Compensation Fund
Challenges and Turnaround Initiatives
Select Committee Presentation
Director-General : NPT Nhleko
27 February 2013
CONTENTS
Objectives of the Fund
1
Background
2
3
Audit Findings
4
Diagnostic Review Findings
5
Interventions
6
7
Looking forward
Critical success factors
OBJECTIVES OF THE FUND
“To pay compensation for death or
disablement caused by
occupational injuries and diseases
sustained or contracted by
employees”
BACKGROUND
The Compensation Fund (CF) has historically been faced
with various challenges in delivering efficient and timeous
services to its stakeholders. These challenges can be
categorised into people, processes and systems in the
business capability areas/model.
The acting capacity of the Director General in the
Compensation Fund provided insight and appreciated the
extent of challenges facing the organisation in its entirety.
The challenges are complex in nature as they are systemic
and have been in existence for years.
OVERVIEW OF AUDIT FINDINGS
2008/9
2009/10
2010/11
2011/12
Revenue
Management
and Debtors
Disclaimer
Disclaimer
Qualification
Qualification
Claims
Disclaimer
Disclaimer
Qualification
Qualification
Disclaimer
Qualification
Cleared
Qualification
Cleared
Bank
Reconciliations
Disclaimer
Audit Analysis - Areas of high concern (2011/12)
Financial /
Performance /
Compliance
Details : LEADERSHIP
• Financial Accounting System - timely production of financial reports
(quality, reliable and credible)
• No evaluation of management action to address audit issues of prior years (ie.
assessment revenue, assessment debtors, penalties and interest)
• Timely producing of information for audit purposes
• SAP Financial system – lack of procedures and training of staff
• MTER HR Plan submitted to DPSA outside the required timeframes
• Lack of leadership in the Finance area – finance and accounting skills. This has led
to a lot of audit adjustments during audit.
• Excessive use of consultants
• Vacant post of HR Chief Director – in excess of 12 months
• The Fund failed to develop an Action Plan to address audit issues
• Auditors could not determine how the Draft DoL ICT strategy will support the
Compensation Fund
Source : AG Management Report 2012
Audit Analysis - Areas of high concern (2011/12)
Financial /
Performance /
Compliance
Details : FINANCIAL AND PERFORMANCE
MANAGEMENT
• Delays in submissions of audit information requests from AG
• SAP Financial system – lack of procedures and training of staff
• Lack of accounts reconciliations
• Difficulties of preparing financial statements
• Lack of understanding of accounting standards (GRAP)
• Non-compliance to procurement processes
• Delays in submissions of audit information requests from AG
• SAP Financial system – lack of procedures and training of staff
• Lack of accounts reconciliations
STRATEGIC CHALLENGES
The following issues and challenges were found to be plaguing the Fund and preventing it from optimally
delivering services to all its stakeholders.
