Department of Labour Unemployment Insurance Fund

1
Department of LabourUnemployment Insurance Fund

• Budget 2006/07
• UIF Presentation to Portfolio Committee
• 13 March 2006

2
Objective 2006/07 Budget Report

• Content
• Programme purpose, Mandate Key objectives
• Achievements 2004/5
• Budget Proposal
• Strategic overview
• Budget process
• Budget Methodology
• Key Expenditure projects (UIF Priorities)
• MTEF Budget (High level)
• Budget Highlights
• Financial performance indicators
• End

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Programme PurposeProgramme 5 Social Insurance

• Purpose Provide for the administrative and other
  support services to the UIF.
• Measurable objective Support and ensure sound
  administration of the UIF in order to ensure
  efficiency and financial sustainability.

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MANDATE

• The Unemployment Insurance Fund was established
  in terms of Section 4(1) of the Unemployment
  Insurance Act, 2001.
• The Fund administers the unemployment insurance
  contributions collected from employers and
  employees to pay benefits and related
  administrative expenses.

5
KEY OBJECTIVES OF THE FUND

• OBJECTIVES
• Broaden coverage of Beneficiaries
• Improve Service delivery
• Strengthen Compliance and Enforcement
• Sustain an affordable benefit regime
• Resolve legislative and administrative
  challenges.

6
Achievements 2004/05

• Improving the Coverage of the Social Security Net
• Number of employees covered by the insurance fund
  increased by 9 an increase of 742,780 employees.
  From 6,231 930 in 2003/2004 to 6,974,710.
• The Fund received R6,152 billion in revenue and
  paid out R2,475 billion in benefit payments up 9
  and 18 respectively on 2003/04.
• Sustaining an affordable Benefit Regime
• Investments with PIC increased by 81
• Investments with PIC valued at R9, 759 billion
  compared to prior year value of R5, 389 billion.

7
Achievements 2004/05 continued

• Improving service delivery
• Over half a million beneficiary claims paid up
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8
Achievements 2004/05 continued

• Improving compliance by employers

9
Achievements 2004/05 continued

• Resolving Administrative challenges
• Completed the recruitment of key personnel
• Chief Financial Officer.
• Four Executive Managers.
• Update
• Two additional Executive Managers appointed for
  Risk Management and Revenue Collection in the
  current year.

10
Improving Institutional Infrastructure and
Capacity

• Key projects finalised are
• Improved operational system (Siyaya benefit
  administration system) finalised and rolled out
  for national pilot in April 2005.
• Integrated Financial Information system (Axsone)
  finalised and implemented in April 2005/06.
• Independent review of the corporate form of the
  UI Fund completed and approved by Minister for
  implementation 1st of April 2006.

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Improving Accountability Improved Audit Report
for 2004/05

• The Auditor Generals qualified Report is a
  positive departure from the previous three years
  of disclaimer.
• Substantially reduced number of qualifications
  and matters of emphasis reflects improved systems
  of internal control.
• Number of qualifications down (75) to 2 from 8
  and matters of non compliance down (68) to 5
  from 16 when compared to prior year.

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Improving Accountability

• Auditor Generals report when compared to
  previous years indicate substantial improvements
  in areas of management relating to
• Internal control environment
• Revenue Management
• Accounting processes
• Services rendered by the Department of Labour
• Fixed Assets
• General computer controls

13
Financial Highlights for 2004/05
14
Update on achievements

• Improving Service delivery
• Operational system Siyaya signed off.
• All new claimants paid via EFT since Jan 2006
• Call centre facilities installed.

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Update on achievements continued

• Sustaining an affordable benefit regime
• The Funds investments at 31 January 2006 is
  valued at R13.8bn an increase of 41.7 when
  compared to year end March 2005.
• Resolving administrative challenges
• Service partnerships are being forged with other
  Agencies such as SARS on Ufiling project.

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Budget Proposal

• Align planning, budgeting and service priorities
• Address capacity challenges
• Inform stakeholders of the UIFs strategy and
  budget plans.

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Budget Process

• Budget Timelines
• Submission to DG - 23 Sept 2005
• Approval by Minister - 30 Sept 2005
• Alignment to national priorities
• Income support
• Capacity building
• Alignment to DoL priorities
• KRA6 Strengthening social protection
• KRA10 Strengthening institutional capacity

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Strategic Overview

• Budget takes account of the following
• Legislative mandate UI Acts
• Vision Mandate
• UIF priorities
• Safety net for the unemployed
• Improve compliance with legislation
• Improve institutional capacity

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Budget Methodology

• UIF Priorities
• Additional investment in capacity
• Projects/initiatives
• Financial stability
• Growth in reserves investment
• Good governance structure
• Agencification
• Performance management
• Budget addresses KRAs and PIs

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Budget Methodology - continued

• Key factors in budget formulation
• Costs employees, services, projects and
  acquisitions
• Investments
• Revenue
• Government priorities
• Economic indicators
• Contributions benefit payments

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Budget Methodology - continued

• Key projects for the year addresses the following
  challenges
• Compliance of employers database, targeted
  communication
• Completeness of revenue invoicing
• Auditor General concerns on control environment
• Service delivery challenges (IT Systems)
• Siyaya, axsone, database
• Institutional reform agencification
• Capacity building in-house skills i.e.
• Investment cash management, control systems

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MTEF BUDGET 2006/07

• High level summary (R millions)
• Year 2006/07 2007/08 2008/09
• Revenue 8,263 9,030 9,864
• Expend 4,186 4,738 5,335
• Reserve (1,410) (1,559) (1,800)
• Surplus 2,666 2,733 2,729
• surplus Actual 2004/05 R2,071m
• surplus Budget 2005/06 R1,904m

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Chapter 6 Budget Highlights

• Highlight of shifts in Funds when compared to
  2005/06.
• Contributions 05/06 R6,640m
• 06/07 R7,239m
• 9 increase based on Actuary estimates Mar 2005
  report.
• Other revenue 05/06 R 804m
• 06/07 R1,024m
• 27 increase due to a corresponding 29 increase
  in the investment base.

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Budget Highlights

• Highlight of shifts in Funds when compared to
  2005/06.
• Admin costs 05/06 R815m
• 06/07 R802m
• Decrease of R13m due to anticipated
  efficiencies.

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Chapter 6 Budget Review - SUMMARY

• 2006/07 Budget Improvements
• Anticipated net improvement R762m or 40
• Based on the following
• Revenue up R818m or 11
• Benefit payments up R252m or 8
• Operating costs down R 12m or 1.4
• Reserves required down R184m or 12
• includes R23m or 60 increase in
  projects/initiatives

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Chapter 8 Statement of Performance

• 2004/05 Budget v. Audited Statements
• surplus up R1,360m or 191 due to
• Revenue up R795m or 13
• Benefit payments down R172m or 6
• Admin Expenditure down R145m or 21
• Required reserves down R248m or 12

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Chapter 8 Statement of Performance - continued

• Performance indicators
• Contribution payout ratio
• 2005/06 2006/07 2007/8 2008/09
• 47.2 46.7 49.9 53.4
• Actual 2003/04 37.5 2004/05 40.8
• Employee costs/contribution ratio
• 2005/06 2006/07 2007/8 2008/09
• 4.3 3.3 3.3 3.3
• Actual 2003/04 4.3 2004/05 3.6
• Administrative costs/contribution ratio
• 2005/06 2006/07 2007/8 2008/09
• 12.2 11.1 11.2 11.0
• Actual 2003/04 9.4 2004/05 8.8

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