Labour Department’s qualified audit catastrophe should see Oliphant fired 

29 September 2016

The Department of Labour received a qualified opinion – the worst possible outcome – in this year’s Annual Report.

This catastrophic performance was explained by:

- The costs of sales being understated by R8 million;

- Inventories being understated by R3.3 million;

- Cash flow concerns; and

- Issues with receivables of R4 million.

It was also revealed in the report that the Department achieved only 50% of its strategic goals and 50% performance on its programmes for the fiscal year.

This is the second consecutive qualified audit by the Department and the clearest indication yet that Minister Oliphant is unsuitable to continue in the Executive. If the President were serious about having a functional, well-run Department of Labour – especially during this time of major job losses - she would be fired as soon as possible.

The annual report also revealed problems with entities. Productivity SA, accounted for irregular expenditures of R2 million and fruitless and wasteful expenditures of R1 million.

Nedlac received a qualified opinion for issues with plant equipment and internal controls. The consequence management and leadership were ineffective leading to irregular expenditure of R8 million and fruitless and wasteful expenditure of R800 000. 

The UIF had irregular expenditure of R64 million and there were issues with record keeping and oversight of leadership. The CCMA financial statements were not prepared in accordance with the PFMA, there was inadequate oversight by the accounting authority and inadequate financial controls, leading to R37 million in irregular expenditure.

For the Compensation Fund, the Auditor-General (A-G) could not even provide an opinion as there was insufficient audit evidence. This fund has been a basket case for a number of years. The Auditor-General’s report on the Compensation Fund makes astounding findings and statements on the horror story of the financial statements, accounting practices, internal controls and disciplinary enquiries.

Among others, the A-G reports the following:

- “I was unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion”. This resulted in a disclaimer of opinion by the A-G, and emphasised by 26 paragraphs listing the problems encountered;

- In terms of investigations into financial misconduct, the A-G notes that the SIU investigation report has still not been finalised;

- Of a total of 130 financial misconduct cases investigated during the financial year “management did not act on the recommendations of the reports for any of the 70 cases, where investigations had been completed”;

- A total of 110 fraud related cases were under investigation during the year, 27 of which were completed. “Some were referred to the South African Police Service”;

- In terms of leadership of the fund, “No action has yet been taken where some investigations confirmed wrongful action by an individual and recommended action be taken”. Cases that transpired in 2014-2015 and 2015-2016 financial years “have not yet been investigated”;

- "Disciplinary steps were not taken against officials who made or permitted irregular or fruitless and wasteful expenditure”; and

- "Disciplinary hearings were not held for confirmed cases of financial misconduct committed by officials, as required by treasury regulation 33.1.1”

With a weak economy, and increased unemployment, working South Africans need to rest assured that the Department of Labour is functioning and doing its job. The best way to reassure the Country, in the wake of this terrible performance, is to fire the Minister of Labour and ensure that the Department is fixed as soon as possible.

Issued by Ian Ollis, DA Shadow Minister of Labour, 29 September 2016