Overall Responsibility: Compensation Commissioner: Mr. S. Mkhonto

1. Compensation FundBriefing to the Portfolio Committeeon CF Preliminary Annual Performance, Strategic Plan for 2013 -2018 and 2013/14 Annual Performance Plan Overall Responsibility:Compensation Commissioner: Mr. S. Mkhonto

2. Table of Contents 1. Overview & Objectives of the Fund 2. CF Measurable Objective 3. Service Delivery Outcomes Vision and Mission PART A : PRELIMINARY ANNUAL REPORT 5.CF Performance Challenges contributing to non achievement of some indicators and how we are responding to them Auditor General’s Report 8. Summary of Budget allocated and expenditure as at end of Dec 2012 PART B: 2013-2018 STRATEGIC PLAN AND 2013/2014 ANNUAL PERFORMANCE PLAN Issues that were in the plan but not finalised Priorities for 2013/14 11. Compensation Fund Strategic Plan and APP for 2013/14 12. Budget Allocation and MTEF Estimates 13. CF expectations of the Portfolio Committee

3. Overview & Objectives of the Fund The Compensation Fund is a public entity of the Department of Labour. The Fund administers the Compensation for Occupational Injuries and Diseases Act no. 130/1993 as amended by the COIDA 61/1997. The main objective of the Act is to provide compensation for disablement caused by occupational injuries or diseases sustained or contracted by employees, or for death resulting from such injuries or diseases, and provide for matters connected therewith.

4. CF Measurable Objective “To pay compensation for death or disablement caused by occupational injuries and diseases sustained or contracted by employees within 90 days of receipt of full documentation”

5. Service Delivery Outcomes

6. Vision To be an employer of choice and an internationally reputable provider of compensation for occupational injuries and diseases, rehabilitation and reintegration services. 6

7. Mission To utilise\leverage automated solutions to provide efficient, quality, client-centric and accessible Compensation Fund services. To ensure effective rehabilitation and re-integration services, through reputable (proven) programmes. To ensure financial viability through efficient collections and prudent investments. To promote job creation initiatives through social responsible investments. To develop and retain a competent and content workforce. 7

8. PART APRELIMINARY ANNUAL REPORT(CF PERFORMANCE AGAINST THE 2012-13 ANNUAL PERFORMANCE PLAN)

9. Summary of Performance

10. Compensation Claims April 2012- March 2013

11. Compensation Fund Claims (Comparison with previous financial years)

12. Claims breakdown per benefit : April 2012- March 2013

13. Claims breakdown and comparison with the previous years

14. Claims per Province April 2012 –March 2013

15. Claims Comparison per Provincial Office

16. STRATEGIC OBJECTIVE:PROVIDING AN EFFICIENT SOCIAL SAFETY NET A total of 21 SCSF projects were funded and monitored namely, Qholaqhwe, Mangaung; Maokeng; Hope Town; Marydale; SikaSonke; Mooi River; Bergville; UKZN; Himville; Matatiele; Aliwal North; Leandra; Nkomazi; Nkunzi; Opret; Mamadi; Community Regeneration; Swellendam; Lethabong and Workers World Media Productions. All these projects have finalised their respective workshops for the first tranche payment by 31 December 2012. Reviewed compensation benefits by end of financial year. Proposal was signed by the Minister and already gazetted for public comments.

17. STRATEGIC OBJECTIVE:PROVIDING AN EFFICIENT SOCIAL SAFETY NET Medical claims 2012 / 2013 Financial year A 12 % increase noted in Invoices processed this financial year. A decrease of 22 % noted in Rand Value this financial year. Over the last five financial years , the Fund has paid an average of 800 000 invoices per year. The Fund was experiencing a decrease in payments due to challenges on the implementation of the new IT system. This trend was noted up to Quarter 3 ,however there were mitigations such as the Medical Backlog project (Electronic processing of invoices), and the Claims backlog project in Quarter 4. The drop of Rand value is attributed to the project processing a high number of invoices with low monetary value and the controls on the electronic system used during the Backlog Project.

