Commercial Crime Courts.

Due to the Fund’s early intervention on fraud we have managed to recover R 137,638 and saved a potential loss of R1,070,743 through fraud.

STRATEGIC OBJECTIVE: INTEGRATION OF CF WITH THE COMPREHENSIVE SOCIAL SECURITY REFORMS (LEGAL SERVICES)

Draft amendments of COIDA, which includes a chapter in Reintegration and Rehabilitation to work, were completed and submitted to the LP&IR branch of the Department of Labour for quality assurance and further consultation.

STRATEGIC OBJECTIVE: PROMOTE POLICY ADVOCACY (COMMUNICATION)

Communication Strategy was successfully implemented. - Educational adverts covering employers, employees and

beneficiaries ran on national TV (SABC 1,2,3 and Etv), national radio stations in all official languages.

- Educational advert covering beneficiaries ran on community newspapers in different languages. Educating them on what services the Fund is offering and what their rights are.

- Radio interviews were conducted on community radio stations in different languages educating and responding to enquiries relating to covering all COIDA.

- Adverts were ran on Commuta net (train stations and buss stations) covering employees and beneficiaries TO ENSURE MAXIMUM REACH.

-

. NOTICE TO EMPLOYERS- Advertorial ran on national newspapers informing employers of the deadline and how to submit

RETURN OF EARNINGS- Television adverts on SABC 1-3 and etv.- Radio advertorials ran on national radio stations in all official

languages.- Alive advertising, adverts for beneficiaries ran on alive screen nationwide from February to March 2013,- On-line advertising ran on news sites from Feb to March 2013,- Billboard advertorials ran on all Gautrain stations from the month of March 2013, - Airport screens advertorials ran from the month of March 2013.

INPACT OF THE RETURN OF EARNINGS ADVERTS

As at 28 February 2013, before the advert, we already had 39 000 employers registered on the ROE Website.

85 000 submissions have been filed successfully on the ROE Website between 1 April to 30 April 2013.

The Call Centre and Walk in Centre online submission statistics as of March to 30th April: 16,654 calls and 9,822 emails.

STRATEGIC OBJECTIVE: IMPROVE FINANCIAL VIABILITY (FINANCE)

The implementation of the RoE website in 2012 for online submissions has been successful..

R3.3 billion of the total R8 billion revenue generated by the Fund was generated through the ROE Website.

As at 31 March 2013, 51,000 employers had registered and filed their annual returns of earnings on the ROE website.

The enforcement of the COID Act and intensified debt collection procedures resulted in improved collection of revenue of R5.8 billion compared to R3.7 billion reported in the previous financial year.

STRATEGIC OBJECTIVE: IMPROVE FINANCIAL VIABILITY (FINANCE)

The Fund maintained its Assets: liability ratio . The current ratio was 4:1 against a target of 2:1

For the 4th quarter the Fund received returns on the Compensation Portfolio of 11.91% against a STEFI benchmark of 11.30%

For Pension Portfolio the Fund received 16.44% against the benchmark of the SWIX 40 of 15.96%.

STRATEGIC OBJECTIVE: IMPROVE CORPORATE SUPPORT AND SERVICES / ENHANCE QUALITY AND ACCESS TO COIDA SERVICES AND INFORMATION (ICT)

The Fund’s IT governance framework was finalised and approved.

A Business Continuity Plan was developed and approved.

The call centre infrastructure was upgraded to newer technologies.

The Return of Earnings website went live and is being extensively used by employers to submit returns.

STRATEGIC OBJECTIVE: STRENGTHENING CORPORATE GOVERNANCE (Internal Audit)

Risk-Based 3 year and Annual Audit Plan Drafted approved by Audit Committee on the 11th June 2012.

Reporting of quarterly reports to the Audit Committee. 4 Audit Committee meetings took place between April 2012 – 31st December 2012.

As at December 2012, a total of 52% (12 out of 23) of audits were finalised and presented at Audit Committee.

Developed and implemented the internal audit Methodology. Teammate software acquired and the methodology is fully incorporated.

A combined assurance model (IA,RM and AG) was drafted and will be implemented in the new financial year.

27

SOME OF THE KEY CHALLENGES FACING THE COMPENSATION FUND AND HOW WE ARE RESPONDING TO THEM

ChallengeInadequate IT Systems.Turnaround time in processing of compensation claims.Backlog in processing claims and payments.Document management.Records management system.

InterventionProcess automationPilot the RMA system.Initiated a Backlog Project.

28

SOME OF THE KEY CHALLENGES FACING THE COMPENSATION FUND AND HOW WE ARE RESPONDING TO THEM (CONT.)

ChallengeDelay and/or non-reporting of accidentsEmployer non-compliance

InterventionInclude employers in Educational CampaignsEngage Enforcement Inspectorate

29

SOME OF THE KEY CHALLENGES FACING THE COMPENSATION FUND AND HOW WE ARE RESPONDING TO THEM (CONT.)

