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Pensioners suffer as their Sh67b goes down the drain

By Wilfred Ayaga | June 27th 2019

In what could turn out to be another mega-scandal in the Jubilee government, the State paid out Sh67.9 billion as pension to people who were not entitled to receive the cash, and others whose identities could not be verified.

The Treasury, without explanation, paid Sh1.6 billion to 962 people before their exit dates from public service even as thousands of workers who retired years earlier languished at home waiting for the processing of their retirement benefits.

Other workers, whose terms of employment were not permanent and pensionable, pocketed Sh492 million without any valid reasons being offered.

In another case, 349 people were irregularly enrolled in the pension system and paid Sh556 million.

The largest chunk of the money - Sh44 billion - was paid to claimants with irregular identities or who lacked personal identification numbers.

Another Sh21 billion was bizarrely paid out to claimants with shared bank accounts while Sh152 million was wired to people with shared identity card numbers.

The damning revelations are contained in a report by Auditor General Edward Ouko, which was tabled in the National Assembly on Tuesday evening.

Ouko said these irregularities are to blame for many beneficiaries waiting for long to get paid and genuine claimants languishing in poverty after missing out on the payments.

The audit conducted last year covers the period between the 2012/2013 and 2016/2017 financial years.

Performance audit

“The Sh67.9 billion was paid to 114,215 claimants, which is an average of Sh594,267 per claimant,” reads the performance audit on the administration of public service pension scheme.

The money in question is more than three times that allocated to free primary school education in the 2019/2020 financial year. It can also build three Thika superhighways.

Pensions are paid by employers on a monthly basis to employees who are not in employment upon attaining the mandatory retirement age, or due to other extraneous causes such as injury and illness. The money can also be paid to a deceased staff’s dependents.

In the financial years under audit, the Government spent Sh199 billion on payment of pensions and gratuities, with the auditor general noting that the expenditure increased at an average rate of 25 per cent annually during this period.

When the auditor asked why people with shared identities had been paid, Treasury bureaucrats said the recipients could have been beneficiaries or pensioners receiving several categories of pension.

Ouko said he discovered that in some cases, the bank accounts did not follow conventional rules, “which made it impossible to determine if these were genuine accounts”.

In one case, for example, an account ‘O’ was shared by 26,121 people and no satisfactory explanation was offered for this anomaly. In total, 870 account numbers were shared by 29,387 pensioners.  

Curiously, some IDs had less than three or more than nine characters, or contained characters such as ‘?’ and ‘&’ instead of numerals.

Some tax PINs, Ouko discovered, lacked the required nine digits in between the alphabets.

“No valid explanation was provided as to why the system would allow processing of payments without these important documents. A system which allows such entries is prone to manipulation which may lead to funds being channelled to wrong individuals,” the auditor said.

But it is the case of casual workers and people still in employment receiving pensions that most poignantly points to the rot at the Pensions Department, which is entrusted with securing the future of workers.

Contained anomalies

“The effect of the anomalies contained in the PMIS (Pensions Management Information System) is irregular payment that has compromised operations and has resulted in many beneficiaries waiting for too long to get paid yet the provisions of funding for payment for pensions during the period under review has been at 97 per cent. This has denied the authentic claimants their pay thus negatively affecting their livelihoods,” Ouko stated in his report. 

The audit was a follow up to a January 2016 report by the Commission on Administrative Justice (Ombudsman), which noted systemic failures in payment of pensions, gratuities and other benefits at the Pensions Department.

Worryingly, taxpayers could lose another Sh86.8 billion if the loopholes at the Pensions Department are not addressed, Ouko said. 

“The system still contains 146,027 claimants who at the time of the audit had not been paid. If they are each to be paid the same average of Sh594,267, a further amount of at least Sh86.8 billion could be at risk if the system errors are not corrected,” states the report.

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