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UIF ANNUAL REPORT 2006/07 PRESENTATION TO THE PORTFOLIO COMMITTEE 20 NOVEMBER 2007

UIF ANNUAL REPORT 2006/07 PRESENTATION TO THE PORTFOLIO COMMITTEE 20 NOVEMBER 2007. UIF. Thank you for inviting us to present to you the Annual Report and Annual Financial Statements for the 2006/07 financial year of the Unemployment Insurance Fund. Index. Background Vision Mission

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UIF ANNUAL REPORT 2006/07 PRESENTATION TO THE PORTFOLIO COMMITTEE 20 NOVEMBER 2007

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  1. UIF ANNUAL REPORT 2006/07 PRESENTATION TO THE PORTFOLIO COMMITTEE 20 NOVEMBER 2007

  2. UIF • Thank you for inviting us to present to you the Annual Report and Annual Financial Statements for the 2006/07 financial year of the Unemployment Insurance Fund

  3. Index • Background • Vision • Mission • Strategic priorities • Operational improvements • Compliance levels • Transformation agenda • Financial report • Actuary report • Auditor General’s report • Management Response • Work plan Priorities for 2007/08 • Outlook

  4. Background • The Unemployment Insurance Fund was established in terms of Section 4(1) of the Unemployment Insurance Act, 2001. • Funding is provided through the Unemployment Insurance Contributions Act 2002 which provides for the imposition and collection of contributions for the benefit of the Fund. • The Fund administers the unemployment insurance contributions collected from employers and employees to pay benefits and related administrative expenses. The surplus is invested through the Public Investment Corporation.

  5. VISION • Contribute to the alleviation of poverty in South Africa by providing effective short-term insurance to all workers who qualify for unemployment and related benefits

  6. MISSION • Rendering an effective and accessible service to all stakeholders • Being a sustainable organisation with sufficient reserves • Administering the Fund professionally

  7. UIF STRATEGIC PRIORITIES • Develop and sustain a safety net for unemployed workers • Improve benefit regime • Improve compliance by investing in infrastructure • Enhance service delivery through institutional reform • Increase stakeholder awareness and support for the Fund

  8. R2.84bn IN BENEFITS PAID IN 2006/07 TO 572,000 CLAIMANTS

  9. Stakeholder Reach • The Fund paid R2,84 billion to 572 000 beneficiaries during the period under review • The decline in benefits payment is attributable to the growing economy as more people are in employment. • Also increased efforts in communication and education means more people are increasingly becoming aware of the do’s and don’ts in applying for benefits.

  10. Stakeholder cont… • A key feature in improving the lives of the workers is constant education and communication • The Fund undertook an extensive outreach programme to create as well as to increase awareness of the services and benefits of the Fund. • The Education and Awareness Campaign is estimated to have reached over 20 million people.

  11. Strategic Transformation • Transformation agenda – During the period under review, the UIF began the process of decentralization. Approval of the restructuring plan for Head Office and subsequently the provincial offices has • Strengthen strategic management and internal control • Led to the implementation of a new governance structure including risk management • Ensured a customer orientated service delivery

  12. Transformation cont… • Employment Equity Report (Designated Groups) Actual statistics for Africans, Indians, Coloureds, White females and people with disabilities are in close proximity of the target set. 68.7% of the employees are Africans, 14.3% are White females while 10.8% and 3.7% are Coloureds and Indians respectively. Over 62% of the workforce are women.

  13. Employment Equity – Race Workforce Profile

  14. OperationsClaims

  15. Claims Cont…

  16. Call Centre 2006/2007

  17. Improving compliance • INCREASED NUMBER OF CONTRIBUTORS • Over 528 000 commercial employers on register up 9.28% and an increase of 9.84% in terms of commercial employees. • Over 540 000 domestic employers on register up 9.69% and an up swing 7.97% in respect of Domestic employees.

  18. Compliance cont.. Commercial Registrations 2005/06 2006/07 Employers 490,145 528,077 Employees 6,502,996 6,605,889 Domestic Registrations Employers 523,547 540,547 Employees 501,629 629,321

  19. Improving compliance • Revenue up R1,1bn or 16% for 2006/07

  20. SUMMARY FINANCIAL REPORT

  21. FINANCIAL ACHIEVEMENTS • FINANCIAL IMPROVEMENT • Net surplus of R6bn up 30 % for 2006/07

  22. BUILDING A SUSTAINABLE BENEFIT REGIME – financial investments worth R19.9bn up 40% • LONGER TERM SUSTAINABILITY • Approximately R20 billion worth of investments under management with PIC up 40%

  23. Actuary’s Report • The asset evaluation conducted by the Fund’s Actuary concluded with the following assertions; • Reserves required to meet potential future liability was estimated at R8,6bn as at 31st March 2007. • The Actuary also concluded the Fund will continue to generate significant surpluses on a cash flow basis for the next ten years.

