CCMA 2011 Annual & Audit Report

Meeting report

The Chairperson welcomed everyone and urged the presenters to be as brief as possible as time was limited.
Commission for Conciliation, Mediation and Arbitration (CCMA) Presentation
The CCMA briefed the Committee by speaking to its Annual Report 2010 – 2011. The delegation comprised of Ms Nerine Kahn, Director; Mr Afzul Sooberdaar, National Senior Commissioner Mediation and Collective Bargaining; Mr Nersan Govender, General Manager Operations; Mr Itumeleng Motsege, General Manager Corporate Services; Mr Sello Hlalele, Head of Internal Audit; Mr Obed Sekgololo, Finance; Ms Ntombi Bhoikotso, Chief Financial Officer and Mr Elias Monage, Chairperson of the Human Resources Subcommittee.
Ms Kahn initiated the presentation and stated that her colleagues would step in where appropriate. She touched on the vision, mission and values of the CCMA. The corporate governance of the CCMA was also elaborated upon and she listed the members of the CCMA Governing Body.
Mr Motsege provided a breakdown of the organisational structure of the CCMA. He noted that the Governing Body retained full and effective control over the governance of the CCMA. The Governing Body had adopted a Governance Framework. It was the accounting authority of the CCMA. The Governing Body had sub-committees which assisted with the fiduciary duties of the CCMA. The Governing Body reported to the National Executive. He pointed out that from a governance point of view the Auditor-General had given the CCMA a good report.
Ms Kahn provided the Committee with a quick refresher on the Siyaphambili Strategy. The Strategy set out the Goals and Strategic Objectives, Key Performance Areas and Measurable Outcomes for the CCMA for the next period 2011-2015. The Strategy would determine the allocation of resources and would drive the performance management system of the CCMA. The Strategy had three main goals and six strategic objectives. The CCMA also established a system that enabled it to monitor and evaluate the impact of its offerings on the economy in terms of its goals of fair democratisation of the workplace, equity and economic development. Quarterly reports were presented to the Governing Body for review. In support of this a Scorecard had been developed to monitor and track progress of the Siyaphambili Strategy. Members were given a synopsis of the Scorecard based on the six strategic objectives. For the last financial year the CCMA scored 3.89 out of 5 which was considered quite good.
Mr Govender continued with highlights from operations for 2011/2012. Operating efficiencies were compared for four years ie 2007/08, 2008/09, 2009/10 and 2010/11. For example for all four years the CCMA was able to conduct its conciliations within the 30 day statutory requirement. It also managed to bring down its late arbitration awards figure of 6% in 2007/08 to 1% in 2011/12. He pointed out some of the highlights and challenges of the CCMA. For the period 1998 to 2011 there was for the most part an increase in the caseload of the CCMA. In 2010 and 2011 the caseloads increased significantly from previous years. It was anticipated that the caseload would increase even further. As the accessibility of the CCMA improved so would the caseload increase. Budgetary constraints hampered attempts to increase accessibility.
Ms Kahn stated that the CCMA maintained relative industrial peace in the run up to and during the 2010 FIFA World Cup by implementing a structure, process and monitoring mechanism to rapidly deal with disputes that had the potential to impact adversely on the event.  An important development over the past year had been the further conceptualisation, development and implementation of the CCMA’s holistic, integrated approach to addressing business distress and job insecurity. This had evolved into an overall job saving strategy. The CCMA also had good projects on job saving for companies.
Ms Bhoikotso took Members through the financial performance of the CCMA. She noted that most of the matters raised by the Auditor General had been resolved. The Auditor General had conducted a special investigation in the 2009/10 financial year and in total 18 findings were raised with recommendations. At present 16 findings had been completed and only two were outstanding. Relating to the financial position of the CCMA, the deficit on capital and reserves had decreased from R46.378m in 2010 to R14.499m in 2011. On retained income there was a deficit of R31.879m in 2011. Net cash flows from operating activities was R27.166m in 2011. Cash and cash equivalents at end of year for 2011 increased to R35.191m from R11.531m in 2010. Changes in assets reflected a reduction in deficit from R46.378m at 31 March 2010 to R14.499m as at 31 March 2011. She pointed out that as yet the CCMA had not yet been audited. There was an interim report and it showed an improvement in the liquidity ratio of the CCMA.