18. STRATEGIC OBJECTIVE: PROVIDE PROFESSIONAL, EFFICIENT AND CLIENT ORIENTATED HUMAN RESOURCE (HRM) More than 100% of the identified training needs were met against the annual target of 82%. 40 training needs were identified and 62 were addressed, which translates to 117% achievement. In contributing towards job creation, 111 interns were appointed by the end of 31st March 2013 against the annual target of 100 set by CF. The Fund consistently maintained its vacancy rate. The vacancy rate is 2.81% against the 10% vacancy norm.

19. STRATEGIC OBJECTIVE: STRENGTHENING CORPORATE GOVERNANCE (RISK MANAGEMENT) Out of 142 Fraud and corruption cases cases 86 finalized within 4months which resulted in two medical health care providers convicted and sentenced to three years house arrest and five years suspended for both. they were also ordered to pay back R2,1m and R455,212.60 with 15% interest respectively. Another 4 Medical health care providers are still on trial for defrauding the Fund the value of R1,359,876.7 7 Ex-employees are also on trial for colluding with Health care providers. Two Health care providers were on trial by HPCSA and the rest are outstanding.

20. STRATEGIC OBJECTIVE: INTEGRATION OF CF WITH THE COMPREHENSIVE SOCIAL SECURITY REFORMS (LEGAL SERVICES) Draft amendments of COIDA, which includes a chapter in Reintegration and Rehabilitation to work, were completed and submitted to the LP&IR branch of the Department of Labour for quality assurance and further consultation.

21. STRATEGIC OBJECTIVE: PROMOTE POLICY ADVOCACY (COMMUNICATION) Communication Strategy was successfully implemented. - Educational adverts covering employers, employees and beneficiaries ran on national TV (SABC 1,2,3 and Etv), national radio stations in all official languages. - Educational advert covering beneficiaries ran on community newspapersin different languages. Educating them on what services the Fund is offering and what their rights are. - Radio interviews were conducted on community radio stations in different languages educating and responding to enquiries relating to covering all COIDA. - Adverts were ran on Commuta net (train stations and buss stations) covering employees and beneficiaries TO ENSURE MAXIMUM REACH. -

22. . NOTICE TO EMPLOYERS- Advertorial ran on national newspapers informing employers of the deadline and how to submitRETURN OF EARNINGS- Television adverts on SABC 1-3 and etv.- Radio advertorials ran on national radio stations in all official languages.- Alive advertising, adverts for beneficiaries ran on alive screen nationwide from February to March 2013,- On-line advertising ran on news sites from Feb to March 2013,- Billboard advertorials ran on all Gautrain stations from the month of March 2013, - Airport screens advertorials ran from the month of March 2013.

23. IMPACT OF THE RETURN OF EARNINGS ADVERTS As at 28 February 2013, before the advert, we already had 39 000 employers registered on the ROE Website. 85 000 submissions have been filed successfully on the ROE Website between 1 April to 30 April 2013. The Call Centre and Walk in Centre online submission statistics as of March to 30th April: 16,654 calls and 9,822 emails.

24. STRATEGIC OBJECTIVE: IMPROVE FINANCIAL VIABILITY (FINANCE) R1,6 Billion was collected in total in quarter 4 against the annual target of R1 billion per annum of the debt book as at 31 March 2011. The implementation of the RoE website in 2012 for online submissions has been successful. For the period until the end of March 2013 94,302 online submissions were received with total revenue of R3,3 billion. In the last two months when the 2012 submissions were opened for submission we have received 82,870 submissions with total revenue of R3,4 billion. 8.10 billion was invoiced by the end of quarter 4 against a target of R5.6bn

25. STRATEGIC OBJECTIVE: IMPROVE FINANCIAL VIABILITY (FINANCE) The Fund maintained its financial ratio target. The current ratio was 4:1 against a target of 2:1 For the 4th quarter the Fund received returns on the Compensation Portfolio of 1.39% against a targeted benchmark of 1.24% and on the Pension Portfolio 1.09% against a targeted benchmark of 1.06%.

