Fraud flagged at the Compensation Fund

Workers injured on the job, such as during the collapse of a building under construction in George in May 2024, have had to wait months to obtain compensation, with some still waiting. The Auditor-General has told Parliament that all aspects of the Fund are dysfunctional. Archive photo: Daniel Steyn

• The Auditor-General’s office described failures across all areas of the Compensation Fund in Parliament earlier this month.
• This has been ongoing for 12 years despite the Special Investigating Unit being tasked in 2014 to investigate the Fund.
• A consultancy firm says it can take six months for a compensation claim to be paid, sometimes legitimate claims are not paid, and sometimes claims are paid twice.
• Claim payment difficulties are leading medical service providers to turn away workers injured on duty.

The Auditor-General’s office has flagged potential fraud at the Compensation Fund and advises that almost every aspect of the institution is dysfunctional.

The Fund exists for workers who suffer work related injury, illness or death. Yet a managing director of a company that assists medical service providers and workers to obtain their compensation, told GroundUp of an instance in which the Fund has taken three years to pay a legitimate claim. As a result, some medical service providers are refusing to treat workers injured on the job.

Under the Compensation for Occupational Injuries and Diseases Act, employers pay an annual amount based on their payroll to the Compensation Fund.

Employers may claim for salaries they pay employees who are sick or injured. Medical service providers can claim for treating sick or injured workers, but they must register with the Fund.

The Fund, therefore, has a list of bank accounts for medical service providers. There should be only one bank account per provider, senior manager in the Auditor-General’s office Bulelwa Sikweyiya told Parliament’s Standing Committee on Public Accounts (SCOPA) earlier this month. But Sikweyiya said that during the 2023/24 audit, they compared the bank accounts on the fund’s database against the account numbers paid.

“What we found was there were accounts that were paid that were different to the accounts sitting on the funds system … which highlights potential fraudulent payments,” she said.

There were also payments made to multiple bank accounts listed under a single medical service provider.

She said system logs showed banking details were changed while someone else was trying to make a payment. The auditors could not see who had made these changes as the log function used to record the details of who goes into the system had been disabled. Where they could determine who the users were, the users claimed their accounts had been hacked as they had not made those changes.

Not only did this raise questions about fraud, but it created fruitless and wasteful expenditure due to payments having to be delayed once fraudulent activity was flagged, leading to the medical service providers taking the Fund to court, and the Fund being ordered to make the payments with interest.

Altered creditors’ banking details are just one issue among a host of failures at the Fund, which has had the lowest audit outcome – disclaimer with findings – since the 2012/13 financial year.

Sikweyiya said internal controls at the Fund have broken down. The auditors are unable to verify what is reported by the Fund. There has been no improvement in the control environment. There is a lack of accountability and no consequence management. Issues from previous years are not addressed, and the institution has “a high tolerance of non-compliance”.

An incompetent fund

The Compensation Fund was singled out as far back as the Auditor-General’s Consolidated general report on national and provincial audit outcomes for 2012/13. The report stated: “Commitments and actions regarding oversight responsibilities over the public entities were not followed through, specifically at the Compensation Fund.”

“Over the years the areas of concern have remained the same, and the nature of the findings have remained the same. These areas range from transactions to balances to disclosures, which means we have issues with the whole set of financials,” said Sikweyiya.

Registered employers are supposed to be assessed annually to check whether they are paying the correct amount to the Fund, but this was not always done. She said where assessments were done, they were not always correct, interest was not charged at the correct rate, or the amount itself was incorrectly calculated. Additionally, revenue had been recorded for companies that had been deregistered, or were in the processes of being deregistered, dissolved or liquidated.

Regarding the Fund’s investments, she said some investment companies were using accounting frameworks different from the Fund’s, resulting in errors when consolidating financial statements.

There were also investments made in startups through the Public Investment Corporation (PIC) that were not yielding results. Questions by SCOPA members revealed the startups had dissolved or been liquidated, which meant the funds were lost.

There had been no improvement in controls when it came to losses due to irregular, and fruitless and wasteful expenditure: R485-million and R652-million respectively in the 2023/24 financial year.

“There is no area that is better. Every control area needs an intervention,” she said.

Mounting frustration

Rudolf de Bruyn, managing director at COID Consult, a company that helps medical service providers claim from the Fund and assists companies to comply with their payment requirements, said they had matters they had been trying to resolve at the Fund for the past nine years.

De Bruyn said documents relating to claims often went missing after they were submitted, resulting in multiple resubmissions, and the investigation and adjudication of claims could take several months.

Even after a claim was approved, it could take six months before the payment was made, and then the payments were sometimes incorrect. He said when incorrect payments were made, an objection had to be lodged with the Fund, with the legal processes taking an additional six to 12 months.

He said he was currently dealing with a 74-year-old client who had completely lost sight in one eye due to an injury while on duty. The accident happened three years ago, in March 2022, and the client is owed 17-month’s salary from the Fund. They are now waiting for the client’s objection to be heard next month.

He said medical service providers experienced similar problems with delays and administration hurdles, much of it to do with the CompEasy online system the Fund introduced in 2019.

He said his company was dealing with a new medical service provider that wanted to treat injured workers on behalf of the Fund, but they had been struggling for a year to get the medical service provider’s bank account verified and added to the online system.

There were “numerous” employers that were not compliant with the necessary regulations, while there were employers who wished to become compliant but were unable to make their payments to the Fund and received no assistance to do so.

This meant the employees could not get a Letter of Good Standing from the Fund, which was required by medical service providers before treating their workers injured on duty. Companies could also not submit a tender if they did not have a Letter of Good Standing.

Additionally, some companies “can wait years” for their Return of Earnings to be audited by the Fund, or for their companies to be re-classified when their business changed. This meant that despite making payments to the Fund, their workers were not covered.

At the same time, he said, medical service providers would “randomly get an overpayment or a double payment on an account”. While COID as a third party would then notify the Fund, he questioned how many medical service providers would do so, especially when they were owed money for other cases.

He said due to longstanding unresolved issues at the Fund, many medical service providers had stopped treating injured workers. This was “probably the most frustrating part of the job.”

However, he said it was “not always doom and gloom”. “There are times that we work well with the Fund.”

He said sometimes a badly injured worker needs to be transported across provinces to be closer to their families, and these claims were resolved “in mere hours”.

“These cases bring joy when seriously injured workers are reunited with their families and they can be treated closer to home.”

SIU investigation

Dysfunction and possible fraud at the Fund has continued despite the Special Investigating Unit (SIU) being given a proclamation in 2014 to investigate the Fund.

The SIU’s final report was submitted in February 2021.

The SIU did not respond to questions on whether prima facie evidence of fraud had been found, and calls to spokesperson Kaizer Kganyago went unanswered.

National Prosecuting Authority spokesperson Mahanjana said he could not assist in answering questions on whether the report had been received and what their decision on prosecutions were without knowing at which office the SIU report had been filed.

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