Ms Kahn concluded by highlighting some of the recognitions that the CCMA had received for excellence. The CCMA had for instance been nominated as one of the top three organisations in the legal sector by the citizens of SA.
Discussion
Mr M Sibande (ANC, Mpumalanga) was concerned about the visibility of CCMA offices nationally, especially in rural areas. He noted that Mpumalanga was a vast province but the CCMA offices were only situated in Witbank. He asked what the problem was. He thought that perhaps the problem lied with requisitions.
In addition, Mr Sibande asked whether the CCMA had internal controls. The issues raised by the Auditor General should have been detected by internal controls. What mechanisms did the CCMA have in place to do follow ups on issues? He asked whether the issues pertaining to seasonal workers had been resolved.
Ms Kahn conceded that the CCMA had challenges regarding its visibility. The CCMA had a deficit in the opening of new offices which should have been two a year. In the last financial year no new offices had been opened. The CCMA had made submissions to National Treasury for greater funding as it had issues regarding governance and accessibility. She noted that the case management system had been upgraded. CCMA cases would be accessible at the Department of Labour offices. The Department would capture CCMA cases so that persons could check on them. It however did not solve the problem of hearing of cases. National Treasury had been supportive of the CCMA’s expansion programme but because of the huge caseload, expansion could not take place as it should.
The internal controls of the CCMA were good. There was a risk management process and it was addressed on an ongoing basis.
Mr O De Beer (COPE, Western Cape) was impressed that the CCMA had good case flow management. Perhaps other government institutions could learn from the CCMA example. If it was true that there were 700 backlogs per day, what was the average turnaround time? He pointed out that the CCMA had a target to cover labour brokers but that the target had not been met.
Ms Kahn said that the CCMA had a world class management system. It operated very well. There was actually no backlog in the CCMA. There was a 0.5% delay in cases.
Mr Govender explained that the bottleneck with regards to cases was at the Labour Court because cases went on review. The CCMA had various departments look at its system. The system was owned by South Africa. The system could be shared with other departments. The system allowed for a quick turnaround time and for good data to be available.
Mr H Groenewald (DA, North West) asked what type of assets the CCMA had. Was there an asset register? Were all policies in place? What type of interventions had the CCMA made to resolve labour issues at Eskom. What were the 18 findings that the Auditor General had made?
Ms Boikotso confirmed that the CCMA did have an asset register. Assets were software that was used, servers, computers, furniture and fixtures and fittings. There were policies in place to manage assets. Assets were counted and monitored in terms of the Scoreboard.
She noted that the 18 findings emanated from various departments within the CCMA, namely human resources, information technology and finance. One of the findings related to supply chain where a vendor’s VAT certificate had expired.
Mr Motsege said that the governance framework was very detailed. There was a policy and review process. Financial policies would be approved by the governing body. The governing body had approved more or less 20 policies in the Annual Report.
Mr Sooberdaar pointed out that the CCMA did well on its policies. The actions taken by the CCMA at Eskom were for industrial action. Bargaining council negotiations at Eskom and Transnet had broken down. 
Mr De Beer referred to vulnerable sectors like domestic and farm workers and stated that there was a perception that the CCMA did not have teeth when it came to these sectors. Was there enforcement of findings of the CCMA regarding these sectors?
The Chairperson referred to the Annual Report of the CCMA on pages 36 and 37 which provided statistics on employment equity. Information was however absent on employment equity figures in relation to senior employees and figures on race and gender. She asked what the CCMA’s plans were to improve accessibility, especially in the Northern Cape and rural areas. She asked that statistics per province on cases achieved by the CCMA be forwarded to the Committee. The Committee also needed information on outstanding cases of the CCMA.
Ms Kahn responded that the Northern Cape was a challenge to the CCMA in terms of access. The CCMA partnered with the Department of Labour to access areas in the Northern Cape by way of a travelling truck. The CCMA had a great deal of offsite hearing venues in the Northern Cape. Extra funds had been received to examine the CCMA funding model. The model was to be reviewed.
If full time commissioners were appointed it could lead to bias. The CCMA preferred commissioners to travel to areas. There were dispute management commissioners in provinces.
Mr Motsege noted that an Employment Equity Plan had been submitted to the Department of Labour. Hence there was a process in place.
Ms Kahn agreed to forward greater detail to the Committee at a later time.
Mr De Beer pointed out that he kept abreast of labour court cases. He referred to the Correctional Services case where persons were fired for wearing dreadlocks. The Labour Court took four years to deal with the issue. How did the work of the CCMA bring down the amount of cases in the Labour Court?
