UIF regresses to qualified audit opinion from auditor-general
Kimi Makwetu found significant internal control deficiencies in the financial management of the Unemployment Insurance Fund
The Unemployment Insurance Fund (UIF) received a qualified audit opinion from auditor-general Kimi Makwetu for the 2018/2019 financial year, a regression from the unqualified opinions of previous years.
The government controlled UIF gives short-term relief to workers when they become unemployed or are unable to work because of maternity, paternity, adoption leave, or illness. It also provides relief to the dependants of a deceased contributor.
Makwetu found significant internal control deficiencies in the financial management of the fund which resulted in “material misstatements” being identified during the audit. The UIF had total net assets of R144bn at the end of March.
Makwetu said in the auditor-general’s report, which is included in the UIF annual report tabled in parliament last week, that he was unable to obtain sufficient appropriate audit evidence to substantiate the amount recognised as investments in associates, joint ventures and unlisted financial instruments.
“Management did not implement effective systems of internal control to verify the data used to determine the fair value of the investments in associates, joint ventures and unlisted financial instruments and the resultant impairment loss. The entity’s records did not permit the application of adequate alternative audit procedures.”
Makwetu said he was unable to determine whether any adjustments were necessary to the investments in associates stated at R3.7bn, joint ventures stated at R154m and unlisted financial instruments stated at R6bn.
The UIF stated an impairment on investments in associates at R569m and no impairment in investments in joint ventures, but Makwetu said he had no way of determining whether adjustments to this were necessary.
Furthermore, Makwetu said he was unable to determine whether any adjustment was necessary to the surplus from equity accounted investments stated at R497m because management did not implement effective systems of internal control to maintain reliable accounting records.
Makwetu also noted that disciplinary steps were not taken against some officials involved in the irregular expenditure of R87m in prior years, as required by the Public Finance Management Act.
UIF commissioner Teboho Maruping explained the regression in the audit outcome as being “largely due to non-submission of audited financial statements by the majority of our investee companies for audit purposes.
“The financial year-end of most investee companies poses a challenge for auditors because they are unable to conduct a complete audit due to outstanding financial information.”
Maruping said the UIF is in discussions with the Public Investment Manager (PIC), which acts as investment manager for the fund, to resolve the problem “as we intend maintaining our investments in the unlisted space to continue to create jobs and preserve those that already exist.”
He stressed that the fund remains committed to “clean and proper” governance and is confident “that the current opinion is not a reflection of poor governance within the UIF”.
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