Issues
Description
Organisational
•
•
•
•
•
Business
Processes and
Policies
• Fragmented and poorly defined business processes and lack of enforceable
controls
• Largely paper based, manual processing and lack of integration across
systems
Information
Technology and
Systems
•
•
•
•
•
No common shared vision of the organisation amongst the leadership
Business Value Chain not adequately mapped and understood by everyone
Not clearly defined roles and responsibilities
Lack of communication and business units functioning in silos
Lack of training and change management
Systems developed against poorly defined processes and requirements
Dual systems being used to process and pay claims
Systems are not user friendly
System response times are too slow and causes delays in operations
CF reliant on DoL to provide ICT services because of the PPP arrangement
Source : CF Diagnostic Review
STRATEGIC CHALLENGES
contd…
Issues
Description
People
• Vision not clearly understood by employees
• Low and misaligned skills levels across the organisation
• Low employee morale and a lack of performance management across the
organization
• Lack of training on operating systems
• No mechanism to implement Talent and Performance management
Change
Management
• Lack of proper communication and consultations from leadership
• Decision making is at a senior leadership level and does not involve all
employees
• No buy-in into new initiatives
Source : CF Diagnostic Review
BUSINESS CAPABILITY CHALLENGES
PEOPLE
-
-
-
-
-
Lack of efficient performance
management and monitoring
PROCESSES
-
Manual orientated processing
-
Low skills level and insufficient training
Centralised processing
organisation
-
Lack of accountability by
managers and supervisors
Numerous non value and
duplicated tasks
-
Highly segmented areas of
operations – no workflows or
integration
No service orientation culture
and staff motivation
Fear of change and a
preference to doing what is
known
-
-
SYSTEMS
-
Highly user dependant and
based on traditional manual
processes
-
Paper based \ manual input – no
electronic submission or
automation of standard
processes and rules
-
No reporting functionalities large reliance on service
provider
-
Poor system implementation by
service provider
Not structured for effective
performance
No effective reporting or
exception reporting
mechanisms
SHORT TO MEDIUM (6 MONTHS)
Area
Details
Timeline and Progress
Appoint a
Project Team
Appoint a Project Manager (and team) to run
with the implementation of the Turnaround
Strategy in the Compensation Fund
Done - team appointed
and operational
Obtain
assistance
from other
Government
entities
Obtain assistance from other Government
agencies who have gone through similar
turnaround projects
Done – officials from
Road Accident Fund and
Unemployment
Insurance Fund involved
in their organisational
turnaround, are on the
project team
Conduct
diagnostic
review of
Compensation
Fund
Conduct a review to identify organisational
weaknesses and challenges that would lead to
defining what the turnaround is to achieve
Done – diagnostic
review completed in
January 2013
SHORT TO MEDIUM (6 MONTHS)
Area
Details
Conduct
leadership
workshop
Conduct a Compensation Fund leadership
Done– January 2013
brainstorming workshop to review and confirm
challenges and weaknesses and identify
turnaround options
Draft
specifications
for a service
provider for
turnaround
Define the specifications on what the
turnaround must entail and how it should be
done
Publish
Publish the specifications for specialist
specifications turnaround organisations to respond through
for
an open tender process
turnaround
Progress and Timelines
Done– specifications
drafted
IN Progress - terms of
reference finalised. Tender
to be published end
February 2013
SHORT TO MEDIUM (6 MONTHS)
Area
Details
Progress and Timelines
Improve IT
systems
functionality
Identify immediate interventions required to
address and improve IT systems functionality
IN PROGRESS
Systems review conducted
and key requirements in
development
May 2013
Stakeholder
engagement
Engage with Compensation Fund stakeholders
to identify challenges and obtain buy-in
CONTINUOUS
DG met with CF Board in
December 2012
Meetings held:
1. CF management and Audit Committee
2. Follow up meeting with CF Board
3. Unions and CF staff
Lessons learnt
from other
turnarounds
Identify lessons learnt from other turnaround
initiatives in order to improve this process and
not make same mistakes
Met with medical service
providers in Western Cape
and KZN
DONE
RAF lessons learnt has
been reviewed and
challenges identified
SHORT TO MEDIUM (6 MONTHS)
Area
Details
Progress and Timelines
Develop
operational
action plan
Develop an operational action plan to address
key areas at CF :
Done - operational action
plan developed and being
implemented
Revenue Management
Information Technology
Audit Findings
Human Resource Management