26. STRATEGIC OBJECTIVE: IMPROVE CORPORATE SUPPORT AND SERVICES / ENHANCE QUALITY AND ACCESS TO COIDA SERVICES AND INFORMATION (ICT) The Fund’s IT governance framework was finalised and approved. A Business Continuity Plan was developed and approved. The call centre infrastructure was upgraded to newer technologies. The Return of Earnings website went live and is being extensively used by employers to submit returns. The Fund is in the process of procuring a new IT solution to pilot in the new year.

27. STRATEGIC OBJECTIVE: STRENGTHENING CORPORATE GOVERNANCE (Internal Audit) Risk-Based 3 year and Annual Audit Plan Drafted approved by Audit Committee on the 11th June 2012. Reporting of quarterly reports to the Audit Committee. 4 Audit Committee meetings took place between April 2012 – 31st December 2012. As at December 2012, a total of 52% (12 out of 23) of audits were finalised and presented at Audit Committee. Developed and implemented the internal audit Methodology. Teammate software acquired and the methodology is fully incorporated. A combined assurance model (IA,RM and AG) was drafted and will be implemented in the new financial year.

28. SOME OF THE KEY CHALLENGES FACING THE COMPENSATION FUND AND HOW WE ARE RESPONDING TO THEM Challenge • Inadequate IT Systems. • Turnaround time in processing of compensation claims. • Backlog in processing claims and payments. • Document management. • Records management system. Intervention • Process automation • Pilot the RMA system. • Initiated a Backlog Project. 28

29. SOME OF THE KEY CHALLENGES FACING THE COMPENSATION FUND AND HOW WE ARE RESPONDING TO THEM (CONT.) Challenge • Delay and/or non-reporting of accidents • Employer non-compliance Intervention • Include employers in Educational Campaigns • Engage Enforcement Inspectorate 29

30. SOME OF THE KEY CHALLENGES FACING THE COMPENSATION FUND AND HOW WE ARE RESPONDING TO THEM (CONT.) Challenge • Human capacity constraints Intervention • Full implementation of the new structure, especially by filling critical posts in the area of Finance and the post of Chief of Operations. 30

31. Auditor-General Report

32. OVERVIEW OF AUDIT FINDINGS 2009 2010 and 2011 2012 Qualification Disclaimer Disclaimer Revenue contributions and assessment debtors Bank (reconciliations/ suspense accounts /balances) Qualification Cleared Disclaimer Qualification Disclaimer Disclaimer Claims incurred Qualification Cleared Disclaimer Accounts payable Qualification Cleared Disclaimer Property, plant and equipment Disclaimer Qualification Cleared IFRS 7

33. Assessment Revenue and Receivables Compensation Fund does not have an adequate system and process in place to ensure that all employers are correctly assessed and billed. Therefore I was unable to verify completeness and accuracy of revenue contributions for the year of R4, 9 billion (2011: R4, 8 billion ) as well as completeness and valuation of assessment debtors of R5, 7 billion (2011:R4, 9 billion . The completeness and valuation of the accrual for assessments not raised totalling R1,5 billion. No further alternative procedures could be performed. Challenges: Inadequate IT Systems Capacity and skills shortages Prior year backlog reduction Unregistered/untraceable employers No link between CIPC (CIPRO) and FC Employer non-compliance Slow networks Audit Qualification 2011/12

34. Action Plan: Short-Term Assessment Revenue and Receivables (cont.) • Improvement on standards and norms • Appoint additional managers –new proposed structure • Managers to manage- monitor performance more strongly • Update employer contact details • Accurate Assessment of all received employer ROE • Follow up and clear all queries timeously • Raising of Estimates for employers who did not return ROE’s • ROE project implemented to remove the backlog • Implementation of ROE website and online submission

35. Assessment Revenue and Receivables (cont.) Action Plan: Medium - Long term Comparison of CF employer database to UIF or SARS database. Adopt a simpler tariff model in order to standardise tariff rates/Actuarial rates. Appoint payroll auditors

