The Pensions Department is on the spot following revelations it irregularly paid out Sh67 billion retirement claims while genuine beneficiaries continue to suffer.
A report by Auditor General Edward Ouko points to a possibility that billions of taxpayers’ money meant for pensions could still be siphoned by those taking advantage of loopholes in the system.
The auditor warns the country is at risk of losing another Sh86.8 billion if the flaws in the Pension Management Information System (PMIS) are not rectified.
In the Performance Audit of the Public Service Pension Scheme report, Ouko flags cases of state officers being enrolled into the system yet they are not on permanent and pensionable terms of service.
Other cases involve payment of claims in lump sum to officers before their official retirement dates; claims with irregular or no KRA pins; irregular or shared ID numbers; and shared bank accounts.
Following the anomalies, Ouko reveals that Sh44 billion was paid out to 82,972 claimants with irregular or no KRA pin numbers while 7,166 civil servants raised claims with irregular ID numbers.
The audit report, for five financial years 2012-13 to 2015-17, further shows that Sh492 million was paid to 196 officers who were ineligible for pension.
The lot was among 146,027 claimants whose payouts were flagged during the period under review.
Some Sh556 million was paid to 349 out of 419 civil servants who made claims yet they were irregularly enrolled in the system.
A system review showed that 117 claimants were fraudulently paid Sh26.9 million yet they were enrolled on dates beyond 2018, some ranging between 2022 and 2099.
“Though the department showed that the entries could have been in error, Sh583 million is significant to the pensioners awaiting payment,” the report states.
Ouko further reveals that Sh1.6 billion was paid in lump sum to 962 officers prior to their exit from various posts in ministries and state departments.
Some Sh152 million, the audit reveals, was paid to 232 claimants with shared ID numbers and a whopping Sh20 billion to 29, 387 claimants with shared bank accounts.
The audit attributes the system anomalies to lack of separation of duties for the system administration and lack of system triggers to detect and flag irregular entries.
“The irregular payments have compromised the operations and resulted in many beneficiaries waiting for too long to get paid. This has denied the authentic claimants their pay thus negatively affecting their livelihoods,” Ouko said.
A total of Sh200 billion was used on payment of pensions from the Consolidated Fund Services account during the five financial years.
The woes of widows, widowers, and orphans - as well as pensioners - in the long queue of those waiting for their claims to be processed have been worsened by revelations that funding for payment of pensions has been at 99 per cent.
This is amid findings that the system, during the February audit, still contained entries for 146,027 claimants whom had not been paid and would have each received about Sh595,000.
“A further amount of Sh86.8 billion could be at risk if the system errors are not corrected,” Ouko says, further advising for segregation of duties performed by the various PMIS administrators.
The auditor further hinges the loss on conflict of interest, wrongful acts, abuse, and errors as a result of no separation of roles undertaken by the PMIS database, system programmer, networking and security administrators.
“Segregation of roles would help in detection of control failures which include security breaches, information theft, and circumvention of security controls,” Ouko says.
The auditor asks the National Treasury to consider configuring the system to install constraints to prevent invalid data and forbid duplicate entries.
“The system should have a field to capture the payroll number from the IPPD to ensure tracking of government employees in the payroll and requirement for crucial details like ID and tax PIN numbers.”
The queries arose from concerns that the pending claims have continued to pile despite funding having increased to 25 per cent over the said period.
The greatest increase was in 2015-16 where Treasury allocated Sh51 billion - being 45 per cent compared to financial year 2014-15 when Sh35 billion was expended.
The auditor further reprimands the Pensions Department for not undertaking due diligence to ascertain whether the intended beneficiaries get the funds.
Ouko says the government may be losing money sent to bank accounts of declared pensioners and dependents since there are no measures put in place to seek proof of life of pensioners and dependents.
Ministries and state departments were not spared the flak amid findings they perpetuate delays in preparation and submission of pension claims.
“There was no valid explanation provided for most of the delays except that some files delayed as a result of erroneous and incomplete applications by ministries,” the auditor says.
The Pensions Department’s delivery charter stipulates that processing and payment of pension benefits is expected to take 21 days from the time a duly completed and supported claim is submitted.
A review of files sampled from select ministries revealed that there was an average 120 days delay between the time a claim was accepted and actually paid out.
State officers who apply for pension payout before dates of exit are only allowed to push such claims be processed to the level of voucher preparation if all documents are attached.
The process includes generating an IPPD deletion sheet to ensure the officer is no longer on payroll, tax, and government liability clearance certificates.
“However, analysis of records revealed that 962 pensioners received their lump sum totaling Sh1.9 billion way before the end of service. No explanation was provided. This would mean that the officers were drawing a salary after receiving pension, which is irregular,” Ouko said.
The auditor castigated Treasury for failing to operationalise the Contributory Scheme – one which would have seen civil servants meeting their own pension costs.
Ouko says the situation must change in the wake of civil service pension liability increasing to unsustainable levels, hence impacting negatively on other priority expenditures.
The Public Service Superannuation Actv2012 was to establish the Contributory Public Service Superannuation Scheme for providing retirement benefits to persons in the public service.
Membership of the scheme was to be mandatory for serving employees below the age of 45 years and new employees but optional for those above 45 years.
All members were to be required to contribute 7.5 per cent of their basic salary to the scheme while the government contributes 15 per cent.
“Despite the pension burden being on the increase, the government has not implemented the scheme that was meant to ease the pension burden,” the audit report states.
A January 2016 report by the Ombudsman reported systemic issues in the payment of pensions.
It cited matters ranging from unresponsiveness, discourtesy, inefficiency, delay, refusal to pay, discrimination and abuse of power in the processing of retirement benefits.
