INTRODUCTION

1. COMPENSATION FUND PRESENTATION ON THE RESPONSES TO PARLIAMENTARY QUESTIONSPORTFOLIO COMMITTEE: LABOUR24 JULY 2013

2. INTRODUCTION Compensation Fund received Parliamentary Questions on 08 May 2013. The purpose of this presentation is to provide a summary of the responses to the questions raised

3. QUESTION 1: How many employers were registered during 2011/12 financial year? And, how many employers were assessed. Total number of registered employers for 2011/12 was 436 807. Two hundred and eighty one thousands eight hundred and seventy (281 870) of these employers were assessed for the same period. QUESTION 2: When comparing claims registered by provinces, Gauteng province registered 93 407 claims and accepted 103 974 claims. How come claims accepted are more than claims registered? (Page 31 of the annual report) This is attributed to the fact that at the time of registration, certain information was not available for adjudication and was only brought later resulting in the difference of figures. The registered claims of 93 407 and the 103 974 accepted in Gauteng province include CF’s Head Office figures.

4. QUESTION 3: On page 31 of the annual report, the total number of claims registered using SAP system is 23 248 and claims accepted were 13 647. This is an enormous amount of claims rejected when compared with claims processed by provinces. Does the new SAP system make it difficult for claims to be accepted? Please provide a detailed response. All claims are registered, scanned and indexed, however, if documentation is incomplete it would be difficult to adjudicate such claims. The adjudication process will be delayed, thus impacting on decisions on whether to accept or reject liability. In the case of incomplete information, CF does not reject such claims, but request additional information to assist in deciding on whether to accept or reject liability. The SAP system registered 23 248 claims and 13 647 were accepted for liability. The 9 601 balance of the claims that were not accepted was due to more information needed for adjudication.

5. QUESTION 4: How many senior managers (i.e. Chief Directors, Directors, Deputy Directors and Assistant Directors) were employed under the 2007 structure? The question is based on the statement by the Commissioner in the 2007/08 Annual Report that, “the Fund continued the year without the Chief Financial Officer and a full complement of its critical Finance managers necessary to manage an organisation of this magnitude. Once approval for the new organisational structure was granted in August last year (2007), a recruitment process ensued and to date the Fund was able to fill 70% senior executive management posts, and the rest of the middle management posts and including that of the CFO will be filled in the new year”. Please provide a detailed response.

6. Posts in the Senior Management Service During the period 2007/8 financial year, the Fund had 4 senior managers (i.e. 1 Commissioner, 1 Chief Financial Officer (CFO) and 2 Directors: Medical and Compensation. The CFO and the D: Comp were suspended and discharged from the public service. D: Comp was re-instated. The Fund functioned without CFO until a new organisational structure was approved by the Minister in 2009. The new CFO was only appointed in 2009. Posts in the Middle Management Services In respect of the MMS there were 21 posts on the establishment. Of these, two were also suspended and subsequently discharged from the public service. The Minister approved a new interim organisational structure in 2008. There were 13 SMS posts and 12 were filled in 2009/10.

7. QUESTION 5: According to page 135 of the annual report, a total of 304 employees received performance bonuses. Yet the Fund has many challenges that could be attributed to inefficiency. How many employees from the finance and project management units received performance bonuses, taking into consideration comments from the Audit Committee on these units’ poor performance? Please provide a detailed response. The number of filled posts on the establishment of the Fund are 909 (excluding SMS) and not the 1 818 as indicated in Table 57 (page 135). Therefore, the figure of 1 818 is incorrect in that 909 was calculated twice. This incorrect calculation of the number of employees has also led to double calculation on the number of those who received performance rewards as stated in Table 57. However, the correct calculation is provided in Table 58 (page 136). In terms this table the correct number of employees who received performance rewards is 155 and not 304 as reflected.

8. QUESTION 5 CONTINUE In the case of CD: FM, out of a total of 251 employees who qualified to be assessed only 50 employees (which 20% of the CD: FM) were paid bonuses. Only 2 employees out of a staff compliment of 19 received bonuses in the Project Management Office. Employees who received these bonuses were below management levels. QUESTION 6:How many senior managers received performance bonuses and why? Did the HR Head receive a performance bonus? If so, why? Did the Commissioner receive a performance bonus? If so, why? Please provide a detailed response. For the 2011/12 financial year, there were no senior managers who received performance bonuses in CF.

9. QUESTION 7: The Committee would like an explanation of the decrease in miscellaneous revenue from R2.595 million in 2010/2011 to R814 000 in the 2011/12 financial year. Miscellaneous revenue of R2, 596 million reported in 2010/11 related to unclaimed credits which were due to employers that could not be traced. These credits have since been reclassified as retained income. Miscellaneous revenue reported in 2011/12 of R814 000 relates to the rental income charged for the leasing of the Compensation Fund’s Bhisho building as well as income from the leasing of the cafeteria at the Compensation House in Pretoria.