36. Interest and Penalties on assessment employers I was unable to verify the accuracy and completeness of interest and penalties for late submissions of return of earning’s and late payment of assessment due to interest and penalties incorrectly charged to assessment debtors. The entity’s records and system did not permit the application of alternative procedures relating to interest on assessment of employers. Consequently I did not obtain all the information and explanations I considered necessary to satisfy myself as to the accuracy and completeness of interest and penalties on assessment employers amounting to R347 million. Action Plan: Short term-Medium term Identify debt collection service provider Ensure proper system configuration Implement moratorium on interest and penalties until such time as system configuration resolved. Audit Qualification 2011/12

37. Medical claims I was unable to express an opinion on the completeness, accuracy and occurrence of benefits paid. Included in the R2,2 billion disclosed in note 4 of the financial statements is an amount of R43 million relating to permanent disability and medical claims that have been paid but could not be reconciled to the benefits claims listing. The entities lack of internal control processes did not allow the performance of alternative audit procedures to confirm the completeness and accuracy of benefits paid. Action Plan: Short- term Recruit appropriately skilled financial staff Ensure proper system configuration Perform monthly reconciliations Ensure proper management review of reconciliations Audit Qualification 2011/12

38. Material losses Included in Material Losses of R26 million disclosed in note 24 to the financial statements is an amount of R4,8 million relating to (new cases) that were finalised in the current year. The balance of R21,2 million relates to cases reported in the prior year but only finalised in the current year. An amount of R3,1 million relating to these cases was recovered. Action Plan: Short -term Review the Fraud prevention Strategy Review effectiveness of fraud prevention controls Implement the fraud Hotline. Matter of Emphasis

39. Presentation of information The reported performance information was deficient in respect of the following criteria: Presentation of information: Performance against predetermined objectives is reported using the National Treasury guideline Usefulness of information Of the total number of planned targets only eight out of twenty two targets were achieved during the year under review. This represents 63.64% (>20%) of total planned targets that were not achieved during the year under review. This was as a result of the Fund not adequately following up on quarterly targets not achieved during the quarterly monitoring reporting process and implementing action plans to address the non achievement. Action Plan: Short-term Strategic plan – SMART principles adopted in setting objectives Monthly/ Quarterly reporting of Performance information Identify action plans to address non achievement of targets. Performance Information

40. CF 2012/13 BUDGET ALLOCATION& SPENDING

41. 2013/14 BUDGET AND MTEF ESTIMATES

42. PART B 2013 – 2018 STRATEGIC PLAN AND 2013/14 ANNUAL PERFORMANCE PLAN

43. Issues that were in the plan but not finalised Enhancement of the Integrated Claims and Financial Management Systems to deal with AG findings. - The systems development which are in progress include MIS, Letters of Good standing, Remittance advices, Electronic Portal). Implementation of the Revenue Management Strategy. Marketing the ROE Website to increase employers access and invoicing Incentives for filling on line and paying within specified period Source Pay Roll Auditors to enforce compliance Backlog management (The Rescue Plan: Claims Registration and Adjudication Projects is in progress). Implementation of the approved Organisational Structure. - The structure is implemented on PERSAL system - Critical posts are being advertised

44. Issues that were in the plan but not finalised (cont.) Decentralisation of COIDA services to Provinces. Amendment of COID Act. COIDA Stakeholder engagement.

45. Priorities for 2013/14 Piloting the RMA system Engage with the medical service in the bargaining chamber Full implementation of the organisation structure Capacitate the Fund in the area of Finance and fill the post of Chief of Operations within the Fund Decentralisation of COID services Finalisation of the Turn-around Strategy and the implementation thereof. The amendment of COIDA Claims management strategy

46. Strategic Objective: Provide an efficient social safety net

47. Strategic Objective: Provide an efficient social safety net

48. Strategic Objective: Provide professional, efficient and client orientated human resource

49. Strategic Objective: Provide professional, efficient and client orientated human resource ( Cont.)

50. Strategic Objective: Strengthening corporate governance