Old age pension scam
Editorial
Stabroek News
November 18, 2002
The discovery of fraud in the new system for paying old age pensions has caused much consternation as it should. The new system was implemented earlier this year by Social Security Minister Bibi Shadick following the discovery of corruption in the previous system. It was estimated that the old list of pensioners was padded with around 6,000 names. This time around, bundles of fake vouchers were cashed at post offices around the country apparently through collusion between ministry staffers and postal employees. The total loss has been estimated at around $17M. Naturally, questions arise as to who is to blame and what should be done.
Schemes of this type where cash is being paid out to significant numbers of people are always prone to abuse. A lot depends on the honesty of the employees in charge of the programme and given human nature and the economic plight of public servants it is not difficult to see how things could go wrong. The best line of defence in programmes of this type is a combination of safeguard mechanisms and rigorous monitoring. It appears that both of these were lacking in this instance and it is something that the ministry and the post office must learn from.
A key shortcoming was that the post office was not provided with specimens of the vouchers until after the discovery of the fraud. The post office says it asked very early on repeatedly for a specimen of the voucher and details about security features so that its employees could be able to spot fakes. The post office says its request was refused. Minister Shadick says she knows nothing about a request for specimens being rejected. If one were to read between the lines, it appears that the ministry was prepared to make specimens available - though this was not done - but not disclose the security features for fear that this would make it easier for fraud to be perpetrated. Even though the security features were withheld fraud was still committed and in the most blatant manner.
Being acutely aware that the previous system had been contaminated by fraud over many years, Minister Shadick should have ensured that specimens and full information on security features were handed over to the post office. The only means through which the Guyana Post Office Corporation (GPOC) could reasonably check whether fraudulent vouchers were being presented to it was if it had the fullest information at its disposal. This, of course, would not have prevented the type of fraud that eventually overtook the system where some of those who were entrusted with checking for authenticity simply took fake vouchers in sheaves, cashed them and pocketed the money. However, at some point in its processing of the vouchers, the GPOC would have surely compared them with the specimens to verify that they were the real thing and this is when the sole responsibility would have been its. The ministry should not have waited for the GPOC to ask for specimens it should have provided them up front. The programme is being run by the ministry and the primary onus is on it to ensure that everything is above board. The post office is only paying on behalf of the ministry.
For its part, the GPOC should not have paid the vouchers without the specimens or at least not for the length of time that it did. It is understandable that given the public demand among pensioners that the post office could not refuse initially to make good on the payments. However, it is difficult to understand why the post office allowed this situation to continue when it could have appealed to higher authorities or simply stopped payments and explained to the public why this was being done.
The scale of the fraud only became evident when the police found bundles of vouchers in a home. The fact that the scam had gone unseen by the accounting units of both the ministry and the post office is very disconcerting. Both the ministry and the post office should have had a clear idea as to the number of pensioners to be paid each month. Tallies that went beyond this should have triggered alarm bells at some point. The bells were not troubled at all. Both the ministry and the post office need to review the manner in which they accounted for the vouchers and make the relevant changes.
In seeking to introduce an incorruptible system, Minister Shadick also switched to a new printer. This was another error as the coupons produced by the new printery appeared to be easily duplicable because of the quality of the paper, etc. Clearly, these decisions have to be taken more carefully. The forgery of departure tax coupons several years ago also required a printery change. The experiences of various government agencies in schemes of this kind should be collated for use by other government agencies which face similar predicaments.
Over the last few years, the government has faced an increasing number of corruption cases in ministries and government agencies. In addition to implementing accountability systems it should also make greater use of the Office of the Auditor General for spot audits and special investigations. Of course, the requisite resources would have to be made available by Parliament for this to become a reality.
Changes are definitely needed in the manner in which old age pensions are paid and the system managed. The ministry should set about making these and instilling confidence in its ability to manage public funds. It and the GPOC must also make sure that those who are responsible for this public fraud and the padding of the old list are identified and handed over to the police for prosecution in the courts.
