The financial books and internal controls of the Unemployment Insurance Fund (UIF) and the Compensation Fund (CF) are in disarray that both entities are vulnerable to exposure to fraud.
The scale of the mismanagement has led to the Auditor General (AG) giving both funds a disclaimed opinion, meaning that the auditor cannot form an opinion on their financial statements.
This was revealed by Bulelwa Sikweyiya, senior audit manager in the AG office during the presentation of their findings of the audit outcomes of the two institutions before the Standing Committee on Public Accounts (SCOPA) on Wednesday.
According to the AG's findings, the CF in 2023/24 financial year had an irregular expenditure of R485m, an increase from R479m in the previous financial year.
The fund also experienced a big loss of R652m in wasteful expenditure in the 2023/24 period, an increase from R567m in the previous period.
Meanwhile, the UIF failed to produce the latest financial statements to the auditor. However, it had an irregular expenditure of R77m in 2022/23, a decrease from R111m in 2021/2022. The entity had a wasteful expenditure of R137m in 2022/23.
Skweyiya blasted both entities for their lack of internal controls and accountability in management which posed a risk for beneficiaries.
"Regarding the CF, there was a complete breakdown in internal controls, exposing the entity to fraud. Persistent financial misstatements were due to inadequate supporting documentation, poor enforcement of compliance, and a lack of consequence management," she said.
Meanwhile, the UIF struggled to submit financial statements on time repeatedly, with Skweyiya saying the entity also mismanaged the payments of the Temporary Employer-Employee Relief Scheme (TERS) payments which were to cushion workers during Covid.
"The benefit payments for Covid-19 TERS were not properly accounted for, due to the status of the accounting records. Employers could not provide evidence/information to substantiate the claims made including confirming the existence of employees, employment status and proof of payments for the disbursement of funds to the employees. As a result, payments made in relation to TERS were not properly substantiated," said Sikweyiya.
About CF, Sikweyiya said the entity's failure to validate employer contributions resulted in incorrect revenue reporting.
"Payments were made to incorrect bank accounts due to unauthorised changes in banking details, and the UIF mismanaged investments, leading to financial losses and impairments," she said.
The AG recommended strengthening preventative and monitoring controls to identify financial mismanagement early.
"Implement consequence management for officials failing to comply with financial regulations. Improve financial reporting processes, including timely submission of audited statements, and enhance oversight and enforcement to prevent fraudulent claims and unauthorised payments," Sikweyiya said.
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