Compensation Fund: Fund receives fifth qualified audit in a row
The Democratic Alliance (DA) will be writing to the Chairperson of the Parliamentary Labour Committee, Lumka Yengeni, requesting that she have the Compensation Commissioner, Shadrack Mkhonto, who is the head of the Department of Labour's Compensation Fund, appear before the committee to account for the fund's poor audit performance. This comes after the Compensation Fund's annual report for the 2009/10 year received a qualified audit with emphasis outcomes for the fifth time in as many years citing poor management controls that resulted in misstated comparative figures to the amount of R342 million, and incidents of fruitless, wasteful and irregular expenditure in the fund amounting to over R14 million.
The Auditor-General's (AG) report into the Compensation Fund paints a picture of an administration that is poorly managed, and a management team that is not adhering to good internal control measures and sound corporate governance as mandated in the Public Finance Management Act (PFMA). In the audit, the AG cites non adherence to Section 51(1)(a)(i) of the act, which details the general responsibilities of accounting officers. The DA notes that the Fund was fingered by the AG in the previous year's annual report for the very same problem, and it points to the management of the Fund being unable to address its poor internal control issues.
The poor management of the Fund seems to be chronic. The dismal performance by the Compensation Fund's management is demonstrated by the Auditor-General revealing that there were misstatements in the Fund's comparative figures which amounted to R342 million. The AG had management correct the misstatement; however the DA is concerned that the amount which was stated was so high, as it points to lax internal financial control mechanisms, and should not be occurring in a Fund that has a Chief Financial Officer and three senior financial Executive Managers.
The Auditor-General found irregular, fruitless and wasteful expenditure in the Fund that resulted from the extension of a contract with an IT service provider without a signed agreement, to the value of R7,6 million. This is in clear violation of the PFMA. The Fund is also identified as having incurred interest on late payments of medical claims. The DA is particularly concerned about the late payment of medical claims as the Fund is not fulfilling its core function efficiently as set out in the Compensation of Occupational Injuries and Diseases Act, which negatively affects service delivery.
The Compensation Fund, as an entity under the Department of Labour, has a history of being managed in a poor manner. The DA earlier this year had questioned how there was an inexplicable R1-billion shortfall in compensation paid out to injured workers in the last financial year during a presentation to the Parliamentary Labour Committee in May. Clearly little is being done to rectify the problems, and to this effect, I will be posing tough questions and proposing solutions to the Compensation Commissioner and his management team when they appear before the committee to account for the results of the annual report.
Statement issued by Ian Ollis MP, Democratic Alliance deputy shadow minister of labour, September 6 2010
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