Nxesi in the hot seat as Scopa sees red on management of compensation fund

19 May 2021 - 15:16 By amanda khoza
Labour minister Thulas Nxesi. File photo.
Labour minister Thulas Nxesi. File photo.
Image: Esa Alexander

Parliament's standing committee on public accounts (Scopa) on Wednesday cracked the whip on the department of labour's compensation fund, saying “heads must roll” for the continuous irregular, fruitless and wasteful expenditure and unqualified audit reports by the auditor-general.

The fund was under scrutiny with Scopa chairperson Mkhuleko Hlengwa saying it had “one of the worst audit outcomes” he had ever encountered.

“Over the past 10 years there have been 10 disclaimers and adverse findings, and quite frankly it is a situation that is totally unacceptable and speaks to a total collapse of the internal controls.

“Seemingly there is no movement to respond insofar as the audit outcomes. An audit action plan is obviously something that does not exist and it if does, it’s not taken seriously. The situation is just untenable,” said Hlengwa.

ANC MP Bheki Hadebe grilled labour minister Thulas Nxesi, saying “heads must roll”.

“The situation is rotten to the core and that is the best description to the current status quo of the fund ... I think it is high time that we put our foot down and take drastic measures and decisions to change the status quo.”

Nxesi admitted that the state of the fund left much to be desired.

“I agree that the fund is rotten to the core. It cannot continue to have disclaimer after disclaimer. To answer your questions as to why this is so, is it neglect, is it corruption, is it structural issues? I think it is a combination of issues.”

Nxesi said there were basic controls the department needed to put in place that had been neglected. He ordered a full forensic audit to be conducted.

“I won’t definitely say it was corruption, but I suspect corruption. The forensic audit will be able to help us with that and answer why certain things are not being followed up on. What is clear is that some of the problems are structural. We must investigate why some of the issues are persisting.”

Hadebe fired back at Nxesi, saying: “You don’t need to waste money instituting a forensic audit for basic controls. Who are the people responsible for record keeping? Who has been responsible for instituting consequence management and why did he/she not play his/her part? What has been done?”  

Nxesi responded by saying, “What is clear is that I don’t think [the current crop of employees] are up to the task and that is a matter which we will ... follow up on immediately.”

The department’s director-general Thobile Lamati explained that the fund did not have its own employees. All the employees who work for the fund are employees of the department who had been seconded to the fund.

He added that this arrangement was “not working” for the department.

“We have been struggling to appoint highly qualified people into key positions in the fund and that is why we resorted to training our own people.”

On the record-keeping issue, Lamati said before 2014, everything at the fund was kept manually.

“That is why when you visit the compensation fund you will see all the files strewn all over the place and there was not proper record keeping. In the middle of 2014, the fund moved onto a new system called Umehluko, and a number of these documents were scanned into the system.

“However, not everything was automated, so that is why you could still find a situation when you are looking for a document and you will not find it, because some of them are still in the legacy system and not migrated.”

In some cases there were no hard copies to show the auditor-general the source documents.

Compensation fund commissioner Vuyo Mafata said over the past five years, the fund had been automating a number of issues that related to the submission of return on earnings and the managing of the fund in relation to claims.

“We have seen a policy change in the past 24 months aimed at addressing some of the policy weaknesses that had been identified within our revenue management space and we will start to see the impact of that over the coming audit years.”

A skills audit in 2015/2016 had also seen some systemic issues addressed, said Mafata.