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UIF ANNUAL REPORT 2005/06 PRESENTATION TO THE PORTFOLIO COMMITTEE

3 NOVEMBER 2006

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• Thank you for inviting us to present to you the Annual Report and Annual Financial Statements for the 2005/06 financial year of the Unemployment Insurance Fund

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Index

• Mandate• Strategic priorities• Service delivery improvements• Compliance levels• Transformation agenda• Financial report• Actuary report• Auditor General’s report• Management Response• Work plan Priorities for 2006/07• Outlook

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Mandate

• The Unemployment Insurance Fund was established in terms of Section 4(1) of the Unemployment Insurance Act, 2001.

• Funding is provided through the amended Unemployment Insurance Contributions Act 2002 which provides for the imposition and collection of contributions for the benefit of the Fund.

• The Fund administers the unemployment insurance contributions collected from employers and employees to pay benefits and related administrative expenses. The surplus is invested with Public Investment Corporation.

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UIF STRATEGIC PRIORITIES

– Broaden coverage of beneficiaries– Improve service delivery– Strengthen Compliance and enforcement– Sustain an affordable benefit regime– Resolve legislative and administrative

challenges.

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COVERAGE OF BENEFICIARIES – 2005/06 – Claims up 5%, Value up 18.5%

BENEFIT TYPE

VALUE / VOLUME

Unemployment benefit Paid over R2,191 billion Approved 451,000 new

claims Illness benefit Paid over R187 million

Approved 26 000 new claims

Maternity / Adoption benefit Paid over R356 million Approved 81, 000 new

claims Dependants benefit Paid over R199 million

Approved 31,000 new claims

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INCREASED NUMBER OF BENEFICIARIES WITHIN THE SOCIAL SECURITY SAFETY NET – number of claims up 5% and total value of claims

R2.9bn up 18.5%.

B e n e f it p a y m e n t s

0

2 0 0 0

4 0 0 0

2 0 0 3 / 0 4 2 0 0 4 / 0 5 2 0 0 5 / 0 6

m illio n s

R 2 9 3 3 m

R2476mR2094m

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Strategic Transformation

• Transformation agenda• Approval of the restructuring plan for Head Office

and subsequently the provincial offices will– Strengthen strategic management and internal control – Lead to the implementation of a new governance

structure including risk management– Ensure a customer orientated service delivery

• Employment Equity Report• Actual statistics for African females, Asians, Coloureds and people

with disabilities are in close proximity of the target set. • 67.5% of the black representation consists of 59% African

employees, 2.5% Asian employees and 6% Coloured employees.• Over 65% of the workforce are women.

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Employment Equity – Race Workforce Profile

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5 . 0 0 %

1 0 . 0 0 %

1 5 . 0 0 %

2 0 . 0 0 %

2 5 . 0 0 %

3 0 . 0 0 %

3 5 . 0 0 %

4 0 . 0 0 %

MA

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LEA F R IC A N A S IA N C O L O U R E D W H IT E

T A R G E T

A C T U A L

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Improved service delivery

• OPERATIONAL ACHIEVEMENTS– NATIONAL ROLL OUT OF A NEW BENEFIT PROCESSING

SYSTEM (SIYAYA)• Over 589,000 claims processed a 5% increase.

– ENHANCEMENT AND FULL INTEGRATION OF ALL BUSINESS SYSTEMS (AXSONE)

• Contributing to better control environment, financial management information and favourable Auditor General report.

– Electronic Fund Transfer• 100% conversion of benefit claimants to payment via bank

accounts removing queues at pay points.• Financial savings of over R20m, disappearance of queues at

service pay points and reduction in fraud.

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Improving compliance

– INCREASED NUMBER OF CONTRIBUTORS• Over 490 000 commercial employers registered up 3.3%• Over 650 000 domestic employers registered up 3.6%.