  24. IMPROVING ACOUNTABILITY • THE AUDITOR GENERAL’S UNQUALIFIED REPORT IS ANOTHER MAJOR ACHIEVEMENT • NO AUDIT QUALIFICATIONS • MAJOR AREAS OF IMPROVEMENT COMPARED TO PREVIOUS YEARS • Bank reconciliation process • Benefit payment to contributors • Fixed asset management • Supply Chain Management

  25. Addressing areas of emphasis • The UIF Management is taking the lead in addressing areas raised as matters of emphasis. • Through the compliance office, progress made in implementation of AG implementing AG recommendations are monitored.

  26. Emphasis cont… 10.1 Unemployment Insurance payments and liabilities: This matter relates to the interpretation of section 13(3) of the Unemployment Insurance Act, 2001. The Auditor-General is of the view that this section can be interpreted and applied in another manner. The fund is of the view that this will lead to inconsistent application of the law. The Office of the Chief Law advisor has endorsed the Funds interpretation of the section and recommended that the section be amended to be formulated in a manner that is less ambiguous. The section has been targeted for amendment in the next UI amendment bill

  27. Emphasis cont… 10.2 Benefits paid in error • The fund maintains a database of 1 million employers and more than 8 million workers. The database of the Fund is updated by employers on a frequent basis as the employment details of workers change. The auditor general is of the view that this data must be independently reviewed and checked for accuracy. • During the audit from the sample extracted and tested the error rate was under 1%. The fund has undertaken steps to review the data and perform additional reviews of the data.

  28. Emphasis cont… Further findings were that the Fund does not have effective controls in place to recover benefits paid in error. The cumulative amount of benefits paid in error is R66.1 million(R33 million:2006) at year end. The 100% increase to R66 million was due to the implementation of various projects to note/ detect and prevent paying benefits in error. In an effort to improve controls to detect/note benefits paid in error, the Fund in the financial year 2006/7 introduced a new adjudication functionality in the Fund’s operational system hence the increase in benefits paid in error.

  29. Emphasis cont… The adjudication functionality electronically detect discrepancies based on updated employee information submitted by employers.

  30. Emphasis cont… 10.2 Benefits paid in error (continued) PROGRESS TO DATE • An approved overpayments policy is in place and currently being implemented • During the 2006/07 Financial Year, the Fund was collecting/recovering from its debtors via set-off and debtors paying through the bank. To further improve on the collection strategy, the Fund has in the current financial year involved the State Attorneys in different provinces and third parties to assist in debt collection.

  31. Emphasis cont… • The Fund is also in the process of reviewing its business processes to try and prevent paying benefits in error.

  32. Emphasis cont… RECOVERY • The recovery rate has substantially improved in the current financial year as compared to prior years • 2005 – 2006 - R 1,383,534.15 • 2006 - 2007 - R 9,438,439.71 • April 07 –Sept 07 R 8,884,616.11 ( six months)

  33. Emphasis cont… 11 (a) The cash basis of accounting is in line with the accounting framework applicable to the Fund. Advice was received from the Office of the Accountant General at National Treasury in this regard. Cash basis of accounting is also used to account for Unemployment Insurance Contributions and all other forms of taxes collected by SARS.

  34. Emphasis cont… 11 (b). Write off of net amount of R3,8 million. AG’s Finding: • The Fund wrote off a net amount of R3,8 million in respect of prior years. • This write off related to the prior year of 2004/5 un-reconciled debits and credits on the bank accounts. These errors occurred during bulk loading of legacy data with the implementation of the new financial system during the 2004/5 Financial Year. This matter has since been resolved.

  35. Service improvement initiatives for 2006/07 • The Fund had 4 strategic imperatives , these were: • Investment in infrastructure to boost service delivery • Improve financial sustainability of the Fund • Build a sound institution based on good governance. • Increase emphasis on performance management

  36. Work Plan Priorities 2007/08 • The focus areas include : • Processes • Enhance quality of service to the clients • Finances • Obtaining clean audit report

  37. Work Plan Priorities 2007/08Cont... • Stakeholders • Increasing awareness campaigns and support • People • Recruit and retain competent staff

  38. Outlook The UIF position for the medium term is: • Improving social assistance • Address capacity constraints • Legislative mandate • Social security reforms • Amendment to UI Act

  39. Department of LabourUnemployment Insurance Fund • THANK YOU

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