Presentation to the S S Mkhonto Compensation Commissioner

Presentation to the S. S. Mkhonto Compensation Commissioner 20 October 2009

- The Compensation Fund is a public entity of the Department of Labour - It is responsible to administer the Compensation for Occupational Injuries and Diseases Act (COIDA) No. 130/1993 as amended by the COIDA 61/1997

§ The Fund provides compensation for disablement caused by occupational injuries or diseases sustained or contracted by workers, or for death resulting from such injuries or diseases § The Fund is financed from levies paid by employers § The revenue consists mainly of annual assessments paid by registered employers on a basis of a percentage or fixed rate of the annual earnings of their workers

MINISTER OF LABOUR COMPENSATION BOARD DIRECTOR-GENERAL : LABOUR BOARD SUB-COMMITTEES AUDIT COMMITTEE COMPENSATION COMMISSIONER

• Improve the internal control environment • Timeous production of monthly financial statements • Compliance • Streamline processes to improve performance • Improve governance and eliminate fraud and corruption 6

IMPROVE THE INTERNAL CONTROL ENVIRONMENT ACTIVITY Appointment of key financial resources to address audit issues PROGRESS -Appointment of CFO finalised – commenced 5 th October 2009 -Executive manager posts : § Filling of 2 x Executive Manager posts in process and will be finalised in by end of November 2009 - Appointment of managers : § 10 manager posts filled A Service Provider (KPMG) has been co-sourced form 1 st October 2009 to provided additional capacity and expert assistance to address AG findings 7

IMPROVE THE INTERNAL CONTROL ENVIRONMENT ACTIVITY Clearing of suspense accounts PROGRESS – An amount of R 87 m was broken down into payments and receipts. – ABSA as the Fund’s banker, is to assist with the clearing of the unallocated contributions – payments from employers without reference numbers. ACTIVITY Introduction and monitoring of month end procedures PROGRESS The finance team now works on monthly closure dates and guidelines have been sent across the organisation to ensure month end procedures are followed. 8

TIMEOUS PRODUCTION OF MONTHLY FINANCIAL STATEMENTS ACTIVITY Performance of weekly bank reconciliations PROGRESS – The bank reconciliations are currently being performed on a weekly basis. – All bank reconciliations are signed-off by the Executive Manager ACTIVITY Clearing of debtors with credit balances PROGRESS R 23 m has been cleared as at 30 September 2009. R 15 million is under review and R 48 000 to be refunded in November 2009. 9

TIMEOUS PRODUCTION OF MONTHLY FINANCIAL STATEMENTS ACTIVITY Updating the Fixed Asset Register (FAR) PROGRESS The FAR project was completed and the fixed asset register finalised. Currently this is being prepared for uploading onto the financial system and will be finalised by 30 November 2009 ACTIVITY Finalisation of merit-rebate and payment PROGRESS A policy on Merit Rebates has been finalised – next step is for review and approval. R 578 m of the R 844 m provided for in the annual report has been identified as payable in the 2009/10 financial year. Payment will be effected once the necessary approvals have been finalised. 10

COMPLIANCE WITH LEGISLATION ACTIVITY Finalisation of policy and implementation PROGRESS Policies on Enforcement of COIDA, Minimum earnings for total temporary disability and Increase of Compensation Benefits (2009) have been finalised and implemented ACTIVITY Finalisation of the computer programming on the financial system PROGRESS The central repository for bank statements storage has been implemented. The project on banking details and EFT is underway and will be finalised by the end of November. 11

COMPLIANCE WITH LEGISLATION ACTIVITY Execution of payments PROGRESS The Fund endeavors to make all payments within the prescribed 30 days after the receipt of an invoice, however this is currently not being 100% achieved. ACTIVITY To ensure IFRS Compliance PROGRESS The Fund currently does not have the requisite resources to ensure compliance. KPMG has been appointed as a service provider to provide assistance with accounting services and ensure that reporting 12 is IFRS compliant.

STREAMLINE PROCESSES TO IMPROVE PERFORMANCE ACTIVITY Complete the back-scanning project and appoint a service provider for scanning and indexing PROGRESS A backlog has developed on the scanning of documents. Whilst these documents are for claims already paid, it is difficult to retrieve when required because it is not in an electronic format. The Fund has approved overtime in order to address the backlog, which has substantially decreased (6. 5 m to 1. 2 m) which will be finalised by March 2010. The Fund also intends to appoint a service provider to assist in finalising this faster. 13

STREAMLINE PROCESSES TO IMPROVE PERFORMANCE ACTIVITY Finalisation of the financial management project PROGRESS The Fund has a project to replace its financial system because of inadequacies with the current system. This project is currently underway and is on track. The business blueprint and a prototype is currently in development, asset accounting and FICA assessments will be finalised by mid October. The expected date for implementation is April 2010. 14

