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GEPF

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GEPF

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    1. 5/10/10 GEPF GEPF This Presentation has been prepared by the GEPF for the Standing Committee on Finance. The narrative information is attached to the relevant slides as “Notes”This Presentation has been prepared by the GEPF for the Standing Committee on Finance. The narrative information is attached to the relevant slides as “Notes”

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    4. 5/10/10 GEPF Challenges GEPF Inherited No appropriate organisational structure into which staff could be appointed As a result GEPF was managed by consultants and contract employees. (There was only one permanent staff member in a management position until September 2006) At operational level about 48% of the staff were contract employees Other staff members were seconded from National Treasury There was significant service delivery backlog of about 40 000 unpaid cases Losses suffered by GEPF as a result of fraud Challenges Addressed An appropriate organisational structure was developed, approved and implemented A Senior Management team was appointed Contract Employees were employed 841 full time employees vs 44 Contractors (2010) Strategy and M&E units were established Risk and Fraud Prevention Unit were established Internal Audit units were established Backlogs are reduced to 14 000 (2010) Challenges GEPF Inherited No appropriate organisational structure into which staff could be appointed As a result GEPF was managed by consultants and contract employees. (There was only one permanent staff member in a management position until September 2006) At operational level about 48% of the staff were contract employees Other staff members were seconded from National Treasury There was significant service delivery backlog of about 40 000 unpaid cases Losses suffered by GEPF as a result of fraud Challenges Addressed An appropriate organisational structure was developed, approved and implemented A Senior Management team was appointed Contract Employees were employed 841 full time employees vs 44 Contractors (2010) Strategy and M&E units were established Risk and Fraud Prevention Unit were established Internal Audit units were established Backlogs are reduced to 14 000 (2010)

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    11. 5/10/10 GEPF (Information slide – not to be presented) Accumulated reserves decreased by 10% during 2009 due to investment losses emanating from the financial markets crash. This has subsequently improved in 2010 by 20%. Contributions received increased as a result of annual salary increases of 11% and an increase in membership from 1.160m to 1.197m during 2009. Contributions received continue increasing in 2010 (although the information provided is only for 11 months). Benefits paid increased in 2009 due to more benefit claims being lodged as a result of intensive awareness campaigns. Furthermore, the benefit payment processing days were reduced from 60 to 54 days. An actuarial valuation for benefits payable has not been done yet for 2010, which could increase benefits paid by R4bn. Administration costs increased by 18% due to enhancing efficiencies in GPAA and increasing national footprint. (Information slide – not to be presented) Accumulated reserves decreased by 10% during 2009 due to investment losses emanating from the financial markets crash. This has subsequently improved in 2010 by 20%. Contributions received increased as a result of annual salary increases of 11% and an increase in membership from 1.160m to 1.197m during 2009. Contributions received continue increasing in 2010 (although the information provided is only for 11 months). Benefits paid increased in 2009 due to more benefit claims being lodged as a result of intensive awareness campaigns. Furthermore, the benefit payment processing days were reduced from 60 to 54 days. An actuarial valuation for benefits payable has not been done yet for 2010, which could increase benefits paid by R4bn. Administration costs increased by 18% due to enhancing efficiencies in GPAA and increasing national footprint.

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    35. 5/10/10 GEPF Risk and Fraud Prevention The enterprise-wide risk assessment facilitated by KPMG identified strategic risks The risk management framework has been approved by the Board of Trustees and implemented. The risks registers have been development for each business unit and units’ risks champions nominated Although the awareness and education campaigns took place it will remain a focus area in the current year A total amount of R 3m was paid to the rightful beneficiaries as a result of successful investigations by the internal forensic unit. The most significant modus-operandi on the fraud investigated was the diversion of benefit payments to the fraudulent bank accounts. There are amounts that have been recovered but due closure of certain criminal cases which cannot be investigated further for obvious reasons, the respective recoveries could be impossible. Regular enterprise-wide fraud-risk assessment are conducted by the Fraud Prevention Unit The fraud register is place and the trends are analysed and monitored. Education and awareness on whistle-blowing was minimal and will be intensified in the current year. A multi-disciplinary approach on investigations has been implemented with the law enforcement agencies. Though there is a significant backlog on cases to be finalized for investigation, a speedy and prompt turn-around time will be embarked upon. Assistance was sought from Pricewaterhouse Coopers on specific investigations as an when required. Risk and Fraud Prevention The enterprise-wide risk assessment facilitated by KPMG identified strategic risks The risk management framework has been approved by the Board of Trustees and implemented. The risks registers have been development for each business unit and units’ risks champions nominated Although the awareness and education campaigns took place it will remain a focus area in the current year A total amount of R 3m was paid to the rightful beneficiaries as a result of successful investigations by the internal forensic unit. The most significant modus-operandi on the fraud investigated was the diversion of benefit payments to the fraudulent bank accounts. There are amounts that have been recovered but due closure of certain criminal cases which cannot be investigated further for obvious reasons, the respective recoveries could be impossible. Regular enterprise-wide fraud-risk assessment are conducted by the Fraud Prevention Unit The fraud register is place and the trends are analysed and monitored. Education and awareness on whistle-blowing was minimal and will be intensified in the current year. A multi-disciplinary approach on investigations has been implemented with the law enforcement agencies. Though there is a significant backlog on cases to be finalized for investigation, a speedy and prompt turn-around time will be embarked upon. Assistance was sought from Pricewaterhouse Coopers on specific investigations as an when required.