10. QUESTION 8: The balance for reserve has decreased from R340, 042 million to zero, representing a percentage decrease of 100 percent in nominal terms. What is the reason for this? The opening balance was R331, 768 million less the R799, 517 million for the actuaries’ capitalised value. Therefore, the amount came to R467, 803 million and the money to fund this came from the investment income of R807, 845 million and, as a result, what was still left was R340, 042 million. In 2011/12 financial year the amount of R340, 042 million was the opening balance less the amount that the actuaries recommended of R2 798, 407 million which came to R2 458, 365 million, and the money to fund this came from the investment income of R842, 071 million, hence there was a deficit of R1, 616, 294 million which was funded from the Compensation Reserve resulting in the zero balance.

11. QUESTION 9: The Committee would like an explanation of why the amount for board members’ fees decrease. This may pose a risk that the board members did not execute their tasks as mandated. Please provide a detailed response. During the 2010/11 there was no decrease in board members’ fees in real terms. The Board of CF sourced the services of a medical practitioner (MPr.) who was advising its TCOD. The same MPr. was actually appointed as a medical assessor, and as a consequence, part of his claim for services rendered was captured and paid from the same allocation used for Board members’ fees who were also attending the TCOD. This claim from the MPr. should have been paid from the compensation related expenses. The anomaly was rectified in the 2011/12 financial year, and the contract for the said MPr. has since expired. Therefore, the decrease in the Board’s fees which came as a result of the correct allocation being used did not in any way pose a risk to the board in executing its duties.

12. QUESTION 10: When is the Project Team going to be ready to report to the Portfolio Committee on what they plan to do within the first 3 years? The Director-General’s project team will be ready at the end of July 2013 to report back to the Portfolio Committee. QUESTION 11: Has the Project Team been able to draw the Terms of Reference detailing what needs to be done? The Terms of Reference have been finalised and the tenders for this published. The evaluation of proposals from prospective service providers has also been completed. It is anticipated that once the adjudication is finalised, the successful bidder will be announced.

13. QUESTION 12: When is the Public Protector Report on the Compensation Fund going to be provided to the Portfolio Committee? CF has not yet received the report of the investigation which was conducted the Public Protector (PP). Once the PP submits the report to CF, a copy will be made available to the Portfolio Committee. QUESTION 13: When is the forensic investigation into the affairs of the CF going to be initiated and what is the time frame? The Request for Proposal (RFP) was advertised in the print media on 03 March 2013. The evaluation has since been conducted and the adjudication on the appointment of the successful bidder is underway.

14. QUESTION 14: In its presentation to the Committee on 13 February 2013, the Fund reported that it still does not have a Chief Financial Officer. The post was reported to be occupied by a consultant who is acting in the CFO post. When is the situation going to be rectified? The interviews for the post of CFO were held in June 2013. A submission containing the name of the nominated candidate for appointment to the post has been prepared for the Minister’s approval.

15. QUESTION 15: What has been done to rectify late payments of Hospital Groups, which resulted in medical staff threatening to withdraw their services? In order to rectify late payments of Hospital Groups the Fund has done the following: Hospital accounts have been processed through the medical electronic backlog. As from January 2013 up to date an amount of R325 529 845.00 has been paid to private hospitals; An amount of R6 771 751 has been paid to public hospitals; The Fund has decentralized payment of medical accounts to all the provinces and medical accounts are processed and paid there; and The Fund recently undertook a project on registration and adjudication of claims which resulted in payment of hospital accounts.

16. QUESTION 16: How far is the process of incentivizing employers to use the web since it has been proved that it leads to high rate of collection? An example was made that R6 million was collected in two weeks when the web was introduced. The process of incentivising employers started in March 2013 with a marketing campaign to promote the ROE Website (online facility to file annual returns).  Employers who file online using the ROE Website were offered incentives on the current assessments in the form of discounts on a sliding scale as follows: 10% discount on assessments settled within 30 days of invoice date. 5% discount on assessments settled within 60 days of invoice date. 2% discount on assessments settled within 90 days of invoice date.

17. QUESTION 16 CONTINUE The date of payment determines the percentage of the discounts to be applied to employers’ accounts. The 90 days expires on 31 July 2013 and the discounts will be applied to employers’ accounts after the expiry dates. As at 30 June 2013, CF has been able to generate the following:

18. QUESTION 17: When will infrastructure (buildings) problems be addressed? A number of improvements were undertaken to ensure that infrastructural problems at CF are addressed. The following improvements were made: The lifts and escalators were replaced in the building; The additional air conditioning units were installed in the building; The electrical contractor was appointed to do repairs and maintenance of the electrical faults in the entire building; Plumbing contractor was appointed to attend to all the plumbing requirements of the Compensation House; The structural engineer was appointed to evaluate the building structure and they found it was sound; and The office space requirements were attended to as and when needed by other business units.

19. THANK YOU