R71 million vanished into thin air at one government entity

The Compensation Fund has found itself racked by financial mismanagement and fraud, losing an estimated R71 million in the process.

The fund falls under the Department of Employment and Labour, and is meant to provide workers with compensation for occupational injuries, illnesses and deaths accrued in the workplace.

Issues such as governance failures, poor cybersecurity, and suspected internal looting threaten to ring the fund completely dry, however.

The Auditor-General of South Africa (AGSA) recently issued a disclaimed audit opinion on the fund for the 13th year in a row.

The fund reportedly received R23.9 billion in revenue during the 2024/25 financial year, including R12.3 billion in contributions from companies who are registered with the fund.

Approximately R5.5 billion of this was paid out in compensation to support injured and sick workers and their dependents during the same period.

Issues such as payments being made to unauthorised bank accounts and without the proper supporting documentation were flagged by the AGSA as being highly concerning.

In one instance, the AGSA identified payments totalling R4.47 million had been redirected to unauthorised bank accounts, resulting in beneficiaries not receiving their claims.

The fund’s fruitless and wasteful expenditure was also noted by the AGSA as a key concern, with the Compensation Fund stating this to be approximately R8 million.

However, the AGSA said this figure is likely much higher as the fund did not disclose every instance of fruitless or wasteful expenditure in its financial statements.

Most notably, the fund’s weak access controls and cybersecurity systems were deemed to pose significant fraud risks.

AGSA Acting Head of Portfolio Kgabo Komape told 702 that their report had found significant material irregularities, where the fund lost money due to fraud or system malfunctions.

“We identified intercepted payments,” Komape said. “Typically, you process the payments you want to make for the claim, and you push it through to the bank using technology.”

“We’ve identified that the bank accounts meant to receive this money had been changed, and the accounts that eventually received the money were unknown as far as the beneficiary listing of the fund was concerned.”

The Auditor-General’s report indicated that there were no password protections for sensitive processes such as the changing of these bank details.

An anonymous source also told The Citizen that the Compensation Fund’s IT systems had been deliberately left unencrypted to allow for internal looting from upper management.

The Compensation Fund responds

The Compensation Fund responded to recent media reports about its fraud losses in a statement made available to Daily Investor.

The fund acknowledged the fraud losses over the past few years, but said these had already been brought to light through internal auditing and investigation.

This, the fund said, reflected a maturing organisation that is becoming increasingly more capable of identifying and responding to instances of fraud from within.

Along with this, the fund claimed its fraud losses had declined by 92%, from R41.4 million in the 2024/25 financial year to just R3 million in 2025/26.

“This substantial decline reflects the tangible impact of strengthened internal controls, improved verification procedures, and targeted anti-fraud interventions,” the Compensation Fund said.

“It also indicates that the fund’s corrective measures are beginning to close systemic gaps that were previously exploited for criminal activities.”

The fund pointed to its introduction of biometric technology in October 2025 as a significant advancement in its protection of high-risk system processes.

The Citizen previously reported that the biometric system had been inoperational despite over R60 million being spent to implement it.

According to the Compensation Fund, the new biometric system has allowed for better partitioning of duties, something which had been flagged as an issue by the AGSA.

In its report, the Auditor-General revealed that the state accountant alone had received payment requests, performed quality checks, executed payments and recorded transactions.

“The system ensures different stages of a transaction are handled by distinct, verified individuals, thereby reducing opportunities for collusion or internal fraud,” the Compensation Fund said.

“Since the implementation of biometric controls, the fund has reported no incidents of fraudulent banking-detail changes, highlighting the effectiveness of this technology.”

The fund reported increased cooperation with law enforcement authorities and financial institutions in the investigation of fraud cases and the recovery of funds.

Through a collaboration with banks and the Asset Forfeiture Unit, the Compensation Fund said it had recovered approximately R46 million linked to fraud.

It also said preservation orders had been secured in another nine cases, allowing the fund to freeze the transfer of assets to the tune of R22.9 million.