PORTFOLIO COMMITTEE ON TRANSPORT. Briefing on the 2013/14 Annual Report and Financial Statements. 17 October 2014

Transcription

1 PORTFOLIO COMMITTEE ON TRANSPORT Briefing on the 2013/14 Annual Report and Financial Statements 17 October 2014

2 Purpose The purpose of this presentation is to present an overview of the performance of the Fund in 2013/14 Background information Strategy Where the business is Highlights in 2013/14 Status at the end of 2013/14 Annual Performance Plan Auditor-General Challenges Where the business needs to go Summary.

3 Background Corporate and Statutory Form Road Accident Fund Act, 1996 (Act No. 56 of 1996) & RAF Amendment Act, 2005 (Act No. 19 of 2005) Payment of compensation in accordance with this Act for loss or damage wrongfully caused by the driving of a motor vehicle Provide compulsory cover to all users of South African roads against injuries sustained or death arising from accidents involving motor vehicles within the borders of South Africa Constitutional Court Rulings and legal precedents have shaped the mandate National public entity (Schedule 3A of the PFMA)

4 Background... The unfortunate legacy The RAF carries an extensive legacy, partly true and partly perceived, which was built over many decades Some facets of this legacy are: Compensation scheme that has struggled to be sustainable Insolvent and bankrupt A lawyers company Intensely bureaucratic Inefficient, uncaring and impersonal Unable to complete programmes and tasks Frozen in a state of perpetual change Incapable of paying claims Fraught with fraud Early signs of change are visible...

5 Background Business Model

6 Background Business Process Origination Human Capital Risk Management Determination Forensics Litigation Finalisation Post -Finalisation Stakeholder Management Project Management Monitoring & Assurance Marketing

7 Background Service Infrastructure Physical Head office in Centurion Five regional processing centres Pretoria, Johannesburg, Durban, East London and Cape Town Customer service centres Nelspruit Mafikeng, Bloemfontein, Polokwane and Kimberley Virtual Call centre ( ) Web ( Twitter Instagram Facebook (

8 Background Organisational structure

9 Strategy Mission, vision and values Minister approved the new Strategic Plan and the 2013/14 Annual Performance Plan (APP) Mission: To provide the highest standard of care to road accident victims to restore balance in the social system. Vision: To provide appropriate cover to all road users within the borders of South Africa; to rehabilitate persons injured, compensate for injuries or death and indemnify wrongdoers as a result of motor vehicle accidents in a timely, caring and sustainable manner; and to support the safe use of our roads. Values: Ubuntu, Pride in what we do and Solution focused Excellence Efficiency

10 Strategy Strategic Objectives RAF Objective 1 A legislative dispensation that is aligned to principles of social security. RAF Objective 2 Effectively manage the Fund s finances and pursue sustainability. RAF Objective 3 A customer-centric, operationally effective and efficient RAF RAF Objective 4 A transformed and capacitated RAF

11 Highlights in 2013/14 Revenue increased by 13% to R20,6 billion Claims processing improved by 47% to a record high of R22.2 billion Cash expenditure on claims exceeded the net Fuel Levy by R1.9 billion (9%) Proactively made business operations more accessible and efficient More than 220,000 calls were responded to by the Call Centre Over 25,000 people follow RAF s social media presence Engaged with road accident victims through our RAF on the Road Interacted with more than 20,000 claimants & settled R161 million in claims New organisational structure and business processes were fully rolled out Productivity improved Quality Assurance Managers tested operational performance and compliance Complaint experience has reduced

12 Highlights in 2013/14 Service perception increased to 64% from 52% and customer satisfaction went up to 72.8% from 66% Staff complement has grown to 2,288 Vacancy rate has now reduced to below 10% Policy business unit has been formally established Combined Assurance Forum established Maintained an Enterprise-wide Risk Management Framework Risk maturity level has improved to Level 4 Audit findings were resolved and many risk mitigation measures implemented. Clean Audits by the Auditor-General of South Africa for 2012/13 and 2013/14

13 Highlights in 2013/14 Implemented the performance management system and succession management plan The draft Road Accident Benefit Scheme (RABS) Bill was published for a second round of public comments Significant Court Rulings clarified the scope and limitations of Contingency Fees Executed the strategic plan and met 83% of APP targets Overall, a shift was made in respect of the focus on the socio-economic impact of crashes on families, homes and communities, and people were put first Batho Pele A seriousness has been introduced in respect of what the Fund is, what it should be and what its employees, as loyal officers, are required to do