Ms Kahn said that the problem was that the Labour Court was under the Department of Justice; hence it was difficult for the CCMA to influence the Labour Court. She also agreed that the Correctional Services case had dragged on for too long.
Mr Sibande emphasised that labour brokers were exploiting workers.
Ms Kahn responded that the reality was that this was not a CCMA issue but rather a Department of Labour issue. The CCMA was not involved in this matter neither did it have enforcement powers.
Mr Groenewald asked whether the CCMA had its own vehicles and if it did was log books used.
He asked what role the CCMA played in the Rustenberg mine situation.
Ms Boikotso answered that CCMA vehicles were leased.
Ms Kahn added that the vehicles had log books. She said that on the mine issue parties had to consent to CCMA intervention.
Mr Sooberdaar responded that the CCMA played a pro-active role. The CCMA had a dispute resolution role and surveyed the collective bargaining environment. Sometimes the CCMA got involved even before strikes happened.
The Chairperson stated that the Committee would consider the report by the CCMA.
She read out the report of the Committee on the CCMA Report including the Report of the Auditor General and having considered the CCMA Report, financial statements and the Report of the Auditor General, the Committee having concluded deliberations thereon adopted the CCMA Report.
The Compensation Fund
The briefing by the Compensation Fund was structured to provide an overview of the Fund, its organisation and performance, its financial performance as well as covering the Auditor General’s Report. The delegation comprised of Mr Shadrack Mkhonto, Compensation Commissioner; Ms Thembi Moleko, Director: Human Resources Management and Mr Madodana Tuntulwana, Planning Monitoring and Evaluation.
Mr Mkhonto undertook the briefing. Firstly, he highlighted some of the Compensation Fund’s Strategic Objectives which were amongst others to provide an efficient social safety net and to enhance quality and access to Compensation for Occupational Injuries and Diseases Act (COIDA) services and information.
The key challenges faced by the Compensation Fund were the delays in reporting or the non reporting of accidents by employers, the continuous struggle to get its Information Technology systems to work as it should, human capacity constraints and constraints on the records management system given that filing was still being done manually. Some of the highlights for 2010/11 were that the Fund was fully capacitated at top management level, the vacancy rate of the Fund had been kept at 5.5%, through the decentralisation project a total number of 33 845 compensation claims and 245 966 medical claims had been processed to the value of R418 597 984 and three educational campaigns about the Fund had been conducted in Limpopo, Mpumalanga and Eastern Cape Provinces. A further highlight relating to risk management was the development of a formal Risk Management Strategy and it was adopted to ensure effective, efficient and transparent risk processes that focussed on strategic and operational risks.
The Compensation Fund handled a total of 215 493 claims of which 144 081 had been finalised. The remaining 33% of unfinalised claims were where the medical condition of the employee had not stabilised and that the employee would only be assessed in the next financial year. A comparison on the value of compensation claims paid was that in 2009 there had been 340 159 claims paid with a total value of R771 801 533 whereas in 2010 there had been a decrease in the number of claims paid but the total value of claims paid had increased to R810 724 702.  On medical claims in 2010/2011 financial year of the 868 284 invoices paid 495 051 invoices had been paid within 30 days. It translated into a 71% turnaround in medical payments in comparison to the 60% of the previous year. Medical payments in 2009/10 was 781 249 payments which totalled R1 451 516 511, in 2010/11 the amount of payments had increased to 868 284 and the total had also increased to R1 909 128 962.
Relating to financial management, contributions received in 2010/11 had increased to R5.27m from R4.8m in 2009/10 which was a 9%increase. Figures on the financial performance of the Compensation Fund for 2008/09; 2009/10 and 2010/11 were also presented. On human resources 673 of 711 posts had been filled which left 38 posts vacant. As previously stated the vacancy rate thus sat at 5.5%. Members were also given a breakdown of the staff turnover rate at various levels within the Compensation Fund. The total turnover rate sat at 2.7%. Members were furthermore given figures on employment equity at various levels. For example at top management level there was one African male in place. The Committee was also provided with an overview of audit findings. For example on claims incurred in 2010/11 a qualification had been received. Some key priorities for the Compensation Fund in 2010/11 were the implementation of the approved organisational structure, the decentralisation of COIDA services, the amendment of COIDA and to improve revenue collection.