Commercial Registrations 2004/05 2005/06

Employers 474,514 490,145 +3.3%

Employees 6,252,644 6,502,996 +4%

Domestic Registrations

Employers 628,390 650,850 +3.6%

Employees 499,165 501,629 +0.1%

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Improving compliance

• Revenue up R800m or 12.5% for 2005/06

0

1 0

R e v e n u e

B i l l i o n s 5 .6 6 .1 6 .9

2 0 0 3 /0 4 2 0 0 4 /0 5 2 0 0 5 /0 6

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SUMMARY FINANCIAL REPORTR million

2005/06

R million

2004/05

% change

Contributions 6,922 6, 152 12.5

Investment income 896 644 39.1

Other revenue 10 11 9.1

Benefit expenditure 2, 933 2, 476 18.5

Operating costs 580 560 3.6

Net surplus 3,868 2, 043 89.3

Investments 14, 290 9, 758 46.4

Reserves 14, 723 10, 178 44.6

Total Assets 14, 871 10, 462 42.1

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FINANCIAL ACHIEVEMENTS

– FINANCIAL IMPROVEMENT• Net surplus of R3.9bn up 89% for

2005/06

0

1 0 0 0

2 0 0 0

3 0 0 0

4 0 0 0

2 0 0 3 / 0 4 2 0 0 4 / 0 5 2 0 0 5 / 0 6

N e t S u r p l u s

m i l l i o n s

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BUILDING A SUSTAINABLE BENEFIT REGIME – financial reserves R14.7bn up 44%

– LONGER TERM SUSTAINABILITY• Investment under management with PIC of

R14.3bn up 46%

R e s e r v e s

0 5 1 0 1 5 2 0

2 0 0 3 /0 4

2 0 0 4 /0 5

2 0 0 5 /0 6

B i l l i o n s

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Actuary’s Report

• The asset evaluation conducted by the Fund’s Actuary concluded the following;– Reserves required to meet potential future liability

was estimated at R9,4bn as at 31st March 2006 as of that date the Fund had R14,9bn in reserves (R5,5bn above the required amount).

– The Actuary also concluded the Fund will continue to generate significant surpluses on a cash flow basis for the next ten years.

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IMPROVING ACOUNTABILITY

THE AUDITOR GENERAL’S UNQUALIFIED REPORT IS ANOTHER MAJOR ACHIEVEMENT - COMPARED TO PRIOR YEAR:

• NO AUDIT QUALIFICATIONS• MAJOR AREAS OF IMPROVEMENT

– Bank reconciliation process– Benefit payment to contributors– Fixed asset management– Computer controls

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Addressing areas of emphasis

• The UIF Management is taking the lead in addressing areas raised as matters of emphasis.

• A monitoring matrix has been developed and implemented to monitor the progress in implementing AG recommendations

• Internal audit resource secured to implement the audit plan for the current year.

• System enhancements, policies and procedures are under review. Some changes have been approved and implemented to address areas of non compliance.

• A recruitment drive is underway to strengthen capacity in terms oversight and strategic direction.

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Service improvement initiatives for 2006/07

– Ufiling Project to enable non SARS employers declare and pay on line via the web launched by the Minister.

– Implementation of electronic document management system with implementation of document scanning and management facilities.

– Enhancement of call centre facilities and implementation of CRM strategy through the introduction of document tracking and SMS facilities.

– Finalise provincial structures for service points and decentralise claims processing.

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Work Plan Priorities 2006/07

• Finalise implementation of the corporate structure of the Fund.– Ring fencing of operational activities

• Decentralise UIF Database management.– Electronic archiving– Data cleansing– Capacity improvements

• Compliance with legislation.– Improve Income for 2005/06 +15%– PFMA & National Treasury Regulations– Implementation of formal risk management structure and

processes for the Fund– Pay claims within four weeks

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Outlook

• Prospects for the Fund remain positive due to;– Continuous improvement in Finances – Reserves

amount to R16.4bn up 12% compared to year end 2005/06.

– Continuous improvement of management capacity through the ongoing restructuring of the Fund through the ring fencing process and recruitment drive

– Improved institutional capacity attributable to enhanced operational and financial management systems.

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Department of LabourUnemployment Insurance Fund

• THANK YOU