14 Status at the end of 2013/14

15 Status at the end of 2013/14

16 Status at the end of 2013/14

17 Status at the end of 2013/14

18 Status at the end of 2013/14

19 Status at the end of 2013/14

20 Status at the end of 2013/14

21 Status at the end of 2013/14

22 Statement of Financial Performance 31 Mar 2014 R'million 31 Mar Mar 2012 R'million R'million Actual Budget Act v Bud Indicator Actual Actual Revenue: - Net fuel levies Other revenue Total Revenue Expenditure: - Claims expenditure (excluding provision for outstanding claims) Employee costs Other expenditure Total Expenditure (Deficit)/surplus before provision for outstanding claims (3 138) Decrease/(Increase) in provision for outstanding claims (14 162) (26) (10 230) (24 961) (Deficit)/surplus for the year (17 300) (8 465) (21 079)

23 Statement of Financial Position 31 Mar Mar Mar 2012 R'million R'million R'million Actual Actual Actual Assets Current Assets 7,426 10,465 8,296 Cash and cash equivalents 2,505 6,144 4,245 Other 4,921 4,321 4,051 Non-current Assets Total Assets 7,694 10,717 8,572 Liabilities Current Liabilities 25,531 21,695 17,411 Other 1,448 1,334 1,012 Provision for outstanding claims 24,083 20,361 16,399 Non-current Liabilities 72,961 62,524 56,249 Other Provision for outstanding claims 72,917 62,477 56,208 Total Liabilities Net Liabilities 98,492 84,219 73,660 (90,798) (73,502) (65,088) Reserves Revaluation reserve Accumulated deficit (90,926) (73,626) (65,160) Total Net Deficit (90,798) (73,502) (65,088)

24

25

26 Status at the end of 2013/14

27 Irregular expenditure Irregular expenditure arise as a result of non-compliance with Supply Chain Management practices as stipulated in the Supply Chain Management Policy, and the PFMA. Instituted disciplinary action, where applicable but also improved processes and ensure awareness and training The main contributors in FY14 were: ICT licenses of R13.9 million that was not renewed in line with the approved procedures The appointment of Recruitment Agencies which did not comply with approved procedures Number of instances however DECREASED from 260 in 2012/13 to 92 at the end of 2013/14 FY15 sees further improvements to processes, reporting and education to ensure effective prevention of instances and rigorous follow up and oversight should instances be identified. The item is a Board Priority

28 Fruitless and wasteful expenditure Fruitless and Wasteful Expenditure arises as a result of Interest Costs charged for late payment following a settlement agreement or a order of the Court which are due immediately The RAF is compelled to comply with PFMA (30 days) and Court rules (Immediately) 2013/14 Experience: Number of bills settled through taxation: 26,698 (2012/13: 21,137) Number of bills where a saving is made through taxation: 25,677 (2012/13: 20,653) Amount saved through taxation: R966,168,695 (2012/13: R386,559,115) The success rate in terms of saving legal cost bills is 96% (2012/13: 98%) 5,595 WRITS were received and is 28.67% lower than in 2012/13

29 Status at the end of 2013/14

30 APP Performance in 2013/14 Target partially achieved (1) Accident Forecast Report completed in the FY, but not Q3 **Target not achieved - Relates to 5% reduction in the deficit, turnaround time for complex claims, prevalence of litigated cases, completion of ALL performance reviews

31 Annual audit by the Auditor-General Opinion Clean and Unqualified Emphases of matter Going concern Irregular expenditure Restatement of corresponding figures Predetermined objectives No findings Compliance with laws and regulations No findings Internal control No findings

32 Challenges attended to Inherent adversarial fault-based Compensation System Restricted access to compensation, long settlement periods, spiralling costs, Multiple, complex and legalistic hurdles Uncertainty as to whether compensation is ultimately used for the intended purpose Compensation for Loss of Support/Earnings Amendment Act increased passenger claim payments Claims for future loss-of-earnings have increased, with Courts requiring minimal proof of loss of earnings Industrial psychologists present forecasted reports on career progression and promotions are now factored in Legal Costs Untenable that 21% of the total claims payment of R22 billion (an improvement on 25% in the prior year) is spent on legal fees R1.7 billion spent on RAF s and R2.9 billion on claimant s legal costs Attempts to procure a new RAF Panel of Attorneys has been challenged extensively

