UIF bosses suspended as auditor-general details Covid-19 relief chaos

The Department of Employment and Labour has suspended top Unemployment Insurance Fund (UIF) officials after the auditor-general found that a lack of financial controls led to widespread failures in Temporary Employer/Employee Relief Scheme (Ters) payments.

Labour and Employment Minister Thulas Nxesi announced that UIF Commissioner Teboho Maruping, along with the UIF’s chief financial officer, chief operating officer and head of supply chain management had been suspended on Wednesday.

“These moves allow for the SIU to conclude its forensic investigation, completely unfettered,” he said.

The UIF had to process an unprecedented number of claims under the Ters benefit, aimed at assisting employees who were temporarily unemployed during the Covid-19 lockdown. Nxesi said a total of R41.6-billion had been disbursed in 9.5 million payments.

In his report on the government’s socio-economic initiatives meant to offset the impact of Covid-19, Auditor-General Kimi Makwetu audited Ters claims made in April and May, amounting to R28-billion. His findings point to a staggering lack of verification and controls.

Over R200,000 was paid to 53 applicants who were under the legal working age of 15 years. Individuals that Home Affairs said were deceased received over R400,000. Almost R170,000 was paid to individuals who are currently in prison, according to the Department of Correctional Services. Over R30-million was paid to people with invalid identity numbers.

The UIF paid R685-million to foreigners whose employers hadn’t paid contributions within the last 12 months; it didn’t check whether they had valid work permits or were refugees. Applicants who had received benefits from other state institutions received over R140-million.

The UIF overpaid on 1,183 Ters claims to the amount of R84-million and underpaid on 1,700 applications, totalling over R250-million. There were also transactions on the system that had been paid but had no corresponding invoices, amounting to over R1.3-billion for over 230,000 applicants.

“I take these breaches very seriously,” said Nxesi on Wednesday.

“Some 38 court cases have been opened, and charges laid against perpetrators, drawing on evidence from the AG’s findings as well as from suspicious transactions picked up by the UIF’s own risk management unit. Some of these cases are already before the courts and perpetrators in jail.”

The minister said a “fusion centre”, including the Financial Intelligence Centre, IPID, Hawks, NPA, SIU and SSA, is working to recover funds unlawfully paid and hold perpetrators accountable.

The UIF’s response had been criticised before the release of the auditor-general’s report. Asked whether he takes personal responsibility, Nxesi said he performs an oversight role and, while he’s accountable to the president and Cabinet, he cannot interfere in the operations of state entities.

The auditor-general’s report is a comprehensive review of the government’s interventions during the Covid-19 response.

Makwetu said, “Emergency responses and quick actions are required to save lives and livelihoods, but the easing of controls and the streamlining of processes and procedures to respond to the crisis, expose the government to the risks of the misuse or abuse of public resources.”

He said the Covid-19 relief package, announced by President Cyril Ramaphosa in April, “landed in a weak control environment”. At the time of the auditor-general’s audit, the first in a series of his office’s investigations, R147-billion was allocated to spend on Covid-19 relief initiatives. A total of R68.9-billion of that had been spent.

“As can be observed from all the initiatives started this far, there are significant risks that point to internal deficiencies as well as the exposure to external risk on the funds. To date, less than half of the appropriated funds have been spent. This suggests that a heightened level of oversight will be required as more programmes are rolled out,” he said.

“Based on what was audited to date, there are clear signs of overpricing, unfair processes, potential fraud and supply chain management legislation being sidestepped. In addition, delays in the delivery of personal protective equipment and quality concerns could have been avoided through better planning and management of suppliers,” said Makwetu.

The auditor-general reviewed contracts provinces paid for personal protective equipment (PPE), and a “high-level audit” found that they may have overpaid by at least R142-million.

Comparing specific provincial contracts to market-related prices that had been suggested by the National Treasury, the auditor-general found examples of Gauteng overpaying by 565% for face masks, KwaZulu-Natal spending 422% more than Treasury suggested on aprons, and North West paying 502% in excess of the prescribed price for gloves.

Makwetu criticised the SA Social Security Agency (Sassa) for its dismemberment of the R350 social relief distress grant, finding that the agency had failed to coordinate with other government institutions to verify whether applicants qualified, resulting in payments to applicants who did not qualify and the denial of applicants who did.

“Our tests of the payments of R1,400-million made as at 14 July 2020 identified 32,642 beneficiaries who were not eligible to receive the grant as they were employed in government or received income from other sources,” reads the auditor-general’s report. DM