STREAMLINE PROCESSES TO IMPROVE PERFORMANCE ACTIVITY Implementation of an Integrated Claims Management System PROGRESS The Fund has come up with a management intervention to identify a claims processing system for the organisation that would improve turnaround time and efficiencies. A proof of concept is currently underway to ensure that the system will address the business needs and to identify gaps, training requirements, process changes and change management issues. Testing has commenced and is expected to be complete by mid December, from January to March a pilot will be run with service providers and if successful, rollout of the system will commence by April 2010. 15

STREAMLINE PROCESSES TO IMPROVE PERFORMANCE ACTIVITY Decentralisation of claims processing to 4 provinces by 31 March 2010 (Limpopo, Free State, Kwa. Zulu- Natal, Eastern Cape) PROGRESS This process has commenced from the 1 st July 2009 with a pilot in Limpopo. The pilot is providing learnings and identifying gaps and challenges which will be addressed in the rollout process to the other provinces. The recruitment and selection process is underway for the other provinces and the actual rollout will be completed by December 2009. 16

IMPROVE GOVERNANCE AND ELIMINATE FRAUD AND CORRUPTION ACTIVITY • • • New draft Model for Assessments Complete Sensitivity Modelling Finalise Stakeholders Consultation Amend legislation Implementation PROGRESS An actuarial review of the assessment rates process has been undertaken and a new methodology of setting assessments has been finalesed. An actuarial sensitivity modelling analysis is currently underway. and will be finalised by 30 November 2009. Stakeholder consultation should begin in the new year and implementation is expect in April 2011. 17

IMPROVE GOVERNANCE AND ELIMINATE FRAUD AND CORRUPTION ACTIVITY Review and roll-out of Risk Management Strategy PROGRESS The Fund has appointed service providers to assist with resource challenges in the risk management environment. This is already yielding value to the organisation. The Risk Management Strategy is currently under review and will be completed by November 2009 Implementation of the Risk Management Strategy is planned for March 2010. 18

IMPROVE GOVERNANCE AND ELIMINATE FRAUD AND CORRUPTION ACTIVITY Strengthening the internal audit function PROGRESS The internal audit function was previously conducted by the Department of Labour’s internal audit section. However, due to a high staff turnaround, this function could no longer be provided. To ensure that an internal audit function is carried out at the Fund, a service provider was appointed whilst the Fund finalises the process of filling of posts. The short listing of an Executive Manager: Internal Audit is currently underway with the assistance of the audit committee. Manager posts have already been advertised and in certain cases interviews conducted. 19

IMPROVE THE INTERNAL CONTROL ENVIRONMENT ACTIVITY • Data cleansing of the debt book • Updating the debtors and accounts payable age analysis PROGRESS As indicated KPMG has been appointed to assist the Fund with accounting services. A plan is currently being developed with KPMG to address the aging issues and to rectify the debt book amount. ACTIVITY Appointment of debt collection service provider PROGRESS Appointment of the service provider is expected to be finalised by end November 2009. 20

oooo

Claims received Claims Accepted Claims repudiated Payments 2007/8 209830 182831 1444 159951 2008/9 203711 167514 643 140770 Apr 09 – Sept 09 103149 61870 49 31327 Financial year 22

250000 200000 Claims received 150000 Claims Accepted Claims repudiated 100000 Payments 50000 0 2007/8 2008/9 Apr 09 - Sept 09 23

COMPENSATION BENEFITS PAID UPTO SEPTEMBER OF EACH YEAR 171655 168024 167085 24

MEDICAL PAYMENTS PER QUARTER 2009 25

2007/08 2008/09 R’ 000 Contributions revenue 3, 889, 963 4, 513, 720 Investment income 1, 349, 815 2, 073, 004 Other income 15, 669 21, 228 Benefits paid 1, 298, 419 2, 929, 473 401, 429 433, 565 4, 270, 014 2, 073, 796 -714, 415 1, 171, 118 Admin Provisions and Actuarial adjustments Surplus / deficit 26

Investments 2007/08 2008/09 R’ 000 16, 655, 425 19, 959, 335 Property, plant and equipment 128, 777 127, 112 Receivables 928, 863 821, 912 Cash and Cash equivalents 589, 998 655, 495 5, 385, 924 6, 532, 805 181, 346 290, 524 12, 735, 793 14, 740, 525 Accumulated Funds Creditors Provisions and accruals 27

UNCLAIMED MONIES • Of the R 6, 5 Billion in accumulated funds – R 400 million is for unclaimed monies which include cancelled cheques • A notice was published in the Government Gazette volume 529 No 32346 of 3 July 2009, to request all beneficiaries of unclaimed monies to come CF to claim their dues. To date no-one has come forward. • The Fund is in the process of developing an awareness campaign around this with the first phase being a monthlong radio advert to request beneficiaries to come forward. 28

29