Compensation Fund missing documents for 25 000 pensioners

Operational black holes at the Compensation Fund (CF) have left administrators unable to pinpoint the origins of their beneficiaries.

Operating under the Department of Employment and Labour (DEL), the CF provides financial support to employees who are injured or become ill while employed.

It also pays pensions to the dependants of workers killed or maimed while working — a sum of at least R1.4 billion annually, said acting CF commissioner Farzana Fakir.

Fakir faced the Standing Committee on Public Accounts (Scopa) on Wednesday to answer questions arising from the Auditor-General of South Africa’s (AG) report on the fund.

The AG gave a presentation to Scopa in February after the CF was given its tenth straight disclaimer audit.

Years of mismanagement

In suggesting the need to summon the fund’s officials, the AG’s report stressed there had been “a total breakdown in the internal controls”.

Additionally, the AG found high levels of fraud, compromised accounting processes and a lack of consequence management.

Fakir has held the acting position for two years and stated that when she took over, the fund had not compiled financial statements for the previous two financial years.

Scopa heard that the CF has also had an acting Director General in place for the past two years, with Fakir adding the fund has had five CFOs in the last four years.

Admitting the fund’s long list of problems, Fakir was adamant that the entity was slowly improving, noting that through two audits, they have managed to compile a current set of financials.

“This is not about addressing audit findings but the implementation of a clean and good governance leadership that we believe must not be person led, but more process driven because this will ensure in future the mistakes we have had in the past are not repeated,’ said Fakir.

Thousands of missing documents

The commissioner said the biggest problem they have found with this function of the CF is the inability to verify the beneficiaries due to the discarding of documentation.

Fakir explained that the CF’s problems began with a move to an automated process that could not be explained to the AG when requested.

This, Fakir said, is the primary cause of the disclaimer audit — meaning the AG was not presented with enough documentation to make a financial judgement on the entity.

“We have around 25 000 pensioners from the 1930s and 1950s who are maybe still alive, still receiving a pension.

“Those reports, because record-keeping was disbanded, all those files in those warehouses were gotten rid of. I can’t find those files, I can’t find those source documents,” Fakir said.

To remedy this, Fakir suggested the department undergo a pensioner verification drive to “cleanse the database”.

Watch the full Scopa briefing on the Compensation Fund below:

‘Unbundling’ from department suggested

The commissioner added that the CF had no in-house auditing team and that independent investigators were appointed when needed.

Attempts have been made to increase accountability at the fund, and in the last three years, the CF has instituted 11 cases involving 25 officials for disciplinary action.

An additional 20 officials have either been suspended or referred for consequence management in the same period

Scopa was eager to hear plans to address the CF’s issues, with Fakir’s most immediate course of action being to address the fund’s organisational culture.

Short-term fixes suggested were moving to a more capable information technology network, digitising records, and implementing automated risk mitigation alerts.

In the long term, Fakir suggested unbundling the funds from the DEL and entering a strategic partnership with the South African Reserve Bank to collect employee contributions.

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