Finance According To The Department Of Labour (Not Garp)

Compensation Fund (Section 15)

The assessments that you pay annually to the Compensation Commissioner (read the Director-General of Labour) are paid into the Compensation Fund as it is labelled in the COIDA. All other forms of income such as penalties and the interest on investments are likewise part of the Compensation Fund. According to the latest available annual report (for the year ended 31 March 2008) published in terms of the COIDA, the “Three-year financial review, 2005/06 – 2007/08” was as follows: 



2005/06 R’ million

2006/07 R’ million

2007/08 R’ million

Assessments revenue

2 931

3 269

3 889

Investment revenue

1 197


1 349

Other revenue




Medical expenditure

1 311

1 415

1 287

Administrative expenditure




Net loss




Administrative expenditure as a % of total expenditure




Long-term liabilities against pensioners

6 232

6 567

8 838


13 534

15 142

16 656

Surplus for the year

5 248

6 057

6 128

Total assets

15 385

16 731

18 303

Auditor-General (Section 20)

At the beginning of 2011 I promised myself that I will not criticize the CC’s office too harshly. I know they are trying to assist employees but the main reason for my new year’s resolution is that they and the other “role-players” are doing a much better job in that regard. My effort is wasted to even try to compete with them. Let me give you an example. On page 31 of their annual report they stated that “The Fund generated revenue of R3.9billion….” which is in line with the table from their financial report above. The Auditor-General is however not convinced. Again, let him speak for himself. From the AG’s report on the financial statements of the Compensation Fund dated 31 July 2008 the following reading should make you, the assessments payers, a bit nervous. 

“Response of the Auditor-General:

3. …….., I was not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion”
Basis for disclaimer of opinion 
Revenue contributions and assessment debtors
5. Various materially incorrect assessments have been recorded by the Fund in the year under review and in previous years. Inadequate monitoring of controls over overdue assessment debtors resulted in the accumulation of incorrect provisional assessments and materially incorrect debtors with credit balances. The lack of a proper management framework for the continuous review of the ageing of assessment debtors has resulted in an unreliable ageing of assessment debtors being applied for the purposes of determining the provision for credit losses. Due to lack of appropriate records, I was not able to perform alternative procedures.” 

Etc, etc. I say no more.

The AG’s Report then queries the claims incurred, the unexplained net charge arising from the Treasury function and also disclosures not made and concludes with the words:

“Disclaimer of opinion
9. Because of the significance of the matters described in the basis for the disclaimer of opinion paragraphs, I have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the financial statements of the Compensation Fund. Accordingly I do not express an opinion on the financial statements”

How the Funds are utilised (Section 16)

Now what is the Compensation Fund used for? In main for the following:

  • Paying compensation to the injured employees, after all that was the idea behind Workers’ Compensation;
  • Paying the medical accounts in respect of the injured. Not always directly to the provider of the service. A considerable number of the accounts are now being taken over by “brokers” who buy the accounts from the service providers at a reduced price (if you can believe that). The “broker” then submits the accounts to the CC’s office for speedy payment. Do not try to find that in the Act, it is not there;
  • Creating and maintaining a reserve fund;
  • Paying the remuneration of the staff employed at the CC’s office;
  • Payment of the CC’s accommodation and equipment such as astronomical amounts for IT hard- and software; and
  • Incidental payments which is not a small amount.

I can continue in more detail but you at least have a point of departure to verify the correctness of your assessments and to monitor how your assessments are being spent. 

Good luck, you will need it.

Till next month