Auditor General Kimi Makwetu has given the Unemployment Insurance Fund a qualified audit opinion, saying he was unable to obtain enough audit evidence to substantiate the amounts recognised as investments, joint ventures and unlisted financial instruments.
The UIF exists to provide social security to workers should they lose their employment, serving as a buffer to the blow of becoming jobless.
During his budget vote in July, Minister of Labour and Employment Thulas Nxesi said his department aimed to leverage the UIF and the Compensation Fund (a fund that reimburses workers that lose work as a result of injury or disease from occupational hazards) as agents in job preservation and skills development for the unemployed.
However, the UIF notes in financial statements in its annual report for the 2018-19 financial year that it’s had financial issues, including the irregular payment of R2.5m, which is being investigated internally, and the write-off of R42.9m in bad debt.
In his audit report, published in November, Makwetu said he could not find adequate evidence in the UIF's financial statements to substantiate some of the figures related to line items including investment, impairments and unlisted instruments.
"Management did not implement effective systems of internal control to verify data that was used to determine the fair value of the investments in associates, joint ventures and unlisted financial instruments and the resultant impairment loss," Makwetu wrote.
Makwetu said the UIF's records did not permit the application of adequate alternative audit procedures, meaning he could not determine if any adjustments were needed to investments in associates stated at R3.6bn, joint ventures at R153m and unlisted instruments at R5.9bn.
Irregular spend, material losses
"I could also not confirm, by alternative means, whether any adjustments were necessary to the impairment of investments stated at R568m and impairments in joint ventures stated at R0," wrote Makwetu.
Makwetu said the UIF incorrectly accounted for loans and receivables at fair value and that this contradicted the policy and requirements of Generally Recognised Accounting Practices (GRAP).
"Irregular expenditure of R13.3m that was incurred in the previous years was still under investigation. Material losses amounting to R42.9m were incurred as a result of a write off of irrecoverable debtors," said Makwetu.
Makwetu said the UIF failed to take disciplinary steps against officials who incurred or permitted irregular expenditure amounting to R86m.
He added that management failed to adequately control daily and monthly processing and reconciliation of transactions.