Discussion
Mr Sibande asked how many legislative amendments was the Compensation Fund calling for and by when would the Committee be able to peruse them. If three educational campaigns were taking place in the Eastern Cape, Limpopo and Mpumalanga the Committee needed specifics as these provinces were vast. On risk management the findings of the Auditor General had said that administration was poorly managed. What was being done to rectify the situation?
Mr Mkhonto responded that labour broking legislation was being discussed. The bill was expected to be finalised by June 2012. In early July 2012 it was expected to go to the Minister. Enforcement would be strengthened as inspectors would have more power. He stated that the Compensation Fund had a fully functional risk management unit. It was through the work of the risk management unit that things were uncovered. The information technology system was challenging as it was manually based.
Mr Groenewald noted that if the Compensation Fund was a state owned entity what assets was it investing in. Huge amounts of money were being invested by the Compensation Fund. There were investments of R23m and R631 000. The Auditor General had stated that money was not being spent in the correct manner. Reference was made to page 82 of the Compensation Fund’s Annual Report. He also referred to page 83 of the Annual Report and noted that the Auditor General had stated that medical claims to service providers amounting to R24m had been poorly managed. Remaining on page 83 of the Annual Report, he asked what was the irregular expenditure amounting to R20m and what was the material losses amounting to R25m. Only R2.4m of the R25m had been recovered by March 2011. What about the rest of the funds? He referred to page 87 of the Annual Report and said that the Auditor General had pointed out that there was a lack of financial leadership. There was also no proper record keeping.
Mr Mkhonto stated that the irregular expenditure was identified by the Compensation Fund’s internal audit function. The problem lied with the Information Technology system contract. The contract had not been renewed. The irregular expenditure was expenditure on the Information Technology system. It was hoped that in 2011/2012 the Siemens information technology system would be switched off. Once this was done then National Treasury would condone the irregular expenditure. As long as the Information Technology system was still running there would be irregular expenditure. On the investment in property, the Compensation Fund owned a building in Bisho and it was rented out to the Department of Public Works. There was also a building in Pretoria which the Compensation Fund owned that was under renovation. There was no investment in new properties.
He responded that the Compensation Fund levied employers and then paid doctors. On assessment revenue the Compensation Fund requested an exception from the SA Revenue Services (SARS). The R24m had been a court settlement amount which had been agreed upon where doctors had handed over their claims to lawyers. It was a qualification that the Compensation Fund accepted because they were unable to capture the data manually. The R20m irregular expenditure was R6m on the accounting system and a further R14m on a second court case. It was R4m that had been recovered from the R25m material losses. Attempts were being made to recover the remaining R21m. Shortfalls on record keeping was due to having a manual system, but records were being scanned in. The Auditor General gave the Compensation Fund five days within which to submit information. Due to the Compensation Fund’s manual system the deadline could not be met.
Mr De Beer stated that there was a perception that the Compensation Fund was not accessible. Normally when the Compensation Fund was accessed it usually was through the use of lawyers. The lawyers in any case took the bulk of the funds. He asked why there was a problem to pay service providers who had rendered services. The systems in the Compensation Fund seemed to have failed the organisation. Was there a difference between the old and the new system?
Mr Mkhonto replied that the Compensation Fund did not deal much with lawyers. Benefits to employees could not be used for any other purpose. Employees were represented by lawyers from the Legal Aid Board. He noted that what Mr De Beer was perhaps referring to was Road Accident Fund claims.
With regards to the payment of service providers within 30 days he said that given the current manual system it was not going to happen. Progress was being made with the new Information Technology system and employees were getting used to it. Training was also taking place.
Mr Groenewald asked if the Information Technology contract was R20m a year.
Mr Mkhonto explained that R6m was for Information Technology and R14m was to make payment in terms of a court order. The system that the Compensation Commission was on was purchased 15 years ago and the company was no longer in existence. The company even owed SARS money. National Treasury could only make a condonation when the Compensation Fund stopped using the system. Once the system was switched off the irregular expenditure could be calculated and National Treasury would condone it.

The Chairperson stated that the Committee would consider the report by the Compensation Fund.
She read out the report of the Committee on the Compensation Fund Report including the Report of the Auditor General and having considered the Compensation Fund Report, financial statements and the Report of the Auditor General, the Committee having concluded deliberations thereon adopted the Compensation Fund Report.
The meeting was adjourned.