South Africa: Compensation Fund to Undergo a Turnaround Strategy and an Intensive Forensic Audit

press release

The Department of Labour's Director-General, Nkosinathi Nhleko, has told the Select Committee on Labour and Public Enterprises that a turnaround strategy is being undertaken to get to the root of the problems bedevilling the Compensation Fund and turn it around in the interests of service delivery, comprehensively looking at business processes, systems and people.

He was addressing the committee in Cape Town on Wednesday on what he intends to do to resolve problems at the Fund - many of which date many years back.

The problems revolve around the backlog in processing claims, revenue collection, low staff morale, poor communication with stakeholders, debt management, fraud and corruption, liability of employers in terms of fines for non-compliance and recoveries, compliance with the Public Finance Management Act as well as expenditure management.

"We have received disclaimers, qualifications and are at risk of getting a disclaimer again due to the seriousness of the problems at the Fund," he said.

He said the interventions he has embarked on include putting together a project team within the Fund which reports directly to him. The team has already come up with terms of reference for the turnaround strategy.

"The team has also conducted a leadership brainstorming workshop to review and confirm challenges and weaknesses and identify short, medium to long term turnaround interventions," he said.

Nhleko said the Fund has also requested assistance from the Road Accident Fund to tap into its technical capacity from their turnaround experience.

In the light of the enormity of issues at the Compensation Fund, a forensic audit will be conducted. He said the forensic audit would also help the Fund understand the root cause of inefficiencies and the extent of fraud within the organisation. He said in the last financial year, known and finalised fraud cases within the Fund amounted to R26 million.

Nhleko said: "We are publishing specifications for specialist turnaround organisations to respond through an open tender process."

Priscilla Temba, chairperson of the committee, said: "We are however, concerned by findings of Auditor-General on the use of consultants and we would want to know how cost-effective will the bringing in of an external service provider be?"

The committee was also told that the long-term intervention would look at defining the future business operating model which would incorporate areas of organisational values and culture, performance management framework and fraud and risk management strategy.

Issued by: Department of Labour

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