ChallengeHuman capacity constraints

InterventionFull implementation of the new structure, especially by filling critical posts in the area of Finance and the post of Chief Director: Operations.

Statement of Financial Position as at 31 March 2013

Restated2013 2012

Inc./ Dec R '000 R '000 ASSETS Current Assets 16,773,322 13,097,520

Non-Current Assets 24,024,984 19,598,273

Total Assets 40,798,306 32,695,793

LIABILITIES Current Liabilities 3,271,348 2,102,549

Non Current Liabilities ‑ 14,172,596 16,411,000

Total Liabilities 17,443,944 18,513,549

Total Funds and Reserves 23,354,362 14,182,244

Statement of Financial Performance for the year ended 31 March 2013

Restated

2013 2012Inc./ Dec R '000 R '000

Revenue 12,232,860 8,453,946

Expenses -2,319,005 -2,622,765

Administration expenses -424,619 -566,188

Total expenses -2,743,624 -3,188,953

Total other gains / losses

-321,450-3,223,106

Surplus for the year 9,167,786 2,041,887

CF 2012/13 BUDGET ALLOCATION AND UTILISATION

Programme Summary Per Economic Classification

2012/13 Approved Budget R'000

Expenditure 31/03/12 R'000

Variance R'000% Spent

Current Payments 1,400,152 771,408 628,744 55%Compensation of Employees 492,364 293,515 198,849 60%Goods and Services 907,788 477,893 429,895 53%Interest and rent on Land - - - -Financial transaction in Asset and Liabilities- - - -Transfers and subsidies 3,134,288 3,131,066 3,222 100%Provinces and Municipalities - - - -Departmental Agencies & Accounts - - - -Universities and Technikons - - - -Households (Benefits): 3,134,288 3,131,066 3,222 100%Gifts and Donations - - - -

Payments on Capital Assets 33,075 814 32,261 2%Buildings and Other Fixed Structures- - - -Machinery and Equipment 33,075 814 32,261 2%Software and other intangible Assets- - - -Land and Subsoil Assets - - - -Total 4,567,515 3,903,288 664,227 85%

Auditor-General Report

THE BASIS FOR DISCLAIMER OF OPINION Revenue and receivables from non-exchange transactions

-The AG was unable to obtain sufficient and appropriate audit evidence for revenue and receivables from non-exchange transactions as management did not maintain proper accounting records, journals and adequate controls over assessment revenue and debtors.

Allowance for impairment

- Management did not provide assessment of impairment in accordance with Standard of Generally Recognised Accounting Practice (GRAP) 104.

Receivable from exchange transactions

- The Fund did not correctly account for concessionary loans in accordance with GRAP 104.

THE BASIS FOR DISCLAIMER OF OPINION (Cont) Benefits paid and payables from exchange transactions

- The Fund’s records did not permit the application of adequate alternative auditing procedures regarding benefit claims and payables.

Provision for outstanding claims

- The Fund did not assess and disclose the reduction amount of provisions resulting from payments and measurements of the estimates in accordance with GRAP 19.

Cash and cash equivalents

- The AG was unable to obtain sufficient and appropriate audit evidence for all the un-reconciled items for cash and cash equivalents as management did not maintain proper accounting records and adequate controls.

THE BASIS FOR DISCLAIMER OF OPINION (Cont) Related party transactions

- Management did not identify and disclose nature of the related party relationships as well as information about transactions and outstanding balances in accordance with IPSAS 20.

Commitments

- The Fund did not have an adequate system in place to maintain records of commitments approved and contracted.

Irregular expenditure

- The AG was unable to obtain sufficient and appropriate audit evidence relating to the particulars of irregular expenditure in the notes to the financial statements as per section 55(2)(b)(i) of the PFMA for the prior year as the Fund did not maintain proper records and adequate systems of internal controls.

THE BASIS FOR DISCLAIMER OF OPINION (Cont)

Aggregation of immaterial uncorrected misstatements

- The financial statements as a whole are materially misstated due to cumulative effective of numerous individually immaterial uncorrected misstatements.

MATTERS OF EMPHASIS Restatement of correspondence figures Allowance for impairments Predetermined objectives Performance targets not specific Reliability of information Compliance with laws and regulations Annual financial statements Annual Report Procurement and contract management Expenditure and revenue management Claims and payables management Liability management Internal control Leadership Financial and performance management Governance

39

Priorities for 2013/14 Financial Year• Implementation of the approved Organisational Structure.• Decentralisation of COIDA services to the provinces.• Pilot the RMA System.• Administration of medical accounts.• Consultation on Amendment of COID Act.• Continue with COIDA Stakeholder engagement.• Improve revenue collection.• Develop a comprehensive action plan to address a disclaimer

opinion.

40

THANK YOU