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    39. 5/10/10 GEPF In 2007 the GEPF Board and the Minister of Finance entered into discussions around improved efficiencies, improved responsiveness to members and pensioners and modernisation of administration systems and standards. A task team was established to undertake research in order to determine the various options available to the GEPF to achieve these efficiencies. The research undertaken by the task team culminated in the development of a Business Case that set out the various options available to the GEPF. Having considered these options the GEPF Board and the Minister of Finance agreed that the most appropriate option is the establishment of a government component to provide administration services to the GEPF based on the following reasons: It would allow for continuity in the status of employees as public service officials It would allow for financial management in terms of the Public Finance Management Act It will be allow for a distinct service delivery relationship with the GEPF Board in respect of its administration requirements and corresponding relationships with the National Treasury in respect of the Programme 8 functions. The Application for the establishment of a government component was made by the Minister of Finance to the Inter- Ministerial Assessment Committee convened by the DpSA. The Inter- Ministerial Assessment Committee sat on the 29 April 2009 and 7 October 2009 and after having considered the financial, legal and governance arrangements as required in terms of the Public Service Act (PSA), recommended to the Minister of the DpSA the establishment of government component. The Government Component is to be called GPAA, established in terms of the Public Service Act, under the executive authority of the Minister of Finance. On 26 March 2010, Government Notice No 231 together with Proclamation No 10 was gazetted establishing the GPAA, with effect of 1 April 2010. In 2007 the GEPF Board and the Minister of Finance entered into discussions around improved efficiencies, improved responsiveness to members and pensioners and modernisation of administration systems and standards. A task team was established to undertake research in order to determine the various options available to the GEPF to achieve these efficiencies. The research undertaken by the task team culminated in the development of a Business Case that set out the various options available to the GEPF. Having considered these options the GEPF Board and the Minister of Finance agreed that the most appropriate option is the establishment of a government component to provide administration services to the GEPF based on the following reasons: It would allow for continuity in the status of employees as public service officials It would allow for financial management in terms of the Public Finance Management Act It will be allow for a distinct service delivery relationship with the GEPF Board in respect of its administration requirements and corresponding relationships with the National Treasury in respect of the Programme 8 functions. The Application for the establishment of a government component was made by the Minister of Finance to the Inter- Ministerial Assessment Committee convened by the DpSA. The Inter- Ministerial Assessment Committee sat on the 29 April 2009 and 7 October 2009 and after having considered the financial, legal and governance arrangements as required in terms of the Public Service Act (PSA), recommended to the Minister of the DpSA the establishment of government component. The Government Component is to be called GPAA, established in terms of the Public Service Act, under the executive authority of the Minister of Finance. On 26 March 2010, Government Notice No 231 together with Proclamation No 10 was gazetted establishing the GPAA, with effect of 1 April 2010.

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    41. 5/10/10 GEPF In terms of the GEP Law and Rules, 1996, the GEPF is responsible for the provision of pensions and other related benefits to members, pensioners and their beneficiaries . Section 7 of the GEP Law also requires the GEPF Board to take such steps as may be required in order to ensure the effective and efficient administration of the Fund. In terms of the Government Notice 231, GPAA is established for the purpose of the administration of the GEPF, Associate Institutions Pension Fund (AIPF), the Temporary Employees Pension Fund (TEPF) and the civil and military pension funds, social benefits and post- retirement medical scheme arrangements as specified. The relationship between GEPF and GPAA will be managed in terms of an Administration Agreement and an Service Level Agreement. Outsourcing of the administration of benefits to GPAA allows for the establishment of an arms length relationship between the GEPF Board and its Administrator as its service provider. The GEPF Board has also appointed a small team of staff headed by a Principal Officer, who would assist the Board with complying with its statutory obligations as set out in the GEP Law and Rules, as well as with the monitoring of performance of GPAA and its investment manager (PIC). In terms of the GEP Law and Rules, 1996, the GEPF is responsible for the provision of pensions and other related benefits to members, pensioners and their beneficiaries . Section 7 of the GEP Law also requires the GEPF Board to take such steps as may be required in order to ensure the effective and efficient administration of the Fund. In terms of the Government Notice 231, GPAA is established for the purpose of the administration of the GEPF, Associate Institutions Pension Fund (AIPF), the Temporary Employees Pension Fund (TEPF) and the civil and military pension funds, social benefits and post- retirement medical scheme arrangements as specified. The relationship between GEPF and GPAA will be managed in terms of an Administration Agreement and an Service Level Agreement. Outsourcing of the administration of benefits to GPAA allows for the establishment of an arms length relationship between the GEPF Board and its Administrator as its service provider. The GEPF Board has also appointed a small team of staff headed by a Principal Officer, who would assist the Board with complying with its statutory obligations as set out in the GEP Law and Rules, as well as with the monitoring of performance of GPAA and its investment manager (PIC).

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