Reporting
Supply Chain
Develop a
communicati
on strategy
Develop a stakeholder matrix and a
communication strategy around the CF
stakeholders
May 2013
IN PROGRESS
End February
SHORT TO MEDIUM (6 MONTHS)
Area
Details
Progress and Timelines
Institute a
forensic audit
Institute an independent forensic audit of the
Fund that would include :
IN Progress - terms of
reference finalised. Tender
to be published end
February 2013
•
•
•
•
•
•
•
•
•
Liability of employers in terms of fines for noncompliance and recoveries
The claim process in terms of chapter V of COIDA Act
Compliance to PFMA
Revenue management
Expenditure administration
Complaints and allegations as reported by the Public
Protector, SCOPA and Portfolio Committee for Labour
Test procedures for prevention of risk and fraud controls
against policy and procedures
Identify irregular and unauthorised expenditure
Verify compliance to the delegation of authority and
materiality framework
May 2013
LONG TERM INTERVENTIONS
The Compensation Fund is a going-concern that would require Operational and Strategic Interventions
Area
Project
Definition
Outcome
Define an optimal business operating model to support the CF mandate
(Investigate and recommend functions that can be outsourced or moved
to other Government entities/Departments)
 Modernised CF
Organisation
Conduct a culture assessment and define a new organisational culture
and values based on the assessment findings
 Engaged and
committed CF
Resources
Define an organisational strategy and structure that supports the newly
defined business operating model
 Skilled CF Resources
Review and refine the business processes through a business
reengineering project and enhance internal policies and procedures
 Improved Service
Delivery to Citizens
Design, develop and implement a new performance management
framework that will adequately drive the business
 Productive Teams
Review and implement strategy for the prevention and management of
fraud and risk, this should encompass fraud and risk awareness
 Improved Service
Delivery to Citizens
Perform a skills audit and assessment of personnel to determine
alignment with the new processes and operating model and define a
training plan for the entire organisation
 Skilled CF Resources
Change Management
Develop an organisational change management strategy and roadmap
that will be rolled out to the entire organisation. Engage with staff on
this current process from the beginning to get them on board.
 World class People,
Processes and
Technology
Revenue and Debt
Management
Strategy
Review and update strategies for Revenue and Debt Management such
as Income Strategy
 Improved Service
Delivery to Citizens
Develop and Implement CF IT Strategy and develop an IT modernisation
roadmap
 Technology
supporting Core
Business
Business Operating
Model
Strategic Projects
Organisational
Values and Culture
Organisational
Strategy and
Structure
Business Processes
and Policies
Performance
Management
Framework
Fraud and Risk
Management
Strategy
Operational
Projects
Skills Assessment
IT Strategy
Source : CF Diagnostic Review
IDEAL VALUE CHAIN
Ideally, the primary business of the Fund is to generate income, pay out claims and manage the
rehabilitation of claimants. These functions are then supported by common back-office support services
that include HR, Finance, Procurement, Information Technology, Governance and Compliance and Risk
and Audit Management.
Manage Service Delivery
Revenue Management
Investments
• Monitoring
Investments
Performance
• Managing
external
investment
managers
• Review Policy
and Framework
Submissions
Claims
Management
Beneficiary
Payments
Case
Management
• Employer
Registration
• Employer
declaration
• Claim
Registration
• Payment
Processing
• Dispute
Management
• Customer
Segmentation
• Contribution
Determination
• Claim Preprocessing
• Approve
payment
• Investigations
• Monitoring
• Payment
Management
(contributions)
• Claims
Processing
• Beneficiary
payments
• Adjudication
• Claim status
reporting
• Dispute
Settlements
• Recovery of
Expenses
from 3rd
parties
Rehabilitati
on
Pension
• Registration
• Monitoring
• Processing
• Restoration and
re-integration of
workers
• Payments
• Reporting
• Provision of
assistive devices
• Reporting
• Fraud and risk
management
• Reporting
Support Services (HR , Finance, Supply Chain, Communications, ICT, Legal services)
Source : CF Diagnostic Review
Governance & Compliance
Risk Management
• Implementation
of Funds
Strategy
Registration
Rehabilitation
Management
Claims Management
FACTORS TO MAKING THIS PROCESS SUCCESSFUL
- Project is owned and reported directly to the Director-General
- Dedicated project team appointed
- External expertise on project team
- Communications and interactions with all stakeholders
- Governance processes to be followed eg. supply chain management
- Buy-in and acceptance by stakeholders
- Continuous change management