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A report by the Auditor General (AG) on fraud and financial mismanagement associated with the Covid-19 TERS benefit scheme of the Unemployment Insurance Fund (UIF), has uncovered poor financial management and verification controls, which has generated millions in payments to the deceased, and people in prison.
AG Kimi Makwetu released the first in a series of special reports on the financial management of the government’s R500 billion Covid-19 aid package this week. The package was announced by President Cyril Ramaphosa in March in response to the impact of the Covid-19 pandemic on the economy.
Following the findings published in the report, Labor and Employment Minister Thulas Nxesi announced that senior FIU officials, including Commissioner Teboho Maruping, were placed on preventive suspension.
Due to the scope of the findings, the Attorney General’s office has sent a list of potentially fraudulent cases to the multi-agency merger center, the Special Investigation Unit, and law enforcement agencies, for speedy follow-up investigations and possible prosecution. .
While the aid package totaled R500 billion, the GA report focused on R147.4 billion allocated through the June 2020 supplemental budget.
Most of it was distributed to support vulnerable households (R40.9 billion); health (21.54 billion rand); support to municipalities (20 billion rand); other first line services (R13.62 billion); basic and higher education (12.54 billion rand). The rest was distributed among other services.
Of this, R68.9 billion (47%) had been spent in July 2020.
TERS payments
Makwetu first highlighted the Temporary Employer / Employee Assistance Scheme (TERS) payment and social allowances. These were introduced to provide financial relief to the vulnerable and to help employers protect jobs.
“By July 31, the Unemployment Insurance Fund (UIF) had paid just over R37 billion in TERS benefits and the South African Social Security Agency (SASSA) had paid R19.6 billion in social grants,” he said the AG.
In this sense, Makwetu said that the new system implemented for TERS incorrectly calculated the benefits for the first lockdown period (March 27 to April 30) by not taking into account the actual period of inactivity and the part of the salary paid by the employers, resulting in significant overpayments.
In analyzing the payment data and comparing the beneficiary information with other government databases, the Auditor General flagged several payments that require investigation.
The AG office analyzed the TERS payments made by checking the details of employers, bargaining councils and employees against various existing government databases such as Internal Affairs, the South African Revenue Service and the CIPC to confirm the beneficiary eligibility, identify double dip, and so on.
He found the following ten red flags regarding payments made through June 30, 2020:
1. Applicants below the legal working age
- Persons under 15 years of legal working age were paid by the FIU. A total amount of R224,677 was paid for 53 requests.
2. Identity number equal to the FIU employee
- A claim of R4,027 was paid to a person who has the same identity number as an employee of the FIU.
3. The deceased persons paid the TERS benefit
- Individuals who were listed as deceased according to the Home Affairs database received TERS benefits totaling R441,144.
4. Incarcerated people paid the TERS benefit
- A total amount of R169,900 was paid to individuals who were indicated to be in prison according to the Department of Correctional Services database.
5. People with invalid identity numbers
- A total of 4,161 payments worth R30,071,248 were made to individuals with invalid identity numbers when compared to the Department of the Interior database.
6. Payments to foreign citizens
- Payments amounting to R685,846,671 were made for 166,619 applications related to foreign nationals whose employers had not paid contributions for them during the last 12 months. The FIU did not confirm whether these non-South African nationals were possibly refugees or had valid work permits.
7. Double dip
The FIU paid R140,556,822 to 35,043 applicants who received benefits from other state institutions (including remuneration in some cases), as follows:
- Students in the national student financial aid plan who received stipends received claims for TERS benefits of R10,335,344.
- Recipients paid by the South African National Defense Force received claims for TERS benefits of R327,638.
- Employees paid through the Salary and Personnel System received claims for TERS benefits of R41,009,737.
- Disability grant recipients were paid claims for TERS benefits of R 69,419.
- Old-age grant recipients were paid claims for TERS benefits worth R88,814,684.
8. Bank details equal to those of the FIU employees
- Four applicants who had the same bank details as the FIU employees were paid R14,614.
9. People who share bank details
- Twelve people who shared the same bank details received R53,971.
10. Double immersion within FIU
- Some individuals were reported to have received payments for claims submitted for both normal benefits and TERS benefits. A total amount of R14,210,866 was paid for TERS benefits in this regard.
Makwetu said there were also poor input and validation controls in the new system and a manual claims submission process used in the first two weeks of implementation further increased the risk of invalid or tampered claim information.
This was also the case with the payment of R350 relief funds that the report said was paid to people who are not in danger or are ineligible.
Turning attention to the procurement of personal protective equipment (PPE), Mkwetu said the audits are in different stages of completion. However, analysis of office data from orders placed by health departments identified that some items were priced at more than double and even five times the prescribed price.
As of June 30, R6.4 billion out of R22 billion had been used in health-related services.
“Similar cases have been identified in the procurement of PPE in the education sector, where national and provincial departments are not purchasing PPE at market-related prices,” Makwetu said.
Although emergency procurement processes were allowed for the procurement of EPP, this did not mean that all supply chain management requirements were relaxed.
“The teams are still busy auditing the procurement processes, but they are identifying issues such as suppliers that do not have valid tax clearance certificates, competitive bidding and quotation processes that are not applied correctly, inadequate or inaccurate specifications and evaluation criteria, and the incorrect application of the same, conflicts of interest and the award of a contract in the health sector to a supplier with no history of supply or delivery of PPE ”, said the AG.
Quarantine sites
The Auditor General said that while 6,123 quarantine sites were initially targeted, the Department of Public Works had only identified 510 sites and only 192 activated for use by the Department of Health.
“The government is unlikely to pursue the original goal of quarantine sites, as demand for such facilities has been relatively low,” he said.
Field hospitals
While 4.8 billion rand was made available for 66 field hospitals across the country, as of June 30, only 18 of these projects had been completed.
“The audit of the procurement processes for the appointment of contractors began recently as a result of delays in providing us with the requested information and documentation, but the audit teams have already identified non-compliance with the legislation in the processes followed,” said Makwetu.
This, he said, is another area where closer cooperation is needed between the Departments of Health and Public Works to monitor the demand for additional beds and the implementation of the initiative.
Read: South Africans’ Personal Information Posted Online After Major Data Breach – Here’s What Was Leaked
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