33 Challenges attended to Financial Sustainability Fuel Levy Funding via the Fuel levy is not associated with claim frequencies and costs Beneficiary base is not constituted by past, present or future contributors to the Fuel Levy Benefit available to beneficiaries or claimants is not defined and in some instances is not limited to a maximum value Social security assistance is not limited to protecting income, lending support or funding healthcare needs, but extends to all three key Claims expenditure Provision for claims incurred has increased at levels far greater than CPI Claim payments are far greater than fuel levy income and this is apparent when operational efficiency and productivity improves Claim values have increased as a result of the Amendment Act which excludes minor injuries and market forces aimed at higher value pay-outs

34 Where the business needs to go Priorities for 2014/15 Board Determine and execute the strategy OPSIT Pay claims efficiently and cost-effectively Render quality services Expand access Ensure optimal capacity Processes, equipment and infrastructure REMCO Ensure optimal capacity People and performance Audit Committee Ensure adequate financial resources Maintain a sound system of internal controls Set controls and address weaknesses RMEC Introduce RABS Assess and treat strategic risks Ensure that significant operational exceptions are managed Maintain compliance

35 Where the business needs to go Strategic risk management RAF has adopted an Enterprise-wide Risk Management approach to manage its risks Risk management methodologies are applied in strategy setting, planning, projects, decision-making and all other business processes Risk governance structures are fully operational The Board assessed the risk environment and retained seven key strategic risks for 2014/15 Financial management People management Service delivery Stakeholder pressure Regulatory framework Fraud and corruption IT management Risk mitigation plans are in place and progress is monitored by the Board

36 Summary Transformation 2011/ / /2014 Strategic plan validity Not aligned to strategy and erroneous Aligned to strategy and SMART targets Strategy executed and matured Fuel Levy R16.9 bn R17.8 bn R20.2 bn Staff count Open Claims Settled Claims Claims Payment R12.5 bn R15 bn R22 bn Legal Costs as % of Claims 29% 27% 21% Reopened claims National footprint - Offices CSC s National footprint - HSC s

37 Summary Transformation 2011/ / /2014 Direct Claims Originated 15 % 23% 27% RAF ON THE ROAD N/R Writs Call Centre Agents Number of Calls % Abandoned calls 5 N/A N/A % Fraud Arrests % Audit Opinions Unqualified Clean Audit Award Clean Audit Internal Audit Findings N/A Risk Maturity (1-5) N/A 3/5 4/5 Compliance Unit N/A Planned Established Strategy and Reporting N/A Planned Established Verification and Validation N/A Planned Established Quality Assurance N/A Planned Established Complaints Management N/A Planned Established

38 Summary The goal

39 Summary Necessities for continued success Additional revenue that matches expenditure Current monthly fuel levy income is R1.7 billion, less the R233 million diesel rebate R2.4 billion worth of claims expenditure awaits payment and has seen WRITS increase Additional revenue will see claims paid, productivity sustained, the number of open claims reduced, a reduction in the provision for claims incurred and the deficit, as well as the number of WRITS, reduced RAF Act amendments being introduced Will enable tariffs, installment payments, funding medical reports, lower legal costs and clearer time frames for claim processing RABS Bill becoming law RABS will define benefits, improve cash flows through installment payments, provide better health and socio-economic outcomes Consultation window should run, close and be moved swiftly to decision making Financial aspects must be dealt with soonest to either curtail the quantum or duration of benefits Legislative delays have a material financial impact (R14 billion growth in liabilities in one year)

40 Conclusion In 2013/14 the Fund improved productivity, paid record claims, reduced the number of open claims, deployed cash efficiently and improved controls Great expectation rests on our shoulders based on recent performance Successes have disrupted comfortable status quos Next phase of transformation will be difficult as fundamental challenges need to be resolved It is important that the RAF remain focused on fulfilling it s strategy and pursuing excellence.

41 Thank You

42

43

44

45 2013/ / /12 Fuel levy 96c/ 88c/l 80c/l Total revenue 20.5bn 18.1bn 17.1bn Loss or deficit 17.3bn 8.5bn 21.1bn Deficit 90.8bn 73.5bn 65.1bn Total exposure to claims incurred 97.0bn 82.8bn 72.0bn Growth in o/s claims provision 14.2bn 10.2bn 24.9bn Claims expenditure 22.3bn 15.2bn 12.2bn Compensation pay-outs - General damages - Income support - Medical costs 17.5bn (78%) 5.9bn 10.4bn 1.2bn 11.3bn (74%) 4bn 6.2bn 1.1bn 9bn (73%) 3.9bn 4.3bn 800m Cash balance 2.5bn 6.1bn 4.2bn Claim payments 211, , ,905 Fruitless expenditure 30,441m 20,226m 22,108m Irregular expenditure 18,457m 4,327m 7,042m